<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, 2002

[_]     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)

           Delaware                                       36-4360035
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

       7444 West Wilson Avenue
          Chicago, Illinois                                 60706
(Address of principal executive offices)                  (Zip Code)

       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 22, 2002, based upon the closing sale
price on that date as reported in The Wall Street Journal was approximately
$66,131,932.

The registrant had 72,781,287 shares of $.01 par value common stock outstanding
as of July 22, 2002.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the proxy statement for the Annual Meeting of Stockholders to be
held on September 20, 2002 which will be filed within 120 days of April 30, 2002
are incorporated by reference into Part III of this Form 10-K.

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                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
Section                                                                                 Page
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<S>                                                                                     <C>
Forward-Looking Statements. .............................................................. 2

PART I

Item 1.   Business ....................................................................... 2
Item 2.   Properties .................................................................... 13
Item 3.   Legal Proceedings ............................................................. 14
Item 4.   Submission of Matters to a Vote of Security Holders ........................... 15

PART II

Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters ......... 17
Item 6.   Selected Financial Data ....................................................... 18
Item 7.   Management's Discussion and Analysis of Financial Condition and Results
            of Operations ............................................................... 20
Item 7A.  Quantitative and Qualitative Disclosures About Market Risk .................... 39
Item 8.   Financial Statements and Supplementary Data ................................... 39
Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial
            Disclosure .................................................................. 39

PART III

Item 10.  Directors and Executive Offices of the Registrant ............................. 40
Item 11.  Executive Compensation ........................................................ 41
Item 12.  Security Ownership of Certain Beneficial Owners and Management ................ 41
Item 13.  Certain Relationships and Related Transactions ................................ 41

PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K .............. 42
Item 14A. Index to Financial Statements and Financial Statement Schedule ............... F-1
</TABLE>

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                           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 1.       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), long distance telecommunication
networks, and military communications. Our optical subsystems are compatible
with the advanced transmission protocols used in these networks, including
Gigabit Ethernet, Fast Ethernet, Fibre Channel, Infiniband, ESCON, and
synchronous optical network (SONET). We also design, manufacture and sell a line
of optical components, cable assemblies and fiber management products 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 decade, the number of communication networks and the
amount of data transmitted over networks has increased substantially due to the
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
growth has

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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 was 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
and free space optical links.

         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. Early storage networks used 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

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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 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
longer distances for disaster protection. In addition, these networks offer
organizations a cost-effective way to address increased bandwidth requirements.

         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. Newest generation networks are also applying Ethernet protocols to
these telecommunication networks. 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

                                      -4-

<PAGE>

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.

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. As network demands have required ever greater port density and cost
reduction, several connectors have emerged based on the multi-fiber MT ferrule.
These ferrules commonly contain up to 24 fibers in the space of an SC interface.
We manufacture MPX compatible, HBMT compatible, and MTP/MPO connectors and cable
assemblies, and optical flex circuits terminated with these connectors to take
advantage of the MT 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.

         The following table summarizes the capabilities of our optical
subsystems:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Fiber Optic Interface/Form Factor         Data Rate/Protocol              Wavelength (nm) / Mode / Distance
-------------------------------------------------------------------------------------------------------------------
Embedded Transceivers
-------------------------------------------------------------------------------------------------------------------
<S>                                       <C>                             <C>
SC Embedded-Standard Form Factor          2.5 Gbps-Infiniband             850nm Multimode-500 meters
"1x9 - Conventional Format"               1.25 Gbps-Gigabit Ethernet      1310nm Single mode-20 kilometers
                                          1.0625 Gbps-Fibre Channel
                                          622 Mbps-OC-12
                                          155 Mbps-OC-3
-------------------------------------------------------------------------------------------------------------------
LC Embedded-Small Form Factor             2.5 Gbps-Infiniband             850nm Multimode-500 meters to 2
"Small Form Factor"                       2.488 Gbps-SONET OC-48          kilometers
                                          2.125 Gbps-2xFibre Channel      1300nm Single mode-20 kilometers
                                          1.5 Gbps-Video
-------------------------------------------------------------------------------------------------------------------
</TABLE>

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<TABLE>
<S>                                       <C>                             <C>
-------------------------------------------------------------------------------------------------------------------
                                          1.25 Gbps-Gigabit Ethernet
                                          1.0625 Gbps-Fibre Channel
                                          622 Mbps-OC-12
                                          155 Mbps-ATM OC-3
                                          200 Mbps-ESCON
                                          100 Mbps-Fast Ethernet
-------------------------------------------------------------------------------------------------------------------
LC Embedded-RJ Size                       2.5 Gbps-Infiniband             850nm Multimode - 500 meters to 2
"Single Port RJ-Format"                   2.125 Gbps-2xFibre Channel      kilometers
                                          1.25 Gbps-Gigabit Ethernet      1300nm Single mode-20 kilometers
                                          1.0625 Gbps-Fibre Channel
                                          155 Mbps-ATM OC-3
                                          100 Mbps-Fast Ethernet
-------------------------------------------------------------------------------------------------------------------
4 Port LC Embedded-RJ Size                2.5 Gbps-Infiniband             850nm Multimode-500 meters
"4 Port RJ-Format"                        2.125 Gbps-2xFibre Channel      1310nm Single mode-20 kilometers
                                          1.25 Gbps-Gigabit Ethernet
                                          1.0625 Gbps-Fibre Channel
                                          155 Mbps-OC-3
                                          100 Mbps-Fast Ethernet
                                          10 Mbps-Ethernet
-------------------------------------------------------------------------------------------------------------------
Internal Removable Transceivers
-------------------------------------------------------------------------------------------------------------------
SC Removable-Standard Form Factor         2.125 Gbps-2xFibre Channel      850nm Multimode-500 meters
"Gigabit Interface Converter" or          1.25 Gbps-Gigabit Ethernet      1310nm Single mode-20 kilometers
"GBIC"                                    1.0625 Gbps-Fibre Channel       1550nm Single mode-70 kilometers
-------------------------------------------------------------------------------------------------------------------
LC Removable-Small Form Factor            2.5 Gbps-Infiniband             850nm Multimode-500 meters
"Small Form Factor Pluggable" or "SFP"    2.488 Gbps-SONET OC-48          1310nm Single mode-20 kilometers
                                          2.125 Gbps-2xFibre Channel
                                          1.5 Gbps-Video
                                          1.25 Gbps-Gigabit Ethernet
                                          1.0625 Gbps-Fibre Channel
                                          622 Mbps-OC-12
                                          200 Mbps-ESCON
                                          155 Mbps-OC-3
                                          100 Mbps-Fast Ethernet
-------------------------------------------------------------------------------------------------------------------
External Removable Transceivers
-------------------------------------------------------------------------------------------------------------------
SC Removable-External Form Factor         2.125 Gbps-2xFibre Channel      850nm Multimode-500 meters
"Media Interface Adapter" or "MIA"        1.25 Gbps-Gigabit Ethernet      1310nm Single mode-20 kilometers
                                          1.0625 Gbps-Fibre Channel
-------------------------------------------------------------------------------------------------------------------
LC Removable-External Form Factor         2.125 Gbps-2xFibre Channel      850nm Multimode-500 meters
"Mini Media Interface Adapter" or         1.25 Gbps-Gigabit Ethernet      1310nm Single mode-20 kilometers
"Mini MIA"                                1.0625 Gbps-Fibre Channel
-------------------------------------------------------------------------------------------------------------------
</TABLE>

         Embedded Transceivers. Embedded transceivers are designed to be
directly attached 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 FCC
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.

     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

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<PAGE>

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. 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 Parallel Optical Links. Multi-channel optical links use
VCSEL arrays to achieve signal densities up to an order of magnitude higher than
SFF transceivers. Initial application for these devices are as high data rate,
very short-range (VSR) data links to support the network architecture of large
optical switches and routers.

         Optical Components

         Our passive network elements include optical interconnect products, WDM
modules, fiber packaging services and related accessories.

         High Density Backplane Connectors. Fiber optic backplane connectors are
high density 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 MPX(TM) compatible, HBMT compatible, and MTP/MPO
compatible fiber optic backplane connectivity systems offers very high-density
connectivity in backplane applications such as those used in high speed data
networking and telecommunications switching equipment.

         Optical Flex Circuits. Optical Flex circuits provide OEM customers the
optical equivalent of the copper printed circuit board. Designed to facilitate
extremely high fiber counts with complex custom layouts, Optical 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 Optical Flex circuits in any routing matrix, size or
shape. We provide a wide variety of Optical Flex circuit interconnect options
including MPX(TM) compatible, HBMT compatible, MTP/MPT compatible, MP, LC,
MT-RJ, FC, ST and SC. Each Optical 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

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technology that increases the size of the optical signal target by nearly 15
times, neutralizing most of the effects of shock, vibration, particle
contamination and misalignment. Our harsh connector products are designed
primarily for use in tactical military, petrochemical and field broadcast
applications.

         Optical Multiplexing and Coupling Components. We design, manufacture,
and sell a range of components that separate and combine up to 16 transmission
streams of different wavelengths from and onto a single fiber. These components
are generally known as coarse wave division multiplexers/demultiplexers (CWDM).
These components allow system designers to increase utilization of installed
fiber plant in metropolitan and local area networks. Additionally we design,
manufacture, and sell a product known as an interleaver which combines two
streams of closely spaced wavelengths into one stream of greater wavelength
density. Generally known as dense wavelength division multiplexing (DWDM), it
combines multiple wavelength streams onto installed fiber plant to increase
utilization. Our interleaver can double the density of two DWDM streams,
doubling fiber utilization.

         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.

         Specialty Fiber Assemblies. 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 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

                                      -8-

<PAGE>

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 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

                                      -9-

<PAGE>

metallorganic chemical vapor deposition reaction chambers and related ancillary
and test equipment 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, 2002, we had 104 employees engaged in research and
development, including 16 engineers with Ph.Ds. Our research and development
expenses were $28.1 million, $14.7 million and $7.0 million in fiscal 2002, 2001
and 2000, 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.

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 fiscal 2002, McData Corporation, our
largest customer, accounted for 24% of our net sales. For fiscal 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
fiscal 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.

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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,
2002 and April 30, 2001, our backlog was approximately $8.4 million and $34.2
million, respectively. 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.

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;

                                      -11-

<PAGE>

         .    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., JDS Uniphase 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, 2002, we had
104 U.S. patents issued and 32 U.S. patent applications pending. Our issued
patents expire between 2005 and 2022. Policing unauthorized use of our

                                      -12-

<PAGE>

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.

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, 2002, we employed a total of 612 full-time employees,
389 of whom were primarily engaged in manufacturing, 104 of whom were engaged in
research and development, 47 of whom were engaged in sales, marketing and
technical support, and 72 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 our operations in different geographic regions
is set forth in Note 13 to our financial statements included in Item 14 of this
Annual Report on Form 10-K.

Item 2.      Properties

         Our corporate headquarters are 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 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 also own an
approximately 90,000 square foot facility for

                                      -13-

<PAGE>

research and development, sales and marketing and manufacturing operations in
Hudson, New Hampshire.

         We lease approximately 38,000 square feet in Mountain View, California
for administrative, sales and marketing, and research and development. This
lease expires in August 2007. We lease approximately 15,000 square feet for
design and manufacturing in Haverhill, Suffolk, United Kingdom. This lease
expires in 2010. In addition, we lease approximately 20,000 square feet in
Hauppauge, New York for design and manufacturing. This lease expires in
September 2004. We also lease an approximately 15,000 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

         From time to time, we become involved in various lawsuits and legal
proceedings that arise in the normal course of business. Litigation is subject
to inherent uncertainties and an adverse result in a lawsuit may harm our
business, financial condition or results of operation. Our management believes
that the resolution of these lawsuits and legal proceedings will not have a
significant effect on the Company's business, financial condition or results of
operation.

         The Company and certain of its directors and executive officers have
been named as defendants in purported class action lawsuits filed in the United
States District Court, Southern District of New York. The first of these
lawsuits, filed on July 25, 2001, is captioned Kucera v. Stratos Lightwave, Inc.
et. al., No. 01 CV 6821. Three other similar lawsuits have also been filed
against the Company and certain of its directors and executive officers. The
complaints also name as defendants the underwriters for the Company's initial
public offering. The complaints are substantially identical to numerous other
complaints filed against other companies that went public over the last several
years. The complaints generally allege, among other things, that the
registration statement and prospectus from the Company's June 26, 2000 initial
public offering failed to disclose certain alleged actions by the underwriters
for the offering. The complaints charge the Company and two or three of its
directors and executive officers with violations of Sections 11 and 15 of the
Securities Act of 1933, as amended, and/or Sections 10(b) and Section 20(a) of
the Securities Exchange Act of 1934, as amended. The complaints also allege
claims solely against the underwriting defendants under Section 12(a)(2) of the
Securities Act of 1933, as amended. The Company believes that these lawsuits are
without merit and intends to defend them vigorously.

         In June 2002, Catherine Lego, as representative of the former
stockholders of Tsunami Optics, Inc. filed a lawsuit against the Company in the
Superior Court of California, City and County of Santa Clara, relating to the
Company's acquisition of Tsunami Optics, Inc. in February 2002. The complaint
alleges, among other things, that the Company breached the acquisition agreement
by failing and refusing to allow Tsunami to operate as a separate subsidiary in
the ordinary course and by firing the Tsunami executives necessary to operate
the business in the ordinary course, making it impossible for Tsunami to achieve
the $18 million earn-out payment provided for in the acquisition agreement. The
complaint also alleges failure of consideration in connection with the
acquisition agreement, and breach of covenants of good

                                      -14-

<PAGE>

faith and fair dealing. Plaintiff is seeking a declaratory judgment that the
Company has materially breached the agreement and $18 million in damages or, in
the alternative, rescission of the acquisition agreement. The Company believes
that this lawsuit is without merit and intends to vigorously defend against
these claims.

         In a separate action filed in the Circuit Court of Cook County,
Illinois, the Company filed suit against James P. Campbell and Catherine Lego,
individually. In its complaint, the Company seeks declaratory judgment that the
Company has the right to make changes in Tsunami's business under the agreement
for the Tsunami acquisition. The complaint also includes claims against Lego and
Campbell for fraud and breach of contract for misrepresentations made by them to
the Company in connection with the Tsunami acquisition and a claim for breach of
fiduciary duty against Campbell. The complaint seeks compensatory and punitive
damages. The Company's management believes that the resolution of these lawsuits
will not have a significant effect on the Company's business or financial
condition.

         We are plaintiffs in several lawsuits relating to our intellectual
property rights. The defendants in these lawsuits include Infineon Technologies
Corp. in the U.S. District Court for the Northern District of California and
E2O, Inc. in the District Court for the District of Delaware. In these actions,
Stratos alleges that optoelectronic products sold by the defendants infringe
upon up to nine of our patents. 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, 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. We intend to pursue these
lawsuits and defend against these counterclaims vigorously.

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

         There were no matters submitted to security holders during the fourth
quarter of fiscal 2002.

                                      -15-

<PAGE>

                      Stratos Lightwave Executive Officers

         The following table sets forth information concerning our executive
officers:

<TABLE>
<CAPTION>
Name                          Age      Positions
----                          ---      ---------
<S>                           <C>      <C>
James W. McGinley             47       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.

David A. Slack                49       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

Market Information

         Our common stock is currently 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, 2002:                                         High         Low
--------------------------------                                          ----         ---
<S>                                                                       <C>          <C>
First Quarter .........................................................   $14.069      $ 8.810
Second Quarter ........................................................   $ 9.960      $ 3.450
Third Quarter .........................................................   $ 7.190      $ 4.010
Fourth Quarter ........................................................   $ 5.980      $ 2.720

Fiscal Year Ended April 30, 2001:
--------------------------------
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 22, 2002 was $0.91. The
approximate number of stockholders of record on July 22, 2002 was 1,173,
excluding shares held in street name.

Dividends

         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.

Equity Compensation Plan Information

         The following table provides information about shares of our common
stock that may be issued upon exercise of stock options under all of our
existing equity compensation plans as of April 30, 2002.

                                      -17-

<PAGE>

                      Equity Compensation Plan Information

<TABLE>
<CAPTION>
                                                                                                Number of securities
                                                                                                remaining available
                                                                                                for future issuance
                                           Number of securities                                 under equity
                                           to be issued upon          Weighted-average          compensation plans
                                           exercise of                exercise price of         (excluding
                                           outstanding options,       outstanding options,      securities reflected
Plan category                              warrants and rights        warrants and rights       in the first column)
-------------                              -----------------------    ----------------------    ----------------------
<S>                                        <C>                        <C>                       <C>
Equity compensation plans
  approved by security holders ........                 7,590,546                    $13.20                 1,409,454
Equity compensation plans not
  approved by security holders ........                 1,010,632                      4.13                   139,368
                                           -----------------------    ----------------------    ----------------------
   Total ..............................                 8,601,178                    $12.14                 1,548,822
                                           =======================    ======================    ======================
</TABLE>

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 years ended April 30, 2002, 2001 and 2000 and the consolidated balance
sheet data as of April 30, 2002 and 2001 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, 1999 and 1998 and the consolidated balance
sheet data as of April 30, 2000, 1999 and 1998 are derived from consolidated
audited financial statements not included in this report.

                                      -18-

<PAGE>

<TABLE>
<CAPTION>
                                                                   Fiscal Year Ended April 30,
                                             -------------------------------------------------------------------------
                                                 2002            2001            2000           1999           1998
                                             ------------    ------------    -----------    -----------    -----------
                                                                 (in thousands, except share data)
<S>                                          <C>             <C>             <C>            <C>            <C>
Statement of Operations Data:
Revenue:
   Net sales .............................    $   56,387      $  126,902      $  71,785      $  46,458      $  24,158
   License fees and royalties ............         3,622           4,873          1,459             50            188
                                             ------------    ------------    -----------    -----------    -----------
                                                  60,009         131,775         73,244         46,508         24,346
Cost and expenses:
   Cost of sales (1) .....................        64,713          89,617         48,064         29,543         17,656
   Research and development (2) ..........        28,087          14,729          7,045          3,301          2,353
   Sales and marketing ...................         7,999           9,146          6,724          4,514          2,945
   General and administrative (3) ........        37,349          13,367          5,361          3,518          2,820
                                             ------------    ------------    -----------    -----------    -----------
     Total costs and expenses ............       138,148         126,859         67,194         40,876         25,774
                                             ------------    ------------    -----------    -----------    -----------
Income (loss) from operations ............       (78,139)          4,916          6,050          5,632         (1,428)
Investment income, net ...................         3,368           7,770             --             --             --
                                             ------------    ------------    -----------    -----------    -----------
Income (loss) before income taxes ........       (74,771)         12,686          6,050          5,632         (1,428)
Provision for income taxes (credit) ......        (2,581)          3,510          2,260          2,130           (570)
                                             ------------    ------------    -----------    -----------    -----------
Net income (loss) ........................    $  (72,190)     $    9,176      $   3,790      $   3,502      $    (858)
                                             ============    ============    ===========    ===========    ===========

Net income (loss) per share, basic and
  diluted ................................    $    (1.11)     $     0.15      $    0.07      $    0.06      $   (0.02)
                                             ============    ============    ===========    ===========    ===========

Weighted average number of common
  shares outstanding
   Basic .................................        65,249          62,460         54,030         54,030         54,030
                                             ============    ============    ===========    ===========    ===========

   Diluted ...............................        65,249          62,805         54,030         54,030         54,030
                                             ============    ============    ===========    ===========    ===========
</TABLE>

_________________________
(1)  Cost of sales for fiscal 2002 includes $8,100 for charges for obsolete and
     slow moving inventory and $8,300 of expenses related to the restructuring
     of operations. See Note 4 to Consolidated Financial Statements.

(2)  Research and development expenses for fiscal 2002 include $6,300 of
     expenses as the result of the Company's change of its policy on research
     and development expenses. Such expenses would have been classified as cost
     of sales under the previous policy. It is not practicable to determine the
     affect this change would have had on prior years.

(3)  General and administrative expenses for fiscal 2002 include $22,400 of
     expenses related to the restructuring of operations. See Note 4 to
     Consolidated Financial Statements.

<TABLE>
<CAPTION>
                                                                              As of April 30,
                                                   -------------------------------------------------------------------
Balance Sheet Data:                                   2002           2001          2000          1999          1998
                                                   -------------------------------------------------------------------
                                                                     (in thousands, except share data)
<S>                                                <C>              <C>            <C>          <C>           <C>
Cash and cash equivalents ......................     $ 61,020       $125,438       $   537      $   550       $    --
Working capital ................................       98,040        178,514        17,748       11,994         5,749
Total assets ...................................      251,776        280,448        61,137       31,523        17,110
Long-term obligations, less current portion ....        6,569             --            --           --            --
Shareholders' equity ...........................      220,480        254,899        52,962       26,169        14,596
</TABLE>

                                      -19-

<PAGE>


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

     The following discussion of our financial condition and results of
operations should be read in conjunction with the consolidated financial
statements and related notes thereto included elsewhere in this Form 10-K. The
following discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ substantially from those
anticipated in these forward-looking statements as a result of several factors,
including those set forth under "Factors That May Affect Our Future Results."

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) long distance telecommunication networks, and military communications.
Our optical subsystems are compatible with the advanced transmission protocols
used in these networks, including Gigabit Ethernet, Fast Ethernet, Fibre
Channel, Infiniband, ESCON and synchronous optical network (SONET). We also
design, manufacture and sell a full line of optical components, cable assemblies
and fiber management products 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 customer demand for
our products, 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

                                      -20-

<PAGE>

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 is also 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 is 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 have periodically 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 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 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.

     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 Electronics, Inc.
("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 continue
to invest 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. Prior to May 28,
2000, expenses have included allocations from Methode of expenses for the
salaries and related 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 legal, accounting and
other professional fees.

                                      -21-

<PAGE>

General and administrative expenses also include the amortization of goodwill
resulting from the excess of the purchase price over net assets of the acquired
companies. Prior to May 28, 2000, 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. We expect to continue to make significant expenditures for
general and administrative services.

Critical Accounting Policies

     Accounts Receivable

     We sell products primarily to various telecommunications providers and
distributors. Sales to these customers have varying degrees of collection risk
associated with them. Judgment is required in assessing the realization of these
receivables based on aging, historical experience and customer's financial
condition.

     Inventory Reserves

     It is our policy to reserve 100% of the value of inventory we specifically
identify and consider obsolete or excessive to fulfill future sales estimates.
We define obsolete inventory as inventory that will no longer be used in the
manufacturing process or items that have potential quality problems. Excess
inventory is defined as inventory in excess of one year's projected usage.
Excess inventory is determined using our best estimate of future demand at the
time, based upon information then available to us. In general, our policy is to
scrap inventory determined to be obsolete shortly after the determination is
made and to keep excess inventory for a reasonable amount of time before it is
discarded. Occasionally, changed circumstances in the marketplace present us
with an opportunity to sell inventory that was previously determined to be
excessive and reserved for. If this occurs, we intend to vigorously pursue such
opportunities.

     Long-Lived Assets Impairment

     We review the carrying value of our long-lived assets, including goodwill,
if the facts and circumstances, such as significant declines in sales, earnings
or cash flows or material adverse changes in the business climate suggest that
it may be impaired. If this review indicates that goodwill or other long-lived
assets will not be recoverable, as determined based on the estimated
undiscounted cash flows of the long-lived asset, impairment is measured by
comparing the carrying value of the long-lived asset to fair value. Fair value
is determined based on quoted market values, discounted cash flows or
appraisals. If an asset is considered held for sale, we adjust the carrying
value of the underlying assets to fair value, as determined based on the
estimated net realizable proceeds of the assets.

     Revenue Recognition

     Revenue from product sales, net of trade discounts, is recognized when
title passes, which generally occurs upon shipment. We handle returns by
replacing, repairing or issuing credit for defective products when returned. We
establish a reserve for returns based on any known and anticipated returns.

                                      -22-

<PAGE>

     Customer Returns

     It is our policy to establish a reserve for customer returns based on any
known and anticipated returns based on past experience. Occasionally, we will
receive requests from customers to accept the return of merchandise for which
they had previously accepted delivery. Although we have no obligation to do so,
each such request is evaluated in light of the contemplation of future business
from the customer. We will continue to consider these requests in the future,
however, we are not able to predict that we will enter into any additional
agreements in the future, and, if so, the amount of any returns.

     Research and Development

     All expenses relative to the development of a new product, prior to its
introduction into production, are considered research and development expenses.
In addition, the costs of the engineering effort to do significant redesign to
enhance product performance that results essentially in a new product are also
considered to be research and development expenses. Because the true
manufacturability of our products is not obvious until a period of volume
production has occurred, initial production is considered a part of the
development process. During this phase, a portion of the scrap expense and yield
loss would be considered development expense. A product is still considered
under development until it matures to the point where its production yields
(volumes) are consistent with other mature products and any engineering effort
is predominately dedicated to customer applications and/or quality support.

     Basis of Presentation

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

Results of Operations

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

                                      -23-

<PAGE>

                                                   Fiscal Year Ended April 30,
                                                 ------------------------------
                                                   2002       2001       2000
                                                 --------   --------   --------
Revenue:
   Net sales ................................       100.0%     100.0%     100.0%
   License fees and royalties ...............         6.2        3.8        2.0
                                                 --------   --------   --------
     Total ..................................       106.2      103.8      102.0

Cost and expenses:
   Cost of sales ............................       114.4       70.6       67.0
   Research and development .................        49.8       11.6        9.8
   Sales and marketing ......................        14.2        7.2        9.4
   General and administrative ...............        66.4       10.5        7.4
                                                 --------   --------   --------
     Total costs and expenses ...............       244.8       99.9       93.6

Income (loss) from operations ...............      (138.6)       3.9        8.4
Investment income, net ......................         6.0        6.1         --
                                                 --------   --------   --------
Income (loss) before income taxes ...........      (132.6)      10.0        8.4
Provision for income taxes (credit) .........        (4.6)       2.8        3.1
                                                 --------   --------   --------
Net income (loss) ...........................      (128.0)%      7.2%       5.3%
                                                 ========   ========   ========

Fiscal Years Ended April 30, 2002 and 2001

     Net Sales. Net sales decreased to $56.4 million in fiscal 2002 from $126.9
million in fiscal 2001. This $70.5 million decrease is the result of a $42.7
million decrease in net sales of optical subsystems and a $27.8 million decrease
in net sales of optical components.

     The decrease in net sales during fiscal 2002 of our optical subsystems was
primarily due to a decrease in sales of our embedded and removable transceivers.
The decrease in sales of our optical components was primarily due to a decrease
in sales of our optical backplane connectors and cable assemblies. The overall
decrease in sales was primarily due to lower customer demand due to the current
economic climate and reduced capital spending for optical networking equipment.
Sales were also negatively impacted by declines in average unit prices for our
products resulting from pricing pressure and changes in product mix. Our total
sales order backlog decreased to $8.4 million as of April 30, 2002 from $34.2
million as of April 30, 2001. Of this $25.8 million decrease in backlog, $20.2
million was due to a decrease in orders for our optical subsystems, and $5.6
million was due to a decrease in orders for our optical components. These
decreases reflect lower customer demand for our products, customer push-outs and
cancellation of orders, due in part to delays in the launch of new product
programs by our customers.

     License Fees and Royalties. License fees and royalties decreased to $3.6
million in fiscal 2002 from $4.9 million in fiscal 2001. The decrease primarily
relates to lump sum payments of approximately $3.5 million from the receipt of
license and royalty payments in association with the settlement of several
patent infringement cases in fiscal 2001 and generally lower sales of optical
subsystems and components among licensees consistent with general economic
conditions in the optical networking market. The decrease was partially offset
by the receipt of a $1.0 million lump sum payment from the settlement of a
patent infringement suit in fiscal 2002. License fees consist of both fixed
schedule payments and contingent payments based on sales volumes of licensed
products.

                                      -24-

<PAGE>

     Cost of Sales and Gross Margins. Cost of sales decreased to $64.7 million
in fiscal 2002 from $89.6 million in fiscal 2001. Gross profit as a percentage
of net sales, or gross margin, decreased to negative (14.8)% in fiscal 2002 from
29.4% in fiscal 2001. Approximately 14.4 percentage points of the 44.2
percentage point decrease in gross margin was due to charges for obsolete and
slow moving inventory, 16.9 percentage points of the decrease in gross margin
was a result of the decline in sales and the decline in the average unit selling
price for our products due primarily to pricing pressures and product mix, 14.7
percentage points was due to the expenses related to the restructuring charges
(including 10.2 percentage points due to charges for obsolete and slow moving
inventory relating to the exit from the single ferrule connector business, 3.0
percentage points for fixed asset impairment related to the exit from the single
ferrule connector business and the discontinuance of the vertical cavity surface
emitting laser (VCSEL) development program, and 1.5 percentage points for
employee severance pay related to the restructuring of operations), and 2.0
percentage points was due to customer returns of unusable inventory. These
factors were offset by the sale of approximately $2.1 million of inventory that
was previously considered excess and fully reserved in the fourth quarter of
fiscal 2001. The sale of this inventory favorably impacted gross margin by 3.8
percentage points.

     Cost of sales was charged approximately $13.8 million and $3.9 million in
fiscal 2002 and 2001 to increase the reserve for obsolete and excess inventory.

     Research and Development. Research and development expenses increased to
$28.1 million in fiscal 2002 from $14.7 million in fiscal 2001. This increase
was due primarily to $6.6 million in material and overhead costs related to
major product development projects, $4.7 million of additional personnel costs
dedicated to research and development, and $2.1 million for expanded research
and development facilities.

     During fiscal 2002, we refined our policy on research and development
expenses to include the costs of scrap and the yield loss during the development
stage of our products. The effect of this change was the classification of $6.3
million in expenses as research and development that would have been classified
as cost of sales under the previous policy. It is not practicable to determine
the effect this change would have had on prior years.

     Sales and Marketing. Sales and marketing expenses decreased to $8.0 million
in fiscal 2002 from $9.1 million in fiscal 2001. This decrease was due to a
decrease of $500,000 in sales and marketing salaries, fringe benefits, bonuses
and commissions, and $600,000 in field sales operating costs supporting our
sales volume.

     General and Administrative. General and administrative expenses increased
to $37.3 million in fiscal 2002 from $13.4 million in fiscal 2001. This $23.9
million increase was due primarily to $22.3 million of expenses related to the
restructuring charges (including $12.8 million for fixed asset impairment
related to the proposed sale of the Company's Bandwidth Semiconductor LLC
subsidiary and the Company's corporate aircraft, $8.5 million for goodwill
impairment related to Bandwidth Semiconductor LLC, and $1.0 million of legal and
other costs related to the restructuring of operations), a $2.4 million increase
in the allowance for doubtful accounts offset in part by a reduction of $800,000
in corporate management costs.

                                      -25-

<PAGE>

     We operate in markets that are currently experiencing a severe economic
downturn that began late in the third quarter of fiscal 2001 and escalated
during the first quarter of fiscal 2002. As a result, many of our customers
began to stretch their payment terms and our days sales in accounts receivable
increased to 85 days at April 30, 2001. Days sales in accounts receivable
improved to 52 days at April 30, 2002. During the first quarter of fiscal 2002,
we identified customers that we considered to be high risk relative to the
collection of accounts receivable. Based upon this review, we recorded a $2.1
million provision for doubtful accounts in the first quarter of fiscal 2002.

     Investment Income, Net. Investment income, net of investment expense,
decreased to $3.4 million in fiscal 2002 from $7.8 million in fiscal 2001.
Investment income consists of earnings on the short-term investment of excess
cash balances and the decrease of this income in fiscal 2002 reflects the
reduction of excess cash balances as well as lower interest rates throughout the
market place during this period.

     Income Taxes. The tax benefit recognized in fiscal 2002 represents the
benefit of tax loss carrybacks available to us. In the second quarter of fiscal
2002, we determined the need for a valuation allowance against the carrying
value of deferred tax assets primarily associated with tax loss carry forwards
based on the significant reduction in business levels experienced during the
quarter and our revised estimated of taxable earnings for the remainder of the
fiscal year. As a result, a $24.7 million valuation allowance has been recorded
which eliminated the tax benefit attributable to the net losses incurred in the
second, third and fourth quarters of fiscal 2002 (approximately $20.4 million),
eliminated approximately $3.9 million of tax benefits recorded in the quarter
ended July 31, 2001, and reserved for approximately $400,000 of deferred tax
assets recorded as of April 30, 2001.

     We have net operating loss carryforwards of approximately $48.5 million
that are available to offset taxable income in the future. The net operating
loss carryforwards will expire in 2022.

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

                                      -26-

<PAGE>

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.

     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.

Liquidity and Capital Resources

     Net cash used in operating activities totaled $20.2 million for fiscal
2002. The use of cash in operating activities resulted primarily from the net
loss and a decrease in accounts payable and accrued expenses offset in part by
decreases in accounts receivable and inventories. Cash provided by operating
activities in fiscal 2001 and 2000 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.

                                      -27-

<PAGE>

     Net cash used in investing activities was $43.5 million for fiscal 2002,
$71.7 million for fiscal 2001 and $24.8 million in fiscal 2000. 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 fiscal 2001 and 2002. We expended $2.95 million for the
acquisition of Polycore Technologies, Inc. in July 2000, $13.0 million for the
acquisition of the Optoelectronics division of Spire Corporation in December
1999, $770,500 for the acquisition of substantially all of the assets of B&H
Mold, Inc. in November 2001, $204,000 to increase our investment in MP Optical
Communications LLC in March 2001, $8.1 million for the acquisition of
substantially all of the net assets of the Optical Flexcircuits division of
Advanced Interconnection Technology, Inc. and $4.6 million (net of cash
received) for the acquisition of Tsunami Optics, Inc. in February 2002. In
addition, the Company acquired $2.8 million in cash from the acquisition of all
the outstanding common stock of Paracer, Inc. in March 2002.

     Net cash used in financing activities for fiscal 2002 represents repayments
on long-term borrowings. Net cash provided by financing activities for fiscal
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 fiscal
2000 consisted primarily of cash contributions from Methode.

     As of April 30, 2002, our principal source of liquidity was approximately
$91.9 million in cash, cash equivalents and short-term investments. 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. Our only cash
commitment is the repayment of long-term debt of approximately $10.3 million. We
believe that our current cash balances will be sufficient to meet our cash needs
for working capital, capital expenditures and repayments of long-term debt for
the next 12 months.

Factors That May Affect Our Future Results

                         Risks Relating to Our Business

We have recently incurred significant net losses, primarily due to the current
economic downturn. Unless we are able to increase our sales or further reduce
our costs, we will continue to incur net losses.

     The current economic downturn has resulted in reduced capital spending for
optical networking products. As a result, many of our customers have
significantly reduced, cancelled or rescheduled orders for our products and
expressed uncertainty as to their future requirements. We experienced a decrease
in net sales of 55% and incurred a net loss of $72.2 million during fiscal 2002.
We expect difficult industry conditions to continue for at least the next 6 to
12 months and may continue for a longer period. Any continued or further decline
in demand for our customers' products or in general economic conditions would
likely result in further reduction in demand for our products and our business,
operating results and financial condition would suffer.

                                      -28-

<PAGE>

     Although we have implemented personnel reductions and other cost reduction
programs, many of our costs are fixed in the near term and we expect to continue
to incur significant manufacturing, research and development, sales and
marketing and administrative expenses. Consequently, we will need to generate
higher revenues while containing costs and operating expenses if we are to
return to profitability. If our efforts to increase our revenues and contain our
costs are not successful, we will continue to incur net losses.

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. Accordingly, 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;

     .    the level of demand for our customers' products;

     .    the cancellation or postponement of orders;

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

     .    changes in our product mix;

     .    competitive pressures resulting in lower prices;

     .    our ability to control costs and expenses;

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

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

     .    general economic factors.

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

                                      -29-

<PAGE>

Our success depends on the long-term 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 long-term growth of these
markets and their use of optical communication technologies. If these markets do
not 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
introduction of new and enhanced products may cause our customers to defer or
cancel orders for existing products. In addition, a slowdown in demand for
existing products ahead of a new product introduction could result in a write
down in the value of inventory on hand relating to existing products.

     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

                                      -30-

<PAGE>

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.

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 and we depend on the companies that provide other components to support
industry standards as they evolve. 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 fiscal year ended April 30,
2002, McData Corporation and its contract manufacturers accounted for 24% of our
net sales. 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 Systems accounting for
11%, 11% and 10% 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, many 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

                                      -31-

<PAGE>

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.

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.
During the last twelve months, our customers have cancelled a significant number
of orders. The reduction, cancellation or delay of individual customer purchase
orders has caused and could continue to 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

                                      -32-

<PAGE>

higher average selling prices. Our inability to reduce manufacturing costs or
introduce new products with higher average selling prices 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., JDS Uniphase 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. As a result, these competitors are able
to devote greater resources than we can to the development, promotion, sale and
support of their products. In addition, several of our competitors have large
market capitalizations or cash reserves and are much better positioned than we
are to acquire other companies in our consolidating industry in order to gain
new technologies or products. Many of our competitors have much greater name
recognition, more extensive customer bases, better-developed distribution
channels and broader product offerings. These companies can leverage their
customer bases and broader product offerings and adopt aggressive pricing
policies to gain market share. In addition, companies with diversified product
offerings can better sustain an economic downturn.

     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. Competitive pressures, combined with
weakening demand, may result in further price reductions, lower margins and loss
of market share. 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. If we underestimate or
overestimate our requirements for these components, our business could be
significantly harmed.

     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.

                                      -33-

<PAGE>

     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.

     We make forecasts for our component requirements based on anticipated
product orders. 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. We may
not accurately predict the demand for our products and the lead-time required to
obtain key components. If we overestimate our requirements, we may have excess
inventory, which may become obsolete and would increase our costs. If we
underestimate our requirements, we may have inadequate inventory, which could
interrupt our manufacturing and delay delivery of our products to our customers.
Either of these occurrences would significantly harm our business.

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

                                      -34-

<PAGE>

vendor, may result in significant customer relations problems and injury to our
reputation and may impair the market acceptance of our products and technology.

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 were approximately 29.1% of our net sales during fiscal 2002 and
approximately 19.8% of our net sales in fiscal 2001. 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;

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

     .    acts of terrorism directed against the United States or U.S.
          affiliated targets.

                                      -35-

<PAGE>

     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.

We intend to pursue additional acquisitions. If we are unable to successfully
integrate any businesses or technologies that we acquire in the future or are
unable to realize the intended benefits of any future acquisitions, our business
will be harmed.

     As part of our strategy, we intend 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. Our experience in acquiring other businesses and
technologies is limited. Acquisitions could result in a number of financial
consequences, including:

     .    use of significant amounts of cash;

     .    the incurrence of debt and contingent liabilities;

     .    potentially dilutive issuances of equity securities;

     .    large one-time write-offs; and

     .    amortization expenses related to goodwill and other intangible assets.

     Acquisitions also involve numerous operational 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.

     If we are unable to successfully integrate these businesses or any other
businesses or technologies that we may acquire in the future or are unable to
realize the intended benefits of any future acquisitions, our business will be
harmed.

Our recent acquisitions have not generated significant sales and require
significant amounts of capital. If these businesses do not become profitable,
our operating results could be seriously harmed.

     In February 2002, we acquired all of the capital stock of Tsunami Optics,
Inc. In March 2002, we acquired all of the capital stock of Paracer, Inc. The
integration of these businesses into our company is not complete. These
businesses are expected to focus on the development and introduction of new
products and have not generated significant revenues to date. In addition, these
businesses have or will require significant amounts of capital to support their

                                      -36-

<PAGE>

product development activities, and we expect to continue to invest substantial
amounts of capital in these businesses for the foreseeable future. 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 has been necessary and may continue to 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 patent 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.

     We are plaintiffs in several lawsuits relating to our intellectual property
rights. The defendants in these lawsuits include Infineon Technologies Corp. and
E20, 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.

     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 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 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.

                                      -37-

<PAGE>


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.

We are currently defending several class action lawsuits which could subject us
to significant money damages, cause us to incur significant costs or otherwise
harm our business.

     We and certain of our executive officers are defendants in certain
purported class action lawsuits filed in the United States District Court,
Southern District of New York. Although we believe these lawsuits are without
merit, an adverse result in these lawsuits could subject us to significant money
damages. This litigation may also require us to incur significant costs in
defense of these lawsuits, could require significant involvement of our senior
management and may divert management's attention from our business and
operations, any of which could have a material adverse affect on our business,
results of operation or financial condition.

     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;

                                      -38-

<PAGE>

     .    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;

     .    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.

                                      -39-

<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, 47, 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, 50, 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, 61, served as President of Global Systems and
Technologies of Tellabs, Inc. from 1998 and Executive Vice President of Tellabs
from 1990, until his resignation in September 2001. Mr. Jackman also served as a
director of Tellabs, Inc. from 1993 until April 2002. From 1993 to 1998, Mr.
Jackman served as President of Tellabs Operations, Inc. 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. Mr. Jackman is also a
director of PCTEL, Inc.

     Charles Daniel Nelsen, 39, has served as Director of Global Supply Chain
Strategy for Motorola Inc.'s Network Solutions Sector 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, 49, has served as Chief Financial Officer of Gardner,
Carton & Douglas, a provider of 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. 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.

                                      -40-

<PAGE>

     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 September 20, 2002, 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.

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.

                                      -41-

<PAGE>

                                     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.   Financial Statement Schedule.

          3.   See Index to Exhibits immediately following the signature page.

     (b)  A Report on Form 8-K dated February 4, 2002 was filed reporting the
completion of the acquisition of Tsunami Optics, Inc. A Report on Form 8-K dated
March 28, 2002 was filed reporting the completion of the acquisition of Paracer,
Inc.

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

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

                                      -42-

<PAGE>

                             STRATOS LIGHTWAVE, INC.
                          INDEX TO FINANCIAL STATEMENTS

Item 14A. Index to Financial Statements and Financial Statement Schedule

     1.   Financial Statements:

<TABLE>
<CAPTION>
                                                                                        Page
                                                                                        ----
          <S>                                                                           <C>
          Report of Independent Auditors ...........................................     F-2
          Consolidated Balance Sheets - April 30, 2002 and 2001 ....................     F-3
          Consolidated Statements of Operations -
             Years Ended April 30, 2002, 2001 and 2000 .............................     F-4
          Consolidated Statements of Shareholders' Equity -
             Years Ended April 30, 2002, 2001 and 2000 .............................     F-5
          Consolidated Statements of Cash Flows -
             Years Ended April 30, 2002, 2001 and 2000 .............................     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, 2002, 2001 and 2000 .............................    II-1
</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>

                         REPORT OF INDEPENDENT AUDITORS

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, 2002 and 2001, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the three years in the period ended April 30, 2002. 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, 2002 and 2001, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended April 30, 2002, 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, presents fairly in all material respects
the information set forth therein.

                                          /s/ Ernst & Young LLP

Chicago Illinois
June 13, 2002,
except for Note 15, as to which the date is July 18, 2002

                                     F-2

<PAGE>

                    STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                      (in thousands, except share amounts)

<TABLE>
<CAPTION>
                                                                                                                  April 30,
                                                                                                           ------------------------
                                                                                                              2002          2001
                                                                                                           ----------    ----------
<S>                                                                                                        <C>           <C>
                                          ASSETS
                                          ------
Current assets:
   Cash and cash equivalents ..........................................................................    $   61,020    $  125,438
   Short-term investments .............................................................................        30,900        20,400
   Accounts receivable, less allowance (2002 - $727; 2001 - $401) .....................................         8,245        24,646
   Inventories:
     Finished products ................................................................................           798         1,551
     Work in process ..................................................................................         2,107         2,281
     Materials ........................................................................................        12,916        23,430
                                                                                                           ----------    ----------
                                                                                                               15,821        27,262
   Recoverable income taxes ...........................................................................         2,820            --
   Deferred income taxes ..............................................................................            --         2,624
   Prepaid expenses ...................................................................................         1,789         1,012
                                                                                                           ----------    ----------
         Total current assets .........................................................................       120,595       201,382
Other assets:
   Goodwill, less accumulated amortization (2002 - $1,620; 2001 - $779) ...............................        55,155        13,472
   Deferred income taxes ..............................................................................         4,494            --
   Assets held for sale ...............................................................................         4,202            --
   Other ..............................................................................................         1,252           534
                                                                                                           ----------    ----------
                                                                                                               65,103        14,006
Property, plant and equipment:
   Land ...............................................................................................         1,071         1,471
   Buildings and building improvements ................................................................        19,966        23,536
   Furniture and fixtures .............................................................................         8,571         3,070
   Machinery and equipment ............................................................................        69,310        57,104
                                                                                                           ----------    ----------
                                                                                                               98,918        85,181
   Less allowances for depreciation ...................................................................        30,020        20,121
                                                                                                           ----------    ----------
                                                                                                               68,898        65,060
                                                                                                           ----------    ----------
         Total assets .................................................................................    $  254,596    $  280,448
                                                                                                           ==========    ==========

                           LIABILITIES AND SHAREHOLDERS' EQUITY
                           ------------------------------------
Current liabilities:
   Notes payable ......................................................................................    $    2,840    $       --
   Accounts payable ...................................................................................        10,126        12,993
   Salaries, wages and payroll taxes ..................................................................         2,942         2,240
   Other accrued expenses .............................................................................         2,932         5,754
   Current portion of long-term debt ..................................................................         3,715            --
   Income taxes .......................................................................................            --         1,881
                                                                                                           ----------    ----------
         Total current liabilities ....................................................................        22,555        22,868
Long-term debt, less current portion ..................................................................         6,569            --
Deferred income taxes .................................................................................         4,494         2,205
Minority interest .....................................................................................           498           476
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
     72,781,287 and 64,092,307 shares at April 30, 2002 and 2001, respectively ........................           728           641
   Additional paid-in capital .........................................................................       283,162       245,538
   Retained earnings (accumulated deficit) ............................................................       (63,115)        9,075
   Foreign currency translation adjustments ...........................................................          (295)         (355)
                                                                                                           ----------    ----------
         Total shareholders' equity ...................................................................       220,480       254,899
                                                                                                           ----------    ----------
           Total liabilities and shareholders' equity .................................................    $  254,596    $  280,448
                                                                                                           ==========    ==========
</TABLE>

                 See notes to consolidated financial statements.

                                       F-3

<PAGE>

                    STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                     Fiscal Year Ended April 30,
                                                                                -------------------------------------
                                                                                  2002          2001           2000
                                                                                ---------      --------       -------
<S>                                                                             <C>            <C>            <C>
Revenue:
   Net sales ...............................................................    $  56,387      $126,902       $71,785
   License fees and royalties ..............................................        3,622         4,873         1,459
                                                                                ---------      --------       -------
     Total .................................................................       60,009       131,775        73,244
Cost and expenses:
   Costs of sales ..........................................................       64,713        89,617        48,064
   Research and development ................................................       28,087        14,729         7,045
   Sales and marketing .....................................................        7,999         9,146         6,724
   General and administrative ..............................................       37,349        13,367         5,361
                                                                                ---------      --------       -------
     Total costs and expenses ..............................................      138,148       126,859        67,194
                                                                                ---------      --------       -------
Income (loss) from operations ..............................................      (78,139)        4,916         6,050
Investment income, net .....................................................        3,368         7,770            --
                                                                                ---------      --------       -------
Income (loss) before income taxes ..........................................      (74,771)       12,686         6,050
Provision (credit) for income taxes ........................................       (2,581)        3,510         2,260
                                                                                ---------      --------       -------
Net income (loss) ..........................................................    $ (72,190)      $ 9,176       $ 3,790
                                                                                =========      ========       =======
Net income (loss) per share, basic and diluted .............................    $   (1.11)      $  0.15       $  0.07
                                                                                =========      ========       =======

Weighted average number of common shares outstanding:
   Basic ...................................................................       65,249        62,460        54,030
                                                                                =========      ========       =======
   Diluted .................................................................       65,249        62,805        54,030
                                                                                =========      ========       =======
</TABLE>

                       See notes to consolidated financial statements.

                                       F-4


<PAGE>

                    STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                 Years Ended April 30, 2002, 2001 and 2000
                                          ----------------------------------------------------------------------------------------
                                                                       Retained        Foreign
                                                       Additional      Earnings        Currency         Total
                                           Common       Paid-in      (Accumulated     Translation    Shareholders    Comprehensive
                                           Stock        Capital        Deficit)       Adjustments      Equity        Income (Loss)
                                          --------     ----------    ------------     -----------    ------------    -------------
<S>                                       <C>          <C>           <C>              <C>            <C>             <C>
Balance at April 30, 1999 ............    $    540     $   25,628    $         --     $        --    $     26,168
Net income ...........................                      3,790                                           3,790    $       3,790
                                                                                                                     =============
Net transactions with
  Methode Electronics, Inc. ..........                     23,004                                          23,004
                                          --------     ----------    ------------     -----------    ------------
Balance at April 30, 2000 ............         540         52,422               -              --          52,962
Net proceeds of initial public
  offering ...........................         101        195,354                                         195,455
Net income ...........................                        101           9,075                           9,176            9,176
Foreign currency translation
  adjustments ........................                                                       (355)           (355)            (355)
                                                                                                                     -------------
                                                                                                                            $8,821
                                                                                                                     =============

Net transactions with
  Methode Electronics, Inc. ..........                     (2,339)                                         (2,339)
                                          --------     ----------    ------------     -----------    ------------
Balance at April 30, 2001 ............    $    641     $  245,538    $      9,075     $      (355)   $    254,899
Common stock issued in acquisitions
  of subsidiaries ....................          87         37,624                                          37,711
Net loss .............................                                    (72,190)                        (72,190)        (72,190)
Foreign currency translation
  adjustments ........................                                                         60              60              60
                                                                                                                     -------------
                                                                                                                         $(72,130)
                                          -------      ----------    ------------     -----------    ------------    =============
Balance at April 30, 2002 ............    $   728      $  283,162    $    (63,115)    $      (295)   $    220,480
                                          =======      ==========    ============     ===========    ============
</TABLE>

                 See notes to consolidated financial statements.

                                       F-5

<PAGE>

                    STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                       Fiscal Year Ended April 30,
                                                                                 -------------------------------------
                                                                                   2002          2001          2000
                                                                                 --------      ---------     ---------
<S>                                                                              <C>           <C>           <C>
Operating activities:
Net income (loss) .........................................................      $(72,190)     $   9,176     $   3,790
     Adjustments to reconcile net income (loss) to net cash provided by
       (used in) operating activities:
        Provision for depreciation ........................................        11,768          7,032         3,025
        Provision for amortization ........................................           847            556           189
        Provision for goodwill impairment .................................         8,493             --            --
        Provision for asset impairment ....................................        13,715             --            --
        Provision for losses on accounts receivable .......................           326            140            77
        Provision (credit) for deferred income taxes ......................           421           (529)           68
        Minority interest .................................................            21            476            --
Changes in operating assets and liabilities: ..............................
        Accounts receivable ...............................................        16,302        (12,798)       (3,173)
        Inventories .......................................................        12,859        (16,163)       (4,186)
        Prepaid expenses and other assets .................................          (428)          (811)         (103)
        Accounts payable and accrued expenses .............................       (12,348)        15,582         2,244
                                                                                 --------      ---------     ---------
          Net cash provided by (used in) operating activities .............       (20,214)         2,661         1,931
Investing activities:
     Purchases of property, plant and equipment ...........................       (22,778)       (47,320)      (11,810)
     Purchases of short-term investments ..................................       (54,700)       (20,400)           --
     Sales of short-term investments ......................................        44,200             --            --
     Acquisitions, net of cash ($3,223) acquired ..........................        (9,961)          (770)      (12,963)
     Additional purchase price of prior-period acquisition ................            --         (2,957)           --
     Increase investment in MP Optical ....................................            --           (204)           --
     Other ................................................................          (275)           (51)          (49)
                                                                                 --------      ---------     ---------
          Net cash used in investing activities ...........................       (43,514)       (71,702)      (24,822)
Financing activities:
     Net proceeds from initial public offering ............................            --        195,454            --
     Payment of notes related to acquisitions .............................            --           (333)           --
     Repayments on long-term borrowings ...................................          (690)            --            --
     Net cash transfers from (to) Methode Electronics, Inc. ...............            --        (1,179)        22,877
                                                                                 --------      ---------     ---------
          Net cash provided by (used in) financing activities .............          (690)       193,942        22,877
                                                                                 --------      ---------     ---------
Net increase (decrease) in cash and cash equivalents ......................       (64,418)       124,901           (14)
Cash and cash equivalents at beginning of period ..........................       125,438            537           551
                                                                                 --------      ---------     ---------
Cash and cash equivalents at end of period ................................       $61,020       $125,438          $537
                                                                                 ========      =========     =========

Supplement schedule of non cash investing and financing activities:
     Long-term debt (including current portion) incurred in exchange for
       the purchase of software and equipment for information technology
        system ............................................................      $  9,084             --            --
     Common stock issued in acquisition of subsidiaries ...................        37,711             --            --
</TABLE>

                       See notes to consolidated financial statements.

                                       F-6


<PAGE>

                    STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 April 30, 2002
                  (all amounts in thousands, except share data)


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 $195,500.

         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.

                                       F-7



<PAGE>


                    STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                 (all amounts in thousands, except share data)

Note 2.     Summary of Significant Accounting Policies

         Principles of consolidation. The consolidated financial statements
include the accounts and transactions of all subsidiaries in which the Company
has a controlling interest. Significant intercompany accounts and transactions
have been eliminated in consolidation.

         Cash and 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.

         Short-term investments. Short-term investments represent short-term
corporate debt that is held to maturity. Cost represents estimated fair value at
the balance sheet date and there are no gross unrealized gains or losses.
Interest payments are included in investment income.

         Inventories. Inventories are stated at the lower of cost (first-in,
first-out method) or market. In fiscal 2002, 2001 and 2000, the Company incurred
charges of $13,835, $3,878 and $1,281, respectively, to write-off inventory
considered obsolete or excessive to fulfill future sales estimates. The increase
in these charges in fiscal 2002 is related to both the Company's optical
subsystems and components inventory, whereas the increases in fiscal 2000 and
2001 were primarily related to the Company's optical subsystems inventory.

         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 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.

         During fiscal 2002, the Company refined its policy on research and
development expenses to include the costs of scrap and the yield loss during the
development stage of its products. The effect of this change was the
classification of $6.3 million in expenses as research and development that
would have been classified as cost of sales under the previous policy. It is not
practicable to determine the affect this change would have had on prior years.

     Advertising. The Company expenses all advertising costs in the year
incurred. Advertising expenses in fiscal 2002, 2001 and 2000 were $548, $800 and
$1,074, respectively.

         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 $5,816, $1,905 and $553,
respectively, in fiscal 2002, 2001 and 2000. The Company establishes a

                                       F-8

<PAGE>

                    STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                 (all amounts in thousands, except share data)

reserve for returns based on any known and anticipated returns. At the end of
each of the years, the amount recorded as a reserve for returns was not
significant to the financial statements.

         The Company operates in markets that are currently experiencing a
severe economic downturn that began late in the third quarter of fiscal 2001 and
escalated during the first quarter of fiscal 2002. As a result, many customers
began to experience excess inventory levels and requested permission to return
merchandise for which they had previously accepted delivery or declined to
accept delivery of the merchandise after shipment from our facility. The
majority of this activity took place during the first six months of fiscal 2002.
In consideration of the contemplation of future business, the Company did accept
return of merchandise previously shipped to certain customers during fiscal
2002. The amount of returns for these shipments were approximately $3,700 in
fiscal 2002. In addition, returns for shipments declined by the customers
amounted to approximately $640. It is not anticipated that these conditions will
reoccur in the future.

         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
revenue from 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 2022.

         Income taxes. The Company's operating results through fiscal 2001 were
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 for fiscal year 2001 and
prior was determined as if the Company were taxed as a separate entity. Methode
and the Company had entered into a tax sharing agreement that required tax
calculation, accrual and payment by the Company as if the Company were filing a
separate tax return. All income tax payments were made by Methode. The Company
reimbursed Methode for all tax payments made on its behalf relative to fiscal
2001. The Company will file consolidated U.S. and state income tax returns on a
stand-alone basis for fiscal 2002. 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. The Company assesses on an ongoing basis
the need for valuation reserves against these deferred tax assets.

                                       F-9



<PAGE>

                    STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                 (all amounts in thousands, except share data)

         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 undiscounted cash flows is less than carrying
value.

         Due to restructuring of the Company's product offerings, along with
current and expected market conditions in the bandwidth marketplace, it became
apparent that the goodwill and fixed assets acquired with the Bandwidth
acquisition were impaired. In accordance with its policies, the Company
completed evaluations of the fair value of the Bandwidth long-lived assets
including goodwill during the quarter ended April 30, 2002. The Company recorded
non-cash charges of $11,800 and $8,500 for fixed assets and goodwill,
respectively, to reduce the carrying value of recorded fixed assets and goodwill
to their estimated fair value.

         In addition, the Company recorded non-cash charges of $1,000 and $900
on impairment of the corporate aircraft and fixed assets related to the exit
from the single ferrule connector business, respectively, to reduce the carrying
value of such assets to their estimated fair 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 has been amortized on a straight-line basis
over 25 years. In accordance with the provisions of Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets, the excess
purchase price for the acquisitions of Tsunami Optics, Inc. and Paracer, Inc.
has not been amortized because the acquisitions occurred after July 1, 2001.

         Use of estimates. The preparation of financial statements in conformity
with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from 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. SFAS No. 133 is effective for the Company
for the fiscal year ended April 30, 2002. The adoption of this statement did not
have a significant impact on the Company's financial results.

                                      F-10


<PAGE>

                    STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                 (all amounts in thousands, except share data)

         In June 2001, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No. 141, Business Combinations, and
No. 142, Goodwill and Other Intangible Assets, effective for fiscal years
beginning after December 15, 2001. Under the new rules, goodwill and intangible
assets deemed to have indefinite lives will no longer be amortized but will be
subject to annual impairment tests in accordance with the Statements. Intangible
assets with finite lives will continue to be amortized over those useful lives.

         The Company plans to adopt these new standards on May 1, 2002.
Application of the nonamortization provisions of the Statement is not expected
to be significant. During fiscal 2003, the Company will perform the first of the
required impairment tests of goodwill and indefinite lived intangible assets as
of May 1, 2002 and has not yet determined what the effect of these tests will be
on the earnings and financial position of the Company.

         In August 2001, the FASB issued SFAS 144, Accounting for the Impairment
or Disposal of Long Lived Assets. The Company will adopt this standard on May 1,
2002. The Company does not expect that the adoption of this statement will have
a material effect on the Company's financial statements.

Note 3.           Acquisitions

Fiscal 2002

         On March 28, 2002, the Company acquired all of the outstanding common
stock of Paracer, Inc. for approximately 5.5 million shares of the Company's
common stock valued at $21,832, and $339 in cash. In addition, the Company
assumed approximately $1,000 of debt, net of cash acquired. Paracer designs
and manufactures Parallel Optics transceivers and subsystems and is based in
Santa Clara, California.

         On February 4, 2002, the Company acquired all of the outstanding common
stock of Tsunami Optics, Inc. in exchange for approximately 3.2 million shares
of the Company's common stock valued at $15,879, and $4,728 in cash. In
addition, the Company assumed approximately $5,900 of debt, plus certain
expenses in connection with the transaction, including a loan of approximately
$3,800 made by the Company to Tsunami prior to the acquisition. The $3,800 loan
was converted to additional capital subsequent to the acquisition. The purchase
agreement includes additional contingent consideration of up to $18,000 payable
in the Company's common stock that may become due based on the attainment of
certain performance targets relative to gross margin dollars on sales during the
fiscal year ended April 30, 2003. Any additional consideration will be recorded
as goodwill. Tsunami develops and manufactures innovative fiber optic components
and modules and is based in Mountain View, California.

         On May 31, 2001, the Company purchased substantially all of the net
assets of the Optical Flexcircuits division of Advanced Interconnection
Technology, Inc., a manufacturer of fiber optic circuits located in Hauppauge,
New York, for approximately $8,117 in cash including costs of acquisition.

                                      F-11

<PAGE>

                    STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                 (all amounts in thousands, except share data)

Fiscal 2001

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

         Effective February 23, 2000, the Company entered into an amendment to
the Asset Purchase Agreement with Rockledge Microelectronics, Inc. (formerly
Polycore Technologies, Inc.) which provided that in the event the Company
participated in an initial public offering of shares to be accomplished not
later than November 15, 2000, the sum of $2,957 would become 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.

Fiscal 2000

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

                                      F-12



<PAGE>

                    STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                 (all amounts in thousands, except share data)

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

<TABLE>
<CAPTION>
                                                 Optoelectronics
                                                   Division of                       Advanced        Tsunami
                                                      Spire                      Interconnection     Optics,      Paracer,
Amount Allocated To:                               Corporation       B&H Mold       Technology         Inc.         Inc.
-------------------                              ---------------    ----------   ---------------   -----------   ----------
<S>                                              <C>                <C>          <C>               <C>           <C>
Assets acquired:
     Cash ....................................           $    --          $ --            $   --       $    79      $ 3,144
     Accounts receivable .....................                --            --                --           162           30
     Inventories .............................                71            43               559           827           --
     Property, plant & equipment .............             3,592           233               318         1,286        1,237
     Other ...................................                --            10                50           417          299
                                                 ---------------    ----------   ---------------   -----------   ----------
       Total assets ..........................             3,663           286               927         2,771        4,710
Liabilities assumed:
     Notes payable ...........................                --            --                --         2,118        3,722
     Accounts payable ........................                33            --                --         1,254          156
     Accrued expenses ........................                --           107               180           350          719
                                                 ---------------    ----------   ---------------   -----------   ----------
       Total liabilities .....................                33           107               180         3,722        4,597
                                                 ---------------    ----------   ---------------   -----------   ----------
     Net assets acquired .....................             3,630           179               747          (951)         113
     Excess purchase price ...................             9,333           591             7,370        21,558       22,058
                                                 ---------------    ----------   ---------------   -----------   ----------
     Purchase price ..........................           $12,963          $770            $8,117       $20,607      $22,171
                                                 ===============    ==========   ===============   ===========   ==========

Cash paid, including transaction costs .......           $12,963          $770            $8,117       $ 4,728      $   339
Stock consideration ..........................                --            --                --        15,879       21,832
                                                 ---------------    ----------   ---------------   -----------   ----------
Total purchase price .........................           $12,963          $770            $8,117       $20,607      $22,171
                                                 ===============    ==========   ===============   ===========   ==========
</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.
The results of operations are included in the Company's consolidated financial
statements. As of April 30, 2002, Methode has contributed $471 (prior to
transfer of ownership to the Company) and Stratos has contributed $204 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 the Company
except for the Optoelectronics Division of Spire Corporation and the $471
contribution to MP Optical China which was provided by Methode.

     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 the fiscal 2002 acquisitions been made as
of the beginning of fiscal 2001 and the fiscal 2001 and 2000 acquisitions been
made as of the beginning of fiscal 2000, unaudited pro forma sales and operating
results would have been as follows:

                                      F-13

<PAGE>

                    STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                 (all amounts in thousands, except share data)


<TABLE>
<CAPTION>
                                                                       -------------------------------------
                                                                            Fiscal Year Ended April 30,
                                                                       -------------------------------------
                                                                          2002          2001         2000
                                                                       ----------    ----------   ----------
<S>                                                                    <C>           <C>           <C>
Net sales ..........................................................     $ 57,722      $131,495      $75,642
Net income (loss) ..................................................      (82,892)        4,867        3,009
Net income (loss) per share, basic and diluted .....................        (1.27)         0.08         0.06
</TABLE>

     The pro forma results reported above are not necessarily indicative of
future results.

     The preliminary purchase price allocations for the Tsunami and Paracer
acquisitions are subject to adjustment in fiscal 2003 when finalized. The
Company is currently in the process of having appraisals performed on the
significant assets. Because of current tax regulations, the goodwill related to
the Tsunami and Paracer acquisitions cannot be deducted for federal and state
income tax purposes.

Note 4.   Restructuring Charges

     The Company recorded restructuring charges of approximately $31,200 in
fiscal 2002. These charges included excess and obsolete inventory, goodwill and
fixed asset impairment, personnel, bad debt, and legal costs related to the
restructuring of operations. Of the total restructuring charge of $31,200,
approximately $21,800 relates to the proposed sale of the Company's Bandwidth
Semiconductor LLC subsidiary located in Hudson, New Hampshire. This amount
represents $11,800 for the write down of fixed assets to their realizable value
from the proposed sale, $8,500 for goodwill impairment, $1,100 for costs
(employee severance pay, abandonment of fixed assets and costs to sublease the
manufacturing facility) associated with the discontinuance of the vertical
cavity surface emitting laser development program (VCSEL) and $400 of other
costs related to the restructuring of operations. The Bandwidth fixed assets net
of allowance for impairment are classified as assets held for sale on the
balance sheet. Sales for Bandwidth were $2,427, $2,519 and $669 in fiscal 2002,
2001 and 2000, respectively, and the operating loss was $7,797, $4,611 and
$1,168 in fiscal 2002, 2001 and 2000, respectively.

     In fiscal 2002, the Company also made the decision to abandon the
manufacture of all product lines which have become purely commodity products in
the market place and concentrate on more highly engineered and high value-added
products. These products demand higher selling prices and deliver higher
contribution margins. Approximately $7,500 of the restructuring charges relates
to exiting the single ferrule connector business. This amount represents a
$6,300 charge for obsolete and excess inventory, $900 impairment of fixed assets
and $300 for employee severance pay related to the restructuring of operations.

                                      F-14

<PAGE>

                    STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                  (all amounts in thousands, except share data)

         The restructuring charges and their utilization are summarized as
follows:

<TABLE>
<CAPTION>
                                           Balance          2002      Utilized through          Balance
(in thousands)                         April 30, 2001     Charges      April 30, 2002       April 30, 2002
--------------                         --------------   -----------   ----------------      --------------
<S>                                    <C>              <C>           <C>                   <C>
Employee costs .....................              $--       $   850            $     -              $  850
Legal and other costs ..............               --         1,850                640               1,210
                                       --------------   -----------   ----------------      --------------
Cash charge ........................               --         2,700                640               2,060

Asset impairment ...................               --        13,700             13,700 (1)              --
Goodwill impairment ................               --         8,500              8,500 (1)              --
Inventory ..........................               --         6,300              6,300 (1)              --
                                       --------------   -----------   ----------------      --------------
Non-cash charge ....................               --        28,500             28,500                  --
                                       --------------   -----------   ----------------      --------------

Total charge .......................              $--       $31,200            $29,140              $2,060
                                       ==============   ===========   ================      ==============
</TABLE>

(1)  Offset against carrying values of respective assets.

     These expenses have been classified in the Statement of Operations as
follows:

<TABLE>
<S>                                                                                                <C>
Cost of sales ................................................................................     $ 8,300
Research and development .....................................................................         500
General and administrative ...................................................................      22,400
                                                                                                 ---------
   Total .....................................................................................     $31,200
</TABLE>

     The Company terminated 94 employees during the restructuring of its
operations, including both production and administrative personnel. Severance
pay relative to these terminations will be paid out during the first quarter of
fiscal 2003.

Note 5.   Income Taxes

     The tax benefit recognized in fiscal 2002 represents the benefit of tax
loss carrybacks available to the Company. The Company recorded a valuation
allowance in fiscal 2002 against the carrying value of deferred tax assets
primarily associated with tax loss carry forwards based on the significant
reduction in business levels experienced during the year and uncertainty
regarding realization of the net operating loss carryforward. As a result, a
valuation allowance of $24,700 was recorded which eliminated the tax benefit
attributable to the losses incurred in fiscal 2002 (approximately $20,400),
eliminated approximately $3,900 of tax benefits recorded in the quarter ended
July 31, 2001, and reserved for approximately $400 of deferred tax assets
recorded as of April 30, 2001.

                                      F-15

<PAGE>

                    STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                 (all amounts in thousands, except share data)

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

<TABLE>
<CAPTION>
                                                                                     As of April 30,
                                                                                 -----------------------
                                                                                    2002         2001
                                                                                 ----------   ----------
<S>                                                                              <C>          <C>
Deferred income tax assets:
   Allowance for doubtful accounts ...........................................     $    246       $  160
   Inventory reserves ........................................................        6,261        1,435
   Basis difference in assets ................................................        4,729           --
   Deferred compensation .....................................................          459          752
   Net operating loss carryforwards ..........................................       17,019           --
   Vacation accrual ..........................................................          214          277
   Other .....................................................................          263           --
                                                                                 ----------   ----------
                                                                                     29,191        2,624
Deferred income tax liabilities:
   Accelerated tax depreciation ..............................................        4,309        2,042
   Investment basis differences ..............................................          185          163
                                                                                 ----------   ----------
                                                                                      4,494        2,205
   Valuation allowance .......................................................      (24,697)          --
                                                                                 ----------   ----------
   Net deferred income tax asset .............................................     $     --       $  419
                                                                                 ==========   ==========
</TABLE>

     Income taxes consisted of the following:

<TABLE>
<CAPTION>
                                                                        Fiscal Year Ended April 30,
                                                                   -------------------------------------
                                                                      2002          2001         2000
                                                                   ----------    ----------   ----------
<S>                                                                <C>           <C>          <C>
Current:
   Federal (credit) ............................................      $(2,778)       $2,602       $1,586
   Foreign .....................................................           --           773          257
   State (credit) ..............................................         (224)          664          349
                                                                   ----------    ----------   ----------
                                                                      $(3,002)       $4,039       $2,192
Deferred (credit) ..............................................          421          (529)          68
                                                                   ----------    ----------   ----------
                                                                      $(2,581)       $3,510       $2,260
                                                                   ==========    ==========   ==========
</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,
                                                                   -------------------------------------
                                                                      2002          2001         2000
                                                                   ----------    ----------   ----------
<S>                                                                <C>           <C>          <C>
Income tax at statutory rate (credit) ..........................     $(26,169)      $ 4,440       $2,057
   Effect of State income taxes ................................       (2,242)          364          239
   Tax exempt investment income ................................          785        (1,042)          --
   Foreign operations with lower statutory rates ...............          121          (299)         (89)
   Valuation allowance .........................................       24,697            --           --
   Other-net ...................................................          227            47           53
                                                                   ----------    ----------   ----------
Income tax provision (credit) ..................................     $ (2,581)      $ 3,510       $2,260
                                                                   ==========    ==========   ==========

</TABLE>

                                      F-16

<PAGE>

                    STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                 (all amounts in thousands, except share data)

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

<TABLE>
<CAPTION>
                                                   Fiscal Year Ended April 30,
                                              --------------------------------------
                                                  2002          2001          2000
                                              -----------    ----------    ---------
<S>                                           <C>            <C>           <C>
Domestic .................................     $(70,697)       $ 9,935       $5,243
Foreign ..................................       (1,493)         2,751          807
                                              -----------    ----------    ---------
                                               $(72,190)       $12,686       $6,050
                                              ===========    ==========    =========
</TABLE>

         The Company settled its income tax liability through the additional
paid-in capital account in fiscal 2000. At April 30, 2001, income taxes payable
included $1,550 payable to Methode in accordance with a tax sharing and
indemnification agreement. At April 30, 2002, recoverable income taxes represent
the future recovery of taxes paid with the fiscal 2001 federal and state income
tax returns and amounts due from Methode for overpayment of fiscal 2001
estimated tax payments.

         The Company paid $1,405 to Methode in fiscal 2002 for fiscal 2001
federal and state income taxes.

         The Company has net operating loss carryforwards of approximately
$48,500 that are available to offset taxable income in the future. The net
operating loss carryforwards will expire in 2022.

Note 6.           Long-Term Debt

         During 2002, the Company entered into two notes payable for the
purchase of computer software and hardware in connection with the implementation
of a new information technology system and several equipment financing
arrangements. At April 30, 2002, information relating to these notes is as
follows:

<TABLE>
<CAPTION>
                                                               Information Technology         Equipment
                                                            ----------------------------
                                                              Note 1           Note 2         Financing        Total
                                                            -----------     ------------    -------------    ---------
<S>                                                         <C>             <C>             <C>              <C>
Current portion ........................................        $1,610           $1,137           $  968      $ 3,715
Long-term ..............................................         4,369            1,466              734        6,569
                                                            -----------     ------------    -------------    ---------
                                                                $5,979           $2,603           $1,702      $10,284
                                                            ===========     ============    =============    =========

Interest rate ..........................................         5.50%            3.52%           13.72%

Payment terms ..........................................       Monthly        Quarterly          Monthly

Maturity ...............................................          2006             2005             2005
</TABLE>

         Cash payments and interest expense in fiscal 2002 for interest on debt
amount to $219.

                                      F-17

<PAGE>

                    STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                 (all amounts in thousands, except share data)

         The aggregate amount of scheduled annual maturities of long-term debt
for each of the next five years is:

                         Fiscal Year                             Amount
                         -----------                             ------
                            2003                                 $ 3,715
                            2004                                   3,767
                            2005                                   2,363
                            2006                                     439
                            2007                                      --
                                                               ----------
                                                                 $10,284
                                                               ==========

Note 7.       Stock Options

         In fiscal 2001, the Company adopted the Stratos Lightwave, Inc. 2000
Stock Plan (the "2000 Plan"). The 2000 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. Pursuant to the 2000 Plan, 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, 2002, awards for 1,409,454 shares under
the 2000 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.

<TABLE>
<CAPTION>
                                           Options Outstanding at April 30, 2002          Options Exercisable
                                          --------------------------------------- ----------------------------------
                                                                   Weighted                            Weighted
                                                                    Average                             Average
                                                Shares           Exercise Price        Shares        Exercise Price
                                          ------------------   ------------------ ---------------- -----------------
<S>                                       <C>                  <C>                <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              25,000          $21.00
Granted ................................      3,476,324               5.62
Cancelled ..............................     (1,013,048)             16.44
                                          ------------------   ------------------ ---------------- -----------------
April 30, 2002 .........................      7,590,546             $13.20           1,967,109          $18.66
                                          ==================   ================== ================ =================
</TABLE>

<TABLE>
<CAPTION>
                                                                                       Average          Average
                                                                                      Remaining         Weighted
Range of Exercise Prices                                                Shares       Life (Years)    Exercise Price
------------------------                                            -------------- --------------- -----------------
<S>                                                                 <C>            <C>             <C>
$2.75 - 9.96 .....................................................      3,253,171       9.5            $ 5.44
$10.27 - 16.13 ...................................................      1,011,825       8.8             11.25
$21.00 - 26.81 ...................................................      3,265,050       8.5             21.14
$31.56 - 46.88 ...................................................         60,500       8.4             34.83
                                                                    -------------- --------------- -----------------
                                                                        7,590,546       8.8            $13.20
                                                                    ============== =============== =================
</TABLE>

         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

                                      F-18

<PAGE>

                    STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                 (all amounts in thousands, except share data)

the Methode 1997 Stock Plan. The Company has assumed all unvested Methode
options held by its employees on the distribution and such options were
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 Company 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.

         In fiscal 2002, the Company adopted the Stratos Lightwave, Inc. 2002
Stock Plan for Acquired Companies (the "2002 Plan"). The 2002 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, 2002, the maximum number of shares for which awards may be issued is
1,150,000 shares and the number of shares for which restricted stock awards may
be issued may not exceed 100,000 shares. At April 30, 2002, awards for 139,368
shares under the 2002 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. Shareholder approval was not
solicited for this plan.

<TABLE>
<CAPTION>
                                                                             Options Outstanding at April 30, 2002
                                                                           -----------------------------------------
                                                                                                  Weighted Average
                                                                                 Shares            Exercise Price
                                                                           -------------------  --------------------
<S>                                                                        <C>                  <C>
April 30, 2001 .........................................................              --               $  --
Granted ................................................................       1,112,498                4.19
Cancelled ..............................................................        (101,866)               4.79
                                                                           -------------------  --------------------
April 30, 2002 .........................................................       1,010,632               $4.13
                                                                           ===================  ====================
</TABLE>

<TABLE>
<CAPTION>

                                                                                      Average          Average
                                                                                     Remaining         Weighted
Range of Exercise Prices                                                Shares      Life (Years)    Exercise Price
------------------------                                            -------------- --------------- -----------------
<S>                                                                 <C>            <C>             <C>
$0.19 - 2.38 ....................................................         105,632       8.3             $0.50
$4.20 - 5.00 ....................................................         905,000       9.8              4.56
                                                                    -------------- --------------- -----------------
                                                                        1,010,632       9.0             $4.13
                                                                    ============== =============== =================
</TABLE>

         Under the terms of the acquisition agreements, the Company has assumed
all outstanding options held by the employees of Tsunami Optics, Inc. and
Paracer, Inc. at the date of acquisition. These options were converted into
options to purchase shares of the Company's common stock. The number of shares
and the exercise price of the Tsunami and Paracer options that converted into
Stratos options were adjusted using a conversion formula set per the purchase
agreement. The resulting Stratos options have maintained the original vesting
provisions and option period. The Tsunami and Paracer options converted into
110,498 options under the 2002 Plan to purchase shares of the Company's common
stock at a weighted average price of $0.50.

                                      F-19

<PAGE>

                    STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                 (all amounts in thousands, except share data)

         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 (loss) in the years ended April 30, 2002, 2001 and 2000 would have been
amounts as indicated below on a pro forma basis:

<TABLE>
<CAPTION>
                                                                                   2002        2001        2000
                                                                                ----------- ----------- -----------
<S>                                                                               <C>          <C>          <C>
Net income (loss)
     As reported ............................................................     $(72,190)    $ 9,176      $3,790
     Pro forma ..............................................................      (94,239)     (3,044)      3,525
Basic and diluted earnings (loss) per share
     As reported ............................................................     $  (1.11)    $  0.15      $ 0.07
     Pro forma ..............................................................     $  (1.44)    $ (0.05)     $ 0.07
</TABLE>

         The weighted average estimated fair value of options granted during
fiscal 2002, 2001 and 2000 was $4.96, $17.16 and $14.42, 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>
                                                                                    2002        2001        2000
                                                                                ------------ ----------- ----------
<S>                                                                             <C>          <C>         <C>
Risk free interest rates ....................................................        5.6%         6.3%       5.9%
Expected option life in years ...............................................        7.0          7.0        6.0
Expected volatility .........................................................      126.4%       116.4%      55.2%
Dividend yield ..............................................................        0.0%         0.0%       0.5%
</TABLE>

                                      F-20

<PAGE>

                    STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                 (all amounts in thousands, except share data)

         In total, the Company has reserved for issuance in the future the
following number of shares of its common stock:

<TABLE>
<CAPTION>
                                                                                                            Shares
                                                                                                         -------------
<S>                                                                                                      <C>
Additional shares for the acquisition of Tsunami Optics, Inc. ........................................      9,574,213
2000 Stock Plan ......................................................................................      1,409,454
2002 Stock Plan ......................................................................................        139,368
                                                                                                         -------------
   Total .............................................................................................     11,123,035
                                                                                                         =============
</TABLE>

Note 8.        Employee 401(k) Savings Plan

         The Company sponsors a 401(k) Savings Plan (the "Plan") which covers
substantially all of its employees. The Plan is a salary reduction plan that
allows employees to defer a percentage of wages subject to Internal Revenue
Service limits. The Plan also allows for Company discretionary contributions
equal to 3% of eligible compensation. The Company provided for discretionary
contributions to the Plan totaling approximately $475 for fiscal 2002.

Note 9.        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.

         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.

                                      F-21

<PAGE>

                    STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                 (all amounts in thousands, except share data)

         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 10.      Earnings (Loss) Per Share

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

<TABLE>
<CAPTION>
                                                                                    Fiscal Year Ended April 30,
                                                                                ------------------------------------
                                                                                    2002        2001        2000
                                                                                ------------ ----------- -----------
<S>                                                                             <C>          <C>         <C>
Numerator - net income (loss) ................................................    $(72,190)    $  9,176    $  3,790
                                                                                ============ =========== ===========
Denominator:
     Denominator for basic earnings per share -
       weighted-average shares outstanding ...................................      65,249      62,460      54,030
     Dilutive potential common shares - employee stock options ...............          --         345          --
                                                                                ------------ ----------- -----------
     Denominator for diluted earnings per share - adjusted
       weighted - average shares and assumed conversions .....................      65,249      62,805      54,030
                                                                                ============ =========== ===========
     Basic and diluted earnings (loss) per share .............................    $  (1.11)    $  0.15     $  0.07
                                                                                ============ =========== ===========
</TABLE>

         Options to purchase 8,601,178 and 2,262,342 shares of Common Stock at a
weighted average option price of $12.10 and $20.06 were outstanding during
fiscal 2002 and 2001, respectively, but were not included in the computation of
diluted earnings per share because of the net loss or because the exercise price
was greater than the average market price of the common shares and, therefore,
the effect would have been antidilutive.

Note 11.      Transactions with Methode

         The Company's revenues from sales of products to Methode in fiscal
2002, 2001 and 2000 were $2,752, $3,684 and $5,898, respectively.

         The Company's operations in fiscal 2000 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 $35,700 for
fiscal 2000, 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. The agreements govern individual
transitional services, as requested 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.

                                      F-22

<PAGE>

                    STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                 (all amounts in thousands, except share data)

         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. The need for services under these
agreements have been substantially reduced at the close of fiscal 2001. Shared
services have continued 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 fiscal 2001 and
2000 were classified as follows:

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

         In addition, the Company incurred net charges (credit) of approximately
$(41) in fiscal 2002 and $436 in fiscal 2001 under its transitional service
agreements with Methode.

Note 12.      Material Customers and Concentration of Credit Risk

         During fiscal 2002, sales to McData Corporation and its contract
manufacturers amounted to 24% of consolidated net sales.

         During fiscal 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 fiscal 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.

         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
19% of the total outstanding balance at April 30, 2002.

                                      F-23

<PAGE>

                    STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                 (all amounts in thousands, except share data)

Note 13.      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.

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

<TABLE>
<CAPTION>
                                                                                   Fiscal Year Ended April 30,
                                                                               -------------------------------------
                                                                                  2002          2001        2000
                                                                               ------------  ----------- -----------
<S>                                                                            <C>           <C>         <C>
Net sales
     United States ..........................................................    $ 47,010     $112,842     $65,784
     Europe .................................................................       9,377       14,060       6,001
                                                                               ------------  ----------- -----------
                                                                                 $ 56,387     $126,902     $71,785
                                                                               ============  =========== ===========
Net income (loss)
     United States ..........................................................    $(70,697)    $  7,198     $ 3,198
     Europe .................................................................      (1,493)       1,978         592
                                                                               ------------  ----------- -----------
                                                                                 $(72,190)    $  9,176     $ 3,790
                                                                               ============  =========== ===========
Long-lived assets
     United States ..........................................................    $ 65,813     $ 61,751     $23,230
     Europe .................................................................       3,085        3,309       1,705
                                                                               ------------  ----------- -----------
                                                                                 $ 68,898     $ 65,060     $24,935
                                                                               ============  =========== ===========
</TABLE>

Note 14.      Litigation

         The Company has been named as a defendant in four purported class
action lawsuits. The complaints also name as defendants the underwriters for the
Company's initial public offering. The complaints are substantially identical to
numerous other complaints filed against other companies that went public over
the last several years. The complaints generally allege, among other things,
that the registration statement and prospectus from the Company's June 26, 2000
initial public offering failed to disclose certain alleged actions by the
underwriters for the offering. The Company believes that these lawsuits are
without merit and intends to defend them vigorously.

         During fiscal 2002 and 2001, the Company settled several patent
infringement cases. As a result of these settlements, the Company received
lump-sum payments of approximately $1,000 in fiscal 2002 and $3,500 in fiscal
2001, which were recorded as license fees and royalties in the consolidated
income statement. Legal fees in connection with some of these matters of
approximately $990 in fiscal 2002 and $1,500 in fiscal 2001 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.

                                      F-24

<PAGE>

                    STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                 (all amounts in thousands, except share data)

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

Note 15.      Subsequent Events

Litigation
----------

         In June 2002, Catherine Lego, representative of the former stockholders
of Tsunami Optics, Inc., filed a lawsuit against the Company in the Superior
Court of California, City and County of Santa Clara, relating to the Company's
acquisition of Tsunami Optics, Inc. in February 2002. The complaint alleges,
among other things, that the Company breached the acquisition agreement by
failing and refusing to allow Tsunami to operate as a separate subsidiary in the
ordinary course and by firing the Tsunami executives necessary to operate the
business in the ordinary course, making it impossible for Tsunami to achieve the
$18 million earn-out payment provided for in the acquisition agreement. The
complaint also alleges failure of consideration in connection with the
acquisition agreement, and breach of covenants of good faith and fair dealing.
Plaintiff is seeking a declaratory judgment that the Company has materially
breached the agreement and $18 million in damages or, in the alternative,
rescission of the acquisition agreement. The Company believes that this lawsuit
is without merit and intends to vigorously defend against these claims.

         In a separate action filed in the Circuit Court of Cook County,
Illinois, the Company filed suit against James P. Campbell and Catherine Lego,
individually. In its complaint, the Company seeks declaratory judgment that the
Company has the right to make changes in Tsunami's business under the agreement
for the Tsunami acquisition. The complaint also includes claims against Lego and
Campbell for fraud and breach of contract for misrepresentations made by them to
the Company in connection with the Tsunami acquisition and a claim for breach of
fiduciary duty against Campbell. The complaint seeks compensatory and punitive
damages. The Company's management believes that the resolution of these lawsuits
will not have a significant effect on the Company's business or financial
condition.

Option Exchange Program
-----------------------

         On June 17, 2002, the Board of Directors of the Company approved a
voluntary stock option exchange program under which eligible employees of the
Company will have the opportunity to exchange their existing options for new
options to be granted in the future under the 2000 Plan and the 2002 Plan. The
offer period for the exchange program began on Monday, July 8, 2002 and will end
on August 5, 2002, unless it is extended.

         All properly tendered stock options will be exchanged under the program
for a promise by the Company to grant the optionee new options no earlier than
the first business day that is six months and one day after the cancellation
date, which is anticipated to be August 6, 2002. Unless the offer is extended,
the Company expects to grant the new option no earlier than February 7, 2003.
The exercise price of the new options will be equal to the closing price of the
Company's common stock on the grant date. The new options will be 25% vested and
exercisable on the grant date and the remaining options will vest ratably over
periods of 18 to 42 months.

                                      F-25

<PAGE>

                    STRATOS LIGHTWAVE, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                 (all amounts in thousands, except share data)

Note 16.      Quarterly Results of Operations (Unaudited)

         The following is a summary of unaudited quarterly results of operations
for the two years ended April 30, 2002:

<TABLE>
<CAPTION>
                                                                       Fiscal Year 2002 Quarter Ended
                                                          ----------------------------------------------------------
                                                             July 31       October 31    January 31      April 30
                                                          --------------  ------------- -------------  -------------
<S>                                                       <C>             <C>           <C>            <C>
Net sales ..............................................        $17,499        $12,212       $12,524        $14,152
Gross profit ...........................................         (4,095)          (290)          970         (4,911)
Net loss ...............................................         (9,717)       (16,272)       (8,223)       (37,978)
Net loss per basic and diluted common share ............          (0.15)         (0.25)        (0.13)         (0.58)
</TABLE>

<TABLE>
<CAPTION>
                                                                       Fiscal Year 2001 Quarter Ended
                                                          ----------------------------------------------------------
                                                             July 31       October 31    January 31      April 30
                                                          --------------  ------------- -------------  -------------
<S>                                                       <C>             <C>           <C>            <C>
Net sales ..............................................        $25,916        $34,479       $40,339        $26,168
Gross profit ...........................................          8,539         11,684        14,825          2,237
Net income (loss) ......................................          2,041          4,004         4,816         (1,685)
Net income (loss) per basic and diluted common share ...           0.04           0.06          0.08          (0.03)
</TABLE>

         The unaudited quarterly results of operations include restructuring
charges of $30,100 and $1,100 in the quarters ended April 30, 2002 and January
31, 2002, respectively. See Note 4.

                                      F-26

<PAGE>

          SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

                             STRATOS LIGHTWAVE, INC.
                    YEARS ENDED APRIL 30, 2002, 2001 AND 2000
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                  Additions
                                              Balance at  -----------------------------                      Balance
                                              beginning     Charged       Charged to                        at end of
Description                                   of period    to expense   other accounts      Deductions        period
-----------                                  -----------  ------------ ----------------    ------------    -----------
<S>                                          <C>          <C>          <C>                 <C>             <C>
Reserve for Inventory Obsolescence:
April 30, 2000                                    1,234         1,281          --               954(A)          1,561
April 30, 2001                                    1,561         3,878          --             1,694(A)          3,745
April 30, 2002                                    3,745        13,835          --             3,673(A)         13,907

Allowance for Doubtful Accounts:
April 30, 2000                                      184            77          --                --               261
April 30, 2001                                      261           158          --                18(B)            401
April 30, 2002                                      401         2,693          --             2,367(B)            727
</TABLE>

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

(A)  Represents write-off of obsolete inventory and usage of product previously
     reserved for.
(B)  Write-off of accounts receivable considered to be uncollectible.

                                      II-1

<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 24, 2002

                                   STRATOS LIGHTWAVE, INC.

                                   By: /s/ James W. McGinley
                                       -----------------------------------------
                                           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.

/s/ James W. McGinley                                            July 24, 2002
---------------------------------------------------
James W. McGinley, President,
Chief Executive Officer and Director


/s/ David A. Slack                                               July 22, 2002
---------------------------------------------------
David A. Slack, Chief Financial Officer
(Principal Financial and Accounting Officer)


/s/ Michael P. Galvin                                            July 22, 2002
---------------------------------------------------
Michael P. Galvin, Director


                                                                 July __, 2002
---------------------------------------------------
Brian J. Jackman, Director


/s/ Charles Daniel Nelsen                                        July 25, 2002
---------------------------------------------------
Charles Daniel Nelsen, Director


/s/ Edward J. O'Connell                                          July 22, 2002
---------------------------------------------------
Edward J. O'Connell, Director

<PAGE>

                                  EXHIBIT INDEX

Exhibit
Number       Description of Document

    3.1      Certificate of Incorporation of Registrant (1)
    3.2      Restated Certificate of Incorporation of Registrant (1)
    3.3      Bylaws of Registrant (1)
    3.4      Certificate of Designation of Series A Junior Participating
             Preferred Stock, included as Exhibit A to Exhibit 4.2
    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)
    10.1     Master Separation Agreement between Methode Electronics, Inc. and
             Registrant (1)
    10.2     Initial Public Offering and Distribution Agreement between Methode
             Electronics, Inc. and Registrant (3)
    10.3     Tax Sharing and Indemnification Agreement between Methode
             Electronics, Inc. and Registrant (3)
    10.4     Master Transitional Services Agreement between Methode Electronics,
             Inc. and Registrant (1)
    10.5     Employee Matters Agreement between Methode Electronics, Inc. and
             Registrant (1)
    10.6     Registration Rights Agreement between Methode Electronics, Inc. and
             Registrant (3)
    10.7     General Assignment and Assumption Agreement between Methode
             Electronics, Inc. and Stratos Lightwave, LLC (1)
    10.8     Form of Indemnity Agreement between Registrant and Registrant's
             directors and officers (1)**
    10.9     Stratos Lightwave, Inc. 2000 Stock Plan, as amended and restated
             (4)
    10.10    Promissory Note of the Registrant payable to Methode Development
             Company (1)
    10.11    Agreement and Plan of Reorganization, dated January 22, 2002, by
             and among the Registrant, Tundra Acquisition Corp. and Tsunami
             Optics, Inc. (5)
    10.12    Stratos Lightwave, Inc. 2002 Stock Plan for Acquired Companies (6)
    10.13    Agreement and Plan of Reorganization, dated March 22, 2002, by and
             among the Registrant, Polar Acquisition Corp. and Paracer, Inc. (7)
    21       List of Subsidiaries *
    23       Consent of Ernst & Young LLP *

_________________________

(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.
(4) Incorporated by reference to the Registrant's Annual Report on Form 10-K for
    the year ended April 30, 2001.
(5) Incorporated by reference to the Registrant's Form 8-K dated February 15,
    2002.
(6) Incorporated by reference to the Registrant's Registration Statement on Form
    S-8 dated January 31, 2002.
(7) Incorporated by reference to the Registrant's Form 8-K dated April 12, 2002.
*   Filed herewith
**  Management contract or compensatory plan or arrangement.