Morris Plains, NJ, June 23, 2003 - Xtellus, a maker of dynamic optical modules and components for reconfigurable optical networks, has successfully completed qualification of the liquid crystal optical processors that are the core technology for its Dynamic Blocker Equalizer product. These processors are made at Xtellus' wholly owned and operated facility in Daejon, South Korea, that is dedicated to fabricating liquid crystal optical processors for telecommunications applications. Qualification was according to Telcordia 1209 and 1221 and covered temperature and humidity cycling, mechanical shock and vibration, and high and low temperature storage.

The Dynamic Blocker Equalizer is a key building block for reconfigurable optical networking applications such as reconfigurable optical add/drop multiplexers, optical cross-connects and channelized dynamic gain equalizers.

Xtellus is also using this milestone to formally announce its South Korean liquid crystal optical processor fabrication facility which it had not disclosed previously. Xtellus located the facility in South Korea as this is where the majority of the world's liquid crystal display production (LCD) takes place and provides Xtellus direct access to the world's best liquid crystal design and manufacturing resources.

Xtellus has invested over a year in customizing machinery and processes to optimize fabrication of liquid crystal optical processors to the highest precision specifications specifically for telecom applications. This is very important because telecom applications require that liquid crystal parameters such as size, spectrum, dynamic range and resolution be optimized differently than for display applications. With this facility Xtellus can fabricate liquid crystal optical processors to the highest specifications with consistent high quality, can customize processors to meet specific customer requirements, and can produce these processors with a rapid turn around time.

The facility in Daejon is headed by Mr. Il Lee. Mr. Lee has over twenty years of liquid crystal display industrial experience. He was head of Deawoo's LCD Division and the founder of an LCD design and manufacturing company, Orion Display Technologies.

Sam Suh, Xtellus' VP Engineering, commented, "We are very excited that our South Korean team has completed the critical milestone of qualifying the liquid crystal optical processors that are the core technology for Xtellus' initial product, the Dynamic Blocker Equalizer. This is a significant step towards qualifying the product as a whole which is what our customers expect."

Gil Cohen, Xtellus' President and CEO, elaborated, "We made two key decisions when we formed Xtellus, to use liquid crystal as our core technology and to have direct control over this technology. We chose liquid crystal based on its proven reliability in over forty years of industrial and high-tech applications, its versatility as a platform to underlie multiple dynamic optical products, and its scalability to process simultaneously up to hundreds of wavelengths in a miniature form factor. By directly controlling this technology we feel that this gives us a huge advantage over other liquid crystal companies for product quality and performance and for customer responsiveness.

"Also, Xtellus is very fortunate to have Mr. Lee as the GM of its Korean operation. His knowledge of liquid crystal manufacturing and his breadth of industry contacts have been essential to Xtellus successfully building and operating the facility within our low cost targets."