<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ----------

                                    FORM 10-Q

                                   ----------

(Mark One)

  [X]  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
       Exchange Act of 1934 for the Quarterly Period Ended July 31, 2002, or

  [_]  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
                                 (708) 867-9600
               (Address, including zip code, and telephone number,
                 including area code, of Registrant's principal
                               executive offices)

                                   ----------

                                 Not Applicable
  -----------------------------------------------------------------------------
   (Former name, former address and former fiscal year, if changed since last
                                     report)

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 ___
                                                                      ---

As of September 12, 2002, there were 72,639,573 shares of the Registrant's
common stock outstanding.

<PAGE>

                             STRATOS LIGHTWAVE, INC.

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                               Page
                                                                                                               ----
<S>                                                                                                            <C>
PART I        FINANCIAL INFORMATION ......................................................................        1
   Item 1.    Financial Statements .......................................................................        1
              Condensed Consolidated Balance Sheets as of April 30, 2002 and July 31, 2002
                 (unaudited) .............................................................................        1
              Condensed Consolidated Statements of Operations (unaudited) for the three months
                 ended July 31, 2001 and 2002 ............................................................        2
              Condensed Consolidated Statements of Cash Flows (unaudited) for the three months
                 ended July 31, 2001 and 2002 ............................................................        3
              Notes to Condensed Consolidated Financial Statements (unaudited) July 31, 2002 .............        4
   Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operation .......        8
   Item 3.    Quantitative and Qualitative Disclosures About Market Risk                                         23

PART II.      OTHER INFORMATION ..........................................................................       24
   Item 1.    Legal Proceedings ..........................................................................       24
   Item 2.    Changes in Securities and Use of Proceeds ..................................................       25
   Item 6.    Exhibits and Reports on Form 8-K ...........................................................       26

SIGNATURES ...............................................................................................       27

INDEX TO EXHIBITS ........................................................................................       30
</TABLE>

                                       -i-

<PAGE>

                                     PART I
                              FINANCIAL INFORMATION

Item 1.  Financial Statements.

                             STRATOS LIGHTWAVE, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                            April 30,        July 31,
                                                                              2002             2002
                                                                           -----------      -----------
                                                                                            (unaudited)
                                        ASSETS
<S>                                                                        <C>              <C>
Current assets:
   Cash and cash equivalents.............................................  $    61,020      $    49,505
   Short-term investments................................................       30,900           28,200
   Accounts receivable, less allowance...................................        8,245            6,925
   Inventories:
      Finished products..................................................          798            1,727
      Work in process....................................................        2,107            2,923
      Materials..........................................................       12,916           10,589
                                                                           -----------      -----------
                                                                                15,821           15,239
   Recoverable income taxes..............................................        2,820            2,820
   Prepaid expenses......................................................        1,789            2,270
                                                                           -----------      -----------
      Total current assets...............................................      120,595          104,959
Other assets:
      Goodwill, less accumulated amortization............................       55,155           55,296
      Deferred income taxes..............................................        4,494            4,856
      Assets held for sale...............................................        4,202            3,866
      Other..............................................................        1,252            1,500
                                                                           -----------      -----------
                                                                                65,103           65,518

Property, plant and equipment............................................       98,918          100,173
   Less allowances for depreciation......................................       30,020           33,406
                                                                           -----------      -----------
                                                                                68,898           66,767
                                                                           -----------      -----------
      Total assets.......................................................  $   254,596      $   237,244
                                                                           ===========      ===========

                         LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Notes payable.........................................................  $     2,840      $        --
   Accounts payable......................................................       10,126            7,020
   Other current liabilities.............................................        5,874            6,686
   Current portion of long-term debt.....................................        3,715            3,980
                                                                           -----------      -----------
      Total current liabilities..........................................       22,555           17,686
Long-term debt, less current portion.....................................        6,569            5,519
Deferred income taxes....................................................        4,494            4,857
Minority interest........................................................          498              492
Stockholders' equity:
   Preferred stock.......................................................           --               --
   Common stock..........................................................          728              728
   Additional paid-in capital............................................      283,162          283,162
   Accumulated deficit...................................................      (63,115)         (74,970)
   Foreign currency translation adjustment...............................         (295)            (230)
                                                                           -----------      -----------
      Total stockholders' equity.........................................      220,480          208,690
                                                                           -----------      -----------
         Total liabilities and stockholders' equity......................  $   254,596      $   237,244
                                                                           ===========      ===========
</TABLE>

              See notes to condensed consolidated financial statements.

                                      -1-

<PAGE>

                             STRATOS LIGHTWAVE, INC.

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

<TABLE>
<CAPTION>
                                                                           Three Months Ended July 31,
                                                                           ----------------------------
                                                                              2001             2002
                                                                           -----------      -----------
<S>                                                                        <C>              <C>
Revenue:
   Net sales.............................................................  $    17,499      $    10,722
   License fees and royalties............................................        1,126              207
                                                                           -----------      -----------
      Total..............................................................       18,625           10,929

Costs and expenses:
   Costs of sales........................................................       21,593           10,757
   Research and development..............................................        7,511            6,745
   Sales and marketing...................................................        2,227            2,220
   General and administrative............................................        4,865            3,437
                                                                           -----------      -----------
      Total costs and expenses...........................................       36,196           23,159
                                                                           -----------      -----------

Loss from operations.....................................................      (17,571)         (12,230)

Investment income, net...................................................        1,369              375
                                                                           -----------      -----------

Loss before income taxes.................................................      (16,202)         (11,855)
Provision for income taxes (credit)......................................       (6,485)              --
                                                                           -----------      -----------
Net loss.................................................................  $    (9,717)     $   (11,855)
                                                                           ===========      ===========
Net loss per share, basic and diluted....................................  $     (0.15)     $     (0.16)
                                                                           ===========      ===========

Weighted average number of common shares outstanding:

   Basic.................................................................       64,092           72,781
                                                                           ===========      ===========
   Diluted...............................................................       64,092           72,781
                                                                           ===========      ===========
</TABLE>

              See notes to condensed consolidated financial statements.

                                      -2-

<PAGE>

                             STRATOS LIGHTWAVE, INC.

           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                              Three Months Ended July 31,
                                                                                             -----------------------------
                                                                                                2001               2002
                                                                                             ----------         ----------
<S>                                                                                          <C>                <C>
Operating activities:
Net loss ..................................................................................  $   (9,717)        $  (11,855)
   Adjustments to reconcile net loss to net cash provided by
     (used in) operating activities:
       Provision for depreciation and amortization ........................................       3,125              3,339
       Provision for deferred taxes (credit) ..............................................      (3,820)                --
       Provision for losses on accounts receivable ........................................       2,425                 --
       Change in operating assets and liabilities .........................................       9,926             (1,227)
                                                                                             ----------         ----------
   Net cash provided by (used in) operating activities ....................................       1,939             (9,743)

Investing activities:
   Purchases of property, plant and equipment .............................................     (12,741)            (1,041)
   Purchases of short-term investment .....................................................     (14,100)            (5,000)
   Sales of short-term investments ........................................................          --              7,700
   Sale of assets held for sale ...........................................................          --                336
   Acquisitions ...........................................................................      (8,027)              (142)
   Other ..................................................................................           5                 --
                                                                                             ----------         ----------
   Net cash (used in) provided by investing activities ....................................     (34,863)             1,853

Financing activities:
   Repayment of borrowings ................................................................          --             (3,625)
                                                                                             ----------         ----------
   Net cash used in financing activities ..................................................          --             (3,625)
                                                                                             ----------         ----------
Net decrease in cash and cash equivalents .................................................     (32,924)           (11,515)
Cash and cash equivalents at beginning of period ..........................................     125,438             61,020
                                                                                             ----------         ----------
Cash and cash equivalents at end of period ................................................  $   92,514         $   49,505
                                                                                             ==========         ==========
</TABLE>

            See notes to condensed consolidated financial statements.

                                       -3-

<PAGE>

                             STRATOS LIGHTWAVE, INC.

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

                                  July 31, 2002

1.   Basis of Presentation

     The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-month period ended July 31, 2002
are not necessarily indicative of the results that may be expected for the year
ending April 30, 2003. This unaudited quarterly information should be read in
conjunction with the audited consolidated financial statements and related notes
for the fiscal year ended April 30, 2002 included in the Company's Annual Report
on Form 10-K filed with the Securities and Exchange Commission.

     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 sixty
percent interest in MP Optical Communications, LLC and Stratos Limited. Prior to
its transfer of Stratos Lightwave, LLC to the Company, Methode transferred all
of the assets and liabilities of its optoelectronics and fiber optic divisions,
the properties associated with its optoelectronics research center and Methode's
corporate facilities occupied by these divisions to Stratos Lightwave, LLC.

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

     After completion of the Company's initial public offering, Methode owned
54,029,807 shares of the Company's common stock, representing approximately
84.3% of the outstanding shares. After receiving a favorable letter ruling from
the Internal Revenue Service in March 2001, and in accordance with its
previously announced intentions, on April 28, 2001, Methode distributed all of
the shares on 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.

     Comprehensive loss consists of net loss and foreign currency translation
adjustments and totaled $9,696,000 and $11,790,000 for the first quarters of
fiscal 2002 and 2003.

     Recent Accounting Pronouncements

     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

                                      -4-

<PAGE>

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 will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of fiscal year 2003.
Application of the nonamortization provisions of the Statement is not expected
to be significant. During fiscal year 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.

2.   Acquisitions

     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 $21,832,000, and $459,000 in cash. In addition, the Company
assumed approximately $1,000,000 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 $15,879,000, and $4,750,000 in cash. In
addition, the Company assumed approximately $5,900,000 of debt, plus certain
expenses in connection with the transaction, including a loan of approximately
$3,800,000 made by the Company to Tsunami prior to the acquisition. The
$3,800,000 loan was converted to additional capital subsequent to the
acquisition. The purchase agreement includes additional contingent consideration
of up to $18,000,000 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 optical subsystems 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 $8,117,000 in cash, including costs of acquisition.

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

                                      -5-

<PAGE>

<TABLE>
<CAPTION>
                                                               Advanced
                                                            Interconnection Tsunami Optics,
Amount Allocated To:                                          Technology          Inc.      Paracer, Inc.
-------------------                                         --------------- -------------- -------------
<S>                                                            <C>                <C>       <C>
Assets acquired
     Cash .................................................    $       --     $    79,000   $ 3,144,000
     Accounts receivable ..................................            --         162,000        30,000
     Inventories ..........................................       559,000         827,000            --
     Property, plant and equipment ........................       318,000       1,286,000     1,237,000
     Other ................................................        50,000         417,000       299,000
                                                            -------------   -------------  ------------
       Total assets .......................................       927,000       2,771,000     4,710,000
Liabilities assumed:
     Notes payable ........................................            --       2,118,000     3,722,000
     Accounts payable .....................................            --       1,254,000       156,000
     Accrued expenses .....................................       180,000         350,000       719,000
                                                            -------------   -------------  ------------
       Total liabilities ..................................       180,000       3,722,000     4,597,000
                                                            -------------   -------------  ------------
     Net assets acquired ..................................       747,000        (951,000)      113,000
     Excess purchase price ................................     7,370,000      21,580,000    22,178,000
                                                            -------------   -------------  ------------
     Purchase price .......................................    $8,117,000     $20,629,000   $22,291,000
                                                            =============   =============  ============

Cash paid, including transaction costs ....................    $8,117,000     $ 4,750,000       459,000
Stock consideration .......................................            --      15,879,000    21,832,000
                                                            -------------   -------------  ------------
Total purchase price ......................................    $8,117,000     $20,629,000   $22,291,000
                                                            =============   =============  ============
</TABLE>

     The above described acquisitions were accounted for using the purchase
method of accounting. Had these acquisitions been made as of the beginning of
fiscal 2002, the impact on the Company's operating results would not have been
significant.

     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.

3.   Restructuring Charges

     The Company recorded restructuring charges of approximately $31.2 million
in fiscal 2002 and approximately $1.0 million in the first quarter of fiscal
2003. These charges included excess and obsolete inventory, goodwill and fixed
asset impairment, personnel, bad debt, and legal costs related to the
restructuring of operations.

     Accruals related to the restructuring charges and their utilization are
summarized as follows:

<TABLE>
<CAPTION>
                                     Balance               2003          Utilized through         Balance
                                 April 30, 2002          Charges          July 31, 2002        July 31, 2002
                                 ----------------    ---------------    ------------------    ---------------
<S>                                   <C>                <C>                   <C>                  <C>
Employee costs                        $  850,000         $1,007,000            $1,338,000           $519,000
Other costs                            1,210,000                 --             1,023,000            187,000
                                 ----------------    ---------------    ------------------    ---------------
Total                                 $2,060,000         $1,007,000            $2,361,000           $706,000
                                 ================    ===============    ==================    ===============
</TABLE>

     Restructuring expenses have been classified in the Statement of Operations
for the three months ended July 31, 2002, as follows:

                                      -6-

<PAGE>

Cost of sales ....................................................... $  385,000
Research and development ............................................     70,000
Sales and marketing .................................................     56,000
General administrative ..............................................    496,000
                                                                      ----------
  Total ............................................................. $1,007,000
                                                                      ==========

     The Company terminated 63 employees in the three months ended July 31, 2002
for the restructuring of its operations, including both production and
administrative personnel. Severance pay in the amount of $159,000 relative to
these terminations will be paid out during fiscal 2003 and the remainder through
fiscal 2006.

4.   Income Taxes

     During 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. As a result, a valuation reserve of $24.7 million was recorded at
April 30, 2002, which eliminated the tax benefit attributable to the losses
incurred in fiscal 2002. We have continued to experience similar reductions in
business levels during the three months ended July 31, 2002, and an additional
valuation reserve of $1.5 million was recorded, which eliminated the tax benefit
attributable to the net loss incurred in the first quarter of fiscal 2003.

     We have net operating loss carry forwards of approximately $59.6 million
that are available to offset taxable income in the future. The net operating
loss carry forwards will expire in 2022 and 2023.

5.   Long-Term Debt

     Long-term debt consists of 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 July 31,
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 ..................................     $1,834,000       $1,145,000        $1,001,000       $3,980,000
Long-term ........................................      3,872,000        1,176,000           471,000        5,519,000
                                                    --------------    -------------    --------------    -------------
                                                       $5,706,000       $2,321,000        $1,472,000       $9,499,000
                                                    ==============    =============    ==============    =============

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

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

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

6.   Loss Per Share

<TABLE>
<CAPTION>
                                                                                        Three Months Ended July 31,
                                                                                    ----------------------------------
                                                                                        2001                 2002
                                                                                    --------------       -------------
<S>                                                                                     <C>                  <C>
Numerator - net loss ..............................................................     $  (9,717)           $(11,855)
                                                                                    ==============       =============
Denominator:
   Denominator for basic and diluted loss per share - weighted-average
   shares outstanding .............................................................        64,092              72,781
                                                                                    ==============       =============
Basic and diluted loss per share ..................................................     $   (0.15)           $  (0.16)
                                                                                    ==============       =============
</TABLE>

                                      -7-

<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operation.

The following discussion of our financial condition and results of operations
should be read in conjunction with the condensed consolidated financial
statements and related notes thereto included elsewhere in this Form 10-Q. 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 for high data rate
networking, data storage and telecommunication applications. These optical
subsystems are designed for use in local area networks (LANs), storage area
networks (SANs), metropolitan area networks (MANs), wide area networks (WANs)
and in the telecommunication markets. Our optical subsystems are compatible with
the advanced transmission protocols used in these networks, including Gigabit
Ethernet, Fast Ethernet, Fibre Channel, and synchronous optical network (SONET).
As previously announced, we discontinued the manufacture of single ferrule
connectors and certain other commodity products in the fourth quarter of fiscal
2002. Beginning in fiscal 2003, sales of optical products previously classified
as optical components will be reclassified as part of our optical subsystem
products.

     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 primarily from the sale of optical subsystems 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 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

                                      -8-

<PAGE>

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. 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 developing new optical subsystems.

     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. 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. General and administrative expenses in fiscal 2002 also
include the amortization of goodwill resulting from the excess of the purchase
price over net assets of the acquired companies. 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

                                      -9-

<PAGE>

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.

     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.

Results of Operations

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

                                      -10-

<PAGE>

                                              Three Months Ended July 31,
                                           --------------------------------
                                               2001                2002
                                           ------------        ------------
Revenue:
   Net sales .............................       100.0%              100.0%
   License fees and royalties ............         6.4                 1.9
                                           ------------        ------------
      Total ..............................       106.4               101.9

Costs and expenses:
   Cost of sales .........................       123.4               100.3
   Research and development ..............        42.9                62.9
   Sales and marketing ...................        12.7                20.7
   General and administrative ............        27.8                32.1
                                           ------------        ------------
      Total costs and expenses ...........       206.8               216.0
                                           ------------        ------------

Loss from operations .....................      (100.4)             (114.1)

Investment income, net ...................         7.8                 3.5
                                           ------------        ------------
Loss before income taxes .................       (92.6)             (110.6)

Provision for income taxes (credit) ......       (37.1)                 --
                                           ------------        ------------

Net loss .................................       (55.5)%            (110.6)%
                                           ============        =============

Three Months Ended July 31, 2002 and 2001

     Net Sales. Net sales decreased to $10.7 million in the three months ended
July 31, 2002 from $17.5 million in the three months ended July 31, 2001. Of
this $6.8 million decrease, $3.6 million is from a decrease in net sales of
optical subsystems primarily due to a decrease in demand in several of our
addressable markets including Fibre Channel, Gigabit Ethernet, Metropolitan Area
Networks and telecommunications, and $3.2 million is from a decrease in net
sales of single ferrule connectors as a result of discontinuing this product
line in the fourth quarter of fiscal 2002.

     The 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 $7.4 million as of July 31, 2002
from $8.4 million as of April 30, 2002. Of this $1.0 million decrease in
backlog, $900,000 was due to a decrease in orders for our optical subsystems and
$100,000 was due to a decrease in orders for optical components which we
discontinued in the fourth quarter of fiscal 2002. 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 decreased to $207,000 in the three
months ended July 31, 2002 from $1.1 million in the three months ended July 31,
2001. The decrease primarily relates to lump sum payments of approximately $1.0
million from the receipt of license and royalty payments in association with the
settlement of two patent infringement cases in the first quarter of fiscal 2002.
The decrease was partially offset by the receipt of higher royalties from two
licensees in the first quarter of fiscal 2003. License fees consist of both
fixed schedule payments and contingent payments based on sales volumes of
licensed products.

     Cost of Sales. Cost of sales decreased to $10.8 million in the three months
ended July 31, 2002 from $21.6 million in the three months ended July 31, 2001.
Gross profit as a percentage of net sales, or gross margin, increased to
negative (.3)% in the three months ended July 31, 2002 from negative (23.4)%

                                      -11-

<PAGE>

in the three months ended July 31, 2001. The reduction in charges for obsolete
and slow moving inventory in the current quarter increased the gross margin 40.8
percentage points and the sale of approximately $230,000 of inventory previously
considered excess and fully reserved, favorably impacted gross margin by 2.2%.
These factors were offset 3.6 percentage points for employee severance pay
related to the restructuring of operations and 16.3 percentage points due to the
decline in sales and the decline in the average unit selling price for our
products due primarily to pricing pressures and product mix.

     Cost of sales was charged approximately $470,000 and $7.9 million in the
three months ended July 31, 2002 and 2001 for obsolete and excess inventory.

     Research and Development. Research and development expenses decreased to
$6.7 million in the three months ended July 31, 2002 from $7.5 million in the
three months ended July 31, 2001. This decrease of $800,000 was due primarily to
a decrease of $1.3 million in material and overhead costs related to major
product development projects, offset by $200,000 of additional personnel costs
dedicated to research and development, and $300,000 for expanded research and
development facilities.

     Sales and Marketing. Sales and marketing expenses remained at $2.2 million
in the three months ended July 31, 2002 compared to the three months ended July
31, 2001. We experienced an increase of $200,000 in sales and marketing
salaries, fringe benefits, bonuses and commissions, and a decrease of $200,000
in field sales operating costs supporting our sales.

     General and Administrative. General and administrative expenses decreased
to $3.4 million in the three months ended July 31, 2002 from $4.9 million in the
three months ended July 31, 2001. This $1.5 million decrease was due to a
reduction of $2.0 million of costs for facilities and staff offset by $500,000
of additional corporate management and legal costs.

     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 and as a result, many of our customers
began to stretch their payment terms. Days sales in accounts receivable
increased to 63 days at July 31, 2002 compared 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 an additional $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 $375,000 in the three months ended July 31, 2002 from $1.4 million
in the three months ended July 31, 2001. Investment income consists of earnings
on the short-term investment of excess cash balances and the decrease of this
income in fiscal 2003 reflects the reduction of excess cash balances as well as
lower interest rates throughout the market place during this period.

     Income Taxes. During 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. As a result, a valuation reserve of $24.7 million was
recorded at April 30, 2002, which eliminated the tax benefit attributable to the
losses incurred in fiscal 2002. We have continued to experience similar
reductions in business levels during the three months ended July 31, 2002, and
an additional valuation reserve of $1.5 million was recorded, which eliminated
the tax benefit attributable to the net loss incurred in the first quarter of
fiscal 2003.

     We have net operating loss carry forwards of approximately $59.6 million
that are available to offset taxable income in the future. The net operating
loss carry forwards will expire in 2022 and 2023.

                                      -12-

<PAGE>

Liquidity and Capital Resources

     Net cash used in operating activities totaled $9.7 million for the three
months ended July 31, 2002. The use of cash in operating activities resulted
primarily from a net loss and decreases in notes payable, accounts payable and
accrued expenses offset in part by decreases in accounts receivable and
inventories. Net cash provided by operating activities was $1.9 million for the
three months ended July 31, 2001. Cash provided by operating activities resulted
primarily from decreases in accounts receivable and inventories offset in part
by the net loss and decreases in accounts payable and accrued expenses.

     Net cash provided by investing activities was $1.9 million in the three
months ended July 31, 2002. Net cash provided by investing activities related
primarily to the sales of short-term investments and assets held for sale offset
in part by the purchase of short-term investments and the purchases of equipment
and facilities. Net cash used in investing activities was $34.9 million in the
three months ended July 31, 2001. Net cash used in investing activities during
this period related primarily to an acquisition, purchases of equipment and
facilities, and the purchase of short-term investments. We expended $8.0 million
in May 2001 for the purchase of substantially all of the assets of the Optical
Flexcircuits division of Advanced Interconnection Technology, Inc.

     Net cash used in financing activities was $3.6 million in the three months
ended July 31, 2002, and represents repayments on borrowings.

     As of July 31, 2002, our principal source of liquidity was approximately
$77.7 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 our ability to lower operating expenses. Our only cash commitment
is the repayment of long-term debt of approximately $9.5 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 39% and incurred a net loss of $11.9 million during the three
months ended July 31, 2002. We experienced a decrease in new 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.

     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.

                                      -13-

<PAGE>

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.

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 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.

                                      -14-

<PAGE>

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 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

                                      -15-

<PAGE>

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 three months ended July 31,
2002, QLogic and its contract manufacturers accounted for 11% of our net sales.
For the three months ended July 31, 2001, McData Corporation and its contract
manufacturers accounted for 14% of our net sales. 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 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,
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.

                                      -16-

<PAGE>

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 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 is highly competitive, which may result in
lost sales or lower gross margins.

     The markets for optical subsystems are highly competitive and are expected
to intensify in the future. We compete primarily with Agilent Technologies,
Inc., Finisar Corporation, Infineon Technologies Corp., JDS Uniphase
Corporation, Lucent Technologies Inc., Molex, Inc., Optical Communications
Products, Inc., Tyco International, Ltd. and a number of 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 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

                                      -17-

<PAGE>

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.

     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 optical
subsystems 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

                                      -18-

<PAGE>

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

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 39.1% of our net sales during the three months
ended July 31, 2002 and approximately 29.1% of our net sales in fiscal 2002. 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.

     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.

                                      -19-

<PAGE>

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 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
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.

                                      -20-

<PAGE>

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.

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:

                                      -21-

<PAGE>

     .   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.

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

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

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

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

     .   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.

                                      -22-

<PAGE>

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 3.  Quantitative and Qualitative Disclosures About Market Risk

     The Company is subject to certain market risks, including foreign currency
and interest rates. 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.

     The Company does not have exposure to interest rate risk related to its
debt obligations because the interest rates are fixed. The Company's market risk
is the potential loss of income from the reduction in interest rates from the
renewal of short-term investments. The Company has experienced such reductions
in these rates during fiscal year 2002 and the first quarter of 2003.

                                      -23-

<PAGE>

                                     PART II
                                OTHER INFORMATION

Item 1.   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 our 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. We believe that these lawsuits are without
merit and intend 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. In August 2002, the
lawsuit was removed to the United States District Court for the Northern
District of California. 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 potential earn-out payment of up
to $18 million 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 has filed various affirmative defenses to this lawsuit.
In addition, the Company has filed a cross complaint against James P. Campbell
and Catherine Lego, individually. In its cross-complaint, the Company seeks
declaratory judgment that it has the right to make changes in Tsunami's business
under the agreement for the Tsunami acquisition. The cross-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
cross-complaint seeks compensatory and punitive damages. We believe that this
lawsuit is without merit and intend to vigorously defend against these claims.

     In August 2002, James Campbell filed a separate lawsuit against the Company
in the Superior court of California, County of Santa Clara, alleging breach of
contract, fraud, violation of the implied covenant of good faith and fair
dealing, age discrimination and wrongful termination in violation of

                                      -24-

<PAGE>

public policy. Campbell seeks unspecified damages, punitive damages and
attorney's fees. We believe that this lawsuit is without merit and intend to
vigorously defend against these claims.

     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 2.   Changes in Securities and Use of Proceeds.

     Stratos Lightwave's registration statement on Form S-1 filed under the
Securities Act of 1933, Commission File No. 333-34864, was declared effective by
the Commission on June 26, 2000. A total of 10,062,500 shares of our common
stock were registered pursuant to this registration statement. The managing
underwriters for the offering were Lehman Brothers, CIBC World Markets, U.S.
Bancorp Piper Jaffray, Robert W. Baird & Co., Tucker Anthony Cleary Gull, and
Fidelity Capital Markets, a division of National Financial Services Corporation.

     The offering commenced on June 26, 2000 and has been completed. All
10,062,500 registered shares, including 1,312,500 shares sold upon exercise of
the underwriters' over allotment option, were sold by Stratos Lightwave at an
initial public offering price of $21.00 per share. The aggregate underwriting
discount paid in connection with the offering was $14,791,875.

     The net proceeds from the offering, after deducting the underwriting
discount and the estimated offering expenses to be paid by Stratos Lightwave,
were approximately $195 million. Uses of proceeds to date include $98.4 million
for general corporate purposes and the purchase of equipment and facilities,
payments of $16.8 million in connection with various acquisitions, repayment of
$2.7 million of advances from a Methode subsidiary, and $333,000 for repayment
of a note assumed in connection with the acquisition of our Stratos Ltd.
subsidiary. The remainder of the proceeds will be used for general corporate
purposes, including working capital, capital expenditures, and research and
development. Pending these uses, the remaining net proceeds have been invested
in short-term interest bearing, investment grade marketable securities.

     Other than the repayment of advances from a Methode subsidiary described
above and the payment of the additional purchase price described above in
connection with our Stratos Lightwave-Florida acquisition which was paid to two
of our officers (and the payment of salaries and expense reimbursements to
employees in the ordinary course of business), none of the net proceeds of the
offering have been paid, directly or indirectly, to any Stratos Lightwave
director or officer or any of their associates, to any persons owing 10 percent
or more of our common stock, or to any Stratos Lightwave affiliate.

                                      -25-

<PAGE>

Item 6.   Exhibits and Reports on Form 8-K.

     (a)  Exhibits. Please see the Exhibit Index following the signature page.

     (b)  Reports on Form 8-K. A current report on Form 8-K was filed on May 10,
2002 to report the adoption of certain restructuring initiatives. No other
reports on Form 8-K were filed by the Registrant in the three months ended July
31, 2002.

                                      -26-

<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

Dated: September 16, 2002     Stratos Lightwave, Inc.

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

                              By:  /s/ David A. Slack
                                  ----------------------------------------------
                                   David A. Slack
                                   Chief Financial Officer
                                   (Principal Financial and Accounting Officer)

                                    -27-

<PAGE>

                             STRATOS LIGHTWAVE, INC.

                 Certification of Disclosure in Quarterly Report
                 Pursuant to the Securities Exchange Act of 1934

     I, James W. McGinley, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of Stratos Lightwave,
Inc.;

     2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report; and

     3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report.

Dated: September 16, 2002                        /s/ James W. McGinley
                                        ---------------------------------------
                                                   James W. McGinley
                                         President and Chief Executive Officer

                                      -28-

<PAGE>

                             STRATOS LIGHTWAVE, INC.

                 Certification of Disclosure in Quarterly Report
                 Pursuant to the Securities Exchange Act of 1934

     I, David A. Slack, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of Stratos Lightwave,
Inc.;

     2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report; and

     3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report.

Dated: September 16, 2002                             /s/ David A. Slack
                                                 -----------------------------
                                                         David A. Slack
                                                    Chief Financial Officer

                                      -29-

<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 the 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      General Assignment and Assumption Agreement between Methode
          Electronics, Inc. and Stratos Lightwave, LLC (1)
10.6      Form of Indemnity Agreement between Registrant and Registrant's
          directors and officers (1)
10.7      Stratos Lightwave, Inc. 2000 Stock Plan, as amended and restated (4)
10.8      Agreement and Plan of Reorganization, dated January 22, 2002, by and
          among the Registrant, Tundra Acquisition Corp. and Tsunami Optics,
          Inc. (5)
10.9      Stratos Lightwave, Inc. 2002 Stock Plan for Acquired Companies (6)
10.10     Agreement and Plan of Reorganization, dated March 22, 2002, by and
          among the Registrant, Polar Acquisition Corp. and Paracer, Inc. (7)
99.1      Certification of Periodic Financial Report Pursuant to 18 U.S.C.
          Section 1350*

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

(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

                                      -30-