OMM INC, S-1/A, 2000-12-15

OMM INC
S-1/A, 2000-12-15
TELEPHONE & TELEGRAPH APPARATUS

Previous: SHOCHET HOLDING CORP, 10QSB, EX-27, 2000-12-15

Next: OMM INC, S-1/A, EX-10.21, 2000-12-15

<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 15, 2000

REGISTRATION NO. 333-45940
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 3

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

OMM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
DELAWARE 3661 33-0762894
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>

9410 CARROLL PARK DRIVE
SAN DIEGO, CA 92121
(858) 362-2800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------

PHILIP CHAPMAN
CHIEF FINANCIAL OFFICER
OMM, INC.
9410 CARROLL PARK DRIVE
SAN DIEGO, CA 92121
(858) 362-2800
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------

COPIES TO:

<TABLE>
<S> <C>
BRUCE M. MCNAMARA, ESQ. THOMAS COLL, ESQ.
THOMAS I. SAVAGE, ESQ. NADER BITAR, ESQ.
EDWARD F. VERMEER, ESQ. JASON CONGER, ESQ.
LINDA Y. SUNG, ESQ. COOLEY GODWARD LLP
WILSON SONSINI GOODRICH & ROSATI 4365 EXECUTIVE DRIVE
PROFESSIONAL CORPORATION SUITE 1100
650 PAGE MILL ROAD SAN DIEGO, CA 92121-2128
PALO ALTO, CA 94304 (858) 550-6000
(650) 493-9300
</TABLE>

------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] __________

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __________

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __________

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 2

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS
NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO
BUY THESE SECURITIES IN ANY STATE JURISDICTION WHERE THE OFFER OR SALE IS
NOT PERMITTED.

Subject to Completion, Dated December 15, 2000.

9,000,000 Shares

[OMM logo]

COMMON STOCK
------------------

OMM, Inc. is offering shares of its common stock. Prior to this offering,
there has been no public market for our common stock. The initial public
offering price of our common stock is expected to be between $10.00 and $12.00
per share. We have applied to list our common stock on The Nasdaq Stock Market's
National Market under the symbol "OMMI".

The underwriters have an option to purchase a maximum of 1,350,000
additional shares to cover over-allotments of shares.

INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE 5.

<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS OMM
-------- ------------- -----------
<S> <C> <C> <C>
Per Share............................................ $ $ $
Total................................................ $ $ $
</TABLE>

Delivery of the shares of common stock will be made on or about
, 2000.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

CREDIT SUISSE FIRST BOSTON
CHASE H&Q
CIBC WORLD MARKETS
DAIN RAUSCHER WESSELS

The date of this prospectus is , 2000.
<PAGE> 3

[INSIDE COVER ART]
<PAGE> 4

[INSIDE FRONT COVER]

The inside front cover page of the prospectus starts with the heading
"OMM All-optical Switching Subsystems." Below that text is a subheading that
reads "for optical communications equipment manufacturers." To the right of that
text is a circle with a graphic of three photonic switch subsystem packages.
Below that, in the lower left-hand corner of the page, is the OMM logo.

On the right-hand side of the cover page is a graphic of optical
streams and a globe which encompasses approximately one-third of the page.

<PAGE> 5

------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY.................... 1
RISK FACTORS.......................... 5
NOTE REGARDING FORWARD-LOOKING
STATEMENTS.......................... 16
USE OF PROCEEDS....................... 16
DIVIDEND POLICY....................... 16
CAPITALIZATION........................ 17
DILUTION.............................. 18
SELECTED FINANCIAL DATA............... 20
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS....................... 21
BUSINESS.............................. 27
MANAGEMENT............................ 43
</TABLE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
TRANSACTIONS WITH RELATED PARTIES AND
INSIDERS............................ 54
PRINCIPAL STOCKHOLDERS................ 56
DESCRIPTION OF CAPITAL STOCK.......... 58
SHARES ELIGIBLE FOR FUTURE SALE....... 61
UNITED STATES TAX CONSEQUENCES TO
NON-U.S. HOLDERS.................... 63
UNDERWRITING.......................... 66
NOTICE TO CANADIAN RESIDENTS.......... 69
WHERE YOU CAN FIND ADDITIONAL
INFORMATION......................... 70
LEGAL MATTERS......................... 70
EXPERTS............................... 70
INDEX TO FINANCIAL STATEMENTS......... F-1
</TABLE>

------------------

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.

DEALER PROSPECTUS DELIVERY OBLIGATION

UNTIL , 2001 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING),
ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
DELIVERY REQUIREMENT IS IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER A
PROSPECTUS WHEN ACTING AS AN UNDERWRITER AND WITH RESPECT TO UNSOLD ALLOTMENTS
OR SUBSCRIPTIONS.

<PAGE> 6

PROSPECTUS SUMMARY

This summary highlights selected information from this prospectus and does
not contain all of the information that may be important to you. To understand
the risks involved in your investment decision, you should carefully read this
entire prospectus, including the risk factors and our financial statements, and
the documents to which we refer you.

OMM, INC.

We make a family of all-optical, or photonic, switching subsystems that are
used to direct communications traffic within and across fiber optic
communications networks. Our products are based on a technology called MEMS, or
micro-electromechanical systems, and consist of arrays of microscopic mirrors,
lenses and other optical components that steer beams of light onto and off of
specific optical fibers without converting pulses of light into electricity for
processing and switching. By eliminating the need to convert light into
electrical signals for processing and switching, our products enable optical
network systems manufacturers to build scalable, cost-effective systems that
address next generation switching needs in the long distance, metropolitan and
local neighborhood segments of communication networks. As of September 30, 2000
we have sold our products to 14 customers, including Cisco Systems, Inc., Corvis
Corporation, Nortel Networks Corporation, Siemens AG and Village Networks, Inc.,
each of which accounted for at least 10% of our revenue for the quarter ended
September 30, 2000.

We design our products to be manufacturable in high volume, and we
continuously review and modify our product designs to ensure product quality,
reliability and durability. In addition, we have implemented several proprietary
automated and semi-automated manufacturing systems and processes to enhance our
manufacturing yields and reliably produce higher volumes of products than
generally possible using manual production techniques.

We were incorporated in California in June 1997 and reincorporated in
Delaware in March 2000. From our inception in June 1997 through April 2000, our
operating activities were primarily devoted to research and development and we
only recently began recognizing revenue on commercial shipments of our products
in the quarter ended June 30, 2000. We recognized revenue of approximately $1.5
million and incurred a net loss of approximately $31.9 million for the nine
months ended September 30, 2000. We used approximately $13.9 million in cash for
operations over the same period, primarily as a result of our net losses in the
period, partially offset by non-cash charges.

Communications service providers have invested significant capital in
optical networks to address the increasing demand for high capacity, or high
bandwidth, communications networks, as well as demand for enhanced services and
improved connection times. As demand for communications services increases, the
need to efficiently move optical data streams onto, around and off of the
network is becoming more acute. Switches, which control the movement of optical
data streams on the network, are becoming an increasingly critical element of
the communications infrastructure. Optical network switching systems in use
today are based on a hybrid technology that converts optical signals into
electrical signals for processing. After electronic processing, the information
must be converted back into an optical data stream for transmission to its next
destination. These complex devices are becoming increasingly challenged to
support the growth in optical networks due to a number of limitations,
including:

- an inability to readily support additional signal wavelengths, increases
in data rates or different transmission protocols as they are added to
the network;

- difficulty in provisioning new services, which involves establishing new
services or adding or decreasing bandwidth to existing services;

- difficulty in changing the configuration of the network; and

- significant power, cooling and space requirements.

These and other factors can add to costs or limit new revenue opportunities for
communications service providers.

1
<PAGE> 7

OMM was established to address these challenges by developing a family of
products that eliminate the need to convert optical signals into electrical
signals before switching the signals. Our family of all-optical switching
subsystems enable optical network systems manufacturers to design and build
switching systems that can switch optical data streams without regard to the
format and sequence in which information is transmitted and exchanged, rate at
which data is transmitted or the wavelength associated with a signal. Our
products enable optical network systems manufacturers to deliver systems to
communications service providers that lower their total cost of ownership and
simplify the process of installing and modifying communications services.

Our objective is to be the leading supplier of highly scalable and reliable
photonic switching subsystems that are integrated into products built by optical
network systems manufacturers. Key elements of our strategy to attain this goal
are to:

- extend our leadership position in supplying all-optical switching
subsystems;

- leverage our automation capabilities;

- broaden our product portfolio;

- design products for manufacturability;

- focus exclusively on subsystems; and

- develop and enhance strategic relationships with customers.

Our principal offices are located at 9410 Carroll Park Drive, San Diego,
California 92121. Our telephone number is (858) 362-2800, and our website is
http://www.omminc.com. We do not intend the information found on our website,
nor information contained on any website linked to it, to constitute a part of
this prospectus.

2
<PAGE> 8

THE OFFERING

Common stock offered.................. 9,000,000 shares

Common stock to be outstanding after
this offering......................... 103,501,500 shares

Use of proceeds....................... To expand our manufacturing
capabilities, marketing and sales
organizations and research and
development efforts, as well as for
working capital and general corporate
purposes, including to support our
expected net operating losses over
the next twelve months.

Proposed Nasdaq National Market
symbol................................ OMMI

The number of shares of common stock to be outstanding after this offering
is based on the number of shares outstanding as of September 30, 2000 and
includes the assumed issuance of 83,901 shares of our common stock issuable upon
the exercise of warrants that, if not exercised by the holders will expire upon
the closing of this offering at a weighted average exercise price of $0.24 per
share. Such number of outstanding stock excludes:

- 14,971,037 shares of common stock issuable upon exercise of outstanding
stock options as of September 30, 2000 at a weighted average exercise
price of $1.15 per share;

- 1,980,158 shares of common stock issuable upon exercise of outstanding
warrants, as adjusted to reflect the conversion of preferred stock into
common stock, at a weighted average exercise price of $0.62 per share;
and

- 14,229,250 shares reserved for future issuance under our stock option and
employee stock purchase plans,

3
<PAGE> 9

SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
SEPTEMBER 30, 2000
----------------------------------------
PRO FORMA AS
ACTUAL PRO FORMA ADJUSTED
-------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents and short-term investments... $ 66,492 $66,512 $156,982
Working capital........................................ 62,798 62,818 153,288
Total assets........................................... 98,369 98,390 188,860
Long-term obligations, less current portion............ 5,592 5,592 5,592
Redeemable convertible preferred stock................. 103,317 -- --
Total stockholders' equity (deficit)................... (22,704) 80,633 171,103
</TABLE>

---------------

See note 2 of notes to the financial statements for an explanation of the
determination of the number of shares used in computing basic and diluted net
loss and pro forma basic and diluted net loss per share data.

- The pro forma amounts on the balance sheet at September 30, 2000 give
effect to the conversion of all outstanding shares of preferred stock
into common stock upon the closing of the offering and the issuance of
83,901 shares of our common stock upon the exercise of outstanding
warrants that, if not exercised by the holders, will expire upon the
closing of this offering, at a weighted average exercise price of $0.24
per share.

- The pro forma as adjusted amounts on the balance sheet at September 30,
2000 give effect to the sale of the shares at an assumed initial public
offering price of $11.00, after deducting underwriting discounts and
commissions and estimated offering expenses payable by us.

Unless otherwise indicated, the information in this prospectus:

- assumes the conversion of all of our outstanding shares of preferred
stock into 70,751,886 shares of common stock upon the closing of this
offering;

- assumes the issuance of 83,901 shares of our common stock upon the
exercise of warrants that, if not exercised by the holders, will expire
upon the closing of this offering at a weighted average exercise price of
$0.24 per share; and

- assumes no exercise of the underwriters' over-allotment option.

4
<PAGE> 10

RISK FACTORS

You should carefully consider the following risk factors and all other
information contained in this prospectus before purchasing our common stock.
Investing in our common stock involves a high degree of risk. Risks and
uncertainties, in addition to those we described below, that are not known to us
or that we currently believe are immaterial may also impair our business
operations. If any of the following risks occur, our business, operating results
and financial condition could be seriously harmed. In addition, the trading
price of our common stock could decline due to the occurrence of any of these
risks, and you may lose all or part of your investment. See "Note Regarding
Forward-Looking Statements."

RISKS RELATED TO OUR BUSINESS

WE HAVE NEVER BEEN PROFITABLE, AND WE EXPECT TO CONTINUE TO INCUR NET LOSSES FOR
THE FORESEEABLE FUTURE. IF WE ARE UNABLE TO INCREASE OUR REVENUES, WE MAY NEVER
ACHIEVE PROFITABILITY.

Since our inception in June 1997, we have incurred significant losses and
expect to continue to incur losses for the foreseeable future. We incurred net
losses of $31.9 million for the nine months ended September 30, 2000 and $7.4
million for the fiscal year ended December 31, 1999. As of September 30, 2000,
we had an accumulated deficit of $40.5 million. To date, we have not achieved
profitability on a quarterly or annual basis.

Our revenues to date have been limited. We began recognizing revenue on
shipments of our photonic switching subsystems in April 2000, and our customers
are still in the early stages of evaluating, testing and deploying our products.
We have a large amount of fixed expenses and expect to incur significant
manufacturing, research and development, sales and marketing and administrative
expenses in the future. As a result, we will need to generate significantly
higher revenues, while containing manufacturing costs and operating expenses, if
we are ever to achieve profitability. Even if we achieve profitability in the
future, we may not be able to sustain or increase profitability on a quarterly
or annual basis. Due to the lack of cash we generate from operations, we have
funded our operations through the sale of equity securities and equipment lease
financings. If we do not realize sufficient revenue levels to achieve
profitability, we may require additional financing, which may not be available.
If we are unable to attain and sustain profitability, our business could be
severely harmed.

As a result of our limited operating history, we have only limited data
from operations on which to rely in forecasting future sales, and we also have
limited meaningful historical financial data upon which to plan future operating
expenses. Many of our expenses are fixed, and we may not be able to reduce our
spending if we determine that our revenue will be lower than expected. If we
fail to accurately forecast our revenues and future operating expenses, we may
incur substantially greater losses than we anticipate or use substantially
greater resources than we currently anticipate which would seriously harm our
business, financial condition and results of operations.

WE EXPECT THAT OUR REVENUES AND OPERATING RESULTS WILL FLUCTUATE ON A QUARTERLY
AND ANNUAL BASIS, WHICH MAY RESULT IN VOLATILITY IN OUR STOCK PRICE.

We expect our future quarterly and annual revenues and operating results to
vary significantly from period to period. A number of factors, many of which are
outside of our control, are likely to cause these variations, including:

- the timing or cancellations of customer orders and shipments;

- the ability of our customers to sell their optical networking systems
that incorporate our products;

- our ability to significantly expand our internal manufacturing capacity
and to improve manufacturing yields and capacity utilization;

- the introduction of new products and product enhancements by our
competitors and any resulting pricing pressures;

5
<PAGE> 11

- the ability of our suppliers to produce and deliver components to us on a
timely basis and in the quantity and quality and at the prices that we
require;

- the loss of one or more of our customers;

- the ability of communication service providers to obtain the necessary
financing to purchase optical networking systems that incorporate our
products; and

- costs related to potential acquisitions of technology or businesses.

Due to these and other factors and because our limited operating history
does not permit meaningful comparisons, we believe that quarter-to-quarter
comparisons of our operating results will not be meaningful. You should not rely
on our results for any quarter as an indication of our future performance. Our
operating results in future quarters may not meet the expectations of securities
analysts or investors, which would likely cause the price of our common stock to
fall.

WE HAVE LIMITED EXPERIENCE AND UNPROVEN CAPABILITIES IN VOLUME MANUFACTURING. IF
WE ARE UNABLE TO ACHIEVE AND SUSTAIN ADEQUATE VOLUME MANUFACTURING, OUR BUSINESS
WILL SUFFER.

Our future success depends in large part on our ability to expand and
improve our manufacturing capabilities, and we must devote significant resources
to expanding our manufacturing capabilities and capacities to meet projected
customer and market demand. We have no experience in rapidly increasing our
manufacturing capacity or in manufacturing products at high volumes and have
only recently commenced manufacturing operations. We currently do not rely on
contract manufacturers and have no present intention of using third-party
manufacturers for our products.

Expanding our manufacturing capacity will be expensive and will require
significant management attention. Our limited manufacturing history and the
developing nature of all-optical switching subsystems make it difficult to
predict the challenges that we may face in expanding our manufacturing capacity.
However, there are a number of factors which could affect our ability to
increase manufacturing capacity, including:

- our ability to procure and install the necessary manufacturing equipment;

- our ability to achieve adequate yields from existing or new manufacturing
lines and the availability of suitable manufacturing facilities;

- our ability to recruit, train and retain qualified manufacturing
personnel;

- our ability to implement quality control systems and achieve any required
quality certifications;

- our ability to schedule production to meet customer demand; and

- our ability to improve and develop automated manufacturing capabilities.

Any of these factors could impair our ability to fulfill orders, which
could result in the loss of our customers. The loss of our customers or any
decrease in sales to our customers could result in revenues below our forecasts
and plans and thereby seriously harm our business.

If we are unable to expand our manufacturing capacity in a timely manner,
or if we do not accurately project demand, we could have excess capacity or
insufficient capacity, either of which could seriously harm our business. We are
currently expanding our manufacturing capabilities and making capital
expenditures based on anticipated levels of customer orders that may not be
realized. Even if we receive orders in one period, demand may not be sustained
over multiple quarters, and the manufacturing capacity that we have added may be
underutilized in subsequent quarters. If anticipated levels of customer orders
are not received, we could have excess capacity and our gross margins will
decline, and we may not be able to reduce our operating expenses quickly enough
to prevent a decline in our operating results.

6
<PAGE> 12

AS WE EXPAND OUR MANUFACTURING CAPACITY, WE MUST ACHIEVE AND MAINTAIN ACCEPTABLE
MANUFACTURING YIELDS OR OUR CUSTOMER SHIPMENTS MAY BE DELAYED, WHICH WOULD
NEGATIVELY IMPACT OUR REVENUES AND CAUSE US TO INCUR ADDITIONAL COSTS.

We have only recently begun commercial production of our products, which
involves complex and precise manufacturing processes. It is critical to our
ability to grow that we achieve and maintain acceptable manufacturing yields on
our current family of products. In addition, we must develop the ability to
continuously transfer production from product development levels to volume
manufacturing and attain and maintain acceptable yields for each new product or
product enhancement that we introduce. If we fail to achieve and maintain
acceptable yields on our current products and future products or product
enhancements, our ability to deliver products to customers in a timely manner
and in the quantities that they require would be significantly impaired.

WE CURRENTLY DERIVE ALL OF OUR REVENUES FROM A SINGLE PRODUCT FAMILY, AND IF
THIS PRODUCT FAMILY DOES NOT ACHIEVE COMMERCIAL SUCCESS, OUR BUSINESS AND
RESULTS OF OPERATIONS WILL BE HARMED.

We currently derive all of our revenues from a single family of photonic
switching subsystems. We expect that this product family will continue to
account for a substantial portion of our total revenues for the foreseeable
future. Market acceptance of our product family by optical network manufacturers
will be critical to our future success and growth. To date, our customers have
purchased our photonic switching subsystems for evaluation, testing and early
deployment, however, our products have not been broadly deployed in commercially
available switching systems. If our target customers do not integrate our
products into their optical switching systems or if these systems do not in turn
gain acceptance among communication service providers, our revenues will not
grow and our business, financial condition and results of operations will be
seriously harmed.

WE MUST ACHIEVE DESIGN WINS WITH POTENTIAL CUSTOMERS, OR WE MAY LOSE THE
OPPORTUNITY FOR SIGNIFICANT SALES TO THESE CUSTOMERS FOR A LENGTHY PERIOD OF
TIME.

Once an optical network systems manufacturer decides to use a particular
supplier's component or subsystem, that manufacturer will design the component
or subsystem into its system, which is known as a design win. Suppliers whose
components or subsystems are designed into the manufacturer's system will,
generally, continue to make sales to that manufacturer until the system is
redesigned or discontinued. Even then, the manufacturer may be reluctant to
design entirely new products into its new systems, as doing so could involve
significant and costly additional redesign efforts. As a result, if we are
unable to secure a design win in a potential customer's particular system, we
may be unable to sell our products to that customer for a lengthy period of
time. If we are unable to secure a sufficient number of design wins, our ability
to grow our revenues and future business would be significantly impaired.

OUR PRODUCTS' SALES CYCLES ARE LONG, WHICH COULD RESULT IN FLUCTUATIONS IN
REVENUES AND OPERATING RESULTS FROM QUARTER TO QUARTER.

We have only recently begun selling our products and, as a result, our
experience with the sales cycle for our products is limited. Customers often
view the purchase of our products as a significant and strategic decision. As a
result, customers may expend significant effort in evaluating, testing and
qualifying our products and manufacturing processes. This customer evaluation
and qualification process can result in a lengthy initial sales cycle of several
months or more. Before customers place an order with us, we may incur
substantial sales and marketing and research and development expenses to
customize our products to our customers' needs. We may also devote significant
management attention, increase manufacturing capacity and order long-lead-time
components or materials prior to receiving an order. Even after this evaluation
process, a potential customer may not purchase any of our products. Because of
the evolving nature of our business and our limited operating history, we cannot
predict the length of these sales cycles. However, we expect these sales cycles
to remain lengthy for the foreseeable future. These potentially long sales
cycles may cause our revenues and operating results to vary significantly and
unexpectedly from quarter to quarter which could harm our results of operations.

7
<PAGE> 13

WE DEPEND ON LIMITED- OR SOLE-SOURCE SUPPLIERS FOR SOME OF THE KEY COMPONENTS
AND MATERIALS USED TO BUILD OUR PRODUCT, WHICH MAKES US SUSCEPTIBLE TO SUPPLY
SHORTAGES, PRICE FLUCTUATIONS, OR VARYING LEAD TIMES, ANY OF WHICH COULD
ADVERSELY AFFECT OUR OPERATING RESULTS.

We currently purchase, and expect to continue purchasing, several key
components and materials used in the manufacture of our products from limited-
or sole-source suppliers. We typically purchase our components and materials
through purchase orders and have no guaranteed supply arrangement with our
suppliers. We may fail to obtain these supplies in a timely manner in the
future. We may also experience difficulty identifying and evaluating alternative
sources of supply for the key components used in our products. Furthermore,
financial or other difficulties that these suppliers may face or consolidation
among our suppliers could limit the availability of our supplies. In addition,
lead times for components and materials vary significantly and depend on
numerous factors, including the specific supplier, the size of the order,
contract terms and current market demand for such components. For substantial
increases in production levels, some suppliers may require long lead-times. If
we over- or underestimate our component and material requirements, we may
negatively impact our inventory expense or manufacturing capability. Any changes
in the quantity of components or materials we demand, interruption or delay in
the supply of any of these components or materials, or an inability to obtain
these components and materials from alternate sources at acceptable prices and
within a reasonable amount of time, would impair our ability to meet scheduled
product deliveries to our customers and could cause customers to cancel orders
and seek supply from competitors, which would harm our business.

WE GENERATE OUR REVENUES FROM A LIMITED NUMBER OF CUSTOMERS. ANY DECREASE IN
REVENUES FROM, OR LOSS OF, THESE CUSTOMERS WOULD HARM OUR OPERATING RESULTS.

Our customer base is limited and highly concentrated. Seven customers
accounted for approximately 87% of our revenues for the nine months ended
September 30, 2000. We also expect that the majority of our revenues will
continue to be generated from sales of our products to a limited number of
customers. If one or more of these customers were to decrease its order levels
or stop ordering from us altogether, our results of operations could suffer.
Customers in our industry tend to order products on an irregular basis. None of
our current customers has any minimum purchase obligations, and each may stop
placing orders with us at any time. These ordering patterns may result in
significant quarterly fluctuations in our revenues and operating results. In
addition, any downturn in the business of our existing customers could result in
significantly decreased sales to these customers, which could seriously harm our
revenues and results of operations.

OUR PRODUCTS MAY CONTAIN DEFECTS THAT ARE NOT DETECTED UNTIL AFTER OUR PRODUCTS
HAVE BEEN INSTALLED IN OUR CUSTOMERS' SYSTEMS. THESE DEFECTS MAY CAUSE US TO
INCUR SUBSTANTIAL COSTS AND SUFFER DAMAGE TO OUR REPUTATION.

Our products are designed to be deployed in large and complex optical
network systems and must be compatible with other components of an optical
network system. Because of the nature of our products, they can only be fully
tested for reliability when deployed in networks carrying live traffic for long
periods of time. To date, our customers have purchased our photonic switching
subsystems for evaluation, testing and early deployment and have not yet fully
deployed our products in large network environments. Accordingly, they may
discover defects in our products after they have been fully deployed and tested
under peak stress conditions. In addition, our products are combined with
products from other vendors. As a result, should problems occur, it may be
difficult to identify the source of the problem. If defects or other problems
are identified in full deployment, we could experience a:

- loss of, or delay in, revenue and loss of market share;

- diversion of research and development resources;

- increased service and insurance costs;

- damage to our reputation and loss of existing customers; and

8
<PAGE> 14

- diversion of management's attention.

In addition, we may be subject to product return, warranty and product
liability claims resulting from defects in our products which could result in
financial liability to us and the loss of our customers.

WE MUST MANAGE OUR GROWTH EFFECTIVELY, OR OUR RESULTS OF OPERATIONS MAY SUFFER.

We were incorporated in June 1997 and began operations shortly thereafter.
Until April 2000, our operations were primarily limited to research and
development efforts for our products. Our limited operating history makes it
difficult to predict the challenges that we will face in the future with regard
to managing growth effectively. However, we continue to expand the scope of our
operations and have substantially increased the number of our employees in the
past year. At December 31, 1999, we had approximately 55 employees, and at
September 30, 2000, we had approximately 250 employees. We are planning to
rapidly expand our manufacturing and development capabilities.

The growth in employee headcount, combined with the challenges of managing
the expansion of our manufacturing operations, has placed, and our anticipated
growth in future operations will continue to place, a significant strain on our
management systems and resources. We expect that we will need to continue to
improve our financial and managerial controls, reporting systems and procedures
and continue to expand, train and manage our work force. If we are unable to
implement on a timely basis the necessary controls and policies to manage our
growth, our operating results could suffer.

WE MUST DEVELOP AND SUCCESSFULLY INTRODUCE NEW AND ENHANCED PRODUCTS THAT MEET
THE NEEDS OF OUR CUSTOMERS OR OUR FUTURE SUCCESS AND RESULTS OF OPERATIONS COULD
BE SIGNIFICANTLY HARMED.

Our future success depends on our ability to develop and manufacture
products in volume that offer enhanced capabilities such as the ability to
support a higher number of fiber connections, or ports. To introduce new
products and product enhancements, we will be required to successfully develop
and effectively transfer production processes from the research and development
phase to volume manufacturing and coordinate our efforts with those of our
suppliers to meet customer and market requirements. Developing products and
product enhancements such as ours is difficult, costly and time consuming. If we
fail to develop product enhancements or introduce new products that meet the
needs of our customers, or fail to effectively transfer production processes,
our customers may no longer choose to purchase our existing or future products
which would cause our revenues to decline. Even if we are able to develop and
commercially introduce new products and enhancements, we cannot assure you that
our new products or enhancements will achieve market acceptance, which could
cause our revenues to either decline or not increase as expected and
significantly harm our future success and results of operations.

WE MUST MANUFACTURE PRODUCTS THAT MEET INDUSTRY QUALITY STANDARDS, OR OUR
CUSTOMERS MAY CHOOSE NOT TO PURCHASE OUR PRODUCTS, WHICH WOULD HARM OUR
OPERATING RESULTS.

Our existing manufacturing line, as well as each new manufacturing line,
must pass through varying levels of qualification by our customers. Generally,
customers do not purchase our products, other than limited numbers of evaluation
units, prior to qualification of our manufacturing line for volume production
and approval of our quality control systems. Customers may require that we be
certified under international quality standards such as ISO 9001 or other
industry standards such as those specified by Telcordia or the Network Equipment
Building Standards requirements. Our products may also have to meet specific
customer requirements. Our manufacturing line for our current line of products
has not yet been qualified for volume production by any of our customers, and we
have not yet completed certification under the ISO 9001 quality standard or any
other industry standards. If we experience delays in receiving qualifications or
certifications required by our customers, our customers may choose not to
purchase products from us, which would result in lost revenue opportunities that
would harm our business.

9
<PAGE> 15

WE DEPEND ON SEVERAL KEY PERSONNEL TO MANAGE OUR BUSINESS EFFECTIVELY IN A
RAPIDLY CHANGING MARKET.

Our future success depends upon the continued services of our executive
officers and other key engineering, sales, marketing, manufacturing and support
personnel. None of our officers or key employees is bound by an employment
agreement for any specific term, and these persons may terminate their
employment at any time. In addition, we do not have "key person" life insurance
policies covering any of our employees. The loss of the services of any of our
key employees could delay the development and production of our products and
negatively impact our ability to maintain customer relationships, which could
harm our business, financial condition and results of operations. In addition,
many of the members of our management team have only been with us for a
relatively short period of time. Failure of the management team to work
effectively together could inhibit our day to day operations and the development
and achievement of our long-term strategies and could seriously harm our
business.

WE MAY NOT BE ABLE TO PROTECT OUR PROPRIETARY TECHNOLOGY. THE LOSS OF OUR
PROPRIETARY TECHNOLOGY COULD ADVERSELY AFFECT OUR ABILITY TO COMPETE.

We rely on a combination of patent, copyright, trademark, and trade secret
laws as well as restrictions on disclosure to protect our intellectual property
rights. To date, we have filed seventeen U.S. patent applications and four
foreign patent applications. However, we cannot assure you that our patent
applications will be approved, that any patents that may be issued to us will
protect our intellectual property or that any issued patents will not be
challenged by third parties. Other parties have developed competing technologies
and may design around any patents that may be issued to us. In addition, we have
received limited product development funding from U.S. governmental agencies. We
cannot assure you that the U.S. government will not attempt to assert
intellectual property rights pursuant to our agreements with these agencies. We
also enter into confidentiality or license agreements with our employees,
consultants and corporate partners and control access to and distribution of our
confidential information and proprietary technology. We cannot be certain that
the steps we have taken will prevent the misappropriation of our proprietary
technology, particularly in foreign countries where the laws may not protect our
intellectual property as fully as in the United States.

WE MAY BECOME INVOLVED IN COSTLY AND TIME-CONSUMING LITIGATION INCLUDING
LITIGATION REGARDING INTELLECTUAL PROPERTY RIGHTS THAT MAY DIVERT MANAGEMENT
ATTENTION, CAUSE US TO INCUR SIGNIFICANT COSTS AND PREVENT US FROM SELLING OR
USING THE CHALLENGED TECHNOLOGY AND THEREBY HARM OUR BUSINESS.

We may from time to time become involved in various lawsuits and legal
proceedings which arise in the ordinary course of our business. In addition, in
recent years, there has been significant litigation in the United States
involving patents and other intellectual property rights. Although we are not
currently party to any litigation, in the future, we may be a party to
litigation to protect our intellectual property or as a result of an alleged
infringement of others' intellectual property. These claims and any resulting
lawsuit, if successful, could subject us to significant liability for damages
and result in the invalidation of our intellectual property rights.

Our involvement in any potential litigation, regardless of the outcome,
would likely be time-consuming and expensive to resolve and would divert
management time and attention from our business and operations. Any potential
intellectual property litigation also could force us to do one or more of the
following:

- stop selling, incorporating or using our products that use the challenged
intellectual property;

- obtain from the owner of the infringed intellectual property right a
license to sell or use the relevant technology, which license may not be
available on reasonable terms, or at all; or

- redesign the products that use the technology.

If we are forced to take any of these actions, our business may be
seriously harmed. An adverse result in any litigation, whether related to our
intellectual property or to other matters, may adversely impact our operating
results or financial condition.

10
<PAGE> 16

We may in the future initiate claims or litigation against third parties
for infringement of our proprietary rights to protect these rights or to
determine the scope and validity of our proprietary rights or the proprietary
rights of competitors. These claims could result in costly litigation and the
diversion of our technical and management personnel.

WE MAY ATTEMPT TO MAKE ACQUISITIONS WHICH COULD DISRUPT OUR BUSINESS AND HARM
OUR FINANCIAL CONDITION.

We may make strategic acquisitions of complementary companies, products or
technologies. In the event of any future acquisitions, we could issue stock that
would dilute our current stockholders' percentage ownership, incur debt, assume
liabilities or incur expenses related to in-process research and development,
amortization of goodwill and other intangible assets.

These purchases could involve numerous risks, including:

- unanticipated costs or liabilities for which we may become responsible;

- adverse effects on existing business relationships with suppliers and
customers;

- risks associated with entering markets in which we have no or limited
prior experience; and

- potential loss of key employees, particularly those of the purchased
organizations.

We cannot assure you that we will be able to successfully integrate any
businesses, products, technologies or personnel that we might acquire in the
future. Moreover, any of these risks could divert our management's attention
from our core business, which could harm our business.

OUR FACILITIES COULD EXPERIENCE CATASTROPHIC LOSS, WHICH WOULD SERIOUSLY HARM
OUR OPERATIONS.

Our facilities could be subject to a catastrophic loss such as fire, flood
or earthquake. All of our research and development activities, manufacturing,
corporate headquarters and other critical business operations are located near
major earthquake faults in San Diego, California. Any loss at any of our
facilities could disrupt our operations, delay production, shipments and revenue
and result in large expense to repair and replace our facilities. While we have
obtained insurance to cover most potential losses at our facilities, we cannot
assure you that our existing insurance coverage will be adequate against all
possible losses or interruption of manufacturing activities.

RISKS RELATED TO OUR INDUSTRY

THE OPTICAL NETWORKING INDUSTRY MUST WIDELY ADOPT OUR ALL-OPTICAL SWITCHING
TECHNOLOGIES, OR OUR BUSINESS WILL SUFFER.

The predominant technology for switching optical signals today is based on
optical-electrical-optical, or OEO, conversions. OEO switches convert optical
signals to electrical signals before switching the signals and convert them back
to optical signals for further transmission. Our success depends on the
willingness of optical network systems manufacturers to embrace all-optical
switching technologies such as those that we make that do not require the
conversion of light to electricity. All-optical switching technologies such as
those that we make that do not require the conversion of light to electricity.
The all-optical switching market is new, and we cannot assure you that optical
network systems manufacturers will choose to build products based on all-optical
switching technologies. In addition, a number of alternative all-optical
technologies are being developed that may be directly competitive to ours. Our
future success depends on the willingness of our customers to rapidly adopt
all-optical switching generally and the micro-electromechanical systems, or
MEMS-based technology on which our products are based.

11
<PAGE> 17

THE OPTICAL NETWORKING INDUSTRY IS SUBJECT TO RAPID TECHNOLOGICAL CHANGE. IF WE
CANNOT KEEP PACE WITH THIS TECHNOLOGICAL CHANGE, OUR BUSINESS WILL SUFFER.

The optical networking industry is characterized by rapid technological
change, frequent new product introductions, changes in customer requirements and
evolving industry standards. In developing our products, we have made, and will
continue to make, assumptions with respect to which standards will be adopted
within our industry. If the standards that are actually adopted are different
from those that we have chosen to support, our products may not achieve
significant market acceptance and our revenues may decline or not increase as
expected and our business will suffer.

WE FACE SIGNIFICANT COMPETITION WHICH COULD HARM OUR BUSINESS AND RESULTS OF
OPERATIONS.

We face competition from a number of large, established public companies,
such as Agilent Technologies, Inc., Corning Incorporated, JDS Uniphase
Corporation, Lucent Technologies Inc.'s Microelectronics Division and Nortel
Networks Corporation, that offer a wide range of components and subsystems to
optical network systems manufacturers. In addition, a number of private
companies have announced plans for all-optical switching products to address
many of the same applications that our products address. We also compete with
several companies, such as PMC-Sierra, Inc. and Applied Micro Circuits
Corporation, that provide OEO based switching products to optical network
systems manufacturers. Moreover, some of our customers may develop all-optical
switching subsystems that compete with our products.

Many of our current and potential competitors have longer operating
histories and significantly greater financial, technical, marketing and other
resources than we have. As a result, these competitors are able to devote
greater resources than we can to the development, promotion, sale and support of
their products. In addition, several of our competitors have large market
capitalizations or cash reserves than we do and may be much better positioned
than we are to acquire other companies in order to gain access to new
technologies or products that may displace our products. In addition, many of
our competitors have much greater name recognition, more extensive customer
bases, better-developed distribution channels and broader product offerings than
we have. These companies can leverage their customer bases and broader product
offerings and adopt aggressive pricing policies to gain market share, all of
which could harm our business.

Additional competitors may enter the market, and we are likely to compete
with new companies in the future. We expect to encounter potential customers
that, due to existing relationships with our competitors, are committed to the
products offered by these competitors. As a result of the above-mentioned
factors, we expect that competitive pressures may result in price reductions,
reduced margins and loss of market share, all of which could harm our business.

IF WE CANNOT RECRUIT AND HIRE ADDITIONAL QUALIFIED PERSONNEL, OUR BUSINESS AND
RESULTS OF OPERATIONS COULD BE HARMED.

We must hire a significant number of additional employees in the next 12
months, particularly engineering and manufacturing personnel. Competition for
highly skilled personnel is intense. Our ability to continue to attract and
retain highly skilled personnel will be a critical factor in determining whether
we will be successful in the future. We may not be successful in attracting,
training or retaining qualified personnel to fulfill our current or future
needs, which may inhibit our day to day operations and the development and
achievement of our long-term strategies and would harm our business.

WE MAY NEED TO OBTAIN LICENSES OF THIRD-PARTY TECHNOLOGY THAT MAY NOT BE
AVAILABLE TO US OR MAY BE VERY EXPENSIVE AND MAY PREVENT US FROM OPERATING OUR
BUSINESS.

From time to time we may be required to license technology from third
parties to develop new products or product enhancements. We cannot assure you
that third-party licenses will be available to us on commercially reasonable
terms, if at all. Our inability to obtain any third-party license required to
develop new products and product enhancements could require us to obtain
substitute technology of lower
12
<PAGE> 18

quality or performance standards or at greater cost, any of which could result
in reduced margins and loss of market share and could seriously harm our
business, financial condition and results of operations.

OUR MANUFACTURING PROCESSES INVOLVE THE USE OF SOME HAZARDOUS MATERIALS.
ENVIRONMENTAL LAWS AND REGULATIONS MAY EXPOSE US TO LIABILITY AND INCREASE OUR
COSTS.

We handle hazardous materials as part of our manufacturing activities.
Consequently, our operations are subject to environmental laws and regulations
governing, among other things, the use and handling of hazardous substances and
waste disposal. We may be required to incur environmental costs to comply with
current or future environmental laws. As with other companies engaged in
manufacturing activities that involve hazardous materials, a risk of
environmental liability is inherent in our manufacturing activities. The costs
associated with environmental compliance or remediation efforts or other
environmental liabilities could result in reduced margins and loss of market
share and could adversely affect our business.

RISKS RELATED TO THIS OFFERING

WE MAY BE REQUIRED TO RAISE ADDITIONAL CAPITAL. IF ADDITIONAL CAPITAL IS NOT
AVAILABLE TO US ON REASONABLE TERMS, OUR ABILITY TO GROW MAY BE LIMITED.

The development and marketing of new products as well as the expansion of
our manufacturing facilities, and adding support and sales and marketing
personnel will require a significant commitment of resources. As a result, we
may be required, or could elect, to seek additional funding. In addition, if the
market for our product develops at a slower pace than anticipated, or if we fail
to establish market share and increase revenues, we may continue to incur
significant operating losses and utilize significant amounts of capital. If our
current capital resources are insufficient to support our operating losses, or
if we utilize our capital resources for acquisitions or other unanticipated
uses, we may need additional capital. In the event we are required to raise
additional funds, we may not be able to do so on favorable terms, or at all.
Further, if we issue new equity securities, stockholders will experience
additional dilution or the new equity securities may have rights, preferences or
privileges senior to those of existing holders of common stock. If we cannot
raise funds on acceptable terms, we may not be able to develop or enhance our
products, take advantage of future opportunities or respond to competitive
pressures or unanticipated requirements. Our inability to raise additional
capital when we require it may delay our product development efforts and could
seriously harm our business.

WE EXPECT TO EXPERIENCE VOLATILITY IN OUR SHARE PRICE, WHICH COULD NEGATIVELY
AFFECT YOUR INVESTMENT. YOU MAY NOT BE ABLE TO RESELL YOUR SHARES AT OR ABOVE
THE INITIAL PUBLIC OFFERING PRICE.

This initial public offering price is likely to vary significantly from the
market price of our common stock after the offering. If you purchase shares of
common stock, you may not be able to resell those shares at or above the initial
public offering price. The market price of our common stock may fluctuate
significantly in response to a number of factors, some of which are beyond our
control, including:

- quarterly variations in our operating results;

- changes in financial estimates or any deviations in revenues or in losses
from the levels expected by securities analysts;

- changes in market valuations of other optical networking companies or
technology companies generally;

- announcements by us, our competitors or other parties relating to major
customers, new products, significant technical innovations, contracts,
acquisitions or strategic partnerships;

- additions or departures of key personnel; and

- future sales of common stock.

13
<PAGE> 19

In addition, the stock market has experienced extreme volatility that has
often been unrelated to the performance of particular companies. These market
fluctuations may cause our stock price to fall regardless of our performance.

THERE MAY BE SALES OF A SUBSTANTIAL AMOUNT OF OUR COMMON STOCK AFTER THIS
OFFERING THAT COULD CAUSE OUR STOCK PRICE TO FALL.

Our current stockholders hold a substantial number of shares, which they
will be able to sell in the public market in the near future. Sales of a
substantial number of shares of our common stock after this offering could cause
our stock price to fall. In addition, the sale of these shares could impair our
ability to raise capital through the sale of additional stock.

Based upon shares outstanding as of September 30, 2000, upon completion of
this offering, we will have 103,501,500 shares of common stock outstanding. Our
current stockholders will be subject to lock-up agreements with the underwriters
or us that restrict their ability to transfer their stock for 180 days from the
date of this prospectus, as described in "Underwriting". Assuming that this
prospectus will be dated December 14, 2000, these lock-up agreements will expire
on June 12, 2001, and an aggregate of 94,310,978 shares will be eligible for
sale, in some cases subject only to the volume, manner of sale and notice
requirements of Rule 144 under the Securities Act and assuming the release of
25% of the shares beginning 90 days from the date of this prospectus has not
occurred. Notwithstanding the 180-day lock-up period, 25% of the shares subject
to these lock-up restrictions, in addition to shares not subject to the lock-up
which may be eligible for sale subject to the requirements of Rule 144, or
23,627,366 total shares, including 16,078,699 shares held by our executive
officers and directors, may be released from these restrictions beginning 90
days from the date of this prospectus, or March 14, 2001. This release will
occur if the last reported sale price of our common stock is at least two times
the initial public offering price per share for 20 of the 30 trading days
preceding the 90th day after the date of this prospectus. Of these shares to be
released on March 14, 2001, 30,621 shares will be eligible for sale, in some
cases subject only to the volume, manner of sale and notice requirements of Rule
144.

MANAGEMENT MAY APPLY THE PROCEEDS OF THIS OFFERING TO USES THAT DO NOT INCREASE
OUR PROFITS OR MARKET VALUE, WHICH MAY CAUSE THE VALUE OF YOUR INVESTMENT TO
DECLINE.

Our management will have considerable discretion in the application of the
net proceeds of this offering, and you will not have the opportunity, as part of
your investment decision, to assess whether the proceeds are being used
appropriately. The net proceeds may be used for corporate purposes that do not
increase our profitability or our market value. Pending application of the
proceeds, they may be placed in investments that do not produce income or that
lose value.

THERE HAS BEEN NO PRIOR MARKET FOR OUR COMMON STOCK. AN ACTIVE PUBLIC MARKET FOR
OUR SECURITIES MAY NOT DEVELOP OR BE SUSTAINED, WHICH COULD MAKE IT MORE
DIFFICULT FOR YOU TO SELL YOUR STOCK.

Prior to this offering, there was no public market for our common stock. An
active public market for our common stock may not develop or be sustained after
this offering, and the market price for our stock might fall below the initial
public offering price. The initial public offering price may bear no
relationship to the price at which the common stock will trade in the open
market after this offering. The initial public offering price will be determined
based on negotiations between us and the representatives of the underwriters,
based on factors that may not be indicative of future market performance.

INSIDERS WILL CONTINUE TO HAVE SUBSTANTIAL CONTROL OVER OMM AFTER THIS OFFERING,
WHICH COULD DELAY OR PREVENT A CHANGE IN OUR CORPORATE CONTROL.

Upon completion of this offering, our executive officers, directors and
principal stockholders who hold 5% or more of the outstanding common stock and
their affiliates will beneficially own, in the aggregate, approximately 62.2% of
our outstanding common stock. As a result, these stockholders will be able to
exercise significant control over all matters requiring stockholder approval,
including the election of directors and approval of mergers or significant
corporate transactions, which could delay or prevent an

14
<PAGE> 20

outside party from acquiring or merging with us. The ability of insiders to
prevent or delay these transactions could cause the price of our common stock to
decline.

INVESTORS WILL EXPERIENCE IMMEDIATE DILUTION AS A RESULT OF THIS OFFERING.

The initial public offering price of our common stock is expected to be
substantially higher than the book value per share of our outstanding common
stock immediately after the offering. Accordingly, if you purchase our common
stock in this offering, you will incur immediate dilution of approximately $9.35
in the book value per share of our common stock from the price you pay for our
common stock. This calculation assumes that you purchased our common stock at
the assumed initial public offering price of $11.00 per share. As a result of
your purchase, you will pay a price per share that substantially exceeds the
value, on a per share basis, of our assets after subtracting our liabilities.
Additionally, immediately after this offering investors in this offering will
have contributed 49% of our total funding but will only own 9% of the
outstanding equity.

PROVISIONS OF OUR CHARTER DOCUMENTS, DELAWARE LAW AND CHANGE OF CONTROL
AGREEMENTS THAT WE HAVE ENTERED INTO MAY HAVE ANTI-TAKEOVER EFFECTS THAT COULD
HINDER A CHANGE IN OUR CORPORATE CONTROL.

Provisions of our certificate of incorporation and bylaws may discourage,
delay or prevent a merger or acquisition that a stockholder may consider
favorable. These provisions include:

- authorizing our board of directors to issue preferred stock without
stockholder approval;

- providing for a classified board of directors with staggered, three-year
terms;

- eliminating the ability of stockholders to call special meetings; and

- prohibiting stockholder actions by written consent.

Provisions of Delaware law, including provisions that prohibit business
combinations with entities holding greater than a threshold of voting stock,
also may discourage, delay or prevent someone from acquiring or merging with us,
which may cause the market price of our common stock to decline. In addition, we
have change of control agreements with each of our officers, which may
discourage, delay or prevent someone from acquiring or merging with us.

15
<PAGE> 21

NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the information in this prospectus contains forward-looking
statements that involve substantial risks and uncertainties. You can identify
these statements by forward-looking words such as "may," "will," "expect,"
"anticipate," "believe," "estimate," "plan" and "continue" or similar words. You
should read statements that contain these words carefully because they: (1)
discuss our future expectations; (2) contain projections of our future results
of operations or of our financial condition; or (3) state other
"forward-looking" information. We believe that it is important to communicate
our future expectations to our investors. However, there may be events in the
future that we have not accurately predicted or which we cannot control. These
events may include our future operating results, our ability to implement our
business plan and potential competition, among other things. The risk factors
listed under "Risk Factors," as well as any cautionary language in this
prospectus, provide examples of risks, uncertainties and events that may cause
our actual results to differ materially from the expectations we describe in our
forward-looking statements. We are under no duty to update any of the
forward-looking statements after the date of this prospectus to conform these
statements to actual results.

USE OF PROCEEDS

We expect to receive net proceeds of approximately $90,470,000 from the
sale of the 9,000,000 shares of common stock, or approximately $104,280,500 if
the underwriters exercise their over-allotment option in full, at an assumed
initial public offering price of $11.00 per share, after deducting the
underwriting discounts and commissions and estimated offering expenses payable
by us.

We intend to use the net proceeds from this offering to expand our
manufacturing capabilities and research and development efforts, to hire and
expand our sales support, marketing and product development organizations, to
expand marketing programs, to establish additional facilities worldwide and for
other general corporate activities and working capital. We also intend to use a
portion of the net proceeds from this offering, along with our cash on hand, to
support our expected net operating losses over the next twelve months. In
addition, we may use a portion of the net proceeds to acquire businesses,
products or technologies that are complimentary to our current or future
business and product lines. We are not currently negotiating any acquisitions,
and we have no agreements with any third party for any acquisitions. Pending use
of the net proceeds of this offering, we intend to invest the net proceeds in
interest-bearing, investment-grade securities.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our capital stock. We
currently expect to retain future earnings, if any, for use in the operation and
expansion of our business and do not anticipate paying any cash dividends in the
foreseeable future. Some of our lease lines and credit agreements prohibit the
payment of dividends without the creditor's prior approval.

16
<PAGE> 22

CAPITALIZATION

The following table sets forth our capitalization as of September 30, 2000:

- on an actual basis:

- on a pro forma basis after giving effect to:

-- the automatic conversion of each outstanding share of our preferred
stock into three shares of our common stock; and

-- the issuance of 83,901 shares of our common stock upon the exercise
of outstanding warrants that, if not exercised by the holders, will
expire upon the closing of this offering at a weighted average
exercise price of $0.24 per share.

- on a pro forma as adjusted basis after giving effect to the sale of
9,000,000 shares of common stock at an assumed initial public offering
price of $11.00 per share, less the underwriting discounts and
commissions and estimated offering expenses payable by us, and the
application of the net proceeds

You should read this table in conjunction with our financial statements and
the related notes "Selected Financial Data" and Management's Discussion and
Analysis of Financial Condition and Results of Operations included elsewhere in
this prospectus.

<TABLE>
<CAPTION>
SEPTEMBER 30, 2000
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(UNAUDITED, IN THOUSANDS)
<S> <C> <C> <C>
Current obligations under capital leases.................... $ 519 $ 519 $ 519
Long-term obligations under capital leases.................. 5,592 5,592 5,592
Redeemable convertible preferred stock $0.0001 par value per
share; 24,227,351 shares authorized, 23,583,962 shares
issued and outstanding actual; no shares authorized,
issued and outstanding pro forma and pro forma as adjusted
(see note 5 of the notes to the financial statements)..... 103,317 -- --
Stockholders' equity (deficit):
Preferred stock, $0.0001 par value per share; no
authorized, issued or outstanding, actual or pro forma;
10,000,000 shares authorized, no shares issued or
outstanding pro forma as adjusted....................... -- -- --
Common stock, $0.0001 par value per share; 150,000,000
shares authorized, actual; 500,000,000 shares authorized
pro forma and pro forma as adjusted; 23,665,713 issued
and outstanding actual; 94,501,500 and 103,501,500
shares issued and outstanding pro forma and pro forma as
adjusted................................................ 2 9 10
Additional paid-in capital................................ 57,019 160,349 250,818
Unearned stock-based compensation......................... (38,125) (38,125) (38,125)
Accumulated deficit....................................... (40,549) (40,549) (40,549)
Stockholder receivable.................................... (1,051) (1,051) (1,051)
-------- -------- --------
Total stockholders' equity (deficit).................... (22,704) 80,633 171,103
-------- -------- --------
Total capitalization............................... $ 86,724 $ 86,744 $177,214
======== ======== ========
</TABLE>

The number of shares of common stock that will be outstanding after this
offering is based on the number of shares outstanding as of September 30, 2000,
and excludes:

- 14,971,037 shares of common stock issuable upon exercise of outstanding
stock options as of September 30, 2000 at a weighted average exercise
price of $1.15 per share;

- 1,980,158 shares of common stock issuable upon exercise of outstanding
warrants as of September 30, 2000, as adjusted to reflect the conversion
of preferred stock into common stock, at a weighted average exercise
price of $0.62 per share; and

- 14,229,250 shares reserved for future issuance under our stock option and
employee stock purchase plans.

17
<PAGE> 23

DILUTION

If you invest in our common stock, your interest will be diluted to the
extent of the difference between the public offering price per share of our
common stock and the pro forma as adjusted net tangible book value per share of
our common stock after this offering.

Our pro forma net tangible book value at September 30, 2000, was $80.5
million, or $0.85 per share. Pro forma net tangible book value per share
represents the amount of our pro forma net tangible book value (total assets
less intangible assets and total liabilities) at September 30, 2000 by the pro
forma number of outstanding shares of common stock after giving effect to:

- the issuance of 83,901 shares of common stock upon the exercise of
outstanding warrants that, if not exercised by the holders, will expire
upon the closing of this offering at a weighted average exercise price of
$0.24 per share; and

- the automatic conversion of all outstanding shares of our preferred stock
into 70,751,886 shares of common stock upon the closing of this offering.

Dilution in pro forma net tangible book value per share represents the
difference between the amount per share paid by purchasers of common stock in
this offering and the pro forma net tangible book value per share of common
stock immediately after completion of this offering. After giving effect to the
sale of the 9,000,000 shares of common stock by us at an assumed initial public
offering price of $11.00 per share, less the underwriting discount and estimated
offering expenses payable by us, our pro forma net tangible book value at
September 30, 2000 would have been $170.9 million, or $1.65 per share. This
represents an immediate increase in the pro forma net tangible book value of
$0.80 per share to existing stockholders and an immediate dilution of $9.35 per
share to new investors, or approximately 85% of the assumed offering price of
$11.00 per share. The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $11.00
Pro forma net tangible book value per share at September
30, 2000............................................... $0.85
Increase per share attributable to new investors.......... 0.80
-----
Pro forma net tangible book value per share after this
offering.................................................. 1.65
------
Dilution per share to new investors......................... $ 9.35
======
</TABLE>

The following table shows on a pro forma basis at September 30, 2000, after
giving effect to the conversion of all outstanding shares of our convertible
preferred stock into an aggregate of shares of common stock upon
the closing of this offering, the number of shares of common stock purchased
from us, the total consideration paid to us and the average price paid per share
by existing stockholders and by new investors purchasing common stock in this
offering:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders........ 94,501,500 91% $104,878,011 51% $ 1.11
New investors in this
offering................... 9,000,000 9 99,000,000 49 $11.00
----------- --- ------------ ---
Total...................... 103,501,500 100% $203,878,011 100%
=========== === ============ ===
</TABLE>

18
<PAGE> 24

- 14,971,037 shares of common stock issuable upon exercise of outstanding
stock options as of September 30, 2000 at a weighted average exercise
price of $1.15 per share;

- 14,229,250 shares reserved for future issuance under our stock option,
director option, and employee stock purchase plans.

19
<PAGE> 25

SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE DATA AND PER SHARE DATA)

You should read selected financial data set forth below in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our financial statements and the related notes included
elsewhere in this prospectus. The statement of operations data set forth below
for the period from June 30, 1997 (inception) to December 31, 1997 and for the
fiscal years ended December 31, 1998 and 1999, and the balance sheet data as of
December 31, 1998 and 1999 are derived from, and qualified by reference to, our
audited financial statements and notes thereto included elsewhere in this
prospectus. The statement of operations data for the nine month periods ended
September 30, 1999 and 2000 and the balance sheet data as of September 30, 2000
are unaudited, have been prepared on the same basis as the audited financial
statements referred to above and, in our opinion, include all adjustments,
consisting only of normal recurring adjustments, that we consider necessary to
present fairly the financial information in accordance with generally accepted
accounting principles. Historic results are not necessarily indicative of the
results that may be expected for any future period or for a full year.

<TABLE>
<CAPTION>
PERIOD FROM
JUNE 30,
1997
(INCEPTION) NINE MONTHS ENDED
TO YEAR ENDED DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, ------------------------- ------------------------
1997 1998 1999 1999 2000
------------ ---------- ----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.......................................... $ -- $ -- $ -- $ -- $ 1,521
Cost of revenues (including stock-based
compensation of $316 for the nine months ended
September 30, 2000)............................. -- -- -- -- 2,098
------- ---------- ----------- ---------- -----------
Gross margin.................................. -- -- -- -- (577)
Operating expenses:
Research and development (including stock-based
compensation of $0, $0, $397, $206 and
$3,375)....................................... 31 1,060 6,348 3,806 17,294
Sales and marketing (including stock-based
compensation of $0, $0, $1, $0 and $2,224).... -- -- 182 124 4,265
General and administrative (including
stock-based compensation of $0, $0, $32, $14
and $6,543)................................... 24 251 911 653 11,060
------- ---------- ----------- ---------- -----------
Total operating expenses...................... 55 1,311 7,441 4,583 32,619
------- ---------- ----------- ---------- -----------
Loss from operations.............................. (55) (1,311) (7,441) (4,583) (33,196)
Other income (expense), net....................... 1 62 83 19 1,308
------- ---------- ----------- ---------- -----------
Net loss.......................................... $ (54) $ (1,249) $ (7,358) $ (4,564) $ (31,888)
======= ========== =========== ========== ===========
Basic and diluted net loss per common share....... $ (0.60) $ (0.49) $ (1.03) $ (0.68) $ (3.07)
======= ========== =========== ========== ===========
Weighted-average shares used in computing basic
and diluted net loss per common share........... 89,934 2,572,477 7,148,210 6,710,892 10,399,460
======= ========== =========== ========== ===========
Pro forma basic and diluted net loss per common
share........................................... $ (0.18) $ (0.43)
=========== ===========
Weighted-average shares used in computing pro
forma basic and diluted net loss per common
share........................................... 41,436,092 73,897,832
=========== ===========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1997 1998 1999 2000
------------ ------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents and short-term investments..... $1,200 $4,721 $20,199 $ 66,492
Working capital.......................................... 1,176 4,680 18,539 62,798
Total assets............................................. 1,232 5,244 23,845 98,369
Long-term obligations, less current portion.............. -- -- 1,104 5,592
Redeemable convertible preferred stock................... 1,267 6,343 28,389 103,317

Total stockholders' deficit.............................. (59) (1,304) (7,690) (22,704)
</TABLE>

20
<PAGE> 26

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with
"Selected Financial Data" and our financial statements and the related notes
included elsewhere in this prospectus. This discussion contains forward-looking
statements that involve risks and uncertainties. Our actual results could differ
materially from those anticipated in the forward-looking statements as a result
of many factors including the risks discussed under the caption "Risk Factors"
and elsewhere in this prospectus.

OVERVIEW

We design, manufacture and sell a family of highly scalable, all-optical,
or photonic, switching subsystems. Our products are based upon our proprietary
implementation of silicon-based micro-electromechanical systems, or MEMS, which
enable optical data streams to be switched among optical fibers entirely in the
optical domain. Our products allow next-generation optical network systems
manufacturers to build scalable, cost-effective optical networking products.

From our inception in June 1997 through April 2000, our operating
activities were primarily devoted to the research and development of our
photonic switching subsystems and automated manufacturing processes. We also
staffed our administrative, marketing and sales organizations and formed
strategic relationships with some of our customers. In April 2000, we began
shipping our photonic switching subsystems for revenue. Since our inception, we
have incurred significant losses, and as of September 30, 2000, we had an
accumulated deficit of $40.5 million. We have not achieved profitability on a
quarterly or annual basis, and anticipate that we will incur net losses for at
least the next several quarters. We expect to incur significant sales and
marketing, research and development and general and administrative expenses for
the foreseeable future and, as a result, we will need to generate significantly
higher revenues to achieve and maintain profitability.

Our shipments to date have consisted of our 4x4-port, 8x8-port and
16x16-port photonic switching subsystems. Ports refer to the number of fibers
that enter or exit the subsystem. As of September 30, 2000, we have shipped more
than 175 units to 14 customers. Our customers are utilizing our products in a
variety of ways, including developmental purposes, field trials and early
network deployments. We currently sell through our direct sales force to optical
network systems manufacturers in North America and Europe. We have generated
substantially all of our revenues from shipments of units to a limited number of
customers, with seven customers accounting for 87% of our revenues for the nine
months ended September 30, 2000. We expect that a significant portion of our
revenues will continue to come from sales of our photonic switching subsystems
to a small number of established and emerging optical network systems
manufacturers.

The market for all-optical network systems into which our products are
integrated is new and rapidly evolving. Accordingly, we expect the number,
volume and timing of orders we receive will be difficult to predict. A
customer's decision to purchase our photonic switching subsystems will typically
involve a significant commitment of its resources and a lengthy evaluation and
product qualification process. This initial evaluation and product qualification
process typically takes several months and includes:

- technical evaluation;

- integration;

- testing;

- network planning; and

- implementation into the network.

Even after our customers choose to purchase our photonic switching
subsystems, our future orders will be impacted by the timing of deployment of
our customers' systems by communications service providers. Timing of deployment
may vary widely by customer and will depend in part on the technological

21
<PAGE> 27

capabilities of the service provider, the size of the network deployment, the
complexity of the service provider's network environment and the degree of
hardware configuration necessary to deploy our customers' systems.

Our cost of revenues includes direct labor, materials and manufacturing
overhead. Materials include amounts paid to suppliers to produce our MEMS chips
and other components. Manufacturing overhead primarily consists of capital
equipment depreciation, facility costs, manufacturing engineering labor and
management and supervisory overhead. We believe that one of our important
competitive advantages will be our emphasis on high-volume manufacturing. To
that end, we have invested, and expect to continue to invest, significant
capital in the development of automated manufacturing processes, operations
infrastructure and product design to enable us to supply commercial quantities
of our products to customers and to improve our costs by enhancing manufacturing
yields.

Research and development expenses consist primarily of salaries and related
personnel costs, fees paid to consultants and outside service providers and
prototype costs related to the design, development, testing and enhancement of
our photonic switching subsystems. We expense our research and development costs
as they are incurred. Several components of our research and development effort
require significant expenditures, the timing of which can cause significant
variability in our quarterly expenses. The number of prototypes required to
build and test a complex product such as our photonic switching subsystems is
large, and the building and testing process occurs over a short period of time.
We also are devoting substantial resources to the continued development of new
products. We believe that research and development is critical to our strategic
product development objectives and that to leverage our leading technology and
meet the changing requirements of our customers, we will need to fund
investments in several development projects in parallel. As a result, we expect
our research and development expenses to increase in absolute dollars in the
future.

Sales and marketing expenses consist primarily of salaries and related
expenses, for personnel engaged in marketing, sales and customer engineering
support functions, as well as costs associated with promotional and other
marketing expenses. In order to increase market penetration of our products, we
intend to initiate additional marketing programs to support our photonic
switching subsystems and expand our direct sales and support operations by
establishing sales offices in additional domestic and international locations.
Additionally, the complexity of our photonic switching subsystems requires that
we employ highly trained customer service and support personnel to assist our
customers. We expect to expand our customer service and support organization to
meet these requirements. We expect that sales and marketing expenses will
increase in absolute dollars in future periods.

General and administrative expenses consist primarily of salaries and
related expenses, for executive, finance, accounting, information technology,
and human resources personnel, as well as recruiting expenses, professional fees
and other corporate expenses. We expect general and administrative expenses to
increase in absolute dollars as we add personnel and incur additional costs
related to the planned growth of our business and our operation as a public
company.

In connection with the grant of stock options to employees during 1999 and
the nine months ended September 30, 2000, we recorded unearned stock-based
compensation of approximately $1.9 million and $49.1 million, respectively,
representing the difference between the value of the common stock for financial
reporting purposes and the exercise price of these options at the date of grant.
Unearned stock-based compensation is amortized over the vesting period of the
applicable options. We expensed approximately $430,000 of stock-based
compensation during the year ended December 31, 1999 and approximately $12.5
million of stock-based compensation during the nine months ended September 30,
2000. This compensation expense relates to stock options awarded to individuals
in all operating expense categories and cost of goods sold. At September 30,
2000, the remaining unearned stock-based compensation of $38.1 million will be
amortized as follows: $6.7 million in the remainder of 2000, $17.2 million in
2001, $9.1 million in 2002, $4.3 million in 2003 and $800,000 in 2004.

As of December 31, 1999, we had approximately $8.0 million of federal and
state net operating loss carryforwards and approximately $8.0 million of state
net operating loss carryforwards for tax reporting

22
<PAGE> 28

purposes available to offset future taxable income. The federal net operating
loss carryforwards expire at various dates beginning in 2012, and the state net
operating loss carryforwards expire at various dates beginning in 2005, to the
extent that they are not utilized. We have not recognized any benefit from the
future use of loss carryforwards for these periods, or for any other periods,
since inception. Our analysis of the realizability of the tax benefits of net
loss carryforwards indicates that the underlying assumptions of future
profitable operations contain risks that do not provide us with sufficient
assurance to recognize any tax benefits at this time.

RESULTS OF OPERATIONS

Revenues

The quarter ended June 30, 2000 was the first quarter in which we
recognized revenue. Revenues for the nine months ended September 30, 2000 were
approximately $1.5 million. Our total revenues for the nine months ended
September 30, 2000 were derived from fourteen customers. We recognize revenue
from product sales when the product has been shipped. Our products are not
subject to any customer acceptance process. Subsequent to the sale of the
products, we have no obligation to provide any modification or customization,
upgrades, enhancements or any post contract customer support. See note 2 of
notes to the financial statements for an explanation of our revenue recognition
policies.

Cost of Revenues

Cost of revenues for the nine months ended September 30, 2000 were
approximately $2.1 million. During prior periods we had no revenues and
generated no cost of revenues. Our gross margin for the six months ended June
30, 2000 which included our first quarter of revenue was not meaningful due to
significant product startup costs and depreciation which were allocated over a
low volume of products shipped. For the quarter ended September 30, 2000 our
gross margins improved to approximately $194,000 or 18% of revenues excluding
stock based compensation of $170,000. In future periods our gross margin will be
affected by a number of factors, including the following:

- our ability to manufacture our photonic switching subsystems in high
volumes;

- the manufacturing yields we experience;

- level of utilization of our manufacturing infrastructure;

- the mix of products sold;

- new product introductions both by us and by our competitors;

- material and component costs; and

- changes in our pricing policies and those of our competitors.

Research and Development Expenses

Our research and development expenses for the period from inception to
December 31, 1997, the years ended December 31, 1998, 1999 and the nine months
ended September 30, 1999 and 2000 were approximately $31,000, $1.1 million, $6.3
million, $3.8 million, $17.3 million, respectively. The increase in 1999 of
approximately $5.3 million, or 499%, over 1998 was due primarily to increased
costs associated with a significant increase in personnel. The increase in the
nine months ended September 30, 2000 of approximately $13.5 million or 355% over
the nine months ended September 30, 1999 was due primarily to an increase in
prototype expenses, as well as increased personnel expenses. The increase in
1998 of approximately $1.0 million over 1997 was due primarily to increased
costs associated with early expansion of our operations. We expect to increase
research and development expenses in absolute dollars in future periods.

23
<PAGE> 29

Sales and Marketing Expenses

We did not recognize any sales and marketing expenses in the period from
inception to December 31, 1997 or in 1998. Sales and marketing expenses for the
year ended December 31, 1999 and for the nine months ended September 30, 1999
and 2000, were approximately $182,000, $125,000 and $4.3 million, respectively.
The increases in each period were due primarily to the initiation of sales and
marketing activities and the increase in the number of sales and marketing
personnel to support the launch of our products. We expect sales and marketing
expenses to increase in absolute dollars in future periods.

General and Administrative Expenses

General and administrative expenses were approximately $23,000, $251,000,
$911,000, $653,000 and $11.1 million for periods ended December 31, 1997, 1998,
1999 and for the nine months ended September 30, 1999 and 2000. The increase of
approximately $660,000, or 262%, in 1999 compared to 1998 was due primarily to
the increased costs associated with an increase in the number of general and
administrative personnel and increased recruiting, accounting and consulting
activities. The increase of approximately $10.4 million, or 1,595%, for the nine
months ended September 30, 2000 over the comparable period in 1999 was also
primarily due to the same factors. The increase in 1998 of approximately
$228,000 over 1997 was due primarily to increased costs associated with
expansion of our operations.

LIQUIDITY AND CAPITAL RESOURCES

Since inception through September 30, 2000, we have financed our operations
primarily through private sales of approximately $103.3 million of equity
securities as well as through approximately $7.0 million of capital leases.

Our redeemable convertible preferred stock has been classified outside of
stockholders' equity based upon accounting guidelines promulgated by the
Securities and Exchange Commission. The preferred stock had a right to
liquidation preferences upon a merger, consolidation or sale or sale of
substantially all of our assets. Solely as a result of these liquidation
provisions the preferred stock is treated as redeemable. The preferred stock
will convert to common stock upon completion of this offering and these
liquidation preferences will terminate. See note 5 of the notes to our financial
statements.

We used approximately $5.3 million in cash for operations in 1999, an
increase of $4.1 million from the approximately $1.2 million used in 1998. The
increase was primarily due to an increase in our net loss before depreciation
and amortization and stock-based compensation from approximately $1.2 million in
1998 to approximately $6.4 million in 1999, partially offset by increased
accounts payable and accrued liabilities. We used approximately $13.9 million in
cash for operations for the nine months ended September 30, 2000, which reflects
our net loss before depreciation and amortization and stock-based compensation
of approximately $16.2 million, increased by the increase in accounts
receivable, inventories and prepaid expenses and other assets and offset by the
increase in accounts payable and accrued liabilities.

We used approximately $372,000 in cash from investing activities in 1998
and approximately $20.0 million in cash from investing activities in 1999. We
generated approximately $5.1 million in cash in 1998, approximately $23.6
million in cash in 1999 and approximately $79.8 million in cash for the nine
months ended September 30, 2000 from financing activities, due primarily to cash
received from private sales of convertible preferred stock. We have used leases
to partially finance capital purchases. In addition, we had approximately $1.6
million in capitalized lease obligations outstanding at December 31, 1999 and
approximately $6.1 million at September 30, 2000.

We have capital lease financing facilities totaling $13.0 million, of which
$12.3 million was utilized as of September 30, 2000. We have committed to
purchase inventory components costing $3.8 million over various periods ending
in 2004.

24
<PAGE> 30

On April 7, 2000, we entered into a revolving credit agreement with
MMC/GATX Partnership No. 1, Comdisco, Inc., and Silicon Valley Bank for an
equipment financing credit line, which provides for maximum borrowings of $10.0
million. The repayment period on the credit line is thirty-six months, with a
termination date of February 28, 2001. Borrowings under this credit line are
secured by all of our equipment, fixtures and other personal property designated
in the agreement, the Loan Agreement Supplement No. 1 dated April 28, 2000 and
the Loan Agreement Supplement No. 2 dated June 30, 2000. Funds borrowed pursuant
to the credit line bear interest at a per annum interest rate equal to the sum
of the applicable U.S. Treasury note interest rate, plus the loan margin of
2.75%. The credit agreement restricts our ability to pay dividends, dispose of
our assets outside of the ordinary course of our business, and obligates us to
avoid encumbering any of our assets. In connection with the credit line, we have
issued warrants to purchase an aggregate of 201,857 shares of our series D
preferred stock at an exercise price of $2.477 per share. All of these warrants
are exercisable until April 7, 2010.

On April 5, 1999, we entered into a separate credit agreement with Silicon
Valley Bank, which provides for maximum borrowings of $1.0 million for equipment
financing. Borrowings under this line of credit are secured by our goods,
equipment, fixtures, inventory, raw materials, supplies, accounts, cash,
contract rights (except contract rights which are non-assignable by their terms)
and other intangible assets, including intellectual property such as patents,
goodwill, trade or service marks and copyrights. Funds borrowed under this
credit agreement bear interest at a per annum interest rate equal to the sum of
the applicable U.S. Treasury note interest rate plus the loan margin of 3.0%.
The agreement restricts our ability to freely dispose of our assets, change the
nature of our business, and make investments or distributions. In connection
with this agreement, we issued a warrant to Silicon Valley Bank on April 5, 1999
to purchase 98,493 shares of our series C preferred stock at an exercise price
of $0.73 per share exercisable until April 5, 2004.

On March 23, 1999, we entered into a subordinated loan and security
agreement with Comdisco, Inc. providing $1.0 million of credit at the interest
rate of twelve percent per year, with a repayment term of thirty-six months.
Borrowings under this line of credit are secured by our receivables, equipment,
fixtures, general intangibles, inventory, personal property and intellectual
property rights. The agreement restricts our ability to declare dividends, merge
with any entity or dispose of our assets. In connection with this agreement, we
issued a warrant to Comdisco on April 8, 1999 to purchase 191,781 shares of our
series C preferred stock at an exercise price of $0.73 per share exercisable
until the later of seven years after the date of the grant or three years after
the effective date of our initial public offering, whichever is later.

The fair value of the warrants at the time of grant was recorded as prepaid
financing fees and is being amortized over the term of the credit agreement.

Cash and cash equivalents and short-term investments totaled approximately
$20.2 million at December 31, 1999, up from approximately $4.7 million at
December 31, 1998. Most of the increase came from sales of convertible preferred
stock offset, in part, by cash used in operations and the purchase of capital
equipment. At September 30, 2000, cash and cash equivalents and short-term
investments totaled approximately $66.5 million. The increase from December 31,
1999 was due to the receipt of approximately $75.0 million from the sale of
convertible preferred stock in May and June 2000.

We expect to devote substantial capital resources to continue our research
and development efforts, to hire and expand our sales, support, marketing and
product development organizations, to expand marketing programs, to establish
additional facilities worldwide and for other general corporate activities.
However, we cannot be certain of the extent to which any of these activities
will consume our capital resources during the next twelve months and beyond.
Although we believe that our current cash balances, together with the net
proceeds of this offering, will be sufficient to fund our operations for the
next 12 months, we cannot assure you that these cash resources will be
sufficient and that we will not require additional financing within this time
frame. Furthermore, if we require additional funding, we cannot assure you that
such funding will be available on terms acceptable to us or at all.

25
<PAGE> 31

RECENT ACCOUNTING PRONOUNCEMENTS

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial
Statements." The objective of SAB 101 is to provide further guidance on revenue
recognition issues in the absence of authoritative literature addressing a
specific arrangement or a specific industry. We have adopted SAB 101 for all
periods presented.

In March 2000, the FASB issued FASB Interpretation No. 44 (FIN 44),
"Accounting for Certain Transactions Involving Stock Compensation." We will be
required to adopt FIN 44 effective July 1, 2000 in respect to specific
provisions applicable to new awards, exchanges of awards in a business
combination, modifications to outstanding awards, and changes in grantee status
that occur on or after that date. FIN 44 addresses practice issues related to
the application of Accounting Practice Bulletin Opinion No. 25, "Accounting for
Stock Issued to Employees." We believe that the application of FIN 44 will not
have a material impact on our financial position or results of operations.

In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133 (FAS 133), "Accounting for
Derivative Instruments and Hedging Activities." In May 1999, the FASB delayed
the effective date of FAS 133 by one year. We will be required to adopt FAS 133
for fiscal year 2001. This statement establishes a new model for accounting for
derivatives and hedging activities. Under FAS 133, all derivatives must be
recognized as assets and liabilities and measured at fair value. We believe that
the adoption of this new accounting standard will not have a material impact on
our financial position or results of operations.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET INTEREST RATE SENSITIVITY

Our exposure to financial market risk, relates primarily to changes in
interest rates affecting our investment portfolio and outstanding debt
obligations. We generally do not attempt to reduce or eliminate our market
exposure on our investment securities because a substantial majority of our
investments are in fixed-rate short-term securities. We do not have any
derivative financial instruments. Due to the short-term nature of our
investments, we believe that there is no material risk. In addition,
substantially all of our outstanding indebtedness is either fixed-rate debt or
short-term variable-rate debt. Therefore, no tabular disclosures have been
presented.

EXCHANGE RATE SENSITIVITY

We operate primarily in the United States and all sales to date have been
made in U.S. dollars. Accordingly, we have had no material exposure to foreign
currency rate fluctuations.

26
<PAGE> 32

BUSINESS

OVERVIEW

We design, manufacture and sell a family of all-optical, or photonic,
subsystems for switching or changing the direction and flow of optical signals.
Our switching subsystems are based upon our proprietary implementation of
micro-electromechanical systems, or MEMS, fabricated on silicon wafers which
enable all-optical switching of data streams. Our products allow optical network
systems manufacturers to build scalable, cost-effective systems that address
next generation switching needs in the long distance, or long haul, metropolitan
and local neighborhood, or access, segments. MEMS-based photonic switches
function by using miniaturized versions of common optical components, including
lenses and mirrors, to steer pulses of light from one fiber to another.
Similarly, they can be used to add optical signals into or remove them from the
network at various points. By eliminating the need to convert light into
electrical signals for processing and switching, our products enable our
customers to market systems that can grow in size and that are capable of
operating in multiple segments of the communications network on a cost-effective
basis.

By utilizing our subsystems, our customers can shorten their product
development time, more readily add additional product features and reduce
product development costs. By deploying products that incorporate our
subsystems, communications service providers are able to reduce their operating
costs, support higher data rates as they are introduced, simplify network
reconfiguration and improve reliability.

We design our products to be manufactured in high volume, and we
continuously review and modify our product designs to ensure product quality,
reliability and durability. In addition, we have implemented several proprietary
automated and semi-automated manufacturing systems and processes to enhance our
manufacturing yields and produce higher volumes of products than generally
possible using manual production techniques.

We currently ship several configurations of our subsystems based on
two-dimensional architectures. MEMS-based photonic switches based on
two-dimensional architectures utilize mirrors that are either "on," meaning that
the mirror is in a position to deflect light, or "off," allowing light to pass
through the switch uninterrupted. This architecture is also referred to as
planar, since light enters and exits the device on a single plane. Our current
family of photonic subsystems is available in multiple configurations, ranging
from 4x4-ports to 16x16-ports. The number of ports refers to the number of
fibers that can enter and exit the switching subsystem. We are currently
developing a family of photonic switching subsystems based on three-dimensional
architectures. In a three-dimensional architecture, mirror structures are
mounted and are free to move in three dimensions, allowing mirrors to work
together to build switches with thousands of ports.

INDUSTRY BACKGROUND

Increase in Demand for Bandwidth

Over the past decade, the proliferation of the Internet and an increase in
the transmission of large data files resulting from electronic commerce and
telecommuting have caused a dramatic increase in the volume of traffic traveling
across communications networks. This increase in data traffic, coupled with
demand for enhanced services and improved connection times, has increased demand
for high capacity, or high bandwidth, communications networks. To address large
increases in communications network utilization, communications service
providers are investing significant capital to upgrade and enhance the
capabilities of their networks and to provide flexibility to support future
service offerings and increased bandwidth requirements.

Evolution of Optical Networks

Optical networks, which transmit light over glass fibers, can carry
significantly more information over longer distances than electrical signals
traveling over copper wire. Because of this and other characteristics,

27
<PAGE> 33

optical networking systems provide the most capable solution to address
accelerating bandwidth requirements and, as a result, demand for optical
networks is strong and is expected to accelerate in the coming years. According
to RHK, a market research and consulting firm, the global optical networking
systems market is projected to increase from $31.5 billion in 1999 to $90.1
billion in 2003.

A number of factors are driving growth in demand for, and proliferation of,
optical network systems, including:

Changing Traffic Patterns. The mix of information carried on
communications networks is rapidly shifting from continuous, low-bandwidth
streams, such as voice traffic, to large blocks of high-bandwidth data,
such as computer files and web pages, that are transferred in bursts.
Because of their inherent capacity, optical networks are well suited to
handle larger data files and the shift in traffic types.

Shift to Mesh-based Networks. To address changing traffic patterns and
to provide increased reliability, service providers are seeking to replace
networks based on ring topologies with networks based on mesh
architectures, which use a greater number of network junctions, or nodes.
Mesh-based architectures are capable of efficiently supporting larger
amounts of traffic and offer greater redundancy than rings.

Increasing Fiber Deployments. Communication service providers are
installing new optical networks to add capacity and are turning on, or
lighting, previously deployed "dark" fiber optic cables to support
additional capacity.

Proliferation of High-capacity Technologies. Widespread deployment of
technologies such as dense wavelength division multiplexing, which uses
multiple wavelengths of light simultaneously in a single fiber to transmit
traffic, has increased the amount of information that can be carried on a
single fiber. For example, individual fibers can now carry as many as 160
separate wavelengths, each of which is capable of transporting network
traffic. In addition, data rates for each wavelength are dramatically
increasing and are now capable of moving data at rates as high as 40
gigabits per second.

Importance of Switching Technologies

The combination of these factors has increased the need to efficiently move
traffic onto, around and off of the network. Switches, which control traffic
movement on a network, are becoming an increasingly critical element of the
communications infrastructure. Both electrically based and optically based
switches perform a variety of functions throughout the network, including:

- shifting traffic from one network branch to another within metropolitan
areas, or cross-connect switching;

- directing traffic along various segments of networks between metropolitan
areas, or core switching;

- inserting or removing traffic at network junctions and combining it with
other traffic on the network, or add-drop multiplexing; and

- providing back-up switching capabilities in the event of a failure on a
portion of the network, or protection switching.

28
<PAGE> 34

The following diagram illustrates a typical communications network and
indicates where switches typically exist.

[DIAGRAM]
In this place is a graphic of a communications network which encompasses
approximately one-half of the page. Positioned throughout the graphic is the
following text "Backbone/Long Haul Network Mesh," "Regional/Metro Network Ring,"
"Access Network Ring," "Network Core Switch," "Network Core Switch," "Optical
Crossconnect," "Optical Add-Drop Multiplexer (OADM)," "Optical Protection
Switch," "(OADM)," "Optical Protection Switch," "Optical Protection Switch" and
"Customer Premises Equipment."

Since switches direct network traffic at every network junction, any
improvement to switching technology has the potential to improve overall network
performance. In addition, improving the speed at which data communications
services can be established or changed within a network, or provisioned, has
been an ongoing challenge for communications service providers.
Electrically-based networks have utilized a wide variety of electronic switching
technologies to improve traffic management. However, within optical networks, as
data rates and channel counts increase, traditional switching technologies have
been unable to keep pace with increasing network capacity.

Optical-electrical-optical Switching

Optical network switches in use today are generally based on a hybrid
technology that first converts optical data streams into electrical signals for
processing. After electronic processing, the information must be converted back
into an optical data stream for transmission to its next destination. These
complex switching systems are known as optical-electrical-optical, or OEO,
systems. OEO switches also require substantial power and central office rack
space to operate. In addition, as the number of fibers and wavelengths in use
increases, the number of OEO switches required to handle network traffic must
also increase. While they have been effectively deployed in optical networks to
date, OEO switches are becoming increasingly incapable of supporting the needs
of emerging next-generation networks. More specifically, OEO switches are
subject to a number of limitations including:

Fixed Data Rates. OEO switches operate at fixed data rates. If the data
rate in a network is changed, each switch throughout the network must be
manually reconfigured, if possible, or replaced with a faster switch.

Lack of Transparency. OEO switches lack transparency, or the ability to
pass signals through a switch without regard to the format and sequence in which
information is transmitted and exchanged, or transmission protocol, the rate at
which data is transmitted or the wavelength associated with a signal.

29
<PAGE> 35

Since these switches are designed to support a particular protocol and are
configured to operate with a specific wavelength, they limit network
flexibility. If additional wavelengths are added to the network, the switch must
be upgraded or replaced if it cannot support the increased number of
wavelengths.

High Total Cost of Ownership. The ability to provision new communications
links rapidly with little or no manual intervention and at a low cost is
becoming essential in the competitive communications services industry. OEO
switching systems typically require costly infrastructure, such as extensive
building and rack space, and electrical power, network management systems and
significant cooling systems to operate reliably. Moreover, adding new services
or changing the configuration of OEO-based switching systems can be very
time-consuming and typically requires the dispatch of technicians to network
intersections where switches reside. Due to the labor-intensive and complex
nature of this process, communications service providers often require a long
period of time to fulfill a customer's request to implement new services or
modify existing services, often foregoing revenue opportunities or risking
losing customers.

Significant Complexity and Lack of Scalability. As additional fibers are
lit, or as more wavelengths, or channels, are deployed in an optical network,
the number of these switches must increase as well, adding significant cost and
complexity to the network itself and to its operation. OEO switches require
significant manual intervention and are time-consuming to deploy, and they
cannot easily scale to support more traffic without a commensurate increase in
ancillary infrastructure and equipment.

Emergence of Photonic Switching

To address the limitations of OEO switching, optical network systems
manufacturers and communication service providers are seeking switching
technologies based solely on optics whereby optical signals can be added to,
removed from or switched among various optical fibers completely in the optical
domain. These switching technologies are referred to as photonic switching
systems, and they offer the potential to reduce switching bottlenecks and
operating costs by eliminating many of the limitations presented by OEO
switches. Photonic switching systems also facilitate the introduction of new
technologies and services, support multiple, high-speed data rates, protocols
and wavelengths and may be scaled as the network infrastructure evolves. Due to
their cost, performance and scalability advantages, photonic switching systems,
of which our product is a subsystem, are expected to become an integral part of
the communications infrastructure. Pioneer Consulting, a telecom research firm,
forecasts that the market for photonic switching systems in North America and
Europe will grow from approximately $70 million in 2000 to $7.5 billion in 2004.

Market Requirements for Photonic Switching Systems

In order to widely deploy photonic switching systems, optical network
system manufacturers and communication service providers require products that
meet the performance, scalability and cost requirements of next-generation
optical networks. Specifically, photonic switching systems must:

- utilize switching technologies that are reliable and capable of being
manufactured in volume;

- be capable of withstanding rigorous environmental conditions;

- support high-speed applications, multiple protocols and a wide variety of
wavelengths;

- scale cost effectively into large, high port-count configurations as the
needs of service providers evolve;

- minimize power and cooling requirements and central office rack space;

- operate in a number of applications such as optical cross-connects that
switch traffic from one network branch to another within metropolitan
areas, optical add-drop multiplexers that insert or remove traffic at
network junctions and combine it with other traffic on the network,
bandwidth reprovisioning and protection switching systems that provide
back-up switching capabilities in the

30
<PAGE> 36

event of a failure on a portion of the network, as well as new
applications as they are introduced; and

- lower the total cost of ownership for service providers by reducing their
initial purchase cost, ongoing maintenance and operational expenses.

Alternative Photonic Switching Technologies

Recognizing the growing importance of photonic switching, optical systems
and component manufacturers have been developing several different photonic
switching technologies, including the following: liquid crystal, bubble, lithium
niobate, acousto-optical, optomechanical, thermo-optical and
micro-electromechanical systems. Due to the rigorous performance, cost and
reliability requirements of optical networks, adaptation of the majority of
these technologies for widespread deployment in optical networks has not yet
proven to be practical. In contrast, micro-electromechanical systems, or MEMS,
-based photonic switching technologies today offer the potential to deliver the
required volume manufacturability, cost, performance, scalability and
reliability needed to address carrier-class requirements.

THE OMM SOLUTION

We design, manufacture and sell high performance, highly scalable, photonic
switching subsystems based on our proprietary implementations of silicon-based
micro-electromechanical systems, or MEMS, technology. Our photonic switching
subsystems are integrated into optical switching systems that are used in
optical networks, which enable our customers to rapidly and cost-effectively
develop high performance next-generation optical network systems. Due to the
versatility and flexibility of our products, customers are able to utilize our
subsystems to build network equipment for all segments of communications
networks and for a wide variety of applications, including optical add-drop
multiplexers that insert or remove traffic at network junctions and combine it
with other traffic on the network, optical cross-connects that switch traffic
from one network branch to another within metropolitan areas, core switches and
protection switching systems that provide back-up switching capabilities in the
event of a failure on a portion of the network.

By applying our expertise in MEMS design, optics, opto-electronics,
packaging and automated manufacturing, we are able to deliver cost-effective,
highly reliable subsystems to optical network system manufacturers. Our photonic
switching subsystems provide our customers with a number of important benefits,
including:

Fully Transparent Switching Capabilities. Our products support optical
transmissions utilizing any protocol, running at any data rate, transmitted on
any wavelength. Moreover, our products are designed to support optical networks
as they evolve by requiring no modification to support new or additional
protocols, increased channel counts or increased data rates as they are
introduced into the network.

Scalability. Our products are designed to enable optical network systems
manufacturers to build low to high port-count photonic switching systems. By
combining, or cascading, our photonic switching subsystems, our customers can
cost-effectively create photonic switches with a variety of port densities.
Additionally, our products' architectures allow our customers to build systems
that can be readily upgraded.

Cost-effectiveness. The performance characteristics of our products, as
well as reduced infrastructure requirements relative to
optical-electrical-optical, or OEO, switching systems, can lead to a
substantially lower cost of ownership for communication service providers.
Furthermore, our products do not require the regulated temperature environments,
substantial electrical power or building space required by photonic systems
based on alternative technologies.

Carrier-class Reliability. Our products are engineered and rigorously
tested to withstand harsh environmental conditions, including temperature
extremes, shock and vibration. Through our proprietary

31
<PAGE> 37

hermetic packaging processes, our products are designed to be impervious to
outside elements that can compromise long-term reliability.

Application Flexibility. Our products are designed for integration in
optical switching systems and can be utilized for a variety of applications for
each segment of the network. Using the same family of products, our customers
can build systems to address multiple applications in between metropolitan
areas, or long haul, within metropolitan areas, or connecting end users within a
metropolitan area with access segments, thereby leveraging their product
development investments.

We believe that our products and technologies offer a combination of
scalability, flexibility, performance and reliability, which enables us to
deliver high-value photonic switching products to customers worldwide.

THE OMM STRATEGY

Our goal is to be the leading supplier of photonic switching subsystems.
Key elements of our strategy to attain this goal include:

Extend Leadership in Supplying Photonic Switching Subsystems. We intend to
extend our lead in commercial shipments of photonic switching subsystems and add
to our product line by continuing to invest substantial resources in research
and development. We will continue to focus on leveraging our intellectual
property in the areas of micro-electromechanical systems, or MEMS, design,
optics, opto-electronics and device packaging.

Leverage Automation Capabilities. To date, we have automated many critical
steps in our assembly and testing processes, including the lifting and
activation of MEMS mirror structures and the alignment of arrays of fibers and
lenses. We will continue to invest substantial resources to increase the level
of automation we employ in the assembly and testing of our products to enable us
to rapidly scale our production capabilities.

Broaden Product Portfolio. We currently offer 4x4-port, 8x8-port and
16x16-port switches in configurations that allow traffic to be switched among
two sets of fibers, or a 2-plane configuration, three sets of fibers, or a
3-plane configuration, or four sets of fibers, or a 4-plane configuration. We
will continue to develop additional switch configurations based on two-dimension
and three-dimension technologies to allow our customers to build photonic
switches with thousands-by-thousands of ports.

Design Products for Manufacturability. From the earliest stages of product
development, we devote significant resources to engineer our products to be
manufacturable in high volumes. We also apply expertise derived from our
knowledge of semiconductor fabrication methodologies and processes to improve
product designs and manufacturing yields.

Focus Exclusively on Subsystems. We focus exclusively on designing and
marketing photonic switching subsystems that are integrated into optical
switching systems that are used in optical networks. By focusing on photonic
switching subsystems, we enable our customers to improve their products' time to
market and allow them to devote their resources to application development and
enhancing their switching systems' capabilities. Moreover, our focus allows us
to concentrate our resources on providing best-in-class photonic switching
subsystem capabilities while addressing a larger portion of the overall optical
switching subsystem market.

Develop and Enhance Strategic Partnerships with Customers. We will continue
to pursue strategic partnerships with optical network systems manufacturers in
order to enable our customers to shorten their product development cycles and to
improve their time to market. Through the establishment of close collaborations
with our customers, we intend to assist them in identifying and responding to
market opportunities while extending our manufacturing and packaging
capabilities to keep pace with customer and market requirements.

32
<PAGE> 38

OUR PRODUCTS

We sell two-dimensional photonic switching subsystems that are scalable
both in port counts, which provides for additional capacity, and in the number
of switching planes, which enables specific optical wavelengths to be added or
dropped. These products enable optical network systems manufacturers to focus
their development resources on software development, system architecture design
and interworking of optical switches with other network elements and
technologies. In addition, we are developing advanced versions of our
two-dimensional products, as well as a family of three-dimensional products.

Current Products

We currently offer our 4x4-port, 8x8-port and 16x16-port, two-dimensional
photonic switching subsystems in both cross-connect and optical add-drop
configurations. Our products can be cascaded to build low-loss optical
cross-connect architectures up to sizes of 256x256-ports. This product suite is
available in 2-plane, 3-plane and 4-plane configurations which support a wide
range of applications, including optical cross-connects that switch traffic from
one network branch to another within metropolitan areas, add-drop multiplexers
that insert or remove traffic at network junctions and combine it with other
traffic on the network, protection switching systems that provide back-up
switching capabilities in the event of a failure on a portion of the network and
core switching systems that direct traffic along various segments of networks
between metropolitan areas. An example of our two-dimensional product in a
4-plane configuration is shown below.

[GRAPHIC]

In this place is a picture of a two-dimensional photonic switching
subsystem package.

TWO-DIMENSIONAL PHOTONIC SWITCHING SUBSYSTEM

33
<PAGE> 39

Our photonic switching subsystems are delivered in rugged, circuit board
mountable hermetic packages with integrated drive electronics and a standard
logic interface to facilitate easy connection to other components. Additionally,
we offer customized versions of our products with subsystems that incorporate
board-level electronics and related optoelectronics components requested by our
customers. An example of a customized two-dimensional product is shown below.

[GRAPHIC]

In this place is a picture of a custom two-dimensional photonic switching
subsystem.

CUSTOM TWO-DIMENSIONAL PHOTONIC SWITCHING SUBSYSTEM

The following table summarizes our current product offerings.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
PRODUCT KEY ATTRIBUTES DATE OF AVAILABILITY
-----------------------------------------------------------------------------------------------------------
<C> <S> <C>
4x4-2 plane 4 input and 4 output port March 2000
non-blocking photonic switch
-----------------------------------------------------------------------------------------------------------
4x4-3 plane 4 input and 4 output port July 2000
non-blocking photonic switch with
additional add/drop port
capabilities
-----------------------------------------------------------------------------------------------------------
4x4-4 plane 4 input and 4 output port July 2000
non-blocking photonic switch with
add/drop and signal pass-through
capabilities
-----------------------------------------------------------------------------------------------------------
8x8-2 plane 8 input and 8 output port March 2000
non-blocking photonic switch
-----------------------------------------------------------------------------------------------------------
8x8-3 plane 8 input and 8 output port July 2000
non-blocking photonic switch with
additional add/drop port
capabilities
-----------------------------------------------------------------------------------------------------------
8x8-4 plane 8 input and 8 output port July 2000
non-blocking photonic switch with
add/drop and signal pass-through
capabilities
-----------------------------------------------------------------------------------------------------------
16x16 product family 16 input and 16 output port non- October 2000
blocking photonic switch products
with add/drop and signal
pass-through capabilities
-----------------------------------------------------------------------------------------------------------
Customized subsystems Circuit board mounted subsystems April 2000
with higher levels of control and
monitoring electronics
-----------------------------------------------------------------------------------------------------------
</TABLE>

34
<PAGE> 40

Future Products

We are enhancing our two-dimensional product family to expand port
capacities as well as to add new capabilities. We are currently developing a
32x32-port photonic switching subsystem which we expect to introduce in 2001. By
cascading these products, our customers will be able to build very dense,
scalable systems up to 512x512 ports. We also plan to extend our two-dimensional
product line to include enhanced features and functionality, at both the
electronics and optoelectronics levels. In addition, we intend to enhance the
functionality of our switching products by incorporating combinations of these
capabilities into a single package. We believe these integrated subsystems will
enable substantial cost saving to our customers and create additional
opportunities for us in the metropolitan area and enterprise level markets.

We are also developing a three-dimensional switching subsystem based on a
proprietary scanning mirror design which we plan to introduce in late 2001. Our
three-dimensional products will be designed to enable optical network systems
manufacturers to provide very large-scale optical cross-connect switching
capabilities to many thousands of ports. With the combination of two-dimensional
and three-dimensional switching products, it is our intention to offer our
customers the broadest possible range of switch densities in the photonic
switching industry.

CUSTOMERS AND STRATEGIC RELATIONSHIPS

We are currently shipping our products to 14 optical network systems
manufacturers worldwide for which we recognize revenues. Following are our top
seven customers based on revenues since we began shipping our products in April
2000 through September 30, 2000:

<TABLE>
<S> <C>
Cisco Systems, Inc. Siemens AG
Corvis Corporation Sorrento Networks, Inc.
ilotron Ltd. Village Networks, Inc.
Nortel Networks Corporation
</TABLE>

For the nine months ended September 30, 2000, each of these customers
accounted for at least 5% of our sales. As a group, these seven customers
accounted for 87% of our total sales for the same period. Of these seven
customers Cisco Systems, Corvis, Nortel Networks and Siemens each accounted for
more than 10% of our total sales for the same period.

As part of our strategy to enable our customers to shorten their product
development cycles and improve their time to market, we enter into strategic
relationships with current and potential customers. To date we have entered into
relationships to collaborate on the development of our next generation of
products with the following entities:

Alcatel

In May 2000, we entered into an agreement with the Alcatel Optics Group, a
business group of Alcatel SA, to collaborate in the development of a large
optical crossconnect subsystem based upon three-dimensional optical
micro-electromechanical systems, or MEMS, switching technology. The agreement,
which expires on December 31, 2002, additionally provides for a mutual exchange
of intellectual property rights so that each party retains rights to technology
associated with its own product while assigning to the other party rights to
technology associated with the other party's product. This collaboration is
intended to enable us to utilize input from Alcatel's development teams to
develop our three-dimensional products faster than if developed alone. Alcatel
has announced that it intends to encompass these three-dimensional products into
its Crosslight(TM) product portfolio. In addition, we have been working with
Alcatel to design protection switching systems based upon our two-dimensional
products. Alcatel has also made an equity investment in OMM in the aggregate
amount of approximately $15 million.

35
<PAGE> 41

Corvis

We have been working with Corvis Corporation to develop optical
cross-connects based on our two-dimensional optical MEMS switching technology.
In November 2000, we entered into an agreement with Corvis Corporation to
collaborate on the development of future networking products. This collaboration
is intended to enable us to utilize input from Corvis' development teams to
develop future products faster than if developed alone.

Siemens

We have been working with Siemens AG to design optical crossconnect
subsystems based upon our two-dimensional optical MEMS switching technology.
Siemens has announced that it is using our two-dimensional product in its
TransXpress(TM) Optical Service Node optical crossconnect system. Siemens has
also made an equity investment in OMM in the aggregate amount of approximately
$10 million.

Sycamore Networks

In August 2000, we entered into a non-exclusive letter of intent with
Sycamore Networks to collaborate in the development of a large optical
crossconnect subsystem based upon three-dimensional optical MEMS switching
technology. This collaboration is intended to enable us to utilize input from
Sycamore Networks' development teams to develop three-dimensional products more
rapidly than if we were to develop them independently. Sycamore has also made an
equity investment in OMM in the aggregate amount of approximately $15 million.

TECHNOLOGY

Background

Using semiconductor and semiconductor fabrication technology, researchers
have been able to construct highly miniaturized versions of most common optical
components, including lenses, mirrors, diffraction gratings and solid state
lasers. Also fabricated using semiconductor processing technology,
micro-electromechanical systems, or MEMS, are miniature assemblies that perform
mechanical tasks when electrical energy is applied to them. The combination of
semiconductor-scale optics and MEMS technology is currently being utilized to
address a variety of emerging optical applications, including photonic
switching.

A MEMS-based photonic switch consists of extremely small, movable mirror
assemblies on the surface of a silicon chip. When electrical current is applied
to the individual assemblies, the angle of the mirror surface can be adjusted to
deflect incoming light beams from optical fibers with extreme precision. These
assemblies can be combined with micro-optics and aligned to optical fibers to
create highly compact photonic switches capable of rapid signal switching among
dense optical fiber arrays. Both the micro-optics and MEMS mirror assemblies are
fabricated on silicon wafers using well-established, very large scale
integration semiconductor fabrication technology and, accordingly, they have
proven to be highly reliable and scalable in their manufacture.

MEMS Design Expertise

MEMS technology represents a relatively new field of technology that began
to find use in commercial applications only within the past decade. The first
volume applications of MEMS technology have included a variety of sensor
applications, including automobile air bag acceleration sensors, and overhead
projection displays. Our use of MEMS technology represents one of the first
commercial deployments of MEMS for optical applications. Using MEMS technology
to create a photonic switch required us to overcome substantial engineering
hurdles such as establishing an unusually high range of motion and actuation
forces on the MEMS structures.

Because of the criticality of MEMS design to our product, we have assembled
a highly experienced engineering team focused on optical MEMS design. Our team
has extensive knowledge in the areas of

36
<PAGE> 42

multi-layer polysilicon processing, MEMS structure and release design and
electrostatic actuation methods. In addition, this team has been able to develop
an extensive MEMS design library, including such elements as torsion bars,
hinges, springs, struts, gimbals and electrostatic actuators. We believe our
MEMS design resources represent a substantial competitive advantage.

Our Switch Architectures

There are two prevailing design approaches for creating photonic switches
utilizing MEMS technology: two-dimensional or digital architecture, and
three-dimensional or analog architecture.

Our two-dimensional digital approach utilizes micro-mirrors and associated
optical fibers arranged in a two-dimensional, planar fashion. The micro-mirrors
can occupy one of two positions, either on or off, at any given time. In this
approach, an array of MEMS micro-mirrors is used to connect a given number, or
N, input fibers to N output fibers and, accordingly, is referred to as an N(2)
architecture because its design requires N(2) individual mirrors. For example,
an 8x8 two-dimensional switch requires 64 micro-mirrors. Benefits of this
architecture are the optical performance, reliability and cost-effectiveness
derived from its design simplicity and its requirement for relatively simple
control circuitry for mirror positioning. Our two-dimensional architecture also
supports the introduction of a third and fourth fiber array, as shown in the
figure below, to a basic two-dimensional switch to permit adding and dropping of
optical signals. Our two-dimensional switches can also be cascaded to form a
multistage architecture scalable to hundreds-by-hundreds of ports.

TWO-DIMENSIONAL PHOTONIC SWITCH ARCHITECTURE

[GRAPHIC]

In this place is a graphic of a two-dimensional Photonic Digital Switch
Architecture which encompasses approximately one-fourth of the page. Positioned
in the graphic is the following text "micro-electromechanical systems Mirrors"
and "Optical Fibers."

Our three-dimensional analog, or beam-steering, approach uses the same
principle of moving micro-mirrors to redirect light. However, in our
three-dimensional architecture, the mirror structures are movable along two
separate axes, directing the beam through three dimensions to multiple possible
positions. Our three-dimensional architecture utilizes two arrays of
micro-mirrors to connect N input fibers to an equal number of output fibers
which results in a switch utilizing 2N micro-mirrors. Although more complex, the
three-dimensional architecture is more scalable than the two-dimensional
architecture as the port count grows and, as a result, our three-dimensional
architecture enables switches with thousands-by-thousands of ports. Because the
two-axis micro-mirror must be capable of multiple possible positions, a
sophisticated

37
<PAGE> 43
sensing and analog control scheme must be implemented to ensure that the mirrors
are each in their correct positions at all times. We utilize a closed-loop
control scheme that monitors mirror positions on a real-time basis to ensure
precise mirror alignment. We believe that a closed-loop position monitoring

38
<PAGE> 44

scheme is fundamental to achieve the beam stability required in carrier-class
deployment of a three-dimensional photonic switch.

THREE-DIMENSIONAL PHOTONIC SWITCH ARCHITECTURE

GRAPHIC
In this place is a graphic of a three-dimensional Photonic Analog Switch
Architecture which encompasses approximately one-fourth of the page. Positioned
throughout, the graphic is the following text "three-dimensional Photonic Switch
Architecture," "Input fibers," "Director (selects output channel)," "Redirector
(ensures coupling into output fibers)," "Input collimators," "Output
collimators" and "Output fibers."

Manufacturing and Packaging Technology

As part of our business strategy we have chosen to develop several
proprietary manufacturing processes in-house and outsource other, less
proprietary manufacturing steps to selected third-party partners. Since the
micro-optics and MEMS-based mirror assemblies are fabricated on silicon wafers
using standard semiconductor fabrication technology, we have these parts
manufactured for us by multiple semiconductor foundry partners. The
manufacturing processes that we perform internally include:

- MEMS wafer dicing;

- MEMS structure release and actuation;

- fiber array and micro-lens array alignment to produce collimator arrays;

- MEMS and collimator array alignment and fixing in place;

- fiber feedthrough sealing and overall package sealing; and

- in-process and final subsystem testing.

Our MEMS-based photonic switching subsystems must be assembled in a
cleanroom environment and be sealed in specially designed, hermetic packages to
achieve and maintain the durability, reliability and performance required by our
customers. Photonic switches require critical alignments of optical components
and fibers and hermetic feedthroughs within the package to allow for the entry
and exit of multiple optical fiber arrays and electrical connections. Using our
proprietary designs and assembly techniques, we integrate the MEMS mirror
control electronics, micro-optics and micro-mirror assembly within the same
hermetically sealed package. This internal integration is designed to
significantly improve reliability, simplify manufacturability and eliminate
shifting and misalignment due to environmental effects such as temperature
extremes, shock and vibration. Incorporating the control electronics also
significantly reduces the number of package feedthroughs required. We have
devoted substantial development resources to the design and fabrication of our
photonic switch packaging. We believe that our packaging expertise represents a
distinctive competitive advantage.

39
<PAGE> 45

Automation

We have designed our products to be manufacturable in high volume. We have
automated our manufacturing processes in order to achieve the high production
volumes required for current and anticipated future market requirements, as well
as maintaining control of our product quality, cycle times and costs. We
continue to devote substantial internal and external engineering resources to
further our automation capabilities. Additionally, we have custom-designed many
of the tools and equipment required for automated manufacturing of our products,
which we believe represents a competitive advantage.

MARKETING, SALES AND CUSTOMER SERVICE

We market and sell our subsystems to established and emerging optical
network systems manufacturers worldwide through our direct sales force. As of
September 30, 2000, we had 10 individuals in our sales and marketing department,
all of whom are based in the United States. Our product marketing efforts
consist primarily of participation in trade shows and industry conferences,
direct marketing to customers and developing industry contacts. For the year
ended December 31, 1999 and the nine months ended September 30, 2000, our sales
and marketing expenses were approximately $182,000 and $4.3 million,
respectively.

RESEARCH AND DEVELOPMENT

We have assembled a team of engineers, technicians and operators with
significant experience in the fiber optics industry, other industries with high
precision manufacturing requirements such as the semiconductor, semiconductor
capital equipment and optical storage and the communications industries. Our
team also has expertise in optics, fiber optic package design, optoelectronics
and system architecture. We invest substantial resources in both new product and
manufacturing process development. Our product development efforts focus on
high-speed optoelectronics, fiber alignment, advanced automation techniques and
test and optical systems design. As of September 30, 2000, we employed 69
individuals engaged in research and development activities. Of these, the
majority hold advanced degrees, including 29 employees with doctorate degrees.

We have made, and will continue to make, a substantial investment in
research and development. Our research and development expenses totaled
approximately $1.1 million for our fiscal year ended December 31, 1998, $6.3
million for our fiscal year ended December 31, 1999 and $17.3 million for the
nine months ended September 30, 2000.

MANUFACTURING AND OPERATIONS

We consider manufacturing to be one of our core competencies and consider
our manufacturing processes to be a significant competitive advantage. To that
end we have invested, and expect to continue to invest, significant capital into
designing and implementing our manufacturing processes and operations
infrastructure. We have made significant efforts to design our products to be
manufacturable in high volume and to ensure that product designs are continually
optimized for manufacturability. Similarly, we have invested substantial
resources aimed at automating much of the manufacturing process. To this end, we
have designed and implemented several proprietary automated and semi-automated
manufacturing systems and processes which should enable us to lower product
costs and increase manufacturing yields. We have developed proprietary automated
systems and processes to:

- dice silicon wafers to maximize the number of usable
micro-electromechanical, or MEMS, chips;

- release, lift and activate the mirror structures on the MEMS chips;

- align and attach fibers to optical components, such as lenses, within the
subsystem package;

- position our fiber arrays in proper alignment with the MEMS chips;

- integrate drive electronics; and

- assemble, package and hermetically seal the switching subsystem.

40
<PAGE> 46

We currently manufacture our products in 5,000 square feet of manufacturing
space that includes approximately 2,000 square feet of cleanroom area. We are
completing construction of an additional manufacturing area in our second San
Diego area facility that will includes more than 20,000 square feet of cleanroom
area. This new facility is scheduled for completion in the fourth quarter of
2000.

We obtain several key components and manufacturing systems from limited or
sole-source suppliers, including collimating lenses, fiber array substrates,
MEMS assembly equipment, and align and fix tools. We intend to locate additional
sources of supply for each of these components, including collimating lenses and
fiber array substrates. However, we cannot assure you that we will be able to
find alternative sources of supply for any of these components. We purchase
these components and systems from their respective manufacturers subject to
purchase orders that we place from time to time. We provide rolling forecasts to
our suppliers and currently maintain inventory levels of key components to
facilitate our ability to meet customer orders. However, demand for the
components and systems that we use is high, and we may, in the future,
experience interruptions or delays in supply of key components, several of which
have long order lead times. We also may experience manufacturing yield
fluctuations that could impact material supply due to increased in-process
scrap, which could impact shipments to customers. If we are unable to obtain
sufficient quantities of components, obtain components available only from our
sole source suppliers, or receive materials in a timely manner, we may be unable
to ship our product to customers as scheduled or may be forced to redesign
portions of our products, which would be costly and time consuming.

As of September 30, 2000, we employed 130 people in manufacturing and
operations.

COMPETITION

The market for optical switching systems is new, rapidly changing and
intensely competitive. We compete with a number of companies that address the
optical switching market, including optical network systems manufacturers, other
subsystems manufacturers and companies that supply various components of optical
switching systems. In addition, we compete with vendors of
optical-electrical-optical, or OEO, switches who will continue to advocate the
use of their products in optical networks. We believe that the principal bases
of competition in our market are the speed and scalability of photonic switches,
their total cost of ownership, reliability and versatility of applications. We
believe that we compete favorably in each of these areas.

We face competition from a number of large, established public companies,
such as Agilent Technologies, Inc., Corning Incorporated, JDS Uniphase
Corporation, Lucent Technologies' Microelectronics Division and Nortel Networks
Corporation, that offer a wide range of components and subsystems to optical
network systems manufacturers. In addition, a number of private companies have
announced plans for all-optical switching products to address many of the same
applications that our products address. We also compete with several companies,
such as PMC-Sierra, Inc. and Applied Micro Circuits Corporation, that provide
OEO products to optical network systems manufacturers. Moreover, some of our
customers are developing all-optical switching subsystems that compete with our
products.

Many of our current and potential competitors have longer operating
histories and significantly greater financial, technical, marketing and other
resources than we have. As a result, these competitors may be able to devote
greater resources than we can to the development, promotion, sale and support of
their products. In addition, several of our competitors that have larger market
capitalizations or cash reserves than we do and may be better positioned than we
are to acquire other companies in order to gain new technologies or products
that may displace our products. In addition, many of our competitors have much
greater name recognition, more extensive customer bases, better-developed
distribution channels and broader product offerings than we have. These
companies can leverage their customer bases and broader product offerings and
adopt aggressive pricing policies to gain market share.

INTELLECTUAL PROPERTY RIGHTS

Our success and ability to compete depend substantially upon our internally
developed technology. We have filed seventeen U.S. patent applications and have
filed four international patent applications pursuant

41
<PAGE> 47

to the Patent Cooperation Treaty. The subject matter of these applications
covers the design, fabrication, assembly and packaging of
micro-electromechanical systems technology optical switches. We cannot assure
you that our patent applications will be approved, that any patents that may
issue will protect our intellectual property or that any issued patents will not
be challenged by third parties.

"OMM," our logo, "Delivering Breakthrough Photonic Solutions," and
"Switching the Way the World Communicates" are our trademarks and trade names.
Each trademark, trade name or service mark of any other company appearing in
this prospectus belongs to its holder.

While we rely on a combination of patent, copyright, trademark, service
mark and trade secret laws and contractual restrictions to establish and protect
our intellectual property, we also believe that factors such as the
technological and creative skills of our personnel, new technology developments,
frequent technology enhancements and reliable product maintenance are essential
to establishing and maintaining a technology leadership position. We cannot
assure you that others have not already developed, or in the future will not
develop, technologies that are similar or superior to our technology.

We generally enter into confidentiality agreements with our employees,
consultants and corporate partners, and generally control access to and
distribution of our proprietary information. We request that our corporate
partners and others who may be given access to our proprietary information sign
non-use and non-disclosure agreements. Despite these efforts to protect our
proprietary rights, unauthorized parties may attempt to copy or otherwise obtain
and use our technology. Policing unauthorized use of technology is difficult,
and there can be no assurance that the steps taken by us will prevent
misappropriation of our technology, particularly in foreign countries where the
laws may not protect our proprietary rights as fully as do the laws of the
United States.

Substantial litigation regarding intellectual property rights exists in the
networking industry, and we expect that optical communications products may be
increasingly subject to third-party infringement claims as the number of
competitors in our industry segment grows. We believe that we own or have the
right to use the technology embodied in our products. However, the networking
industry is characterized by a very large number of patents, many of which are
of questionable validity and some of which appear to overlap with other issued
patents. We have received limited product development funding from U.S.
government agencies. We cannot assure you that the U.S. government will not
attempt to assert intellectual property rights pursuant to our agreements with
these agencies. In addition, many of our competitors in the networking industry
have filed or, we believe, intend to file patent applications covering aspects
of their technology on which they may claim infringement by us with respect to
our products. Because patent applications can be maintained in secrecy in the
United States until such patents are issued and are maintained in secrecy for a
period of time outside of the United States, we are conducting only limited
searches to determine whether our products may fall within the scope of any
patents or patent applications of others.

We cannot make any assurances that other third parties will not claim
infringement by us with respect to our products and our associated technology.
In the future, we may be a party to litigation to protect our intellectual
property or as a result of an alleged infringement of others' intellectual
property. These claims and any resulting lawsuit, regardless of our success,
would likely be time-consuming to defend, subject us to significant litigation
costs, divert management's attention and resources, cause product shipment
delays or require us to enter into royalty or licensing arrangements. Any
potential intellectual property litigation also could force us to do one or more
of the following:

- stop selling, incorporating or using our products that use the infringed
intellectual property;

- obtain from the owner of the infringed intellectual property a license to
sell or use the relevant technology, which license may not be available
on terms acceptable to us, if at all; and

- redesign our products that use the technology.

If we are forced to take any of these actions, our business may be
seriously harmed. A successful claim of intellectual property infringement
against us and the failure or inability by us to license the infringed or
similar technology or redesign our products could seriously harm our business.

42
<PAGE> 48

We may in the future initiate claims or litigation against third parties
for infringement of our proprietary technology to protect our intellectual
property or determine the scope and validity of our proprietary rights or the
proprietary rights of our competitors. These claims could result in costly
litigation and the diversion of our technical and management personnel.

EMPLOYEES

As of September 30, 2000, we had 248 full-time employees, 69 of whom were
in research and development, 137 were in manufacturing and quality assurance, 10
were in sales and marketing, and 32 were in general and administrative
functions. None of our employees is represented by a labor union or subject to a
collective bargaining agreement. We have not experienced any work stoppages and
we consider our relations with our employees to be good.

FACILITIES

Our corporate headquarters facility, of approximately 100,000 square feet,
is located in San Diego, California. We lease our corporate headquarters
facility pursuant to a lease agreement that expires in July 2009, subject to our
one-time option to extend the lease for an additional three-year period. The
Company leases an additional facility of approximately 21,000 square feet, also
in San Diego, for engineering and manufacturing. We lease this second facility
pursuant to a lease agreement that expires in June 2004, subject to our one-time
option to extend the lease for an additional five-year period. We anticipate
that we will need to secure additional space for our operations within the next
twelve months.

LEGAL PROCEEDINGS

We are not currently subject to any material legal proceedings.

43
<PAGE> 49

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table contains information with respect to our executive
officers and directors as of September 30, 2000:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Hus Tigli................................. 46 Chief Executive Officer, President and Director
Anis Husain............................... 49 Chief Technology Officer, Senior Vice President,
Research and Development and Chairman of the
Board of Directors
Philip Chapman............................ 47 Chief Financial Officer
Conrad Burke.............................. 34 Senior Vice President, Marketing and Sales
James Hartman............................. 43 Vice President, Manufacturing
Christian Lepiane......................... 41 Vice President, Sales
Stephen Domenik(1)(2)..................... 49 Director
Barry Fidelman(1)(2)...................... 60 Director
Bruce Graham(1)(2)........................ 40 Director
</TABLE>

---------------
(1) Member of audit committee

(2) Member of compensation committee

Hus Tigli has served as Director and as our Chief Executive Officer and
President since February 2000. Mr. Tigli was Senior Vice President and Group
General Manager of the Telecommunications, Energy & Industrial Group of Raychem
Corporation from 1998 to 1999, and held general management and functional
leadership positions at Raychem Corporation from 1981 to 1998. Mr. Tigli
received B.S. and M.S. degrees in Engineering from Columbia University and an
M.B.A. degree from Harvard University.

Anis Husain, one of our co-founders, has served as Chairman of our Board of
Directors and Senior Vice President, Research and Development since 1997. He has
served as our Chief Technology Officer since March 2000. From 1997 to February
2000, Dr. Husain also served as our Chief Executive Officer and President. Prior
to co-founding OMM, Dr. Husain was Assistant Director of the Electronics
Technology Office and held various other positions at the Defense Advanced
Research Projects Agency from 1994 to 1997. From 1985 to 1993, Dr. Husain was
Section Manager of the Photonics Department and developed photonics and
optoelectronics products for Honeywell Systems Inc.'s and Research Center. Dr.
Husain received a B.Sc. degree in Engineering from University of London,
Imperial College, and a Ph.D. in Electrical Engineering at University College,
London.

Philip Chapman has served as our Chief Financial Officer since May 2000.
Mr. Chapman was Chief Financial Officer at Microchip Technology Incorporated, a
global manufacturer of programmable microcontrollers, from 1992 to May 2000.
From 1988 to 1992, Mr. Chapman served as Chief Financial Officer for Syntellect,
Inc., a company involved in voice processing technology. From 1984 to 1988, he
served as Chief Financial Officer for Medical Systems Support, Inc., a company
involved in developing independent service capability for hospital computer and
digital imaging systems. Mr. Chapman received a B.A. degree in Accounting and
Managerial Finance from the University of California and an M.B.A. degree from
Harvard University.

Conrad Burke has served as our Senior Vice President, Marketing and Sales
since March 2000. Mr. Burke was Director of Marketing for Optoelectronics
Products and held various other marketing positions at Lucent Technologies'
Microelectronics Group from 1992 to February 2000. Mr. Burke received a B.Sc.
degree in Physics from University College Dublin and a M.Sc. degree in Physics
from Trinity College Dublin, Ireland.

44
<PAGE> 50

James Hartman has served as our Vice President, Manufacturing since April
1999. Mr. Hartman was responsible for wafer fabrication operations as Vice
President of Front-End Manufacturing at LinFinity Microelectronics, Inc. from
1996 to 1999. From 1991 to 1996, Mr. Hartman was responsible for wafer
fabrication operations as an Engineering Manager and in various other
manufacturing positions for SGS-Thomson Microelectronics N.V. From 1989 to 1991,
he was a Senior Process Engineer for Lam Research Corporation. Mr. Hartman
received a M.S. degree in Chemistry from San Diego State University.

Christian Lepiane has served as our Vice President, Sales since March 2000.
Mr. Lepiane was Director of Segment Sales at Lucent Technologies from 1995 to
2000. From 1985 to 1995, Mr. Lepiane served as Manager of Global Accounts and
held various other positions for AT&T's Microelectronics, now Lucent
Technologies, Microelectronics Division. Mr. Lepiane received a B.S. degree in
Economics and Accounting from University of Pittsburgh and an M.B.A. from the
University of California at Irvine.

Stephen Domenik has served as a member of our Board of Directors since
October 1998. Mr. Domenik has been a Partner and has held various other
positions with Sevin Rosen Funds, a venture capital firm, since 1995. Mr.
Domenik is a director of several privately held companies. Mr. Domenik received
a B.S. degree in Physics and a M.S. degree in Electrical Engineering both from
the University of California at Berkeley.

Barry Fidelman has served as a member of our Board of Directors since March
2000. Mr. Fidelman has been a Principal and has held various positions with
Atlas Venture, a venture capital firm, since 1988. Mr. Fidelman is a director of
several privately held companies. Mr. Fidelman received a B.S. degree in
Electrical Engineering from the Massachusetts Institute of Technology and an
M.B.A. degree from Harvard University.

Bruce Graham has served as a member of our Board of Directors since
December 1998. Mr. Graham has been a Partner of Infinity Capital, L.L.C., a
venture capital firm, since November 2000. From December 1996 to October 2000,
Mr. Graham was a Partner of Bessemer Venture Partners, a venture capital firm.
From 1991 until November 1996, Mr. Graham was an Associate and Vice President at
Vertex Management, a venture capital firm. Mr. Graham is a director of several
privately held companies. Mr. Graham received a B.S. degree in Chemical
Engineering from Princeton University and a M.B.A. degree from Stanford
University.

BOARD OF DIRECTORS

Our board of directors currently consists of five members and one vacant
position. Upon completion of this offering, our bylaws will provide for a
classified board of directors of five members and two vacant positions
consisting of three classes of directors, each serving staggered three-year
terms. As a result, a portion of our board of directors will be elected each
year. To implement the classified structure, prior to the consummation of the
offering, two of the members to the board of directors will be elected to
one-year terms, two will be elected to two-year terms and one will be elected to
a three-year term. Thereafter, directors will be elected for three-year terms.
Hus Tigli and Barry Fidelman have been designated Class I Directors, whose terms
expire at the 2001 annual meeting of stockholders. Stephen Domenik and Bruce
Graham have been designated Class II Directors, whose terms expire at the 2002
annual meeting of stockholders. Anis Husain has been designated a Class III
Director and two seats are vacant, whose terms expire at the 2003 annual meeting
of stockholders. This classification of the board of directors may delay or
prevent a change in control of our company or in our management. See
"Description of Capital Stock -- Delaware Anti-Takeover Law and Certain Charter
and Bylaw Provisions."

Executive officers are appointed by the board of directors on an annual
basis and serve until their successors have been elected and qualified. There
are no family relationships among any of our directors, officers or key
employees.

45
<PAGE> 51

Board Committees

Audit Committee

We established an audit committee in July 2000. The audit committee
consists of Stephen Domenik, Barry Fidelman and Bruce Graham. The audit
committee reviews our internal accounting procedures and consults with and
reviews the services provided by our independent accountants.

Compensation Committee

We established a compensation committee in July 2000. The compensation
committee consists of Stephen Domenik, Barry Fidelman and Bruce Graham. The
compensation committee reviews and recommends to the board of directors the
compensation of all of our officers and directors, including stock compensation
and loans and establishes and reviews general policies relating to the
compensation and benefits of our employees.

Compensation Committee Interlocks and Insider Participation

Prior to establishing the compensation committee, the board of directors as
a whole performed the functions delegated to the compensation committee. No
member of the board of directors or the compensation committee serves as a
member of the board of directors or compensation committee of any entity that
has one or more executive officers serving as a member of our board of directors
or compensation committee.

Director Compensation

We do not currently compensate our directors in cash for their service as
members of the board of directors, although they are reimbursed for expenses in
connection with attending board of directors and committee meetings. Our 1997
Stock Plan provides for the automatic grant of non-statutory stock options to
non-employee directors. For further information regarding the provisions of the
1997 Stock Plan, see "-- Employee and Director Benefit Plans."

Limitations on Directors' Liability and Indemnification

Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that directors
of a corporation will not be personally liable for monetary damages for breach
of their fiduciary duties as directors, except liability for:

- any breach of their duty of loyalty to the corporation or its
stockholders;

- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;

- unlawful payments of dividends or unlawful stock repurchases or
redemptions; or

- any transaction from which the director derived an improper personal
benefit.

The limitation of liability does not apply to liabilities arising under the
federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or rescission.

Our certificate of incorporation and bylaws provide that we will indemnify
our directors and officers and may indemnify our employees and other agents to
the fullest extent permitted by law. We believe that indemnification under our
bylaws covers at least negligence and gross negligence on the part of
indemnified parties. Our bylaws also permit us to secure insurance on behalf of
any officer, director, employee or other agent for any liability arising out of
his or her actions in their capacity as an officer, director, employee or other
agent, regardless of whether the bylaws would permit indemnification.

We have entered into agreements to indemnify our directors, executive
officers and controller, in addition to the indemnification provided for in our
bylaws. These agreements, among other things, provide

46
<PAGE> 52

for indemnification of our directors, executive officers and controller for
judgments, fines, settlement amounts and limited expenses, which includes
attorneys' fees incurred by the director, executive officer or controller in any
action or proceeding, including any action by or in the right of OMM, arising
out of the person's services as a director, executive officer or controller of
us, any of our subsidiaries or any other company or enterprise to which the
person provides services at our request. We believe that these provisions and
agreements are necessary to attract and retain qualified persons as directors
and executive officers.

The limited liability and indemnification provisions in our certificate of
incorporation and bylaws may discourage stockholders from bringing a lawsuit
against our directors for breach of their fiduciary duty and may reduce the
likelihood of derivative litigation against our directors and officers, even
though a derivative action, if successful, might otherwise benefit us and our
stockholders. A stockholder's investment in us may be adversely affected to the
extent we pay the costs of settlement or damage awards against our directors and
officers under these indemnification provisions.

At present, there is no pending litigation or proceeding involving any of
our directors, officers or employees in which indemnification is sought, nor are
we aware of any threatened litigation that may result in claims for
indemnification.

EXECUTIVE COMPENSATION

The following table sets forth the compensation earned, awarded or paid for
services rendered to us in all capacities for the fiscal year ended December 31,
1999, by our Chief Executive Officer and our four next most highly compensated
executive officers who earned more than $100,000 in salary and bonus during the
fiscal year ended December 31, 1999, if any, whom we refer to in this prospectus
collectively as the "Named Executive Officers":

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
-------------------- UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS
--------------------------- --------- -------- ------------
<S> <C> <C> <C>
Anis Husain, Chief Technology Officer, Senior Vice
President, Research and Development(1).................... $162,786 -- 15,000
James Hartman, Vice President of Manufacturing.............. $ 98,250 $25,000 921,000
Hus Tigli, Chief Executive Officer and President(2)......... -- -- --
Philip Chapman, Chief Financial Officer(3).................. -- -- --
</TABLE>

---------------
(1) Mr. Husain was our Chief Executive Officer until February 2000.

(2) Hus Tigli joined us as our Chief Executive Officer in February 2000. Mr.
Tigli's scheduled annual compensation is $204,000 in addition to a $81,600
bonus contingent on achieving specific goals and we have granted Mr. Tigli
options to purchase 6,300,000 shares at an exercise price of $0.1667 per
share.

(3) Philip Chapman joined us as our Chief Financial Officer in May 2000. Mr.
Chapman's scheduled annual compensation is $185,000 in addition to a $50,000
bonus contingent on achieving specific goals and we have granted Mr. Chapman
options to purchase 1,050,000 shares at an exercise price of $0.3333 per
share.

OPTION GRANTS IN FISCAL YEAR 1999

The following table provides detailed information regarding stock options
granted to the Named Executive Officers during the fiscal year ended December
31, 1999. All of these stock options were granted under our 1997 Stock Plan and
have a term of ten years, subject to earlier termination in the event the

47
<PAGE> 53

optionees' services to us cease. See "-- Employee and Director Benefit Plans"
for a description of material terms of these stock options. See "Transactions
with Related Parties and Insiders" for a description of the exercises of stock
options granted to the Named Executive Officers under the 1997 Stock Plan.

In accordance with the rules of the Securities and Exchange Commission,
also shown below is the potential realizable value over the term of the option,
or the period from the grant date to the expiration date, based on assumed rates
of stock appreciation of 5% and 10%, compounded annually. These amounts are
based on the assumed rates of appreciation of 5% and 10% and do not represent
our estimate of our future stock price. Potential realizable values are computed
by:

- multiplying the number of shares of common stock underlying each option
by the assumed initial public offering price of $11.00 per share;

- assuming that the total stock value derived from that calculation
compounds at the annual 5% or 10% rate shown in the table for the entire
ten-year term of the option; and

- subtracting from that result the total option exercise price.

Actual gains, if any, on stock option exercises will be dependent on the
future performance of the common stock.

<TABLE>
<CAPTION>
PERCENT OF
TOTAL POTENTIAL REALIZABLE VALUE AT
NUMBER OF OPTIONS ASSUMED ANNUAL RATES OF
SECURITIES GRANTED TO STOCK APPRECIATION FOR OPTION
UNDERLYING EMPLOYEES EXERCISE TERM
OPTIONS DURING PRICE PER EXPIRATION ------------------------------
NAME GRANTED PERIOD(1) SHARE(2) DATE(S) 5% 10%
---- ---------- ---------- --------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Anis Husain................ 15,000(3) 0.3% $0.033 8/26/2009 $ 268,273 $ 427,473
James Hartman.............. 906,000(4) 16.9% $0.033 4/08/2009 $16,203,666 $25,819,339
15,000(5) 0.3% $0.033 8/26/2009 $ 268,273 $ 427,473
Hus Tigli.................. -- -- -- -- -- --
Philip Chapman............. -- -- -- -- -- --
</TABLE>

---------------
(1) Based on an aggregate of 4,820,250 options granted by us during the fiscal
year ended December 31, 1999, to our employees, directors and consultants,
including the Named Executive Officers.

(2) The exercise price of each option was equal to the fair market value of our
common stock on the date of grant, as determined by our board of directors.

(3) Granted pursuant to an option agreement and according to a four-year vesting
schedule in which one-fourth of the shares vested on August 27, 2000 and
1/48 of the shares vesting monthly thereafter.

(4) Granted pursuant to an option agreement and according to a four-year vesting
schedule in which one-fourth of the shares vested on April 1, 2000 and 1/48
of the shares vesting monthly thereafter.

(5) Granted pursuant to an option agreement and according to a four-year vesting
schedule in which one-fourth of the shares vested on August 27, 2000 and
1/48 of the shares vesting monthly thereafter.

AGGREGATE OPTION EXERCISES IN FISCAL YEAR 1999 AND FISCAL YEAR-END OPTION VALUES

The following table sets forth information with respect to the Named
Executive Officers concerning option exercises for the fiscal year ended
December 31, 1999, and exercisable and unexercisable options held as of December
31, 1999. None of the executive officers listed in the table below exercised any
of their options during the fiscal year ended December 31, 1999.

The fiscal year-ended value of in-the-money stock options represents the
difference between the exercise price of such options, and the fair value of our
common stock as of December 31, 1999. The fair value of our common stock on
December 31, 1999 for financial reporting purposes on such date was $0.74 per
share. The actual value of in-the-money stock options will depend upon the
trading price of our

48
<PAGE> 54

common stock on the date of sale of the underlying common stock and may be
higher or lower than the amount set forth in the table above. The values of
unexercised in-the-money options are computed by:

- multiplying the number of shares of common stock underlying each option
by the assumed initial public offering price of $11.00 per share, and

- subtracting the result of multiplying the exercise price per share by the
number of shares.

For a list of purchases of restricted shares of our common stock by the
executive officers listed in the table below, please see "Transactions with
Related Parties and Insiders":

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT DECEMBER 31, 1999 DECEMBER 31, 1999
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Anis Husain..................................... -- 15,000 -- $ 164,505
James Hartman................................... -- 921,000 -- $10,100,607
Hus Tigli....................................... -- -- -- --
Philip Chapman.................................. -- -- -- --
</TABLE>

EMPLOYEE AND DIRECTOR BENEFIT PLANS

Amended and Restated 1997 Stock Plan

Our Amended and Restated 1997 Stock Plan provides for the grant of
incentive stock options to employees and nonstatutory stock options, options and
stock purchase rights to employees, directors and consultants. The 1997 Stock
Plan was adopted by our board of directors in October, 1997 and approved by our
stockholders in September 1998. Our board of directors approved an amendment to
the 1997 Stock Plan to increase the number of shares reserved under the 1997
Stock Plan on September 15, 2000.

As of September 30, 2000, total of 35,050,000 shares of common stock have
been reserved for issuance under the 1997 Stock Plan. An annual increase will be
added on the first day of our fiscal year, beginning in 2002, equal to the
lesser of:

- 6,500,000 shares;

- 5.0% of the outstanding shares on that date; or

- a lesser amount determined by the board of directors.

As of September 30, 2000, options to purchase 14,971,037 shares of common
stock were outstanding and 10,229,250 shares were available for future grant,
including the 10,000,000 shares reserved for issuance on September 15, 2000.

Administration

Our board of directors or a committee of our board of directors administers
the 1997 Stock Plan. The administrator of our 1997 Stock Plan has the power to
determine, among other things:

- the terms of the options or stock purchase rights granted, including the
exercise price of the option or stock purchase right;

- the number of shares subject to each option or stock purchase right;

- the exercisability of each option or stock purchase right; and

- the form of consideration payable upon the exercise of each option or
stock purchase right.

Options

The exercise price of all incentive stock options granted under the 1997
Stock Plan must be at least equal to the fair market value of the common stock
on the date of grant. The exercise price of

49
<PAGE> 55

nonstatutory stock options and stock purchase rights granted under the 1997
Stock Plan is determined by the administrator, but with respect to nonstatutory
stock options intended to qualify as "performance-based compensation" within the
meaning of Section 162(m) of the Internal Revenue Code, the exercise price must
be at least equal to the fair market value of our common stock on the date of
grant. With respect to any participant who owns stock possessing more than 10%
of the voting power of all classes of our outstanding capital stock, the
exercise price of any incentive stock option granted must be at least equal to
110% of the fair market value on the grant date and the term of such incentive
stock option must not exceed five years. The term of all other options granted
under the 1997 Stock Plan may not exceed ten years.

During any fiscal year, each optionee may be granted options to purchase a
maximum of 1,000,000 shares. In addition, in connection with an optionee's
initial employment with us, the optionee may be granted an option covering an
additional 1,500,000 shares.

Options granted under the 1997 Stock Plan must generally be exercised
within three months after the end of optionee's status as an employee, director
or consultant of ours, or within 12 months after the optionee's termination by
death or disability, but in no event later than the expiration of the option's
term.

Automatic Option Grants to Non-Employee Directors

Our 1997 Stock Plan also provides for the automatic grant of 45,000 shares
of common stock to a director who first becomes a non-employee director, except
those directors who become non-employee directors by ceasing to be employee
directors, on or after the date of this offering. This option will vest as to
15,000 of the shares subject to the option on each anniversary of the date of
grant. Each non-employee director will automatically be granted an option to
purchase 15,000 shares each year on the date of our annual stockholders'
meeting, if as of such date, he or she shall have served on the Board for at
least the preceding six months of the date of this offering, if on such date, he
or she will have served on our board of directors for at least the previous six
months. This option will vest as to one hundred percent of the shares subject to
the option on each anniversary of the date of grant. All options automatically
granted to non-employee directors will have a term of ten years and the exercise
price will be one hundred percent of fair market value per share of common stock
on the date of grant.

Vesting

Options and stock purchase rights granted under our 1997 Stock Plan
generally become exercisable at the rate of 1/4 of the total number of shares
subject to the option twelve months after the date of grant, and 1/48 of the
shares subject to the option each month thereafter.

Transferability of Options

Options and stock purchase rights granted under the 1997 Stock Plan are
generally not transferable by the optionee, and each option and stock purchase
right is exercisable during the lifetime of the option only by the optionee.

Stock Purchase Right

In the case of stock purchase rights, unless the administrator determines
otherwise, the restricted stock purchase agreement shall grant us a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's employment or consulting relationship with us for any reason,
including death or disability. The purchase price for shares repurchased
pursuant to the restricted stock purchase agreement shall be the original price
paid by the purchaser and may be paid by cancellation of any indebtedness of the
purchaser to us. The repurchase option shall lapse at a rate determined by the
administrator.

50
<PAGE> 56

Adjustments upon Merger or Asset Sale

The 1997 Stock Plan provides that in the event of our merger with or into
another corporation, or a sale of substantially all of our assets, the successor
corporation will assume each option and stock purchase right or substitute an
equivalent option. If the outstanding options and stock purchase rights are not
assumed or substituted by the successor corporation, the optionees will become
fully vested in and have the right to exercise such options or stock purchase
rights. If an option or stock purchase right becomes fully vested and
exercisable in the event of a merger or sale of assets, the administrator must
notify the optionee that the option or stock purchase right is fully exercisable
for a period of 15 days from the date of the notice, and the option or stock
purchase right will terminate upon the expiration of the 15-day period.

Amendment and Termination of the 1997 Stock Plan

The administrator will have the authority to amend, suspend or terminate
the 1997 Stock Plan, so long such action does not affect any shares of common
stock previously issued and sold or any option previously granted under the 1997
Stock Plan. Unless earlier terminated, the 1997 Stock Plan will terminate
automatically 10 years from the date of obtaining stockholder approval of the
amended plan in October 2007.

2000 STOCK PURCHASE PLAN

Our 2000 Stock Purchase Plan was adopted by our board of directors on
September 15, 2000, and will be effective upon completion of this offering,
subject to stockholder approval. The 2000 Stock Purchase Plan provides our
employees with an opportunity to purchase our common stock through accumulated
payroll deductions. A total of 4,000,000 shares of common stock have been
reserved for issuance under the 2000 Stock Purchase Plan, none of which had been
issued as of the date of this prospectus. An annual increase will be added on
the first day of our fiscal year, beginning in 2002, equal to the lesser of:

- 2,700,000 shares;

- 2% of the outstanding shares on that date; or

- a lesser amount determined by the board of directors.

The 2000 Stock Purchase Plan will be administered by our board of directors
or by a committee appointed by the board of directors.

Structure of the 2000 Stock Purchase Plan

The 2000 Stock Purchase Plan, which is intended to qualify under Section
423 of the Internal Revenue Code, provides consecutive twenty-four month
offering periods with consecutive, semi-annual purchase periods. The twenty-four
month offering periods generally start on the first trading day on or after May
1 and November 1 of each year, except for the first twenty-four month offering
period, which commences on the first trading day on or after the effective date
of this offering and ends on the last trading day on or before October 31, 2002.

Eligibility

Employees are eligible to participate if they are customarily employed by
us or any participating subsidiary for at least 20 hours per week and more than
five months in any calendar year. However, employees may not be granted an
option to purchase stock under the 2000 Stock Purchase Plan if they either:

- immediately after grant, own stock possessing 5% or more of the total
combined voting power or value of all classes of our capital stock; or

51
<PAGE> 57

- hold rights to purchase stock under our employee stock purchase plans
which accrue at a rate which exceeds $25,000 worth of stock for each
calendar year.

Purchases

The 2000 Stock Purchase Plan permits participants to purchase our common
stock through payroll deductions of up to 10% of the participant's
"compensation." Compensation is defined as the participant's base straight time
gross earnings, commissions, overtime and shift premium, but exclusive of
incentive compensation, incentive payments, bonuses and other compensation. The
maximum number of shares a participant may purchase during a single semi-annual
participation period is 10,000 shares.

Amounts deducted and accumulated by the participant are used to purchase
shares of common stock at the end of each semi-annual participation period. The
price of stock purchased under the 2000 Stock Purchase Plan is generally 85% of
the lower of the fair market value of the common stock either:

- at the beginning of the offering period; or

- at the end of the semi-annual participation period.

Participants may end their participation at any time during a twenty-four
month offering period, and they will be paid their payroll deductions to date.
Participation ends automatically upon termination of employment with us.

Transferability of Rights

Rights granted under the 2000 Stock Purchase Plan are not transferable by a
participant other than by will, the laws of descent and distribution, or as
otherwise provided under the 2000 Stock Purchase Plan.

Merger or Asset Sale

The 2000 Stock Purchase Plan provides that, in the event we merge with or
into another corporation or there is a sale of substantially all of our assets,
the successor corporation will assume each outstanding option or substitute an
equivalent option. If the successor corporation refuses to assume or substitute
the outstanding options, the offering period then in progress will be shortened
and a new exercise date, before the date of our proposed merger or sale, will be
set.

Amendment and Termination of the 2000 Stock Purchase Plan

The 2000 Stock Purchase Plan will terminate in 2010. Our board of directors
has the authority to amend or terminate the 2000 Stock Purchase Plan, except
that no such action may adversely affect any outstanding rights to purchase
stock under the 2000 Stock Purchase Plan.

401(K) PLAN

In August 1999, we adopted a Retirement Savings and Investment Plan, or
401(k) plan, covering our eligible employees located in the United States. The
401(k) Plan is intended to qualify under Section 401(a) of the Internal Revenue
Code of 1986, as amended. All contributions to the 401(k) Plan by eligible
employees or by us, and the investment earnings thereon, are not taxable to such
employees until withdrawn, and any contributions we may make are expected to be
deductible by us when made. Our eligible employees may elect to reduce their
eligible compensation by up to 25%, subject to statutorily prescribed limits,
and to have such compensation reductions contributed on their behalf to the
401(k) Plan. The 401(k) Plan permits, but does not require, us to make matching
contributions to the 401(k) Plan.

EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL ARRANGEMENTS

Hus Tigli. In January 2000, Hus Tigli accepted our employment offer letter,
which provided that Mr. Tigli would be entitled to receive an annual salary of
$204,000, a signing bonus of $50,000 and a

52
<PAGE> 58

bonus of $81,600 during his first year of employment, based on performance
milestones. In connection with this offer letter, in March 2000, Mr. Tigli was
also allowed to purchase, at a price of $0.1667 per share, 6,300,000 shares of
our common stock, under a restricted stock purchase agreement. These shares vest
over a four year period and vest as to one-fourth of these shares on February 1,
2001, with the remainder of the shares vesting ratably monthly thereafter. In
connection with the offer letter, Mr. Tigli also entered into a change of
control agreement in January 2000, which provides that, upon termination without
cause or a reduction in position within twelve months after a merger or
acquisition or acquisition of all or substantially all of our assets, vesting
will be accelerated so that one hundred percent of the common stock vesting
pursuant to any stock option agreements or subject to repurchase pursuant to any
restricted stock purchase agreements will be vested and Mr. Tigli will receive
monthly severance payments for a period of twelve months following the date of
termination. In addition, upon an involuntary termination without cause within
the first twelve months of employment and there is no change of control, vesting
of common stock pursuant to any stock option agreements or subject to repurchase
pursuant to any restricted stock purchase agreements will be accelerated with
respect to the number of shares of common stock that would otherwise vest in a
six month period and Mr. Tigli will receive monthly severance payments for a
period of twelve months following termination.

Philip Chapman. In May 2000, Philip Chapman accepted our employment offer
letter, which provided that Mr. Chapman would be entitled to receive an annual
salary of $185,000 and a bonus of $50,000 during his first year of employment,
based on performance milestones. His offer letter also provided for a $60,000
combined relocation and signing bonus. In connection with this offer letter, in
May 2000, Mr. Chapman was also granted options to purchase, at a price of
$0.3333 per share, 1,050,000 shares of our common stock, pursuant to a stock
option agreement. These options vest over a four year period and vest as to
one-fourth of these options on May 22, 2001, with the remainder of the options
vesting ratably monthly thereafter. In connection with the offer letter, Mr.
Chapman also entered into a change of control agreement, in May 2000, which
provides that, upon termination without cause or a significant reduction in
position within twelve months after a merger, acquisition, acquisition of all or
substantially all of our assets or change of beneficial ownership of more than
50% of our stock to an unaffiliated entity, vesting of the stock purchased will
be accelerated so that at least one hundred percent of the common stock vesting
pursuant to any stock option agreements or subject to repurchase pursuant to any
restricted stock purchase agreements will be vested and Mr. Chapman will receive
monthly severance payments for a period of six months following termination.

Anis Husain. Dr. Husain entered into a change of control agreement in June
2000, which provides that, upon termination without cause or a significant
reduction in position within twelve months after a merger, acquisition,
acquisition of all or substantially all of our assets or change of beneficial
ownership of more than 50% of our stock to an unaffiliated entity, vesting of
the stock purchased will be accelerated so that at least one hundred percent of
the common stock vesting pursuant to any stock option agreements or subject to
repurchase pursuant to any restricted stock purchase agreements will be vested
and Dr. Husain will receive monthly severance payments for a period of six
months following termination.

James Hartman. In March 1999, James Hartman accepted our employment offer
letter, which provided that Mr. Hartman would be entitled to receive an annual
salary of $130,000 and a bonus of $50,000 during his first year of employment,
based on performance milestones. His offer letter also provided for a $25,000
signing bonus. In connection with this offer letter, in April 2000, Mr. Hartman
was also granted options to purchase, at a price of $0.033 per share, 906,000
shares of our common stock, pursuant to a stock option agreement. These shares
vest over a four year period and vested as to one-fourth of these shares on
April 1, 2000, with the remainder of the shares vesting ratably monthly
thereafter. Mr. Hartman also entered into a change of control agreement in May
2000, which provides that, upon termination without cause or a significant
reduction in position within twelve months after a merger, acquisition,
acquisition of all or substantially all of our assets or change of beneficial
ownership of more than 50% of our stock to an unaffiliated entity, vesting of
the stock purchased will be accelerated so that at least one hundred percent of
the common stock vesting pursuant to any stock option agreements or

53
<PAGE> 59

subject to repurchase pursuant to any restricted stock purchase agreements will
be vested and Mr. Hartman will receive monthly severance payments for a period
of six months following termination.

Conrad Burke. In February 2000, Conrad Burke accepted our employment offer
letter, which provided that Mr. Burke would be entitled to receive an annual
salary of $190,000 and a bonus of $50,000 during his first year of employment,
based on performance milestones. His offer letter also provided for a $70,000
combined relocation and signing bonus. In connection with this offer letter, in
March 2000, Mr. Burke was also granted options to purchase, at a price of
$0.1667 per share, 1,200,000 shares of our common stock, pursuant to a stock
option agreement. These options vest over a four year period and vest as to
one-fourth of these options on March 1, 2001, with the remainder of the options
vesting ratably monthly thereafter. Mr. Burke also entered into a change of
control agreement in May 2000, which provides that, upon termination without
cause or a significant reduction in position within twelve months after a
merger, acquisition, acquisition of all or substantially all of our assets or
change of beneficial ownership of more than 50% of our stock to an unaffiliated
entity, vesting of the stock purchased will be accelerated so that at least one
hundred percent of the common stock vesting pursuant to any stock option
agreements or subject to repurchase pursuant to any restricted stock purchase
agreements will be vested and Mr. Burke will receive monthly severance payments
for a period of six months following the date of termination. In addition, upon
an involuntary termination without cause within the first twelve months of
employment, without a change of control, vesting will be accelerated with
respect to the number of shares of common stock subject to vesting under the
stock option agreement equivalent to one-eighth of the number of shares of
common stock granted at the time of his hire and Mr. Burke will receive monthly
severance payments for a period of six months following termination.

Christian Lepiane. In February 2000, Christian Lepiane accepted our
employment offer letter, which provided that Mr. Lepiane would be entitled to
receive an annual salary of $180,000 and a bonus of $50,000 during his first
year of employment, based on performance milestones. His offer letter also
provided for a $60,000 combined relocation and signing bonus and a one time car
allowance of $15,000. In connection with this offer letter, in March 2000, Mr.
Lepiane was also granted options to purchase, at a price of $0.1667 per share,
900,000 shares of our common stock, pursuant to a stock option agreement. These
options vest over a four year period and vest as to one-fourth of these options
on March 1, 2001, with the remainder of the options vesting ratably monthly
thereafter. Mr. Lepiane also entered into a change of control agreement, in May
2000, which provides that, upon termination without cause or a significant
reduction in position within twelve months after a merger, acquisition,
acquisition of all or substantially all of our assets or change of beneficial
ownership of more than 50% of our stock to an unaffiliated entity, vesting of
the stock purchased will be accelerated so that at least one hundred percent of
the common stock vesting pursuant to any stock option agreements or subject to
repurchase pursuant to any restricted stock purchase agreements will be vested
and Mr. Lepiane will receive monthly severance payments for a period of six
months following the date of termination. In addition, upon an involuntary
termination without cause within the first twelve months of employment, without
a change of control, vesting will be accelerated with respect to the number of
shares of common stock subject to vesting under the stock option agreement
equivalent to one-eighth of the number of shares of common stock granted at the
time of his hire and Mr. Lepiane will receive monthly severance payments for a
period of three months following termination.

54
<PAGE> 60

TRANSACTIONS WITH RELATED PARTIES AND INSIDERS

Other than compensation agreements and other arrangements, which are
described as required in "Management," and the transactions described below,
since our inception in June 1997, there has not been, nor is there currently
proposed, any transaction or series of similar transactions to which we were or
will be a party:

- in which the amount involved exceeded or will exceed $60,000; and

- in which any director, executive officer, or holder of more than 5% of
our common stock on an as-converted basis or any member of their
immediate family had or will have a direct or indirect material interest.

We believe that each of the transactions described below were on terms no
less favorable than could have been obtained from unaffiliated third parties.

SALES OF OUR COMMON STOCK AND PREFERRED STOCK

Common Stock

The following table summarizes the private placement transactions in which
we sold common stock to our directors, executive officers, 5% stockholders and
persons and entities affiliated with them:

<TABLE>
<CAPTION>
DATES OF PRICE PER SHARES OF
PURCHASER PURCHASE SHARE COMMON STOCK
--------- --------- --------- ------------
<S> <C> <C> <C>
Hus Tigli(1).................................... 3/20/2000 $0.1667 6,300,000
Anis Husain..................................... 7/2/1997 $0.0001 9,540,000
James Hartman(2)................................ 4/9/2000 $0.0333 226,500
James Hartman(2)................................ 5/24/2000 $0.0333 694,500
</TABLE>

---------------

(1) Hus Tigli signed a secured full recourse promissory note as consideration
for his purchase of common stock pursuant to the exercise of employee stock
options on March 20, 2000. For a description of this promissory note, please
see "-- Loan to Executive Officer."

(2)James Hartman purchased these shares of common stock pursuant to the exercise
of employee stock options.

Series A Preferred Stock

On August 11, 1997 and on October 18, 1997, we sold 1,000,000 shares of our
Series A Preferred Stock for $0.20 per share, with total aggregate proceeds of
approximately $200,000. Each share of Series A Preferred Stock is convertible
into three shares of common stock. The purchasers of the Series A Preferred
Stock included the following directors, 5% stockholders and persons affiliated
with them, among others:

<TABLE>
<CAPTION>
SHARES OF
PURCHASER SERIES A STOCK
--------- --------------
<S> <C>
Anis Husain............................................ 750,000
</TABLE>

Anis Husain is currently our Chief Technology Officer, Senior Vice
President, Research and Development, and Chairman of our Board of Directors.

55
<PAGE> 61

Series C Preferred Stock

On October 16, 1998 and on December 14, 1998, we sold 6,966,162 shares of
our Series C Preferred Stock for $0.73 per share, with total aggregate proceeds
of approximately $5,085,300. Each share of Series C Preferred Stock is
convertible into three shares of common stock. The purchasers of the Series C
Preferred Stock included the following directors, 5% stockholders and persons
affiliated with them, among others:

<TABLE>
<CAPTION>
SHARES OF
PURCHASER SERIES C STOCK
--------- --------------
<S> <C>
Entities affiliated with Sevin Rosen Funds VI L.P...... 4,110,000
Entities affiliated with Bessemer Venture Partners IV
L.P. ................................................ 2,739,725
</TABLE>

Series D Preferred Stock

On November 16, 1999, we sold 8,911,992 shares of our Series D Preferred
Stock for $2.477 per share, with total aggregate proceeds of approximately
$22,075,000. Each share of Series D Preferred Stock is convertible into three
shares of common stock. The purchasers of the Series D Preferred Stock included
the following directors, 5% stockholders and persons affiliated with them, among
others:

<TABLE>
<CAPTION>
SHARES OF
PURCHASER SERIES D STOCK
--------- --------------
<S> <C>
Entities affiliated with Sevin Rosen Fund VI L.P. ..... 1,613,650
Entities affiliated with Atlas Venture Fund IV,
L.P. ................................................ 4,037,142
Entities affiliated with Bessemer Venture Partners IV
L.P. ................................................ 2,018,571
</TABLE>

Series E Preferred Stock

On May 31, 2000 and June 14, 2000, we sold 4,355,398 shares of our Series E
Preferred Stock for $17.22 per share, with total aggregate proceeds of
approximately $75,000,000. Each share of Series E Preferred Stock is convertible
into three shares of common stock. The purchasers of the Series E Preferred
Stock included the following directors, 5% stockholders and persons affiliated
with them, among others:

<TABLE>
<CAPTION>
SHARES OF
PURCHASER SERIES E STOCK
--------- --------------
<S> <C>
Entities affiliated with Sevin Rosen Fund VI L.P. ..... 58,072
Entities affiliated with Atlas Venture Fund IV,
L.P. ................................................ 290,360
Entities affiliated with Bessemer Venture Partners IV
L.P. ................................................ 232,287
</TABLE>

LOAN TO EXECUTIVE OFFICER

In March 2000, in connection with Hus Tigli's purchase of 6,300,000 shares
of our common stock, we loaned Mr. Tigli $1,050,000 under a secured full
recourse promissory note with an annual interest rate of 6.69% compounded
semi-annually. Principal and interest on the note become due and payable on
March 20, 2005. The note also provides that we may accelerate any payments of
the amounts outstanding under the loan in the event Mr. Tigli ceases to be an
employee of ours. The note is also secured in part by the purchased stock.

INDEMNIFICATION

We have entered into indemnification agreements with each of our directors
and officers. These indemnification agreements will require us to indemnify our
directors and officers to the fullest extent permitted by Delaware law. Please
see "Management -- Board of Directors -- Limitations on Directors' Liability and
Indemnification."

All future transactions, including any loans from our company to our
officers, directors, principal stockholders or affiliates, will be approved by a
majority of the board of directors, including a majority of the independent and
disinterested members of the board of directors or, if required by law, a
majority of disinterested stockholders, and will be on terms no less favorable
to our company than could be obtained from unaffiliated third parties.

56
<PAGE> 62

PRINCIPAL STOCKHOLDERS

The following table sets forth information known to us with respect to the
beneficial ownership of our common stock as of September 30, 2000, and as
adjusted to reflect the sale of common stock offered in this prospectus:

- each stockholder known by us to own beneficially more than 5% of our
common stock, as explained below;

- each of the Named Executive Officers as listed in the "Summary
Compensation Table";

- executive officers who joined us after December 31, 1999;

- each of our directors; and

- all of our directors and executive officers as a group.

Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of common stock subject to options or warrants held by that person that
are currently exercisable or will become exercisable within 60 days after
September 30, 2000, are deemed outstanding, while the shares are not deemed
outstanding for purposes of computing percentage ownership of any other person.
Unless otherwise indicated in the footnotes below, the persons and entities
named in the table have sole voting or investment power with respect to all
shares beneficially owned, subject to community property laws where applicable.

The percentage of shares beneficially owned is based on the aggregate of
94,501,500 shares of common stock outstanding as of September 30, 2000, assuming
conversion of all outstanding shares of preferred stock into common stock, and
9,000,000 shares of common stock issued in this offering. Unless otherwise
indicated, the address of each listed stockholder is OMM, Inc., 9410 Carroll
Park Drive, San Diego, CA 92121.

<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED
--------------------
NUMBER OF SHARES BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED OFFERING OFFERING
------------------------------------ ------------------ -------- --------
<S> <C> <C> <C>
5% Stockholders:
Sevin Rosen Fund VI L.P.(a)............................... 17,345,166 18.4% 16.8%
13455 Noel Road, Suite 1670
Dallas, TX 75240
Bessemer Venture Partners IV L.P.(b)...................... 14,971,749 15.9 14.5
535 Middlefield Road
Menlo Park, CA 94025
Atlas Venture Fund IV L.P.(c)............................. 12,982,506 13.8 12.6
222 Berkeley Street
Boston, MA 02116

Directors and Executive Officers:
Hus Tigli(d).............................................. 6,300,000 6.7 6.1
Anis Husain(e)............................................ 11,805,000 12.5 11.4
Philip Chapman(f)......................................... * * *
Stephen Domenik(a)........................................ 17,345,166 18.4 16.8
169 University Avenue
Palo Alto, CA 94301
Bruce Graham(b)........................................... 14,971,749 15.9 14.5
535 Middlefield Road
Menlo Park, CA 94025
</TABLE>

57
<PAGE> 63

<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED
--------------------
NUMBER OF SHARES BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED OFFERING OFFERING
------------------------------------ ------------------ -------- --------
<S> <C> <C> <C>
Barry Fidelman(c)......................................... 12,982,506 13.8 12.6
222 Berkeley Street
Boston, MA 02116
James Hartman............................................. 921,000 1.0 *
Conrad Burke(g)........................................... * * *
Christian Lepiane(h)...................................... * * *
All directors and executive officers as a group (9
persons)(i)............................................. 64,314,796 68.1 62.2
</TABLE>

---------------
* Represents less than one percent.

(a) Includes 16,058,094 shares held by Sevin Rosen Fund VI L.P., and 22,500
shares held by Sevin Rosen Bayless Management Company and 1,264,572 shares
held by Sevin Rosen VI Affiliates Fund L.P., SRB Associates VI L.P. serves
as a general partner for each of these entities and may be deemed the
beneficial owner of the shares held by each of the entities. Stephen Domenik
is a general partner of SRB Associates VI L.P. and may be deemed the
beneficial owner of the shares beneficially owned by such entities. Mr.
Domenik disclaims beneficial ownership except to the extent of pecuniary
interest therein.

(b) Includes 8,319,816 shares held by Bessemer Venture Partners IV L.P. and
5,830,023 shares held by Bessec Ventures IV L.P. and 821,910 shares held by
Bessemer Venture Investors L.P. Bessemer Venture Partners IV L.P. serves as
a general partner for each of these entities and may be deemed the
beneficial owner of the shares held by each of the entities. Bruce Graham
serves as a general partner of Bessemer Venture Partners IV L.P. and may be
deemed the beneficial owner of the shares beneficially owned by Bessemer
Venture Partners IV L.P.

(c) Includes 9,937,194 shares held by Atlas Venture Fund IV, L.P. and 1,442,490
shares held by Atlas Venture Parallel Fund IV-A, C.V. and 1,442,490 shares
held by Atlas Venture Parallel Fund IV-B, C.V. and 160,332 shares held by
Atlas Venture Entrepreneurs' Fund IV, L.P. Atlas Venture Associates IV, L.P.
serves as a general partner of these entities and may be deemed the
beneficial owner of the shares held by each of the entities. Barry Fidelman
serves as a principal of Atlas Venture, and may be deemed the beneficial
owner of the shares beneficially owned by Atlas Venture Fund IV, L.P.

(d) Subject to a restricted stock purchase agreement and according to a vesting
schedule over a four-year period in which one-fourth of the shares will be
released from our right of repurchase on February 1, 2001 and 1/48 of the
shares will be released monthly thereafter.

(e) Includes 1,788,750 shares as of September 30, 2000 subject to a restricted
stock purchase agreement which are released from our repurchase right at the
rate of 198,750 shares per month until June 30, 2001. Includes 10,937 shares
as of September 30, 2000 subject to a restricted stock purchase agreement
which are released from our repurchase right at the rate of 312 shares per
month until August 26, 2003.

(f) Mr. Chapman has options to purchase 1,050,000 shares of common stock at an
exercise price of $0.3333 per share, none of which are exercisable within 60
days of the date of this prospectus.

(g) Mr. Burke has options to purchase 1,200,000 shares of common stock at an
exercise price of $0.1667 per share, none of which are exercisable within 60
days of the date of this prospectus.

(h) Mr. Lepiane has options to purchase 900,000 shares of common stock at an
exercise price of $0.1667 per share, none of which are exercisable within 60
days of the date of this prospectus.

(i) Includes 398,124 shares subject to options and restricted stock purchase
agreements exercisable or released from our repurchase right within 60 days
of September 30, 2000.

58
<PAGE> 64

DESCRIPTION OF CAPITAL STOCK

GENERAL

Upon completion of this offering, we will be authorized to issue
500,000,000 shares of common stock, $0.0001 par value, and 100,000,000 shares of
undesignated preferred stock, $0.0001 par value. We believe that the following
description of our capital stock is complete in all material respects, but we
refer to you to the exhibits filed together with this prospectus for the
complete terms regarding our capital stock, our certificate of incorporation and
our bylaws, which are included as exhibits to the registration statement of
which this prospectus forms a part.

COMMON STOCK

As of September 30, 2000, there were 94,501,500 shares of common stock
outstanding that were held of record by approximately 107 stockholders, assuming
the conversion of all shares of preferred stock into common stock and the
issuance of shares of common stock upon the exercise of warrants that, if not
exercised by the holders, will expire upon the closing of this offering.

The holders of common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may be
applicable to any outstanding preferred stock, the holders of common stock are
entitled to receive ratably such dividends, if any, as may be declared from time
to time by the board of directors out of funds legally available for that
purpose. See "Dividend Policy." In the event of a liquidation, dissolution or
winding up of OMM, the holders of common stock are entitled to share ratably in
all assets remaining after payment of liabilities, subject to prior distribution
rights of preferred stock, if any, then outstanding. The common stock has no
preemptive or conversion rights or other subscription rights. There are no
redemption or sinking fund provisions applicable to the common stock.

PREFERRED STOCK

The board of directors has the authority, without action by the
stockholders, to designate and issue preferred stock in one or more series and
to designate the rights, preferences and privileges of each series, any or all
of which may be greater than the rights of the common stock. We cannot state the
actual effect of the issuance of any shares of preferred stock upon the rights
of holders of the common stock until the board of directors determines the
specific rights of the holders of such preferred stock. However, the effects
might include, among other things, restricting dividends on the common stock,
diluting the voting power of the common stock, impairing the liquidation rights
of the common stock and delaying or preventing a change in control of OMM
without further action by the stockholders. Upon the closing of this offering,
no shares of preferred stock will be outstanding. We have no present plans to
issue additional shares of preferred stock.

WARRANTS

At September 30, 2000, there were warrants outstanding to purchase a total
of 1,980,158 shares of common stock, Series C Preferred Stock and Series D
Preferred Stock, as adjusted to reflect the conversion of all shares of
preferred stock to common stock with adjusted exercise prices ranging from
$0.2433 to $8.00 per share for a weighted average exercise price of $0.62 per
share. Concurrent with our initial public offering the warrants to purchase
preferred stock will automatically convert into warrants to purchase common
stock. Additionally, upon our initial public offering, warrants to purchase
83,901 shares of common stock will expire unless earlier exercised. Accordingly,
warrants to purchase 1,896,257 shares of common stock will remain outstanding
after the completion of this offering. Warrants to purchase 295,479 shares of
common stock will expire on April 15, 2004, unless earlier exercised, warrants
to purchase 50,000 shares of common stock will expire on September 5, 2005,
unless earlier exercised, warrants to purchase 945,207 shares of common stock
will expire on the later of April 4, 2006 or three years after the date of

59
<PAGE> 65

the closing of this offering, unless earlier exercised and warrants to purchase
605,571 shares of common stock will expire on April 7, 2010, unless earlier
exercised.

REGISTRATION RIGHTS

Pursuant to the amended and restated shareholders' rights agreement entered
into between us and holders of 70,751,886 registrable shares of common stock
issuable upon conversion of our preferred stock, we are obligated, under limited
circumstances and subject to specified conditions and limitations, to use our
best efforts to register the registrable shares.

We must use our best efforts to register shares of the registrable shares:

- if we receive, with respect to the first demand registration, the written
notice from holders of 50% or more of the registrable shares or with
respect to the second demand registration, written notice from the
holders of 25% or more of the registrable shares, requesting that we
effect a registration with respect to not less than the number of
registrable shares then held by the holders requesting registration, that
would be reasonably anticipated to result in a price to the public that
will exceed $7,500,000;

- if we decide to register our own securities, except in connection with
this offering; or

- if we receive written notice from holders of the registrable shares
requesting that we effect a registration on Form S-3, with respect to
shares of the registrable shares, the reasonably anticipated price to the
public of which exceeds $500,000 and we are then eligible to use Form
S-3, which at the earliest will occur twelve calendar months after the
closing of this offering.

However, in addition to other conditions and limitations, if requested to
register shares of registrable shares, we can delay registration not more than
once in any 12-month period and for not more than 90 days. In addition, we are
obligated to effect only two demand registrations requested by the holders of
the registrable shares and an additional six registrations on Form S-3. In any
case where we decide to register our own securities pursuant to an underwritten
offering, the managing underwriter may exclude the registrable shares from the
registration.

These registration rights terminate with respect to each registrable share
upon the first to occur of when the holder can transfer or sell his or her
registrable shares pursuant to Rule 144 in any three-month period or five years
after the closing of this offering. All holders of these registration rights
have entered into lock-up agreements that waive their registration rights until
180 days following the date of this prospectus.

DELAWARE ANTI-TAKEOVER LAW AND CHARTER AND BYLAW PROVISIONS

Provisions of Delaware law and our certificate of incorporation and bylaws
could make it more difficult to acquire us by means of a tender offer, a proxy
contest or otherwise, and the removal of incumbent officers and directors. These
provisions, summarized below, are expected to discourage coercive takeover
practices and inadequate takeover bids and to encourage persons seeking to
acquire control of us to first negotiate with us. We believe that the benefits
of increased protection of our potential ability to negotiate with the proponent
of an unfriendly or unsolicited proposal to acquire or restructure us outweigh
the disadvantages of discouraging takeover or acquisition proposals because,
among other things, negotiation of these proposals could result in an
improvement of their terms.

We are subject to Section 203 of the Delaware General Corporation Law, an
anti-takeover law. In general, Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years following the date the person became an
interested stockholder, unless, with exceptions, the "business combination" or
the transaction in which the person became an interested stockholder is approved
in a prescribed manner. Generally, a "business combination" includes a merger,
asset or stock sale, or other transaction resulting in a financial benefit to
the interested stockholder. Generally, an "interested stockholder" is a person
who, together with

60
<PAGE> 66

affiliates and associates, owns, or within three years prior to the
determination of interested stockholder status, did own, 15% or more of a
corporation's voting stock. The existence of this provision would be expected to
have an, anti-takeover effect with respect to transactions not approved in
advance by the board of directors, including discouraging attempts that might
result in a premium over the market price for the shares of common stock held by
stockholders.

Our certificate of incorporation and bylaws require that any action
required or permitted to be taken by our stockholders must be effected at a duly
called annual or special meeting of the stockholders and may not be effected by
a consent in writing. In addition, special meetings of our stockholders may be
called only by the board of directors, the president, the chief executive
officer, the chairman of the board, or by a committee of the board of directors
designated with the authority to call special meetings. Our certificate of
incorporation and bylaws also provide that, beginning upon the closing of this
offering, our board of directors will be divided into three classes, with each
class serving staggered three-year terms, and that amendments to the special
meetings provision, the action by written consent of stockholders without a
meeting provision, the classes of directors provision and the indemnification
provision of the certificate of incorporation and of the bylaws require the
approval of holders of at least 66 2/3% of the voting power of all outstanding
stock. These provisions may have the effect of deterring hostile takeovers or
delaying changes in control or management of OMM.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the common stock is Wells Fargo
Shareowner Services.

NATIONAL MARKET LISTING

We have applied to list our common stock on The Nasdaq Stock Market's
National Market under the symbol "OMMI."

61
<PAGE> 67

SHARES ELIGIBLE FOR FUTURE SALE

Immediately prior to this offering, there was no public market for our
common stock. Future sales of substantial amounts of common stock in the public
market could adversely affect the market price of the common stock.

Upon completion of this offering, we will have outstanding 103,501,500
shares of common stock, assuming the issuance of 9,000,000 shares of common
stock offered by us and no exercise of options after September 30, 2000, and
assuming no exercise of the underwriters' over-allotment option. All of the
shares sold in this offering will be freely tradable without restriction or
further registration under the Securities Act; provided, however, that if shares
are purchased by "affiliates" as that term is defined in Rule 144 under the
Securities Act, their sales of shares would be subject to the limitations and
restrictions that are described below.

The remaining 94,501,500 shares of common stock held by existing
stockholders were issued and sold by us in reliance on exemptions from the
registration requirements of the Securities Act. Of these shares, 94,386,978 of
such shares will be subject to the restrictions contained in the lock-up
agreements described in "Underwriting" on the effective date of this offering.
On the effective date of this offering, shares not subject to the lock-up
agreements described in "Underwriting" will not be eligible for sale pursuant to
Rule 144(k). In addition, holders of stock options could exercise such options
and sell, subject to lock-up agreements described in "Underwriting," that amount
of the shares issued upon exercise as described below.

<TABLE>
<CAPTION>
APPROXIMATE SHARES
RELEVANT DATES ELIGIBLE FOR FUTURE SALE COMMENT
-------------- ------------------------ -------
<S> <C> <C>
On the date of this prospectus..... 0 Freely tradable shares not sold in
this offering
90 days after the date of this
prospectus....................... 30,621
Early lock-up release.............. 23,627,366 All shares subject to early lock-up
release if the last reported sale
price of our common stock is at
least two times the initial public
offering price per share for 20 of
the 30 trading days preceding the
90th day after the date of this
prospectus; shares saleable under
Rule 144, 144(k) and 701
180 days after the date of this
prospectus....................... 94,310,978 All shares subject to lock-up
released; shares saleable under
Rule 144, 144(k) and 701
</TABLE>

RULE 144

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year would be entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of:

- 1% of the number of shares of common stock then outstanding, which will
equal approximately 103,417 shares immediately after this offering; or

- the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to such sale.

Sales under Rule 144 are also subject to other requirements regarding the
manner of sale, notice filing and the availability of current public information
about us.

62
<PAGE> 68

RULE 144(k)

Under Rule 144(k), a person who is not deemed to have been one of our
"affiliates" at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner other than an "affiliate," is
entitled to sell such shares without complying with the manner of sale, notice
filing, volume limitation or notice provisions of Rule 144. Therefore, unless
otherwise restricted, "144(k) shares" may be sold immediately upon the
completion of this offering.

RULE 701

In general, any of our employees, directors, officers, consultants or
advisors who purchases shares from us in reliance on Rule 701 in connection with
a compensatory stock or option plan or other written agreement before the
effective date of this offering is entitled to resell such shares 90 days after
the effective date of this offering in reliance on Rule 144, without having to
comply with all of the restrictions, including the holding period, contained in
Rule 144.

The SEC has indicated that Rule 701 will apply to typical stock options
granted by an issuer before it becomes subject to the reporting requirements of
the Securities Exchange Act of 1934, along with the shares acquired upon
exercise of such options (including exercises after the date of this
prospectus). Securities issued in reliance on Rule 701 are restricted securities
and, subject to the contractual restrictions described above, beginning 90 days
after the date of this prospectus, may be sold by persons other than
"affiliates," as defined in Rule 144, subject only to the manner of sale
provisions of Rule 144 and by "affiliates" under Rule 144 without compliance
with its one year minimum holding period requirement.

STOCK OPTIONS

As of September 30, 2000, there were a total of 14,971,037 shares of common
stock subject to outstanding options under our 1997 Stock Plan, 2,327,372 of
which were vested, and all of which are subject to the lock-up agreements
described in "Underwriting." Immediately after the completion of the offering,
we intend to file registration statements on Form S-8 under the Securities Act
to register all of the shares of common stock issued or reserved for future
issuance under our 1997 Stock Plan, as amended, and our 2000 Stock Purchase
Plan. After the effective dates of the registration statements on Form S-8,
shares purchased upon exercise of options granted pursuant to the 1997 Stock
Plan, as amended, 2000 Stock Purchase Plan and would be available for resale in
the public market, subject to the lock-up agreements described in Underwriting.

63
<PAGE> 69

UNITED STATES TAX CONSEQUENCES TO NON-U.S. HOLDERS

The following general discussion summarizes some of the material United
States Federal income and estate tax consequences of the ownership and
disposition of our common stock by a non-U.S. holder of common stock. A
"non-U.S. holder" generally is a holder of common stock that is not, for United
States Federal income tax purposes, any of the following:

- a citizen or resident of the United States;

- a corporation, partnership or other entity created or organized in or
under the laws of the United States or any of its political subdivisions;

- an estate, the income of which is subject to U.S. Federal income taxation
regardless of its source; or

- a trust whose administration is subject to the primary supervision of a
U.S. court, and which has one or more U.S. persons who have the authority
to control all substantial decisions of the trust.

If you are an individual, you may, in many cases, be deemed to be a
resident alien, as opposed to a nonresident alien, by virtue of being present in
the United States for at least 31 days in the calendar year and for an aggregate
of at least 183 days during a three-year period ending in the current calendar
year (counting for such purposes all of the days present in the current year,
one-third of the days present in the immediately preceding year, and one-sixth
of the days present in the second preceding year). A resident alien is subject
to United States Federal income tax as if such individual was a citizen of the
United States.

If a partnership is a beneficial owner of our common stock, the tax
treatment of a partner will generally depend upon the status of the partner and
upon the activities of the partnership. If you are a partner of a partnership
holding common stock, you should consult your tax advisor about the U.S. tax
consequences of holding and disposing of shares of our common stock.

This discussion is limited to non-U.S. holders who hold the common stock as
a capital asset. This discussion does not consider all aspects of U.S. Federal
income and estate taxation or the specific facts and circumstances that may be
relevant to particular non-U.S. holders in light of their personal
circumstances, such as insurance companies, tax-exempt organizations, financial
institutions, broker-dealers or certain U.S. expatriates, and does not address
the treatment of those holders under the laws of any state, local or foreign
taxing jurisdiction. In addition, this discussion does not address any special
tax provisions which may apply to you if you relinquished United States
citizenship or residence. Further, the discussion is based on provisions of the
United States Internal Revenue Code of 1986, as amended, or the Internal Revenue
Code, Treasury regulations under the Internal Revenue Code, and administrative
and judicial interpretations of the Internal Revenue Code. This discussion is
based on the provisions of the Internal Revenue Code as they are in effect on
the date of this prospectus. All of these provisions are subject to change or
different interpretation on a possibly retroactive basis.

EACH PROSPECTIVE HOLDER IS URGED TO CONSULT ITS TAX ADVISOR WITH RESPECT TO
THE UNITED STATES FEDERAL INCOME AND ESTATE TAX CONSEQUENCES OF ACQUIRING,
HOLDING AND DISPOSING OF COMMON STOCK, AS WELL AS ANY TAX CONSEQUENCES THAT MAY
ARISE UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION.

Dividends

Dividends paid to a non-U.S. holder of common stock generally will be
subject to United States Federal withholding tax at a 30% rate or a lower rate
as may be specified by an applicable income tax treaty. Dividends that are
effectively connected with the non-U.S. holder's conduct of a trade or business
within the United States (and if an income tax treaty applies, are attributable
to a United States permanent establishment of such non-U.S. holder) will not be
subject to withholding tax provided that such non-U.S. holder complies with
applicable certification and disclosure requirements. Instead, the "effectively
connected" dividends will be subject to U.S. Federal income tax on a net basis
at applicable graduated rates in the same manner as dividends paid to United
States citizens, resident aliens and

64
<PAGE> 70

domestic United States corporations. Any effectively connected dividends
received by a corporate non-U.S. holder may also be subject to an additional
"branch profits tax" at a 30% rate or a lower rate as may be specified by an
applicable income tax treaty.

Under currently effective United States Treasury regulations, dividends
paid prior to January 1, 2001 to an address in a foreign country are presumed to
be paid to a resident of that country, unless the payor has knowledge to the
contrary, for purposes of the withholding discussed above and for purposes of
determining the applicability of a tax treaty rate. Under recently finalized
United States Treasury regulations that will generally be effective for
distributions after December 31, 2000, or the "Final Withholding Regulations,"
however, a non-U.S. holder of common stock who wishes to claim the benefit of an
applicable treaty rate would be required to satisfy applicable certification
requirements. In addition, under the Final Withholding Regulations, in the case
of common stock held by a foreign partnership, (1) the certification
requirements would generally be applied to the partners of the partnership and
(2) the partnership would be required to provide information, including a United
States taxpayer identification number. The Final Withholding Regulations provide
look-through rules for tiered partnerships.

The foregoing rules apply to distributions to shareholders out of our
current or accumulated earnings and profits. Different withholding rules will
apply to any distributions that we pay in excess of our current or accumulated
earnings and profits.

A non-U.S. holder of common stock that is eligible for a reduced rate of
United States withholding tax under a tax treaty may obtain a refund of any
excess amounts currently withheld by filing an appropriate claim for refund with
the United States Internal Revenue Service.

Gain On Disposition Of Common Stock

A non-U.S. holder generally will not be subject to United States Federal
income tax for gain recognized on a sale or other disposition of common stock
unless one of the following conditions is satisfied:

- the gain is effectively connected with a trade or business conducted by
the non-U.S. holder in the United States (and, if an income tax treaty
applies, is attributable to a permanent establishment maintained in the
United States by such non-U.S. holder). The non-U.S. holder will, unless
an applicable treaty provides otherwise, be taxed on its net gain derived
from the sale or other disposition under regular graduated U.S. Federal
income tax rates. Effectively connected gains realized by a corporate
non-U.S. holder may also be subject to an additional "branch profits tax"
at a 30% rate or a lower rate as may be specified by an applicable income
tax treaty;

- in the case of a non-U.S. holder who is an individual and holds the
common stock as a capital asset, the holder is present in the United
States for 183 or more days in the taxable year of the sale or other
disposition and other conditions exist;

- we are or have been a "United States real property holding corporation"
for U.S. Federal income tax purposes within the shorter of the five-year
period preceding such disposition or such non-U.S. holder's holding
period. We believe that we are not currently, and are not likely to
become, a "United States real property holding corporation" for U.S.
Federal income tax purposes. If we were to become a "United States real
property holding corporation," under currently effective United States
Treasury regulations, any gain recognized by a non-U.S. holder still
would not be subject to U.S. Federal income tax if the shares were
considered to be "regularly traded on an established securities market,"
and the non-U.S. holder did not hold, directly or indirectly at any time
during the shorter of the periods described above, more than 5% of our
common stock; or

- the non-U.S. holder is subject to tax under provisions of the Internal
Revenue Code applicable to U.S. expatriates.

65
<PAGE> 71

Federal Estate Tax Consequences

Common stock held by an individual non-U.S. holder at the time of death
will be included in such holder's gross estate for U.S. Federal estate tax
purposes, and may be subject to U.S. Federal estate tax, unless an applicable
estate tax treaty provides otherwise.

Information Reporting and Backup Withholding

We must report annually to the United States Internal Revenue Service and
to each non-U.S. holder the amount of dividends paid to, and the tax withheld
with respect to, such holder, regardless of whether any tax was actually
withheld. This information may also be made available to the tax authorities in
the non-U.S. holder's country of residence. Under current law, United States
information reporting requirements, other than reporting of dividend payments
for purposes of the withholding tax noted above, and backup withholding tax
generally will not apply to dividends paid to non-U.S. holders that are either
subject to the 30% withholding discussed above or that are not subject to
withholding because an applicable tax treaty reduces or eliminates the
withholding. Otherwise, backup withholding of United States Federal income tax
at a rate of 31% may apply to dividends paid with respect to common stock to
holders that are not "exempt recipients" and that fail to provide the required
information including the holder's United States taxpayer identification number.

Under current law, generally, unless the payor of dividends has actual
knowledge that the payee is a United States person, the payor may treat dividend
payments to a payee with a foreign address as exempt from information reporting
and backup withholding. However, under the Final Withholding Regulations,
dividend payments generally will be subject to information reporting and backup
withholding unless applicable certification requirements are satisfied. See the
discussion above with respect to the rules applicable to foreign partnerships
under the Final Withholding Regulations.

In general, United States information reporting and backup withholding
requirements also will not apply to a payment made outside the United States of
the proceeds of a sale of common stock to or through an office outside the
United States of a non-United States broker. However, United States information
reporting, but not backup withholding, requirements will apply to a payment made
outside the United States of the proceeds of a sale of common stock through an
office outside the United States of a broker that, for United States Federal
Income tax purposes, is a United States person, a "controlled foreign
corporation," or a foreign person that derives 50% or more of its gross income
for the periods from the conduct of a trade or business in the United States,
or, in the case of payments made after December 31, 2000, a foreign partnership
that at any time during its tax year either is engaged in the conduct of a trade
or business in the United States or has as partners one or more United States
persons that, in the aggregate, hold more than 50% of the income or capital
interest in the partnership, unless the broker has documentary evidence in its
records that the holder or beneficial owner is a non-United States person or the
holder or beneficial owner otherwise establishes an exemption. Payment of the
proceeds of the sale of common stock to or through a United States office of a
broker is currently subject to both United States backup withholding and
information reporting unless the holder certifies its non-United States status
under penalties of perjury or otherwise establishes an exemption.

Backup withholding is not an additional tax. Amounts withheld under the
backup withholding rules are generally allowable as a refund or credit against
such non-U.S. holder's Federal income tax liability, if any, provided that the
required information is furnished to the Internal Revenue Service.

66
<PAGE> 72

UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting
agreement dated , we have agreed to sell to the underwriters
named below, for whom Credit Suisse First Boston Corporation, Chase Securities
Inc., CIBC World Markets Corp. and Dain Rauscher Incorporated are acting as
representatives, the following respective numbers of shares of common stock:

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation......................
Chase Securities Inc. ......................................
CIBC World Markets Corp. ...................................
Dain Rauscher Incorporated..................................
---------
Total.....................................................
=========
</TABLE>

The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.

We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to additional shares at the initial public
offering price less the underwriting discounts and commissions. The option may
be exercised only to cover any over-allotments of common stock.

The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a selling concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on sales to other broker or dealers. After the initial public offering, the
public offering price and concession and discount to broker or dealers may be
changed by the representatives.

The following table summarizes the compensation and estimated expenses we
will pay.

<TABLE>
<CAPTION>
PER SHARE TOTAL
-------------------------------- --------------------------------
WITHOUT WITH WITHOUT WITH
OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting Discounts and
Commissions paid by us............. $ $ $ $
Expenses payable by us............... $ $ $ $
</TABLE>

The representatives have informed us that the underwriters do not expect
discretionary sales to exceed 5% of the shares of common stock being offered.

We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act of 1933
relating to, any shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock, or publicly
disclose the intention to make any offer, sale, pledge, disposition or filing,
without the prior written consent of Credit Suisse First Boston Corporation for
a period of 180 days after the date of this prospectus, except issuances
pursuant to the exercise of employee stock options outstanding on the date
hereof.

Our officers, directors and holders of at least seven million shares have
agreed that they will not offer, sell, contract to sell, pledge or otherwise
dispose of, directly or indirectly, any shares of our common stock or securities
convertible into or exchangeable or exercisable for any shares of our common
stock, enter into a transaction which would have the same effect, or enter into
any swap, hedge or other arrangement that transfers, in whole or in part, any of
the economic consequences of ownership of our common stock, whether any of these
transactions are to be settled by delivery of our common stock or other
securities, in

67
<PAGE> 73

cash or otherwise, or publicly disclose the intention to make any offer, sale,
pledge or disposition, or to enter into any of these types of transactions,
swap, hedge or other arrangement, without, in each case, the prior written
consent of Credit Suisse First Boston Corporation for a period of 180 days after
the date of this prospectus. If the reported last sale price of our common stock
on the Nasdaq National Market is at least twice the offering price per share for
20 of the 30 trading days ending on the last trading day preceding the 90th day
after the date of this prospectus, then 25% of the shares of our common stock
owned by the officers, directors and stockholders described above subject to the
180-day restriction described above, or 23,625,375 shares, will be released on
the 91st day after the date of this prospectus.

The underwriters have reserved for sale, at the initial public offering
price up to shares of the common stock for employees, directors and other
persons associated with us who have expressed an interest in purchasing common
stock in the offering. The number of shares available for sale to the general
public in the offering will be reduced to the extent these persons purchase the
reserved shares. Any reserved shares not so purchased will be offered by the
underwriters to the general public on the same terms as the other shares.

We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments which the underwriters may be required
to make in that respect.

We have applied to list the shares of common stock on The Nasdaq Stock
Market's National Market under the symbol "OMMI".

In connection with the offering the underwriters may engage in stabilizing
transactions, over-allotment transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934.

- Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.

- Over-allotment involves sales by the underwriters of shares in excess of
the number of shares the underwriters are obligated to purchase, which
creates a syndicate short position. The short position may be either a
covered short position or a naked short position. In a covered short
position, the number of shares over-allotted by the underwriters is not
greater than the number of shares that they may purchase in the
over-allotment option. In a naked short position, the number of shares
involved is greater than the number of shares in the over-allotment
option. The underwriters may close out any short position by either
exercising their over-allotment option and/or purchasing shares in the
open market.

- Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions. In determining the source of shares to
close out the short position, the underwriters will consider, among other
things, the price of shares available for purchase in the open market as
compared to the price at which they may purchase shares through the
over-allotment option. If the underwriters sell more shares than could be
covered by the over-allotment option -- a naked short position -- that
position can only be closed out by buying shares in the open market. A
naked short position is more likely to be created if the underwriters are
concerned that there may be downward pressure on the price of the shares
in the open market after pricing that could adversely affect investors
who purchase in the offering.

- Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a stabilizing or syndicate covering
transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids
may have the effect of raising or maintaining the market price of the common
stock or preventing or retarding a decline in the market price of the common
stock. As a result the price of the common stock may be higher than the

68
<PAGE> 74

price that might otherwise exist in the open market. These transactions may be
effected on The Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.

A prospectus in electronic format will be made available on the web sites
maintained by one or more of the underwriters participating in this offering.
The representatives may agree to allocate a number of shares to underwriters for
sale to their online brokerage account holders. Internet distributions will be
allocated by the underwriters that will make internet distributions on the same
basis as other allocations.

69
<PAGE> 75

NOTICE TO CANADIAN RESIDENTS

RESALE RESTRICTIONS

The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are made. Any resale of the common stock in Canada must
be made under applicable securities laws which will vary depending on the
relevant jurisdiction, and which may require resales to be made under available
statutory exemptions or under a discretionary exemption granted by the
applicable Canadian securities regulatory authority. Purchasers are advised to
seek legal advice prior to any resale of the common stock.

REPRESENTATIONS OF PURCHASERS

By purchasing common stock in Canada and accepting purchase confirmation a
purchaser is representing to us and the dealer from whom the purchase
confirmation is received that:

- the purchaser is entitled under applicable provincial securities laws to
purchase the common stock without the benefit of a prospectus qualified
under those securities laws,

- where required by law, the purchaser is purchasing as principal and not
as agent, and

- the purchaser has reviewed the text above under "Resale Restrictions".

RIGHTS OF ACTION (ONTARIO PURCHASERS)

The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.

ENFORCEMENT OF LEGAL RIGHTS

All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or such persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a result, it may not
be possible to satisfy a judgment against the issuer or such persons in Canada
or to enforce a judgment obtained in Canadian courts against such issuer or
persons outside of Canada.

NOTICE TO BRITISH COLUMBIA RESIDENTS

A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by the purchaser pursuant to this offering. The report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from us. Only one report must
be filed for common stock acquired on the same date and under the same
prospectus exemption.

TAXATION AND ELIGIBILITY FOR INVESTMENT

Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and about the eligibility of the common
stock for investment by the purchaser under relevant Canadian legislation.

70
<PAGE> 76

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act for the shares of common stock in
this offering. This prospectus does not contain all of the information in the
registration statement and the exhibits and schedule that were filed with the
registration statement. For further information with respect to OMM and our
common stock, we refer you to the registration statement and the exhibits and
schedule that were filed with the registration statement. We believe that
statements contained in this prospectus about the contents of any contract or
any other document that is filed as an exhibit to the registration statement are
complete in all material respects, but we refer you to the full text of the
contract or other document filed as an exhibit to the registration statement for
the complete terms of such items. A copy of the registration statement and the
exhibits and schedule that were filed with the registration statement may be
inspected without charge at the public reference facilities maintained by the
Securities and Exchange Commission in Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and copies of all or any part of the registration
statement may be obtained from the SEC upon payment of the prescribed fee. The
Securities and Exchange Commission maintains a World Wide Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Securities and Exchange
Commission. The address of the site is http://www.sec.gov.

Upon completion of this offering, OMM will become subject to the
information and periodic reporting requirements of the Securities Exchange Act
of 1934, and, in accordance with the requirements of the Securities Exchange Act
of 1934, will file periodic reports, proxy statements and other information with
the Securities and Exchange Commission. These periodic reports, proxy statements
and other information will be available for inspection and copying at the
regional offices, public reference facilities and web site of the Securities and
Exchange Commission referred to above.

LEGAL MATTERS

The validity of the common stock offered hereby will be passed upon for us
by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto,
California. Legal matters for the underwriters will be passed upon by Cooley
Godward LLP, San Diego, California. As of the date of this prospectus, WS
Investment Company 98B, 99B and 2000B investment partnerships composed of
certain current and former members of and persons associated with Wilson Sonsini
Goodrich & Rosati, Professional Corporation, and certain other members and
employees of Wilson Sonsini Goodrich & Rosati beneficially own 234,669 shares of
our common stock and warrants to purchase 50,000 shares of common stock.

EXPERTS

The financial statements as of December 31, 1998 and 1999 and for the
period from June 30, 1997 (inception) to December 31, 1997 and for each of the
two years in the period ended December 31, 1999 included in this Prospectus have
been so included in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.

71
<PAGE> 77

(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE> 78

OMM, INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... F-2
Balance Sheets as of December 31, 1998 and 1999 and
September 30, 2000 (unaudited)............................ F-3
Statements of Operations for the Period From June 30, 1997
(Inception) to December 31, 1997, for the Years Ended
December 31, 1998 and 1999 and for the Nine Months Ended
September 30, 1999 and 2000 (unaudited)................... F-4
Statements of Redeemable Convertible Preferred Stock and
Stockholders' Equity (Deficit) for the Period From June
30, 1997 (Inception) to December 31, 1997, for the Years
Ended December 31, 1998 and 1999 and for the Nine Months
Ended September 30, 2000 (unaudited)...................... F-5
Statements of Cash Flows for the Period From June 30, 1997
(Inception) to December 31, 1997, for the Years Ended
December 31, 1998 and 1999 and for the Nine Months Ended
September 30, 1999 and 2000 (unaudited)................... F-7
Notes to Financial Statements............................... F-8
</TABLE>

F-1
<PAGE> 79

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of OMM, Inc.

In our opinion, the accompanying balance sheets and the related statements
of operations, of redeemable convertible preferred stock and stockholders'
equity (deficit) and of cash flows present fairly, in all material respects, the
financial position of OMM, Inc. at December 31, 1998 and 1999, and the results
of its operations and its cash flows for the period from June 30, 1997
(inception) through December 31, 1997 and for the years ended December 31, 1998
and 1999 in conformity with accounting principles generally accepted in the
United States of America. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

PRICEWATERHOUSECOOPERS LLP

San Diego, California
June 23, 2000

F-2
<PAGE> 80

OMM, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY
------------------------- SEPTEMBER 30, SEPTEMBER 30,
1998 1999 2000 2000
----------- ----------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents.................................. $ 4,720,585 $ 3,056,843 $ 36,015,372
Short-term investments..................................... -- 17,142,211 30,476,590
Accounts receivable........................................ 143,468 89,944 1,093,364
Inventories................................................ -- -- 4,487,950
Prepaid financing fees..................................... -- 131,611 786,624
Prepaid expenses and other current assets.................. 20,615 159,566 2,102,195
----------- ----------- ------------
Total current assets..................................... 4,884,668 20,580,175 74,962,095
Property and equipment, net................................. 359,723 2,900,539 19,219,392
Prepaid financing fees...................................... -- 266,894 1,638,688
Restricted cash (Note 9).................................... -- -- 2,200,000
Other assets................................................ -- 97,215 349,301
----------- ----------- ------------
$ 5,244,391 $23,844,823 $ 98,369,476
=========== =========== ============

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable........................................... $ 154,655 $ 1,308,832 $ 10,674,894
Accrued expenses........................................... 50,457 264,679 970,441
Current portion of capital lease obligations............... -- 467,234 519,049
----------- ----------- ------------
Total current liabilities................................ 205,112 2,040,745 12,164,384
----------- ----------- ------------
Long-term liabilities
Capital lease obligation, less current portion............. -- 1,104,391 5,591,851
----------- ----------- ------------
Total liabilities........................................ 205,112 3,145,136 17,756,235
----------- ----------- ------------
Commitments (Note 9)

Redeemable convertible preferred stock, $.0001 par value;
24,227,351 shares authorized (Note 5)
Series E, 4,355,401 shares authorized; 0, 0, 4,355,398 and
0 shares issued and outstanding at December 31, 1998 and
1999, September 30, 2000 and September 30, 2000 pro
forma; liquidation preference of $74,999,953............. -- -- 74,927,670
Series D, 9,113,849 shares authorized; 0, 8,911,992,
8,911,992 and 0 shares issued and outstanding at December
31, 1998 and 1999, September 30, 2000 and September 30,
2000 pro forma; liquidation preference of $22,075,004.... -- 22,046,319 22,046,319
Series C, 7,407,691 shares authorized; 6,966,162,
6,966,162, 6,966,162 and 0 shares issued and outstanding
at December 31, 1998 and 1999, September 30, 2000 and
September 30, 2000 pro forma; liquidation preference of
$5,085,298............................................... 5,051,349 5,051,349 5,051,349
Series B, 2,350,410 shares authorized; 2,350,410,
2,350,410, 2,350,410 and 0 shares issued and outstanding
at December 31, 1998 and 1999, September 30, 2000 and
September 30, 2000 pro forma; liquidation preference of
$1,099,992............................................... 1,092,942 1,092,942 1,092,942
Series A, 1,000,000 shares authorized; 1,000,000,
1,000,000, 1,000,000 and 0 shares issued and outstanding
at December 31, 1998 and 1999, September 30, 2000 and
September 30, 2000 pro forma; liquidation preference of
$200,000................................................. 198,649 198,649 198,649
----------- ----------- ------------ ------------
Total redeemable convertible preferred stock......... 6,342,940 28,389,259 103,316,929
----------- ----------- ------------ ------------
Stockholders' equity (deficit)
Preferred stock, $0.0001 par value; 10,000,000 shares
authorized at September 30, 2000; no shares issued and
outstanding.............................................. -- -- -- --
Common stock, $.0001 par value; 150,000,000 shares
authorized; 14,107,500, 14,212,500, 23,665,713 and
94,501,500 shares issued and outstanding at December 31,
1998 and 1999, September 30, 2000 and September 30, 2000
pro forma................................................ 1,411 1,422 2,367 9,450
Additional paid-in capital................................. 5,440 2,459,224 57,018,721 160,348,703
Unearned stock-based compensation.......................... -- (1,484,540) (38,125,291) (38,125,291)
Stockholder receivable..................................... (7,800) (4,600) (1,050,800) (1,050,800)
Accumulated deficit........................................ (1,302,712) (8,661,078) (40,548,685) (40,548,685)
----------- ----------- ------------ ------------
Total stockholders' equity (deficit)..................... (1,303,661) (7,689,572) (22,703,688) $ 80,633,377
----------- ----------- ------------ ============
$ 5,244,391 $23,844,823 $ 98,369,476
=========== =========== ============
</TABLE>

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

F-3
<PAGE> 81

OMM, INC.

STATEMENTS OF OPERATIONS

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

F-4
<PAGE> 82

OMM, INC.

STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK

AND STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
REDEEMABLE CONVERTIBLE PREFERRED STOCK
--------------------------------------------------------------------------
SERIES E SERIES D SERIES C
----------------------- ----------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock... -- $ -- -- $ -- -- $ --
Issuance of Series A
preferred stock.......... -- -- -- --
Exercise of stock
options.................. -- -- -- --
Issuance of Series B
preferred stock.......... -- -- -- --
Repayment of shareholder
note receivable.......... -- -- -- --
Net loss................... -- -- -- -- -- --
--------- ----------- --------- ----------- --------- ----------
BALANCE AT DECEMBER 31,
1997..................... -- -- -- -- -- --
Issuance of Series B
preferred stock.......... -- -- -- -- -- --
Issuance of Series C
preferred stock.......... -- -- -- -- 6,966,162 5,051,349
Issuance of common stock... -- -- -- -- -- --
Repayment of shareholder
note receivable.......... -- -- -- -- -- --
Net loss................... -- -- -- -- -- --
--------- ----------- --------- ----------- --------- ----------
BALANCE AT DECEMBER 31,
1998..................... -- -- -- -- 6,966,162 5,051,349
Exercise of stock
options.................. -- -- -- -- -- --
Issuance of Series D
preferred stock.......... -- -- 8,911,992 22,046,319 -- --
Unearned stock-based
compensation............. -- -- -- -- -- --
Amortization of stock-based
compensation............. -- -- -- -- -- --
Issuance of warrants to
purchase Series C
preferred stock for
services received........ -- -- -- -- -- --
Issuance of warrants to
purchase Series C
preferred stock in
obtaining financing
arrangements............. -- -- -- -- -- --
Repayments of shareholder
note receivable.......... -- -- -- -- -- --
Net loss................... -- -- -- -- -- --
--------- ----------- --------- ----------- --------- ----------
BALANCE AT DECEMBER 31,
1999..................... -- -- 8,911,992 22,046,319 6,966,162 5,051,349
Exercise of stock options
and warrants............. -- -- -- -- -- --
Issuance of Series E
preferred stock.......... 4,355,398 74,927,670 -- -- -- --
Unearned stock-based
compensation............. -- -- -- -- -- --
Amortization of stock-based
compensation............. -- -- -- -- -- --
Options issued for services
received................. -- -- -- -- -- --
Issuance of warrants to
purchase common stock for
services received........ -- -- -- -- -- --
Issuance of warrants to
purchase Series D
preferred stock in
obtaining financing
arrangement.............. -- -- -- -- -- --
Repayments of stockholder
note receivable.......... -- -- -- -- -- --
Net loss................... -- -- -- -- -- --
--------- ----------- --------- ----------- --------- ----------
BALANCE AT SEPTEMBER 30,
2000 (UNAUDITED)......... 4,355,398 $74,927,670 8,911,992 $22,046,319 6,966,162 $5,051,349
========= =========== ========= =========== ========= ==========

<CAPTION>
REDEEMABLE CONVERTIBLE PREFERRED STOCK
---------------------------------------------
SERIES B SERIES A
---------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
--------- ---------- --------- --------
<S> <C> <C> <C> <C>
Issuance of common stock... -- $ -- -- $ --
Issuance of Series A
preferred stock.......... -- -- 1,000,000 198,649
Exercise of stock
options.................. -- -- -- --
Issuance of Series B
preferred stock.......... 2,296,995 1,067,944 -- --
Repayment of shareholder
note receivable.......... -- -- -- --
Net loss................... -- -- -- --
--------- ---------- --------- --------
BALANCE AT DECEMBER 31,
1997..................... 2,296,995 1,067,944 1,000,000 198,649
Issuance of Series B
preferred stock.......... 53,415 24,998
Issuance of Series C
preferred stock.......... -- -- -- --
Issuance of common stock... -- -- -- --
Repayment of shareholder
note receivable.......... -- -- -- --
Net loss................... -- -- -- --
--------- ---------- --------- --------
BALANCE AT DECEMBER 31,
1998..................... 2,350,410 1,092,942 1,000,000 198,649
Exercise of stock
options.................. -- -- -- --
Issuance of Series D
preferred stock.......... -- -- -- --
Unearned stock-based
compensation............. -- -- -- --
Amortization of stock-based
compensation............. -- -- -- --
Issuance of warrants to
purchase Series C
preferred stock for
services received........ -- -- -- --
Issuance of warrants to
purchase Series C
preferred stock in
obtaining financing
arrangements............. -- -- -- --
Repayments of shareholder
note receivable.......... -- -- -- --
Net loss................... -- -- -- --
--------- ---------- --------- --------
BALANCE AT DECEMBER 31,
1999..................... 2,350,410 1,092,942 1,000,000 198,649
Exercise of stock options
and warrants............. -- -- -- --
Issuance of Series E
preferred stock.......... -- -- -- --
Unearned stock-based
compensation............. -- -- -- --
Amortization of stock-based
compensation............. -- -- -- --
Options issued for services
received................. -- -- -- --
Issuance of warrants to
purchase common stock for
services received........ -- -- -- --
Issuance of warrants to
purchase Series D
preferred stock in
obtaining financing
arrangement.............. -- -- -- --
Repayments of stockholder
note receivable.......... -- -- -- --
Net loss................... -- -- -- --
--------- ---------- --------- --------
BALANCE AT SEPTEMBER 30,
2000 (UNAUDITED)......... 2,350,410 $1,092,942 1,000,000 $198,649
========= ========== ========= ========
</TABLE>

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

F-5
<PAGE> 83

OMM, INC.

STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK

AND STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)

<TABLE>
<CAPTION>
TOTAL
COMMON STOCK ADDITIONAL UNEARNED STOCKHOLDERS'
------------------- PAID-IN STOCK-BASED STOCKHOLDER ACCUMULATED EQUITY
SHARES AMOUNT CAPITAL COMPENSATION RECEIVABLE DEFICIT (DEFICIT)
---------- ------ ----------- ------------ ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock.......... 13,965,000 $1,397 $ 4,504 $ -- $ -- $ -- $ 5,901
Issuance of Series A preferred
stock........................... -- -- -- -- (12,500) -- (12,500)
Exercise of stock options......... 30,000 3 197 -- -- -- 200
Issuance of Series B preferred
stock........................... -- -- -- -- -- -- --
Repayment of shareholder note
receivable...................... -- -- -- -- 1,500 -- 1,500
Net loss.......................... -- -- -- -- -- (53,675) (53,675)
---------- ------ ----------- ------------ ----------- ------------ ------------
BALANCE AT DECEMBER 31, 1997...... 13,995,000 1,400 4,701 -- (11,000) (53,675) (58,574)
Issuance of Series B preferred
stock........................... -- -- -- -- -- -- --
Issuance of Series C preferred
stock........................... -- -- -- -- -- -- --
Issuance of common stock.......... 112,500 11 739 -- -- -- 750
Repayment of shareholder note
receivable...................... -- -- -- -- 3,200 -- 3,200
Net loss.......................... -- -- -- -- -- (1,249,037) (1,249,037)
---------- ------ ----------- ------------ ----------- ------------ ------------
BALANCE AT DECEMBER 31, 1998...... 14,107,500 1,411 5,440 -- (7,800) (1,302,712) (1,303,661)
Exercise of stock options......... 105,000 11 3,489 -- -- -- 3,500
Issuance of Series D preferred
stock........................... -- -- -- -- -- -- --
Unearned stock-based
compensation.................... -- -- 1,914,312 (1,914,312) -- -- --
Amortization of stock-based
compensation.................... -- -- -- 429,772 -- -- 429,772
Issuance of warrants to purchase
Series C preferred stock for
services received............... -- -- 39,825 -- -- -- 39,825
Issuance of warrants to purchase
Series C preferred stock in
obtaining financing
arrangements.................... -- -- 496,158 -- -- -- 496,158
Repayments of shareholder note
receivable...................... -- -- -- -- 3,200 -- 3,200
Net loss.......................... -- -- -- -- -- (7,358,366) (7,358,366)
---------- ------ ----------- ------------ ----------- ------------ ------------
BALANCE AT DECEMBER 31, 1999...... 14,212,500 1,422 2,459,224 (1,484,540) (4,600) (8,661,078) (7,689,572)
Exercise of stock options and
warrants........................ 9,453,213 945 1,411,809 -- (1,050,000) -- 362,754
Issuance of Series E preferred
stock........................... -- -- -- -- -- -- --
Unearned stock-based
compensation.................... -- -- 49,131,692 (49,131,692) -- -- --
Amortization of stock-based
compensation.................... -- -- -- 12,490,941 -- -- 12,490,941
Options issued for services
received........................ -- -- 67,873 -- -- -- 67,873
Issuance of warrants to purchase
common stock for services
received........................ -- -- 1,495,560 -- -- -- 1,495,560
Issuance of warrants to purchase
Series D preferred stock in
obtaining financing
arrangement..................... -- -- 2,452,563 -- -- -- 2,452,563
Repayments of stockholder note
receivable...................... -- -- -- -- 3,800 -- 3,800
Net loss.......................... -- -- -- -- -- (31,887,607) (31,887,607)
---------- ------ ----------- ------------ ----------- ------------ ------------
BALANCE AT SEPTEMBER 30, 2000
(UNAUDITED)..................... 23,665,713 $2,367 $57,018,721 $(38,125,291) $(1,050,800) $(40,548,685) $(22,703,688)
========== ====== =========== ============ =========== ============ ============
</TABLE>

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

F-6
<PAGE> 84

OMM, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
PERIOD FROM
JUNE 30, 1997 YEAR ENDED NINE MONTHS ENDED
(INCEPTION) TO DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, -------------------------- --------------------------
1997 1998 1999 1999 2000
-------------- ----------- ------------ ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss............................................. $ (53,675) $(1,249,037) $ (7,358,366) $(4,564,245) (31,887,607)
Adjustments to reconcile net loss to net cash used by
operating activities
Depreciation and amortization...................... 1,854 44,535 344,404 206,731 1,266,420
Amortization of prepaid financing fees............. -- -- 97,653 57,947 425,756
Amortization of discount on held-to-maturity
investments...................................... -- -- -- -- (95,820)
Amortization of unearned stock-based
compensation..................................... -- -- 429,772 220,486 12,490,941
Stock-based compensation for non-employees......... -- -- 39,825 39,825 1,563,433
Loss on disposal of property and equipment......... -- -- 4,223 4,223 --
Changes in assets and liabilities
Accounts receivable.............................. -- (143,468) 53,524 90,787 (1,003,420)
Inventories...................................... -- -- -- (4,487,950)
Prepaid expenses and other assets................ -- (20,615) (236,166) (140,742) (2,194,715)
Accounts payable, accrued expenses and other
liabilities.................................... 24,231 180,881 1,368,399 963,002 10,071,824
---------- ----------- ------------ ----------- ------------
Net cash used by operating activities.......... (27,590) (1,187,704) (5,256,732) (3,121,986) (13,851,138)
---------- ----------- ------------ ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment.................. (34,236) (371,876) (2,889,443) (1,540,871) (17,585,274)
Increase in restricted cash.......................... -- (2,200,000)
Purchases of available-for-sale investments.......... (19,984,354) (2,842,143) (3,914,600)
Proceeds from available-for-sale investments......... -- -- 2,842,143 2,842,143 19,099,012
Purchases of held-to-maturity investments............ -- -- -- -- (28,422,970)
---------- ----------- ------------ ----------- ------------
Net cash used by investing activities.......... (34,236) (371,876) (20,031,654) (1,540,871) (33,023,832)
---------- ----------- ------------ ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock and exercise
of stock options and warrants...................... 6,101 750 3,500 -- 362,754
Net proceeds from issuance of Series A preferred
stock.............................................. 186,149 -- -- -- --
Net proceeds from issuance of Series B preferred
stock.............................................. 1,067,944 24,998 -- -- --
Net proceeds from issuance of Series C preferred
stock.............................................. -- 5,051,349 -- -- --
Net proceeds from issuance of Series D preferred
stock.............................................. -- -- 22,046,319 -- --
Net proceeds from issuance of Series E preferred
stock.............................................. -- 74,927,670
Proceeds from borrowings............................. -- -- 500,000 -- --
Payments on borrowings............................... -- -- (500,000) -- --
Financing of property and equipment under capital
leases............................................. -- -- 1,622,551 1,311,903 5,275,191
Principal payments on capital leases................. -- -- (50,926) (19,073) (735,916)
Principal repayments on shareholder note
receivable......................................... 1,500 3,200 3,200 2,150 3,800
---------- ----------- ------------ ----------- ------------
Net cash provided by financing activities...... 1,261,694 5,080,297 23,624,644 1,294,980 79,833,499
---------- ----------- ------------ ----------- ------------
Net increase (decrease) in cash and cash equivalents... 1,199,868 3,520,717 (1,663,742) (3,367,877) 32,958,529
Cash and cash equivalents at beginning of period....... -- 1,199,868 4,720,585 4,720,585 3,056,843
---------- ----------- ------------ ----------- ------------
Cash and cash equivalents at end of period............. $1,199,868 $ 4,720,585 $ 3,056,843 $ 1,352,708 36,015,372
========== =========== ============ =========== ============
NONCASH FINANCING ACTIVITIES
Issuance of Series A preferred stock for stockholder
note receivable.................................... $ 12,500 $ -- $ -- $ -- $ --
========== =========== ============ =========== ============
Issuance of warrants to purchase preferred stock in
obtaining financing arrangements................... $ -- $ -- $ 496,158 $ 496,158 $ 2,452,563
========== =========== ============ =========== ============
Issuance of common stock for stockholder note
receivable......................................... $ -- $ -- $ -- $ -- $ 1,050,000
========== =========== ============ =========== ============
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid for interest............................... $ -- $ 78 $ 43,885 $ 8,600 $ 231,569
========== =========== ============ =========== ============
</TABLE>

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

F-7
<PAGE> 85

OMM, INC.

NOTES TO FINANCIAL STATEMENTS

1. THE COMPANY

OMM, Inc. (the "Company") was originally incorporated in California on June
30, 1997. In March 2000, the Company reincorporated in the State of Delaware.

The Company makes a family of all-optical, or photonic, switching
subsystems that are used to direct communications traffic within and across
fiber optic communications networks. The Company's products are based on a
technology called MEMS, or micro-electromechanical systems, and consist of
arrays of microscopic mirrors, lenses and other optical components that steer
beams of light onto and off of specific optical fibers without converting pulses
of light into electricity for processing and switching. The Company's products
allow optical network systems manufacturers to build scalable, cost-effective
systems that address next generation switching needs in the long distance,
metropolitan and local neighborhood segments of communication networks.

Although the Company has begun the production and shipment of its products
to customers, it is devoting significant efforts toward product research and
development. As such, it is subject to a number of risks and challenges similar
to other companies in a similar stage of development. These risks include, but
are not limited to, dependence on a few customers, dependence on key
individuals, dependence on key suppliers of integral components, the need to
develop and market commercially usable products, the ability to obtain adequate
financing to support growth and product development and competition from
substitute products and larger companies with greater financial, technical,
management, and marketing resources.

The Company incurred net losses of $53,675, $1,249,037 and $7,358,366 for
the period from June 30, 1997 (inception) to December 31, 1997 and for the years
ended December 31, 1998 and 1999, respectively. At December 31, 1999, the
Company had an accumulated deficit of $8,661,078 and has funded those losses
through the sale of redeemable convertible preferred stock and the issuance of
certain long-term obligations. The Company is dependent on the proceeds of
equity financings to meet its future working capital and research and
development needs.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Unaudited Pro Forma Stockholders' Equity

The Company's Board of Directors has authorized the filing of a
Registration Statement with the Securities and Exchange Commission to register
shares of its common stock in an initial public offering ("IPO"). If the IPO is
consummated as presently anticipated, each outstanding share of preferred stock
will automatically convert into three shares of common stock under the terms of
the preferred stock agreements (see Note 5). Unaudited pro forma stockholders'
equity as of September 30, 2000 reflects the conversion of all outstanding
preferred stock into common stock as if such conversion had occurred as of
September 30, 2000.

Unaudited Financial Statements

The interim financial statements as of September 30, 2000 and for the nine
months ended September 30, 1999 and 2000 are unaudited and have been prepared on
the same basis as the audited financial statements. In the opinion of
management, these unaudited financial statements reflect all adjustments,
consisting only of normal recurring adjustments, necessary to present fairly the
financial information set forth therein in accordance with accounting principles
generally accepted in the United States of America. Operating results for
interim periods are not necessarily indicative of operating results for an
entire year.

F-8
<PAGE> 86
OMM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make certain estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the financial statement date, as well as the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

Cash and Cash Equivalents

The Company considers cash equivalents to include highly liquid instruments
with maturities of three months or less from the date of purchase. Cash and cash
equivalents include cash deposited in money market accounts, certificates of
deposit and commercial paper.

Short-Term Investments

Management determines the appropriate classification of marketable
securities at the time of purchase and reevaluates such designation as of each
balance sheet date. Held-to-maturity securities are carried at amortized cost,
which approximates fair value. Available-for-sale securities are stated at
market value as determined by the most recently traded price of each security at
the balance sheet date with net unrealized gains and losses reported within
stockholders' equity. The specific identification method is used to compute
realized gains and losses.

Concentrations of Risk

The Company's financial instruments that are subject to concentrations of
credit risk consist primarily of cash and cash equivalents, short-term
investments and accounts receivable. The Company's policy is to place its cash
and cash equivalents with high quality financial institutions in order to limit
its credit exposure. Short-term investments consist of commercial paper issued
by high credit quality institutions. To date, the Company has not experienced
any credit losses associated with these financial instruments.

The Company operates in the optical networking industry and primarily sells
its products to optical networking equipment manufacturers. The Company performs
on-going credit evaluations of its customers' financial condition and generally
requires no collateral from these customers. The Company reviews customer
balances for potential credit losses and establishes an allowance for
potentially uncollectible accounts receivable. As of September 30, 2000, the
Company has not identified any potential credit losses and therefore has not
established an allowance for doubtful accounts.

During the nine months ended September 30, 2000, sales to four customers
accounted for approximately 61% of total revenue. Accounts receivable from these
customers as of September 30, 2000 represented approximately 67% of total
accounts receivable.

Certain key components used in the Company's products are procured from
single or limited source suppliers. The failure of a supplier to deliver on
schedule could delay or interrupt the Company's delivery of products and thereby
adversely affect the Company's revenues and operating results.

Fair Value of Financial Instruments

The carrying amounts of the Company's short-term investments, accounts
receivable, accounts payable and accrued expenses approximate their fair value
due to the short-term nature of these balances.

F-9
<PAGE> 87
OMM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Inventory

Inventory is stated at the lower of cost determined using the first-in,
first-out method or market.

Property and Equipment

Property and equipment is recorded at cost and is depreciated using the
straight-line method over the estimated useful lives of the assets ranging from
three to five years for laboratory equipment, computer equipment and furniture
and fixtures. Leasehold improvements are amortized using the straight-line
method over the shorter of their estimated useful lives or the term of the
lease. Expenditures for maintenance and repairs are charged to operations as
incurred. When assets are retired or sold, the assets and accumulated
depreciation are removed from the respective accounts and any gain or loss is
recognized.

Long-Lived Assets

Long-lived assets held and used by the Company are reviewed for impairment
whenever events or changes in circumstances indicate that their net book value
may not be recoverable. An impairment loss is recognized if the sum of the
expected future cash flows (undiscounted and before interest) from the use of
the assets is less than the net book value of the asset. The amount of the
impairment loss, if any, will generally be measured as the difference between
the net book value of the assets and their estimated fair values. The Company
has not incurred any such losses.

Intangible Assets

The Company values its patents based on the actual legal costs incurred to
obtain the patent. Patent costs will be amortized using the straight-line method
over their estimated useful lives which are expected to range from three to five
years once the patent is issued. At December 31, 1999 and September 30, 2000,
the Company has capitalized patent costs totaling $67,877 and $167,138,
respectively, which are included in non-current other assets. As of September
30, 2000, no patents have been issued, therefore, the Company has not commenced
amortization as of that date.

Revenue Recognition

Revenues from product sales are recognized when all of the following
conditions are met: the product has been shipped, the Company has the right to
invoice the customer at a fixed price, the collection of the receivable is
probable and there are no significant obligations remaining. The Company's
products are not subject to any customer acceptance process. Subsequent to the
sale of the products, the Company has no obligation to provide any modification
or customization, upgrades, enhancements or any postcontract customer support.

Research and Development

Research and development costs are expensed as incurred.

Stock-Based Compensation

The Company measures compensation expense for its employee stock-based
compensation plan using the intrinsic value method and provides pro forma
disclosures of net loss as if a fair value-based method had been applied in
measuring compensation expense. Accordingly, compensation cost for stock awards
is measured as the excess, if any, of the fair value for financial reporting
purposes of the Company's common stock at the date of grant over the amount an
employee must pay to acquire the stock. Compensation cost is amortized over the
related vesting periods using an accelerated graded method in accordance with
Financial Accounting Standards Board Interpretation No. 28 ("FIN 28"),
"Accounting for Stock
F-10
<PAGE> 88
OMM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Appreciation Rights and Other Variable Stock Option or Award Plans". Accrued
compensation costs for unvested awards that are forfeited are reversed against
compensation expense or unearned stock-based compensation, as appropriate, in
the period of forfeiture. Stock-based awards issued to non-employees are
accounted for using a fair value method and are remeasured to fair value, as
determined by management, at each period end until the earlier of the date that
performance by the counterparty is complete or a performance commitment has been
obtained.

Income Taxes

Current income tax expense or benefit is the amount of income taxes
expected to be payable or refundable for the current year. A deferred income tax
asset or liability is computed for the expected future impact of differences
between the financial reporting and tax bases of assets and liabilities and for
the expected future tax benefit to be derived from tax credits and loss
carryforwards. Deferred tax assets are reduced by a valuation allowance when, in
the opinion of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized.

Comprehensive Income (Loss)

Comprehensive loss for all periods presented consists solely of net loss.

New Accounting Pronouncements

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." The objective of SAB 101 is to provide further guidance on revenue
recognition issues in the absence of authoritative literature addressing a
specific arrangement or a specific industry. The guidance in SAB 101 is required
to be followed no later than the fourth fiscal quarter of the fiscal year
beginning after December 15, 1999. The Company has adopted SAB 101 for all
periods presented.

In March 2000, the Financial Accounting Standards Board ("FASB") issued
FASB Interpretation No. 44 ("FIN 44"), "Accounting for Certain Transactions
Involving Stock Compensation." The Company will be required to adopt FIN 44
effective July 1, 2000 in respect to specific provisions applicable to new
awards, exchanges of awards in a business combination, modifications to
outstanding awards, and changes in grantee status that occur on or after that
date. FIN 44 addresses practice issues related to the application of Accounting
Practice Bulletin Opinion No. 25, "Accounting for Stock Issued to Employees."
The Company believes that the application of FIN 44 will not have a material
impact on the Company's financial position or results of operations.

In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133 ("FAS 133"), "Accounting for Derivative Instruments and Hedging
Activities." In May 1999, the FASB delayed the effective date of FAS 133 by one
year. The Company will be required to adopt FAS 133 for fiscal year 2001. This
statement establishes a new model for accounting for derivatives and hedging
activities. Under FAS 133, all derivatives must be recognized as assets and
liabilities and measured at fair value. The Company believes that the adoption
of this new accounting standard will not have a material impact on the Company's
financial position or results of operations.

Earnings (Loss) per Common Share

Basic earnings (loss) per share is computed by dividing income (loss)
available to common stockholders by the weighted average number of common shares
outstanding for the period. Weighted average shares exclude shares of unvested
restricted common stock subject to repurchase rights by the Company. Diluted
earnings (loss) per share is computed by dividing income (loss) available to
common

F-11
<PAGE> 89
OMM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

stockholders by the weighted average number of common shares outstanding during
the period increased to include dilutive potential common shares that were
outstanding during the period. The dilutive effect of outstanding stock options,
warrants and restricted stock is reflected in diluted earnings per share by
application of the treasury stock method.

The Company has excluded all redeemable convertible preferred stock,
outstanding stock options, outstanding warrants and unvested restricted common
stock subject to repurchase from the calculation of diluted loss per share for
all periods presented because such securities are antidilutive for these
periods. The total number of potential common shares excluded from the
calculation of diluted loss per share is as follows:

<TABLE>
<CAPTION>
PERIOD FROM
JUNE 30, 1997 NINE MONTHS ENDED
(INCEPTION) TO YEAR ENDED DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, ------------------------ ------------------------
1997 1998 1999 1999 2000
-------------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Redeemable convertible
preferred stock........... 9,890,985 30,949,716 57,685,692 30,949,716 70,751,886
Outstanding stock options
and
warrants.................. -- 3,526,500 10,106,337 9,279,837 16,951,195
Unvested common stock
subject to repurchase..... 13,437,000 8,535,625 5,184,344 5,978,688 10,829,625
---------- ---------- ---------- ---------- ----------
Total..................... 23,327,985 43,011,841 72,976,373 46,208,241 98,532,706
========== ========== ========== ========== ==========
</TABLE>

Unaudited pro forma net loss per common share, basic and diluted, is
calculated assuming the conversion of all outstanding shares of preferred stock
into common stock using the if-converted method from the respective dates of
issuance and the exercise of outstanding warrants that will expire upon the
closing of the IPO. The calculation of unaudited pro forma net loss per share
for the year ended December 31, 1999 and the nine months ended September 30,
2000 excludes 15,290,681 and 27,780,820 potential common shares, respectively,
as their impact would be antidilutive. A reconciliation of shares used in the
calculation of pro forma net loss per share attributable to common shareholders,
basic and diluted, is as follows:

<TABLE>
<CAPTION>
FOR THE YEAR
ENDED FOR THE NINE
DECEMBER 31, MONTHS ENDED
1999 SEPTEMBER 30, 2000
------------ ------------------
(UNAUDITED)
<S> <C> <C>
Weighted average common shares outstanding............. 7,148,210 10,399,460
Weighted average common shares issued upon conversion
of outstanding preferred stock....................... 34,245,932 63,414,471
Weighted average common shares issued upon exercise of
warrants............................................. 41,950 83,901
---------- ----------
Shares used in computing unaudited pro forma net loss
per common share, basic and diluted.................. 41,436,092 73,897,832
========== ==========
</TABLE>

F-12
<PAGE> 90
OMM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

3. SHORT-TERM INVESTMENTS

At December 31, 1999 and September 30, 2000, short-term investments
consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1999 2000
------------ -------------
(UNAUDITED)
<S> <C> <C>
Held-to-maturity:
Corporate bonds......................................... $ -- $ 2,964,644
Medium and short-term notes............................. -- 1,822,847
Euro dollar bonds....................................... -- 10,789,360
Taxable auction securities.............................. -- 3,200,000
Commercial paper........................................ -- 2,838,211
Asset backed securities................................. -- 6,903,728
----------- -----------
-- 28,518,790
Available-for-sale:
Commercial paper........................................ 17,142,211 1,957,800
----------- -----------
$17,142,211 $30,476,590
=========== ===========
</TABLE>

At December 31, 1999 and September 30, 2000, held-to-maturity and
available-for-sale debt securities have maturities of one year or less.

As of September 30, 2000, there are no unrealized gains or losses on
available-for-sale securities. There were no realized gains or losses during the
year ended December 31, 1999 and the nine months ended September 30, 2000.

4. COMPOSITION OF CERTAIN BALANCE SHEET COMPONENTS

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- SEPTEMBER 30,
1998 1999 2000
-------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ACCOUNTS RECEIVABLE
Billed....................................... $ 91,200 $ 89,944 $ 1,093,364
Unbilled..................................... 52,268 -- --
-------- ---------- -----------
$143,468 $ 89,944 $ 1,093,364
======== ========== ===========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- SEPTEMBER 30,
1998 1999 2000
------------ ---------- -------------
(UNAUDITED)
<S> <C> <C> <C>
INVENTORIES..................................
Raw materials.............................. $ -- $ -- $ 1,868,161
Work in process............................ -- -- 2,501,915
Finished goods............................. -- -- 117,874
-------- ---------- -----------
$ -- $ -- $ 4,487,950
======== ========== ===========
</TABLE>

F-13
<PAGE> 91
OMM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- SEPTEMBER 30,
1998 1999 2000
------------ ---------- -------------
(UNAUDITED)
<S> <C> <C> <C>
PROPERTY AND EQUIPMENT
Construction in progress................... $ -- $ -- $ 6,800,589
Laboratory equipment....................... 319,700 2,557,224 10,598,073
Computer equipment......................... 61,214 248,641 2,356,334
Furniture and fixtures..................... 13,305 202,143 835,311
Leasehold improvements..................... 11,893 252,994 252,994
-------- ---------- -----------
406,112 3,261,002 20,843,301
Less accumulated depreciation and
amortization............................ (46,389) (360,463) (1,623,909)
-------- ---------- -----------
$359,723 $2,900,539 $19,219,392
======== ========== ===========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- SEPTEMBER 30,
1998 1999 2000
------------ ---------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ACCRUED EXPENSES
Accrued compensation....................... $ 37,774 $ 86,479 $ 490,502
Accrued vacation........................... 12,683 62,173 246,543
Deferred rent.............................. -- 86,027 158,169
Accrued legal and accounting fees.......... -- 30,000 45,000
Accrued other.............................. -- -- 30,227
-------- ---------- -----------
$ 50,457 $ 264,679 $ 970,441
======== ========== ===========
</TABLE>

5. COMMON STOCK AND REDEEMABLE CONVERTIBLE PREFERRED STOCK

In October 1998, the Company effected a five-for-one stock split of both
common and preferred stock. The accompanying financial statements and related
notes have been retroactively adjusted to reflect this stock split for all
periods presented.

In July 2000, the Company's Board of Directors approved a two-for-one
common stock dividend, which had the effect of a three-for-one stock split with
an effective date of August 2, 2000. In accordance with the Series A, B, C, D
and E redeemable convertible preferred stock agreements, the number of common
stock shares into which outstanding shares of Series A, B, C, D and E redeemable
convertible preferred stock are convertible was adjusted consistent with the
common stock split. This stock split has been retroactively reflected in the
accompanying financial statements and related notes for all periods presented.

The Company's redeemable convertible preferred stock has been classified
outside of stockholders' equity based upon accounting guidelines promulgated by
the Securities and Exchange Commission. The preferred stock has certain deemed
liquidation rights upon a merger, consolidation or sale of substantially all of
the Company's assets. Solely as a result of these provisions, the preferred
stock is treated as redeemable. See "Liquidation Preferences" set forth below.

Common Stock

At inception, the Company issued 13,212,000 shares of restricted common
stock to the founders of the Company at a per share price of $0.001. The terms
of these shares are such that, in the event of termination of employment, the
Company may elect to repurchase the unvested shares at the original purchase
price for a period of 90 days. This restriction lapses as to 25% of the shares
one year from the

F-14
<PAGE> 92
OMM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

date of issuance, while the restriction as to the remaining 75% of the shares
lapses monthly over the subsequent three year period. At September 30, 2000,
2,477,250 of the founders' shares remain subject to repurchase by the Company.

During the period from June 30, 1997 (inception) to December 31, 1997, the
years ended December 31, 1998 and 1999 and during the nine months ended
September 30, 2000, the Company issued 225,000, 112,500, 52,500 and 8,349,781
shares of restricted common stock, respectively in connection with exercises of
stock options. The stock vests over the remaining option vesting period, and is
subject to the same restrictions and repurchase provisions as the founders'
shares described above. At September 30, 2000, 8,318,408 of these shares,
respectively, remain subject to repurchase by the Company.

Redeemable Convertible Preferred Stock

The rights, preferences and privileges of the Preferred Stock are as
follows:

Dividends

The holders of shares of the Series A, B, C, D and E preferred stock are
entitled to receive dividends of $0.01, $0.024, $0.0365, $0.124, and $0.861,
respectively, per share per annum (subject to appropriate adjustment in the
event of any stock dividend, stock split, combination or other similar
recapitalization affecting such shares), payable when and as declared by the
Board of Directors of the Company. The right to receive dividends shall be
noncumulative; however the Company shall not declare or pay any distributions on
shares of common stock until the preferred stockholders have received a
distribution at the rate specified above. As of September 30, 2000 no dividends
have been declared or paid. Certain lease lines and credit agreements prohibit
the payment of dividends without the creditor's prior approval.

Liquidation Preference

In certain events, including liquidation, dissolution or winding up of the
Company, including a consolidation or merger and conveyance of substantially all
of the assets of the Company, the holders of Series A, B, C, D and E preferred
stock have a preference in liquidation over the common stockholders of $0.20,
$0.468, $0.73, $2.477 and $17.22 per share, respectively (subject to appropriate
adjustment in the event of any stock dividend, stock split, combination or other
similar recapitalization affecting such shares), plus any dividends declared but
unpaid thereon. If the assets of the Company are not sufficient to fulfill the
liquidation amount, the shareholders will share in the distribution of the
assets on a pro rata basis based on the liquidation amount. These liquidation
preferences terminate upon conversion of shares of the preferred stock into
shares of the common stock upon completion of the IPO.

Voting Rights

Each holder of preferred stock shall be entitled to the number of votes
equal to the number of whole shares of common stock into which they are then
convertible.

Conversion

Each share of preferred stock is convertible at any time at the option of
the holder into three shares of common stock, subject to customary adjustments
to protect against dilution. In addition, the preferred stock automatically
converts into common stock upon (i) the closing of a public offering of the
Company's common stock at a price of at least $11.48 per share, which will
result in gross proceeds of at least $10,000,000 or (ii) the affirmative vote of
the holders of a majority of the shares of preferred stock outstanding at the
time of such vote. The Company has reserved sufficient shares of common stock
for the conversion of its preferred stock.

F-15
<PAGE> 93
OMM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

6. STOCK OPTIONS

The Company established the 1997 Stock Plan (the "Plan"), as amended, under
which 35,050,000 shares of the Company's common stock may be issued pursuant to
the grant of incentive and nonstatutory stock options and stock purchase rights.
Incentive stock options may be granted to employees only, while nonstatutory
stock options and stock purchase rights may be granted to employees, directors
and consultants to the Company. The Plan is administered by the Board of
Directors. Incentive stock options may be granted at a price per share not less
than the value of the Company's common stock at the date of grant as determined
by the Board of Directors, while nonstatutory options may be granted at a price
per share not less than 85% of the value of the Company's common stock at the
date of grant. The options vest and become exercisable over periods determined
by the Board of Directors. Options generally vest over four years and expire ten
years from the date of grant. At September 30, 2000, there were 10,229,250
shares of the Company's common stock available for future grant under the Plan.

During the nine months ended September 30, 2000, the Company amended the
stock option agreements of certain option holders to allow for early exercise of
options to purchase an aggregate of 10,275,750 shares of restricted common
stock. The options may be exercised at any time as to shares that have not yet
vested by delivering a Restricted Stock Purchase Agreement. During the nine
months ended September 30, 2000, 8,349,781 shares of restricted common stock
were issued upon the exercise of such amended options. The terms of the
restricted common stock are described under the heading "Redeemable Common
Stock" in note 5.

The following table summarizes stock option activity under the Plan since
the Company's inception:

<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
EXERCISE
SHARES PRICE
---------- ---------
<S> <C> <C>
Balance at June 30, 1997 (inception).................. --
Granted............................................. 255,000 $0.01
Exercised........................................... (255,000) $0.01
----------
Balance at December 31, 1997.......................... -- $0.01
Granted............................................. 3,639,000 $0.01
Exercised........................................... (112,500) $0.01
----------
Balance at December 31, 1998.......................... 3,526,500 $0.01
Granted............................................. 5,363,250 $0.03
Exercised........................................... (105,000) $0.03
Forfeited........................................... (3,000) $0.03
----------
Balance at December 31, 1999.......................... 8,781,750 $0.02
Granted............................................. 15,703,000 $1.17
Exercised........................................... (9,377,213) $0.15
Forfeited........................................... (136,500) $0.24
----------
Balance at September 30, 2000......................... 14,971,037 $1.15
==========
</TABLE>

F-16
<PAGE> 94
OMM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The following table summarizes information about stock options outstanding
and exercisable at December 31, 1999:

<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE WEIGHTED-
REMAINING AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER
PRICES OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE
-------- ----------- ------------ --------- -----------
<S> <C> <C> <C> <C>
$0.01 3,767,250 8.4 $0.01 1,411,374
$0.03 5,014,500 9.4 $0.03 96,048
--------- ---------
8,781,750 1,507,422
========= =========
</TABLE>

In connection with the grant of stock options, the Company recorded
unearned stock-based compensation, within stockholders' equity of $1,914,312
during the year ended December 31, 1999 and $1,261,698 and $49,131,692 during
the nine months ended September 30, 1999 and 2000, respectively. These
transactions have been recorded as a charge to unearned stock-based compensation
and a credit to additional paid-in capital. Amortization of unearned stock-based
compensation, net of any charges reversed during the period for the forfeiture
of unvested awards, was $429,772 during the year ended December 31, 1999 and
$220,486 and $12,490,941 during the nine months ended September 30, 1999 and
2000, respectively.

Fair Value Disclosures

Had compensation cost been determined based on the fair value method at the
grant dates for awards under the Plan, the Company's net loss on a pro forma
basis would have been as follows:

<TABLE>
<CAPTION>
PERIOD FROM
JUNE 30, 1997
(INCEPTION) TO YEAR ENDED DECEMBER 31,
DECEMBER 31, ------------------------
1997 1998 1999
-------------- ---------- ----------
<S> <C> <C> <C>
Net loss:
As reported................................. $53,675 $1,249,037 $7,358,366
Pro forma................................... 53,760 1,250,181 7,369,460
Net loss per share (diluted)
As reported................................. (0.60) (0.49) (1.03)
Pro forma................................... (0.60) (0.49) (1.03)
</TABLE>

The weighted-average grant-date fair value per share of options granted
during the period from June 30, 1997 (inception) to December 31, 1997 and during
the years ended December 31, 1998 and 1999 was as follows:

<TABLE>
<CAPTION>
PERIOD FROM
JUNE 30, 1997 YEAR ENDED
(INCEPTION) TO DECEMBER 31,
DECEMBER 31, --------------
1997 1998 1999
-------------- ----- -----
<S> <C> <C> <C>
Exercise price equal to fair value of common stock on
the grant date:
Weighted-average exercise price...................... $0.01 $0.01 --
Weighted-average option fair value................... $0.00 $0.00 --
Exercise price less than fair value of common stock on
the grant date:
Weighted-average exercise price...................... -- -- $0.03
Weighted-average option fair value................... -- -- $0.36
</TABLE>

F-17
<PAGE> 95
OMM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The fair value of the options was estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions:

<TABLE>
<CAPTION>
PERIOD FROM
JUNE 30, 1997 YEAR ENDED
(INCEPTION) TO DECEMBER 31,
DECEMBER 31, ------------------
1997 1998 1999
-------------- ------- -------
<S> <C> <C> <C>
Expected life....................................... 4 years 4 years 4 years
Risk-free interest rate............................. 5.4% 5.9% 5.4%
Expected volatility................................. 0.0% 0.0% 0.0%
Expected dividend yield............................. 0.0% 0.0% 0.0%
</TABLE>

The volatility of the Company's common stock underlying the options was not
considered because the Company's stock was not publicly traded as of December
31, 1999. For purposes of pro forma disclosures, the estimated fair value of
options is amortized to expense over the options' vesting periods using an
accelerated graded method in accordance with FIN 28.

Non-employee options

In March 2000, the Company issued 24,000 options to purchase common stock
with an exercise price of $0.33 to non-employees in exchange for continued
services. These options vest over a three year period and expire ten years from
the date of grant. In connection with the issuance of the options, the Company
recorded $67,873 of research and development expense through the nine months
ended September 30, 2000. The fair value of the options as of September 30, 2000
was determined based on the application of the Black-Scholes options pricing
model using the following assumptions: weighted average expected life of ten
years, weighted average risk free interest rate of 5.90%, volatility of 90% and
dividend yield of zero. These options will be remeasured at each period end
until the earlier of (i) all services are performed or (ii) the options are
fully vested.

7. WARRANTS

During 1999, the Company issued fully vested, immediately exercisable and
non-forfeitable warrants to purchase 413,562 shares of Series C preferred stock
at an exercise price of $0.73 in connection with capital lease facilities and in
connection with a working capital facility (Note 8). The warrants expire over
periods of five to seven years or three years from the effective date of a
qualified initial public offering of the Company. The fair value of the warrants
at the time of grant, which was determined by management to be $496,158 based
upon the application of the Black-Scholes option pricing model using the
following assumptions: weighted average contractual life of 6 years, weighted
average risk free interest rate of 5.10%, volatility of 90% and expected
dividend yield of zero, was recorded as prepaid financing fees and is being
amortized ratably over the term of the capital lease and working capital
facilities. At September 30, 2000, all of these warrants remain outstanding.

In July 1999, the Company issued a fully vested, immediately exercisable
and non-forfeitable warrant to purchase 27,967 shares of Series C preferred
stock at an exercise price of $0.73 in connection with services received prior
to the date of grant. This warrant expires at the earlier of (i) five years from
the date of grant; (ii) the closing of an underwritten public offering of the
Company's common stock in which the gross proceeds are not less than $10
million; (iii) upon the closing of a consolidation or merger of the Company with
or into, or the transfer of all or substantially all of the Company's assets, or
at least 50% of the Company's voting stock to another corporation. The fair
value of this warrant at the time of grant, which was determined by management
to be $39,825 based upon application of the Black-Scholes option pricing model
using the following assumptions: contractual life of 5 years, risk free interest
rate of 5.60%,

F-18
<PAGE> 96
OMM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

volatility of 90% and dividend yield of zero, was expensed during 1999. At
September 30, 2000, all of these warrants remain outstanding.

In February 2000, the Company entered into a service agreement with a
consultant whereby, upon the successful completion of each of two assignments,
the Company will grant to the consultant warrants to purchase 36,000 shares of
the Company's common stock at an exercise price of $0.167. The fair value of
these warrants as of September 30, 2000, which was determined by management to
be $783,360 based upon application of the Black-Scholes option pricing model
using the following assumptions: contractual life of 5 years, risk free interest
rate of 5.90%, volatility of 90% and dividend yield of zero, was recorded as
additional general and administrative expense in the accompanying statement of
operations for the nine months ended September 30, 2000. These warrants will be
remeasured at each period end until all services have been performed.

In March 2000, the Company issued fully vested, immediately exercisable and
non-forfeitable warrants to purchase 60,000 shares of common stock at an
exercise price of $0.167 in connection with services from a consultant received
prior to the date of grant. These warrants expire at the earlier of (i) five
years from the date of grant, (ii) the closing of an underwritten public
offering of the Company, which will result in gross proceeds of at least
$10,000,000, or (iii) upon the closing of a consolidation or merger of the
Company with or into, or the transfer of all or substantially all of the
Company's assets, or at least 50% of the Company's voting stock, to another
corporation. The fair value of these warrants at the time of grant, which was
determined by management to be $144,600 based upon application of the Black-
Scholes option pricing model using the following assumptions: contractual life
of 5 years, risk free interest rate of 6.59%, volatility of 90% and dividend
yield of zero, was expensed during the nine months ended September 30, 2000. In
August 2000 the company issued warrants to purchase 16,000 shares of common
stock to the same consultant at a weighted average exercise price of $2.30 in
connection with services received. These warrants have the same terms stated
above. The fair value of these warrants at the time of grant, which was
determined by management to be $141,600 based upon application of the
Black-Scholes option pricing model using the following assumptions: contractual
life of 5 years, risk free interest rate of 6.04%, volatility of 90% and
dividend yield of zero, was expensed during the nine months ended September 30,
2000. All of these warrants were exercised in August 2000.

In April 2000, the Company issued fully vested, immediately exercisable and
non-forfeitable warrants to purchase 201,857 shares of Series D preferred stock
at an exercise price of $2.477 in connection with a credit facility to finance
up to $10,000,000 in equipment acquisitions (Note 8). The warrants expire ten
years from the date of grant. The fair value of the warrants at the time of
grant, which was determined by management to be $2,385,950 based upon the
application of the Black-Scholes option pricing model using the following
assumptions: weighted average contractual life of 10 years, weighted average
risk free interest rate of 5.86%, volatility of 90% and expected dividend yield
of zero, was recorded as prepaid financing fees and is being amortized ratably
over the term of the capital lease. At September 30, 2000, all of these warrants
remain outstanding.

In September 2000, the Company issued fully vested, immediately exercisable
and non-forfeitable warrants to purchase an aggregate of 50,000 shares of common
stock at an exercise price of $8.00 to WS Investment Company 2000B and certain
members of Wilson Sonsini Goodrich & Rosati in connection with legal services
provided prior to the date of grant. These warrants expire five years from the
date of grant. The fair value of these warrants at the time of grant, which was
determined by management to be $426,000 based upon application of the
Black-Scholes option pricing model using the following assumptions: contractual
life of 5 years, risk free interest rate of 5.95%, volatility of 90% and
dividend yield of zero, was expensed during the nine months ended September 30,
2000.

F-19
<PAGE> 97
OMM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

8. INCOME TAXES

Deferred tax assets are comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ SEPTEMBER 30,
1998 1999 2000
--------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......... $ 508,546 $ 3,192,546 $ 10,280,797
Research and development credit
carryforwards.......................... 60,000 533,920 1,231,420
Manufacturers' investment credit
carryforwards.......................... -- 75,044 193,844
Stock-based compensation.................. -- 15,864 638,648
Accrued expenses and other................ 8,764 86,312 183,673
--------- ----------- ------------
Total deferred tax assets.............. 577,310 3,903,686 12,528,382
Deferred tax liabilities:
Depreciation and amortization............. -- (24,417) (118,541)
--------- ----------- ------------
Net deferred tax assets................ 577,310 3,879,269 12,409,841
Less valuation allowance............... (577,310) (3,879,269) (12,409,841)
--------- ----------- ------------
$ -- $ -- $ --
========= =========== ============
</TABLE>

Based upon the lack of prior earnings history of the Company and based upon
other available evidence, management has recorded a full valuation allowance for
deferred tax assets as it is more likely than not that such assets will not be
realized. Due to the cumulative losses of the Company since inception and as a
result of the full valuation allowance against net deferred tax assets, no
current or deferred income tax provision or benefit was recorded during all the
periods presented.

A reconciliation of income taxes to the amount computed by applying the
statutory federal income tax rate to the net loss is summarized as follows:

<TABLE>
<CAPTION>
PERIOD FROM
JUNE 30, 1997
(INCEPTION) TO YEAR ENDED DECEMBER 31, NINE MONTHS
DECEMBER 31, ------------------------ ENDED SEPTEMBER 30,
1997 1998 1999 2000
-------------- --------- ----------- -------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Amounts computed at
statutory federal rate... $(18,250) $(424,673) $(2,501,844) $(10,841,786)
Amortization of stock-based
compensation............. -- -- 146,122 4,246,920
Federal research and
development credit....... -- (40,992) (303,502) (450,000)
Change in valuation
allowance of deferred tax
assets................... 20,714 556,596 3,301,959 8,530,572
State taxes................ (3,132) (93,743) (650,474) (1,495,342)
Other...................... 668 2,812 7,739 9,636
-------- --------- ----------- ------------
$ -- $ -- $ -- $ --
======== ========= =========== ============
</TABLE>

As of December 31, 1999, the Company had $8,014,984 federal and $8,014,984
state net operating loss carryforwards and had research and development tax
credit carryforwards of $344,494 and $287,009, respectively. As of September 30,
2000, the Company had $25,809,399 federal and $25,805,599 state net operating
loss carryforwards and had research and development tax credit carryforwards of
$794,494 and $662,009, respectively. The federal and state net operating loss
carryforwards begin to expire in 2012 and

F-20
<PAGE> 98
OMM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2005, respectively. The federal research and development tax credit
carryforwards begin to expire in 2018. The state research and development tax
credit carryforwards do not expire.

During the period from June 30, 1997 (inception) through December 31, 1998,
certain stock ownership changes occurred. As a result, management estimates that
the annual utilization in future years of net operating loss and research and
development credit carryforwards generated through December 31, 1998 will be
limited pursuant to Sections 382 and 383 of the Internal Revenue Code.

9. COMMITMENTS

The Company leases facilities and equipment under non-cancelable operating
and capital leases which expire on varying dates through 2004. The Company's
future minimum payments under non-cancelable operating and capital leases are as
follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR ENDING DECEMBER 31, LEASES LEASES
------------------------ ---------- ----------
<S> <C> <C>
2000.............................................. $ 575,934 $ 335,306
2001.............................................. 575,934 350,376
2002.............................................. 551,870 364,588
2003.............................................. 72,496 379,861
2004.............................................. 5,921 161,535
---------- ----------
1,782,155 $1,591,666
==========
Less amounts representing interest................ 210,530
----------
Future minimum lease obligation................... 1,571,625
Less current portion.............................. 467,234
----------
$1,104,391
==========
</TABLE>

Assets under capital leases included in property and equipment consist of
the following:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1999 2000
------------ -------------
(UNAUDITED)
<S> <C> <C>
PROPERTY AND EQUIPMENT
Laboratory equipment........................... $2,260,177 $ 9,200,016
Computer equipment............................. 199,605 2,131,469
Furniture and fixtures......................... 179,553 736,769
Leasehold improvements......................... 252,994 252,994
---------- ------------
2,892,329 12,321,248
Less accumulated amortization.................. (262,627) (1,305,132)
---------- ------------
$2,629,702 $ 11,016,116
========== ============
</TABLE>

Rent expense attributable to noncancelable operating leases was $1,600,
$15,067 and $158,616 during the period from June 30, 1997 (inception) to
December 31, 1997 and for the years ended December 31, 1998 and 1999 and
$192,241 and $553,867 for the nine months ended September 30, 1999 and 2000,
respectively. Facility operating leases contain escalation clauses. The Company
recognizes rent expense on a straight-line basis over the lease term.

In September 1999, the Company committed to purchase inventory components
costing $1,200,000 each year for a period of three years from one of its
vendors. In January 2000, the Company committed to purchase inventory components
costing $2,600,000 over a four year period from another of its vendors.

F-21
<PAGE> 99
OMM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

During 1999, the Company obtained capital lease facilities to finance up to
$3,000,000 in property and equipment acquisitions and a $500,000 working capital
facility. During 1999, the Company borrowed $500,000 under the working capital
facility. The working capital facility stipulates an interest rate equal to
prime plus 0.5%, 10% at September 30, 2000. At December 31, 1999, the working
capital facility had been repaid in full.

During the nine months ended September 30, 2000, the Company refinanced,
under capital lease facilities, property and equipment totaling $4,767,262, of
which $927,917 was acquired during 1999 and is included in property and
equipment at December 31, 1999. Monthly payments of $186,180 will be made under
the capital lease facilities.

In April 2000, the Company entered into a credit facility with commercial
lenders which provides for borrowings of up to $10,000,000 for the purchase of
equipment. Borrowings will bear interest at 12%. The credit facility terminates
on February 28, 2001 with any borrowings being repaid over a 36 month repayment
period.

In May 2000, the Company entered into a facility operating lease which
expires on July 31, 2009. Under the lease, the Company will make monthly
payments of $84,147 which will accelerate annually to monthly payments of
$138,596 in 2008. In connection with this lease, the Company entered into an
irrevocable letter of credit in the amount of $2,200,000 which comprises the
restricted cash balance at September 30, 2000. The letter of credit provides for
automatic yearly renewals with annual reductions of $440,000 over the term of
the lease.

10. BENEFIT PLANS

401(k) Plan

The Company sponsors an employee savings plan that qualifies as a deferred
salary arrangement under Section 401(k) of the Internal Revenue Code. Under the
savings plan, participating employees may defer a portion of their pre-tax
earnings, up to the Internal Revenue Service annual contribution limit.
Additionally, the Company may elect to make matching contributions into the
savings plan at its sole discretion. As of September 30, 2000, the Company has
not made any matching contributions into the savings plan.

2000 Stock Purchase Plan

In September 2000, the Board approved the establishment, upon the closing
of an initial public offering of the Company's common stock, of the 2000 Stock
Purchase Plan (the "Purchase Plan"). A total of 4,000,000 shares of the
Company's common stock have been reserved for issuance under the Purchase Plan,
none of which have been issued. The number of shares reserved for issuance under
the Purchase Plan will be subject to an annual increase on January 1 of each
year beginning in 2001 equal to the lesser of (a) 2,700,000 shares, (b) 2.0% of
the outstanding shares on such date or (c) a lesser amount as determined by the
Board. The Purchase Plan permits eligible employees to purchase shares of common
stock at a fifteen percent (15%) discount through payroll deductions during
sequential 6-month offering periods. Unless the Board establishes a higher
price, the price at which shares are purchased under the Purchase Plan for such
offering period is equal to 85% of the lesser of the fair market value of the
common stock on the first day of such offering period or the last day of the
purchase period. The initial offering period will commence on the effective date
of an initial public offering of the Company's common stock.

F-22
<PAGE> 100
OMM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

11. SUBSEQUENT EVENTS

Subsequent to September 30, 2000, the Company granted options to purchase
1,800,500 and 301,500 shares of common stock to employees at an exercise price
of $10 and $0.03, respectively. In addition, subsequent to September 30, 2000,
no options were exercised into unvested restricted stock.

F-23

[OMM LOGO]
<PAGE> 101
[BACK COVER]

The back cover of the prospectus starts in the lower left-hand corner of
the page with the OMM logo. Below that is the following text "Switching the way
the world communicates(TM)."

To the right of that text in the upper third of the page is a circle with a
graphic of a photonic switch subsystem package. Below that circle is a second
circle with a graphic of a photonic switch subsystem in its box. Below that
second circle is a third circle with a graphic of a partial view of an enlarged
view of a photonic switch subsystem in its box.

On the right-hand side of the back page is a graphic of optical streams
and fingertips which encompasses approximately one-third of the page.
<PAGE> 102

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discount and commissions, payable by the registrant in connection
with the sale of common stock being registered. All amounts are estimates except
the SEC registration fee and the NASD filing fee.

<TABLE>
<S> <C>
SEC registration fee........................................ $ 32,789
NASD filing fee............................................. 12,920
Nasdaq National Market listing fee.......................... 95,000
Printing and engraving costs................................ 175,000
Legal fees and expenses..................................... 600,000
Accounting fees and expenses................................ 600,000
Blue sky fees and expenses.................................. 15,000
Transfer Agent and Registrar fees........................... 5,000
Miscellaneous expenses...................................... 64,291
----------
Total............................................. $1,600,000
==========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law, or DGCL, permits
indemnification of officers, directors and other corporate agents under certain
circumstances and subject to certain limitations. Our Certificate of
Incorporation and Bylaws provide that we shall indemnify our directors, officers
and agents to the fullest extent permitted by the DGCL against judgments and
monetary damages as a result of such individual serving as a director, officer
or agent, including in circumstances in which indemnification is otherwise
discretionary under such law. Our Bylaws also provide that we shall advance
expenses incurred by a director, officer or agent in advance of a final
disposition of such action provided we receive an undertaking by such individual
to repay the amounts advanced if it is ultimately determined that he is not
entitled to be indemnified. In addition, with the approval of our board of
directors and our stockholders, we have entered into separate indemnification
agreements with our directors, officers and certain employees that require us,
among other things, to indemnify them to the fullest extent permitted by law
against any judgments, amounts paid in settlement and all expenses incurred in
connection with defending any action that may arise by reason of their status or
service (other than liabilities arising from willful misconduct of a culpable
nature) and to obtain directors' and officers' insurance, if available on
reasonable terms. We are required to advance expenses incurred by a party to
such indemnification agreement in advance of a determination or judgment subject
to a determination by our board of directors or another party who is not a party
or defendants to such claim that the party to the indemnification agreement
would not be permitted to be indemnified under applicable law. Parties to the
indemnification agreements would not be indemnified for any acts, omissions or
transactions for which they are prohibited from receiving indemnification under
applicable law.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Since inception, we have issued unregistered securities to a limited number
of persons as described below:

None of these transactions involved any underwriters, underwriting
discounts or commissions, or any public offering, and we believe that each
transaction was exempt from the registration requirements of the Securities Act
by virtue of Section 4(2) thereof, Regulation D promulgated thereunder or Rule
701 pursuant to compensatory benefit plans and contracts relating to
compensation as provided under such Rule 701. The recipients of securities in
each such transaction represented their intention to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof,

II-1
<PAGE> 103

and appropriate legends were affixed to the share certificates and instruments
issued in such transactions. All recipients had adequate access, through their
relationships with us, to information about us.

As of September 30, 2000, the registrant has issued stock options to
purchase 24,957,250 shares of common stock with exercise prices ranging from
$0.0067 to $10.00 under its 1997 Stock Option Plan. Of the options, options for
9,849,713 shares have been exercised, options for 136,500 shares have been
cancelled and options for 14,971,037 shares remain outstanding under the 1997
Stock Option Plan.

The registrant issued and sold 1,000,000 shares of Series A preferred stock
at a price of $0.20 per share to five individual investors and founders in a
private placement equity venture financing transaction on August 11, 1997 and on
October 18, 1997. Each share of Series A preferred stock is convertible into
three (3) shares of common stock. The total aggregate proceeds to the registrant
in the private placement transaction was approximately $200,000.

The registrant issued and sold 2,350,410 shares of Series B preferred stock
at a price of $0.468 per share to eight individual investors and one venture
institutional investor in a private placement equity venture financing
transaction on December 31, 1997 and on June 16, 1998. Each share of Series B
preferred stock is convertible into three (3) shares of common stock. The total
aggregate proceeds to the registrant in the private placement transaction was
approximately $1,100,000.

The registrant issued and sold 6,966,162 shares of Series C preferred stock
at a price of $0.73 per share to nine total individual and venture institutional
investors in a private placement equity venture financing transaction on October
16, 1998 and on December 14, 1998. Each share of Series C preferred stock is
convertible into three (3) shares of common stock. The total aggregate proceeds
to the registrant in the private placement transaction was approximately
$5,085,300.

The registrant issued and sold 8,911,992 shares of Series D preferred stock
at a price of $2.477 per share to eleven total individual and venture
institutional investors in a private placement equity venture financing
transaction on November 16, 1999. Each share of Series D preferred stock is
convertible into three (3) shares of common stock. The total aggregate proceeds
to the registrant in the private placement transaction was approximately
$22,075,000.

The registrant issued and sold 4,355,398 shares of Series E preferred stock
at a price of $17.22 per share to sixteen total institutional venture and
corporate affiliated investors in a private placement equity venture financing
transaction on May 31, 2000 and on June 14, 2000. Each share of Series E
preferred stock is convertible into three (3) shares of common stock. The total
aggregate proceeds to the registrant in the private placement transaction was
approximately $75,000,000.

The registrant issued warrants to purchase up to an aggregate of 60,000
shares of common stock at an exercise price of $0.1667, $2.00 and $2.25 per
share to James Smith & Company in a private placement transaction related to
rendering of services on March 1, 2000, August 15, 2000 and August 22, 2000, Mr.
Smith exercised these warrants on August 2, 17 and 22, 2000.

The registrant issued a warrant to purchase up to an aggregate of 98,493
shares of Series C Preferred Stock at an exercise price of $0.73 per share to
Silicon Valley Bank in a private placement lease financing transaction on April
5, 1999. Each share of Series C Preferred Stock is convertible into three (3)
shares of common stock. The rights to exercise the warrant will terminate after
five (5) years from the date of the warrant provided that notice of the
expiration of the warrant is given not less than 30 days prior to the expiration
date.

The registrant issued warrants to purchase up to an aggregate of 315,069
shares of Series C Preferred Stock at an exercise price of $0.73 per share to
Comdisco in a private placement lease financing transaction on April 8, 1999 and
May 3, 1999. Each share of Series C Preferred Stock is convertible into three
(3) shares of common stock. The rights to exercise the warrants will terminate
upon the latter of (i) seven (7) years from the date of the warrant or (ii)
three (3) years from an initial public offering by the registrant of its stock.

II-2
<PAGE> 104

The registrant issued a warrant to purchase up to an aggregate of 27,967
shares of Series C Preferred Stock at an exercise price of $0.73 per share to
Busch International in a private placement transaction related to the rendering
of services on July 30, 1999. Each share of Series C Preferred Stock is
convertible into three (3) shares of common stock. The rights to exercise the
warrant will terminate upon the earliest of (i) July 29, 2004, (ii) an initial
public offering having aggregate proceeds of at least $10,000,000 or (iii) a
merger or acquisition.

The registrant issued warrants to purchase an aggregate of 201,857 shares
of Series D Preferred Stock at an exercise price of $2.477 per share to
Comdisco, Meier Mitchell & Company and Silicon Valley Bank in a private
placement lease financing transaction on April 7, 2000. Each share of Series D
Preferred Stock is convertible into three (3) shares of common stock. The rights
to exercise the warrants will terminate upon the expiration of ten (10) years.

As of September 5, the registrant issued warrants to purchase up to an
aggregate of 50,000 shares of common stock at an exercise price of $8.00 per
share to WS Investment Company 2000B and certain members of Wilson Sonsini
Goodrich & Rosati in a private placement transaction related to the rendering of
services. The rights to exercise the warrants will terminate upon September 4,
2005.

The sales of the above securities were deemed to be exempt from
registration in reliance on Rule 701 promulgated under Section 3(b) under the
Securities Act as transactions pursuant to a compensatory benefit plan or a
written contract relating to compensation, or in reliance on Section 4(2) of the
Securities Act or Regulation D promulgated thereunder as transactions by an
issuer not involving any public offering. The recipients of securities in each
such transaction represented their intention to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the share
certificates and other instruments issued in such transactions. All recipients
either received adequate information about OMM, Inc. or had access, through
employment or other relationships, to such information.

ITEM 16. EXHIBITS

(a) EXHIBITS

II-3
<PAGE> 105

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.4* Full Recourse Promissory Note held by the registrant for Hus
Tigli dated as of March 20, 2000
10.5* Change of Control Agreement between the registrant and Hus
Tigli dated as of January 24, 2000
10.6* Change of Control Agreement between the registrant and Anis
Husain dated as of June 7, 2000
10.7* Change of Control Agreement between the registrant and
Philip Chapman dated as of May 12, 2000
10.8* Change of Control Agreement between the registrant and James
Hartman dated as of May 26, 2000
10.9* Change of Control Agreement between the registrant and
Conrad Burke dated as of May 26, 2000
10.10* Change of Control Agreement between the registrant and
Christian Lepiane dated as of May 26, 2000
10.11* Amended and Restated 1997 Stock Plan
10.12* Form of Stock Option Agreement
10.13* 2000 Employee Stock Purchase Plan
10.14* San Diego Tech Center Office Building Lease between the
registrant and San Diego Tech Center, LLC dated as of March
25, 1999
10.15* First Amendment to Lease between the registrant and San
Diego Tech Center, LLC dated as of January 18, 1999
10.16* Industrial Lease between the registrant and the Irvine
Company dated as of May 2000
10.17* Loan and Security Agreement by and among the registrant,
MMC-GATX Partnership No. 1, Silicon Valley Bank and
Comdisco, Inc. dated as of April 7, 2000
10.18* Loan and Security Agreement between the registrant and
Silicon Valley Bank dated as of April 5, 1999
10.19* Loan and Security Agreement between the registrant and
Comdisco, Inc. dated as of March 23, 1999
10.20* Master Lease Agreement by and between the registrant and
Comdisco, Inc. dated as of March 23, 1999
10.21+ Amended and Restated Supply Agreement by and between the
registrant and Rockwell Science Center, LLC dated as of
January 1, 2000
23.1 Consent of PricewaterhouseCoopers LLP
23.2** Consent of Counsel (see Exhibit 5.1)
23.3 Consent of Pioneer Consulting, LLC
24.1* Power of Attorney (see page II-6)
</TABLE>

---------------
* Previously filed

** To be filed by amendment

+ Confidential treatment requested

(B) FINANCIAL STATEMENT SCHEDULES

Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.

ITEM 17. UNDERTAKINGS

The registrant hereby undertakes to provide to the underwriters at the
closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification by the registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions referenced in Item 14 of
this registration statement or otherwise, the registrant has been advised that
in

II-4
<PAGE> 106

the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by a director,
officer or controlling person in connection with the securities being registered
hereunder, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

The registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of
this Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.

II-5
<PAGE> 107

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 3 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of San Diego, State of California, on the 15th day of December, 2000.

OMM, Inc.

By: *
------------------------------------
Hus Tigli
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 3 to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
* President, Chief Executive December 15, 2000
--------------------------------------------------- Officer and Director
Hus Tigli (Principal Executive Officer)

/s/ PHILIP CHAPMAN Chief Financial Officer December 15, 2000
--------------------------------------------------- (Principal Financial and
Philip Chapman Accounting Officer)

* Chief Technology Officer and December 15, 2000
--------------------------------------------------- Chairman
Anis Husain

* Director December 15, 2000
---------------------------------------------------
Stephen Domenik

* Director December 15, 2000
---------------------------------------------------
Barry Fidelman

* Director December 15, 2000
---------------------------------------------------
Bruce Graham

*By: /s/ PHILIP CHAPMAN
-----------------------------------------------
Philip Chapman
Attorney-in-fact
</TABLE>

II-6
<PAGE> 108

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1** Form of Underwriting Agreement
3.1* Amended and Restated Certificate of Incorporation of the
registrant
3.2* Second Amended and Restated Bylaws of the registrant
4.1** Form of Common Stock Certificate
4.2* Form of Warrant to Purchase Series C Preferred Stock of the
registrant held by Busch International
4.3* Form of Warrant to Purchase Series C Preferred Stock of the
registrant held by Comdisco, dated as of April 8, 1999
4.4* Form of Warrant to Purchase Series C Preferred Stock of the
registrant held by Silicon Valley Bank
4.5** Form of Warrant to Purchase Stock of the registrant held by
WS Investment Company 2000B
4.6* Form of Warrant to Purchase Series D Preferred Stock of the
registrant held by Comdisco, Meier Mitchell & Company and
Silicon Valley Bank
4.7* Form of Warrant to Purchase Series C Preferred Stock of the
registrant held by Comdisco, dated as of May 3, 1999
5.1** Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation
10.1* Form of indemnification agreement entered into by the
registrant with each of its directors and executive officers
10.2* Amended and Restated Shareholders Rights Agreement dated as
of May 31, 2000 by between the registrant and certain
stockholders, as amended
10.3* Founders Restricted Stock Purchase Agreement by and between
the registrant and Anis Husain dated July 2, 1997.
10.4* Full Recourse Promissory Note held by the registrant for Hus
Tigli dated as of March 20, 2000
10.5* Change of Control Agreement between the registrant and Hus
Tigli dated as of January 24, 2000
10.6* Change of Control Agreement between the registrant and Anis
Husain dated as of June 7, 2000
10.7* Change of Control Agreement between the registrant and
Philip Chapman dated as of May 12, 2000
10.8* Change of Control Agreement between the registrant and James
Hartman dated as of May 26, 2000
10.9* Change of Control Agreement between the registrant and
Conrad Burke dated as of May 26, 2000
10.10* Change of Control Agreement between the registrant and
Christian Lepiane dated as of May 26, 2000
10.11* Amended and Restated 1997 Stock Plan
10.12* Form of Stock Option Agreement
10.13* 2000 Employee Stock Purchase Plan
10.14* San Diego Tech Center Office Building Lease between the
registrant and San Diego Tech Center, LLC dated as of March
25, 1999
10.15* First Amendment to Lease between the registrant and San
Diego Tech Center, LLC dated as of January 18, 1999
10.16* Industrial Lease between the registrant and the Irvine
Company dated as of May 2000
10.17* Loan and Security Agreement by and among the registrant,
MMC-GATX Partnership No. 1, Silicon Valley Bank and
Comdisco, Inc. dated as of April 7, 2000
10.18* Loan and Security Agreement between the registrant and
Silicon Valley Bank dated as of April 5, 1999
10.19* Loan and Security Agreement between the registrant and
Comdisco, Inc. dated as of March 23, 1999
10.20* Master Lease Agreement by and between the registrant and
Comdisco, Inc. dated as of March 23, 1999
</TABLE>
<PAGE> 109

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.21+ Amended and Restated Supply Agreement by and between the
registrant and Rockwell Science Center, LLC dated as of
January 1, 2000
23.1 Consent of PricewaterhouseCoopers LLP
23.2** Consent of Counsel (see Exhibit 5.1)
23.3 Consent of Pioneer Consulting, LLC
24.1* Power of Attorney (see page II-6)
</TABLE>

---------------
* Previously filed

** To be filed by amendment

+ Confidential treatment requested