<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 January 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
  incorporation or organization)                          Identification No.)



                             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 March 11, 2002 there were 67,268,094 shares of the Registrant's common
stock outstanding.

<PAGE>

                             STRATOS LIGHTWAVE, INC.

                                      INDEX
                                      -----
<TABLE>
<CAPTION>
                                                                                                                  Page
                                                                                                                  ----
<S>                                                                                                               <C>
PART I            FINANCIAL INFORMATION
    Item 1.       Financial Statements
                  Condensed Consolidated Balance Sheets as of April 30, 2001 and
                  January 31, 2002 (unaudited) .................................................................    2
                  Condensed Consolidated Statements of Operations (unaudited) for the
                  three and nine months ended January 31, 2001 and 2002 ........................................    3
                  Condensed Consolidated Statements of Cash Flows (unaudited) for the
                  nine months ended January 31, 2001 and 2002 ..................................................    4
                  Notes to Condensed Consolidated Financial Statements (unaudited)
                  January 31, 2002 .............................................................................    5
    Item 2.       Management's Discussion and Analysis of Financial Condition and Results of Operations ........   10
    Item 3.       Quantitative and Qualitative Disclosures About Market Risk ...................................   28

PART II.          OTHER INFORMATION
    Item 1.       Legal Proceedings ............................................................................   29
    Item 2.       Changes in Securities and Use of Proceeds ....................................................   30
    Item 6.       Exhibits and Reports on Form 8-K .............................................................   30

SIGNATURES .....................................................................................................   32

INDEX TO EXHIBITS ..............................................................................................   33
</TABLE>

                                       -1-

<PAGE>

                                     PART I
                              FINANCIAL INFORMATION

Item 1.  Financial Statements.

                             STRATOS LIGHTWAVE, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                                       April 30,        January 31,
                                                                                         2001              2002
                                                                                       ---------        -----------
<S>                                                                                    <C>              <C>
                                                                                                        (unaudited)
                                       ASSETS
Current assets:
  Cash and cash equivalents .........................................................     $125,438       $ 64,747
  Short-term investments ............................................................       20,400         32,500
  Accounts receivable, less allowance ...............................................       24,646         10,693
Inventories:
  Finished products .................................................................        1,551          1,087
  Work in process ...................................................................        2,281          2,000
  Materials .........................................................................       23,430         16,888
                                                                                       -----------       --------
                                                                                            27,262         19,975
Deferred income taxes ...............................................................        2,624          3,255
Prepaid expenses ....................................................................        1,012          1,862
                                                                                       -----------       --------
    Total current assets ............................................................      201,382        133,032
Other assets:
  Goodwill, less accumulated amortization ...........................................       13,472         20,218
  Other .............................................................................          534          4,648
                                                                                       -----------       --------
                                                                                            14,006         24,866
Property, plant and equipment .......................................................       85,181        114,894
  Less allowances for depreciation ..................................................       20,121         29,002
                                                                                       -----------       --------
                                                                                            65,060         85,892
                                                                                       -----------       --------
    Total assets ....................................................................     $280,448       $243,790
                                                                                       ===========       ========

                        LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable ..................................................................      $12,993       $  6,317
  Other current liabilities .........................................................        9,875          6,219
                                                                                       -----------       --------
   Total current liabilities ........................................................       22,868         12,536
Long term debt ......................................................................           --          6,736
Deferred income taxes ...............................................................        2,205          3,256
Minority interest ...................................................................          476            488
Stockholders' equity:
  Preferred stock ...................................................................           --             --
  Common stock ......................................................................          641            641
  Additional paid-in capital ........................................................      245,538        245,538
  Retained earnings (deficit) .......................................................        9,075        (25,138)
  Foreign currency translation adjustment ...........................................         (355)          (267)
                                                                                       -----------       --------
   Total stockholders' equity .......................................................      254,899        220,774
                                                                                       -----------       --------
     Total liabilities and stockholders' equity .....................................     $280,448       $243,790
                                                                                       ===========       ========
</TABLE>

            See notes to condensed consolidated financial statements.

                                       -2-

<PAGE>

                             STRATOS LIGHTWAVE, INC.

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

<TABLE>
<CAPTION>
                                                      Three Months Ended      Nine Months Ended
                                                          January 31,            January 31,
                                                      -------------------     -----------------------
                                                        2001       2002         2001           2002
                                                      -------    --------     --------       --------
<S>                                                   <C>       <C>          <C>       <C>
Revenue:
  Net sales ........................................  $40,339     $12,524     $100,734       $ 42,234
  License fees and royalties .......................      226         390        1,103          1,837
                                                      -------     --------    --------       --------
    Total ..........................................   40,565      12,914      101,837         44,071

Costs and expenses:
  Cost of sales ....................................   25,514      11,554       65,686         45,650
  Research and development .........................    3,661       5,589        9,898         21,173
  Sales and marketing ..............................    2,670       1,695        6,911          5,792
  General and administrative .......................    3,679       3,133        8,562         11,370
                                                      -------     --------    ---------      --------
   Total costs and expenses ........................   35,524      21,971       91,057         83,985
                                                      -------     --------    ---------      --------
Income (loss) from operations ......................    5,041      (9,057)      10,780        (39,914)
Interest income, net ...............................    2,365         834        5,930          3,119
                                                      -------     --------    ---------      --------
Income (loss) before income taxes ..................    7,406      (8,223)      16,710        (36,795)
Provision for income taxes (credit) ................    2,590         --         5,850         (2,581)
                                                      -------     --------    ---------      --------
Net income (loss) ..................................   $4,816      (8,223)     $10,860       $(34,214)
                                                      =======     ========    =========      ========
Net income (loss) per share, basic .................    $0.08     $ (0.13)       $0.18        $(0.53)
                                                      =======     ========    =========      ========
Net income (loss) per share, diluted ...............    $0.08     $ (0.13)       $0.17        $(0.53)
                                                      =======     ========    =========      ========
Weighted average number of common shares
outstanding:
  Basic ............................................   64,092      64,092       61,916         64,092
                                                      =======     ========    =========      ========
  Diluted ..........................................   65,095      64,092       62,376         64,092
                                                      =======     ========    =========      ========
</TABLE>

            See notes to condensed consolidated financial statements.

                                       -3-

<PAGE>

                             STRATOS LIGHTWAVE, INC.

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

<TABLE>
<CAPTION>
                                                                                          Nine Months Ended
                                                                                             January 31,
                                                                                      --------------------------
                                                                                         2001             2002
                                                                                      ----------       ---------
<S>                                                                                   <C>              <C>
Operating activities:
  Net income (loss) ...............................................................  $  10,860         $(34,213)
  Adjustments to reconcile net income (loss) to net cash used in operating
    activities:
   Provision for depreciation and amortization ....................................      5,100             9,929
   Provision for deferred taxes ...................................................         --               421
   Provision for losses on accounts receivable ....................................         --               152
   Change in operating assets and liabilities .....................................   (19,722)             8,532
                                                                                      --------         ---------
Net cash used in operating activities .............................................    (3,762)          (15,179)
Investing activities:
  Purchases of property, plant and equipment ......................................   (31,594)          (21,447)
  Purchases of short-term investments .............................................         --          (34,700)
  Sales of short-term investments .................................................         --            22,600
  Acquisitions ....................................................................      (752)           (8,117)
  Additional purchase price of prior period acquisition ...........................    (2,957)                --
  Other ...........................................................................       (12)              (77)
                                                                                      --------         ---------
Net cash used in investing activities .............................................   (35,315)          (41,741)
Financing activities:
  Net proceeds from initial public offering .......................................    195,465                --
  Loan to Affiliate ...............................................................         --           (3,771)
  Payment of note related to prior period acquisition .............................      (333)                --
  Net cash transfers to Methode Electronics, Inc. .................................    (1,179)                --
                                                                                      --------         ---------
  Net cash provided by (used in) financing activities .............................    193,953           (3,771)
                                                                                      --------         ---------
  Net increase (decrease) in cash and cash equivalents ............................    154,876          (60,691)
  Cash and cash equivalents at beginning of period ................................        537           125,438
                                                                                      --------         ---------
  Cash and cash equivalents at end of period ......................................   $155,413           $64,747
                                                                                      ========         =========

                                                                                        2001             2002
                                                                                      --------         ---------
Supplemental schedule of non cash investing and financing activities:
  Proceeds of long-term debt (including current portion)
  to purchase software and equipment for information technology system ............         --            $9,084
</TABLE>

            See notes to condensed consolidated financial statements.

                                       -4-

<PAGE>

                             STRATOS LIGHTWAVE, INC.

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                January 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 and nine-month periods
ended January 31, 2002 are not necessarily indicative of the results that may be
expected for the year ending April 30, 2002. 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, 2001
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 sales of 10,062,500 shares of
common stock in its initial public offering at a price of $21 per share. The net
proceeds from the offering, after deducting the underwriting discount and the
offering expenses paid by the Company, were approximately $195.5 million.

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

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


                                       -5-

<PAGE>

condensed consolidated financial statements after May 28, 2000 reflect the
operations, cash flows and assets and liabilities of the Company on a
stand-alone basis.

     For purposes of governing certain of the ongoing relationships between the
Company and Methode after the separation and to provide for an orderly
transition, the Company and Methode have entered into various agreements to
provide similar services as those described above. The agreements govern
individual transitional services as requested by Methode or the Company, of the
other party. These services are to be provided in accordance with the policies,
procedures and practices in effect before the transfer date. The term of each
agreement is one year (provision for extension exists) unless earlier
terminated.

     The Company's expenses under its transitional service arrangements with
Methode do not differ significantly from the costs historically allocated to it
by Methode for similar arrangements. The need for services under these
agreements have been substantially reduced at the close of fiscal 2001. Shared
services have continued in fiscal 2002 only in the areas of legal and quality
control.

     The allocation of Methode corporate expenses was discontinued on May 28,
2000. Subsequent to this date, the Company incurred these corporate expenses
either directly in its operations or indirectly under its transitional services
agreement with Methode. Charges to the Company from Methode for allocations in
the nine months ended January 31, 2001 were classified as follows:

<TABLE>
<CAPTION>


                                                 in thousands
                                                 ------------
           <S>                                   <c>
           Cost of sales.......................     $106
           Research and development............        5
           Sales and marketing.................      188
           General and administrative..........      376
                                                    ----
             Total.............................     $675
                                                    ====
</TABLE>

     In addition, the Company incurred charges of approximately $54,000 and
$333,000 in the three and nine months ended January 31, 2001 and a $4,000 credit
and $27,000 credit in the three and nine months ended January 31, 2002 under its
transitional service agreements with Methode.

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

     Comprehensive income (loss) consists of net income (loss) and foreign
currency translation adjustments and totaled $4,879,000 and ($8,340,000) for the
third quarters of fiscal 2001 and 2002, and $10,734,000 and ($34,125,000) for
the nine months ended January 31, 2001 and 2002.

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 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. Other intangible assets will
continue to be amortized over their useful lives.


                                       -6-

<PAGE>

     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 expected to
result in an increase in net income of approximately $535,000 ($0.01 per share)
per year. 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.

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

2.   Acquisitions

     On May 31, 2001, the Company purchased, for approximately $8,117,000 in
cash including costs of acquisition, substantially all of the net assets of the
Optical Flexcircuits division of Advanced Interconnection Technology, Inc.

     The allocation of the purchase price to the net assets acquired was as
follows:
<TABLE>
<CAPTION>

       <S>                                          <C>
       Asset acquired:
         Inventories............................... $  559,000
         Property, plant and equipment.............    318,000
         Other.....................................     50,000
                                                    ----------
           Total assets............................    927,000

       Liabilities assumed:
         Accrued expenses..........................    180,000
                                                    ----------
         Total liabilities.........................    180,000
                                                    ----------
         Net assets acquired.......................    747,000
         Excess purchase price.....................  7,370,000
                                                    ----------
         Purchase price............................ $8,117,000
                                                    ==========
</TABLE>


     On November 22, 2000, the Company purchased, for approximately $752,000 in
cash including costs of acquisition, substantially all of the net assets of B&H
Mold, Inc., a tool manufacturer in Libertyville, Illinois.

     Effective February 23, 2000, the Company entered into an amendment to the
Asset Purchase Agreement with Rockledge Microelectronics, Inc. (formerly
Polycore Technologies, Inc.) which provided that in the event the Company is
part of an initial public offering of shares to be accomplished not later than
November 15, 2000, the sum of $2.957 million will become payable to the seller
within 30 days following the initial public offering in full satisfaction of
such additional contingent consideration. This amount was paid in July 2000 and
has been accounted for as additional purchase price.

     The above described acquisitions were accounted for using the purchase
method of accounting. If these acquisitions had been made as of the beginning of
fiscal 2001, the impact on the Company's operating results would not have been
significant.

                                       -7-

<PAGE>

3.   Income Taxes

     The tax benefit recognized in the nine months ended January 31, 2002
represents the benefit of tax loss carrybacks available to the Company. The
Company determined the need for a valuation allowance in the second quarter of
fiscal 2002, against the carrying value of deferred tax assets primarily
associated with tax loss carry forwards based on the significant reduction in
business levels experienced during the quarter and revised estimates of taxable
earnings for the remainder of the fiscal year. As a result, a $13.8 million
valuation allowance has been recorded which eliminated the tax benefit
attributable to the net losses incurred in the second and third quarters of
fiscal 2002 (approximately $9.5 million), eliminated approximately $3.9 million
of tax benefits recorded in the quarter ended July 31, 2001, and reserved for
approximately $400,000 of deferred tax assets recorded as of April 30, 2001.

4.   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. Information relating to these notes is as follows:

<TABLE>
<CAPTION>

                                           Note 1         Note 2
                                         ----------     ----------
<S>                                      <C>            <C>
     Current portion.................... $1,088,000     $1,260,000
     Long-term..........................  1,754,000      4,982,000
                                         ----------     ----------
                                         $2,842,000     $6,242,000
                                         ==========     ==========

     Interest rate.....................       3.52%          5.50%
     Payment terms....................    Quarterly        Monthly
     Payment amount...................     $300,587       $107,476
     Maturity.........................      7/31/04       10/01/05

</TABLE>

5.   Earnings Per Share

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

<TABLE>
<CAPTION>

                                                               Three Months Ended                  Nine Months Ended
                                                                   January 31,                        January 31,
                                                            ------------------------            ----------------------
                                                              2001            2002                2001          2002
                                                            -------         --------            -------       --------
<S>                                                         <C>             <C>                 <C>          <C>
Numerator - net income (loss).............................  $ 4,816         $ (8,223)           $10,860       $(34,214)
Denominator:
  Denominator for basic earnings (loss) per share-
  weighted-average shares outstanding.....................   64,092           64,092             61,916         64,092
  Dilutive potential common shares-
  employee stock options..................................        3               --                460             --
                                                            -------         --------            -------       --------
  Denominator for diluted earnings (loss) per
  shares-adjusted weighted-average shares and
  assumed conversions.....................................   64,095           64,092             62,376         64,092
                                                            =======         ========           ========       ========
  Basic earnings (loss) per share.........................  $  0.08         $  (0.13)          $   0.18       $  (0.53)
                                                            =======         ========           ========       ========
  Diluted earnings (loss) per share.......................  $  0.08         $  (0.13)          $   0.17       $  (0.53)
                                                            =======         ========           ========       ========
</TABLE>

                                       -8-

<PAGE>

6.   Discontinuance of Development Program

     In November 2001, management decided to discontinue the vertical cavity
surface emitting laser (VCSEL) development program at its Bandwidth
Semiconductor LLC subsidiary located in Bedford, MA. The Company has incurred or
will incur charges of approximately $1.1 million related to the discontinuation
of this program for employee severance pay, losses on abandonment of fixed
assets and costs to sublease the manufacturing facility. These charges were
recorded in the third quarter of the current fiscal year.

7.   Subsequent Event

     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 its common stock. In addition, the Company assumed approximately $5.9 million
of debt, plus certain expenses in connection with the transaction, including a
loan of approximately $3.8 million made by the Company to Tsunami prior to the
acquisition. The purchase agreement includes additional contingent consideration
of up to $18.0 million in Stratos Common Stock that may become due based upon
the attainment of certain performance targets. The transaction will be accounted
for using the purchase method of accounting.


                                       -9-

<PAGE>

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

     The following discussion of our financial condition and results of
operations should be read in conjunction with the 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 and components for high
data rate networking, data storage and telecommunication applications. These
optical subsystems are designed for use in local area networks (LANs), storage
area networks (SANs), metropolitan area networks (MANs), wide area networks
(WANs) and in the telecommunication markets. Our optical subsystems are
compatible with the advanced transmission protocols used in these networks,
including Gigabit Ethernet, Fast Ethernet, Fibre Channel, and synchronous
optical network (SONET). We also design, manufacture and sell a full line of
optical components and cable assemblies for use in these networks.

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

     Our net sales are derived principally from the sale of optical subsystems
and components to optical communication original equipment manufacturers (OEMs).
Our net sales have fluctuated from period to period based on 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 duration of all of these license agreements extends
until the expiration of the licensed patents. We will

                                       -10-

<PAGE>

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.

     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. Reserves associated with obsolete or excessive inventory are
written-off as obsolete or excessive inventory is scraped or discarded.
Occasionally, changed circumstances in the marketplace present us with an
opportunity to sell inventory that was previously determined to be excessive and
reserved for. If this occurs, we intend to vigorously pursue such opportunities.

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

     We market and sell our products domestically and internationally through
our direct sales force, local resellers and manufacturers' representatives.
Sales and marketing expenses consist primarily of personnel costs, including
sales commissions and product marketing and promotion costs. Prior to May 28,
2000, expenses have included allocations from Methode of expenses for the
salaries and related expenses for sales and marketing personnel. We expect to
continue to make significant expenditures for sales and marketing services.

     General and administrative expenses consist primarily of personnel costs
for our administrative and financial groups, as well as legal, accounting and
other professional fees. General and administrative expenses also include the
amortization of goodwill resulting from the excess of the purchase price over
net assets of the acquired companies. Prior to May 28, 2000, expenses have
included allocations from Methode for the salaries and related expenses for
administrative, finance and human resources personnel;

                                       -11-

<PAGE>

professional fees; information technology and other corporate expenses. We
expect to continue to make significant expenditures for general and
administrative services.

Basis of Presentation

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

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

Results of Operations

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

<TABLE>
<CAPTION>




                                                             Three Months Ended                 Nine Months Ended
                                                                 January 31,                       January 31,
                                                           ----------------------             ---------------------
                                                            2001             2002              2001            2002
                                                           -----            -----             -----           -----
<S>                                                        <C>              <C>               <C>             <C>
Revenue:
  Net sales............................................... 100.0%           100.0%            100.0%          100.0%
  License fees and royalties..............................   0.6              3.1               1.1             4.3
                                                           -----            -----             -----           -----
   Total.................................................. 100.6%           103.1%            101.1%          104.3%

Costs and expenses:
  Cost of sales...........................................  63.2             92.3              65.2           108.1
  Research and development................................   9.1             44.6               9.8            50.1
  Sales and marketing.....................................   6.7             13.5               6.9            13.7
  General and administrative..............................   9.1             25.0               8.5            26.9
                                                           -----            -----             -----           -----
   Total costs and expenses...............................  88.1            175.4              90.4           198.8
                                                           -----            -----             -----           -----
Income (loss) from operations.............................  12.5            (72.3)             10.7           (94.5)

Interest income, net......................................   5.9              6.6               5.9             7.4
                                                           -----            -----             -----           -----
Income (loss) before income taxes.........................  18.4            (65.7)             16.6           (87.1)

Provision for income taxes (credit).......................   6.4             --                 5.8            (6.1)
                                                           -----            -----             -----           -----
Net income (loss).........................................  12.0%           (65.7)%            10.8%          (81.0)%
                                                           =====            =====             =====           =====
</TABLE>



                                       -12-

<PAGE>


Three and Nine Months Ended January 31, 2002 and 2001

     Net Sales. Net sales for the third quarter of fiscal 2002 decreased to
$12.5 million from $40.3 million in the same period a year ago. Of the $27.8
million decrease in the third quarter, $18.0 million is from a decrease in net
sales of optical subsystems and $9.8 million is from a decrease in net sales of
optical components. Net sales for the nine month period ended January 31, 2002
decreased 58% over the same period a year ago to $42.2 million from $100.7
million. Net sales of optical subsystems and optical components decreased $38.2
million and $20.3 million, respectively, in the nine months ended January 31,
2002 over the comparable period last year.

     The decrease in net sales during the three and nine month periods ended
January 31, 2002 of our optical subsystems was primarily due to a decrease in
sales of our embedded and removable transceivers. The decrease in sales of our
optical components was primarily due to a decrease in sales of our optical
backplane connectors and cable assemblies. The overall decrease in sales was
primarily due to lower customer demand due to the current economic climate and
reduced capital spending for optical networking equipment. Sales were also
negatively impacted by declines in average unit prices for our products
resulting from pricing pressure and changes in product mix. Our total sales
order backlog decreased to $9.9 million as of January 31, 2002 from $34.2
million as of April 30, 2001. Of this $24.3 million decrease in backlog, $17.2
million was due to a decrease in orders for our optical subsystems, and $7.1
million was due to a decrease in orders for our optical components. These
decreases reflect lower customer demand for our products, customer push-outs and
cancellation of orders, due in part to delays in the launch of new product
programs by our customers.

     License Fees and Royalties. License fees increased to $390,000 in the
three months ended January 31, 2002 from $226,000 in the three months ended
January 31, 2001. License fees increased to $1,837,000 in the nine months ended
January 31, 2002 from $1,103,000 in the comparable period last year. These
increases are primarily from the addition of two new licensees in the fourth
quarter of fiscal 2001, offset in part by generally lower sales of optical
subsystems and components among licensees, consistent with general economic
conditions in the optical networking market. License fees consist of both fixed
schedule payments and contingent payments based on sales volumes of licensed
products.

     Cost of Sales and Gross Margins. Cost of sales decreased to $11.5
million in the three months ended January 31, 2002 from $25.5 million in the
three months ended January 31, 2001 and to $45.6 million for the nine months
ended January 31, 2002 compared to $65.7 million in the nine months ended
January 31, 2001. Gross profit as a percentage of net sales, or gross margin,
decreased to 7.7% in the three months ended January 31, 2002 from 36.8% in the
three months ended January 31, 2001. Approximately 17.0 percentage points of the
29.1 percentage point decrease in gross margin was due to the decline in sales,
6.9 percentage points was due to the expenses related to the discontinuance of
the VCSEL development program at our Bandwidth Semiconductor subsidiary and 9.6
percentage points was due to a charge for obsolete and slow moving inventory.
These factors were offset by the sale of approximately $555,000 million of
inventory that was previously considered excess and fully reserved against its
cost in the fourth quarter of fiscal year 2001. The sale of this inventory
favorably impacted gross margin by 4.4 percentage points.

     The gross margin decreased to negative (8.1)% for the nine months ended
January 31, 2002 from 34.8% in the comparable period last year. Approximately
22.9 percentage points of the 42.9 percentage point decrease in gross margin was
due to charges for obsolete and slow moving inventory, 16.0 percentage points of
the decrease in gross margin was a result of the decline in sales, 2.1
percentage points was due to the expenses related to the discontinuance of the
VCSEL development program at our Bandwidth Semiconductor subsidiary, 2.5
percentage points was due to customer returns of unusable

                                      -13-

<PAGE>


inventory and approximately 3.0 percentage points was due to a decline in the
average unit selling price for our products due primarily to pricing pressures
and product mix. These factors were offset by the sale of approximately $1.5
million of inventory that was previously considered excess and fully reserved
against its cost in the fourth quarter of fiscal year 2001. The sale of this
inventory favorably impacted gross margin by 3.6 percentage points.

     Cost of sales was charged approximately $1.2 million and $9.7 million
in the three and nine months ended January 31, 2002 to increase the reserve for
obsolete and excess inventory. The reserve was decreased by approximately
$723,000 and $2.8 million in the three and nine months ended January 31, 2002 to
account for the disposal of obsolete and excess inventory.

     Research and Development. Research and development expenses increased
to $5.6 million in the three months ended January 31, 2002 from $3.6 million in
the three months ended January 31, 2001. This increase of $2.0 million was due
primarily to $1.0 million in material and overhead costs related to major
product development projects (including $150,000 related to the discontinuance
of the VCSEL development program at our Bandwidth Semiconductor subsidiary),
$500,000 of additional personnel costs dedicated to research and development and
$500,000 for new and expanded research and development facilities in Chicago, IL
and Hudson, New Hampshire.

     Research and development expenses increased to $21.2 million in the
nine months ended January 31, 2002 from $9.9 million in the nine months ended
January 31, 2001. This increase of $11.3 million was due primarily to $6.2
million in material and overhead costs related to major product development
projects (including $150,000 related to the discontinuance of the VCSEL
development program at our Bandwidth Semiconductor subsidiary), and $1.9 million
of material costs related to scrap experienced in increasing the performance
specifications of our products to exceed the current product requirements of our
customers, $3.6 million of additional personnel costs dedicated to research and
development, and $1.5 million for new and expanded research and development
facilities in Chicago, Illinois and Hudson, New Hampshire.

     Sales and Marketing. Sales and marketing expenses decreased to $1.7
million in the three months ended January 31, 2002 from $2.7 million in the
three months ended January 31, 2001. This $1.0 million decrease was due to a
decrease of $450,000 in sales and marketing salaries, fringe benefits, bonuses
and commissions, and $550,000 in field sales operating costs supporting our
sales volume.

     Sales and marketing expenses decreased to $5.8 million in the nine
months ended January 31, 2002 from $6.9 million in the comparable period last
year. This $1.1 million decrease was due both to a decrease of $500,000 in sales
and marketing salaries, fringe benefits, bonuses and commissions, and $600,000
in field sales operating costs supporting our sales volume.

     General and Administrative. General and administrative expenses
decreased to $3.1 million in the three months ended January 31, 2002 from $3.7
million in the three months ended January 31, 2001. This $600,000 decrease was
primarily due to the reduction in corporate management costs after the effect of
costs ($75,000) related to the discontinuance of the VCSEL development program
at our Bandwidth Semiconductor subsidiary.

     General and administrative expenses increased to $11.4 million in the
nine months ended January 31, 2002 from $8.6 million in the comparable period
last year. This $2.8 million increase was primarily due to a $2.1 million
increase in the allowance for doubtful accounts, and $700,000 of additional
corporate management and legal costs including $75,000 related to the
discontinuance of the

                                      -14-

<PAGE>

VCSEL development program at our Bandwidth Semiconductor subsidiary and
approximately $285,000 of costs associated with corporate development
activities.

     We operate in markets that are currently experiencing a severe economic
downturn that began late in the third quarter of fiscal 2001 and escalated
during the first quarter of fiscal 2002. As a result, many of our customers
began to stretch their payment terms and our days sales in accounts receivable
increased to 85 days at April 30, 2001. Days sales in accounts receivable
improved to 77 days at January 31, 2002. During the first quarter of fiscal year
2002, we identified customers that we considered to be high risk relative to the
collection of accounts receivable. Based upon this review, we recorded a $2.1
million provision for doubtful accounts in the first quarter of fiscal year
2002.

     Investment Income, Net. Investment income, net of investment expense,
decreased to $834,000 in the three months ended January 31, 2002 from $2.4
million in the three months ended January 31, 2001 and decreased to $3.1 million
in the nine months ended January 31, 2002 from $5.9 million in the comparable
period last year. Investment income consists of earnings on the short-term
investment of excess cash balances and the decreases of this income in the three
and nine month periods ended January 31, 2002 reflect the reduction of excess
cash balances as well as lower interest rates throughout the market place during
these periods.

     Income Taxes. The tax benefit recognized in the nine months ended January
31, 2002 represents the benefit of tax loss carrybacks available to the Company.
We determined the need for a valuation allowance in the second quarter of fiscal
2002, against the carrying value of deferred tax assets primarily associated
with tax loss carry forwards based on the significant reduction in business
levels experienced during the quarter and our revised estimated of taxable
earnings for the remainder of the fiscal year. As a result, a $13.8 million
valuation allowance has been recorded which eliminated the tax benefit
attributable to the net losses incurred in the second and third quarters of
fiscal 2002 (approximately $9.5 million), eliminated approximately $3.9 million
of tax benefits recorded in the quarter ended July 31, 2001, and reserved for
approximately $400,000 of deferred tax assets recorded as of April 30, 2001.

Liquidity and Capital Resources

     Net cash used in operating activities totaled $15.2 million for the nine
months ended January 31, 2002. The use of cash in operating activities resulted
primarily from a net loss and the decrease in accounts payable and accrued
expenses offset in part by decreases in accounts receivable and inventories. Net
cash used in operating activities was $3.8 million for the nine months ended
January 31, 2001. Cash used in operating activities resulted primarily from
increases in accounts receivable and inventories offset in part by net income
and increases in accounts payable and accrued expenses.

     Net cash used in investing activities totaled $41.7 million in the nine
months ended January 31, 2002, including $21.5 million for the purchase of
equipment and facilities, a $12.1 million net increase in short-term investments
and $8.1 million for the acquisition of the Optical Flexcircuits division of
Advanced Interconnection Technology, Inc. Net cash used in investing activities
totaled $35.3 million in the nine months ended January 31, 2001, including $31.6
million for the purchase of equipment and facilities, $3.0 million for
additional purchase price related to the acquisition of our Stratos
Lightwave-Florida facility, and $752,000 for the acquisition of substantially
all of the assets of B&H Mold, Inc.

     Cash used in financing activities in the nine months ended January 31, 2002
represents an advance of $3,771,000 to Tsunami Optics, Inc. Net cash provided by
financing activities in the nine months ended January 31, 2001, consisted
primarily of net proceeds of $196.0 million, after related expenses, from our
initial public offering, and $1.5 million in advances from a subsidiary of
Methode,


                                       -15-

<PAGE>

offset in part by the 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. We sold 10,062,500 shares of common
stock, including the underwriters' exercise of their overallocation option, at
$21 per share in our initial public offering.

     As of January 31, 2002, our principal source of liquidity was approximately
$97.2 million in cash, cash equivalents and short-term investments. Our future
capital requirements will depend on a number of factors, including our future
net sales and the timing and rate of expansion of our business. We believe that
our current cash balances will be sufficient to meet our cash needs for working
capital and capital expenditures for the next 12 months.

Factors That May Affect Our Future Results

                         Risks Relating to Our Business

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 58% and incurred a net loss of $34.2 million during the first
nine months of fiscal 2002. We expect difficult industry conditions to continue
for at least the next three to six 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. 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;


                                       -16-

<PAGE>

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

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

     The market for our products and technology is characterized by rapid
technological change, new and improved product introductions, changes in
customer requirements and evolving industry standards. Our future success will
depend to a substantial extent on our ability to develop, introduce and support
new products and technology on a successful and timely basis. If we fail to
develop and deploy new products and technologies or enhancements of existing
products on a successful and timely basis or we experience delays in the
development, introduction or enhancement of our products and technologies, our
products will no longer be competitive and our net sales will decline. The
introduction of new and enhanced products may cause our customers to defer or
cancel orders for existing products. In addition, a slowdown in demand for
existing products ahead of a new product introduction could result in a write
down in the value of inventory on hand relating to existing products.

     The development of new, technologically advanced products is a complex and
uncertain process requiring high levels of innovation and highly skilled
engineering and development personnel, as well as the accurate anticipation of
technological and market trends. We cannot assure you that we will be able

                                       -17-

<PAGE>

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
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, returns or delays purchases of our products.

     Our success will depend on our continued ability to develop and manage
relationships with significant customers. For the nine months ended January 31,
2002, our two largest customers and their respective contract manufacturers
accounted for 28% of our net sales, with McData Corporation and Con-Tech Systems
Inc. accounting for 24% and 4% of our net sales, respectively. For the 2001
fiscal year, our three largest customers and their respective contract
manufacturers accounted for 32% of our net sales, with McData Corporation,
Alcatel Network Systems and Cisco Systems accounting for 11%, 11% and 10% of our
net sales, respectively. We expect our dependence on sales to a small number of
large customers to continue.

                                       -18-

<PAGE>

     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, returned or delayed purchases of our products.
Further, some of our customers may in the future shift their purchases of
products from us to our competitors or to joint ventures between these customers
and our competitors. The loss of or a significant reduction in orders from one
or more of our largest customers, our inability to successfully develop
relationships with additional customers or future price concessions that we may
make could cause our net sales to significantly decline.

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

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

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

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

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

     The average unit price of our products generally decrease as the products
mature in response to increased competition, the introduction of new products
and increased unit volumes. Substantially all of our products are designed and
manufactured in our own facilities. Accordingly, a significant portion of our
cost of sales is fixed over the near term. In order to remain competitive, we
must continually reduce


                                       -19-

<PAGE>

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

     The markets for optical subsystems and components are highly competitive
and are expected to intensify in the future. For optical subsystems, we compete
primarily with Agilent Technologies, Inc., Finisar Corporation, Infineon
Technologies Corp., JDS Uniphase Corporation and Optical Communications
Products, Inc. For optical components, we compete primarily with Infineon
Technologies Corp, Lucent Technologies Inc., Molex, Inc. and Tyco International,
Ltd. and numerous other smaller companies. Many of these companies have
substantially greater financial, technical, marketing and distribution resources
and brand name recognition than we have. As a result, these competitors are able
to devote greater resources than we can to the development, promotion, sale and
support of their products. In addition, several of our competitors have large
market capitalizations or cash reserves and are much better positioned than we
are to acquire other companies in our consolidating industry in order to gain
new technologies or products. Many of our competitors have much greater name
recognition, more extensive customer bases, better-developed distribution
channels and broader product offerings. These companies can leverage their
customer bases and broader product offerings and adopt aggressive pricing
policies to gain market share. In addition, companies with diversified product
offerings can better sustain an economic downturn.

     We expect that more companies, including some of our customers, will enter
the markets for our products. We may not be able to compete successfully against
either current or future competitors. Competitive pressures, combined with
weakening demand, may result in further price reductions, lower margins and loss
of market share. In addition, some of our current and potential customers are
attempting to integrate their operations by producing their own optical
subsystems or components or acquiring one or more of our competitors which may
eliminate the need to purchase our products. Furthermore, larger companies in
other related industries are developing and acquiring technologies and applying
their significant resources, including their distribution channels and brand
name recognition, in an effort to capture significant market share. While this
trend has not historically impacted our competitive position, it may result in
future decreases in our net sales.

We depend on suppliers for several key components. If we underestimate or
overestimate our requirements for these components, our business could be
significantly harmed.

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

     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


                                       -20-

<PAGE>

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.

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

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

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

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

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

     Our products are complex and may contain defects, particularly when first
introduced or as new versions are released. Our customers integrate our
subsystems and components into systems and products that they develop themselves
or acquire from other vendors. As a result, when problems occur in equipment or
a system into which our products have been incorporated, it may be difficult to
identify the source of the problem. We may be subject to liability claims for
damages related to product defects or


                                       -21-

<PAGE>

experience manufacturing delays as a result of these defects in the future, any
or all of which could be substantial. The length of any future manufacturing
delays in connection with a product defect will depend on the nature of the
defect and whether we or one of our component suppliers was the source of the
defect. Moreover, the occurrence of defects, whether caused by our products or
technology or the products of another vendor, may result in significant customer
relations problems and injury to our reputation and may impair the market
acceptance of our products and technology.

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 28.3% of our net sales during the nine months
ended January 31, 2002 and approximately 19.8% of our net sales in fiscal 2001.
Our international operations are subject to a number of risks and uncertainties,
including:

     .    difficulties in managing operations in different locations;

     .    changes in foreign currency rates;

     .    longer accounts receivable collection cycles;

     .    difficulties associated with enforcing agreements through foreign
          legal systems;

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

     .    trade protection measures and import and export licensing
          requirements;

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

     .    potentially adverse tax consequences;

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

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




                                       -22-

<PAGE>

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

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

     As part of our strategy, we intend to pursue opportunities to buy other
businesses or technologies that would complement our current products, expand
our markets or enhance our technical capabilities, or that may otherwise offer
growth opportunities. Our experience in acquiring other businesses and
technologies is limited. Acquisitions could result in a number of financial
consequences, including:

     .    use of significant amounts of cash;

     .    the incurrence of debt and contingent liabilities;

     .    potentially dilutive issuances of equity securities;

     .    large one-time write-offs; and

     .    amortization expenses related to goodwill and other intangible assets.

     Acquisitions also involve numerous operational risks, including:

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

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

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

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

     .    potential loss of key employees of purchased organizations.

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

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

     In May 2001, we acquired substantially all of the assets of Advanced
Interconnection Technology, Inc. In February 2002, we acquired all of the
capital stock of Tsunami Optics, 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.


                                       -23-

<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.

     Methode and Stratos are plaintiffs in several lawsuits relating to our
intellectual property rights. The defendants in these lawsuits include Infineon
Technologies Corp., Optical Communications Products, Inc. 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.

     As part of our separation from Methode, the Methode patents which are the
subject of these lawsuits and Methode's rights in these lawsuits have been
contributed to us and we have agreed to indemnify Methode against all costs,
expenses and liabilities associated with these lawsuits. These lawsuits are in
the preliminary stage, and we cannot predict their outcome with certainty. If
one or more of these patents were found to be invalid or unenforceable, we would
lose the ability to prevent others from using the technologies covered by the
invalidated patents. This could result 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-


                                       -24-

<PAGE>

consuming, result in costly litigation, and divert the efforts of our technical
and management personnel. If we are unsuccessful in defending ourselves against
these types of claims, we could be subject to significant monetary damages and
may be required to do one or more of the following:

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

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

     .    redesign those products that use the relevant technology.

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

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

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

            Risks Relating to Our Separation from Methode Electronics

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

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

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

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


                                      -25-

<PAGE>

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

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

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

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

     .    major business combinations involving us.

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

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

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

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

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

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

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

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


                                      -26-

<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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


                                      -27-

<PAGE>

holder of 15% or more of our outstanding common stock. These provisions apply
even if the offer may be considered beneficial by some stockholders.

We recently adopted a shareholder rights plan which has anti-takeover effects.

     We recently entered into a shareholder rights plan. The plan has the
anti-takeover effect of causing substantial dilution to a person or group that
attempts to acquire us on terms not approved by our board of directors. The
existence of the plan could limit the price that certain investors might be
willing to pay in the future for shares of our common stock and could
discourage, delay or prevent a merger or acquisition that a stockholder may
consider favorable.

Item 3.   Quantitative and Qualitative Disclosures About Market Risk

          Although certain of the Company's subsidiaries enter into transactions
in currencies other than their functional currency, foreign currency exposures
arising from these transactions are not material to the Company. The primary
foreign currency exposure arises from the translation of the Company's net
equity investment in its foreign subsidiaries to U.S. dollars. The Company
generally views as long-term its investments in foreign subsidiaries with
functional currencies other than the U.S. dollar. The primary currencies to
which the Company is exposed are the pound sterling and the Chinese renmimbi.


                                       -28-

<PAGE>

                                     PART II
                                OTHER INFORMATION
                                -----------------

Item 1. Legal Proceedings.

Pending Litigation

     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. The Company's management
is of the opinion that the resolution of these lawsuits and legal proceedings
will not have a significant effect on the Company's business, financial
condition or results of operation.

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

     Methode and Stratos are plaintiffs in several lawsuits relating to our
intellectual property rights. The defendants in these lawsuits include Infineon
Technologies Corp. and Optical Communications Products, Inc. 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.

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


                                      -29-

<PAGE>

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.

Settled Litigation

     Stratos was previously a plaintiff in a lawsuit against Finisar Corporation
pending in the United States District Court for the Northern District of
California. In this action, Stratos alleged that optoelectronic products sold by
Finisar infringed upon certain Stratos' patents. Finisar had filed various
affirmative defenses and counterclaims against Stratos, including claims that
Finisar invented and was the rightful owner or co-owner of the subject patents.

     In February 2002, Methode, Stratos and Finisar entered into an agreement
under which they dismissed their claims against one another and released each
other from claims pending prior to the agreement, including Finisar's claims of
ownership and inventorship and Stratos' claims of patent infringement and
damages. However, neither party believes that the agreement will have a material
adverse effect on its business or financial condition.

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 $68.7 million
for general corporate purposes and the purchase of equipment and facilities,
payments of $11.8 million in connection with various acquisitions, $3.8 million
for a loan to Tsunami Optics, Inc., 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.

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

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




                                      -30-

<PAGE>

     (b) Reports on Form 8-K. No Current Reports on Form 8-K were filed by the
Registrant in the three months ended January 31, 2002. The Registrant filed a
Current Report on Form 8-K on February 15, 2002 to report the acquisition of
Tsunami Optics, Inc.


                                      -31-

<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:  March 12, 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)





                                      -32-

<PAGE>

                                  EXHIBIT INDEX

Exhibit
Number    Description of Document
-------   -----------------------

  3.1     Certificate of Incorporation of Registrant (1)
  3.2     Restated Certificate of Incorporation of Registrant (1)
  3.3     Bylaws of Registrant (1)
  3.4     Certificate of Designation of Series A Junior Participating Preferred
          Stock, included as Exhibit A to Exhibit 4.2
  4.1     Specimen certificate representing the common stock (1)
  4.2     Rights Agreement, dated as of March 23, 2001, between Stratos
          Lightwave, Inc. and Mellon Investor Services LLC (2)
 10.1     Master Separation Agreement between Methode Electronics, Inc. and
          Registrant (1)
 10.2     Initial Public Offering and Distribution Agreement between Methode
          Electronics, Inc. and Registrant (3)
 10.3     Tax Sharing and Indemnification Agreement between Methode Electronics,
          Inc. and Registrant (3)
 10.4     Master Transitional Services Agreement between Methode Electronics,
          Inc. and Registrant (1)
 10.5     Employee Matters Agreement between Methode Electronics, Inc. and
          Registrant (1)
 10.6     Registration Rights Agreement between Methode Electronics, Inc. and
          Registrant (3)
 10.7     General Assignment and Assumption Agreement between Methode
          Electronics, Inc. and Stratos Lightwave, LLC (1)
 10.8     Form of Indemnity Agreement between Registrant and Registrant's
          directors and officers (1)
 10.9     Stratos Lightwave, Inc. 2000 Stock Plan, as amended and restated (4)
 10.10    Promissory Note of the Registrant payable to Methode Development
          Company (1)
 10.11    Agreement and Plan of Reorganization, dated January 22, 2002, by and
          among the Registrant, Tundra Acquisition Corp. and Tsunami Optics,
          Inc. (5)
 10.12    Stratos Lightwave, Inc. 2002 Stock Plan for Acquired Companies (6)

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

(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.




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