UNITED STATES 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 October 31, 2004
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to

(Mark One)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2006


o		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 INTERNATIONAL, INC.

(Exact name of Registrant as specified in its charter)

Delaware		36-4360035
(State or Other Jurisdiction of		(I.R.S. Employer Identification No.)
Incorporation or Organization)
7444 West Wilson Avenue		60706
Chicago, Illinois 60706
(Address of Principal Executive		(Zip Code)
Offices)

7444 West Wilson Avenue		60706
Chicago, Illinois 60706
(Address of Principal Executive Offices)		(Zip Code)

(708) 867-9600
(Registrant’s Telephone Number, Including Area Code)

Not Applicable

~~Not~~(Former ~~Applicable~~ Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant (~~Former~~1) has ~~Name,~~filed ~~Former~~all ~~Address~~reports ~~and~~required ~~Former~~to ~~Fiscal~~be ~~Year,~~filed by ifSection 13 ~~Changed~~or ~~Since~~15(d) ~~LastReport~~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.

~~Indicate~~Yes byþ No 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. o

~~Yes~~Indicate xby Nocheck omark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

~~Indicate~~Large byAccelerated ~~check~~Filer ~~mark~~o Accelerated ~~whether~~Filer ~~the registrant is an accelerated filer (as defined in Rule 12b~~o Non-2Accelerated ofFiler ~~the Securities Exchange Act of 1934).~~ þ

~~Yes~~Indicate oby Nocheck xmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

AsYes ofo No ~~December 14, 2004, there were 14,159,123 shares of the registrant’s~~þ ~~common stock, par value $0.01 per share, outstanding.~~

The registrant had 14,492,028 shares of $.01 par value common stock outstanding as of December 12, 2006.

STRATOS INTERNATIONAL, INC.

INDEX

Page	~~Page~~
PART I FINANCIAL INFORMATION
Item 1. Financial Statements		12
Condensed Consolidated Balance Sheets as of April 30, 2004 and October 31, 2004 (unaudited)		1
Condensed Consolidated Balance Sheets as of October 31, 2006 (unaudited) and April 30, 2006		3
Condensed Consolidated Statements of Operations (unaudited) for the three and six months ended October 31, 2003 and 2004		2
Condensed Consolidated Statements of Operations for the three months and six months ended October 31, 2006 and 2005 (unaudited)		4
Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended October 31, 2003 and 2004		3
Condensed Consolidated Statements of Cash Flows for the six months ended October 31, 2006 and 2005 (unaudited)		5
Notes to Condensed Consolidated Financial Statements (unaudited) October 31, 2004		4
Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months and six months ended October 31, 2006 and 2005 (unaudited)		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		12
Notes to Condensed Consolidated Financial Statements as of October 31, 2006 (unaudited)		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		15
Item 3. Quantitative and Qualitative Disclosures About Market Risk		24
Item 4. Controls and Procedures		24
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		25
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		25
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		27
Item 6. Exhibits		26
Item 4. Submission of Matters to Vote of Security Holders		28
Item 6. Exhibits		28
SIGNATURES		30
INDEX TO EXHIBITS		31
PART I
Certification
FINANCIAL INFORMATION
Certification
Item 1. Financial Statements.
Certification
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
Certification
Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer
Certification
Section 1350 Certification of Chief Executive Officer
Certification
Section 1350 Certification of Chief Financial Officer
Cautionary Statements

~~-i-~~2

~~PART~~STRATOS ~~I FINANCIAL~~INTERNATIONAL, ~~INFORMATION~~INC.

~~Item~~CONDENSED 1.CONSOLIDATED ~~Financial~~BALANCE ~~Statements.~~SHEETS (in thousands)

STRATOS INTERNATIONAL, INC.


	October 31,			April 30,
	2006			2006
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	7,993		$	11,742
Short-term investments		18,150			19,000
Accounts receivable, less allowance ($566 and $575)		14,724			13,606
Inventories
Finished products		3,206			3,428
Work in process		942			954
Materials		14,142			11,100

		18,290			15,482
Refundable income taxes		1,837			1,837
Prepaid expenses and other current assets		818			590

Total current assets		61,812			62,257

Other assets
Goodwill and other indefinite-lived assets		5,664			5,664
Intangible and other assets, net of amortization		11,141			11,832
Assets held for sale		2,600			2,864
Other Assets		100			100

		19,505			20,460

Property, plant and equipment		91,224			90,497
Less allowance for depreciation		77,020			74,060

		14,204			16,437


Total assets	$	95,521		$	99,154


Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable	$	4,945		$	4,724
Other current liabilities		5,279			6,028
Income taxes payable		207			216

Total current liabilities		10,431			10,968

Series B redeemable preferred stock		982			1,979

Shareholders’ equity
Preferred stock, $0.01 par value: Authorized 1,000,000 shares; issued and outstanding 9,820 and 19,790 shares of Series B redeemable preferred stock at October 31, 2006 and April 30, 2006 respectively		—			—
Common stock, $0.01 par value: Authorized 20,000,000 shares; issued 15,072,743, and 14,942,164 shares at October 31, 2006 and April 30, 2006, respectively		151			149
Cost of shares in treasury: 582,818 and 301,521 shares at October 31, 2006 and April 30, 2006 respectively		(3,723	)		(1,871	)
Additional paid-in capital		319,033			322,607
Accumulated deficit		(231,070	)		(230,269	)
Unearned compensation		—			(4,400	)
Accumulated other comprehensive loss		(283	)		(9	)

Total shareholders’ equity		84,108			86,207

Total liabilities and shareholders’ equity	$	95,521		$	99,154

~~CONDENSED~~See ~~CONSOLIDATED~~notes ~~BALANCE~~to ~~SHEETS~~condensed consolidated financial statements

~~(in thousands)~~3

	April 30,			October 31,
	2004			2004
				(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	15,501		$	27,388
Short-term investments		21,488			9,247
Accounts receivable, less allowance		12,544			10,703
Inventories:
Finished products		2,831			2,852
Work in process		1,042			902
Materials		12,091			13,117
		15,964			16,871
Recoverable income taxes		4,176			4,212
Prepaid expenses		1,326			1,235
Total current assets		70,999			69,656
Other assets:
Goodwill and other indefinite lived assets		6,110			6,110
Intangible assets, net of amortization		14,665			14,036
Assets held for sale		4,441			2,988
Other		5,879			6,043
		31,095			29,177
Property, plant and equipment		91,530			89,678
Less allowances for depreciation		64,574			65,848
		26,956			23,830
Total assets	$	129,050		$	122,663
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	8,422		$	7,044
Other current liabilities		7,373			8,153
Current portion of long-term debt		2,230			1,766
Total current liabilities		18,025			16,963
Long-term debt, less current portion		801			—
Deferred income taxes		445			445
Redeemable preferred stock		5,000			5,000
Shareholders’ equity:
Preferred stock – Series B		—			—
Common stock		143			142
Additional paid-in capital		319,212			318,629
Accumulated deficit		(210,633	)		(215,201	)
Unearned compensation		(3,809	)		(2,796	)
Foreign currency translation adjustments		114			(271	)
Cost of shares in treasury		(248	)		(248	)
Total shareholders’ equity		104,779			100,255
Total liabilities and shareholders’ equity	$	129,050		$	122,663

~~See~~STRATOS ~~notes~~INTERNATIONAL, ~~to condensed consolidated financial statements~~INC.

~~-1-~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per share amounts)


	Three months ended						Six months ended
	October 31,						October 31,
	2006			2005			2006			2005
Revenues:
Net sales	$	23,036		$	18,949		$	44,100		$	39,429
License fees and royalties		196			65			327			209

Total revenues		23,232			19,014			44,427			39,638

Cost of revenues		14,419			12,262			29,107			24,715

Gross profit		8,813			6,752			15,320			14,923

Operating expenses:
Research and development		2,209			1,839			4,121			3,843
Sales and marketing		2,697			2,536			5,238			5,083
General and administrative		3,652			3,562			7,637			7,866
Restructuring and other charges		—			483			—			483

Total operating expenses		8,558			8,420			16,996			17,275


Income (loss) from operations		255			(1,668	)		(1,676	)		(2,352	)
Investment income, net		362			295			725			547
Other income (expense)		156			1,027			462			381

Income (loss) before income taxes		773			(346	)		(489	)		(1,424	)
Income tax provision		—			—			—			(9	)

Net income (loss)		773			(346	)		(489	)		(1,433	)
Preferred stock dividend		(25	)		(88	)		(312	)		(175	)

Net income (loss) attributable to common shareholders	$	748		$	(434	)	$	(801	)	$	(1,608	)


Per share data, basic and diluted:
Basic earnings per share	$	0.05		$	(0.03	)	$	(0.06	)	$	(0.12	)

Diluted earnings per share	$	0.05		$	(0.03	)	$	(0.06	)	$	(0.12	)


Basic number of common shares outstanding		13,658			13,921			13,679			13,913

Diluted number of common shares outstanding		14,625			13,921			13,679			13,913

~~STRATOS~~See ~~INTERNATIONAL,~~notes ~~INC.~~to condensed consolidated financial statements

~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)~~4

(inTable thousands,of except per share amounts)Contents

	Three Months Ended						Six Months Ended
	October 31,						October 31,
	2003			2004			2003			2004
Revenue:
Net sales	$	7,111		$	18,181		$	13,682		$	39,204
License fees and royalties		113			1,493			619			4,276
Total		7,224			19,674			14,301			43,480
Costs and expenses:
Costs of sales		8,020			12,439			15,498			26,253
Research and development		1,807			2,422			4,697			4,828
Sales and marketing		1,327			2,610			2,845			5,419
General and administrative		3,775			6,267			6,473			11,501
Total costs and expenses		14,929			23,738			29,513			48,001
Loss from operations		(7,705	)		(4,064	)		(15,212	)		(4,521	)
Investment income, net		184			65			423			129
Loss before income taxes		(7,521	)		(3,999	)		(14,789	)		(4,392	)
Provision for income taxes		—			—			—			—
Net loss		(7,521	)		(3,999	)		(14,789	)		(4,392	)
Preferred stock dividend requirements		—			(88	)		—			(175	)
Net loss attributable to common shareholders	$	(7,521	)	$	(4,087	)	$	(14,789	)	$	(4,567	)
Net loss per share attributable to common shareholders, basic and diluted:
Net loss	$	(1.02	)	$	(0.30	)	$	(2.00	)	$	(0.33	)
Preferred stock dividend requirements		—			—			—			(0.01	)
Net loss per share attributable to common shareholders	$	(1.02	)	$	(0.30	)	$	(2.00	)	$	(0.34	)
Weighted average number of common shares outstanding:
Basic and diluted		7,392			13,549			7,378			13,542

STRATOS INTERNATIONAL, INC.

~~See~~CONDENSED ~~notes~~CONSOLIDATED toSTATEMENTS ~~condensed~~OF ~~consolidated~~CASH ~~financial statements.~~FLOWS (Unaudited) (in thousands)

-2-


	Six Months Ended
	October 31,
	2006			2005
Operating activities:
Net loss	$	(489	)	$	(1,433	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Provision for depreciation		3,005			2,910
Provision for amortization of intangible assets		692			692
Provision for amortization of unearned compensation		700			409
Provision for losses on accounts receivable		(9	)		89
Provison for obsolete and overstock inventory		316			971
(Gain) loss on sales of assets		28			(34	)
Change in operating assets and liabilities:
Accounts receivable		(1,109	)		1,577
Inventories		(3,124	)		(553	)
Prepaid assets		(227	)		(273	)
Other assets		—			5,932
Accounts payable and accrued expenses		(677	)		(7,022	)

Net cash provided by (used in) operating activities		(894	)		3,265

Investing activities:
Purchases of property, plant and equipment		(535	)		(585	)
Purchases of short-term investments		(2,000	)		(12,895	)
Sales of short-term investments		2,850			6,947
Proceeds from sale of assets		—			40
Proceeds from sale of assets held for sale		—			53

Net cash provided by (used in) investing activities		315			(6,440	)

Financing activities:
Repayments on long-term borrowings		—			(815	)
Dividends on preferred stock		(312	)		(175	)
Net proceeds from exercise of stock options		265			89
Purchase of shares for treasury		(1,852	)		—
Redemption of preferred shares		(997	)		—

Net cash used in financing activities		(2,896	)		(901	)

Effect of exchange rates on cash		(274	)		315


Net decrease in cash and cash equivalents		(3,749	)		(3,761	)
Cash and cash equivalents at beginning of period		11,742			13,276

Cash and cash equivalents at end of period	$	7,993		$	9,515

~~Table~~See ofnotes ~~Contents~~to condensed consolidated financial statements.

~~STRATOS INTERNATIONAL, INC.~~5

CONDENSEDTable CONSOLIDATEDof STATEMENTS OF CASH FLOWS (Unaudited) Contents

~~(in~~STRATOS ~~thousands)~~INTERNATIONAL, INC.

	Six Months Ended
	October 31,
	2003			2004
Operating activities:
Net loss	$	(14,789	)	$	(4,392	)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for depreciation and amortization		2,584			3,642
Gain on sale of assets held for sale		(1,305	)		—
Change in operating assets and liabilities		2,784			427
Net cash used in operating activities		(10,726	)		(323	)
Investing activities:
Purchases of property, plant and equipment		(1,815	)		(346	)
Purchases of short-term investments		(28,503	)		(3,747	)
Sales of short-term investments		13,679			15,988
Proceeds from sale of property, plant and equipment		—			186
Proceeds from sale of assets held for sale		4,381			1,450
Net cash from (used in) investing activities		(12,258	)		13,531
Financing activities:
Repayments on long-term borrowings		(1,959	)		(1,265	)
Net proceeds from exercise of stock options		138			119
Dividends on preferred stock		—			(175	)
Treasury stock transactions		(217	)		—
Net cash used in financing activities		(2,038	)		(1,321	)
Net increase (decrease) in cash and cash equivalents		(25,022	)		11,887
Cash and cash equivalents at beginning of period		43,649			15,501
Cash and cash equivalents at end of period	$	18,627		$	27,388

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(in thousands)

See notes to condensed consolidated financial statements.


	Three Months Ended						Six Months Ended
	October 31,						October 31,
	2006			2005			2006			2005

Net income (loss)	$	773		$	(346	)	$	(489	)	$	(1,433	)
Other comprehensive income (loss):
Foreign currency translation adjustments		(139	)		(89	)		(274	)		315

Comprehensive Income (loss)	$	634		$	(435	)	$	(763	)	$	(1,118	)

~~-3-~~See notes to condensed consolidated financial statements.

~~Table of Contents~~6

STRATOSTable INTERNATIONAL,of INC. Contents

~~NOTES~~STRATOS INTERNATIONAL, TOINC. ~~CONDENSED~~AND ~~CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~SUBSIDIARIES

~~October 31,~~NOTES ~~2004 (All~~TO ~~amounts~~CONDENSED inCONSOLIDATED ~~thousands,~~FINANCIAL ~~except~~STATEMENTS ~~share and per share data~~(UNAUDITED) OCTOBER 31, 2006

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. 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 U.S. generally accepted accounting principles for complete financial statements. Certain items included in these statements are based on management’s estimates. In ~~the~~our opinion ~~of management~~, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the ~~three and~~ six -month ~~periods~~period ended October 31, ~~2004~~2006 are not necessarily indicative of the results that may be expected for the fiscal year ending April 30, ~~2005~~2007. 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, ~~2004~~2006 included in ~~the~~our ~~Company’s~~ Annual Report on Form 10-K, ~~as amended,~~ filed with the Securities and Exchange Commission.

~~Comprehensive~~ Stratos’ ~~loss~~fiscal ~~consists~~reporting ofyear ~~net~~ends ~~loss~~on ~~and~~the ~~foreign~~closest ~~currency~~Saturday ~~translation~~to April 30th. Stratos’ fiscal ~~adjustments~~reporting ~~and~~quarter ~~totaled~~ends ~~$7,517~~on ~~and~~the ~~$4,384~~closest ~~for~~Saturday to the ~~second~~end ~~quarters~~of the last month of the fiscal quarter. ~~2004~~For ~~and~~simplicity ~~2005~~purposes ~~and~~Stratos ~~$14,870~~refers ~~and~~to ~~$4,777~~its ~~for~~second ~~the~~quarter ~~six~~end ~~months~~as ~~ended~~ October 31, ~~2003~~2006 and fiscal year end as April 30, 2006. Stratos uses rounding in its financial presentations and ~~2004~~as a result, for presentation purposes certain sums may not mathematically calculate.

2. ~~Stock-Based~~Recent ~~Compensation~~Accounting Pronouncements

In ~~the first quarter of fiscal 2004~~May 2005, the ~~Company adopted Statement of~~ Financial Accounting Standards ~~No.~~Board (FASB) ~~148,~~issued ~~Accounting for Stock-Based Compensation. The provisions of~~ SFAS No. ~~148~~154 ~~did not have a material impact on~~Accounting ~~the~~for ~~Company’s~~Changes ~~financial~~and ~~position~~Error ~~or results of operations~~Corrections. The ~~Company~~pronouncement ~~will continue~~significantly tochanges ~~account~~the requirements for accounting ~~stock-based~~and ~~compensation~~reporting ~~plans~~a ~~using~~change ~~the intrinsic value method described~~ in ~~Accounting~~accounting ~~Principles Board Opinion No~~principal. ~~25, Accounting~~ ~~for~~It ~~Stock~~replaces ~~Issued~~APB-20 ~~to Employees,~~ and ~~related~~FAS-3 ~~interpretations. All~~and ~~stock~~applies ~~options~~to ~~granted~~all byvoluntary ~~the~~changes ~~Company~~in ~~are~~accounting ~~granted~~principal atas ~~market~~well ~~price~~as ~~and~~changes ~~thus~~required noby an ~~compensation~~accounting ~~expense~~pronouncement iswhen ~~recorded~~that inpronouncement ~~the~~does ~~Company’s~~not ~~results~~specify ofa ~~operations~~transition method. ~~Under~~The ~~SFAS~~effective ~~No. 148,~~date ~~the~~of ~~Company~~FAS 154 is ~~required~~for toaccounting ~~report~~changes ~~quarterly~~ and ~~year~~corrections toof ~~date~~errors ~~pro forma~~made ~~net~~in ~~loss~~fiscal ~~and loss per share as if the Company had accounted for its stock~~years ~~options~~beginning ~~plans~~after ~~under~~December 15, ~~the fair value method~~2005. ~~The~~We ~~following~~believe ~~table~~that ~~shows~~we ~~the Company’s~~are ~~pro~~in ~~forma~~compliance ~~net~~with ~~loss~~all accounting changes and ~~loss~~there ~~per~~are ~~share~~no ascorrections ~~if the Company had recorded the fair value~~ of ~~stock~~errors ~~options as compensation expense~~needed.

4 In December 2004, FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets. SFAS No. 153 amends APB Opinion No. 29, Accounting for Nonmonetary Transactions, to require that exchanges of nonmonetary assets be accounted for at fair value, rather than carryover basis. Nonmonetary exchanges that lack commercial substance are exempt from this requirement. SFAS No. 153 is effective for nonmonetary exchanges entered into in fiscal years beginning after June 15, 2005. We have not entered into exchanges that could be considered nonmonetary.

~~Table~~ In November 2004, the FASB issued SFAS No. 151, Inventory Costs. SFAS No. 151 requires that abnormal amounts of ~~Contents~~idle facility expense, freight, handling costs, and spoilage be

~~STRATOS INTERNATIONAL, INC.~~7

NOTESTable TOof CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Contents

	Three Months Ended						Six Months Ended
	October 31,						October 31,
(Dollars in thousands, except per share amounts)	2003			2004			2003			2004
Reported net loss attributable to common shareholders	$	(7,521	)	$	(4,087	)	$	(14,789	)	$	(4,567	)
Stock-based compensation, net of tax		(609	)		(213	)		(1,205	)		(483	)
Pro forma net loss		(8,130	)		(4,300	)		(15,994	)		(5,050	)
Reported basic and diluted net loss per share attributable to common shareholders		(1.02	)		(0.30	)		(2.00	)		(0.34	)
Pro forma basic and diluted net loss per share attributable to common shareholders		(1.10	)		(0.32	)		(2.17	)		(0.37	)

STRATOS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
OCTOBER 31, 2006

charged to expense in the period they are incurred rather than capitalized as a component of inventory costs. SFAS No. 151 ~~stock~~is ~~options~~effective ~~were~~for ~~issued~~inventory ~~during~~costs ~~the~~incurred ~~six~~in ~~months~~fiscal ~~ended~~periods beginning ~~October~~after June 3115, ~~2004~~2005. We have adopted SFAS No. 151 effective for our fiscal year 2007. SFAS No. 151 has not had a material effect on the valuation of our inventory.

3. ~~Business~~Stock-Based ~~Combinations~~Compensation

In ~~November~~December ~~2003~~2004, the ~~Company~~FASB ~~acquired~~issued ~~Sterling~~SFAS ~~Holding Company~~ No. 123(~~“Sterling”~~R), a ~~privately-held~~revision ~~company~~to ~~based~~SFAS ~~in Mesa~~No. 123, ~~Arizona~~Accounting ~~that designs and~~for ~~manufactures~~Stock-Based ~~Radio~~Compensation. ~~Frequency~~This ~~(“RF”)~~standard ~~and~~requires ~~microwave~~us ~~interconnect~~to ~~products~~measure ~~via~~the ~~its two~~cost ~~operating~~of ~~units,~~employee ~~Trompeter~~services received ~~Electronics,~~in ~~Inc.~~exchange ~~and~~for ~~Semflex,~~equity ~~Inc.~~awards ~~The~~based ~~Company completed~~on ~~this~~the ~~merger~~grant ondate ~~November 6,~~fair ~~2003,~~value ~~following~~of ~~approval~~the byawards. ~~both~~The ~~Company~~cost ~~and~~is ~~Sterling~~recognized ~~shareholders.~~as Atcompensation ~~closing,~~expense ~~Sterling~~over ~~became~~the avesting ~~wholly-owned subsidiary~~period of the ~~Company,~~awards. ~~with~~Stratos ~~Sterling~~adopted ~~shareholders receiving 6,082,000~~SFAS ~~shares~~No. 123(R) ofat the ~~Company’s~~beginning ~~common~~of ~~stock,~~fiscal ~~which~~2007. ~~represented~~We ~~approximately~~adopted ~~82% of~~ the ~~Company’s~~prospective ~~total~~method ~~shares~~of ~~outstanding~~transition ~~immediately prior to the consummation of~~under the ~~merger~~statement. OfUnder ~~such~~this ~~amount~~method, ~~608,189~~we ~~shares~~began ~~were~~recognizing ~~placed~~compensation incost ~~escrow~~for toequity ~~provide~~based ~~indemnification~~compensation ~~to the Company with respect to certain matters provided~~ for ~~in the~~all ~~merger~~new ~~agreement.~~or ~~These~~modified ~~shares~~grants ~~were released from escrow and distributed~~ after the ~~end~~date of ~~the second quarter~~adoption. ~~Company~~In ~~common shares issued in this transaction were valued at $5.09 a share~~addition, ~~the~~we ~~closing price on July 2, 2003,~~recognize the ~~day~~unvested ~~the~~portion ~~merger was announced. The Company also issued 50,000 shares~~ of ~~Series B~~ ~~redeemable~~the ~~preferred~~grant ~~stock~~date ~~with~~fair ~~a face~~ value of ~~$5,000~~awards ~~and~~issued ~~a contingent~~prior ~~value of up~~ to anadoption ~~additional $6,250~~ based on ~~certain events,~~the ~~including~~fair ~~the~~values ~~future~~previously ~~performance~~calculated offor ~~the~~disclosure ~~Company’s~~purposes. ~~common~~SFAS ~~share price~~No. 123(R) ~~The total~~did ~~purchase~~not ~~consideration~~have ~~was~~a ~~$38,755,~~material effect ~~consisting~~on ofour ~~common~~financial ~~and~~statements ~~preferred shares~~for ofthe ~~Company~~period ~~stock~~ended ~~valued at $35~~October 31,~~957~~ ~~and $2,798 of acquisition related costs~~2006.

~~The~~ No ~~primary~~stock ~~reasons~~options ~~for~~have ~~the~~been ~~acquisition~~issued ~~included~~during ~~Stratos’ desire to expand~~ the ~~size~~six ofmonths ~~its~~ended ~~business~~October 31, ~~Stratos’ belief that Sterling’s electronic interconnect operations would be a positive addition to Stratos’ existing product lines~~2006, and ~~Stratos’ goal of acquiring profitable operations~~2005. ~~Sterling’s~~Unearned ~~historical~~compensation ~~operating~~was ~~results,~~reclassified ~~future~~to ~~operating~~additional ~~forecasts~~paid-in ~~and~~capital for the ~~fair~~ ~~value~~period ofended ~~Sterling’s assets less liabilities assumed~~October 31, ~~contributed~~2006 toin ~~the determination~~accordance ofwith ~~the~~SFAS ~~purchase price and the recognition of goodwill~~123R.

5 The following tables illustrate options outstanding under all plans as of October 31, 2006 and April 30, 2006:

~~Table of Contents~~8

STRATOSTable INTERNATIONAL,of INC. Contents

STRATOS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (~~Unaudited~~UNAUDITED) OCTOBER 31, 2006

The Sterling acquisition was accounted for using the purchase method of accounting and the results of operations of Sterling have been included in the Company’s consolidated financial statements from the date of acquisition.


	Options outstanding						Options Exercisable
	at October 31, 2006						at October 31, 2006
			Weighted		Weighted				Weighted
			Average		Average				Average
	Number of		Remaining		Exercise		Number of		Exercise
	Shares		Life (years)		Price		Shares		Price

Range of Exercise Prices
$2.63 - 7.60		194,955		6.42	$	3.83		193,112	$	3.80
$27.50 - 59.80		51,708		4.32	$	51.57		51,645	$	51.60
$105.80 - 210.00		2,988		3.84	$	170.68		2,988	$	170.68

Total		249,651		5.95	$	15.71		247,745	$	15.78

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


	Options outstanding						Options Exercisable
	at April 30, 2006						at April 30, 2006
			Weighted		Weighted				Weighted
			Average		Average				Average
	Number of		Remaining		Exercise		Number of		Exercise
	Shares		Life (years)		Price		Shares		Price

Range of Exercise Prices
$2.63 - 7.60		232,830		6.91	$	3.76		230,325	$	3.74
$27.50 - 59.80		51,708		4.82	$	51.57		51,645	$	51.60
$105.80 - 210.00		5,988		4.25	$	181.77		5,988	$	181.77

Total		290,526		6.48	$	15.94		287,958	$	16.03

Assets acquired:
Cash	$	10,918
Accounts receivable		5,312
Inventories		7,785
Developed technology		3,185
Computer software		700
Company trade names		2,700
Customer relationships		10,800
Deferred income taxes		7,572
Property, plant and equipment		8,489
Other		3,099
Total assets		60,560
Liabilities assumed:
Accounts payable		1,430
Accrued expenses		3,673
Dividend payable		12,000
Deferred income taxes		8,112
Total liabilities		25,215
Net assets acquired		35,345
Goodwill		3,410
Purchase price	$	38,755
Cash paid, including transaction costs	$	2,798
Stock consideration		35,957
Total purchase price	$	38,755

The following table illustrates activities in our option plans:

Independent valuation specialists identified $17,385 of intangible assets in the acquisition of Sterling. These intangible assets and their associated useful lives are as follows (in thousands):


				Weighted
	Number of			Average
	Options			Exercise
	Outstanding			Price
Balance at April 30, 2006		290,526		$	15.94
Granted		—			—
Exercised		(33,176	)	$	7.08
Cancelled		(3,000	)	$	192.81

Balance at July 31, 2006		254,350		$	15.49
Granted		—			—
Exercised		(4,699	)	$	6.46
Cancelled		—			—

Balance at October 31, 2006		249,651		$	15.71

	Amount		Useful Life
Patents and related technology	$	3,185	14.25 years
Developed software		700	5.00 years
Tradenames		2,700	Indefinite
Customer relationships		10,800	12.50 years
	$	17,385

6 Table of Contents

~~Table~~STRATOS INTERNATIONAL, ofINC. ~~Contents~~AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) OCTOBER 31, 2006

~~STRATOS~~ 4. ~~INTERNATIONAL,~~Net ~~INC.~~Income (Loss) Per Share

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


	Three Months Ended					Six Months Ended
	October 31,					October 31,
	2006		2005			2006			2005
Net income (loss) attributable to common shareholders	$	748	$	(434	)	$	(801	)	$	(1,608	)


Basic number of common shares outstanding*		13,658		13,921			13,679			13,913

Diluted number of common shares outstanding*		14,625		13,921			13,679			13,913


Basic earnings per share	$	0.05	$	(0.03	)	$	(0.06	)	$	(0.12	)

Diluted earnings per share	$	0.05	$	(0.03	)	$	(0.06	)	$	(0.12	)

~~Goodwill~~* ~~and~~weighted ~~other indefinite lived assets at October 31, 2004 and April 30, 2004 are comprised of goodwill of $3,410 and tradenames of $2,700 related to the Sterling acquisition.~~ average

~~Had~~ 5. ~~the~~Intangible ~~acquisition been made as of May 1, 2003, unaudited pro forma sales~~Assets ~~and operating results are estimated to have been as follows:~~

							Pro forma
	Stratos			Sterling			Adjustments			Consolidated
Net sales:
Six months ended October 31, 2003	$	13,682		$	17,364		$	—		$	31,046
Net loss:
Six months ended October 31, 2003		(14,789	)		(4,579	)		(997	)		(20,365	)
Net loss per share, basic and diluted:
Six months ended October 31, 2003		(2.00	)		(0.63	)		(0.13	)		(2.76	)

Amortizable intangible assets were comprised of the following:

The pro forma adjustments represent additional depreciation related to the step-up in value of fixed assets and amortization of intangibles acquired.


	October 31, 2006							April 30, 2006
	Gross							Gross
	Carrying		Accumulated					Carrying		Accumulated					Useful
	Amount		Amortization			Net		Amount		Amortization			Net		Lives
Amortizable Intangible Assets
Customer relationships	$	10,800	$	(2,591	)	$	8,209	$	10,800	$	(2,159	)	$	8,641	12.50 yrs
Patents and related technology		4,368		(1,436	)	$	2,932		4,368		(1,295	)		3,073	14.25 yrs
Developed software		700		(700	)		—		700		(582	)		118	3.00 yrs

Total amortized intangible assets	$	15,868	$	(4,727	)	$	11,141	$	15,868	$	(4,036	)	$	11,832

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


	Fiscal Year
	2007			2008			2009			2010			2011			Thereafter

Amortization amount	$	(1,266	)	$	(1,148	)	$	(1,148	)	$	(1,148	)	$	(1,148	)	$	(5,974	)

~~Under~~ Amortization ~~current~~for ~~tax~~intangible ~~regulations,~~assets ~~the~~was ~~goodwill~~$0.3 million ~~related~~and to$0.7 million for the ~~acquisition~~three ofand ~~Sterling~~six ~~cannot~~months beended ~~deducted~~October 31, ~~for federal and state income tax purposes~~2006.

~~4. Intangible Assets~~10

AmortizableTable intangible assets were comprised of the following: Contents

	October 31, 2004						April 30, 2004
	Gross						Gross
	Carrying		Accumulated				Carrying		Accumulated
Amortizable Intangible Assets	Amount		Amortization		Net		Amount		Amortization		Net
	(in thousands)
Customer relationships	$	10,800	$	864	$	9,936	$	10,800	$	432	$	10,368
Patents and related technology		4,085		452		3,633		4,039		325		3,714
Developed software		700		233		467		700		117		583
Total amortized intangible assets	$	15,585	$	1,549	$	14,036	$	15,539	$	874	$	14,665

STRATOS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
OCTOBER 31, 2006

~~Amortization for intangible assets was $355 and $684 for the three and six months ended October 31, 2004~~ 6. ~~Annual~~Assets ~~expense~~Held ~~for~~For ~~intangible assets subject to~~Sale ~~amortization is expected to approximate $1,500 for each of the next five years.~~

5 Assets held for sale at October 31, 2006 are comprised of real property that is no longer in use. ~~Restructuring~~We ~~Charges~~are actively marketing these assets for sale, and we expect to sell these assets within a one-year period. We used independent appraisals or realtors’ letters of opinion of value to determine the estimated net realizable value of assets held for sale.

~~During~~ We ~~prior~~have ~~fiscal~~reclassified ~~years~~certain ~~the~~machinery ~~Company~~and ~~recorded~~equipment ~~restructuring~~that ~~charges~~was previously classified as assets ~~related~~held for sale back to ~~the~~property ~~consolidation~~plant and ~~elimination~~equipment. ofThe ~~various~~machinery ~~operating~~and ~~units.~~equipment ~~These charges~~has ~~included~~a ~~excess~~useful life of 5 years and ~~obsolete~~has ~~inventory,~~been ~~goodwill~~fully ~~and~~depreciated ~~fixed~~to ~~asset impairment~~its net realizable value, ~~personnel~~$264,000. ~~rentals~~The ~~for~~machinery ~~limited~~and equipment ~~use~~should be sold or disposed of during fiscal 2007.

7. Restructuring Charges

~~Table~~ During the current and prior fiscal years, we recorded restructuring charges related to the consolidation and elimination of ~~Contents~~various operating units. These charges included excess and obsolete inventory write downs, charges for goodwill and fixed asset impairment, personnel expenses, lease expenses for limited-use facilities, and legal costs related to the restructuring of operations.

~~STRATOS~~ Accruals ~~INTERNATIONAL,~~relating ~~INC.~~to restructuring charges and the subsequent activities are summarized as follows:

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


	Balance		2007		Utilized through			Balance
	April 30, 2006		Charges		Oct. 31, 2006			Oct. 31, 2006

Employee costs	$	320	$	—	$	(195	)	$	125
Idle facility rental		946		—		(367	)		579


Total	$	1,266	$	—	$	(562	)	$	704

~~facilities and legal costs related to the restructuring of operations~~ 8. ~~The~~ ~~Company~~Income ~~terminated 95 employees in fiscal 2004 during the restructuring of~~Taxes ~~operations, including both production and administrative personnel.~~

~~Accruals~~ Through ~~relating~~October 31, to2006, ~~restructuring~~we ~~charges~~recorded ~~and~~a ~~the~~valuation ~~subsequent~~allowance ~~activity~~of ~~are~~$80.0 million against deferred ~~summarized~~income astax ~~follows:~~assets primarily associated with tax loss carry forwards. Our significant operating losses experienced in recent years establishes a presumption that realization of these income tax benefits does not meet a “more likely than not” standard.

	Balance		2005		Utilized through		Balance
	April 30, 2004		Charges		October 31, 2004		October 31, 2004
Employee costs	$	240	$	—	$	101	$	139
Limited-use facility rental		738		—		535		203
	$	978	$	—	$	636	$	342

We have net operating loss carryforwards of approximately $179.7 million. We believe that our acquisition of Sterling Holding Company in November 2003 triggered Internal Revenue Code Section 382 limitations on the net operating loss that existed prior to the acquisition, which was approximately $132.5 million. Of that amount, we believe the available utilization of the net operating loss is limited to approximately $2.0 million on an annual basis. The net operating loss carry forwards will expire between 2022 and 2026.

~~6. Income Taxes~~11

TheTable Company has recorded a valuation allowance of $65,200 against deferred income tax assets primarily associated with tax loss carry forwards through April 30, 2004 because the significant operating losses experienced in recent years establishes a presumption that realization of these income tax benefits does not meet a “more likely than not” standard. We have continued to experience operating losses during the six months ended October 31, 2004, and an additional valuation reserve of $1,600 was recorded, which eliminated the tax benefit attributable to the net loss incurred in the first six months of fiscal 2005. Contents

~~We have net operating loss carryforwards of approximately $165~~STRATOS INTERNATIONAL,~~000~~ ~~that are available to offset taxable income in the future~~INC. ~~The~~AND ~~net operating loss~~SUBSIDIARIES ~~carry~~NOTES ~~forwards~~TO ~~will~~CONDENSED ~~expire~~CONSOLIDATED inFINANCIAL ~~2022~~STATEMENTS ~~through~~(UNAUDITED) OCTOBER ~~2025.~~31, 2006

7 9. ~~Long-Term~~Other ~~Debt~~Current Liabilities

~~Long-term~~ Other ~~debt~~current ~~consists~~liabilities ofconsist ~~a note payable for the purchase~~ of ~~computer software~~accrued ~~and hardware in connection with the implementation of a new information technology system in fiscal 2002. At October 31~~expenses, ~~2004,~~and ~~the remaining principal payments totaling $1,766~~ are ~~considered~~detailed ~~current~~as ~~because~~follows: ~~such payments are due within one year of the balance sheet date.~~

The note is supported by a letter of credit in the amount of $2,700 that expires on August 1, 2005.


	October 31,		April 30,
	2006		2006

Other Current Liabilities
Employee costs	$	2,031	$	2,514
Commissions		659		801
Other		591		456
Rent — idle facilities		579		946
Deferred Sales and claims		536		536
Professional Fees		515		441
Real estate and other taxes		368		334

Total	$	5,279	$	6,028

8 10. ~~Assets Held For Sale~~Litigation

~~Assets~~ From ~~held~~time ~~for~~to ~~sale~~time, atStratos ~~October 31,~~becomes ~~2004~~involved ~~represents~~in ~~real~~various ~~property~~lawsuits and ~~machinery~~ ~~and~~legal ~~equipment~~proceedings that arise isin nothe ~~longer~~normal incourse ~~use~~of ~~and~~business. isWe ~~being~~believe ~~actively~~that ~~marketed for~~the ~~sale.~~resolution ~~Management~~of ~~expects~~these tolawsuits ~~complete~~and ~~these~~legal proceedings ~~sales~~will ~~transactions~~not ~~within~~have a ~~one-year~~ ~~period.~~significant ~~The~~effect ~~Company~~on ~~recorded~~our abusiness, ~~charge~~financial condition or results of operations.

8 Stratos and certain of our former 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. The complaints are substantially identical to numerous other complaints filed against other companies that went public during the time of Stratos’ IPO. Three other similar lawsuits have also been filed against Stratos and certain of our former directors and executive officers. The complaints also name as defendants the underwriters for Stratos’ initial public offering. The complaints generally allege, among other things, that the registration statement and prospectus from our June 26, 2000 initial public offering failed to disclose certain alleged actions by the underwriters for the offering. The complaints charge Stratos and several of our former directors and executive officers with violations of Sections 11 and 15 of the Securities Act of 1933, as amended, and/or Section 10(b) and Section 20(a) to the Security 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.

~~Table~~ In 2003, we agreed to a Memorandum and Understanding, which reflects a settlement of ~~Contents~~these class actions as between the purported class action plaintiffs, Stratos and the former officers and directors, and our liability insurers. Under the terms of the Memorandum of Understanding, our liability insurers will pay certain sums to the plaintiffs, with the amount dependent upon the plaintiffs’ recovery from the underwriters in the IPO class actions as a

~~STRATOS INTERNATIONAL, INC.~~12

NOTESTable TOof CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Contents

~~of $619 in fiscal 2004 to adjust the carrying value of assets held for~~STRATOS ~~sale~~INTERNATIONAL, ~~to their estimated net realizable value~~INC. ~~The~~AND ~~Company used independent~~SUBSIDIARIES ~~appraisals~~NOTES orTO ~~realtors’~~CONDENSED ~~letters~~CONSOLIDATED ofFINANCIAL ~~opinion~~STATEMENTS ~~of value to determine the estimated~~(UNAUDITED) ~~net~~OCTOBER ~~realizable~~31, ~~value of assets held for sale.~~2006

9whole. ~~Loss~~The ~~Per~~plaintiffs ~~Share~~will dismiss with prejudice their claims against Stratos and our former officers and directors, and Stratos will assign to the plaintiffs certain claims that it may have against the underwriters. The plaintiffs filed with the court a motion for preliminary approval of the settlement, which, when granted, would lead to the mailing of class-wide notices of the settlement and a hearing date for approval of the settlement. The issuers, including Stratos, filed a statement joining in the plaintiffs’ motion for preliminary approval of the settlement. The underwriter defendants opposed the motion. On February 15, 2005, the Court issued its ruling granting the plaintiffs’ motion for preliminary approval of the settlement with the issuers, subject to certain changes to the bar order to be included as part of the settlement and to the notice to the class, and the Court recently approved the revisions made to the settlement and the notice pursuant to its prior order. The settlement still remains subject to final approval by the Court after notice of the settlement is sent to the class. A final fairness hearing on the settlement was held on April 24, 2006, at which time the Court took final approval of the settlement under advisement.

	Three Months Ended						Six Months Ended
	October 31,						October 31,
	2003			2004			2003			2004
Numerator – net loss attributable to common shareholders	$	(7,521	)	$	(4,087	)	$	(14,789	)	$	(4,567	)
Denominator:
Denominator for basic and diluted loss per share – weighted-average shares outstanding		7,392			13,549			7,378			13,542
Basic and diluted loss per share	$	(1.02	)	$	(0.30	)	$	(2.00	)	$	(0.34	)

In February 2002, we acquired Tsunami Optics, Inc. The acquisition agreement contemplated a potential earn-out payment of up to $18 million in common stock if certain financial targets were achieved following the acquisition. In June 2002, Catherine Lego, as representative of the former Tsunami shareholders, filed a lawsuit against Stratos alleging, among other things, that Stratos breached the acquisition agreement by refusing to allow Tsunami to operate as a separate subsidiary, firing the Tsunami executives that were necessary to operate the business, and thereby making it impossible for Tsunami to achieve the targets required to receive any earn-out payments. The complaint also alleged fraud and violations of federal securities laws in connection with the acquisition of Tsunami. Plaintiffs sought $38 million in damages or the rescission of the acquisition agreement. Stratos filed a counterclaim against Ms. Lego and several other shareholders and officers of Tsunami which alleged fraud, breach of contract and violations of federal securities laws. The counterclaim sought compensatory and punitive damages.

~~The~~ In ~~effect~~April 2004, the Court entered an order in favor of ~~outstanding~~Stratos ~~stock~~to ~~options~~dismiss ~~and~~with ~~unvested~~prejudice ~~restricted~~11 ~~stock~~of 13 ~~awards~~counts of the plaintiffs’ complaint. A trial on the plaintiffs’ two remaining claims (breach of ~~have~~contract ~~not~~and ~~been~~rescission) ~~considered~~was held in December 2004 in the ~~determination~~United States District Court, Northern District of ~~dilutive~~California. ~~weighted~~On ~~average~~February 16, 2005, the Court entered judgment in Stratos’ favor on both ~~shares~~of ~~outstanding~~plaintiffs’ ~~because~~two ~~their~~remaining ~~effect~~claims. ~~would~~The beCourt ~~antidilutive~~entered judgment against Stratos on its counterclaim against the plaintiffs. The plaintiffs appealed the trial court’s judgments. Stratos did not appeal the trial court’s judgment in plaintiffs’ favor on Stratos’ counterclaims. In August 2005, the plaintiffs agreed to dismiss their appeal, and the appeal was dismissed with prejudice on September 7, 2005.

~~10.~~ In ~~Sale~~August 2002, James Campbell, the former CEO of Tsunami, filed a ~~Business~~lawsuit against Stratos alleging wrongful termination in breach of his employment contract, fraud and age discrimination. Campbell’s claims were subsequently amended to include intentional infliction

~~Effective May 23, 2003, the Company sold the assets and business of its~~13 wholly-owned subsidiary, Bandwith Semiconductor LLC, located in Hudson, New Hampshire. The Company realized a net gain of approximately $1,200, which is reflected as a reduction of general and administrative expenses in the condensed consolidated statement of operations for the six months ended October 31, 2003.

11.Table Litigationof Contents

~~The Company and certain of its directors and executive officers have been~~STRATOS ~~named as defendants in purported class action lawsuits filed in the United States District Court~~INTERNATIONAL, ~~Southern District of New York~~INC. ~~The~~AND ~~first of these~~SUBSIDIARIES ~~lawsuits,~~NOTES ~~filed~~TO onCONDENSED ~~July 25,~~CONSOLIDATED ~~2001,~~FINANCIAL isSTATEMENTS 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 during the time of the Company’s IPO. 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 Section 10(bUNAUDITED) ~~and~~ ~~Section~~OCTOBER ~~20(a) to the Security Exchange Act of 1934~~31, ~~as amended. The complaints~~2006 ~~also allege claims solely against the underwriting defendants under Section 12(a)(2) of the Securities Act of 1933, as amended.~~

9of emotional distress. Campbell sought unspecified damages, punitive damages and attorney’s fees. During the first quarter of fiscal year 2006 we settled this litigation.

~~Table~~ In August 2004, Federal Insurance Company, issuer of ~~Contents~~the Directors’ and Officers’ Insurance policy for Stratos, filed a complaint for declaratory judgment in the United States District Court, Northern District of Illinois to deny coverage to Stratos for the Lego and Campbell lawsuits described above. The suit was filed in response to Stratos’ submission of a claim for insurance coverage for the Lego and Campbell lawsuits and the tender of defense costs to the insurer for reimbursement. Federal did not seek damages from Stratos and Stratos disputed denial of the coverage. In June 2005 the court determined that Federal was not responsible for the claim for insurance coverage or the reimbursement of the defense costs. We filed an appeal of the ruling. In November 2005, the lawsuit was settled as disclosed in our results for the quarter ended January 31, 2006.

~~STRATOS~~ During ~~INTERNATIONAL~~the first quarter of fiscal 2006, ~~INC~~Stratos settled two patent infringement suits with Picolight, Inc. The cases were pending in the U.S. District Court for the District of Delaware and were dismissed with prejudice on June 10, 2005.

~~NOTES~~ During TOthe ~~CONDENSED~~first ~~CONSOLIDATED~~quarter ~~FINANCIAL~~of ~~STATEMENTS~~fiscal ~~(Unaudited)~~2006, Stratos received a lump sum of $5.5 million from the settlement of litigation in fiscal 2003. The present value of this amount was recorded as litigation settlements in the fiscal 2003 Consolidated Statement of Operations. In addition, Stratos paid $1.8 million in the first quarter of fiscal 2006 in settlement of two cases. This amount was recorded as litigation settlements in the fiscal 2005 Consolidated Statement of Operations.

~~In 2003, the Company agreed to a Memorandum of Understanding, which~~14 reflects a settlement of these class actions as between the purported class action plaintiffs, the Company and the defendant officers and directors, and the Company’s liability insurer. Under the terms of the Memorandum of Understanding, the Company’s liability insurers will pay certain sums to the plaintiffs, with the amount dependent upon the plaintiffs’ recovery from the underwriters in the IPO class actions as a whole. The plaintiffs will dismiss with prejudice their claims against the Company and its officers and directors, and the Company will assign to the plaintiffs certain claims that it may have against the underwriters. The plaintiffs have filed with the court a motion for preliminary approval of the settlement, which, if granted, will lead to the mailing of class-wide notices of the settlement and a hearing date for approval of the settlement. The issuers filed a statement joining in the plaintiffs’ motion for preliminary approval of the settlement. The underwriter defendants have opposed the motion, and the court has not ruled on it.

InTable February 2002, the Company acquired Tsunami Optics, Inc. The acquisition agreement contemplated a potential earn-out payment of up to $18 million in common stock if certain financial targets were achieved following the acquisition. In June 2002, Catherine Lego, as representative of the former Tsunami shareholders, filed a lawsuit against the Company alleging, among other things, that the Company breached the acquisition agreement by refusing to allow Tsunami to operate as a separate subsidiary, firing the Tsunami executives that it believed were necessary to operate the business and thereby making it impossible for Tsunami to achieve the targets required to receive any earnout payments. The complaint also alleged fraud and violations of federal securities laws in connection with the acquisition of Tsunami. Plaintiffs are seeking $38 million in damages or the rescission of the acquisition agreement. The Company filed a counterclaim against Ms. Lego and several other shareholders and officers of Tsunami which alleges fraud, breach of contract and violations of federal securities laws. The counterclaim seeks compensatory and punitive damages. Contents

~~In April~~Item ~~2004, the Court entered an order in favor of the Company to dismiss with prejudice 11 of 13 counts of the plaintiffs’ complaint~~2. ~~The alleged damages sought for the plaintiffs~~Management’ two remaining claims (breach of contract and rescission) remain unchanged at $38 million. The Company believes that the plaintiffs’ remaining claims are without merit and intends to vigorously defend against these claims. The court also denied the plaintiff’s ~~motion~~ toDiscussion ~~dismiss the Company’s counterclaims of fraud~~ and ~~violations~~Analysis of ~~federal~~ ~~securities~~Financial ~~law~~Condition and ~~granted~~Results ~~the plaintiff’s motion to dismiss the allegation~~ of ~~breach of contract. Trial of this action commenced on December~~ ~~1, 2004, and is expected to conclude in December 2004~~Operations.

~~In August 2002, James Campbell, the former CEO of Tsunami, filed a lawsuit~~Overview ~~against the Company alleging wrongful termination in breach of his employment~~ contract, fraud and age discrimination. Campbell’s claims were subsequently amended to include intentional infliction of emotional distress. Campbell seeks unspecified damages, punitive damages and attorney’s fees. The Company believes that this lawsuit is without merit and intends to vigorously defend against these claims. An August 2004 trial date was originally set but was vacated, and a new trial date has not been set.

10 Stratos is an innovative international supplier of shielded electronic and optical interconnects, plus the transceiver components that are used to connect these two transmission line mediums. We design and manufacture interconnect components and subsystems used in telecom communications, datacom, military and video markets for signal networking.

~~Table~~ We have a rich history of ~~Contents~~optical and mechanical packaging expertise and have been a pioneer in developing several optical devices using innovative form factors for telecom, datacom, video, military, and harsh environment applications. We have a broad range of products and are a market leader in several niches including specialty optical products such as RJ and low rider transceivers, Media Interface Adapters, flex circuits, as well as high performance RF and microwave coax and triax interconnect products. We currently serve more than 1,300 active customers in telecom, military and video markets.

~~STRATOS~~ On ~~INTERNATIONAL~~September 14, ~~INC~~2006, we announced that our Board of Directors had decided to explore various strategic alternatives for Stratos to maximize shareholder value, including the possible sale of Stratos. In connection with this process, we retained CIBC World Markets Corp. as our exclusive financial advisor. The process continues to be active, and we currently anticipate that the process may be resolved during the third or fourth quarters of our fiscal year. There can be no assurance that the strategic alternatives process will result in a transaction involving Stratos.

~~NOTES~~Results TOof ~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~Operations

InThree ~~March 2003,~~Months ~~Alcatel~~Ended ~~USA filed suit against the Company and others~~October 31, ~~seeking~~ ~~unspecified~~2006 ~~damages~~ and ~~alleging breach of contract, breach of~~2005 ~~warranty, negligent misrepresentation, fraud and conspiracy in connection with~~ Alcatel’s purchase of certain goods from the defendants over a period spanning 2000 and 2001. The Company asserted certain counterclaims against Alcatel relating to the same type of goods at issue in Alcatel’s complaint. In April 2004, Alcatel and the Company executed a written settlement agreement resolving all disputes. Pursuant to the terms of the written settlement agreement, the parties executed mutual releases and the case was dismissed with prejudice on August 13, 2004.

The ~~Company~~following istable asets ~~plaintiff~~forth incertain astatement ~~lawsuit relating to its intellectual property rights against Picolight, Inc. (District~~ of ~~Delaware).~~operations Indata ~~this~~as action, the Company alleges that optoelectronic products sold by the defendant infringe numerous of the Company’s patents and is seeking monetary damages and injunctive relief. The defendant has asserted an affirmative defense and filed counterclaims and contends that the patents are invalid, unenforceable and/or not infringed by the products sold by the defendant. Picolight has asserted an antitrust counterclaim based on the alleged unenforceability of the Company’s patents. If successful, the defendant is seeking attorneys’ fees and costs in connection with the lawsuit. The Company intends to pursue this lawsuit and defend against the counterclaims vigorously. On November 24, 2003, a ~~jury returned~~percentage ~~a verdict finding that Picolight infringed six~~ of ~~the Company’s~~total ~~patents.~~revenues ~~The~~for ~~case is currently in~~ the ~~inequitable~~periods ~~conduct phase and we are~~indicated: ~~awaiting the judge’s ruling. The third phase on validity is dependent on the outcome of the inequitable conduct phase, and would be followed by the damages phase.~~

~~During the second quarter of fiscal year 2005 the Company settled a patent~~15 ~~infringement case and as a result of this settlement the Company received approximately $1.4 million, which was recorded as license fees and royalties in the consolidated statement of operations.~~

11 Table of Contents


	Three Months Ended
	October 31,
	2006					2005						Change
	Dollars		%			Dollars			%			Dollars			%

Revenues:
Net sales	$	23,036		99.2	%	$	18,949			99.7	%	$	4,087			21.6	%
License fees and royalties		196		0.8	%		65			0.3	%		131			201.5	%

Total revenues		23,232		100.0	%		19,014			100.0	%		4,218			22.2	%

Costs of revenues		14,419		62.1	%		12,262			64.5	%		2,157			17.6	%

Gross profit		8,813		37.9	%		6,752			35.5	%		2,061			30.5	%

Operating expenses:
Research and development		2,209		9.5	%		1,839			9.7	%		370			20.1	%
Sales and marketing		2,697		11.6	%		2,536			13.3	%		161			6.3	%
General and administrative		3,652		15.7	%		3,562			18.7	%		90			2.5	%
Restructuring and other charges		—		0.0	%		483			2.5	%		(483	)

Total operating expenses		8,558		36.8	%		8,420			44.3	%		138			1.6	%


Income (loss) from operations		255		1.1	%		(1,668	)		(8.8	%)		1,923			(115.3	%)

Investment income, net		362		1.6	%		295			1.6	%		67			22.7	%
Other income (expense)		156		0.7	%		1,027			5.4	%		(871	)		(84.8	%)

Income (loss) before income taxes		773		3.3	%		(346	)		(1.8	%)		1,119			(323.4	%)
Provision for income taxes		—		0.0	%		—			0.0	%		—			0.0	%

Net income (loss)	$	773		3.3	%	$	(346	)		(1.8	%)	$	1,119			(323.4	%)

~~Item~~ Net Sales: Net sales for our second quarter ended October 31, 2006 increased to $23.0 million from $18.9 million in the comparable quarter last year. Of the $4.1 million increase in the second quarter, $1.8 million was from an increase in net sales to the military government end market, $1.2 million was from an increase to other end markets, $0.7 million ~~Management’s~~was ~~Discussion~~from ~~and~~an ~~Analysis~~increase in ofnet ~~Financial~~sales ~~Condition~~to the data networking end market, $0.2 million was from an increase in net sales to the storage/enterprise end market and ~~Results~~$0.2 million ofwas ~~Operations~~from an increase in net sales to the telecom/metro end market.

~~You~~ License ~~should~~Fees ~~read the following discussion together with our consolidated financial statements~~ and ~~notes~~Royalties: toLicense ~~those~~fees ~~financial~~increased ~~statements, which are included in this report. This report contains forward-looking statements made pursuant~~ to ~~the safe harbor provisions of Section~~$0.2 ~~27A~~million ofin the ~~Securities~~second ~~Act of~~quarter ~~1933,~~ended ~~as amended, and Section~~October ~~21E of the Securities and Exchange Act of 1934~~31, as ~~amended.~~2006 The words “anticipates,” “intends,” “expects,” “could,” “should,” “plans,” “believes,” “estimates,” or words or phrases of similar import generally identify forward-looking statements. You are cautioned that forward-looking statements are subject to risks, trends and uncertainties that could cause actual results, performance or achievements to differ materially from ~~those expressed in any forward-looking statements~~$0. Important factors that could cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by those statements include, but are not limited to the following: (i) the continuation of the current economic climate and its effect on our business; (ii)1 ~~our~~million ~~ability~~in ~~to meet analyst and investor expectations; (iii)~~ the ~~long-term~~ ~~growth~~comparable ofquarter ~~the~~last ~~communications~~year. ~~industry~~License ~~and its use of our~~fees ~~technologies;~~consist (iv) our ability to develop and market new products and technology and to make enhancements to existing products and technology on a successful and timely basis; (v) our and our customers’ ability to comply with evolving domestic and international government regulations; (vi) expenditures associated with redesigning products to comply with evolving industry standards or alternative technologies that become the industry standard; (vii) our dependence on sales to the military/aerospace industry; (viii) our ability to develop and manage relationships with large customers that comprise, and will comprise, a significant percentage of ~~our~~payments ~~net~~contingent ~~sales,~~upon ~~respectively; (ix) the length of~~ sales ~~cycles,~~volumes ~~which vary by product and customer, and the effect that this length has on net sales and operating expenses; (x) the lack~~ of ~~long-term customer~~licensed contracts and its effect on customers’ ability to reduce, cancel and defer orders on short notice without significant penalty; (xi) the effect on gross margins of an inability to reduce manufacturing costs or increase sales of higher margin products; (xii) the impact of competitive products; (xiii) our reliance on a limited number of suppliers and the effect of underestimating or overestimating the need for certain supplies; (xiv) our ability to attract and retain qualified personnel; (xv) the effect of defects in our products; (xvi) the effect of compliance with environmental laws and other legal requirements; (xvii) the effect of economic, political and regulatory risks associated with international operations, including acts of terrorism directed against the United States or U.~~S. affiliated targets; (xviii) our ability to complete and~~ integrate acquisitions, strategic alliances and joint ventures; (xix) our ability to secure and defend intellectual property rights and, when appropriate, license required technology; (xx) adverse outcomes of pending, threatened or future litigation, including suits related to intellectual property matters; (xxi) volatile market prices for securities of technology-related companies; (xxii) the effect of provisions in our organizational documents and Delaware law that may delay or prevent the acquisition of Stratos or may decrease the value of Stratos common stock; (xxiii) our ability to integrate Stratos and Sterling; (xxiv) the continued costs associated with the acquisition of Sterling; and (xxv) impact on our earnings of application of the purchase method of accounting in connection w ith the Sterling merger. Because forward-looking statements are subject to assumptions and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Shareholders are cautioned not to place undue reliance on such statements, which speak only as of the date of this document or the date of any document incorporated by

Backlog: Our total sales order backlog decreased to $14.2 million during the quarter ended October 31, 2006 from $16.0 million as of July 31, 2006, or a total decrease of ($1.8) million. Backlog in our Optical Group decreased ($2.5) million, consisting of a ($1.7) million decrease in active products, and a ($0.9) million decrease in passive products, partially offset by an increase of $0.1 million in video products. The backlog in RF Microwave increased $0.7 million during the second quarter ended October 31, 2006. Our backlog was $12.8 million at October 31, 2005.

~~Table of Contents~~16

reference.Table All subsequent written and oral forward-looking statements concerning the matters addressed in this document and attributable to the Company or any person acting on the Company’s behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable law or regulation, the Company undertakes no obligation to release publicly any revisions or updates to such forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events. Contents

~~See~~ Cost of Revenues and Gross Margins: Gross profit increased to $8.8 million for the ~~cautionary~~second quarter ~~statements~~ended ~~included~~October 31, as2006 ~~Exhibit~~from $6.8 99million toin ~~this~~the ~~quarterly~~comparable ~~report~~quarter last year. Gross margin ~~for~~as a ~~more~~percentage ~~detailed~~of ~~discussion~~total ofrevenues increased to 37.9% in the ~~foregoing~~second ~~and~~quarter ~~other~~from ~~factors~~35.5% ~~that~~in ~~could~~the ~~cause~~comparable ~~actual~~quarter ~~results~~last year. Cost of sales increased to ~~differ~~$14.4 million ~~materially~~in ~~from~~the ~~those~~second ~~included~~quarter ended October 31, 2006 from $12.3 million in the comparable quarter last year. The increase in gross ~~forward-looking~~margins ~~statements~~was ~~and~~primarily ~~that,~~attributed ~~among~~to ~~others~~improved customer product mix, ~~should~~as bethe ~~considered~~increase in sales of ~~evaluating~~higher ~~our~~profit ~~outlook~~margin products had a positive effect on the gross margin in the quarter ended October 31, 2006.

~~Overview~~ Research and Development. Research and development expenses increased to $2.2 million in the second quarter ended October 31, 2006 from $1.8 million in the comparable quarter last year. The $0.4 million increase was due to $0.3 million increased spending on material for new product development and $0.1 million increase in salaries, wages and benefits.

In Sales ~~November 2003, the Company acquired Sterling Holding Company (“Sterling”), a privately-held company based in Mesa, Arizona that designs~~ and ~~manufactures~~ ~~Radio~~Marketing. ~~Frequency~~Sales ~~(“RF”)~~ and ~~microwave~~marketing ~~interconnect~~expenses ~~products~~increased via its two operating units, Trompeter Electronics, Inc. and Semflex, Inc. At closing, Sterling became a wholly-owned subsidiary of the Company, with Sterling shareholders receiving 6,082,000 shares of the Company’s common stock, which represented approximately 82% of the Company’s total shares outstanding immediately prior to ~~the consummation of the merger~~$2.7 million ~~Of such amount, 608,189 shares were placed~~ in ~~escrow to provide indemnification to~~ the ~~Company with~~quarter ~~respect~~ended toOctober 31, ~~certain~~2006 ~~matters provided for in the merger agreement. These shares were released~~ from ~~escrow and distributed after the end of the second quarter. Company common shares issued in this transaction were valued at~~ $52.~~09 a share, the closing price on July~~5 2,million ~~2003,~~in the ~~day~~comparable ~~the~~quarter ~~merger~~last ~~was announced~~year. The ~~Company~~ ~~also issued 50,000 shares of Series B redeemable preferred stock with a face value of~~ $5.0.2 million increase ~~and~~was adue ~~contingent value of up~~ to an ~~additional~~increase ~~$6.25 million based on certain events, including the future performance~~ of ~~the Company’s share price. The total purchase consideration was~~ $380.82 million~~, consisting~~ ofin ~~common~~commission ~~and~~expenses ~~preferred~~related ~~shares~~to ofincreased ~~Company stock valued at $36.0~~sales ~~million and $2~~revenue.~~8 million of acquisition related costs.~~

In General ~~connection~~and ~~with~~Administrative. ~~the~~General ~~transaction,~~and ~~the~~administrative ~~Company~~expenses ~~expanded~~increased ~~its~~to ~~Board~~$3.7 million ofin ~~Directors~~quarter toended ~~nine~~October 31, ~~members.~~2006 ~~The~~from ~~new~~$3.6 million ~~board~~in ~~was~~the ~~comprised~~comparable ofquarter ~~four~~last ~~members~~year. ofThe ~~the~~$0.1 ~~Company’s~~million ~~Board~~increase atwas ~~the~~due ~~time~~to ofan ~~the~~increase ~~closing~~ of ~~the~~$0.1 million ~~merger,~~in ~~four~~general ~~members~~operating ~~from Sterling’s Board, and an additional director chosen by Sterling~~expenses.

On Restructuring ~~May 19,~~and ~~2004,~~Other weCharges. ~~announced~~During ~~that~~the ~~our~~quarter ~~Board~~ended ofOctober 31, ~~Directors~~2005, ~~had~~we ~~decided~~recorded to$0.5 ~~explore~~million ~~various~~in ~~strategic~~restructuring ~~alternatives~~charges tofor ~~maximize~~personnel ~~shareholder~~and ~~value,~~severance ~~including a~~expenses ~~possible~~related ~~sale~~to of the ~~Company. In connection with that decision, our Board of~~consolidation ~~Directors has formed a committee~~ and ~~has~~elimination ~~retained~~of ~~CIBC~~various ~~World Markets Corp~~activities. as ~~its exclusive financial advisor. There can be no assurance that a transaction will result involving the Company.~~

On Investment ~~November 5~~income, ~~2004,~~net: ~~the~~Investment ~~Company~~income, ~~announced~~net ~~that~~of ~~James~~investment ~~W. McGinley resigned effective that date~~expense, asincreased ~~President~~to ~~and~~$0.4 million ~~Chief~~in ~~Executive Officer and director of~~ the ~~Company.~~quarter Inended ~~addition~~October 31, ~~the~~2006 ~~Company~~from ~~announced~~$0.3 million ~~that~~in ~~Brian~~the J.comparable ~~Jackman~~quarter ~~had~~last ~~resigned~~year. asInvestment aincome ~~director~~consists of earnings on the ~~Company~~short-term ~~effective~~investment ~~the~~of ~~same~~excess ~~date~~cash balances. The Asincrease areflected ~~result, the~~higher ~~Board~~prevailing ~~currently~~interest ~~has~~rates ~~seven~~during ~~members.~~the period

13 Other income (expense): Other income for the quarter ended October 31, 2006 consisted primarily of unrealized foreign exchange gains on intercompany loans recorded in our operations in the United Kingdom. Other income of $1.0 million in the quarter ended October 31, 2005 consisted of $0.6 million relating to the resolution and reversal of prior period accruals, $0.2 million of unrealized foreign exchange gains on intercompany loans and $0.2 million of other non-operating income.

~~Table~~ Income Taxes: Stratos recorded a valuation allowance of ~~Contents~~$80.0 million against deferred income tax assets primarily associated with tax loss carry forwards through October 31, 2006. The significant operating losses experienced in recent years establishes a presumption that realization of these income tax benefits does not meet a “more likely than not” standard.

~~We develop, manufacture and sell optical, RF, and microwave components and~~17 subsystems for various applications and multiple end markets. These subsystems are designed for use in storage, data networking, metro and wide area telecom networks, military, aerospace, video, government security, oil and gas, and other industrial markets and applications. We plan to continue to diversify our end markets and expand our product offerings through internal and, possibly, external growth. Our products are compatible with the various standards used in these applications, including Gigabit Ethernet, Fast Ethernet, Fibre Channel, and synchronous optical network (“SONET”), and other standards dictated by the application of our products.

OurTable net sales are derived from the sale of optical components and subsystems to original equipment manufacturers (“OEMs”) and local resellers, and from the sale of RF and microwave components to telecom service providers, OEMs, military and government users, and distributors and resellers. Our net sales have fluctuated from period to period due to customer demand for our products, the size and timing of customer orders, our ability to deliver in the relevant period and any canceled, delayed or rescheduled orders in the relevant period. We determine inventory reserves in light of the rapid technological change experienced in our industry 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. Contents

~~The~~Six ~~average~~Months ~~unit~~Ended ~~prices of many of our products generally decrease as the products mature in response to factors such as increased competition~~October 31, ~~the introduction~~2006 ~~of new products~~ and ~~increased unit volumes. We anticipate that~~2005 average selling prices of many of our products 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 new products that incorporate features that can be sold at higher average selling prices, on a timely basis. There can be no assurance that we will be able to introduce new products to offset the anticipated decrease in the average selling prices of our products.

License fees and royalties represent payments received from licensees of our patented technology, which is also used by us in our optical, RF and microwave product lines. 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, which in most cases is greater than ten years. We will consider entering into similar agreements in the future. However, we are not able to predict whether we will enter into any additional licenses in the future and, if so, the amount of any license fees or royalties.


	Six Months Ended
	October 31,
	2006						2005						Change
	Dollars			%			Dollars			%			Dollars			%

Revenues:
Net sales	$	44,100			99.3	%	$	39,429			99.5	%	$	4,671			11.8	%
License fees and royalties		327			0.7	%		209			0.5	%		118			56.5	%

Total revenues		44,427			100.0	%		39,638			100.0	%		4,789			12.1	%

Costs of revenues		29,107			65.5	%		24,715			62.4	%		4,392			17.8	%

Gross profit		15,320			34.5	%		14,923			37.6	%		397			2.7	%

Operating expenses:
Research and development		4,121			9.3	%		3,843			9.7	%		278			7.2	%
Sales and marketing		5,238			11.8	%		5,083			12.8	%		155			3.0	%
General and administrative		7,637			17.2	%		7,866			19.8	%		(229	)		(2.9	%)
Restructuring and other charges		—			0.0	%		483			1.2	%		(483	)

Total operating expenses		16,996			38.3	%		17,275			43.6	%		(279	)		(1.6	%)


Loss from operations		(1,676	)		(3.8	%)		(2,352	)		(5.9	%)		676			(28.7	%)

Investment income, net		725			1.6	%		547			1.4	%		178			32.5	%
Other income (expense)		462			1.0	%		381			1.0	%		81			21.3	%

Loss before income taxes		(489	)		(1.1	%)		(1,424	)		(3.6	%)		935			(65.7	%)
Provision for income taxes		—			0.0	%		(9	)		(0.0	%)		9			0.0	%

Net loss	$	(489	)		(1.1	%)	$	(1,433	)		(3.6	%)	$	944			(65.9	%)

~~Our~~ Net ~~cost~~sales: ofNet sales ~~consists~~for ofthe ~~materials,~~six-month ~~salaries~~period ~~and~~ended ~~related~~October 31, ~~expenses~~2006 ~~for manufacturing~~increased ~~personnel~~to ~~and~~$44.1 million ~~manufacturing~~from ~~overhead~~$39.4 million Wein ~~purchase~~the ~~several~~comparable ~~key components~~period ~~used~~last inyear. Of the ~~manufacture~~$4.7 million ofincrease ~~our~~in ~~products~~the six-month ~~from~~period aended ~~limited~~October 31, ~~number~~2006, ~~of suppliers~~$2.1 million Wewas ~~have~~from ~~periodically~~an ~~experienced~~increase ~~shortages~~in ~~and~~net ~~delivery~~sales ~~delays~~to ~~for~~the ~~these~~other ~~materials.~~end ~~In some circumstances~~markets, we$1.3 million ~~maintain~~was from an ~~inventory~~increase ofin ~~limited source~~net ~~components~~sales to ~~decrease~~ the ~~risk~~military/government ofend market, ~~shortage~~$0.8 million Ifwas wefrom ~~overestimate~~an ~~our requirements,~~increase wein ~~may~~net ~~have~~sales ~~excess~~to ~~inventory~~the ofdata ~~these~~networking ~~components.~~end ~~The~~market ~~majority~~and $0.6 ofmillion ~~our~~was ~~products~~from ~~are~~an ~~designed~~increase ~~and manufactured~~ in ~~our~~net ~~own~~sales ~~facilities.~~to In the ~~future~~ westorage/enterprise ~~may~~end ~~expand~~market. ~~the~~Sales ~~volume~~to ofthe telecom/metro ~~products~~end ~~manufactured~~market bydecreased ~~third parties~~$0. In1 million. ~~order to remain~~

14 License Fees and Royalties. License fees increased to $0.3 million in the six-month period ended October 31, 2006 from $0.2 million in the comparable period last year. License fees consist of payments contingent upon sales volumes of licensed products.

~~Table~~ Backlog: Our total sales order backlog increased to $14.2 million during the six-month period ended October 31, 2006 from $13.6 million as of ~~Contents~~April 30, 2006, or a total increase of $0.6 million. Backlog in our Optical Group decreased ($0.4) million, consisting of a decrease of ($0.8) million in active products, a decrease of ($0.4) million in passive products and an increase of $0.8 million in video products. The backlog in RF Microwave increased $1.0 million during the six-month period ended October 31, 2006. Our backlog was $12.8 million at October 31, 2005.

~~competitive, we must continually reduce our manufacturing costs through~~18 ~~design and engineering innovations and increases in manufacturing efficiencies. There can be no assurance that we will be able to reduce our manufacturing costs.~~

SomeTable of our critical components used in production of certain of our products are purchased from a key supplier, which has been acquired by a competitor of the Company. If this supplier increases prices, reduces quantities available to us or ceases to supply us, our business and results of operations may be significantly harmed. Contents

~~Research~~ Cost of Sales and ~~development~~Gross ~~expenses~~Margins. ~~consist~~Gross ~~primarily~~profit ofincreased ~~salaries~~to ~~and related~~$15.3 million ~~expenses~~in ~~for~~the ~~design~~six- ~~engineers~~month period ended October 31, ~~scientists~~2006 ~~and~~from ~~other~~$14.9 million ~~technical~~in the comparable period last year. Gross margin ~~personnel~~as a percent of total revenues decreased to 34.5% in the six months ended October 31, ~~depreciation~~2006 from 37.6% in the comparable period last year. Cost of ~~test~~sales ~~and~~increased ~~prototyping~~to ~~equipment~~$29.1 million in the six-month period ended October 31, ~~and~~2006 ~~tooling~~from $24.7 million in the comparable period last year. The ~~Research~~decrease ~~and~~in ~~development~~gross ~~expenses~~margin, ~~also~~as ~~consist~~a percentage of ~~materials~~total ~~and~~revenue ~~operating expenses~~is ~~related~~primarily attributed to ~~major~~changes in customer product ~~development~~mix, ~~projects.~~competitive Wepricing ~~charge~~concessions ~~all~~and ~~research~~increased manufacturing costs during the ~~and~~first ~~development~~quarter ~~expenses~~of toour ~~operations~~current asfiscal ~~incurred~~year.

We Research ~~market~~and Development. Research and ~~sell~~development ~~our~~expenses ~~products~~increased ~~domestically~~to ~~and~~$4.1 million ~~internationally~~in ~~through~~the ~~our~~six-month ~~direct~~period ~~sales~~ended ~~force~~October 31, ~~local~~2006 ~~resellers~~from ~~and manufacturers’ representatives~~$3. ~~Specifically,~~8 million wein ~~have~~the ~~established~~comparable ~~relationships~~period ~~with~~last ~~resellers~~year. ~~and~~The ~~manufacturers’~~$0.3 million ~~representatives~~increase inincluded ~~North~~$0.1 million ~~America,~~for ~~Europe~~salaries, ~~South~~wages ~~America,~~and ~~Asia~~benefits plus $0.2 million for material and ~~various~~supplies ~~other~~for ~~countries~~new product development.

~~The~~ Sales ~~Company~~and ~~sells~~Marketing. ~~through~~Sales aand ~~team~~marketing ofexpenses ~~representative~~increased ~~distributors~~to ~~and~~$5.2 million ~~direct sales~~in ~~professionals~~the ~~across~~six-month period ~~North~~ended ~~America~~October 31, ~~Europe~~2006 ~~and~~from ~~Asia~~$5.1 million ~~The~~in ~~Company’s~~the ~~sales teams~~comparable ~~are~~period ~~organized~~last ~~into~~year. ~~three~~The ~~groups~~$0.1 million ~~including~~increase ~~Stratos~~includes ~~Lightwave~~$0.2 million ~~(active~~in ~~and passive~~increased ~~components~~commissions ~~and subsystems), Trompeter~~ (RFproportional ~~interconnect~~to ~~products) and~~higher ~~Semflex~~sales ~~(microwave~~revenue), ~~cable~~ and ~~cable assemblies)~~$0.1 million ~~The~~in ~~Company~~increased ~~maintains~~in ~~three sales~~salaries ~~organizations~~wages toand ~~capture~~benefits, ~~the~~offset ~~strong~~in ~~brand~~part by ~~identity~~a ~~each~~reduction ~~has~~of ~~developed~~$0.2 million in ~~its~~ ~~respective~~other ~~marketplace~~sales expenses.

~~The~~ General ~~marketing group is responsible for developing marketing strategies~~ and ~~programs~~ ~~that~~Administrative. ~~support~~General ~~the sale of the Company’s products~~ and ~~enhance~~administrative ~~its reputation~~expenses indecreased ~~the~~to ~~industry~~$7. ~~These strategies and programs include (i)~~6 ~~ongoing interaction~~million ~~with customers for~~ in the ~~development~~six-month ofperiod ~~new~~ended ~~products and technical support~~October 31, ~~(ii) advertising~~2006 ~~and~~from ~~other promotional activities in industry trade journals and publications targeting design engineers, (iii)~~$7.9 ~~participation~~million in ~~major~~ ~~trade show events and conferences in~~ the ~~communications~~comparable ~~network~~period ~~industry to~~last ~~promote the Company’s broad lines of active and passive optical, and RF and~~year. ~~microwave~~The ~~components and subsystems, (iv)~~$0.3 ~~public~~million ~~relations~~decrease ~~covering~~includes ~~new products,~~a ~~applications~~reduction ~~and~~of ~~design wins, (v)~~$0.2 ~~market~~million ~~research~~in tooperating ~~support~~expenses ~~R&D investment~~ and ~~investor relations activity, (vi) corporate branding to create~~ a ~~consistent~~ ~~message across the Stratos Lightwave, Trompeter and Semflex brands,~~$0.1 ~~and~~million ~~(vii) interaction~~decrease ~~with~~is ~~our~~salaries ~~customers~~wages ~~in industry associations~~ and ~~standards committees to promote and further enhance active and passive interconnection technologies, and increase the Company’s visibility as an industry expert~~benefits.

15 Restructuring and Other Charges. During the six months ended October 31, 2005, we recorded restructuring and other charges related to the consolidation and elimination of various activities, which represented personnel severance expenses.

~~Table~~ Investment Income, net. Investment income net of ~~Contents~~investment expense, increased to $0.7 million in the six-month period ended October 31, 2006 from $0.5 million in the comparable period last year. Investment income consists of earnings on the short-term investment of excess cash balances. The increase reflected higher prevailing interest rates during the period.

We Other ~~believe~~income ~~our~~(expense): ~~ability~~Other toincome ~~deliver~~for ~~value~~the six-~~added~~month ~~customer~~period ~~service~~ended ~~and~~October 31, 2006 ~~technical~~consisted ~~support~~primarily isof ~~essential~~unrealized toforeign ~~our~~exchange ~~business.~~gains ~~Our~~on ~~sales~~intercompany ~~force~~loans ~~and~~recorded ~~design engineers~~in ~~work closely with~~ our operations ~~customers~~in ~~through~~ the ~~design~~United ~~and manufacturing process~~Kingdom. WeOther ~~also~~income ~~provide~~of ~~extensive~~$0.4 million ~~technical~~in ~~support~~the tocomparable ~~our~~period ~~customers~~last ~~after the~~year ~~design~~consisted ~~and~~of ~~qualification process is complete~~$0.8 million Werelating ~~intend~~ to ~~strengthen~~the ~~our current~~resolution ~~customer~~and ~~relationships~~reversal byof ~~continuing~~prior toperiod ~~deliver~~accruals aand ~~high~~$0.3 million ~~level~~ of ~~value-added~~ ~~service~~other ~~and~~non-operating ~~technical~~income, ~~support~~offset ~~and~~partially ~~leveraging~~by ~~our~~$0.7 million ~~reputation~~of ~~for~~unrealized foreign ~~high~~exchange ~~quality~~losses ~~products~~on ~~and~~intercompany ~~service~~loans torecorded ~~establish~~in ~~relationships~~our ~~with~~operations ~~new customers~~in the United Kingdom.

~~Sales~~ Income ~~and~~Taxes. ~~marketing~~Stratos ~~expenses~~has ~~consist~~recorded ~~primarily~~a valuation allowance of ~~personnel~~$80.0 million ~~costs,~~against deferred ~~including~~income ~~sales~~tax ~~commissions,~~assets ~~travel~~primarily ~~costs,~~associated ~~outside~~with ~~marketing~~tax ~~and~~loss ~~consulting services~~carry forwards through October 31, ~~and~~2006. ~~product~~The significant ~~marketing~~operating ~~and~~losses ~~promotion~~experienced ~~costs.~~in Werecent ~~expect~~years toestablishes ~~continue~~a topresumption that realization ~~make~~of ~~significant~~these ~~expenditures~~income ~~for~~tax ~~sales~~benefits ~~and~~does ~~marketing~~not ~~services~~meet a “more likely than not” standard.

~~General and administrative expenses consist primarily of personnel costs~~19 for our administrative and financial groups, as well as legal, accounting, information technology and other professional fees. We expect to continue to make significant expenditures for general and administrative services.

CriticalTable Accountingof Policies Contents

~~Accounts~~Liquidity ~~Receivable~~and Capital Resources

We Net ~~sell~~cash ~~products~~used ~~primarily~~by tooperating ~~various~~activities ~~OEMs~~totaled ~~and distributors~~($0.9) ~~Sales~~million ~~to these~~for ~~customers~~the ~~have~~six-month ~~varying~~period ~~degrees~~ended October 31, of2006. ~~collection~~During ~~risk~~the ~~associated~~period ~~with~~our ~~them~~net loss was ($0. ~~Management~~5) ~~assesses~~million, ~~collection~~and ~~risk~~depreciation and amortization ~~the~~was ~~related~~$4.4 million. ~~allowance~~The provision for ~~doubtful accounts~~obsolete ~~based~~inventory onwas ~~the~~$0.3 million. ~~aging~~Cash ofused for increases in accounts receivable, ~~historical~~inventory ~~experience~~ and ~~the~~other current assets was ($4.4) million. Cash ~~customer’s~~used ~~financial~~for ~~condition~~decreases in accounts payable and accrued liabilities was ($0.7) million.

~~Inventory~~ Net ~~Reserves~~cash provided by operating activities totaled $3.3 million for the six-month period ended October 31, 2005. The net cash provided by operating activities primarily resulted from the receipt of $5.5 million from the settlement of litigation recorded as litigation settlements in fiscal 2003, partially offset by the payment of ($1.8) million in settlement of two cases which were recorded as litigation settlements in fiscal 2005. During the six-month period ended October 31, 2005, our net loss was ($1.4) million and depreciation and amortization was $4.0 million. The provision for obsolete inventory was $1.0 million. Cash provided by decreases in accounts receivable was $1.6 million. Cash used for increases in inventories and other current assets was ($0.8) million. Cash used for decreases in accounts payable and accrued expenses was ($5.2) million.

It The isnumber ~~our policy to reserve 100%~~ of ~~the~~days’ ~~value~~that ~~of inventory we specifically identify and consider obsolete or excessive for fulfilling future~~ sales ~~estimates.~~ Wewere ~~define~~outstanding ~~obsolete inventory as inventory that will no longer be used~~ in ~~the~~accounts ~~manufacturing~~receivable ~~process~~was or57 days items that have potential quality problems. Excess inventory is defined as inventory in excess of one to two years’ projected usage depending upon the product. Excess inventory is determined using our best estimate of future demand at ~~the time, based upon~~October ~~information then available to us. In general~~31, ~~our~~2006 ~~policy~~compared is to ~~scrap~~60 days ~~inventory determined~~at ~~to be obsolete shortly after the determination is made and to keep excess inventory for a reasonable amount of time before it is discarded. Occasionally~~April 30, ~~changed circumstances in the marketplace present us with an opportunity to sell inventory that was previously determined to be excessive and reserved for~~2006. ~~If this occurs, we vigorously pursue such opportunities.~~

~~Impairment~~ Net ofcash ~~Long~~provided by investing activities was $0.3 million for the six-~~Lived~~month ~~Assets~~period ended October 31, 2006, consisting of a decrease in short term investments of $0.8 million and capital expenditures of ($0.5) million.

We Net ~~review the carrying value of our long-lived assets if the facts and circumstances, such as significant declines in sales, earnings or~~ cash ~~flows~~used ~~or material adverse changes~~ in ~~the~~investing ~~business~~activities ~~climate~~was ~~suggest that they may be impaired~~($6.4) Ifmillion ~~this~~during ~~review~~the ~~indicates that long~~six-~~lived~~month ~~assets~~period ~~will not be~~ended ~~recoverable~~October 31, as2005, ~~determined~~including ~~based~~a on($6.0) ~~the~~million ~~estimated~~net ~~undiscounted~~increase ~~cash~~in ~~flows of the long~~short-~~lived~~term ~~asset,~~investments ~~impairment~~and is($0.5) million ~~measured~~for ~~by comparing~~ the ~~carrying~~purchase ~~value~~ of ~~the~~ ~~long-lived~~equipment.

16 Net cash used in financing activities was ($2.9) million for the six-month period ended October 31, 2006. Purchase of shares for the treasury used ($1.9) million, redemption of preferred shares used ($1.0) million and preferred dividends used ($0.3) million. Net proceeds from the exercise of stock options provided $0.3 million.

~~Table~~ Net cash used in financing activities was ($0.9) million during the six-month period ended October 31, 2005. This amount consisted of ~~Contents~~a ($0.8) million repayment of borrowings and ($0.2) million of dividend payments on preferred stock and $0.1 million of proceeds from exercise of stock options.

~~asset~~ As toof ~~fair value. Fair value is determined based on quoted market values~~October 31, ~~discounted cash flows or appraisals. If an asset is considered held for sale~~2006, weour ~~adjust~~principal ~~the~~source ~~carrying value~~ of ~~the~~liquidity ~~underlying~~was ~~assets~~approximately to$26.1 million ~~fair value,~~in ascash, ~~determined~~cash ~~based~~equivalents onand ~~the~~short-term ~~estimated net realizable proceeds of the assets~~investments.

~~Revenue~~ In ~~Recognition~~past years, we implemented personnel reductions, shut down certain facilities, disposed of certain assets and put in place other cost reduction programs. However, since many of our costs are fixed in the near term, we expect to continue to incur significant manufacturing, research and development, sales and marketing and administrative expenses.

~~Revenue from product sales, is recognized when a customer order is~~20 established, the price is determined, title passes (which occurs upon shipment) and collectibility is reasonably assured. On rare occasions, we may ship products to a customer FOB destination and transfer of ownership occurs at the customer’s place of business. Our product sales do not include any obligations for installation, training or other post shipment obligations. We do not issue any guarantees or provide warranties for our products. We handle returns by replacing, repairing or issuing credit for defective products when returned. We establish a reserve for returns based on any known and anticipated returns and accordingly adjust revenue, accounts receivable and inventories.

CustomerTable Returns of Contents

ItWe isare ~~our~~also ~~policy~~examining toand ~~establish~~pursuing aopportunities ~~reserve~~ for ~~customer~~improving ~~returns~~gross ~~based~~margins onand ~~any~~cash ~~known~~flows. ~~returns~~The ~~and~~merger ~~anticipated~~with ~~returns~~Sterling ~~based~~combined ontwo ~~past~~companies ~~experience~~with ~~and~~brands ~~accordingly~~that are well-respected by ~~adjust~~segments ~~revenue~~of the telecommunications, ~~accounts~~military, ~~receivable~~video and ~~inventories.~~broadcast customer base, and that seek solutions to difficult problems at the electrical side of the high-performance, high-bandwidth interfaces. We believe that these products, when combined with superior customer service, provide the potential for improving gross margins and cash flows.

~~Customer~~Accordingly, ~~demand~~we iscontinue ato ~~changing~~examine ~~dynamic.~~the ~~Occasionally,~~requirements weof ~~have~~our customers and ~~will~~the broader ~~receive~~potential ~~requests~~customer ~~from~~base ~~customers~~where toour ~~accept~~core ~~the~~competencies ~~return~~could ofprovide ~~merchandise~~value ~~for~~to ~~which they~~customers ~~had~~in ~~previously~~an ~~accepted~~enduring and ~~delivery~~profitable way. ~~Although~~We weare ~~have~~also nofocused ~~obligation~~on toimproving docustomer service through better execution of sodelivery, ~~each~~support ~~such~~and ~~request~~cycle istime, ~~evaluated~~particularly infor ~~light~~specialty ofproducts ~~contemplated~~for ~~future~~customers ~~business~~who value and ~~from~~will ~~that~~pay ~~customer~~for this service. We ~~will~~seek ~~continue~~ to ~~consider~~create ~~these~~a ~~requests~~customer-responsive inorganization ~~the~~that ~~future,~~executes on ~~however,~~demand weand ~~are~~stands ~~not~~behind ~~able~~its tocustomers’ ~~predict~~strategy. ~~the~~There ~~amount~~is ofno ~~any~~assurance ~~such~~that ~~returns~~these efforts will be successful.

~~Research~~Our future capital requirements will depend on a number of factors, including our ability to generate increased sales and ~~Development~~our ability to manage operating expenses. The continued diversification of our end markets and expansion of our product offerings through internal and, possibly, external growth could materially change our level of cash and cash equivalents. This diversification may require us to seek equity or debt financing. Our cash commitments are the payment of cumulative cash dividends on the Series B Preferred Stock on terms specified in the Certificate of Designation for such stock, in the amount of approximately $0.1 million annually. Also, we are obligated to redeem all shares of Series B Preferred Stock in accordance with the terms of the Certificate of Designation for such stock no later than 60 days following the occurrence of certain events relating to the achievement of $250 million in annual revenue or $500 million in market capitalization. In addition, in the event of a change of control, the outstanding Series B Preferred Stock becomes redeemable for an aggregate of $1.0 million, subject to upward adjustment under certain circumstances relating to market price of our Common Stock.

~~All~~We ~~expenses~~believe relative to the development of a new product, prior to its introduction into production, are considered research and development expenses. In addition, the costs of the engineering effort to do significant redesign to enhance product performance that ~~results~~our ~~essentially~~current incash abalances ~~new~~will ~~product~~be ~~are~~sufficient ~~also considered~~ to bemeet ~~research and development expenses. Because the true manufacturability of~~ our ~~products~~cash isneeds ~~not obvious until a period of volume~~for ~~production~~working ~~has occurred~~capital, ~~initial~~capital ~~production is considered a part of the development process. During this phase~~expenditures, ~~a portion of~~ the ~~scrap expense and yield loss is considered development expense. A product continues to be considered under development until it matures to the point where its production yields (volumes)~~Series ~~are~~B ~~consistent~~Preferred ~~with~~Stock ~~other~~dividend ~~mature products~~ and ~~any~~repayments ~~related~~of ~~engineering~~borrowings ~~effort~~for isthe ~~predominately~~next ~~dedicated to customer applications and/or quality support~~12 months.

17Off-Balance Sheet Arrangements

~~Table~~ We are not party to any transactions, arrangements and other relationships with unconsolidated entities or other persons that are reasonably likely to have a current or future material effect on our financial condition, results of ~~Contents~~operations, liquidity, or capital resources. We have no exposures to off-balance sheet arrangements; no special purpose entities; and no activities that include non-exchange-traded contracts accounted for at fair value.

~~Results~~Critical ofAccounting ~~Operations~~Policies

The ~~following~~preparation ~~table~~of ~~sets~~this ~~forth~~Quarterly ~~certain~~Report ~~statement~~requires ofmanagement’s ~~operations~~judgment ~~data~~to asmake aestimates and ~~percentage~~assumptions ofthat ~~net~~affect ~~sales~~the ~~for~~reported ~~the~~amounts ~~periods~~of ~~indicated:~~assets and liabilities, disclosure of

	Three Months Ended October 31,										Change
	2004					2003					$			%
	(dollars in millions)
Revenue:
Net sales	$	18,181		100.0	%	$	7,111		100.0	%	$	11,070			155.7	%
License fees and royalties		1,493		8.2			113		1.6			1,380			1,221.2
Total revenue		19,674		108.2			7,224		101.6			12,450			172.3
Costs and expenses:
Cost of sales		12,439		68.4			8,020		112.8			4,419			55.1
Research and development		2,422		13.3			1,807		25.4			615			34.0
Sales and marketing		2,610		14.4			1,327		18.7			1,283			96.7
General and administrative		6,267		34.5			3,775		53.1			2,492			66.0
Total costs and expenses		23,738		130.6			14,929		210.0			8,809			59.0
Loss from operations		(4,064	)	(22.4	)		(7,705	)	(108.4	)		3,641			47.3
Investment income, net		65		0.4			184		2.6			(119	)		(64.7	)
Loss before income taxes		(3,999	)	(22.0	)		(7,521	)	(105.8	)		3,522			46.8
Provision for income taxes		—		—			—		—			—			—
Net loss	$	(3,999	)	(22.0	)%	$	(7,521	)	(105.8	)%	$	3,522			46.8	%

ThreeTable Monthsof Ended October 31, 2004 and 2003 Contents

~~Net~~contingent ~~Sales.~~assets ~~Net~~and ~~sales~~liabilities ~~for~~at the ~~second~~dates ~~quarter~~ of ~~fiscal 2005 increased to $18.2 million from $7.1 million a year ago. Of~~ the ~~$11.1 million~~financial ~~increase~~statements ~~in the~~and ~~second quarter, $6.0 million was from an increase in net sales to~~ the ~~military/governmental~~ ~~end market, $2.2 million from an increase to the~~reported ~~telecom/metro~~amounts ~~end~~of ~~market,~~revenues and ~~$3.7 million~~expenses isduring ~~from~~the anreporting ~~increase in net sales to other end markets~~period. ~~These~~There ~~increases~~can ~~were~~be ~~offset~~no inassurance ~~part~~that ~~by an $800,000~~actual ~~decrease~~results inwill ~~net~~not ~~sales~~differ ~~in the data networking end market. Included in the amounts above is $10.6 million in sales~~ from ~~product~~those ~~lines acquired in the merger with Sterling~~estimates.

~~Excluding~~Our ~~the~~significant ~~sales~~accounting ~~attributable~~policies toare ~~the~~described ~~product~~in ~~lines~~our ~~acquired~~Form ~~from Sterling,~~10-K ~~sales~~for ~~increased $488,000 (6.9%) in~~ the ~~three~~year ~~months~~ ended ~~October 31,~~April ~~2004~~30, ~~over the comparable period last year~~2006. ~~The~~There ~~increase~~have inbeen ~~sales~~no ~~was~~significant ~~due~~changes to ~~an increase~~those inaccounting ~~customer~~policies ~~demand~~subsequent ~~for~~to ~~our products in most of our end markets~~that filing.

OnForward-looking ~~November 5, 2004 the Company announced that revenues for the three~~statements months ended October 31, 2004 would be lower than expected, due to anticipated returns of a specific product sold to one major customer. As a result of certain quality problems experienced with the product, the Company decided to accept the returns and rework the parts and the quality issue

18 You should read the discussions in this report together with our consolidated financial statements and notes to those financial statements, which are included in this report. This report contains forward-looking statements made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. The words “anticipates,” “intends,” “expects,” “could,” “should,” “plans,” “believes,” “estimates,” or words or phrases of similar import generally identify forward-looking statements. You are cautioned that forward-looking statements are subject to risks, trends and uncertainties that could cause actual results, performance or achievements to differ materially from those expressed in any forward-looking statements. Important factors that could cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by those statements include, but are not limited to the following: (i) the continuation of the current economic climate in the communications industry and its effect on our business; (ii) the long-term growth of the communications, aerospace, and military industries; (iii) our ability to adapt to changing technologies; (iv) our ability to develop and market new products and technology and to make enhancements to existing products and technology on a successful and timely basis; (v) our and our customers’ ability to comply with evolving domestic and international government regulations; (vi) expenditures associated with redesigning products to comply with evolving industry standards or alternative technologies that become the industry standard; (vii) our dependence on sales to the communications and military/aerospace industries; (viii) our ability to develop and manage relationships with large customers that comprise, and will comprise, a significant percentage of our net sales; (ix) the length of sales cycles, which vary by product and customer, and the effect that this length has on net sales and operating expenses; (x) the lack of long-term customer contracts and its effect on customers’ ability to reduce, cancel and defer orders on short notice without significant penalty; (xi) the effect on gross margins of an inability to reduce manufacturing costs or increase sales of higher margin products; (xii) the impact of competitive products and competitive pricing pressure; (xiii) our reliance on a limited number of suppliers and the effect of underestimating or overestimating the need for certain supplies; (xiv) our ability to attract and retain qualified personnel; (xv) the effect of defects in our products; (xvi) the effect of compliance with environmental laws and other legal requirements; (xvii) the effect of economic, political and regulatory risks associated with international operations, including acts of terrorism directed against the United States or U.S. affiliated targets; (xviii) our ability to complete and integrate acquisitions, strategic alliances and joint ventures, including our ability to complete the integration of Stratos and Sterling Holding Company; (xix) our ability to secure and defend intellectual property rights and, when appropriate, license required technology; (xx) adverse outcomes of pending, threatened or future litigation, including suits related to intellectual property matters; (xxi) volatile market prices for securities of technology-

~~Table of Contents~~22

hasTable been resolved to the customer’s satisfaction. Returns of $1.5 million related to this matter were recorded in the three months ended October 31, 2004. However, the customer has identified additional source(s) for this product and competition will likely create downward pricing pressure. Contents

~~License~~related ~~Fees~~companies; ~~and~~(xxii) the ~~Royalties.~~effect ~~License~~of ~~fees~~provisions ~~increased~~in toour ~~$1.5 million~~organizational indocuments ~~the~~and ~~three~~Delaware ~~months~~law ~~ended~~that ~~October 31,~~may ~~2004~~delay ~~from~~or ~~$113,000~~prevent in the ~~three~~acquisition ~~months~~of ~~ended~~Stratos or may decrease the value of ~~October~~Stratos common stock; and (xxiii) 31our ability to meet management, ~~2003~~analyst and investor expectations. ~~This~~Because ~~increase~~forward-looking isstatements ~~primarily~~are ~~attributable~~subject to $1assumptions and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements.~~4 million~~ Shareholders are cautioned not to place undue reliance on such statements, which speak only as of ~~license~~the ~~fee~~date ~~income~~of ~~associated~~this ~~with~~document or the ~~settlement~~date of aany ~~patent infringement~~document ~~case~~incorporated by reference. ~~License~~All subsequent ~~fees~~written ~~consist~~and oforal ~~both~~forward-looking ~~fixed~~statements ~~schedule~~concerning ~~payments~~the ~~and~~matters addressed in this ~~contingent~~document ~~payments~~and ~~based~~attributable to us or any person acting on ~~sales~~our ~~volumes~~behalf ofare ~~licensed~~expressly ~~products~~qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable law or regulation, we undertake no obligation to release publicly any revisions or updates to such forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events.

~~Cost of Sales and Gross Margins. Cost of sales increased to $12.4 million~~23 in the three months ended October 31, 2004 from $8.0 million in the three months ended October 31, 2003. Gross margin as a percentage of net sales improved to 31.6% in the three months ended October 31, 2004 from negative 12.8% in the three months ended October 31, 2003. Approximately, 13.6 percentage points of the 44.4% increase was due to the decrease in prime costs and manufacturing costs, 22.6 percentage points was due to product lines acquired in the merger with Sterling, and 9.2 percentage points was due to the reduction in the charges for obsolete and slow moving inventory that were recognized in the second quarter of fiscal 2004. These factors were offset by 1.0 percentage point for the reduction in sales of inventory previously considered excess and fully reserved.

ResearchTable and Development. Research and development expenses increased to $2.4 million in the three months ended October 31, 2004 from $1.8 million in the three months ended October 31, 2003. The increase of $600,000 was due primarily to a $400,000 increase in costs of personnel dedicated to research and development and $200,000 increase in material and overhead cost related to major product development. The above amounts include $165,000 of research and development expenses attributable to the product lines acquired from Sterling. Contents

~~Sales and Marketing. Sales and marketing expenses increased to $2.6 million in the three months ended October~~Item ~~31, 2004 from $1.~~3 ~~million for the three months ended October 31, 2003~~. ~~This~~Quantitative ~~$1.3 million increase was due to increases of $1.4 million in sales~~ and ~~marketing~~Qualitative ~~salaries,~~Disclosures ~~fringe~~About ~~benefits, bonuses~~Market ~~and commissions, offset by a decrease of $100,000 in field sales operating costs supporting our sales~~Risk. ~~The above amounts include $1.4 million~~ ~~of sales and marketing expenses attributable to the product lines acquired from Sterling.~~

~~General~~We ~~and~~are ~~Administrative.~~subject ~~General~~to ~~and~~certain ~~administrative~~market ~~expenses~~risks, ~~increased~~including foreign currency fluctuations and interest torates. $6Although our Stratos U.~~3 million~~K. subsidiary enters into transactions in ~~the~~currencies ~~three~~other ~~months~~than ~~ended~~its functional ~~October 31~~currency, ~~2004~~the Pound Sterling, foreign currency exposures arising from ~~$3.8 million~~these intransactions ~~the~~are ~~comparable~~not ~~period~~material ~~last~~to ~~year~~us. ~~This~~The ~~increase~~primary offoreign ~~$2.5 million~~currency ~~resulted~~exposure arises from an ~~increase~~the translation of ~~$600,000~~our net inequity ~~corporate~~investment ~~salaries,~~in ~~fringe~~our ~~benefits~~foreign ~~and~~subsidiary ~~bonuses~~to ~~and a~~U.S. $1Dollars.~~9 million~~ ~~increase~~We ingenerally ~~general~~view ~~expenses.~~our ~~The~~investment in ~~amounts~~our ~~above~~foreign ~~include~~subsidiary $1as long-term.~~2 million~~ ofThe ~~general~~primary ~~and~~currency ~~administrative~~to ~~expenses~~which ~~attributable~~we toare ~~the~~exposed ~~product lines~~is ~~acquired~~the ~~from~~ Pound Sterling.

~~Investment Income, Net. Investment income, net of investment expense, decreased to $65,000 in the three months ended October~~Item ~~31, 2004 from $184,000 in the three months ended October 31, 2003~~4. ~~Investment~~Controls ~~income~~and ~~consists of earnings on the short-term investment of excess cash balances~~Procedures. ~~The decrease of~~ ~~this income in the three months ended October 31, 2004~~

19 As of the end of the period covered by this report on Form 10-Q, our management, including our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Our disclosure controls and procedures have been designed to meet, and management believes that they meet, reasonable assurance standards. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, subject to the limitations noted above, our disclosure controls and procedures are effective in timely alerting them to material information required to be disclosed in our filings with the SEC.

~~Table~~ There ofhas ~~Contents~~been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the fiscal quarter ended October 31, 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

~~reflect less cash being invested on a short-term basis as well as lower~~24 ~~prevailing interest rates during the period.~~

IncomeTable Taxes. The Company has recorded a valuation allowance of $65.4 million against deferred income tax assets primarily associated with tax loss carry forwards through July 31, 2004 because the significant operating losses experienced in recent years establishes a presumption that realization of these income tax benefits does not meet a “more likely than not” standard. We have continued to experience operating losses during the three months ended October 31, 2004, and an additional valuation allowance of $1.4 million was recorded, which eliminated the tax benefit attributable to the net loss incurred in the second quarter of fiscal 2005. Contents

~~Six~~PART ~~Months~~II OTHER ~~Ended October 31, 2004 and 2003~~INFORMATION

	Six Months Ended October 31,										Change
	2004					2003					$			%
	(dollars in millions)
Revenue:
Net sales	$	39,204		100.0	%	$	13,682		100.0	%	$	25,522			186.5	%
License fees and royalties		4,276		10.9			619		4.5			3,657			590.8
Total revenue		43,480		110.9			14,301		104.5			29,179			204.0
Costs and expenses:
Cost of sales		26,253		67.0			15,498		113.3			10,755			69.4
Research and development		4,828		12.3			4,697		34.3			131			2.8
Sales and marketing		5,419		13.8			2,845		20.8			2,574			90.5
General and administrative		11,501		29.3			6,473		47.3			5,028			77.7
Total costs and expenses		48,001		122.4			29,513		215.7			18,488			62.6
Loss from operations		(4,521	)	(11.5	)		(15,212	)	(111.2	)		10,691			70.3
Investment income, net		129		0.3			423		3.1			(294	)		69.5
Loss before income taxes		(4,392	)	(11.2	)		(14,789	)	(108.1	)		10,397			70.3
Provision for income taxes		—		—			—		—			—			—
Net loss	$	(4,392	)	(11.2	)%	$	(14,789	)	(108.1	)%	$	10,397			70.3	%

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~Net~~Purchases ~~sales~~of ~~for~~Equity ~~the~~Securities ~~six~~by ~~month period ended October 31, 2004 increased $25.5 million over~~ the ~~same~~Issuer period a year ago to $39.2 million from $13.7 million. The increase represents a $9.8 million increase in net sales to the military/governmental end market, a $4.8 million increase in the net sales to the telecom/metro end market, a $3.8 million increase in net sales to the data networking end market, a $100,000 increase in the net sales into the storage end market, and ~~$7 million~~Affiliated ~~is from an increase in net sales to other end markets.~~Purchasers ~~Included in the amounts above is $21.1 million in net sales from product lines acquired in the merger with Sterling.~~

Excluding the sales attributable to the product lines acquired from Sterling, sales increased $4.4 million (32.1%) in the six months ended October 31, 2004 over the comparable period last year. The increase in sales was due to an increase in customer demand for our products throughout our end markets. Our total sales order backlog decreased to $12.3 million as of October 31, 2004 from $13.0 million as of April 30, 2004. Although we realized a slight


					Total No. of
					Shares Purchased		Maximum No. of
					as Part of		Shares that May
	Total No. of		Average Price		Publicly		Yet Be Purchased
Period	Shares Purchased		Paid Per Share		Announced Plan		Under the Plan
May 1, 2006 through May 31, 2006		60,042	$	6.86		60,042		1,539,811
June 1, 2006 through June 30, 2006		65,458	$	6.74		65,458		1,474,353
July 1, 2006 through July 31, 2006		59,287	$	6.74		59,287		1,415,066
Aug. 1, 2006 through Aug. 31, 2006		58,500	$	6.25		58,500		1,356,566
Sept. 1, 2006 through Sept. 30, 2006		38,000	$	6.14		38,000		1,318,566
Oct. 1, 2006 through Oct. 31, 2006		0		n/a		0		1,318,566

20All repurchases in this table were completed through open market purchases pursuant to our stock repurchase program commenced in 2005. Pursuant to the stock repurchase program, we intend to repurchase a number of shares approximately equal to the number of shares of our common stock we issue or anticipate issuing pursuant to our Stratos Lightwave, Inc. 2003 Stock Plan on or after July 29, 2005, which is equal to the 1,847,889 shares available for grant under the 2003 Stock Plan as of August 5, 2005. There is no set expiration date for the stock repurchase program.

~~Table of Contents~~25

decreaseTable in our backlog since the end of fiscal 2004, we experienced an increase in backlog in all our end markets over the comparable period in fiscal 2004. Contents

~~License Fees and Royalties. License fees increased to $4.3~~Item ~~million in the six months ended October 31, 2004 from $619,000 in the six months ended October 31, 2003~~6. ~~This increase is primarily attributable to~~Exhibits $3.9 million of license fee income associated with the settlement of two patent infringement cases. License fees consist of both fixed schedule payments and contingent payments based on sales volumes of licensed products.

Cost of Sales and Gross Margins. The gross margin increased to 33% for the six months ended October 31, 2004 from negative 13.3% in the comparable period last year. Approximately 15.8 percentage points of the 46.3% increase was due to the decrease in prime costs and manufacturing costs, 21.6 percentage points was due to product lines acquired in the merger with Sterling, 10.4 percentage points was due to the reduction in the charges for obsolete and slow moving inventory and 2.8 percentage points was due to reduction of the cost of severance pay relating to restructuring of operations. These factors were offset by 4.3 percentage points for the sale of inventory previously considered excess and fully reserved.


Number		Description of Document
2.1		Agreement and Plan of Merger, dated as of July 2, 2003, as amended as of August 19, 2003 and October 31, 2003, among Stratos Lightwave, Inc., Sleeping Bear Merger Corp. and Sterling Holding Company (incorporated by reference to Exhibit 2.1 to the registrant’s Current Report on Form 8-K filed November 12, 2003)
3.1		Restated Certificate of Incorporation of registrant (incorporated by reference to Exhibit 3.1 to the registrant’s Annual Report on Form 10 K filed July 29, 2005)
3.2		Certificate of Amendment of Restated Certificate of Incorporation of the registrant (incorporated by reference to Exhibit 3.2 to the registrant’s Annual Report on Form 10-K filed July 28, 2006)
3.3		Bylaws of registrant (incorporated by reference to Exhibit 3.2 to the registrant’s Annual Report on Form 10-K filed July 29, 2005)
3.4		Certificate of Designation of Series A Junior Participating Preferred Stock (incorporated by reference to Exhibit 3.1)
3.5		Certificate of Designation for Series B Preferred Stock (incorporated by reference to Exhibit 3.1)
4.1		Specimen certificate representing the common stock (incorporated by reference to Exhibit 4.1 to registrant’s Amendment No. 2 to Form S-1, filed June 22, 2000)
4.2		Specimen certificate representing the Series B Preferred Stock (incorporated by reference to Exhibit 4.2 to registrant’s Quarterly Report on Form 10-Q filed December 15, 2003)
4.3		Rights Agreement, dated as of March 23, 2001, between Stratos International, Inc. and Mellon Investor Services LLC (incorporated by reference to Exhibit 99.2 to registrant’s Current Report on Form 8-K, filed March 28, 2001)
4.4		First Amendment, dated as of July 2, 2003, to Rights Agreement, dated as of March 23, 2001, between Stratos Lightwave, Inc. and Mellon Investor Services LLC, as Rights Agent (incorporated by reference to Exhibit 1.2 to registrant’s Form 8-A/ A, filed August 7, 2003)
4.5		Registration Rights Agreement, dated as of July 2, 2003, among Stratos Lightwave, Inc., Citicorp Venture Capital Ltd., the William N. and Carol A. Stout Trust dated 11/24/98 and the William N. and Carol A. Stout Charitable Remainder Unit Trust (incorporated by reference to Exhibit 4.4 to Amendment No. 1 to Form S-4, filed September 29, 2003)
4.6		Standstill Agreement, dated as of July 2, 2003, between Stratos Lightwave, Inc. and Citicorp Venture Capital Ltd. (incorporated by reference to Exhibit 4.3 to Amendment No. 1 to Form S-4, filed September 29, 2003)
10.1		Form of Indemnity Agreement between registrant and registrant’s directors and officers** (incorporated by reference to Exhibit 10.8 to Amendment No. 1 to Form S-1, filed June 5, 2000)
10.2		Stratos Lightwave, Inc. 2000 Stock Plan, as amended and restated** (incorporated by reference to Exhibit 10.9 to registrant’s Annual Report on Form 10-K, filed July 26, 2001)

~~Cost of sales was increased approximately $140,000 and $1.5 million in the~~26 ~~six months ended October 31, 2004 and 2003, respectively, for obsolete and excess inventory.~~

ResearchTable and Development. Research and development expenses increased to $4.8 million in the six months ended October 31, 2004 from $4.7 million in the six months ended October 31, 2003. The increase of $100,000 was the result of increases in personnel costs dedicated to research and development and in material and overhead costs related to major product development. The above amounts include $287,000 of research and development expenses attributable to the product lines acquired from Sterling. Contents

Sales and Marketing. Sales and marketing expenses increased to $5.4 million in the six months ended October 31, 2004 from $2.8 million in the comparable period last year. This $2.6 million increase was due to an increase in sales and marketing salaries, fringe benefits, bonuses and commissions. The above amounts include $2.8 million of sales and marketing expenses attributable to the product lines acquired from Sterling.


Number		Description of Document
10.3		Stratos Lightwave, Inc. 2003 Stock Plan** (incorporated by reference to Exhibit 10.1 to Amendment No. 1 to Form S-4, filed September 29, 2003)
10.4		Amendment to Stratos Lightwave, Inc. 2003 Stock Plan** (incorporated by reference to Appendix B to registrant’s definitive proxy statement filed August 8, 2006)
10.5		Management Retention Agreement between the registrant and Phillip A. Harris, dated February 1, 2005** (incorporated by reference to Exhibit 10.1 on Form 8-K filed on February 1, 2005)
10.6		Form of the Restricted Stock Agreement for Directors of the Stratos Lightwave, Inc. 2003 Stock Plan** (incorporated by reference to Exhibit 99.1 on Form 8-K, filed on December 6, 2005)
10.7		Form of the Restricted Stock Agreement for Employees of the Stratos Lightwave, Inc. 2003 Stock Plan** (incorporated by reference to Exhibit 10.3 on Form 8-K filed May 1, 2006)
10.8		Stratos Lightwave, Inc. 2003 Employee Stock Purchase Plan** (incorporated by reference to Exhibit 10.2 to Amendment No. 1 to Form S-4, filed September 29, 2003)
10.9		Management Retention Agreement between the registrant and James McGinley** (incorporated by reference to Exhibit 10.11 to registrant’s Quarterly Report on Form 10-Q, filed December 16, 2002)
10.10		Amendment to Management Retention Agreement between the registrant and James McGinley** (incorporated by reference to Exhibit 10.12 to registrant’s Annual Report on Form 10-K, filed July 29, 2003)
10.11		Amendment to Management Retention Agreement between the registrant and James McGinley** (incorporated by reference to Exhibit 99.3 on Form 8-K filed on November 12, 2004)
10.12		Management Retention Agreement between the registrant and David Slack** (incorporated by reference to Exhibit 10.12 to registrant’s Quarterly Report on Form 10-Q, filed December 16, 2002)
10.13		Amendment to Management Retention Agreement between the registrant and David Slack** (incorporated by reference to Exhibit 10.13 to registrant’s Annual Report on Form 10-K, filed July 29, 2003)
10.14		Amendment to Management Retention Agreement between the registrant and David A. Slack, dated February 4, 2005** (incorporated by reference to Exhibit 99.2 on Form 8-K filed on February 9, 2005)
10.15		Management Retention Agreement between the registrant and Richard Durrant** (incorporated by reference to Exhibit 10.14 to registrant’s Quarterly Report on Form 10-Q, filed December 16, 2002)
10.16		Amendment to Management Retention Agreement between the registrant and Richard Durrant** (incorporated by reference to Exhibit 10.15 to registrant’s Annual Report on Form 10-K, filed July 29, 2003)
10.17		Agreement dated May 3, 2004 concerning expense reimbursement between the registrant and Richard C.E. Durrant** (incorporated by reference to Exhibit 10.2 on Form 8-K filed on February 1, 2005)

~~General and Administrative. General and administrative expenses increased~~27 to $11.5 million in the six months ended October 31, 2004 from $6.5 million in the comparable period last year. This $5 million increase was due to $500,000 in legal fees for the settlement of litigation as described in License Fees and Royalties above, $1.2 million increase in salaries, fringe benefits and bonuses and a $3.3 million increase in general expenses. The amounts above include $2.3 million of general and administrative expenses attributable to the product lines acquired from Sterling.

InvestmentTable Income, Net. Investment income, net of investment expense, decreased to $129,000 in the six months ended October 31, 2004 from $423,000 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 six months ended October 31, 2004 reflect the reduction of excess cash balances as well as lower prevailing interest rates during the period. Contents


Number		Description of Document
10.18		Employment, Confidentiality and Noncompete Agreement, dated as of November 3, 1997, by and between Trompeter Electronics, Inc. and Joe Norwood** (incorporated by reference to Exhibit 10.17 on Form 10-K/ A filed on August 30, 2004)
10.19		Salary Continuation Agreement, dated as of August 10, 2004, by and between Trompeter Electronics, Inc. and Joe Norwood** (incorporated by reference to Exhibit 10.20 on Form 10-K/A filed on August 30, 2004)
10.20		Form of the Option Agreement of the Stratos Lightwave, Inc. 2003 Stock Plan** (incorporated by reference to Exhibit 10.22 on Form 10-K filed July 29, 2005)
10.21		Form of Management Retention Agreement** (incorporated by reference to Exhibit 10.1 on Form 8-K filed May 1, 2006)
10.22		Restricted Stock Agreement between the registrant and Phillip A. Harris, dated December 15, 2004, as amended and restated as of September 14, 2005** (incorporated by reference to Exhibit 99.4 to the registrant’s Current Report on Form 8-K, filed September 21, 2005)
10.23		Amendment to Restricted Stock Agreement between the registrant and Phillip A. Harris, dated as of December 6, 2005** (incorporated by reference to Exhibit 99.3 to registrant’s Current Report on Form 8-K, filed December 8, 2005)
10.24		Restricted Stock Agreement between the registrant and Newell V. Starks, dated April 29, 2004, as amended and restated as of September 14, 2005** (incorporated by reference to Exhibit 99.5 to the registrant’s Current Report on Form 8-K, filed September 21, 2005)
10.25		Restricted Stock Agreement between the registrant and Newell V. Starks, dated March 9, 2005** (incorporated by reference to Exhibit 99.3 to the registrant’s Current Report on Form 8-K, filed September 21, 2005)
10.26		Restricted Stock Agreement between the registrant and Newell V. Starks, dated December 6, 2005** (incorporated by reference to Exhibit 99.4 to the registrant’s Current Report on Form 8-K, filed December 8, 2005).
10.27		Letter agreement between the registrant and Newell V. Starks, dated November 23, 2005, with respect to severance benefits***
10.28		Schedule of Non-Management Director Fees** (incorporated by reference to Exhibit 10.24 on Form 10-K filed July 29, 2005)
10.29		Summary Schedule of Officer Compensation** (incorporated by reference to Exhibit 10.29 on Form 10-K filed July 28, 2006)
10.30		Form of the 2006 Annual Incentive Bonus Plan** (incorporated by reference to Exhibit 99.6 to registrant’s Current Report on Form 8-K, filed September 21, 2005)
10.31		2007 Annual Incentive Bonus Plan** (incorporated by reference to Exhibit 10.1 on Form 8-K filed May 1, 2006)
31.1		Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer*

~~Table of Contents~~28

IncomeTable Taxes. The Company has recorded a valuation allowance of $65.2 million against deferred income tax assets primarily associated with tax loss carry forwards through April 30, 2004 because the significant operating losses experienced in recent years establishes a presumption that realization of these income tax benefits does not meet a “more likely than not” standard. We have continued to experience operating losses during the six months ended October 31, 2004, and an additional valuation allowance of $1,600 was recorded, which eliminated the tax benefit attributable to the net loss incurred in the first six months of fiscal 2005. Contents

We have net operating loss carry forwards of approximately $165 million that are available to offset taxable income in the future. The net operating loss carry forwards will expire in 2022 through 2025.


Number		Description of Document
31.2		Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer*
32.1		Section 1350 Certification of Chief Executive Officer*
32.2		Section 1350 Certification of Chief Financial Officer*

Liquidity and Capital Resources


*		Filed herewith.

**		Management contract or compensatory plan or arrangement required to be filed as an exhibit to this quarterly report on Form 10-Q.

~~Net cash used in operating activities totaled $323,000 for the six months~~29 ended October 31, 2004. The use of cash in operating activities resulted primarily from a net loss, the decrease of accounts payable and accrued expenses, and an increase in inventory, offset in part by a decrease in accounts receivable. Net cash used in operating activities totaled $10.7 million for the six months ended October 31, 2003. The use of cash in operating activities resulted primarily from a net loss offset in part by decreases in accounts receivable and inventories and increases in accounts payable and accrued expenses.

WeTable operate in markets that have experienced a severe economic downturn during the past several years and, as a result, many of our customers may, from time to time, stretch their payment terms. Days sales in accounts receivable was 53 days at October 31, 2004 compared to 57 days at April 30, 2004. Contents

~~Net cash from investing activities totaled $13.5 million in the six months~~SIGNATURES ended October 31, 2004, including a $12.2 million decrease in short-term investments, $200,000 in proceeds from the sale of fixed assets and $1.4 million of proceeds from the sale of assets held for sale, offset by $350,000 for the purchase of equipment and facilities. Net cash used in investing activities totaled $12.3 million in the six months ended October 31, 2003, including $1.8 million for the purchase of equipment and facilities, a $14.8 million increase in short-term investments, partially offset by $4.3 million of proceeds from the sale of assets held for sale.

~~Net~~Pursuant ~~cash~~to ~~used~~the inrequirements ~~financing~~of ~~activities was $1.3 million in~~ the ~~six~~Securities ~~months ended~~Exchange ~~October 31,~~Act ~~2004, including a $1.25 million repayment on borrowings and $175,000~~ of ~~dividends on preferred stock~~1934, ~~offset~~the inregistrant ~~part~~has ~~by $120,000 of~~duly ~~proceeds~~caused ~~from~~this ~~exercise~~report ofto ~~stock~~be ~~options.~~signed ~~Net~~on ~~cash~~its ~~used~~behalf inby ~~financing activities was $2.0 million in~~ the ~~six months ended October 31~~undersigned, ~~2003,~~thereunto ~~including~~duly ~~a $2~~authorized.0 ~~million repayment on borrowings and $200,000 in treasury stock transactions, offset in part by $200,000 of proceeds from exercise of stock options.~~

As of October 31, 2004, our principal source of liquidity was approximately $36.6 million in cash, cash equivalents and short-term investments.


Date: December 12, 2006	Stratos International, Inc.
	By:	/s/ Barry Hollingsworth Barry Hollingsworth, Chief Financial Officer
	By:	/s/ Phillip A. Harris Phillip A. Harris President and Chief Executive Officer

~~Sterling provided $4.1 million of net positive cash flow during the six~~30 ~~months ended October 31, 2004.~~

Our future capital requirements will depend on a number of factors, including our ability to generate increased sales and our ability to manage operating expenses. The continued diversification of our end markets and expansion of our product offerings through internal and, possibly, external growth could materially change our level of cash and cash equivalents. This diversification may require the Company to seek equity or debt financing. Our only cash commitments are (i) the repayment of long-term debt of approximately $1.8 million and (ii) the payment of cumulative cash dividends on the Series B Preferred Stock on terms specified in the Certificate of Designation for such stock ($350,000 annually). We also are obligated to redeem all shares of Series B Preferred Stock in accordance with the terms of the Certificate of Designation for such stock no later than 60 days following the occurrence of certain events relating to the Company’s achievement of $250 million in annual revenue or $500 million in market capitalization. In addition, if a change of control of the Company occurs, the Series B Preferred Stock becomes redeemable for an aggregate of $5 million, subject to upward adjustment under certain circumstances relating to market price of the Company’s Common Stock. We believe that our current cash balances will be sufficient to meet our cash needs for working capital, capital expenditures, the Series B Preferred Stock dividend and repayments of long-term debt for the next 12 months. The settlement of, or an adverse result in, current and future litigation may, however, significantly affect our cash position and capital requirements. To the extent that the Company needs to or deems it advisable to seek equity or debt financing in connection with any of the foregoing, no assurance can be given that such financing will be available, or that it will be available on favorable terms.

The severe economic downturn in our markets during the past several years may continue in the remainder of fiscal 2005, during which we may experience significant decreases in net sales and incur net losses, offset to a certain extent by net profits generated by Sterling. We expect the difficult industry conditions to continue for at least the next 6 to 12 months and they 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.

Further, in order to propel overall industry growth and to encourage interoperability of supplier components, subsystems, systems and networks, various industry standards have evolved and are evolving which provide customers the opportunity to choose between vendors who have form, fit and function compatible products that are essentially interchangeable as second or third sources. As customers manage their supply chains more efficiently, pricing pressure increases on vendors, such as the Company, reducing gross margins for similar products.

In response to these conditions, we have implemented personnel reductions, shut down certain facilities, disposed of certain assets and put in place other cost reduction programs; however, since many of our costs are fixed in the near term, 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.

We are also examining and pursuing opportunities for improving gross margins and cash flow. The merger with Sterling combined two companies with brands that are well-respected by segments of the telecommunications, military, video and broadcast customer base that seek solutions to difficult problems at the electrical side of the high-performance, high-bandwidth interface which are solved by products offered by Stratos. We believe that these products, when combined with superior customer service, provide the potential for improving gross margins and cash flows.

Off-Balance Sheet Arrangements

We are not party to any transactions, arrangements and other relationships with unconsolidated entities or other persons that are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The Company is subject to certain market risks, including foreign currency and interest rates. Although our Stratos U.K. subsidiary enters into transactions in currencies other than its functional currency, foreign currency exposures arising from these transactions are not material to us. The primary foreign currency exposure arises from the translation of our net equity investment in our foreign subsidiary to U.S. dollars. We generally view our investment in our foreign subsidiary with a functional currency other than the U.S. dollar as long-term. The primary currency to which we are exposed is the pound sterling.

The Company does not have exposure to interest rate risk related to its debt obligation because the interest rate is fixed. The Company’s market risk is the potential loss of income from the reduction in interest rates from the renewal of short-term investments. The Company has experienced such reductions in these rates during fiscal year 2004 and the first six months of fiscal 2005.

Item 4. Controls and Procedures.

As of the end of the period covered by this report, our management, including our Chief Financial Officer and the two other Executive Vice Presidents, carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based upon that evaluation, our Chief Financial Officer and the two other Executive Vice Presidents concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be included in our filings with the SEC.

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this quarterly report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, the Company becomes involved in various lawsuits and legal proceedings that arise in the normal course of business. The Company believes that the resolution of these lawsuits and legal proceedings will not have a significant effect on the Company’s business, financial condition or results of operations.

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 during the time of the Company’s IPO. 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 Section 10(b) and Section 20(a) to the Security 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.

In 2003, the Company agreed to a Memorandum of Understanding, which reflects a settlement of these class actions as between the purported class action plaintiffs, the Company and the defendant officers and directors, and the Company’s liability insurer. Under the terms of the Memorandum of Understanding, the Company’s liability insurers will pay certain sums to the plaintiffs, with the amount dependent upon the plaintiffs’ recovery from the underwriters in the IPO class actions as a whole. The plaintiffs will dismiss with prejudice their claims against the Company and its officers and directors, and the Company will assign to the plaintiffs certain claims that it may have against the underwriters. The plaintiffs have filed with the court a motion for preliminary approval of the settlement, which, if granted, will lead to the mailing of class-wide notices of the settlement and a hearing date for approval of the settlement. The issuers filed a statement joining in the plaintiffs’ motion for preliminary approval of the settlement. The underwriter defendants have opposed the motion, and the court has not ruled on it.

In February 2002, the Company acquired Tsunami Optics, Inc. The acquisition agreement contemplated a potential earn-out payment of up to $18 million in common stock if certain financial targets were achieved following the acquisition. In June 2002, Catherine Lego, as representative of the former Tsunami shareholders, filed a lawsuit against the Company alleging, among other things, that the Company breached the acquisition agreement by refusing to allow Tsunami to operate as a separate subsidiary, firing the Tsunami executives that it believed were necessary to operate the business and thereby making it impossible for Tsunami to achieve the

targets required to receive any earnout payments. The complaint also alleged fraud and violations of federal securities laws in connection with the acquisition of Tsunami. Plaintiffs are seeking $38 million in damages or the rescission of the acquisition agreement. The Company filed a counterclaim against Ms. Lego and several other shareholders and officers of Tsunami which alleges fraud, breach of contract and violations of federal securities laws. The counterclaim seeks compensatory and punitive damages.

In April 2004, the Court entered an order in favor of the Company to dismiss with prejudice 11 of 13 counts of the plaintiffs’ complaint. The alleged damages sought for the plaintiffs’ two remaining claims (breach of contract and rescission) remain unchanged at $38 million. The Company believes that the plaintiffs’ remaining claims are without merit and intends to vigorously defend against these claims. The court also denied the plaintiff’s motion to dismiss the Company’s counterclaims of fraud and violations of federal securities law and granted the plaintiff’s motion to dismiss the allegation of breach of contract. Trial of this action commenced on December 1, 2004, and is expected to conclude in December 2004.

In August 2002, James Campbell, the former CEO of Tsunami, filed a lawsuit against the Company alleging wrongful termination in breach of his employment contract, fraud and age discrimination. Campbell’s claims were subsequently amended to include intentional infliction of emotional distress. Campbell seeks unspecified damages, punitive damages and attorney’s fees. The Company believes that this lawsuit is without merit and intends to vigorously defend against these claims. An August 2004 trial date was originally set but was vacated, and a new trial date has not been set.

In August 2004, Federal Insurance Company, issuer of the Directors’ and Officers’ Insurance policy for the company, filed suit against the Company and others in the United States District Court, Northern District of Illinois. The Complaint for Declaratory Judgment has been filed to deny coverage to the Company, under its Director and Officer policy, for the Lego and Campbell lawsuits. The suit was filed in response to the Company’s submission of a claim for insurance coverage for the Lego and Campbell lawsuits and the tender of defense costs to the insurer for reimbursement. Federal does not seek damages from the Company and the Company disputes denial of the coverage. This action is scheduled for trial in June 2005.

In March 2003, Alcatel USA filed suit against the Company and others, seeking unspecified damages and alleging breach of contract, breach of warranty, negligent misrepresentation, fraud and conspiracy in connection with Alcatel’s purchase of certain goods from the defendants over a period spanning 2000 and 2001. The Company asserted certain counterclaims against Alcatel relating to the same type of goods at issue in Alcatel’s complaint. In April 2004, Alcatel and the Company executed a written settlement agreement resolving all disputes. Pursuant to the terms of the written settlement agreement, the parties executed mutual releases and the case was dismissed with prejudice on August 13, 2004.

The Company is a plaintiff in a lawsuit relating to its intellectual property rights against Picolight, Inc. (District of Delaware). In this action, the Company alleges that optoelectronic products sold by the defendant infringe numerous of the Company’s patents and is seeking monetary damages and injunctive relief. The defendant has asserted an affirmative defense and

filed counterclaims and contends that the patents are invalid, unenforceable and/or not infringed by the products sold by the defendant. Picolight has asserted an antitrust counterclaim based on the alleged unenforceability of the Company’s patents. If successful, the defendant is seeking attorneys’ fees and costs in connection with the lawsuit. The Company intends to pursue this lawsuit and defend against the counterclaims vigorously. On November 24, 2003, a jury returned a verdict finding that Picolight infringed six of the Company’s patents. The case is currently in the inequitable conduct phase and we are awaiting the judge’s ruling. The third phase on validity is dependent on the outcome of the inequitable conduct phase, and would be followed by the damages phase.

During the second quarter of fiscal year 2005 the Company settled a patent infringement case and as a result of this settlement the Company received approximately $1.4 million, which was recorded as license fees and royalties in the consolidated statement of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

(b) The Company’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. As adjusted for the 1-for-10 reverse stock split in October, 2002, a total of 1,006,250 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 Company sold these shares at an initial public offering price of $210.00 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 the Company, were approximately $195 million. Uses of proceeds to date include $135.2 million for general corporate purposes and the purchase of equipment and facilities, payments of $17.1 million in connection with various acquisitions, repayment of $2.7 million of advances from a Methode Electronics Inc. (“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 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 director or officer of the Company or any of their associates, to any persons owning 10 percent or more of our common stock, or to any affiliate of the Company.

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

There were no matters submitted to a vote of security holders during the three month period ended October 31, 2004.

Item 6. Exhibits.

Exhibit
Number		Description of Document
2.1		Agreement and Plan of Merger, dated as of July 2, 2003, as amended as of August 19, 2003 and October 31, 2003, among Stratos Lightwave, Inc., Sleeping Bear Merger Corp. and Sterling Holding Company (12)
3.1		Restated Certificate of Incorporation of Registrant (13)
3.2		Bylaws of Registrant (1)
3.3		Certificate of Designation of Series A Junior Participating Preferred Stock, included as Exhibit A to Exhibit 4.3
3.4		Certificate of Designation for Series B Preferred Stock (11)
4.1		Specimen certificate representing the common stock (1)
4.2		Specimen Certificate representing the Series B Preferred Stock (13)
4.3		Rights Agreement, dated as of March 23, 2001, between Stratos International, Inc. and Mellon Investor Services LLC (2)
4.4		First Amendment, dated as of July 2, 2003, to Rights Agreement, dated as of March 23, 2001, between Stratos Lightwave, Inc. and Mellon Investor Services LLC, as Rights Agent. (10)
4.5		Registration Rights Agreement, dated as of July 2, 2003, among Stratos Lightwave, Inc., Citicorp Venture Capital Ltd., the William N. and Carol A. Stout Trust dated November 24, 1998 and the William N. and Carol A. Stout Charitable Remainder Unit Trust (11)
4.6		Standstill Agreement, dated as of July 2, 2003, between Stratos Lightwave, Inc. and Citicorp Venture Capital Ltd. (11)
10.1		Form of Indemnity Agreement between Registrant and Registrant’s directors and officers (1)
10.2		Stratos Lightwave, Inc. 2000 Stock Plan, as amended and restated (3)
10.3		Agreement and Plan of Reorganization, dated January 22, 2002, by and among the Registrant, Tundra Acquisition Corp. and Tsunami Optics, Inc. (4)
10.4		Stratos Lightwave, Inc. 2002 Stock Plan for Acquired Companies (5)
10.5		Agreement and Plan of Reorganization, dated March 18, 2002, by and among the Registrant, Polar Acquisition Corp. and Paracer, Inc. (6)
10.6		Management Retention Agreement between the Registrant and James McGinley (7)
10.7		Management Retention Agreement between the Registrant and David Slack (7)
10.8		Management Retention Agreement between the Registrant and Richard Durrant (7)
10.9		Stratos Lightwave, Inc. Severance Plan (7)
10.10		Agreement and Plan of Merger, dated as of July 2, 2003, as amended as of August 19, 2003 and October 31, 2003, among Stratos Lightwave, Inc., Sleeping Bear Merger Corp. and Sterling Holding Company (11)
10.11		Amendment to Management Retention Agreement between the Registrant and James McGinley (8)
10.12		Amendment to Management Retention Agreement between the Registrant and David Slack (8)
10.13		Amendment to Management Retention Agreement between the Registrant and Richard Durrant (8)
10.14		Amendment to Stratos Lightwave, Inc. Severance Plan (8)
10.15		Stratos Lightwave, Inc. 2003 Stock Plan (10)
10.16		Stratos Lightwave, Inc. 2003 Employee Stock Purchase Plan (10)
10.17		Employment, Confidentiality and Noncompete Agreement, dated as of November 3, 1997, by and between Trompeter Electronics, Inc. and Joe Norwood (13)
10.18		Salary Continuation Agreement, dated as of October 18, 2000, by and between Trompeter Electronics, Inc. and Joe Norwood (13)
10.19		Amendment to Salary Continuation Agreement, dated as of July 26, 2004, by and between Trompeter Electronics, Inc. and Joe Norwood (13)
10.20		Salary Continuation Agreement, dated as of August 10, 2004, by and between Trompeter Electronics,

Exhibit
Number		Description of Document
		Inc. and Joe Norwood (13)
10.21		Amendment to Management Retention Agreement between the Registrant and James McGinley (13)
31.1		Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer*
31.2		Rule 13a-14(a)/15d-14(a) Certification of Executive Officer*
31.3		Rule 13a-14(a)/15d-14(a) Certification of Executive Officer*
32.1		Section 1350 Certification of Chief Financial Officer*
32.2		Section 1350 Certification of Executive Officer*
32.3		Section 1350 Certification of Executive Officer*
99		Cautionary Statements*

(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 Annual Report on Form 10-K for the year ended April 30, 2001.
(4)		Incorporated by reference to the Registrant’s Form 8-K dated February 4, 2002.
(5)		Incorporated by reference to the Registrant’s Registration Statement on Form S-8 dated January 31, 2002.
(6)		Incorporated by reference to the Registrant’s Form 8-K dated March 28, 2002.
(7)		Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended October 31, 2002.
(8)		Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended April 30, 2003.
(9)		Incorporated by reference to the Registrant’s Form 8-A/A filed August 7, 2003.
(10)		Incorporated by reference to the Registrant’s Form S-4/A effective September 29, 2003.
(11)		Incorporated by reference to the Registrant’s Form 8-K dated November 6, 2003.
(12)		Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended October 31, 2003.
(13)		Incorporated by reference to the Registrant’s Form 10-K/A filed August 30, 2004.

* Filed or furnished herewith

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.

Date: December 14, 2004	Stratos International, Inc.
	By:	/s/ David A. Slack
		David A. Slack
		Executive Vice President – Finance and
		Chief Financial Officer
	By:	/s/ Joe D. Norwood
		Joe D. Norwood
		Executive Vice President
	By:	/s/ Richard C.E. Durrant
		Richard C.E. Durrant
		Executive Vice President

EXHIBIT INDEX

Exhibit
Number		Description of Document
2.1		Agreement and Plan of Merger, dated as of July 2, 2003, as amended as of August 19, 2003 and October 31, 2003, among Stratos Lightwave, Inc., Sleeping Bear Merger Corp. and Sterling Holding Company (12)
3.1		Restated Certificate of Incorporation of Registrant (13)
3.2		Bylaws of Registrant (1)
3.3		Certificate of Designation of Series A Junior Participating Preferred Stock, included as Exhibit A to Exhibit 4.3
3.4		Certificate of Designation for Series B Preferred Stock (11)
4.1		Specimen certificate representing the common stock (1)
4.2		Specimen Certificate representing the Series B Preferred Stock (13)
4.3		Rights Agreement, dated as of March 23, 2001, between Stratos International, Inc. and Mellon Investor Services LLC (2)
4.4		First Amendment, dated as of July 2, 2003, to Rights Agreement, dated as of March 23, 2001, between Stratos Lightwave, Inc. and Mellon Investor Services LLC, as Rights Agent. (10)
4.5		Registration Rights Agreement, dated as of July 2, 2003, among Stratos Lightwave, Inc., Citicorp Venture Capital Ltd., the William N. and Carol A. Stout Trust dated November 24,19/98 and the William N. and Carol A. Stout Charitable Remainder Unit Trust (11)
4.6		Standstill Agreement, dated as of July 2, 2003, between Stratos Lightwave, Inc. and Citicorp Venture Capital Ltd. (11)
10.1		Form of Indemnity Agreement between Registrant and Registrant’s directors and officers (1)
10.2		Stratos Lightwave, Inc. 2000 Stock Plan, as amended and restated (3)
10.3		Agreement and Plan of Reorganization, dated January 22, 2002, by and among the Registrant, Tundra Acquisition Corp. and Tsunami Optics, Inc. (4)
10.4		Stratos Lightwave, Inc. 2002 Stock Plan for Acquired Companies (5)
10.5		Agreement and Plan of Reorganization, dated March 18, 2002, by and among the Registrant, Polar Acquisition Corp. and Paracer, Inc. (6)
10.6		Management Retention Agreement between the Registrant and James McGinley (7)
10.7		Management Retention Agreement between the Registrant and David Slack (7)
10.8		Management Retention Agreement between the Registrant and Richard Durrant (7)
10.9		Stratos Lightwave, Inc. Severance Plan (7)
10.10		Agreement and Plan of Merger, dated as of July 2, 2003, as amended as of August 19, 2003 and October 31, 2003, among Stratos Lightwave, Inc., Sleeping Bear Merger Corp. and Sterling Holding Company (11)
10.11		Amendment to Management Retention Agreement between the Registrant and James McGinley (8)
10.12		Amendment to Management Retention Agreement between the Registrant and David Slack (8)
10.13		Amendment to Management Retention Agreement between the Registrant and Richard Durrant (8)
10.14		Amendment to Stratos Lightwave, Inc. Severance Plan (8)
10.15		Stratos Lightwave, Inc. 2003 Stock Plan (10)
10.16		Stratos Lightwave, Inc. 2003 Employee Stock Purchase Plan (10)
10.17		Employment, Confidentiality and Noncompete Agreement, dated as of November 3, 1997, by and between Trompeter Electronics, Inc. and Joe Norwood (13)
10.18		Salary Continuation Agreement, dated as of October 18, 2000, by and between Trompeter Electronics, Inc. and Joe Norwood (13)
10.19		Amendment to Salary Continuation Agreement, dated as of July 26, 2004, by and between Trompeter Electronics, Inc. and Joe Norwood (13)
10.20		Salary Continuation Agreement, dated as of August 10, 2004, by and between Trompeter Electronics, Inc. and Joe Norwood (13)
10.21		Amendment to Management Retention Agreement between the Registrant and James McGinley (13)
31.1		Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer*
31.2		Rule 13a-14(a)/15d-14(a) Certification of Executive Officer*
31.3		Rule 13a-14(a)/15d-14(a) Certification of Executive Officer*
32.1		Section 1350 Certification of Chief Financial Officer*

Exhibit
Number		Description of Document
32.2		Section 1350 Certification of Executive Officer*
32.3		Section 1350 Certification of Executive Officer*
99		Cautionary Statements*

(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 Annual Report on Form 10-K for the year ended April 30, 2001.
(4)		Incorporated by reference to the Registrant’s Form 8-K dated February 4, 2002.
(5)		Incorporated by reference to the Registrant’s Registration Statement on Form S-8 dated January 31, 2002.
(6)		Incorporated by reference to the Registrant’s Form 8-K dated March 28, 2002.
(7)		Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended October 31, 2002.
(8)		Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended April 30, 2003.
(9)		Incorporated by reference to the Registrant’s Form 8-A/A filed August 7, 2003.
(10)		Incorporated by reference to the Registrant’s Form S-4/A effective September 29, 2003.
(11)		Incorporated by reference to the Registrant’s Form 8-K dated November 6, 2003.
(12)		Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended October 31, 2003.
(13)		Incorporated by reference to the Registrant’s Form 10-K/A filed August 30, 2004.

* Filed or furnished herewith.

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