<PAGE>

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

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

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

                                   FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

  For the Fiscal Year Ended April 30, 2001

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

    For the transition period from _______ to ________

                        Commission File Number: 0-30869

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

                            STRATOS LIGHTWAVE, INC.
            (Exact Name of Registrant as Specified in its Charter)

<TABLE>
 <S>                                             <C>
                   Delaware                                        36-4360035
 (State or other jurisdiction of incorporation        (I.R.S. Employer Identification No.)
                       or
                 organization)
            7444 West Wilson Avenue
               Chicago, Illinois                                     60706
   (Address of principal executive offices)                        (Zip Code)
</TABLE>

      Registrant's telephone number, including area code: (708) 867-9600

          Securities registered pursuant to Section 12(b) of the Act:

                                     None

          Securities registered pursuant to Section 12(g) of the Act:

                          $.01 par value Common Stock

                               (Title of Class)

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

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

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

   The aggregate market value of the $.01 par value common stock held by non-
affiliates of the registrant on July 16, 2001, based upon the closing sale
price on that date as reported in The Wall Street Journal was approximately
$589,232,250.

   The registrant had 64,092,300 shares of $.01 par value common stock
outstanding as of July 16, 2001.

                      DOCUMENTS INCORPORATED BY REFERENCE

   Portions of the proxy statement for the Annual Meeting of Stockholders to
be held on August 28, 2001 which will be filed within 120 days of April 30,
2001 are incorporated by reference into Part III of this Form 10-K.

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

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
 <C>         <S>                                                           <C>
 Forward-Looking Statements..............................................    3

                                        PART I

 Item 1.     Business...................................................     3
 Item 2.     Properties.................................................    14
 Item 3.     Legal Proceedings..........................................    14
 Item 4.     Submission of Matters to a Vote of Security Holders........    15

                                       PART II

             Market for Registrant's Common Equity and Related
 Item 5.     Stockholder Matters........................................    17
 Item 6.     Selected Financial Data....................................    18
 Item 7.     Management's Discussion and Analysis of Financial Condition
             and Results of Operations..................................    19
             Quantitative and Qualitative Disclosures About Market
 Item 7A.    Risk.......................................................    32
 Item 8.     Financial Statements and Supplementary Data................    32
 Item 9.     Changes in and Disagreements with Accountants on Accounting
             and Financial Disclosure...................................    32

                                       PART III

 Item 10.    Directors and Executive Offices of the Registrant..........    33
 Item 11.    Executive Compensation.....................................    33
             Security Ownership of Certain Beneficial Owners and
 Item 12.    Management.................................................    34
 Item 13.    Certain Relationships and Related Transactions.............    34

                                       PART IV

             Exhibits, Financial Statement Schedules, and Reports on
 Item 14.    Form 8-K...................................................    34
             Index to Financial Statements and Financial Statement
 Item 14(a). Schedule...................................................   F-1
</TABLE>

                                       2
<PAGE>

                          FORWARD LOOKING STATEMENTS

   The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto included elsewhere in this
Annual Report on Form 10-K. This report contains forward-looking statements
that involve risks and uncertainties. Our actual results could differ
materially from the results contemplated by these forward looking statements
due to certain factors, including those discussed below in Item 7 and
elsewhere in this report.

                                    PART I

Item I. Business

Overview

   We develop, manufacture and sell optical subsystems and components for high
data rate networking, data storage and telecommunication applications. Our
optical subsystems convert electronic signals into optical signals and back to
electronic signals, thereby facilitating the transmission of information over
optical communication networks. These optical subsystems are designed for use
in local area networks (LANs), storage area networks (SANs), metropolitan area
networks (MANs), wide area networks (WANs), and in the telecommunication
markets. Our optical subsystems are compatible with the advanced transmission
protocols used in these networks, including Gigabit Ethernet, Fast Ethernet,
Fibre Channel, and synchronous optical network (SONET). We also design,
manufacture and sell a full line of optical components and cable assemblies
for use in these networks.

   On February 23, 2000, Methode Electronics, Inc. (Methode) announced plans
to create a separate company comprised of its optical products businesses.
Accordingly, we were incorporated in Delaware in April 2000 as a wholly-owned
subsidiary of Methode. In June 2000 we launched our initial public offering of
10,062,500 shares of common stock at $21.00 per share. After the completion of
our public offering, Methode owned approximately 84.3% of our outstanding
common stock. On March 23, 2001, Methode announced that its board of directors
had declared a stock dividend of all of Methode's shares in us. The dividend
was distributed on April 28, 2001 to Methode stockholders of record as of
April 5, 2001. The distribution was made on the basis of 1.5113 shares of our
common stock for each share of Methode Class A and Class B common stock held.

Industry Background

 Increasing Demand for Higher Bandwidth

   Over the last several years, the number of communication networks and the
amount of data transmitted over networks has increased substantially due to
the rapid growth of data intensive applications such as Internet access, e-
commerce, e-mail, video conferencing, multimedia file transfers and the
movement of large blocks of stored data across networks. In addition, the
expansion of data and storage networks for business over a geographically
dispersed user base has increased the amount of data transmitted over
communication networks. This rapid growth has exposed the transmission speed
and physical space limitations of existing networks which traditionally have
relied primarily on the transmission of electronic signals.

 Use of Optical Technology in Communications Networks

   To address expanding bandwidth and transmission distance requirements, new
communication equipment has been developed using optical technology for high
data rate networking, data storage and telecommunication applications. Optical
technology uses light instead of electricity to transmit information. An
optical network is comprised of a series of network devices, such as hubs,
switches, servers and storage elements, which are interconnected with fiber
optic cabling.


                                       3
<PAGE>

   Optical transceivers convert electronic signals into optical signals and
back into electronic signals, thereby facilitating the transmission of
information over optical communication networks. At the sending end, an
optical transceiver converts electronic-based information streams into light-
based information streams for launch into the optical communication network. A
focused light source, either a light emitting diode or a laser, within the
optical transceiver is used to illuminate the fiber core with a series of
coded pulses of light that represent the information to be transmitted. At the
receiving end, an optical transceiver converts the light-based information
stream back into an electronic-based stream.

 Growth of Optical Technology in the Enterprise Market

   Gigabit Ethernet and Fast Ethernet in Local Area Networks. LANs
interconnect computer users within an organization and allow users to share
computer resources. Early LANs, which had relatively limited performance
requirements, short connection distances and low transmission speeds, were
generally interconnected using copper cabling. Most present day LANs use the
Ethernet transmission protocol, which operates at 10 megabits per second
(Mbps). As performance requirements, transmission distance and bandwidth
requirements of network users have increased, transmission protocols have
evolved to 100 Mbps Fast Ethernet, and Gigabit Ethernet technology, which
operates at 1,000 Mbps or 1 gigabit per second (Gbps). Each Gigabit Ethernet
switch port relies on a subsystem to transmit and receive data.

   The increasing bandwidth needs of network users have prompted manufacturers
to begin developing networking systems with per-port transmission speeds of 10
Gbps. The scalability and migration capacity built into the Gigabit Ethernet
protocol allows original equipment manufacturers (OEMs) developing these
systems to leverage their experience with this standard to transition to the
higher data rate. This next generation of high data rate networking systems
will require even higher performance optical subsystems and components.

   Fibre Channel in Storage Area Networks. Data storage technology is evolving
rapidly. Most present day storage networks use a standard interface protocol
known as the small computer systems interface or SCSI, which allows storage
devices and servers to communicate at speeds limited to 40 or 80 Megabytes per
second over a maximum transmission distance of no greater than 25 meters and
to support the connection of a maximum of 15 devices. Although these distances
and speeds were sufficient for early storage applications, SCSI has become a
limiting technology for newer SANs, which require networking at high speeds
over long distances and scalability to interconnect large numbers of users.

   To address the limitations of SCSI-based storage systems, the Fibre Channel
standard was developed in the early 1990s. Fibre Channel allows up to 126
devices to communicate with each other at rates up to 1.0625 Gbps over
distances up to 10 kilometers, while maintaining backward compatibility with
the installed base of SCSI-based storage systems. The next generation of SAN
products, currently in the early stages of commercial deployment, will operate
at speeds of 2.125 Gbps. Fibre Channel also is scalable and expected to
support systems with data rates of 8 Gbps and higher. Fibre Channel-based SANs
enable enhanced network applications such as storage backup, and better
overall storage management achievable through centralized storage resources.
Each Fibre Channel switch port relies on a subsystem to transmit and receive
data.

 Increasing Penetration of Optical Technology in MANs, WANs and
 Telecommunication Networks

   Metropolitan and Wide Area Networks. The increased transmission
capabilities of optical technology have allowed for the geographic extension
of LANs and SANs through the use of extended networks, such as MANs and WANs.
These networks enable enterprises to interconnect network systems throughout a
corporate campus or wide geographic area rather than within a single building.
Interconnections between network systems are performed by switches and routers
that use optical subsystems to effect the necessary conversions between
electronic and optical systems. In addition, optical components are used at
each interface to join optical fibers in cable-to-cable and cable-to-optical
subsystem connections. These networks enable business enterprises to use their
networks for enhanced applications, such as real-time backup data storage at
distances of up to 120 kilometers for disaster protection. In addition, these
networks offer organizations a cost-effective way to address increased
bandwidth requirements.

                                       4
<PAGE>

   Telecommunication Networks. Optical technology also is being used in high
data rate telecommunication applications, including the intra-office
connection of clusters of telecommunication switches based on the SONET and
ATM protocols. SONET switches and ATM access switches are often used in
telecommunication networks to switch regional traffic and route long distance
traffic. In these core networks, multiple switches are often grouped together
within a service provider's central office network. The interconnections
between these systems are often provided by optical subsystems and components.

 Demands on Suppliers of Optical Subsystems and Components

   The ability to send high data rate optical signals over longer distances
depends not only on optical transceiver technology, but also on the precision
of the optical connections within the network. The demand for increasing
bandwidth places continued emphasis on the need for high quality optical
connectivity in critical applications such as in telecommunications networks,
where the transmission of higher data rates over long distances has pushed the
limits of signal integrity. Optical connections within the network contribute
to signal loss and even small differences in signal loss due to the quality of
individual connections can substantially reduce the distance over which
optical signals can reliably be sent.

   The market demands on optical communication OEMs to produce networking
systems with ever increasing data rates over long distances have driven the
need for advanced optical subsystems and components that provide the critical
interconnections between devices within these high data rate network systems.

   Optical communication OEMs are accelerating new product design times. As a
result, OEMs increasingly rely on highly integrated subsystem suppliers to
rapidly develop major elements of their systems. These suppliers allow optical
communication OEMs to better focus on their core competencies in overall
product design, specific differentiating product benefits, marketing and
distribution. We expect this trend to continue, with optical communication
OEMs outsourcing an increasing percentage of their non-core functions to
contract manufacturers and integrated subsystem suppliers.

The Stratos Advantage

   We develop, manufacture and sell optical subsystems and components for high
data rate networking, data storage and telecommunication applications. These
optical subsystems are designed for use in LANs, SANs, MANs, WANs, and in the
telecommunication markets. Our optical subsystems are compatible with the
transmission protocols used in these networks, including Gigabit Ethernet,
Fast Ethernet, Fibre Channel, and synchronous optical network (SONET). We also
design, manufacture and sell a full line of optical components and cable
assemblies for use in enterprise networks, as well as MAN, WAN and
telecommunication markets.

   We believe our company possesses the following key competitive advantages:

     High Performance. We design, manufacture and test our products to
  provide optical line transmission performance with specific attention to
  standards compliance and interoperability. For instance, our gigabit speed
  optical transceivers are engineered using advanced mechanical packaging
  technologies, which we believe allows us to deliver some of the industry's
  lowest radiated electromagnetic interference solutions. We also employ a
  number of sophisticated manufacturing processes, including micron tolerance
  molding, precision fixturing and state-of-the-art metrology capabilities,
  which result in low signal loss and return loss.

     Integrated Design and Manufacturing. Our in-house design, engineering
  and manufacturing personnel have extensive experience in electronics,
  optical systems and electro-mechanical packaging. Our diverse technical
  capabilities, including internal tooling, design production,
  stereolithography, molding and automated surface-mount assembly, enable us
  to produce high-performance optical subsystems and components with
  shortened product design cycles and faster times to market. Our advanced
  technical capabilities in miniaturization and integration allow us to
  design products with higher port density and smaller packaging and, when
  necessary, allow us to rapidly scale our production to deliver high volumes
  of these products.

                                       5
<PAGE>

     Broad Subsystem and Component Product Line. Our broad line of optical
  subsystems and components are available in a variety of fiber optic
  interfaces, or form factors, support a wide range of data rates, protocols,
  wavelengths, modes and transmission distances, and have applications in the
  enterprise, MAN, WAN and telecommunication markets. We offer industry
  standard SC and higher density LC versions of all of our optical
  subsystems.

     Reliability. We design, manufacture and test in-house and take a multi-
  tiered approach to assure the reliability of our optical subsystems. During
  the design phase, our optical subsystems undergo rigorous verification and
  qualification testing before designs are released to production. All of our
  optical subsystems also undergo thermal stress screening before being
  shipped to customers. Our design and manufacturing operations are closely
  integrated and employ the same state-of-the-art automated testing
  procedures to ensure performance is maintained from design through
  production. We also track field quality performance to identify significant
  trends and opportunities for product improvements.

The Stratos Strategy

   Our objective is to be a leading developer, manufacturer and seller of
high-performance optical subsystems and components to optical communication
OEMs. Key elements of our strategy include the following:

     Develop Emerging Technologies. We believe our experience in electronics,
  optical systems and electro-mechanical packaging and our active
  participation in industry organizations which establish the standards for
  next generation technologies have made us a leader in the development and
  manufacture of optical products. We intend to continue to invest in the
  development of new and enhanced technologies that result in new products
  with improved performance features, such as higher data rate, higher port
  density and greater reliability.

     Expand Our Product Portfolio to Provide Comprehensive Solutions. Our
  goal is to provide a broad portfolio of products that address all of the
  optical subsystem and component needs of our customers. We are committed to
  the ongoing development and expansion of our portfolio of high-performance
  optical subsystems and components.

     Design and Build Increasingly Integrated Subsystems and Components. We
  intend to leverage our existing design and manufacturing expertise in
  optical technologies to manufacture value-added integrated optical
  subsystems and components. We believe there is a growing demand from
  optical communication OEMs for more highly integrated optical subsystems
  and components. Integration provides many benefits to our customers,
  including cost reductions as well as performance and reliability
  improvements. In addition, we believe our integrated subsystems and
  components allow our customers to design systems with greater port density.

     Strengthen and Expand Customer Relationships. Our field and product
  design engineers work closely with our customers from the initial product
  design stage through the manufacturing process. We also provide extensive
  customer service and technical support throughout the qualification and
  sale process. This level of interaction enables us to respond quickly to
  our customers and align our product development efforts with their needs.
  We intend to strengthen our current customer relationships by continuing to
  deliver a high level of value-added service and technical support and
  leveraging our reputation for high quality products and service to
  establish relationships with new customers. We also intend to capitalize on
  our service-oriented approach and our existing customer relationships to
  market our other products.

     Pursue Complementary Acquisitions. We currently intend to pursue
  opportunities to acquire or invest in other businesses or technologies that
  would complement our current products, enhance our technical capabilities,
  lower our manufacturing costs, expand our markets, or that may otherwise
  offer growth opportunities.

                                       6
<PAGE>

Products

   We design, manufacture and sell a broad line of high-performance, optical
subsystems and components. Our products are designed for the various fiber
optic interfaces on the market today, including the SC and LC interfaces. The
SC fiber optic interface is one of the most common interfaces used in optical
network applications. This interface was designed to be used over the entire
range of optical network applications. The LC fiber optic interface is one-
half the size of the SC interface and was designed to meet the higher port
density requirements of space restricted applications. The LC interface is an
evolutionary version of the SC interface that shares proven connector
technology.

 Optical Subsystems

   Our optical subsystems consist of a broad range of optical transceivers and
multi-channel optical links. These devices serve as high data rate
interconnects between network devices, such as hubs, switches, servers and
storage elements. Our optical subsystems are available in a variety of fiber
optic interfaces, or form factors, and support a wide range of data rates,
protocols, wavelengths, modes and transmission distances.

                                       7
<PAGE>

   The following table summarizes the capabilities of our optical subsystems:

<TABLE>
<CAPTION>
     Fiber Optic                                           Wavelength (nm)
Interface/Form Factor      Data Rate/Protocol            / Mode / Distance
---------------------  -------------------------- --------------------------------
<S>                    <C>                        <C>
Embedded
 Transceivers
SC Embedded-                                      850nm Multimode-500 meters
Standard Form          2.488 Gbps-SONET OC-48     1310nm Single mode-20 kilometers
Factor "1x9--          1.25 Gbps-Gigabit Ethernet
Conventional           1.0625 Gbps-Fibre Channel
Format"                622 Mbps-ATM OC-12

LC Embedded-Small      2.488 Gbps-SONET OC-48     850nm Multimode-500 meters
Form Factor "Small     2.125 Gbps-2xFibre Channel 1310nm Single mode-20 kilometers
Form Factor"           1.25 Gbps-Gigabit Ethernet
                       1.0625 Gbps-Fibre Channel

LC Embedded-RJ         155 Mbps-ATM OC-3          820nm Multimode-2 kilometers
Size "Single Port      100 Mbps-Fast Ethernet     1300nm Single mode-20 kilometers
RJ-Format"             10 Mbps-Ethernet

4 Port LC              155 Mbps-ATM OC-3          820nm Multimode-2 kilometers
Embedded-RJ Size       100 Mbps-Fast Ethernet     1300nm Single mode-20 kilometers
"4 Port RJ-Format"     10 Mbps-Ethernet
Internal Removable
Transceivers
SC Removable-          2.488 Gbps-SONET OC-48     850nm Multimode-500 meters
Standard Form          2.125 Gbps-2xFibre Channel 1310nm Single mode-20 kilometers
Factor "Gigabit        1.25 Gbps-Gigabit Ethernet
Interface              1.0625 Gbps-Fibre Channel
Converter" or          622 Mbps-ATM OC-12
"GBIC"                 155 Mbps-ATM OC-3

LC Removable-Small                                850nm Multimode-500 meters
Form Factor "Small     2.488 Gbps-SONET OC-48     1310nm Single mode-20 kilometers
Form Factor            2.125 Gbps-2xFibre Channel
Pluggable" or          1.25 Gbps-Gigabit Ethernet
"SFP"                  1.0625 Gbps-Fibre Channel
External Removable
Transceivers
SC Removable-          2.125 Gbps-2xFibre Channel 850nm Multimode-500 meters
External Form          1.25 Gbps-Gigabit Ethernet 1310nm Single mode-20 kilometers
Factor "Media          1.0625 Gbps-Fibre Channel
Interface Adapter"
or "MIA"

LC Removable-          2.125 Gbps-2xFibre Channel 850nm Multimode-500 meters
External Form          1.25 Gbps-Gigabit Ethernet 1310nm Single mode-20 kilometers
Factor "Mini Media     1.0625 Gbps-Fibre Channel
Interface Adapter"
or "Mini MIA"
</TABLE>

   Embedded Transceivers. Embedded transceivers are designed to be directly
soldered to a printed circuit board. Our embedded 850nm transceivers feature
VCSELs that perform more reliably over time and over extreme temperatures than
previously used edge emitting laser devices. We believe our transceivers
deliver some of the lowest radiated electromagnetic interference levels in the
industry, assisting our customers in achieving required Federal Communications
Commission certification. Our highly miniaturized optical RJ-format
transceivers use the identical shell and external port dimensions as the most
common copper-wired network interface, allowing manufacturers to use the same
cabinetry, port labels and panel cutouts of previous electronic-signal based
designs.

                                       8
<PAGE>

   Internal Removable Transceivers. Internal removable transceivers, also
known as gigabit interface converters or GBICs, are configured in a protective
module designed to plug into a connector and guide rail system that has been
soldered to a printed circuit board. This allows for the easy removal of the
transceiver from the system, giving network designers greater configuration
flexibility and replacement options. Removable transceivers are designed to be
"hot pluggable," meaning they can be replaced while the system is operational.
This feature is particularly advantageous in network applications where
maintaining uninterrupted service is critical. Removable transceivers are
typically more expensive than embedded transceivers due to the need for
greater protective housing, durability of connector contacts that must
reliably withstand multiple insertions, additional circuitry and the
additional cost of the connector and guide rail system. Our GBIC products
feature higher quality VCSELs and alternating current coupling, deliver some
of the lowest electromagnetic interference levels in the industry and are
assembled in a precision mechanical package for higher performance and
reliability.

   External Removable Transceivers. External removable transceivers, also
known as media interface adapters or MIAs, are similar to GBICs, except the
transceiver module remains outside of the system. This configuration is used
to convert electronic signals from a short-distance copper-wire based
transceiver to optical signals. This product is typically used to extend the
flexibility of copper-wire based storage networking equipment.

   Multi-Channel Optical Links. Multi-channel optical links are arrays with
signals typically configured for one direction, unlike transceivers, which are
pairs of bi-directional (transmit/receive) channels. An initial application
for these devices are as high data rate, very short-range (VSR) data links.
This allows the use of less costly and more available components by splitting
the signal into multiple, lower data rate channels.

 Optical Components

   Our optical components include an extensive range of fiber optic
connectors, cable assemblies and related accessories.

   Fiber Optic Connectors. Our connector products include a variety of form
factors for single and multi-fiber applications. In addition to standard SC
connectors and legacy standard connectors, we offer small form factor LC and
MT-RJ connectors that meet the needs of our customers to connect higher
numbers of interface ports in the same or smaller space. Common applications
of our optical connectors include enterprise, broadband and telecommunication
applications.

   High Density Backplane Connectors. Fiber optic backplane connectors are
high density fiber optic connectors specifically designed for internal systems
such as switches. These connectors are increasingly replacing electronic
interconnections inside many high-performance systems, solving many of the
heat, distance and electromagnetic interference problems associated with
standard electronic based wiring. Our QUANTUM MPX(TM) fiber optic backplane
connectivity system offers very high-density connectivity in backplane
applications such as those used in high speed data networking and
telecommunications switching equipment.

   Optical Flexcircuits. QUANTUM-Flex circuits provide OEM customers the
optical equivalent of flexible copper printed circuits. Designed to facilitate
extremely high fiber counts with complex custom layouts, QUANTUM-Flex circuits
have all the channels, ports and fiber routings preconfigured to reduce
installation time and simplify system architecture. Utilizing discreet
Singlemode or Multimode fibers, sophisticated computer aided machining can
precisely manufacture QUANTUM-Flex circuits in any routing matrix, size or
shape. We provide a wide variety of QUANTUM-Flex circuit interconnect options
including Quantum MPX(TM), MP, LC, MT-RJ, FC, ST and SC. Each QUANTUM-Flex
circuit is factory terminated and is optically tested providing system
designers a true plug and play option in an optical domain.

   Harsh Environment Connectors. We offer a comprehensive line of high-
performance connectors for harsh environment applications. These connectors
use a patented expanded beam technology that increases the size of the optical
signal target by nearly 15 times, neutralizing most of the effects of shock,
vibration, particle

                                       9
<PAGE>

contamination and misalignment. Our harsh connector products are designed
primarily for use in tactical military, petrochemical and field broadcast
applications.

   Cable Assemblies. We manufacture a variety of customized cable assemblies
for use where greater performance such as generally lower and more predictable
insertion loss, reflectance and mechanical characteristics are required.
Common applications include intra-system interconnecting patch cords for OEMs
of high capacity networking systems and telecommunications switches as well as
inter-connecting cable terminations for high and intermediate data rate
applications.

   Custom Value-Added Products. We manufacture custom integrated optical
connector assemblies where our specialized capabilities can be used to provide
our customers with value-added products. These capabilities include precision
connection of optoelectric devices to active subsystems, air tight fiber optic
connections used in laser packaging applications, precision attachment of
connectors to fiber optic cable, direct attachment of multi-fiber assemblies
to integrated circuits, and assembly, splicing and termination of high density
fiber optic connectors.

   Other Accessories. Our standard and multi-fiber adapters are physically
configured to translate between cabling systems and devices with incompatible
interconnection geometries. Our test loop-backs monitor on-line performance
and fault location. Other accessories include our family of high density,
ready-to-install fiber management cassettes, manifolds and cabinets.

Technology

   The design, manufacture and testing of high-performance optical subsystems
and components for optical communication networks require diverse technical
skills and expertise. Key elements of our technological capabilities include:

     Integrated Systems Design. The design, manufacture and testing of our
  optical subsystems require a combination of sophisticated technical
  competencies in optical engineering, electronic circuit design, mechanical
  engineering and electro-mechanical packaging. We believe our technical
  competencies in these areas enable us to produce optical subsystems with
  some of the industry's lowest radiated electromagnetic interference levels.
  Our technical capabilities in miniaturization and advanced circuitry
  integration also allow us to design products with higher port density and
  smaller packages.

     Advanced Optical Subassembly Design. We combine advanced semiconductor
  laser designs and our internally developed device positioning, alignment
  and bonding technologies with integrated optical packaging techniques to
  produce advanced optical subassemblies. We believe these designs and
  technologies improve the performance of our products as well as enhance
  yields and reduce material costs.

     Electronic Circuit Design. Our electronic circuit design expertise
  includes a full range of analog and digital signaling capabilities. Our
  proprietary designs and innovations in laser driver, pre-amplifier and
  post-processing circuits have allowed us to be early entrants in the
  Gigabit data communication market. We believe our electronic circuit design
  capabilities will enable us to develop future optoelectronic products
  capable of even faster data rates.

     Advanced Semiconductor Device Development. As the need for higher
  bandwidth continues, we expect demand to increase for products operable at
  10 Gbps and above. Anticipating this potential demand, we are researching
  and developing capabilities in formulating compound semiconductor devices
  such as VCSELs and pin detectors. We believe these capabilities will enable
  us to develop products with higher data rate capabilities.

     Precision Molding Capability. Our experience in the precision molding of
  polymer materials allows us to minimize optical signal loss and maximize
  performance for our customers' products. This capability

                                      10
<PAGE>

  is at the core of both our approach to the subassembly fabrication within
  our optical subsystem product lines and our optical component products.

     Manufacturing Systems. Our in-house manufacturing expertise enables us
  to design, implement and optimize manufacturing processes from the initial
  development of product prototypes through full-scale production. To
  maximize production yield and minimize production costs, our manufacturing
  process includes extensive quality assurance systems and performance
  testing.

Manufacturing

   Our integrated manufacturing capabilities include product design,
engineering, fabrication, assembly and packaging of our products. We also
provide quality assurance through proprietary internal testing procedures
throughout the entire manufacturing process. These capabilities enable us to
reduce development times, increase end-to-end production yields and rapidly
respond to customer needs, enabling us to leverage our diverse skill base and
multiple core competencies in design and manufacturing.

   We currently manufacture our gigabit optical subsystems and components in
our Chicago, Illinois facilities. Our megabit optical subsystems are
manufactured at our Palm Bay, Florida facility. These operations involve high-
capacity pick-and-place equipment, wave and convection-reflow soldering
systems, precision plastic molding equipment, evaporative metal deposition
chambers, automated and semi-automated chip-to-wire bonding equipment and
laser welding systems as well as extensive test equipment laboratories, clean-
room capacity and in-house tool-making capability. We currently fabricate
compound semiconductor wafers using metallorganic chemical vapor deposition
reaction chambers and related ancillary and test equipment in Bedford,
Massachusetts. We anticipate moving this operation in the second quarter of
fiscal 2002 to a facility in Hudson, New Hampshire.

   We manufacture expanded-beam, harsh environment fiber optic for tactical
military and other extreme conditions in Haverhill, England. This operation
involves precision plastic molding equipment, micron tolerance machining, and
fiber metalization capability, as well as extensive test equipment
laboratories and clean-room capacity. These resources allow us to manufacture
specialized fiber optic products. We produce value-added fiber optic cable
assemblies for the Chinese and other Asian markets through a majority-owned
subsidiary in Shenzhen, China.

   The raw materials required to manufacture our products are generally
available from several suppliers, although certain key components, such as
semiconductor devices, are available from a limited number of suppliers. We
currently have two or more suppliers for all key components. Although we enter
into long-term agreements for the purchase of certain key components from time
to time, our purchases from limited source suppliers are generally made on a
purchase order basis. In certain circumstances, we maintain an inventory of
limited source components to limit the potential impact of a component
shortage.

Research and Development

   As of April 30, 2001, we had 122 employees engaged in research and
development, including 16 engineers with advanced degrees, 8 of whom have
Ph.Ds. Our research and development expenses were $14.7 million, $7.0 million
and $3.3 million in the fiscal years ended April 30, 2001, 2000 and 1999,
respectively.

   We believe continued investment in technology is critical to our future
success. We concentrate our research and development activities on enhancing
our existing products and developing new products to meet the evolving needs
of our customers. Our interaction with customers throughout the product design
process enables us to anticipate emerging technological trends in the
networking industry and focus our research and development efforts on
addressing these needs.

                                      11
<PAGE>

Customers

   We sell our products primarily to optical communication OEMs and resellers.
In some cases, we sell our products directly to contract manufacturers who, at
the direction of our customers, incorporate them into products being assembled
by these contract manufacturers for our customers.

   A small number of customers have historically accounted for a significant
portion of our net sales. For the fiscal year ended April 30, 2001, our three
largest customers and their respective contract manufacturers accounted for
32% of our net sales, with McData Corporation, Alcatel Network Systems and
Cisco Systems accounting for 11%, 11% and 10% of our net sales, respectively.
For the fiscal year ended April 30, 2000, our three largest customers and
their respective contract manufacturers accounted for 44% of our net sales,
with Cisco Systems, Nortel Networks and Alcatel Network Systems accounting for
26%, 10% and 8% of our net sales, respectively. For the fiscal year ended
April 30, 1999, our three largest customers and their respective contract
manufacturers accounted for 43% of our net sales, with Nortel Networks, Cisco
Systems and Alcatel Network Systems accounting for 27%, 10% and 6% of our net
sales, respectively.

Backlog

   Backlog consists of written purchase orders for products for which we have
assigned shipment dates within the following 12 months. As of April 30, 2001,
our backlog was approximately $34.2 million. Orders in backlog are firm, but
are subject to cancellation or rescheduling by the customer.

Sales, Marketing and Technical Support

   We market and sell our products domestically and internationally through
our direct sales force, local resellers and manufacturers' representatives.
Specifically, we have established relationships with resellers and
manufacturers' representatives in Australia, Europe, India, Israel and the
Pacific Rim.

   Our marketing organization develops strategies and implements programs to
support the sale of our products and enhance our reputation in the industry.
Our current marketing efforts include the following initiatives:

  . ongoing interaction with customers in the context of product development
    and technical support;

  . advertising and other promotional activities in industry trade journals
    and publications targeting design engineers;

  . participation in major trade show events and conferences in the
    communications network industry to promote our broad lines of optical
    subsystems and components; and

  . active interaction with our customers in industry associations and
    standards committees to promote and further enhance Gigabit Ethernet,
    Fibre Channel and passive interconnection technologies, promote
    standardization in the LAN and SAN markets and increase our visibility as
    industry experts.

   We believe our ability to deliver value-added customer service and
technical support is essential to our business. Our sales force and design
engineers work closely with our customers through the design and manufacturing
process. We also provide extensive technical support to our customers after
the design and qualification process is complete. We intend to strengthen our
current customer relationships by continuing to deliver a high level of value-
added service and technical support and leveraging our reputation for high
quality products and service to establish relationships with new customers.

                                      12
<PAGE>

Competition

   The market for optical subsystems and components for optical communication
network applications is highly competitive and subject to rapidly changing
technology. We believe the primary competitive factors impacting our business
are:

  . data rate, port density, reliability and other performance features;

  . ability to rapidly scale production for high volumes;

  . timeliness of new product introductions;

  . length of product design cycle;

  . compatibility with emerging industry standards;

  . scope and responsiveness of service and technical support;

  . price and performance characteristics; and

  . established reputation with key customers.

   For optical subsystems, we compete primarily with Agilent Technologies,
Inc., Finisar Corporation, Infineon Technologies Corp., International Business
Machines Corporation, and Optical Communications Products, Inc. For optical
components, we compete primarily with Infineon Technologies Corp., Lucent
Technologies, Inc., Molex, Inc., and Tyco International, Ltd. and numerous
other smaller companies. Many of our current and potential competitors have
significantly greater financial, technical, marketing, purchasing and other
resources than we do, and as a result, may be able to:

  . respond more quickly to new or emerging technologies or standards and to
    changes in customer requirements;

  . devote greater resources to the development, promotion and sale of their
    products; and

  . deliver competitive products at a lower price.

   In addition, some of our existing and potential customers are also current
and potential competitors. These companies may attempt to integrate their
operations by producing their own optical subsystems or components or by
acquiring one of our competitors, thereby eliminating the need to purchase our
products. Furthermore, larger companies in other related industries may
develop or acquire technologies and apply their significant resources,
including their distribution channels and brand name recognition, to capture
significant market share.

   We cannot assure you that we will be able to compete successfully against
either current or future competitors. Increased competition could result in
significant price erosion, reduced revenue, lower margins or loss of market
share, any of which would significantly harm our business.

Intellectual Property

   We rely on a combination of patent, copyright, trademark and trade secret
laws, as well as confidentiality agreements and licensing arrangements, to
establish and protect our proprietary rights. As of April 30, 2001, we had 66
U.S. patents issued and 40 U.S. patent applications pending. Our issued
patents expire between 2005 and 2018. Policing unauthorized use of our
products and technology is difficult. We file patent applications and other
registrations in foreign countries to establish and protect our proprietary
rights where we believe such filings are necessary to protect our technology.
However, the laws of some foreign countries do not protect our proprietary
rights to the same extent as do the laws of the United States. Despite our
efforts to protect our proprietary rights, unauthorized parties may attempt to
copy or otherwise obtain and use our products or technology. Our inability to
adequately protect against unauthorized use of our intellectual property could
devalue our property content and impair our ability to compete effectively.
Further, enforcing our intellectual property rights could result in the
expenditure of significant financial and managerial resources, whether or not
we are successful. Litigation may be necessary in the future to enforce our
intellectual property rights.

                                      13
<PAGE>

Regulatory Matters

   Our properties and business operations are subject to a wide variety of
federal, state, local, and foreign environmental, health and safety laws and
other legal requirements, including those relating to the storage, use,
discharge and disposal of toxic, volatile or otherwise hazardous substances
used in our manufacturing processes. If we fail to obtain required permits or
otherwise fail to operate within these or future legal requirements, we may be
required to pay substantial penalties, suspend our operations or make costly
changes to our manufacturing processes or facilities. Although we believe that
we are in compliance and have complied with all applicable legal requirements,
we may be required to incur additional costs to comply with current or future
legal requirements.

Employees

   As of April 30, 2001, we employed a total of 871 full-time employees, 633
of whom were primarily engaged in manufacturing, 122 of whom were engaged in
research and development, 45 of whom were engaged in sales, marketing and
technical support, and 71 of whom were engaged in administration. We also from
time to time employ part-time employees and hire independent contractors. Our
employees are not represented by any collective bargaining agreement, and we
have never experienced a work stoppage. We believe that our employee relations
are good.

Geographic Areas

   Information concerning Stratos' operations in different geographic regions
is set forth in Note 10 to Stratos' financial statements included in Item 14
of this Annual Report on Form 10-K.

Item 2. Properties

   Our corporate headquarters is located in Chicago, Illinois. This facility
occupies two buildings owned by us with approximately 88,500 total square feet
and contains our administrative offices, sales and marketing offices, research
and development facilities and primary optical subsystems manufacturing
facility. In addition, we own an approximately 60,000 square foot facility in
Chicago, Illinois which contains our primary optical components manufacturing
facility. We also own an approximately 16,000 square foot facility in Palm
Bay, Florida, which contains administrative offices, sales and marketing,
research and development, and manufacturing facilities. We sublease
approximately 21,000 square feet for research and development, sales and
marketing and manufacturing operations in Bedford, Massachusetts. We
anticipate moving this operation in the second quarter of fiscal 2002 to an
approximately 90,000 square foot facility we own in Hudson, New Hampshire. We
intend to sub-lease the Bedford facility after this move.

   We lease approximately 15,000 square feet for design and manufacturing in
Haverhill, Suffolk, United Kingdom. This lease expires in 2010. We also lease
an approximately 30,000 square foot manufacturing facility in Shenzhen, China.
This lease expires in September, 2009.

   We believe our facilities are adequate to meet our current needs.

Item 3. Legal Proceedings.

   Methode and Stratos are plaintiffs in several lawsuits relating to our
intellectual property rights. The defendants in these lawsuits include Finisar
Corporation ("Finisar"), Infineon Technologies Corp., and Optical
Communications Products, Inc. in the U.S. District Court for the Northern
District of California and in the District Court for the District of Delaware.
In these actions, Stratos alleges that optoelectronic products sold by the
defendants infringe upon seven of our patents. Stratos also alleges that
Finisar breached its obligations under a license and supply agreement with
Methode by failing to provide it with information regarding new technology
related to the products licensed under the agreement. We are seeking monetary
damages and injunctive relief. The defendants in these lawsuits have filed
various affirmative defenses and contend that the patents are invalid,

                                      14
<PAGE>

unenforceable and/or not infringed by the products sold by the defendants and,
if successful, are seeking attorneys' fees and costs in connection with the
lawsuits. In addition, Finisar has filed counterclaims asserting that one of
its founders is the primary inventor of the technology that is the subject of
certain patents, that Methode and Stratos improperly obtained the patents
based on Finisar's disclosure of the technology to Methode and that Finisar is
the rightful owner or co-owner of the patents. Finisar and Infineon have
alleged that Methode failed to disclose certain information to the Patent and
Trademark Office (PTO) that, if known to the PTO, would have prevented the
issuance of one of the patents and that Methode and Stratos engaged in
inequitable conduct before the PTO. Infineon's inequitable conduct claim has
been dismissed by the court. Finisar has also alleged breach of contract,
antitrust violations, conversion, trespass to chattels, breach of implied
obligation of good faith and fair dealing, constructive fraud, actual fraud,
misappropriation of trade secrets, breach of oral contract, conspiracy in
restraint of trade, attempted monopolization, conspiracy to monopolize,
violation of the Cartwright Act, unfair practices, unfair competition and
unjust enrichment and seeks unspecified compensatory damages, restitution and
the correction of inventorship with respect to certain patents.

   As part of our separation from Methode, the Methode patents which are the
subject of these lawsuits and Methode's rights in this litigation have been
contributed to us and we have agreed to indemnify Methode against all costs,
expenses and liabilities associated with these lawsuits. We intend to pursue
these lawsuits and defend against these counterclaims vigorously. These
lawsuits are in the preliminary stage, and we cannot predict their outcome
with certainty. Patent litigation is particularly complex and can extend for a
protracted time, which can substantially increase the cost of such litigation.
If one or more of these patents were found to be invalid or unenforceable, we
would lose the ability to prevent others from using the technologies covered
by the invalidated patents. This could result in significant decreases in our
sales and gross margins for our products that use these technologies. In
addition, we would lose the future royalty payments from our current licensees
of these patents. We could also be required to pay significant monetary
damages to one or more of the defendants and/or be required to reimburse them
for their legal fees. Accordingly, if one or more of these patents were found
to be invalid or unenforceable, our business would be significantly harmed.

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

   A special meeting of our stockholders was held on March 23, 2001. At the
special meeting, our stockholders voted on a proposal to amend the Stratos
Lightwave 2000 Stock Plan. The voting results were as follows:

<TABLE>
<CAPTION>
         For                            Against                                            Abstain
         ---                           ---------                                           -------
      <S>                              <C>                                                 <C>
      55,436,116                       4,140,149                                           23,825
</TABLE>

                                      15
<PAGE>

                      Stratos Lightwave Executive Officers

   The following table sets forth information concerning our executive
officers:

<TABLE>
<CAPTION>
             Name              Age                   Positions
             ----              ---                   ---------
 <C>                           <C> <S>
 James W. McGinley...........   46 President, Chief Executive Officer and
                                   Director since April 2000. Mr. McGinley was
                                   President of Methode Electronics, Inc. from
                                   August 1998 through June 2000. Mr. McGinley
                                   served as President of Methode Electronics'
                                   Optical Interconnect Products Division from
                                   January 1995 through July 1998. Mr. McGinley
                                   has been a director of Methode since 1993.

 Philip W. Schofield.........   43 Vice President and Chief Operating Officer
                                   since April 2000. Mr. Schofield previously
                                   served as Vice President of Methode
                                   Electronics' Fiber Optic Products Group
                                   since April 1994.

 David A. Slack..............   48 Vice President, Finance and Chief Financial
                                   Officer since April 2000. Mr. Slack served
                                   as the Chief Financial Officer of the
                                   Optoelectronics Group of Methode Electronics
                                   from March 27, 2000 through April 2000. From
                                   1993 through March 27, 2000, Mr. Slack
                                   served as Director of Finance, Chief
                                   Financial Officer and Director of
                                   Information Technology of Bretford
                                   Manufacturing, Inc., a manufacturer of
                                   furniture, carts, mounts, screens and other
                                   equipment.
</TABLE>

                                       16
<PAGE>

                                    PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

   Since our initial public offering on June 26, 2000, our common stock has
traded on the Nasdaq National Market under the symbol "STLW." The following
table sets forth the range of high and low closing sales prices of our common
stock for the periods indicated:

<TABLE>
<CAPTION>
   Fiscal Year Ended April 30, 2001                              High     Low
   --------------------------------                             ------- -------
   <S>                                                          <C>     <C>
   First Quarter (June 27, 2000 through July 31, 2000)......... $56.125 $26.000
   Second Quarter.............................................. $50.500 $21.313
   Third Quarter............................................... $27.625 $ 9.063
   Fourth Quarter.............................................. $14.125 $ 5.375
</TABLE>

   The closing price of our common stock on July 16, 2001 was $9.21. The
approximate number of stockholders of record on July 16, 2001 was 1,105,
excluding shares held in street name.

   We have never declared or paid dividends on our common stock and currently
do not intend to pay dividends in the foreseeable future so that we may
reinvest our earnings in the development of our business. The payment of
dividends in the future will be at the discretion of the Board of Directors.

                                      17
<PAGE>

Item 6. Selected Financial Data

   You should read the following selected combined financial data in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our combined financial statements and the
related notes included elsewhere in this report.

   The consolidated statement of operations data set forth below for the
fiscal year ended April 30, 2001, 2000 and 1999 and the consolidated balance
sheet data as of April 30, 2001 and 2000 are derived from, and are qualified
by reference to, our audited consolidated financial statements included
elsewhere in this report. The consolidated statement of operations data set
forth below for the fiscal year ended April 30, 1998 and 1997 and the
consolidated balance sheet data as of April 30, 1999, 1998 and 1997 are
derived from consolidated audited financial statements not included in this
report.

<TABLE>
<CAPTION>
                                           Fiscal Year Ended April 30,
                                     -----------------------------------------
                                       2001    2000    1999    1998     1997
                                     -------- ------- ------- -------  -------
                                     (in thousands, except per share amounts)
<S>                                  <C>      <C>     <C>     <C>      <C>
Statement of Operations Data:
Revenue:
  Net sales........................  $126,902 $71,785 $46,458 $24,158  $20,966
  License fees and royalties.......     4,873   1,459      50     188      --
                                     -------- ------- ------- -------  -------
                                      131,775  73,244  46,508  24,346   20,966
Cost and expenses:
  Cost of sales....................    89,617  48,064  29,543  17,656   14,121
  Research and development.........    14,729   7,045   3,301   2,353    2,294
  Sales and marketing..............     9,146   6,724   4,514   2,945    2,524
  General and administrative.......    13,367   5,361   3,518   2,820    2,909
                                     -------- ------- ------- -------  -------
    Total costs and expenses.......   126,859  67,194  40,876  25,774   21,848
                                     -------- ------- ------- -------  -------
Income (loss) from operations......     4,916   6,050   5,632  (1,428)    (882)
Investment income, net.............     7,770     --      --      --       --
                                     -------- ------- ------- -------  -------
Income (loss) before income taxes..    12,686   6,050   5,632  (1,428)    (882)
Income taxes (benefit).............     3,510   2,260   2,130    (570)    (375)
                                     -------- ------- ------- -------  -------
Net income (loss)..................  $  9,176 $ 3,790 $ 3,502 $  (858) $  (507)
                                     ======== ======= ======= =======  =======
Net income (loss) per share, basic
 and diluted.......................  $   0.15 $  0.07 $  0.06 $ (0.02) $ (0.01)
                                     ======== ======= ======= =======  =======
Weighted average number of common
 shares outstanding
  Basic............................    62,460  54,030  54,030  54,030   54,030
                                     ======== ======= ======= =======  =======
  Diluted..........................    62,805  54,030  54,030  54,030   54,030
                                     ======== ======= ======= =======  =======

<CAPTION>
                                                 As of April 30,
                                     -----------------------------------------
                                       2001    2000    1999    1998     1997
                                     -------- ------- ------- -------  -------
<S>                                  <C>      <C>     <C>     <C>      <C>
Balance Sheet Data:
Cash and cash equivalents..........  $125,438 $   537 $   550 $   --   $   --
Working capital....................   178,514  17,748  11,994   5,749    4,444
Total assets.......................   280,448  61,137  31,523  17,110   14,619
Long-term obligations, less current
 portion...........................       --      --      --      --       --
Shareholders' equity...............   254,899  52,962  26,169  14,596   12,939
</TABLE>

                                      18
<PAGE>

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

Overview

   We develop, manufacture and sell optical subsystems and components for high
data rate networking, data storage and telecommunication applications. These
optical subsystems are designed for use in local area networks (LANs), storage
area networks (SANs), metropolitan area networks (MANs), wide area networks
(WANs) and in the telecommunication markets. Our optical subsystems are
compatible with the advanced transmission protocols used in these networks,
including Gigabit Ethernet, Fast Ethernet, Fibre Channel, and synchronous
optical network (Sonet). We also design, manufacture and sell a full line of
optical components and cable assemblies for use in these networks.

   On February 23, 2000, Methode Electronics, Inc. ("Methode") announced plans
to create a separate company comprised of its optical products businesses.
Accordingly, we were incorporated in Delaware in April 2000 as a wholly owned
subsidiary of Methode. In June 2000 we launched our initial public offering of
10,062,500 shares of common stock at $21.00 per share. After the completion of
our public offering, Methode owned approximately 84.3% of our outstanding
common stock. On March 23, 2001, Methode announced that its board of directors
had declared a stock dividend of all of Methode's shares in us. The dividend
was distributed on April 28, 2001 to Methode stockholders of record as of
April 5, 2001. The distribution was made on the basis of 1.5113 shares of
Stratos stock for each share of Methode Class A and Class B common stock held.

   Our net sales are derived principally from the sale of optical subsystems
and components to optical communication original equipment manufacturers
(OEMs). Our net sales have fluctuated from period-to-period based on the size
and timing of customer orders, particularly from our largest customers, and
based on any canceled, delayed or rescheduled orders in the relevant period.
We determine reserves for rapid technological change on a product-by-product
basis. While it is likely that obsolescence due to rapid technological change
will continue, the timing and amount of this obsolescence cannot be predicted
with certainty.

   The average unit prices of our products generally decrease as the products
mature, in response to factors such as increased competition, the introduction
of new products and increased unit volumes. We anticipate that average selling
prices will continue to decline in future periods, although the timing and
degree of the declines cannot be predicted with any certainty. We must
continue to develop and introduce on a timely basis new products that
incorporate features that can be sold at higher average selling prices.

   License fees and royalties represent payments received from licensees of
our patented technology, which also is used by us in our optical subsystems.
These license agreements generally provide for up-front payments and/or future
fixed payments or ongoing royalty payments based on a percentage of sales of
the licensed products. The timing and amounts of these payments are beyond our
control. Accordingly, the amount received in any given period is expected to
vary significantly. The duration of all of these license agreements extends
until the expiration of the licensed patents. We will consider entering into
similar agreements in the future, however, we are not able to predict whether
we will enter into any additional licenses in the future and, if so, the
amount of any license fees or royalties.

   Our cost of sales consists of materials, salaries and related expenses for
manufacturing personnel and manufacturing overhead. We purchase several key
components used in the manufacture of our products from a limited number of
suppliers. We periodically have experienced shortages and delivery delays for
these materials. In some circumstances, we maintain an inventory of limited
source components to decrease the risk of shortage. If we overestimate our
requirements, we may have excess inventory of these components. Substantially
all of our products are designed and manufactured in our own facilities.
Accordingly, a portion of our cost of sales is fixed over the near term. In
order to remain competitive, we must continually reduce our manufacturing
costs through design and engineering innovations and increases in
manufacturing efficiencies. There can be no assurance that we will be able to
reduce our manufacturing costs or introduce new products to offset anticipated
decreases in the average selling prices of our products.

                                      19
<PAGE>

   Research and development expenses consist primarily of salaries and related
expenses for design engineers, scientists and other technical personnel,
depreciation of test and prototyping equipment, and tooling. Research and
development expenses also consist of materials and overhead costs related to
major product development projects. Prior to May 28, 2000, research and
development expenses have included allocations from Methode of expenses for
salaries and related expenses for research and development personnel. We
charge all research and development expenses to operations as incurred. We
believe that continued investment in research and development is critical to
our long-term business success. We intend to increase investment in research
and development programs in future periods for the purpose of enhancing or
reducing the cost of current optical subsystems and components, and developing
new optical subsystems and components.

   We market and sell our products domestically and internationally through
our direct sales force, local resellers and manufacturers' representatives.
Sales and marketing expenses consist primarily of personnel costs, including
sales commissions and product marketing and promotion costs. Historically,
expenses have included allocations from Methode of expenses for the salaries
and expenses for sales and marketing personnel. We expect to continue to make
significant expenditures for sales and marketing services.

   General and administrative expenses consist primarily of personnel costs
for our administrative and financial groups, as well as accounting and other
professional fees. General and administrative expenses also consist of the
amortization of goodwill resulting from the excess of the purchase price over
net assets of the acquired companies, which is amortized on a straight-line
basis over years. Historically, expenses have included allocations from
Methode for the salaries and related expenses for administrative, finance and
human resources personnel; professional fees; information technology and other
corporate expenses. In support of our continued growth and our operations as
an independent public company, we expect to continue to make significant
expenditures for general administrative services.

Basis of Presentation

   Our historical consolidated financial statements for periods ending on or
prior to May 28, 2000, have been carved out from consolidated financial
statements of Methode using the historical results of operations and cash
flows and historical basis of the and liabilities of our business. The
historical consolidated financial statements also include allocations to us of
Methode's corporate expenses, including centralized accounting, treasury,
information technology, human resources, sales and marketing, legal, real and
other corporate services and infrastructure costs. We consider the expense
allocations to be reasonable reflections of the utilization of the services
provided to us or the benefits received by us. The consolidated financial
statements after May 28, 2000, reflect operations, cash flows and assets and
liabilities of the Company on a stand-alone basis.

   Our historical financial information for periods ending on or prior to May
28, 2000, is not indicative of our financial position, of operation or cash
flows in the future, nor is it necessarily indicative of what our financial
position, results of operations or flows would have been were we a separate,
stand-alone entity for the periods presented. Our consolidated financial
information periods ending on or prior to May 28, 2000, does not reflect
additional expenses that we may incur as a result of being a stand-public
company.

                                      20
<PAGE>

Results of Operations

   The following table sets forth certain statement of income data as a
percentage of net sales for the periods indicated:

<TABLE>
<CAPTION>
   Fiscal Year Ended April 30,                                2001   2000   1999
   ---------------------------                                -----  -----  -----
   <S>                                                        <C>    <C>    <C>
   Revenue:
     Net sales............................................... 100.0% 100.0% 100.0%
     License fees and royalties..............................   3.8    2.0    0.1
                                                              -----  -----  -----
       Total................................................. 103.8  102.0  100.1
   Costs and expenses:
     Cost of sales...........................................  70.6   67.0   63.6
     Research and development................................  11.6    9.8    7.1
     Sales and marketing.....................................   7.2    9.4    9.7
     General and administrative..............................  10.5    7.4    7.6
                                                              -----  -----  -----
       Total costs and expenses..............................  99.9   93.6   88.0
   Income from operations....................................   3.9    8.4   12.1
   Investment income, net....................................   6.1    --     --
                                                              -----  -----  -----
   Income before income taxes................................  10.0    8.4   12.1
   Provision for income taxes................................   2.8    3.1    4.6
                                                              -----  -----  -----
   Net income................................................   7.2%   5.3%   7.5%
                                                              =====  =====  =====
</TABLE>

Fiscal Years Ended April 30, 2001 and 2000

   Net Sales. Net sales increased to $126.9 million in the fiscal year ended
April 30, 2001, from $71.8 million in the fiscal year ended April 30, 2000.
This $55.1 million increase is the result of a $32.3 million increase in net
sales of optical subsystems and a $22.8 million increase in net sales of
optical components. The increase in sales of our optical subsystems was due
primarily to an increase in sales of our embedded and removable transceivers
in a variety of wavelengths and form factors. The increase in sales of our
optical components was primarily due to an increase in sales of our optical
backplane connectors and cable assemblies.

   License Fees and Royalties. License fees and royalties increased to $4.9
million in the fiscal year ended April 30, 2001, from $1.5 million in the
fiscal year ended April 30, 2000. The increase of $3.4 million principally
related to our receipt of up-front royalty payments from the settlement of
several patent infringement cases. License fees and royalties consist of both
fixed schedule payments and contingent payments based on sales volumes of
licensed products.

   Cost of Sales and Gross Margins. Cost of sales increased to $89.6 million
in the fiscal year ended April 30, 2001, from $48.1 million in the fiscal year
ended April 30, 2000. The increase was due primarily to increases in the
production of both our optical subsystems and optical components. Gross profit
as a percentage of net sales, or gross margin, decreased to 29.4% in the
fiscal year ended April 30, 2001, from 33.0% in the fiscal year ended April
30, 2000. Approximately 2.5% of the 3.6% decrease in gross margin was the
result of recording a reserve for excess and obsolete inventory in the fourth
quarter of fiscal year 2001 due to decreased demand for certain products. The
balance of the decrease was due to declines in average unit prices for our
products due primarily to pricing pressure and product mix.

   Research and Development. Research and development expenses increased to
$14.7 million in the fiscal year ended April 30, 2001, from $7.0 million in
the fiscal year ended April 30, 2000. This increase was due primarily to $2.9
million in material and overhead costs related to major product development
projects, $3.5 million of additional personnel costs dedicated to research and
development, $326,000 for legal costs related to intellectual property, and
$1.0 million for new and expanded research and development facilities in
Chicago, Illinois, and Bedford, Massachusetts.

                                      21
<PAGE>

   Sales and Marketing. Sales and marketing expenses increased to $9.1 million
in the fiscal year ended April 30, 2001, from $6.7 million in the fiscal year
ended April 30, 2000. This increase was due to an increase of $1.6 million in
sales and marketing salaries, fringe benefits, bonuses and commissions, and
$800,000 in field sales operating costs supporting our sales volume.

   General and Administrative. General and administrative expenses increased
to $13.4 million in the fiscal year ended April 30, 2001, from $5.4 million in
the fiscal year ended April 30, 2000. This $8.0 million increase was due
primarily to $5.2 million of additional costs for expanded facilities and
staff, $1.3 million of additional corporate management costs and $1.5 million
in legal fees for the settlement of certain patent infringement cases.

   Investment Income, Net. Investment income, net of investment expense,
increased to $7.8 million in the fiscal year ended April 30, 2001. Investment
income consists of earnings on the short-term investment of excess cash
balances. We did not have any investment income in the fiscal year ended April
30, 2000.

   Income Taxes. The effective tax rate was 27.7% for the fiscal year ended
April 30, 2001, compared with 37.4% for the fiscal year ended April 30, 2000.
The overall decrease in the effective tax rate in fiscal 2001 was principally
the result of investment income not taxable for federal income tax purposes.
No separate tax returns have been filed for our business because our operating
results have been fully consolidated for tax purposes with the results of
Methode.

Fiscal Years Ended April 30, 2000 and 1999

   Net Sales. Net sales increased to $71.8 million in the fiscal year ended
April 30, 2000, from $46.5 million in the fiscal year ended April 30, 1999. Of
this $25.3 million increase, $19.2 million is from an increase in net sales of
optical subsystems and $6.1 million is from an increase in net sales of
optical components. The increase in net sales of our optical subsystems was
due primarily to an increase in sales of our line of internal removable
transceivers.

   License Fees and Royalties. License fees and royalties increased to $1.5
million in the fiscal year ended April 30, 2000, from $50,000 in the fiscal
year ended April 30, 1999. License fees and royalties consist of both fixed
schedule payments and contingent payments based on sales volumes of licensed
products.

   Cost of Sales. Cost of sales increased to $48.1 million in the fiscal year
ended April 30, 2000, from $29.5 million in the fiscal year ended April 30,
1999. This increase was due primarily to an increase in the production of our
internal removable transceivers. Gross profit as a percentage of net sales, or
gross margin, decreased to 33.0% in the fiscal year ended April 30, 2000, from
36.4% in the fiscal year ended April 30, 1999. Approximately 1.7% of the 3.4%
decrease in gross margin was the result of additional start-up and unusual
expenses incurred during the fiscal year ended April 30, 2000 related to the
acquisition of our Stratos Lightwave - Florida, Inc. and Bandwidth
Semiconductor subsidiaries, and approximately 1.2% resulting from obsolete
inventory. The balance of the decrease was due to declines in average unit
prices for our products.

   Research and Development. Research and development expenses increased to
$7.0 million in the fiscal year ended April 30, 2000, from $3.3 million in the
fiscal year ended April 30, 1999. This increase of $3.7 million was due
primarily to $1.8 million in material and overhead costs related to major
product development projects, $1.7 million of additional personnel costs
dedicated to research and development, and $200,000 for new and expanded
research and development facilities in Chicago, Illinois, and Bedford,
Massachusetts.

   Sales and Marketing. Sales and marketing expenses increased to $6.7 million
in the fiscal year ended April 30, 2000, from $4.5 million in the fiscal year
ended April 30, 1999. This $2.2 million increase was due to an increase of
$1.3 million in sales and marketing salaries, fringe benefits, bonuses and
commissions, $700,000 in field sales operating costs supporting our sales
volume, and $200,000 in advertising and promotional costs.

   General and Administrative. General and administrative expenses increased
to $5.4 million in the fiscal year ended April 30, 2000, from $3.5 million in
the fiscal year ended April 30, 1999. This $1.9 million increase

                                      22
<PAGE>

was primarily due to $1.2 million of additional costs for expanded plant
facilities and staff, $500,000 of additional corporate management and legal
costs, as well as $200,000 for the amortization of goodwill resulting from our
three acquisitions.

   Income Taxes. The provision for income taxes increased to $2.3 million in
the fiscal year ended April 30, 2000, based on an effective tax rate of 37.4%,
from $2.1 million in the fiscal year ended April 30, 1999, based on an
effective tax rate of 37.8%. No separate tax returns have been filed for our
business because our operating results have been fully consolidated for tax
purposes with the results of Methode.

Liquidity and Capital Resources

   Net cash provided by operating activities was $2.7 million for the fiscal
year ended April 30, 2001, $1.9 million for the fiscal year ended April 30,
2000, and $48,000 in the fiscal year ended April 30, 1999. Cash provided by
operating activities in the fiscal years ended April 30, 2001, 2000 and 1999
resulted primarily from growth in net income and increases in accounts payable
and accrued expenses, which were offset in part by increases in accounts
receivable and inventories.

   Net cash used in investing activities was $71.7 million for the fiscal year
ended April 30, 2001, $24.8 million in the fiscal year ended April 30, 2000,
and $7.0 million in the fiscal year ended April 30, 1999. Net cash used in
investing activities during these periods related primarily to acquisitions,
purchases of equipment and facilities, and the purchase of short-term
investments in the fiscal year ended April 30, 2001. We expended $1.7 million
for the acquisition of Stratos Limited in December 1998, $795,000 and $2.95
million for the acquisition of Polycore Technologies, Inc. in April 1999 and
July 2000, respectively, $13.0 million for the acquisition of the
Optoelectonics division of Spire Corporation in December 1999, $770,500 for the
acquisition of substantially all the assets of B&H Mold, Inc. in November 2001,
and $204,000 to increase our investment in MP Optical Communications LLC in
March 2001.

   Net cash provided by financing activities for the fiscal year ended April
30, 2001, consisted primarily of net proceeds of $195.5 million, after related
expenses, from our initial public offering, offset by $1.2 million in net
advances repaid to Methode subsidiaries and $333,000 for repayment of a note
assumed in connection with the acquisition of our Stratos Ltd. subsidiary. We
sold 10,062,500 shares of common stock, at $21 per share in our initial public
offering. Net cash provided by financing activities of $22.8 million for the
fiscal year ended April 30, 2000, and $7.5 million for the fiscal year ended
April 30, 1999, consisted primarily of cash contributions from Methode.

   Our future capital requirements will depend on a number of factors,
including our future net sales and the timing and rate of expansion of our
business. We believe that our current cash balances, together with the cash
flow expected to be generated from our future operations, will be sufficient to
meet our cash needs for working capital and capital expenditures for the next
12 months.

Factors That May Affect Our Future Results

                         Risks Relating to Our Business

Our net sales and operating results vary significantly from quarter to quarter,
and our stock price may fall if our quarterly performance does not meet
analysts' or investors' expectations.

   Our quarterly net sales and operating results have varied significantly in
the past and are likely to vary significantly in the future, which makes it
difficult to predict our future operating results. Although our annual net
sales have generally improved over the last several years, we believe that
quarter-to-quarter comparisons of our net sales and operating results are not
meaningful and should not be relied upon as an indicator of our future
performance. Some of the factors which cause our net sales and operating
results to vary include:

  . the timing of customer orders, particularly from our largest customers;

  . our ability to manufacture and ship our products on a timely basis;

                                       23
<PAGE>

  . changes in our product mix;

  . competitive pressures resulting in lower prices;

  . the introduction of new products or technologies by us or our
    competitors; and

  . the timing of our receipt of license fees and royalty payments relating
    to our intellectual property.

   In one or more future quarters, our net sales or operating results will
likely be below the expectations of public market analysts and investors. If
this occurs, the price of our common stock would likely decline.

Our success depends on the growth of communication networks and their use of
optical communication technologies. If these events do not occur, our net
sales may decline and our business would likely be significantly harmed.

   Our optical subsystems and components are used primarily in enterprise,
metropolitan area, wide area and telecommunication networks. These markets are
rapidly evolving and it is difficult to predict their potential size or future
growth rate. In addition, there is uncertainty as to the extent to which
optical communication technologies will be used throughout these markets. Our
success in generating revenue in these markets will depend on the growth of
these markets and their use of optical communication technologies. If these
markets do not continue to grow, or if the use of optical communication
technologies in these markets does not expand, our net sales may decline and
our business would likely be significantly harmed.

We must develop new products and technology as well as enhancements to
existing products and technology in order to remain competitive. If we fail to
do so, our products will no longer be competitive and our net sales will
decline.

   The market for our products and technology is characterized by rapid
technological change, new and improved product introductions, changes in
customer requirements and evolving industry standards. Our future success will
depend to a substantial extent on our ability to develop, introduce and
support new products and technology on a successful and timely basis. If we
fail to develop and deploy new products and technologies or enhancements of
existing products on a successful and timely basis or we experience delays in
the development, introduction or enhancement of our products and technologies,
our products will no longer be competitive and our net sales will decline.

   The development of new, technologically advanced products is a complex and
uncertain process requiring high levels of innovation and highly skilled
engineering and development personnel, as well as the accurate anticipation of
technological and market trends. We cannot assure you that we will be able to
identify, develop, manufacture, market or support new or enhanced products
successfully, if at all, or on a timely basis. Further, we cannot assure you
that our new products will gain market acceptance or that we will be able to
respond effectively to product announcements by competitors, technological
changes or emerging industry standards. Any failure to respond to
technological change would significantly harm our business.

Our products are incorporated into larger systems which must comply with
various domestic and international government regulations. If the performance
of our products contributes to our customers' inability to comply with these
requirements, we may lose these customers and our net sales will decline.

   In the United States, our products are incorporated into larger systems
which must comply with various regulations and standards defined by the
Federal Communications Commission and Underwriters Laboratories.
Internationally, our products are incorporated into larger systems which must
also comply with standards established by local authorities in various
countries which may vary considerably. If the performance of our products
contributes to our customers' inability to comply with existing or evolving
standards established by regulatory authorities or to obtain timely domestic
or foreign regulatory approvals we may lose these customers and our net sales
will decline.

                                      24
<PAGE>

If our products fail to comply with evolving industry standards or alternative
technologies in our markets, we may be required to make significant
expenditures to redesign our products.

   Our products comprise only a part of an entire networking system and must
comply with evolving industry standards in order to gain market acceptance. In
many cases, we introduce a product before an industry standard has become
widely accepted. Because industry standards do not exist in some cases at the
time we are developing new products, we may develop products that do not
comply with the eventual industry standard. If this occurs, we would need to
redesign our products to comply with adopted industry standards. In addition,
if alternative technologies are adopted as an industry standard within our
target markets, we would have to dedicate significant time and resources to
redesign our products to meet this new industry standard. If we are required
to redesign our products, we may incur significant expenses and losses due to
lack of customer demand, unusable purchased components for these products and
the diversion of our engineers from future product development efforts. If we
are not successful in redesigning our products or developing new products to
meet new standards or any other standard that may emerge, our net sales will
decline.

We derive a significant portion of our net sales from a few large customers,
and our net sales may decline significantly if any of these customers cancels,
reduces or delays purchases of our products.

   Our success will depend on our continued ability to develop and manage
relationships with significant customers. For the 2001 fiscal year, our three
largest customers and their respective contract manufacturers accounted for
32% of our net sales, with McData Corporation, Alcatel Network Systems and
Cisco System accounting for 11%, 11% and 10% of our net sales, respectively.
For the 2000 fiscal year, our three largest customers and their respective
contract manufacturers accounted for 44% of our net sales, with Cisco Systems,
Nortel Networks and Alcatel Network Systems accounting for 26%, 10% and 8% of
our net sales, respectively. We expect our dependence on sales to a small
number of large customers to continue.

   The markets in which we sell our products are dominated by a relatively
small number of systems manufacturers, thereby limiting the number of our
potential customers. As a result, our relationships with these customers are
critically important to our business. We cannot assure you that we will be
able to retain our largest customers, that we will be able to attract
additional customers or that our customers will be successful in selling their
products which incorporate our products. Our customers have in the past sought
price concessions from us and will continue to do so in the future. Also, some
of our customers have canceled, reduced or delayed purchases of our products.
Further, some of our customers may in the future shift their purchases of
products from us to our competitors or to joint ventures between these
customers and our competitors. The loss of or a significant reduction in
orders from one or more of our largest customers, our inability to
successfully develop relationships with additional customers or future price
concessions that we may make could cause our net sales to significantly
decline.

Our sales cycle runs from our customers' initial design to production for
commercial sale. This cycle is long and unpredictable and may cause our net
sales to decline or increase our operating expenses.

   We cannot predict the timing of our sales accurately because of the length
of our sales cycles. As a result, if sales forecasts from specific customers
are not realized, we may be unable to compensate for the sales shortfall and
our net sales may decline. The period of time between our initial contact with
a customer and the receipt of a purchase order may span up to a year or more,
and varies by product and customer. During this time, customers may perform,
or require us to perform, extensive evaluation and qualification testing of
our products. Generally, they consider a wide range of issues before
committing to purchase our products, including ability to interoperate with
other subsystems and components, product performance and reliability. We may
incur substantial sales and marketing expenses and expend significant
management effort while our potential customers are qualifying our products.
Even after incurring these costs, we ultimately may not sell any or only small
amounts of our products to these potential customers. Consequently, if new
sales do not result from our efforts to qualify our products, our operating
expenses will increase.

                                      25
<PAGE>

Our customers may cease purchasing our products at any time and may cancel or
defer purchases on short notice, which may cause our net sales to decline or
increase our operating expenses.

   We generally do not have long-term contracts with our customers. Sales are
typically made pursuant to individual purchase orders, often with extremely
short lead times, that may be canceled or deferred by customers on short
notice without significant penalty. Our customers base their orders for our
products on the forecasted sales and manufacturing schedules for their own
products. Our customers have in the past significantly accelerated, canceled
or delayed orders for our products in response to unanticipated changes in the
manufacturing schedules for their own products, and will likely do so again in
the future. The reduction, cancellation or delay of individual customer
purchase orders could cause our net sales to decline. Moreover, these
uncertainties complicate our ability to accurately plan our manufacturing
schedule and may increase our operating expenses.

If we do not decrease our manufacturing costs or increase sales of higher
margin products as the average unit price of our existing products decreases,
our gross margins will decline.

   The average unit price of our products generally decrease as the products
mature in response to increased competition, the introduction of new products
and increased unit volumes. Substantially all of our products are designed and
manufactured in our own facilities. Accordingly, a significant portion of our
cost of sales is fixed over the near term. In order to remain competitive, we
must continually reduce our manufacturing costs through design and engineering
changes and increases in manufacturing efficiencies. We must also continue to
develop and introduce on a timely basis new products that incorporate features
that can be sold at higher average selling prices. Our inability to reduce
manufacturing costs or introduce new products will cause our gross margins to
decline, which would significantly harm our operating results.

The market for optical subsystems and components is highly competitive, which
may result in lost sales or lower gross margins.

   The markets for optical subsystems and components are highly competitive
and are expected to intensify in the future. For optical subsystems, we
compete primarily with Agilent Technologies, Inc., Finisar Corporation,
Infineon Technologies Corp., International Business Machines Corporation and
Optical Communications Products, Inc. For optical components, we compete
primarily with Infineon Technologies Corp, Lucent Technologies Inc., Molex,
Inc. and Tyco International, Ltd. and numerous other smaller companies. Many
of these companies have substantially greater financial, technical, marketing
and distribution resources and brand name recognition than we have. We expect
that more companies, including some of our customers, will enter the markets
for our products. We may not be able to compete successfully against either
current or future competitors. Our competitors continue to introduce improved
products with lower prices, and we will have to do the same to remain
competitive. In addition, some of our current and potential customers are
attempting to integrate their operations by producing their own optical
subsystems or components or acquiring one or more of our competitors which may
eliminate the need to purchase our products. Furthermore, larger companies in
other related industries are developing and acquiring technologies and
applying their significant resources, including their distribution channels
and brand name recognition, in an effort to capture significant market share.
While this trend has not historically impacted our competitive position, it
may result in future decreases in our net sales.

We depend on suppliers for several key components and if these suppliers are
unable to meet our needs, we may experience delays in shipments and increased
costs.

   We purchase several key components that are incorporated into our products
from a limited number of suppliers. We have experienced shortages and delays
in obtaining key components in the past and expect to experience shortages and
delays in the future. These shortages and delays have typically occurred when
demand within the industry has increased rapidly and exceeds the capacity of
suppliers of key components in the short term. Delays and shortages also often
occur in the early stages of a product's life cycle. The length of shortages
and delays in the past has varied from several days to a month. We are unable
to predict the length of any future shortages or delays.

                                      26
<PAGE>

   Although we enter into long-term agreements for the purchase of key
components from time to time, our purchases of key components are generally
made on a purchase order basis. We may also maintain an inventory of limited
source components to limit the potential impact of a component shortage.

   The inability to obtain sufficient quantities of these components that meet
our quality requirements may interrupt and delay the manufacturing of our
products or result in the cancellation of orders for our products. In
addition, our suppliers could discontinue the manufacture or supply of these
components at any time. We may not be able to identify and integrate
alternative sources of supply in a timely fashion, or at all. Any transition
to alternative suppliers may result in delays in shipment and increased
expenses and may limit our ability to deliver products to our customers.
Furthermore, if we are unable to identify an alternative source of supply, we
may have to redesign or modify our products, which may cause delays in
shipments, increased design and manufacturing costs and increased prices for
our products.

If we are unable to manage our growth effectively, we will incur additional
operating expenses and our operating results will suffer.

   We have significantly expanded our operations over the last several years.
This growth has placed a strain on our management systems and operational
resources. As demand for our products grows, we will need to expand our design
and manufacturing capabilities, as well as our sales, marketing and technical
support. We will also need to improve our financial and managerial controls,
reporting systems and procedures. The technical complexities of our products
and the rapidly evolving markets we serve will require a high level of
management effectiveness in managing the expansion of our operations. Our key
management personnel have limited experience in managing this type of growth.
If we are unable to manage our growth effectively, we will incur additional
expenses which will cause our operating results to suffer.

Our success depends on our ability to hire and retain qualified technical
personnel, and if we are unable to do so, our product development efforts and
customer relations will suffer.

   Our products require sophisticated manufacturing, research and development,
marketing and sales, and technical support. Our success depends on our ability
to attract, train and retain qualified technical personnel in each of these
areas. Competition for personnel in all of these areas is intense and we may
not be able to hire or retain sufficient personnel to achieve our goals or
support the anticipated growth in our business. The market for the highly-
trained personnel we require is very competitive, due to the limited number of
people available with the necessary technical skills and understanding of our
products and technology. If we fail to hire and retain qualified personnel,
our product development efforts and customer relations will suffer.

Our products may contain defects which may cause us to incur significant
costs, divert our attention from product development efforts and result in a
loss of customers.

   Our products are complex and may contain defects, particularly when first
introduced or as new versions are released. Our customers integrate our
subsystems and components into systems and products that they develop
themselves or acquire from other vendors. As a result, when problems occur in
equipment or a system into which our products have been incorporated, it may
be difficult to identify the source of the problem. We may be subject to
liability claims for damages related to product defects or experience
manufacturing delays as a result of these defects in the future, any or all of
which could be substantial. The length of any future manufacturing delays in
connection with a product defect will depend on the nature of the defect and
whether we or one of our component suppliers was the source of the defect.
Moreover, the occurrence of defects, whether caused by our products or
technology or the products of another vendor, may result in significant
customer relations problems and injury to our reputation and may impair the
market acceptance of our products and technology.

                                      27
<PAGE>

We are subject to environmental laws and other legal requirements that have
the potential to subject us to substantial liability and increase our costs of
doing business.

   Our properties and business operations are subject to a wide variety of
federal, state, and local environmental, health and safety laws and other
legal requirements, including those relating to the storage, use, discharge
and disposal of toxic, volatile or otherwise hazardous substances used in our
manufacturing processes. We cannot assure you that these legal requirements
will not impose on us the need for additional capital expenditures or other
requirements. If we fail to obtain required permits or otherwise fail to
operate within these or future legal requirements, we may be required to pay
substantial penalties, suspend our operations or make costly changes to our
manufacturing processes or facilities. Although we believe that we are in
compliance and have complied with all applicable legal requirements, we may
also be required to incur additional costs to comply with current or future
legal requirements.

Economic, political and regulatory risks associated with international
operations may limit our sales and increase our costs of doing business
abroad.

   A portion of our sales are generated from customers located outside the
United States, principally in Europe. We also operate manufacturing facilities
in China and the United Kingdom. Sales to customers located outside of the
United States, excluding sales to Methode and its affiliates, were
approximately 19.8% of our net sales in fiscal 2001 and approximately 15.2% of
our net sales in fiscal 2000. Our international operations are subject to a
number of risks and uncertainties, including:

  . difficulties in managing operations in different locations;

  . changes in foreign currency rates;

  . longer accounts receivable collection cycles;

  . difficulties associated with enforcing agreements through foreign legal
    systems;

  . seasonal reductions in business activities in some parts of the world,
    such as during the summer months in Europe;

  . trade protection measures and import and export licensing requirements;

  . changes in a specific country's or region's political or economic
    conditions;

  . potentially adverse tax consequences; and

  . the potential difficulty in enforcing intellectual property rights in
    some foreign countries.

   These factors could adversely impact our international sales or increase
our costs of doing business abroad or impair our ability to expand into
international markets, and therefore could significantly harm our business.

Future acquisitions we undertake could harm our business by diverting our
resources and increasing our costs.

   We expect to pursue opportunities to buy other businesses or technologies
that would complement our current products, expand our markets or enhance our
technical capabilities, or that may otherwise offer growth opportunities. Any
future acquisitions may result in the use of significant amounts of cash, the
incurrence of debt, and amortization expenses related to goodwill and other
intangible assets. Our experience in acquiring other businesses and
technologies is limited. Acquisitions involve numerous risks, including:

  . difficulties in integrating operations, products, technologies and
    personnel;

  . unanticipated costs or write-offs associated with the acquisition;

  . diversion of management's attention from other business concerns;

  . diversion of capital and other resources from our existing businesses;
    and

  . potential loss of key employees of purchased organizations.

                                      28
<PAGE>

Our recent acquisitions have not generated significant sales, and if these
businesses do not become profitable our operating results could be seriously
harmed.

   In December 1999, Methode acquired the optoelectronics business of Spire
Corporation, which we operate as our Bandwidth Semiconductor subsidiary. In
May 2001, we acquired substantially all of the assets of Advanced
Interconnection Technology, Inc. The integration of these businesses into our
company is not complete. Since their acquisition by us, these businesses have
focused on the introduction of new products and the expansion of their
manufacturing capabilities and have not generated significant revenues. In
addition, these businesses have required significant amounts of capital to
support their development activities, and we expect to continue to invest
substantial amounts of capital in these businesses. If these businesses do not
become profitable, our operating results could be seriously harmed.

Our inability to protect our intellectual property rights would significantly
impair their value and our competitive position.

   We rely on a combination of patent, copyright, trademark and trade secret
laws, as well as confidentiality agreements and licensing arrangements, to
establish and protect our proprietary rights. Although we have numerous issued
patents and pending patent applications, we cannot assure you that any patents
will issue as a result of our pending patent applications or, if issued, that
any patent claim allowed will be sufficiently broad to protect our technology.
In addition, we cannot assure you that any existing or future patents will not
be challenged, invalidated or circumvented, or that any right granted
thereunder would provide us with meaningful protection of our technology.
Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy or otherwise obtain and use our products or technology. We
may be unable to detect the unauthorized use of our intellectual property or
to take appropriate steps to enforce our intellectual property rights.
Policing unauthorized use of our products and technology is difficult. In
addition, the laws of some foreign countries do not protect our proprietary
rights to the same extent as do the laws of the United States. Further,
enforcing our intellectual property rights could result in the expenditure of
significant financial and managerial resources and the success of these
efforts cannot be predicted with certainty. Litigation may be necessary in the
future to enforce our intellectual property rights. This litigation could be
costly and its outcome cannot be predicted with certainty. Our inability to
adequately protect against unauthorized use of our intellectual property would
significantly impair its value and our competitive position.

We are currently involved in pending litigation which, if decided against us,
could impair our ability to prevent others from using our technology, result
in the loss of future royalty income and require us to pay significant
monetary damages.

   Methode and Stratos are plaintiffs in several lawsuits relating to our
intellectual property rights. The defendants in these lawsuits include Finisar
Corporation, Infineon Technologies Corp., and Optical Communications Products,
Inc. In these actions, Stratos alleges that optoelectronic products sold by
the defendants infringe upon certain Stratos patents. The defendants in these
lawsuits have filed various affirmative defenses. In addition, Finisar has
filed various counterclaims. These counterclaims include claims that Finisar
is the rightful owner or co-owner of the patents, that Stratos has engaged in
certain antitrust violations and theft of trade secrets, and that Stratos has
breached contracts and the covenants of good faith and fair dealing. Finisar
seeks unspecified compensatory damages, restitution and the correction of
inventorship with respect to the Stratos patents.

   As part of our separation from Methode, the Methode patents which are the
subject of these lawsuits and Methode's rights in these lawsuits have been
contributed to us and we have agreed to indemnify Methode against all costs,
expenses and liabilities associated with these lawsuits. These lawsuits are in
the preliminary stage, and we cannot predict their outcome with certainty. If
one or more of these patents were found to be invalid or unenforceable, we
would lose the ability to prevent others from using the technologies covered
by the invalidated patents. This could result insignificant decreases in our
sales and gross margins for our products that use these technologies. In
addition, we would lose the future royalty payments from our current licensees
of these patents.

                                      29
<PAGE>

We could also be required to pay significant monetary damages to one or more
of the defendants or be required to reimburse them for their legal fees.
Accordingly, if one or more of these patents were found to be invalid or
unenforceable, our business would be significantly harmed.

Claims that we infringe third-party intellectual property rights could result
in significant monetary damages and expenses or restrictions on our ability to
sell our products.

   In recent years, there has been significant litigation in the United States
involving patents and other intellectual property rights. From time to time,
third parties may assert patent, copyright and other intellectual property
rights to technologies used in our business. In addition, our rights to use
our name or other trademarks are subject to challenge by others. Any claims,
with or without merit, could be time-consuming, result in costly litigation,
and divert the efforts of our technical and management personnel. If we are
unsuccessful in defending ourselves against these types of claims, we could be
subject to significant monetary damages and may be required to do one or more
of the following:

  . stop using the challenged trademarks or selling our products that use or
    incorporate the relevant technology;

  . attempt to obtain a license to sell or use the challenged intellectual
    property, which license may not be available on reasonable terms or at
    all; or

  . redesign those products that use the relevant technology.

   In the event a claim against us was successful and we could not obtain a
license to the relevant technology on acceptable terms or license a substitute
technology or redesign our products to avoid infringement, our business would
be significantly harmed.

           Risks Relating to Our Separation from Methode Electronics

Our historical financial information may not be representative of our results
as a separate company.

   Our historical financial information for periods ending on or prior to
April 30, 2000 may not reflect what our results of operation, financial
position and cash flows would have been had we been a stand-alone company for
the periods presented. Methode did not account for us as, and we were not
operated as, a stand-alone company during these periods. In addition, our
historical financial information is not necessarily indicative of what our
results of operations, financial position and cash flows will be in the
future. We have not made adjustments to reflect many significant changes that
will occur in our cost structure, funding and operations as a result of our
separation from Methode, including changes in our management structure and
employee benefit plans and the increased costs associated with being a public,
stand-alone company.

One of our directors may have conflicts of interest because he is also a
director of Methode.

   One member of our board of directors is also a director of Methode. This
director will have obligations to both companies and may have conflicts of
interest with respect to matters potentially or actually involving or
affecting us. In addition, this director's family owns significant amounts of
Methode's stock. This ownership could create, or appear to create, potential
conflicts of interest when this director is faced with decisions that could
have different implications for Methode and us.

We may have potential business conflicts of interest with Methode with respect
to our past and ongoing relationships, the resolution of which may not be as
favorable to us as if we were dealing with an unaffiliated party.

   We currently have various interim and ongoing agreements with Methode. As a
result, conflicts of interest may arise between Methode and us in a number of
areas relating to our past and ongoing relationships, including:

  . the nature, quality and pricing of the interim services Methode has
    agreed to provide to us;

                                      30
<PAGE>

  . litigation, labor, tax, employee benefits and other matters arising from
    our separation from Methode; and

  . major business combinations involving us.

   We cannot assure you that we will be able to resolve any conflicts we may
have with Methode or, if we are able to do so, that the resolution will be as
favorable as if we were dealing with an unaffiliated party.

We have agreed to contractual limitations under our separation agreements with
Methode which could limit the conduct of our business and our ability to
pursue our business objectives.

   We have agreed to contractual limitations under our separation agreements
with Methode which place restrictions on our ability to conduct our business.
Under our tax sharing and indemnification agreement with Methode, we have
agreed to limit our ability to complete acquisitions and divestitures and
issue capital stock. The purpose of these provisions is to preserve Methode's
tax-free treatment of the spin-off. These restrictions in the tax sharing and
indemnification agreement generally expire two years after the completion of
the spin-off.

   Under our master separation agreement with Methode, we and our affiliates
have agreed not to engage in:

  . the manufacture or sale, other than to our current customers as of the
    contribution date, of standard cable assemblies and specified cable
    management cabinets and value-added cable assemblies for local area
    networks, data centre, telecom and other project installation driven
    applications in Europe;

  . the manufacture or sale of electronic interconnect devices anywhere in
    the world; and/or

  . the sale of standard cable assembly or cable management cabinets in
    combination with system integration or system installation services to
    end-user clients in the United States and Europe.

   Any of these restrictions could materially limit the way in which we
conduct our business and our ability to pursue our business objectives.

If the spin-off is not tax-free, we could be liable to Methode for the
resulting taxes, which would significantly harm our business.

   We have agreed to indemnify Methode in the event the spin-off is not tax-
free to Methode for reasons including actions taken by or with respect to us
or our failure to take various actions, all as set forth in our tax sharing
agreement with Methode. We may not be able to control some of the events that
could trigger this liability. In particular, any acquisition of us by a third
party within two years of the spin-off could result in the spin-off becoming a
taxable transaction and give rise to our obligation to indemnify Methode for
any resulting tax or other liability. If we were to become obligated to
indemnify Methode for this liability, our financial condition and business
would be significantly harmed.

  Risks Relating to the Securities Markets and Ownership of Our Common Stock

The market prices for securities of technology related companies have been
volatile in recent years and our stock price could fluctuate significantly.

   Our common stock has been publicly traded only since June 27, 2000. The
market price of our common stock has been subject to significant fluctuations
since the date of our initial public offering. These fluctuations could
continue. Factors that could affect our stock price include:

  . economic and stock market conditions generally and specifically as they
    may impact participants in the communication industry;

  . earnings and other announcements by, and changes in market evaluations
    of, participants in the optical communication industry;

  . changes in financial estimates and recommendations by securities analysts
    following our stock;

                                      31
<PAGE>

  . announcements or implementation by us or our competitors of technical
    innovations or new products; and

  . strategic moves by us or our competitors, such as acquisitions.

   In addition, the securities of many companies have experienced extreme
price and volume fluctuations in recent years, often unrelated to the
companies' operating performance. Specifically, market prices for securities
of technology related companies have frequently reached elevated levels, often
following their initial public offerings. These levels may not be sustainable
and may not bear any relationship to these companies' operating performances.

Provisions in our charter documents and Delaware law may delay or prevent an
acquisition of our company, which could decrease the value of your shares.

   Our restated certificate of incorporation and bylaws and Delaware law
contain provisions that could make it more difficult for a third party to
acquire us without the consent of our board of directors. These provisions
include a classified board of directors and limitations on actions by our
stockholders by written consent. In addition, our board of directors has the
right to issue preferred stock without stockholder approval, which could be
used to dilute the stock ownership of a potential hostile acquiror. Delaware
law also imposes some restrictions on mergers and business combinations
between us and any holder of 15% or more of our outstanding common stock.
These provisions apply even if the offer may be considered beneficial by some
stockholders.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

   Although certain of our subsidiaries enter into transactions in currencies
other than their functional currency, foreign currency exposures arising from
these transactions are not material to us. The primary foreign currency
exposure arises from the translation of our net equity investment in our
foreign subsidiaries to U.S. dollars. We generally view as long-term our
investments in foreign subsidiaries with functional currencies other than the
U.S. dollar. The primary currencies to which we are exposed are the pound
sterling and Chinese renminbi.

Item 8. Financial Statements and Supplementary Data

   See the Index to Financial Statements on Page F-1. Such financial
statements are incorporated herein by reference.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

     None.

                                      32
<PAGE>

                                   PART III

Item 10. Directors and Executive Officers of the Registrant

   Set forth below is a list of the names, ages and principal occupation of
our directors.

   James W. McGinley, 46, has been our President, Chief Executive Officer and
a director since our inception. Mr. McGinley was President of Methode
Electronics from August 1998 through June 2000, and has been a director of
Methode Electronics since 1993. Mr. McGinley previously served as President of
Methode Electronics' Optical Interconnect Products Division from January 1995
through July 1998.

   Michael P. Galvin, 48, has been President of Galvin Enterprises, Inc. since
1992. Galvin Enterprises manages a venture capital portfolio of investments in
biotechnology, real estate development and business services. From 1989 to
1992, Mr. Galvin served as Assistant Secretary of Commerce for Export
Administration under the Bush Administration, managing the U.S. government's
dual-use (non-munitions) strategic trade and technology transfer programs.
From 1978 to 1989, Mr. Galvin was an attorney at the law firm of Winston &
Strawn where he was elected a corporate finance transactions partner. Mr.
Galvin has been a director of Stratos Lightwave since June 2000. Mr. Galvin is
a member of our Board's Compensation Committee.

   Brian J. Jackman, 60, has served as President of Global Systems and
Technologies of Tellabs, Inc. since 1998. Mr. Jackman has served as a director
of Tellabs, Inc. since 1993 and as Executive Vice President of Tellabs, Inc.
since 1990. From 1993 to 1998, Mr. Jackman served as President of Tellabs
Operations, Inc. Prior to joining Tellabs, Inc., Mr. Jackman held several
management positions with International Business Machines. Mr. Jackman has
been a director of Stratos Lightwave since June 2000. Mr. Jackman is a member
of our Board's Compensation Committee and Audit Committee.

   C. Daniel Nelsen, 39, has served as Director of Global Supply Chain
Strategy for Motorola Inc.'s Global Telecom Solutions Sector (GTSS) since
2000. From 1998 to 2000, Mr. Nelsen served as Senior Manager, Supply Chain of
A.T. Kearney, an international consulting firm. Prior to that, from 1994 to
1998, Mr. Nelsen held the positions of Managing Associate, Senior Associate
and Associate at Coopers & Lybrand Consulting. Mr. Nelsen has been a director
of Stratos Lightwave since June 2000. Mr. Nelsen is a member of our Board's
Audit Committee.

   Edward J. O'Connell, 48, has served as Chief Financial Officer of Gardner,
Carton & Douglas, a provider or professional legal services, since 2000. From
1999 to 2000, Mr. O'Connell served as Chief Financial Officer of Hey Company,
LLC, a company involved with e-commerce. From 1998 to 1999, Mr. O'Connell
served as the Senior Vice President of Finance and Administration, Chief
Financial Officer and Secretary of Delphi Information Systems, Inc. (now known
as "ebix.com"), a software, consulting services and e-commerce company. From
1995 to 1998, Mr. O'Connell served as Chief Operating Officer and Chief
Financial Officer for Keck, Mahin & Cate, a provider of legal professional
services. In December 1997, Keck, Mahin & Cate filed a voluntary petition in
bankruptcy under Chapter 11 of the United States Bankruptcy Code. From 1991 to
1995, Mr. O'Connell served as Senior Vice President and Chief Financial
Officer of Genderm Corporation, a manufacturer of pharmaceuticals. Mr.
O'Connell has been a director of Stratos Lightwave since June 2000.
Mr. O'Connell is a member of our Board's Compensation Committee and Audit
Committee.

   Additional information regarding our directors is included under the
captions "Directors and Director Nominees" and "Section 16(a) Beneficial
Ownership Reporting Compliance" in our proxy statement ("Proxy Statement") for
the Annual Meeting of Stockholders to be held August 28, 2001, and is
incorporated herein by reference. Information regarding our executive officers
is included in Part I of this report under "Stratos Lightwave Executive
Officers".

Item 11. Executive Compensation

   Information regarding executive compensation is included under the captions
"Executive Compensation" and "Comparison of Stockholder Return" in the Proxy
Statement and is incorporated herein by reference.

                                      33
<PAGE>

Item 12. Security Ownership of Certain Beneficial Owners and Management

   Information regarding the security ownership of certain beneficial owners
and management is included under the caption "Stock Ownership" in the Proxy
Statement and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

   Information regarding certain relationships and related transactions is
included under the caption "Related Transactions" in the Proxy Statement and
is incorporated herein by reference.

                                    PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

    (a) 1. See Index to Financial Statements on Page F-1.
       2. See Financial Statement Schedule on Page F-18.
       3. See Index to Exhibits immediately following the signature page.

     (b)  A Report on Form 8-K dated March 22, 2001 was filed reporting the
adoption of a stockholder rights plan. A Report on Form 8-K dated March 23,
2001 was filed reporting the spin-off of Stratos Lightwave from Methode
Electronics.

     (c)  See Index to Exhibits immediately following the signature page.

     (d)  See Index to Financial Statements and Financial Statement Schedule
on Page F-1.

                                      34
<PAGE>

Item 14(a). Index to Financial Statements and Financial Statement Schedule

<TABLE>
<S>                                                                      <C>
1.  Financial Statements:
<CAPTION>
                                                                         Page
                                                                         -----
<S>                                                                      <C>
  Report of Independent Auditors........................................  F-2
  Consolidated Balance Sheets--April 30, 2001 and 2000..................  F-3
  Consolidated Statements of Income--Years Ended April 30, 2001, 2000
   and 1999.............................................................  F-4
  Consolidated Statements of Shareholders' Equity--Years Ended April 30,
   2001, 2000 and 1999..................................................  F-5
  Consolidated Statements of Cash Flows--Years Ended April 30, 2001,
   2000 and 1999........................................................  F-6
  Notes to Consolidated Financial Statements............................  F-7

2.  Financial Statement Schedule:

  Schedule II--Valuation and qualifying accounts and reserves--Years
   Ended April 30, 2001, 2000 and 1999..................................  F-18
</TABLE>

  All other schedules of which provision is made in the applicable accounting
  regulation of the Securities and Exchange Commission are not required under
  the related instructions or are inapplicable, and therefore have been
  omitted.

                                      F-1
<PAGE>

                         INDEPENDENT AUDITORS' REPORT

Board of Directors and Shareholders
Stratos Lightwave, Inc.

   We have audited the accompanying consolidated balance sheets of Stratos
Lightwave, Inc. and Subsidiaries as of April 30, 2001 and 2000, and the
related consolidated statements of income, shareholders' equity, and cash
flows for each of the three years in the period ended April 30, 2001. Our
audits also included the financial statement schedule listed in the Index at
Item 14(a). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

   We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards 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. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

   In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Stratos
Lightwave, Inc. and Subsidiaries as of April 30, 2001 and 2000, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended April 30, 2001, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.

                                          /s/ Ernst & Young LLP

Chicago Illinois
June 6, 2001

                                      F-2
<PAGE>

                    STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                               April 30
                                                       -------------------------
                                                           2001         2000
                                                       ------------  -----------
<S>                                                    <C>           <C>
                       ASSETS
                       ------
Current assets:
 Cash and cash equivalents...........................  $125,437,773  $   536,741
 Short-term investments..............................    20,400,000          --
 Accounts receivable, less allowance (2001--$401,246;
  2000--$261,067)....................................    24,646,287   12,127,293
 Inventories:
   Finished products.................................     1,550,685      764,367
   Work in process...................................     2,281,017      991,358
   Materials.........................................    23,430,224    9,416,523
                                                       ------------  -----------
                                                         27,261,926   11,172,248
 Deferred income taxes...............................     2,623,800    1,166,000
 Prepaid expenses....................................     1,012,501      201,390
                                                       ------------  -----------
     Total current assets............................   201,382,287   25,203,672
Other assets:
 Goodwill, less accumulated amortization (2001--
  $779,164; 2000--$188,807)..........................    13,471,768   10,562,430
 Deferred income taxes...............................           --       127,000
 Other...............................................       534,067      309,199
                                                       ------------  -----------
                                                         14,005,835   10,998,629
Property, plant and equipment:
 Land................................................     1,471,205      651,105
 Buildings and building improvements.................    23,535,554    9,786,077
 Furniture and fixtures..............................     3,070,398    1,837,233
 Machinery and equipment.............................    57,103,486   26,101,745
                                                       ------------  -----------
                                                         85,180,643   38,376,160
 Less allowances for depreciation....................    20,120,522   13,441,597
                                                       ------------  -----------
                                                         65,060,121   24,934,563
                                                       ------------  -----------
     Total assets....................................  $280,448,243  $61,136,864
                                                       ============  ===========

        LIABILITIES AND SHAREHOLDERS' EQUITY
        ------------------------------------
Current liabilities:
 Accounts payable....................................  $ 12,992,780  $ 4,388,904
 Other accrued expenses..............................     7,994,896    3,066,823
 Income taxes........................................     1,881,081          --
                                                       ------------  -----------
     Total current liabilities.......................    22,868,757    7,455,727
Deferred income taxes................................     2,204,600      718,800
Minority interest....................................       476,325          --
Shareholders' equity:
 Preferred stock, $.01 par value. Authorized
  5,000,000 shares; none issued or outstanding.......           --           --
 Common stock, $.01 par value. Authorized 200,000,000
  shares; issued and outstanding 64,092,300 and
  54,029,800 shares at April 30, 2001 and 2000,
  respectively.......................................       640,923      540,298
 Additional paid-in capital..........................   245,537,530   52,422,039
 Retained earnings...................................     9,074,701          --
 Foreign currency translation adjustments............      (354,593)         --
                                                       ------------  -----------
     Total shareholders' equity......................   254,898,561   52,962,337
                                                       ------------  -----------
      Total liabilities and shareholders' equity.....  $280,448,243  $61,136,864
                                                       ============  ===========
</TABLE>

                See notes to consolidated financial statements.

                                      F-3
<PAGE>

                    STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                               Fiscal Year Ended April 30,
                                           ------------------------------------
                                               2001        2000        1999
                                           ------------ ----------- -----------
<S>                                        <C>          <C>         <C>
Revenue:
  Net sales..............................  $126,901,863 $71,784,734 $46,457,899
  License fees and royalties.............     4,872,857   1,458,673      50,000
                                           ------------ ----------- -----------
    Total................................   131,774,720  73,243,407  46,507,899
Costs and expenses:
  Costs of sales.........................    89,616,698  48,063,896  29,543,042
  Research and development...............    14,729,277   7,044,523   3,300,495
  Sales and marketing....................     9,146,438   6,724,101   4,513,911
  General and administrative.............    13,366,997   5,361,323   3,517,967
                                           ------------ ----------- -----------
    Total costs and expenses.............   126,859,410  67,193,843  40,875,415
                                           ------------ ----------- -----------
Income from operations...................     4,915,310   6,049,564   5,632,484
Investment income, net...................     7,770,341         --          --
                                           ------------ ----------- -----------
Income before income taxes...............    12,685,651   6,049,564   5,632,484
Provision for income taxes...............     3,510,000   2,260,000   2,130,000
                                           ------------ ----------- -----------
Net income...............................  $  9,175,651 $ 3,789,564 $ 3,502,484
                                           ============ =========== ===========
Net income per share, basic and diluted..  $       0.15 $      0.07 $      0.06
                                           ============ =========== ===========
Weighted average number of common shares
 outstanding:
  Basic..................................    62,460,096  54,029,800  54,029,800
                                           ============ =========== ===========
  Diluted................................    62,805,289  54,029,800  54,029,800
                                           ============ =========== ===========
</TABLE>


                See notes to consolidated financial statements.

                                      F-4
<PAGE>

                    STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                        Years Ended April 30, 2001, 2000 and 1999
                         --------------------------------------------------------------------------
                                                             Foreign
                                   Additional               Currency       Total
                          Common    Paid-in      Retained  Translation Shareholders'  Comprehensive
                          Stock     Capital      Earnings  Adjustments    Equity         Income
                         -------- ------------  ---------- ----------- -------------  -------------
<S>                      <C>      <C>           <C>        <C>         <C>            <C>
Balance at April 30,
 1998................... $540,298 $ 14,056,025  $      --   $     --   $ 14,596,323
Net income..............             3,502,484                            3,502,484    $3,502,484
Net transactions with
 Methode Electronics,
 Inc....................             8,069,822                            8,069,822
                         -------- ------------  ----------  ---------  ------------
Balance at April 30,
 1999...................  540,298   25,628,331         --         --     26,168,629
Net income..............             3,789,564                            3,789,564     3,789,564
Net transactions with
 Methode Electronics,
 Inc....................            23,004,144                           23,004,144
                         -------- ------------  ----------  ---------  ------------
Balance at April 30,
 2000...................  540,298   52,422,039         --         --     52,962,337
Net proceeds of initial
 public offering........  100,625  195,353,864                          195,454,489
Net income..............               100,950   9,074,701                9,175,651     9,175,651
Other comprehensive
 loss:
Foreign currency
 translation
 adjustments............                                     (354,593)     (354,593)     (354,593)
                                                                                       ----------
Total comprehensive
 income.................                                                               $8,821,058
                                                                                       ==========
Net transactions with
 Methode Electronics,
 Inc....................            (2,339,323)                          (2,339,323)
                         -------- ------------  ----------  ---------  ------------
Balance at April 30,
 2001................... $640,923 $245,537,530  $9,074,701  $(354,593) $254,898,561
                         ======== ============  ==========  =========  ============
</TABLE>


                See notes to consolidated financial statements.

                                      F-5
<PAGE>

                    STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                             Fiscal Year Ended April 30,
                                        ---------------------------------------
                                            2001          2000         1999
                                        ------------  ------------  -----------
<S>                                     <C>           <C>           <C>
Operating activities:
Net income............................  $  9,175,651  $  3,789,564  $ 3,502,484
  Adjustments to reconcile net income
   to net cash provided by operating
   activities:
    Provision for depreciation........     7,032,187     3,025,468    1,740,452
    Provision for amortization........       556,185       188,807       15,150
    Provision for losses on accounts
     receivable.......................       140,179        77,067      200,000
    Provision for deferred income
     taxes............................      (529,300)       68,000     (170,000)
    Minority interest.................       476,325           --           --
Changes in operating assets and
 liabilities:
    Accounts receivable...............   (12,798,396)   (3,172,813)  (4,712,825)
    Inventories.......................   (16,163,297)   (4,186,088)  (2,300,851)
    Prepaid expenses..................      (811,111)     (102,515)     (63,229)
    Accounts payable and accrued
     expenses.........................    15,582,495     2,243,791    1,836,919
                                        ------------  ------------  -----------
      Net cash provided by operating
       activities.....................     2,660,918     1,931,281       48,100
Investing activities:
  Purchases of property, plant and
   equipment..........................   (47,320,080)  (11,809,724)  (4,456,513)
  Purchases of short-term
   investments........................   (20,400,000)          --           --
  Acquisitions, net of cash acquired..      (770,499)  (12,962,606)  (2,504,778)
  Additional purchase price of prior-
   period acquisition.................    (2,956,510)          --           --
  Increase investment in MP Optical...      (204,000)          --           --
  Other...............................       (51,052)      (49,567)     (61,926)
                                        ------------  ------------  -----------
      Net cash used in investing
       activities.....................   (71,702,141)  (24,821,897)  (7,023,217)
Financing activities:
  Net proceeds from initial public
   offering...........................   195,454,489           --           --
  Payment of notes related to
   acquisitions.......................      (333,157)          --       (50,000)
  Net cash transfers from (to) Methode
   Electronics, Inc...................    (1,179,077)   22,877,143    7,575,176
                                        ------------  ------------  -----------
      Net cash provided by financing
       activities.....................   193,942,255    22,877,143    7,525,176
                                        ------------  ------------  -----------
Net increase (decrease) in cash and
 cash equivalents.....................   124,901,032       (13,473)     550,059
Cash and cash equivalents at beginning
 of period............................       536,741       550,214          155
                                        ------------  ------------  -----------
Cash and cash equivalents at end of
 period...............................  $125,437,773  $    536,741  $   550,214
                                        ============  ============  ===========
</TABLE>

                                      F-6
<PAGE>

                   STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                April 30, 2001

Note 1. Basis of Presentation

   As of May 28, 2000, Methode Electronics, Inc. ("Methode") contributed and
transferred to the Company all of the capital stock and equity interests held
by Methode in subsidiaries and other entities that conducted a majority of its
optical products business, pursuant to a master separation agreement. The
capital stock and equity interests contributed and transferred to the Company
were Bandwidth Semiconductor, LLC; Methode Communications Modules, Inc. (now
Stratos Lightwave-Florida, Inc.); Stratos Lightwave, LLC; Methode's 60%
interest in MP Optical Communications, LLC and Stratos Limited. Prior to its
transfer of Stratos Lightwave, LLC to the Company, Methode transferred all of
the assets and liabilities of its optoelectronics and fiber optic divisions,
the properties associated with its optoelectronics research center and
Methode's corporate facilities occupied by these divisions to Stratos
Lightwave, LLC.

   In July 2000, the Company completed the sale of 10,062,500 shares of common
stock in its initial public offering at a price of $21 per share. The net
proceeds from the offering, after deducting the underwriting discount and the
offering expenses paid by the Company, were approximately $195.5 million.

   After completion of the Company's initial public offering, Methode owned
54,029,807 shares of the Company's common stock, representing approximately
84.3% of the outstanding shares. After receiving a favorable letter ruling
from the Internal Revenue Service in March 2001, and in accordance with its
previously announced intentions, on April 28, 2001, Methode distributed all of
the shares of the Company's common stock owned by Methode to Methode's
stockholders in a distribution intended to be tax free for U.S. federal income
tax purposes.

   The Company's consolidated financial statements for the periods ended on or
prior to May 28, 2000, have been carved out from the consolidated financial
statements of Methode, using the historical results of operations and cash
flows and historical basis of the assets and liabilities of the business. The
consolidated financial statements for the periods ended on or prior to May 28,
2000, also include allocations to the Company of Methode's corporate expenses,
including centralized accounting, treasury, information technology, human
resources, sales and marketing, legal, real estate and other corporate
services and infrastructure costs. The Company considers the expense
allocations to be reasonable reflections of the utilization of the services
provided to it or the benefits received by it. The consolidated financial
statements after May 28, 2000 reflect the operations, cash flows and assets
and liabilities of the Company on a stand-alone basis.

Note 2. Summary of Significant Accounting Policies

   Principles of consolidation: The consolidated financial statements include
the accounts and transactions of all subsidiaries. Significant intercompany
accounts and transactions have been eliminated in consolidation.

   Cash equivalents: All highly liquid investments with a maturity of three or
fewer months when purchased are carried at their approximate fair value and
classified in the balance sheet as cash equivalents.

   Inventories: Inventories are stated at the lower of cost (first-in, first-
out method) or market. In fiscal years 2001, 2000 and 1999, the Company
incurred charges of $3,878,000, $1,281,000 and $585,000, respectively, to
write-off inventory considered obsolete or excessive to fulfill future sales
estimates. The increases in fiscal year 2001 and 2000 were related to the
Company's transceiver lines.

   Property, plant and equipment: Properties are stated on the basis of cost.
For financial reporting purposes the Company amortizes such costs by annual
charges to income, computed on the straight-line method using

                                      F-7
<PAGE>

                   STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

estimated useful lives of 5 to 35 years for buildings and improvements, 3 to
15 years for machinery and equipment and 5 to 10 years for furniture and
fixtures. Accelerated methods are generally used for income tax purposes.

   Research and development costs: Costs associated with the development of
new products are charged to expense when incurred.

   Advertising: The Company expenses all advertising costs in the year
incurred. Advertising expense was $800,000 in 2001, $1,074,000 in 2000, and
$961,000 in 1999.

   Revenue recognition: Revenue from product sales, net of trade discounts, is
recognized when title passes, which generally occurs upon shipment. The
Company handles returns by replacing, repairing or issuing credit for
defective products when returned. Returns were $1,905,000, $553,000, and
$1,240,000, respectively, in fiscal years 2001, 2000 and 1999. A specific
reserve for returns was not established at April 30, 2001, 2000 and 1999
because the estimated reserves were not considered to be significant.

   Shipping and handling fees and costs: The Company includes shipping and
handling costs in costs of sales.

   License fees and royalties: License fees and royalties represent income
under license agreements for patented technology, which also is used by the
Company in its optical subsystems. The license agreements generally provide
for fixed up-front payments and/or future fixed payments or continuing royalty
payments based on a percentage of sales of the licensed products. The timing
and amounts of these payments is beyond the Company's control. Accordingly,
the amount received in any given period is expected to vary significantly. The
duration of these license agreements extend generally until the expiration of
the licensed patents which range from 2005 to 2018.

   Income taxes: The Company's operating results historically have been
included in Methode's consolidated U.S. and state income tax returns or in tax
returns of certain Methode foreign subsidiaries. The provision for income
taxes in the Company's consolidated financial statements has been determined
as if the Company were taxed as a separate entity. Methode and the Company
have entered into a tax sharing agreement that requires tax calculation,
accrual and payment by the Company as if the Company was filing a separate tax
return. All income tax payments are made by Methode. The Company will
reimburse Methode for all tax payments made on its behalf relative to fiscal
2001. Deferred tax assets and liabilities are recognized for the expected tax
consequences of temporary differences between the tax bases of assets and
liabilities and their reported amounts, and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected to
reverse.

   Long lived assets: The Company periodically reviews long-lived assets to
determine if there are indicators of impairment. When indicators of impairment
are present, the Company evaluates the carrying value of property, plant, and
equipment and intangibles, including goodwill, in relation to the operating
performance and future undiscounted cash flows of the underlying businesses.
The Company adjusts the net carrying value of the underlying assets if the sum
of the expected future cash flows is less than carrying value.

   Foreign currency translation: The functional currencies of the Company's
foreign subsidiaries are local currencies. Accordingly, the results of
operations of the Company's foreign operations are translated into U.S.
dollars using average exchange rates during the year, while the assets and
liabilities are translated using period end exchange rates.

   Intangibles: The excess of purchase price over the estimated fair value of
net assets of acquired companies is being amortized on a straight-line basis
over 25 years.

                                      F-8
<PAGE>

                   STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


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

Recent Accounting Pronouncements

   In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS), No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement requires companies to
record derivatives on the balance sheet as assets or liabilities, measured at
fair value. Gains or losses resulting from changes in the values of those
derivatives would be accounted for depending on the use of the derivative and
whether it qualifies for hedge accounting. SFAS No. 133 is effective for the
fiscal year ending April 30, 2002. The adoption of this statement did not have
a significant impact on the Company's financial results.

Note 3. Acquisitions

 Fiscal 2001 Acquisition

   On November 22, 2000, the Company purchased for approximately $770,000 in
cash, including costs of acquisition, substantially all of the net assets of
B&H Mold, Inc., a tool manufacturer in Libertyville, Illinois.

 Fiscal 2000 Acquisition

   On December 29, 1999, Methode purchased for approximately $13,000,000 in
cash, including costs of acquisition, substantially all the net assets of the
Optoelectronics division of Spire Corporation.

 Fiscal 1999 Acquisitions

   On April 15, 1999, Methode purchased substantially all of the net assets of
Stratos Lightwave-Florida, Inc. (formerly Polycore Technologies, Inc.) a
developer of highly integrated data communication modules for Local Area
Network equipment. The purchase price, including direct acquisition costs, was
$795,000 in cash. Effective February 23, 2000, the Company entered into an
amendment to the purchase agreement, which provided that in the event the
Company is part of an initial public offering of shares to be accomplished not
later than November 15, 2000, the sum of $2.957 million became payable to the
seller within 30 days following the initial public offering in full
satisfaction of such additional contingent consideration. This amount was paid
in July 2000 and has been accounted for as additional purchase price.

   On December 1, 1998, Methode purchased, for cash of $1,735,800, all of the
outstanding shares of Stratos Ltd. (formerly AB Stratos, Ltd.) of Haverhill,
England. Stratos Ltd. is a developer and manufacturer of fiber optic
connectivity products for harsh environments.

                                      F-9
<PAGE>

                   STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   The allocation of the purchase price to the net assets acquired was as
follows:

<TABLE>
<CAPTION>
                                          Optoelectronics
                                            Division of     Stratos
                                               Spire      Lightwave--  Stratos
      Amount Allocated To        B&H Mold   Corporation       FLA      Limited
      -------------------        -------- --------------- ----------- ----------
<S>                              <C>      <C>             <C>         <C>
Assets acquired:
  Cash.......................... $    --    $       --    $   26,000  $      --
  Accounts receivable...........      --            --        26,000     691,000
  Inventories...................   43,000        71,000       72,000     705,000
  Property, plant & equipment...  233,000     3,592,000      103,000     843,000
  Other.........................   10,000           --           --      199,000
                                 --------   -----------   ----------  ----------
    Total assets................  286,000     3,663,000      227,000   2,438,000
Liabilities assumed:
  Notes payable.................      --            --        50,000     494,000
  Accounts payable..............      --         33,000       79,000     939,000
  Accrued expenses..............  107,000           --        14,000         --
                                 --------   -----------   ----------  ----------
    Total liabilities...........  107,000        33,000      143,000   1,433,000
                                 --------   -----------   ----------  ----------
  Net assets acquired...........  179,000     3,630,000       84,000   1,005,000
  Excess purchase price.........  591,000     9,333,000    3,668,000     731,000
                                 --------   -----------   ----------  ----------
  Purchase price................ $770,000   $12,963,000   $3,752,000  $1,736,000
                                 ========   ===========   ==========  ==========
</TABLE>

   In February 1999, Methode formed MP Optical Communications LLC together
with one Chinese national. Methode held a 60% interest and the Chinese
national owns a 40% interest in the equity of the venture. In September 1999,
MP Optical Communications LLC formed MP Optical Communications (Shenzhen) Co.
Ltd. (MP Optical China) as a wholly owned subsidiary and as its principal
operating unit. In accordance with SFAS No. 94 "Consolidation of all Majority-
Owned Subsidiaries," the results of operations are included in the Company's
consolidated financial statements. The Company has agreed to contribute a
total of $1,700,000 in capital to MP Optical China by October 2001. As of
April 30, 2001, Methode has contributed $471,000 (prior to transfer of
ownership to the Company) and Stratos has contributed $204,000 in capital to
MP Optical China. The MP Optical China facility is located in Shenzhen, China,
where its operations involve the development and production of optical
connectors.

   Cash for the acquisitions described above was provided by Methode except
for B&H Mold, the additional purchase for Stratos Lightwave-Florida and the
$204,000 contribution to MP Optical China.

   The above-described acquisitions were accounted for using the purchase
method of accounting and the results of operations of the acquired companies
have been included in the Company's consolidated financial statements from
their respective dates of acquisition. Had these acquisitions been made as of
the beginning of fiscal 2000, unaudited pro forma sales and operating results
would be as follows:

<TABLE>
<CAPTION>
                                                       Fiscal Year Ended April
                                                                 30,
                                                       ------------------------
                                                           2001        2000
                                                       ------------ -----------
   <S>                                                 <C>          <C>
   Net sales.......................................... $127,446,603 $75,642,184
   Net income.........................................    9,205,105   3,009,520
   Net income per share, basic and diluted............         0.15        0.06
</TABLE>

                                     F-10
<PAGE>

                   STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Note 4. Income Taxes

   Significant components of the Company's deferred tax assets and liabilities
were as follows:

<TABLE>
<CAPTION>
                                                             As of April 30,
                                                          ---------------------
                                                             2001       2000
                                                          ---------- ----------
   <S>                                                    <C>        <C>
   Deferred tax liabilities:
     Accelerated tax depreciation........................ $2,042,100 $  820,800
     Investment basis differences........................    162,500        --
                                                          ---------- ----------
   Total deferred tax liabilities........................  2,204,600    820,800
   Deferred tax assets:
     Deferred compensation...............................    751,500    502,200
     Inventory valuation differences.....................  1,434,700    391,000
     Investment basis differences........................        --     101,700
     Bad debt reserves...................................    160,500    101,700
     Vacation accruals...................................    277,100    171,400
                                                          ---------- ----------
       Total deferred tax assets.........................  2,623,800  1,268,000
                                                          ---------- ----------
     Net deferred tax assets............................. $  419,200 $  447,200
                                                          ---------- ----------
     Net current deferred tax assets..................... $2,623,800 $1,166,000
     Net non-current deferred tax liabilities ...........  2,204,600   (718,800)
                                                          ---------- ----------
                                                          $  419,200 $  447,200
                                                          ========== ==========
</TABLE>

   Income taxes consisted of the following:

<TABLE>
<CAPTION>
                                                   Fiscal Year Ended April 30,
                                                 ---------------------------------
                                                    2001        2000       1999
                                                 ----------  ---------- ----------
   <S>                                           <C>         <C>        <C>
   Current
     Federal.................................... $2,602,200  $1,586,000 $1,833,000
     Foreign....................................    772,800     257,000     47,000
     State......................................    664,300     349,000    420,000
                                                 ----------  ---------- ----------
                                                 $4,039,300  $2,192,000 $2,300,000
   Deferred (credit)...............................(529,300)     68,000   (170,000)
                                                 ----------  ---------- ----------
                                                 $3,510,000  $2,260,000 $2,130,000
                                                 ==========  ========== ==========
</TABLE>

   A reconciliation of the consolidated provisions for income taxes to amounts
determined by applying the prevailing statutory federal income tax rate of 35%
to pre-tax earnings is as follows:

<TABLE>
<CAPTION>
                                             Fiscal Year Ended April 30,
                                           ----------------------------------
                                              2001        2000        1999
                                           ----------  ----------  ----------
   <S>                                     <C>         <C>         <C>
   Income tax at statutory rate........... $4,440,000  $2,057,000  $1,916,000
     Effect of State income taxes.........    364,000     239,000     257,000
     Tax exempt investment income......... (1,042,000)        --          --
     Foreign operations with lower
      statutory rates.....................   (299,000)    (89,000)    (50,000)
     Other--net...........................     47,000      53,000       7,000
                                           ----------  ----------  ----------
   Income tax provision................... $3,510,000  $2,260,000  $2,130,000
                                           ==========  ==========  ==========
</TABLE>

                                     F-11
<PAGE>

                   STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   Income taxes are based on pre-tax earnings which are distributed
geographically as follows:

<TABLE>
<CAPTION>
                                                  Fiscal Year Ended April 30,
                                               ---------------------------------
                                                  2001        2000       1999
                                               ----------- ---------- ----------
   <S>                                         <C>         <C>        <C>
   Domestic................................... $ 9,935,106 $5,243,064 $5,494,968
   Foreign....................................   2,750,545    806,500    137,516
                                               ----------- ---------- ----------
                                               $12,685,651 $6,049,564 $5,632,484
                                               =========== ========== ==========
</TABLE>

   The Company settled its income tax liability through the additional paid-in
capital account in fiscal 2000 and 1999. At April 30, 2001, income taxes
payable included $1,550,000 payable to Methode in accordance with a tax
sharing and indemnification agreement. No provision has been made for income
taxes of approximately $410,000 at April 30, 2001, which would be payable
should undistributed net income of $3,647,500 of foreign operations be
distributed as dividends, as the Company plans to continue these foreign
operations and does not contemplate such distributions in the foreseeable
future.

   The Company believes it is more likely than not that future taxable income
will be sufficient to allow it to realize its deferred tax assets.
Accordingly, the Company has not established a valuation allowance related to
its deferred tax assets.

Note 5. Stock Options

   In fiscal 2001, the Company adopted the Stratos Lightwave, Inc. 2000 Stock
Plan ("Plan"). The Plan permits the Company to award stock options, restricted
stock and stock appreciation rights to present and future directors, officers
and employees of the Company. As of April 30, 2001, the maximum number of
shares for which awards may be issued is 9,000,000 shares and the number of
shares for which restricted stock awards may be issued may not exceed
1,875,000 shares. At April 30, 2001, awards for 3,872,730 shares under the
Plan are reserved for issuance in the future. Stock options granted to date
generally vest over a period of 12 to 48 months after the date of grant and
have a term of 10 years. At April 30, 2001, there were 25,000 options granted
under the Plan excercisable at an exercise price of $21.00.

<TABLE>
<CAPTION>
                                                        Options Outstanding at
                                                            April 30, 2001
                                                       -------------------------
                                                                     Weighted
                                                                     Average
                                                        Shares    Exercise Price
                                                       ---------  --------------
   <S>                                                 <C>        <C>
   April 30, 2000.....................................       --          --
   Granted............................................ 5,247,320      $19.14
   Conversion of Methode options......................   156,305       13.92
   Cancelled..........................................  (276,355)      19.13
                                                       ---------
   April 30, 2001..................................... 5,127,270      $18.98
                                                       =========
</TABLE>

<TABLE>
<CAPTION>
                                                     Average       Average
                                                    Remaining      Weighted
   Range of Exercise Prices               Shares   Life (Years) Exercise Price
   ------------------------              --------- -----------  --------------
   <S>                                   <C>       <C>          <C>
   $7.09-16.86.......................... 1,229,520     9.7          $11.33
   $21.00-29.62......................... 3,827,250     9.3           21.16
   $31.56-46.88.........................    70,500     9.3           34.53
                                         ---------
                                         5,127,270     9.4          $18.98
                                         =========
</TABLE>

                                     F-12
<PAGE>

                   STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   Unvested Methode options held by the Company's employees were forfeited as
of Methode's distribution of the Company's common stock on April 28, 2001,
under the terms of the Methode 1997 Stock Plan. The Company has assumed all
unvested Methode options held by its employees on the distribution. These
Methode options have converted at the distribution date into options to
purchase shares of the Company's common stock. The number of shares and the
exercise price of Methode options that converted into Stratos options were
adjusted using a conversion formula. The conversion formula was based on the
opening per-share price of shares of the Company's common stock on the first
trading day after the distribution, relative to the closing per-share price of
Methode Class A common stock on the last trading day before the distribution.
The resulting Stratos options have maintained the original vesting provisions
and option period. The Methode options converted into 156,305 options to
purchase shares of the Company's common stock at a weighted average price of
$13.92.

   The Company has adopted the disclosure-only provisions of SFAS No. 123 and
has not recorded any compensation expense associated with these stock options.
Consistent with prior years, stock-based compensation continues to be recorded
using the intrinsic value method prescribed in APB No. 25 and related
Interpretations. If the Company had determined compensation cost based on the
fair value at the grant date consistent with SFAS No. 123, the Company's net
income in the years ended April 30, 2001, 2000 and 1999 would have been
reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                2001        2000       1999
                                             ----------  ---------- ----------
   <S>                                       <C>         <C>        <C>
   Net income (loss)
     As reported............................ $9,176,000  $3,790,000 $3,502,000
     Pro forma.............................. (3,044,000)  3,525,000  3,398,000
   Basic and Diluted Earnings (Loss) Per
    Share
     As reported............................ $     0.15  $     0.07 $     0.06
     Pro forma.............................. $    (0.05) $     0.07 $     0.06
</TABLE>

   The weighted average estimated fair value of options granted during fiscal
2001, 2000 and 1999 was $17.16, $14.42 and $6.61, respectively. The fair value
of each option grant is estimated on the date of grant using the Black-Scholes
option pricing model with the following weighted average assumptions:

<TABLE>
<CAPTION>
                                                              2001   2000  1999
                                                              -----  ----  ----
<S>                                                           <C>    <C>   <C>
Risk free interest rates.....................................   6.3%  5.9%  5.4%
Expected option life in years................................   7.0   6.0   6.0
Expected volatility.......................................... 116.4% 55.2% 43.8%
Dividend yield...............................................   0.0%  0.5%  1.4%
</TABLE>

Note 6. Shareholders' Rights Agreement

   On March 22, 2001, the Company's Board of Directors declared a dividend of
one preferred share purchase right (a "Right") for each share of Common Stock
outstanding on April 3, 2001 to the shareholders of record on that date. Each
Right entitles the registered holder to purchase from the Company one one-
thousandth of a share of the Company's Series A Junior Participating Preferred
Stock at an exercise price of $80.00 per one one-thousandth of a preferred
share, subject to adjustment.

   The Rights will trade automatically with the Common Stock and will not be
exercisable until it is announced that a person or group has become an
"acquiring person" by acquiring 15% or more of the Common Stock, or a person
or group commences a tender offer that will result in such person or group
owning 15% or more of the Common Stock. Thereafter, separate right
certificates will be distributed, and each right will entitle its holder to
purchase for the exercise price, a fraction of a share of the Company's Series
A Junior Participating Preferred Stock having economic and voting terms
similar to one share of Common Stock.

                                     F-13
<PAGE>

                   STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   Upon announcement that any person or group has become an acquiring person,
each Right will entitle all rightholders (other than the acquiring person) to
purchase, for the exercise price, a number of shares of Common Stock having a
market value of twice the exercise price. Rightholders would also be entitled
to purchase the common stock of another entity having a value of twice the
exercise price if, after a person has become an acquiring person, the Company
were to enter into certain mergers or other transactions with such other
entity. If any person becomes an acquiring person, the Company's Board of
Directors may, at its option and subject to certain limitations, exchange one
share of Common Stock for each Right.

   The Rights may be redeemed by the Company's Board of Directors for $0.01
per Right at any time prior to a person or group having become an acquiring
person. The Rights will expire on April 3, 2011.

Note 7. Earnings Per Share

   The following table sets forth the computation of basic and diluted
earnings per share:

<TABLE>
<CAPTION>
                                                Fiscal Year Ended April 30,
                                            -----------------------------------
                                               2001        2000        1999
                                            ----------- ----------- -----------
   <S>                                      <C>         <C>         <C>
   Numerator--net income................... $ 9,175,651 $ 3,789,564 $ 3,502,484
   Denominator:
     Denominator for basic earnings per
      share--weighted-average shares
      outstanding..........................  62,460,096  54,029,800  54,029,800
     Dilutive potential common shares--
      employee stock options...............     345,193         --          --
                                            ----------- ----------- -----------
     Denominator for diluted earnings per
      share--adjusted weighted--average
      shares and assumed conversions.......  62,805,289  54,029,800  54,029,800
                                            =========== =========== ===========
   Basic and diluted earnings per share.... $      0.15 $      0.07 $      0.06
                                            =========== =========== ===========
</TABLE>

   Options to purchase 2,262,342 shares of Common Stock at a weighted average
option price of $20.06 were outstanding during 2001 but were not included in
the computation of diluted earnings per share because the exercise price was
greater than the average market price of the common shares and, therefore, the
effect would have been antidilutive.

Note 8. Transactions with Methode

   The Company's revenue from sales of products to Methode was $3,684,000 in
2001, $5,897,800 in 2000 and $4,018,000 in 1999.

   The Company's operations in fiscal 2000 and 1999 were funded by Methode,
without any interest charges, as reflected in the consolidated statement of
cash flows. The average intercompany payable to Methode for this funding was
$35.7 million and $20.2 million for fiscal years 2000 and 1999, respectively,
and is included in additional paid-in capital in the consolidated balance
sheet.

   For purposes of governing certain of the ongoing relationships between the
Company and Methode after the separation and to provide for an orderly
transition, the Company and Methode entered into various agreements to provide
similar services as those provided in the past. These services include
centralized accounting, treasury, information technology, human resources,
sales and marketing, legal, real estate and other corporate services and
infrastructure costs. The agreements govern individual transitional services,
as requested

                                     F-14
<PAGE>

                   STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

by Methode or the Company, of the other party. These services are to be
provided in accordance with the policies, procedures and practices in effect
before the transfer date. The term of each agreement is one year (provision
for extension exists) unless earlier terminated.

   The Company's expenses under its transitional service arrangements with
Methode do not differ significantly from the costs historically allocated to
it by Methode for similar arrangements, and reflected in these consolidated
financial statements. The need for services under these agreements have been
substantially reduced at the close of fiscal 2001. It is anticipated that
shared services will continue in fiscal 2002 only in the areas of legal and
quality control.

   The allocation of Methode corporate expenses was discontinued on May 28,
2000. After this date, the Company incurred corporate expenses directly in its
operations or indirectly under its transitional services agreement with
Methode. Charges to the Company from Methode for allocations in the fiscal
years ended April 30, 2001, 2000 and 1999 were classified as follows:

<TABLE>
<CAPTION>
                                                  Fiscal Year Ended April 30,
                                                 ------------------------------
                                                   2001      2000       1999
                                                 -------- ---------- ----------
   <S>                                           <C>      <C>        <C>
   Cost of sales................................ $106,000 $1,167,000 $  823,000
   Research and development.....................    5,000    755,000    462,000
   Sales and marketing..........................  188,000  2,686,000  1,974,000
   General and administrative...................  376,000  3,068,000  2,585,000
                                                 -------- ---------- ----------
     Total...................................... $675,000 $7,676,000 $5,844,000
                                                 ======== ========== ==========
</TABLE>

   In addition, the Company incurred net charges of approximately $436,000 in
fiscal 2001 under its transitional service agreements with Methode.

Note 9. Material Customers and Concentration of Credit Risk

   During the fiscal year ended April 30, 2001, sales to McData Corporation,
Alcatel Network Systems and Cisco Systems, Inc. and their respective contract
manufacturers amounted to 11%, 11% and 10%, respectively, of consolidated net
sales.

   During the fiscal year ended April 30, 2000, sales to Cisco Systems, Inc,
Nortel Networks Corporation and Alcatel Network Systems and their respective
contract manufacturers amounted to 26%, 10% and 8%, respectively, of
consolidated net sales.

   During the fiscal year ended April 30, 1999, sales to Nortel Networks
Corporation and Cisco Systems, Inc. and their respective contract
manufacturers amounted to 27% and 10%, respectively, of consolidated net
sales.

   Accounts receivable are generally due within 30 to 45 days. Credit losses
relating to all customers consistently have been within management's
expectations. Accounts receivable from one customer accounted for
approximately 13% of the total outstanding balance at April 30, 2001.

Note 10. Segment Information

   The Company operates in one industry segment, the design, manufacture and
sale of optical subsystems and components for high data rate networking, data
storage and telecommunication applications.

                                     F-15
<PAGE>

                   STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   Information about the results of the Company's operations in different
geographic regions is as follows:

<TABLE>
<CAPTION>
                                                Fiscal Year Ended April 30,
                                           -------------------------------------
                                               2001         2000        1999
                                           ------------- ----------- -----------
   <S>                                     <C>           <C>         <C>
   Net sales
     United States........................ $ 112,842,000 $65,784,000 $44,516,000
     Europe...............................    14,060,000   6,001,000   1,942,000
                                           ------------- ----------- -----------
                                           $ 126,902,000 $71,785,000 $46,458,000
                                           ============= =========== ===========
   Net income
     United States........................ $   7,198,000 $ 3,198,000 $ 3,419,000
     Europe...............................     1,978,000     592,000      83,000
                                           ------------- ----------- -----------
                                             $ 9,176,000 $ 3,790,000 $ 3,502,000
                                           ============= =========== ===========
   Long-lived assets
     United States........................ $  61,751,000 $23,230,000 $11,763,000
     Europe...............................     3,309,000   1,705,000     768,000
                                           ------------- ----------- -----------
                                           $  65,060,000 $24,935,000 $12,531,000
                                           ============= =========== ===========
</TABLE>

Note 11. Quarterly Results of Operations (Unaudited)

   The following is a summary of unaudited quarterly results of operations for
the two years ended April 30, 2001

<TABLE>
<CAPTION>
                                      Fiscal Year 2001 Quarter Ended
                              -----------------------------------------------
                                July 31   October 31  January 31   April 30
                              ----------- ----------- ----------- -----------
   <S>                        <C>         <C>         <C>         <C>
   Net sales................. $25,916,164 $34,478,795 $40,338,660 $26,168,244
   Gross profit..............   8,538,994  11,683,852  14,825,122   2,237,197
   Net income (loss).........   2,040,963   4,003,588   4,815,914  (1,684,814)
   Net income (loss) per
    diluted common share.....        0.04        0.06        0.08       (0.03)

<CAPTION>
                                      Fiscal Year 2000 Quarter Ended
                              -----------------------------------------------
                                July 31   October 31  January 31   April 30
                              ----------- ----------- ----------- -----------
   <S>                        <C>         <C>         <C>         <C>
   Net sales................. $14,567,346 $16,022,437 $17,962,879 $23,232,072
   Gross profit..............   5,519,015   4,698,527   5,742,800   7,760,496
   Net income................   1,483,115     421,593     792,690   1,092,166
   Net income per diluted
    common share.............        0.03        0.01        0.01        0.02
</TABLE>

Note 12. Litigation

   The Company is a plaintiff in three lawsuits against Finisar Corporation.
The Company alleges that optoelectronic products sold by Finisar infringe upon
seven Stratos patents. Stratos seeks monetary damages and injunctive relief.
Finisar has filed various counterclaims. These counterclaims include claims
that Finisar is the rightful owner or co-owner of the patents, that Stratos
has engaged in certain antitrust violations, theft of trade secrets by
Stratos, and Stratos has breached contracts and covenants of good faith and
fair dealing. Finisar seeks unspecified compensatory damages, restitution and
the correction of inventorship with respect to the seven Stratos patents.
These lawsuits are in the preliminary stages, and the Company cannot predict
their outcome with certainty.

                                     F-16
<PAGE>

                   STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   During fiscal 2001, the Company settled several patent infringement cases.
As a result of these settlements, the Company received lump-sum payments in
fiscal 2001 of approximately $3.5 million, which were recorded as license fees
and royalties in the consolidated income statement. Legal fees in connection
with some of these matters of approximately $1.5 million were classified in
general and administrative expenses. In addition, the Company is entitled to
fixed future payments and/or ongoing royalty payments based on a percentage of
sales of licensed products. The timing and/or the amount of these payments is
not within the Company's control. Also, in certain circumstances, the Company
is entitled to other future economic benefits.

   In addition, certain litigation arising in the normal course of business is
pending against the Company. Management is of the opinion that the resolution
of this Company's litigation will not have a significant effect on the
consolidated financial statements.

                                     F-17
<PAGE>

          SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

                            STRATOS LIGHTWAVE, INC.
                   YEARS ENDED APRIL 30, 2001, 2000 AND 1999

<TABLE>
<CAPTION>
                                            Additions
                         Balance at -------------------------                Balance at
                         beginning  Charged to   Charged to                    end of
      Description        of period   expense   other accounts  Deductions      period
      -----------        ---------- ---------- --------------  ----------    ----------
<S>                      <C>        <C>        <C>             <C>           <C>
Reserve for Inventory
 Obsolescence:
April 30, 1999.......... $  242,000 $  585,000   $1,043,000(A) $  656,000(B) $1,234,000
April 30, 2000..........  1,234,000  1,281,000          --        954,000(B)  1,561,000
April 30, 2001..........  1,561,000  3,878,000          --      1,694,000(B)  3,745,000

Allowance for Doubtful
 Accounts:
April 30, 1999.......... $  175,000 $  200,000   $    9,000(A) $  200,000(C) $  184,000
April 30, 2000..........    184,000     77,000          --            --        261,000
April 30, 2001..........    261,000    158,000          --         18,000       401,000
</TABLE>
--------
(A) Represents balance of Stratos LTD at date of acquisition.
(B) Represents write-off of obsolete inventory and usage of product previously
    reserved for.
(C) Write-off of accounts receivable from customer that filed bankruptcy.

                                      F-18
<PAGE>

                                   SIGNATURES

   Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this annual report to be
signed on its behalf by the undersigned, thereunto duly authorized.

Date: July 23, 2001

                                          Stratos Lightwave, Inc.

                                                 /s/ James W. McGinley
                                          By: _________________________________
                                                     James W. McGinley
                                               President and Chief Executive
                                                          Officer

   Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
              Signature                          Title                   Date
              ---------                          -----                   ----

<S>                                    <C>                        <C>
      /s/ James W. McGinley            President, Chief Executive    July 23, 2001
______________________________________  Officer and Director
          James W. McGinley

        /s/ David A. Slack             Chief Financial Officer       July 23, 2001
______________________________________  (Principal Financial and
            David A. Slack              Accounting Officer)

      /s/ Michael P. Galvin            Director                      July 23, 2001
______________________________________
          Michael P. Galvin

       /s/ Brian J. Jackman            Director                      July 23, 2001
______________________________________
           Brian J. Jackman

       /s/ C. Daniel Nelsen            Director                      July 23, 2001
______________________________________
           C. Daniel Nelsen

      /s/ Edward J. O'Connel           Director                      July 23, 2001
______________________________________
          Edward J. O'Connel
</TABLE>
<PAGE>

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
 Exhibit
 Number  Description of Document
 ------- -----------------------
 <C>     <S>
  3.1    Certificate of Incorporation of Registrant (1)

  3.2    Certificate of Designation of Series A Junior Participating Preferred
         Stock, included as Exhibit A to Exhibit 4.2

  3.2    Restatement Certificate of Incorporation of Registrant (1)

  3.3    Bylaws of Registrant (1)

  4.1    Specimen certificate representing the common stock (1)

  4.2    Rights Agreement, dated as of March 23, 2001, between Stratos
         Lightwave, Inc. and Mellon Investor Services LLC (2)

         Master Separation Agreement between Methode Electronics, Inc. and
 10.1    Registrant (1)

 10.2    Initial Public Offering and Distribution Agreement between Methode
         Electronics, Inc. and Registrant (3)

         Tax Sharing and Indemnification Agreement between Methode Electronics,
 10.3    Inc. and Registrant (3)

         Master Transitional Services Agreement between Methode Electronics,
 10.4    Inc. and Registrant (1)

         Employee Matters Agreement between Methode Electronics, Inc. and
 10.5    Registrant (1)

         Registration Rights Agreement between Methode Electronics, Inc. and
 10.6    Registrant (3)

 10.7    General Assignment and Assumption Agreement between Methode
         Electronics, Inc. and Stratos Lightwave, LLC (1)

         Form of Indemnity Agreement between Registrant and Registrant's
 10.8    directors and officers (1)**

 10.9    Stratos Lightwave, Inc. 2000 Stock Plan, as amended and restated *

         Promissory Note of the Registrant payable to Methode Development
 10.10   Company (1)

 21      List of Subsidiaries*

 23      Consent of Ernst & Young LLP*
</TABLE>
--------
(1) Incorporated by reference to the Registrant's Registration Statement on
    Form S-1 effective June 26, 2000.
(2) Incorporated by reference to the Registrant's Form 8-K dated March 22,
    2001.
(3) Incorporated by reference to the Registrant's Quarterly Report on Form 10-
    Q for the quarter ended July 31, 2000.
 * Filed herewith
** Management contract or compensatory plan or arrangement.