TABLE OF CONTENTS




|                                                   |                                                                                                |  |  |  |  |  |  | 
|-------------------------------------------------- | ---------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|Part I   Financial Information                    
|                                                   | Item 1.  Financial Statements                                                                 
|                                                   | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
|                                                   | Item 3. Quantitative and Qualitative Disclosures about Market Risk                            
|Part II. Other Information                        
|                                                   | Item 5. Other Information                                                                     
|                                                   | Item 6. Exhibits and Reports on Form 8-K                                                      
|SIGNATURES                                        
|EXHIBIT INDEX                                     
|Ex-10.1  Second Amendment to Loan Agreement       
|Ex-10.2  Seventh Amendment Agreement              
|Ex-10.3  Deposition Sciences, Inc. 2001 Eq In Plan
|Ex-12  Comp. of Ratio Earnings to Fixed Charges   
|Ex-99.1  Press Release                            
|Ex-99.2  Press Release                            
|Ex-99.3  Press Release                            
|Ex-99.4  Press Release                            
|Ex-99.5  Press Release                            
|Ex-99.6  Press Release                            
|Ex-99.7  Press Release                            



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##### Table of Contents



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 March 31, 2001

or

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from _____________________ to ___________________

Commission File Number: 0-27202

ADVANCED LIGHTING TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)


|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Ohio                                                           |  | 34-1803229                          
|                                                              
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer Identification No.)

|                                         |  |           
|---------------------------------------- |  | ----------
|32000 Aurora Road, Solon, Ohio           |  | 44139     
|                                        
|(Address of principal executive offices) |  | (Zip Code)

440/519-0500

(Registrants telephone number, including area code)


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

There were 23,260,583 shares of the Registrants Common Stock, $.001 par value
per share, outstanding as of April 25, 2001.





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##### Table of Contents



INDEX

Advanced Lighting Technologies, Inc.

|              |                                                                                       |                                                            |  |      |    | 
|------------- | ------------------------------------------------------------------------------------- | ---------------------------------------------------------- |  | ---- | -- | 
|              |                                                                                       |                                                            |  | Page
|              |                                                                                       |                                                            |  | No. 
|Part I        | Financial Information                                                                
|             
|Item 1.       | Financial Statements (Unaudited)                                                     
|             
|              |                                                                                       | Condensed Consolidated Balance Sheets                    
|             
|             
|             
|             
|              |                                                                                       | March 31, 2001 and June 30, 2000                           |  |      | 2  | 
|             
|              |                                                                                       | Condensed Consolidated Statements of Operations          
|             
|             
|             
|             
|              |                                                                                       | Three months and nine months
ended March 31, 2001 and 2000 |  |      | 3  | 
|             
|              |                                                                                       | Condensed Statement of Consolidated Shareholders Equity 
|             
|             
|             
|             
|              |                                                                                       | Nine months ended March 31, 2001                           |  |      | 4  | 
|             
|              |                                                                                       | Condensed Consolidated Statements of Cash Flows          
|             
|             
|             
|             
|              |                                                                                       | Nine months ended March 31, 2001 and 2000                  |  |      | 5  | 
|             
|              |                                                                                       | Notes to Condensed Consolidated Financial Statements       |  |      | 6  | 
|             
|Item 2.       | Managements Discussion and Analysis of Financial Condition
and Results of Operations |                                                            |  | 14   |   
|             
|Item 3.       | Quantitative and Qualitative Disclosures about Market Risk                            |                                                            |  | 27   |   
|             
|Part II       | Other Information                                                                    
|             
|Item 5.       | Other Information                                                                     |                                                            |  | 28   |   
|             
|Item 6.       | Exhibits and Reports on Form 8-K                                                      |                                                            |  | 29   |   
|             
|Signatures    |                                                                                       |                                                            |  |      | 31 | 
|             
|Exhibit Index |                                                                                       |                                                            |  |      | 32 | 





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##### Table of Contents









Advanced Lighting Technologies, Inc.
Condensed Consolidated Balance Sheets(in thousands, except per share amounts)

|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   |         |             |        |           |         |          |        | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------- | ------- | ----------- | ------ | --------- | ------- | -------- | ------ | 
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   |         | (Unaudited) |        | (Audited)
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   |         | March 31    |        | June 30, 
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   |         | 2001        |        | 2000     
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   |         |             |        |          
|Assets                                                                                                                                                                                                  
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|Current assets:                                                                                                                                                                                         
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Cash and cash equivalents                                                                                                                                                       |                                   | $       | 3,669       |        |           | $       | 3,890    |       
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Trade receivables, less allowances of $1,042 and $1,129                                                                                                                         |                                   |         | 32,813      |        |           |         | 31,983   |       
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Inventories:                                                                                                                                                                   
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         |                                                                                                                                                                                 | Finished goods                    |         |             | 25,523 |           |         |          | 26,532 | 
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         |                                                                                                                                                                                 | Raw materials and work-in-process |         |             | 22,333 |           |         |          | 21,930 | 
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   |         |             |        |           |         |          |       
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   | 47,856  |             |        |           | 48,462  |         
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Prepaid expenses                                                                                                                                                                |                                   |         | 2,942       |        |           |         | 1,881    |       
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   |         |             |        |           |         |          |       
|Total current assets                                                                                                                                                                                     |                                                                                                                                                                                 |                                   | 87,280  |             |        |           | 86,216  |         
|                                                                                                                                                                                                        
|Property, plant and equipment:                                                                                                                                                                          
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Land and buildings                                                                                                                                                              |                                   |         | 44,419      |        |           |         | 44,187   |       
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Production machinery and equipment                                                                                                                                              |                                   |         | 79,050      |        |           |         | 62,323   |       
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Other equipment                                                                                                                                                                 |                                   |         | 2,777       |        |           |         | 5,077    |       
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Furniture and fixtures                                                                                                                                                          |                                   |         | 21,596      |        |           |         | 20,893   |       
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   |         |             |        |           |         |          |       
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   | 147,842 |             |        |           | 132,480 |         
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Less accumulated depreciation                                                                                                                                                   |                                   |         | 29,315      |        |           |         | 23,317   |       
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   |         |             |        |           |         |          |       
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   | 118,527 |             |        |           | 109,163 |         
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|Receivables from related parties                                                                                                                                                                         |                                                                                                                                                                                 |                                   | 2,482   |             |        |           | 3,755   |         
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|Investments in affiliates                                                                                                                                                                                |                                                                                                                                                                                 |                                   | 13,997  |             |        |           | 14,251  |         
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|Other assets                                                                                                                                                                                             |                                                                                                                                                                                 |                                   | 6,924   |             |        |           | 7,037   |         
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|Intangible assets                                                                                                                                                                                        |                                                                                                                                                                                 |                                   | 31,105  |             |        |           | 31,791  |         
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|Excess of cost over net assets of businesses acquired, net                                                                                                                                               |                                                                                                                                                                                 |                                   | 50,855  |             |        |           | 52,262  |         
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   |         |             |        |           |         |          |       
|                                                                                                                                                                                                         |                                                                                                                                                                                 | $                                 | 311,170 |             |        | $         | 304,475 |         
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   |         |             |        |           |         |          |       
|Liabilities and shareholders equity                                                                                                                                                                    
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|Current liabilities:                                                                                                                                                                                    
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Short-term debt and current portion of long-term debt                                                                                                                           |                                   | $       | 6,463       |        |           | $       | 7,097    |       
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Accounts payable                                                                                                                                                                |                                   |         | 18,337      |        |           |         | 20,389   |       
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Payables to related parties                                                                                                                                                     |                                   |         | 1,238       |        |           |         | 2,639    |       
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Employee-related liabilities                                                                                                                                                    |                                   |         | 3,712       |        |           |         | 3,913    |       
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Accrued income and other taxes                                                                                                                                                  |                                   |         | 1,206       |        |           |         | 1,436    |       
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Other accrued expenses                                                                                                                                                          |                                   |         | 6,622       |        |           |         | 10,793   |       
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   |         |             |        |           |         |          |       
|Total current liabilities                                                                                                                                                                                |                                                                                                                                                                                 |                                   | 37,578  |             |        |           | 46,267  |         
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|Long-term debt                                                                                                                                                                                           |                                                                                                                                                                                 |                                   | 154,965 |             |        |           | 158,110 |         
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|Minority interest                                                                                                                                                                                        |                                                                                                                                                                                 |                                   | 371     |             |        |           | 316     |         
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|Preferred stock, $.001 par value, per share; 1,000 shares
authorized; 761 Series A convertible redeemable shares
issued and outstanding at March 31, 2001 (redemption
value  $23,064 at March 31, 2001) |                                                                                                                                                                                 |                                   | 18,904  |             |        |           | 16,999  |         
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|Shareholders equity                                                                                                                                                                                    
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Common stock, $.001 par value, 80,000 shares authorized,
23,249 shares issued and outstanding as of March 31,
2001 and 20,482 shares issued and outstanding as of
June 30, 2000 |                                   |         | 23          |        |           |         | 20       |       
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Paid-in-capital                                                                                                                                                                 |                                   |         | 217,440     |        |           |         | 195,786  |       
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Accumulated other comprehensive income (loss)                                                                                                                                   |                                   |         | (5,132      | )      |           |         | (2,659   | )     
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Loan and interest receivable from officer                                                                                                                                       |                                   |         | (12,807     | )      |           |         | (9,528   | )     
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Retained earnings (deficit)                                                                                                                                                     |                                   |         | (100,172    | )      |           |         | (100,836 | )     
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   |         |             |        |           |         |          |       
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   | 99,352  |             |        |           | 82,783  |         
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   |         |             |        |           |         |          |       
|                                                                                                                                                                                                         |                                                                                                                                                                                 | $                                 | 311,170 |             |        | $         | 304,475 |         
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   |         |             |        |           |         |          |       

See notes to condensed consolidated financial statements

2



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##### Table of Contents



Advanced Lighting Technologies, Inc.
Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except per share dollar amounts)

|                                                        |                                       |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |         |  
|------------------------------------------------------- | ------------------------------------- | - | ------------------ | ------ | ----------------- | - | ------ | ------ | ---- | - | ------- | ------- | - | - | ------- | ------- | -
|                                                        |                                       |   | Three Months Ended |        | Nine Months Ended
|                                                        |                                       |   | March 31,          |        | March 31,        
|                                                        |                                       |   |                    |        |                  
|                                                        |                                       |   | 2001               |        | 2000              |   | 2001   |        | 2000
|                                                        |                                       |   |                    |        |                   |   |        |        |     
|Net sales                                               |                                       | $ | 53,073             |        |                   | $ | 54,945 |        |      | $ | 161,911 |         |   | $ | 171,010 |        
|                                                       
|                                                       
|                                                       
|                                                       
|Costs and expenses:                                    
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Cost of sales                         |   |                    | 31,533 |                   |   |        | 32,270 |      |   |         | 97,085  |   |   |         | 103,966 |  
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Marketing and selling                 |   |                    | 10,907 |                   |   |        | 10,367 |      |   |         | 31,611  |   |   |         | 31,159  |  
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Research and development              |   |                    | 3,098  |                   |   |        | 3,665  |      |   |         | 9,681   |   |   |         | 10,643  |  
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | General and administrative            |   |                    | 3,606  |                   |   |        | 3,669  |      |   |         | 10,614  |   |   |         | 11,790  |  
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Special charge                        |   |                    |       |                   |   |        | (234   | )    |   |         |        |   |   |         | (234    | )
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Amortization of intangible assets     |   |                    | 709    |                   |   |        | 706    |      |   |         | 2,118   |   |   |         | 2,053   |  
|                                                        |                                       |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        
|Income from operations                                  |                                       |   | 3,220              |        |                   |   | 4,502  |        |      |   | 10,802  |         |   |   | 11,633  |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                       
|Other income (expense):                                
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Interest expense                      |   |                    | (3,436 | )                 |   |        | (3,580 | )    |   |         | (10,663 | ) |   |         | (10,693 | )
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Interest income                       |   |                    | 262    |                   |   |        | 242    |      |   |         | 749     |   |   |         | 676     |  
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Income (loss) from equity investments |   |                    | (81    | )                 |   |        | 104    |      |   |         | (63     | ) |   |         | 189     |  
|                                                        |                                       |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        
|Income (loss) before income taxes and
minority interest |                                       |   | (35                | )      |                   |   | 1,268  |        |      |   | 825     |         |   |   | 1,805   |        
|                                                       
|                                                       
|                                                       
|                                                       
|Income taxes                                            |                                       |   | 9                  |        |                   |   | 210    |        |      |   | 106     |         |   |   | 549     |        
|                                                        |                                       |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        
|Income (loss) before minority interest                  |                                       |   | (44                | )      |                   |   | 1,058  |        |      |   | 719     |         |   |   | 1,256   |        
|                                                       
|                                                       
|                                                       
|                                                       
|Minority interest in income of consolidated subsidiary  |                                       |   | (31                | )      |                   |   | (13    | )      |      |   | (55     | )       |   |   | (13     | )      
|                                                        |                                       |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        
|Net income (loss)                                       |                                       | $ | (75                | )      |                   | $ | 1,045  |        |      | $ | 664     |         |   | $ | 1,243   |        
|                                                        |                                       |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        
|Earnings (loss) per share:                             
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Basic                                 |   | $                  | (.03   | )                 |   | $      | .02    |      |   | $       | (.30    | ) |   | $       | .00     |  
|                                                        |                                       |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        
|                                                        | Diluted                               |   | $                  | (.03   | )                 |   | $      | .02    |      |   | $       | (.30    | ) |   | $       | .00     |  
|                                                        |                                       |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        
|Weighted average shares outstanding:                   
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Basic                                 |   |                    | 23,238 |                   |   |        | 20,394 |      |   |         | 22,175  |   |   |         | 20,343  |  
|                                                        |                                       |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        
|                                                        | Diluted                               |   |                    | 23,238 |                   |   |        | 21,693 |      |   |         | 22,175  |   |   |         | 21,086  |  
|                                                        |                                       |   |                    |        |                   |   |        |        |      |   |         |         |   |   |         |        

See notes to condensed consolidated financial statements

3



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##### Table of Contents



Advanced Lighting Technologies, Inc.
Condensed Statement of Consolidated Shareholders Equity (Unaudited)
Nine Months Ended March 31, 2001(in thousands)

|                                                                                                                   |                  |                        |        |           |   |        |        |              |   |         |    |               |   |               |         |          |   |            |        |          |        |   |        |             |   |          |        |          |   |   |          |          |   |   |        |         |   | 
|------------------------------------------------------------------------------------------------------------------ | ---------------- | ---------------------- | ------ | --------- | - | ------ | ------ | ------------ | - | ------- | -- | ------------- | - | ------------- | ------- | -------- | - | ---------- | ------ | -------- | ------ | - | ------ | ----------- | - | -------- | ------ | -------- | - | - | -------- | -------- | - | - | ------ | ------- | - | 
|                                                                                                                   |                  |                        |        |           |   |        |        |              |   |         |    |               |   |               |         |          |   |            |        |          |        |   |        |             |   |          |        | Loan and
|                                                                                                                   |                  |                        |        |           |   |        |        |              |   |         |    |               |   |               |         |          |   |            |        |          |        |   |        | Accumulated |   | Interest
|                                                                                                                   |                  |                        |        |           |   |        |        | Common Stock |   |         |    |               |   | Comprehensive |         | Other    |   | Receivable |        | Retained
|                                                                                                                   |                  |                        |        | Preferred |   |        |        | Paid-In      |   | Income  |    | Comprehensive |   | From          |         | Earnings
|                                                                                                                   |                  |                        |        | Stock     |   | Shares |        | Par Value    |   | Capital |    | (Loss)        |   | Income (Loss) |         | Officer  |   | (Deficit)  |        | Total   
|                                                                                                                   |                  |                        |        |           |   |        |        |              |   |         |    |               |   |               |         |          |   |            |        |         
|Balance at July 1, 2000                                                                                            |                  | $                      | 16,999 |           |   |        | 20,482 |              |   | $       | 20 |               |   | $             | 195,786 |          |   |            |        |          |        | $ | (2,659 | )           |   | $        | (9,528 | )        |   | $ | (100,836 | )        |   | $ | 99,782 |        
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Net income                                                                                                         |                  |                        |       |           |   |        |       |              |   |         |   |               |   |               |        |          |   | $          | 664    |          |        |   |       |             |   |          |       |          |   |   | 664      |          |   |   | 664    |        
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Net proceeds from public
offering of common shares                                                                 |                  |                        |       |           |   |        | 1,700  |              |   |         | 2  |               |   |               | 22,898  |          |   |            |       |          |        |   |       |             |   |          |       |          |   |   |         |          |   |   | 22,900 |        
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Preferred shares accretion                                                                                         |                  |                        | 1,905  |           |   |        |       |              |   |         |   |               |   |               | (1,905  | )        |   |            |       |          |        |   |       |             |   |          |       |          |   |   |         |          |   |   |       |        
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Value of beneficial conversion
option of preferred shares                                                          |                  |                        | (5,329 | )         |   |        |       |              |   |         |   |               |   |               | 5,329   |          |   |            |       |          |        |   |       |             |   |          |       |          |   |   |         |          |   |   |       |        
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Additional preferred shares
accretion from cumulative
effect of accounting
change for beneficial
conversion option |                  |                        | 5,329  |           |   |        |       |              |   |         |   |               |   |               | (5,329  | )        |   |            |       |          |        |   |       |             |   |          |       |          |   |   |         |          |   |   |       |        
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Loan to officer                                                                                                    |                  |                        |       |           |   |        |       |              |   |         |   |               |   |               |        |          |   |            |       |          |        |   |       |             |   |          | (2,685 | )        |   |   |         |          |   |   | (2,685 | )      
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Interest on loan to officer                                                                                        |                  |                        |       |           |   |        |       |              |   |         |   |               |   |               |        |          |   |            |       |          |        |   |       |             |   |          | (594   | )        |   |   |         |          |   |   | (594   | )      
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|GE Warrant exercised                                                                                               |                  |                        |       |           |   |        | 999    |              |   |         | 1  |               |   |               | (1      | )        |   |            |       |          |        |   |       |             |   |          |       |          |   |   |         |          |   |   |       |        
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Stock options exercised                                                                                            |                  |                        |       |           |   |        | 12     |              |   |         |   |               |   |               | 124     |          |   |            |       |          |        |   |       |             |   |          |       |          |   |   |         |          |   |   | 124    |        
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Stock purchases                                                                                                   
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | by employees     |                        |        |          |   |        |        | 10           |   |         |    |              |   |               |         | 85       |   |            |        |         |        |   |        |            |   |          |        |         |   |   |          |         |   |   |        | 85      |  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Stock issued pursuant to
employee benefit plan                                                                     |                  |                        |       |           |   |        | 46     |              |   |         |   |               |   |               | 453     |          |   |            |       |          |        |   |       |             |   |          |       |          |   |   |         |          |   |   | 453    |        
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Other comprehensive                                                                                               
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | income (loss):  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | Foreign currency
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   |                  | translation adjustment |        |           |  |        |        |              |  |         |    |               |  |               |         |          |  |            |        |          | (2,473 | ) |        |             |   |          |        |          |  |   |          |          |   |   |        |         |  | 
|                                                                                                                   |                  |                        |        |           |   |        |        |              |   |         |    |               |   |               |         |          |   |            |        |          |        |   |        |             |   |          |        |          |   |   |          |          |   |   |        |        
|Other comprehensive
income (loss)                                                                                  |                  |                        |        |           |   |        |        |              |   |         |    |               |   |               |         |          |   |            | (2,473 | )        |        |   | (2,473 | )           |   |          |        |          |   |   |          |          |   |   | (2,473 | )      
|                                                                                                                   |                  |                        |        |           |   |        |        |              |   |         |    |               |   |               |         |          |   |            |        |          |        |   |        |             |   |          |        |          |   |   |          |          |   |   |        |        
|Comprehensive income (loss)                                                                                        |                  |                        |        |           |   |        |        |              |   |         |    |               |   |               |         |          |   | $          | (1,809 | )       
|                                                                                                                   |                  |                        |        |           |   |        |        |              |   |         |    |               |   |               |         |          |   |            |        |          |        |   |        |             |   |          |        |          |   |   |          |          |   |   |        |        
|Balance at                                                                                                        
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | March 31, 2001   |                        | $      | 18,904    |   |        |        | 23,249       |   |         | $  | 23            |   |               | $       | 217,440  |   |            |        |          |        |   | $      | (5,132      | ) |          | $      | (12,807  | ) |   | $        | (100,172 | ) |   | $      | 118,256 |  
|                                                                                                                   |                  |                        |        |           |   |        |        |              |   |         |    |               |   |               |         |          |   |            |        |          |        |   |        |             |   |          |        |          |   |   |          |          |   |   |        |        

See notes to condensed consolidated financial statements

4



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##### Table of Contents



Advanced Lighting Technologies, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)(in thousands)

|                                               |                                                                                             |                         |                                                     |          |                             |         |       |          |        |         |  
|---------------------------------------------- | ------------------------------------------------------------------------------------------- | ----------------------- | --------------------------------------------------- | -------- | --------------------------- | ------- | ----- | -------- | ------ | ------- | -
|                                               |                                                                                             |                         |                                                     |          | Nine Months Ended March 31,
|                                               |                                                                                             |                         |                                                     |          |                            
|                                               |                                                                                             |                         |                                                     |          | 2001                        |         | 2000 
|                                               |                                                                                             |                         |                                                     |          |                             |         |      
|Operating activities                          
|                                              
|                                              
|                                              
|                                              
|                                               | Net income                                                                                  |                         | $                                                   | 664      |                             |         | $     | 1,243    |       
|                                              
|                                              
|                                              
|                                              
|                                               | Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                             |                         | Depreciation                                        |          |                             | 6,444   |       |          |        | 5,461   |  
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                             |                         | Amortization                                        |          |                             | 2,118   |       |          |        | 2,053   |  
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                             |                         | Provision for doubtful accounts                     |          |                             | 181     |       |          |        | 132     |  
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                             |                         | Loss (income) from equity investment                |          |                             | 64      |       |          |        | (189    | )
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                             |                         | Special charges                                     |          |                             |        |       |          |        | (234    | )
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                             |                         | Changes in operating assets and liabilities:       
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                             |                         | Trade receivables                                   |          |                             | (961    | )     |          |        | (7,858  | )
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                             |                         | Inventories                                         |          |                             | 898     |       |          |        | (3,753  | )
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                             |                         | Prepaids and other assets                           |          |                             | 421     |       |          |        | (308    | )
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                             |                         | Accounts payable and accrued expenses               |          |                             | (7,670  | )     |          |        | (6,404  | )
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                             |                         | Payments related to special charge accruals         |          |                             | (96     | )     |          |        | (2,534  | )
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                             |                         | Other                                               |          |                             | (1,663  | )     |          |        | (267    | )
|                                               |                                                                                             |                         |                                                     |          |                             |         |       |          |       
|                                               |                                                                                             |                         | Net cash provided by (used in)
operating activities |          |                             | 400     |       |          |        | (12,658 | )
|                                              
|                                              
|                                              
|                                              
|Investing activities                          
|                                              
|                                              
|                                              
|                                              
|                                               | Capital expenditures                                                                        |                         |                                                     | (17,474  | )                           |         |       | (4,357   | )     
|                                              
|                                              
|                                              
|                                              
|                                               | Sale of short-term investments                                                              |                         |                                                     |         |                             |         |       | 350      |       
|                                              
|                                              
|                                              
|                                              
|                                               | Purchases of businesses                                                                     |                         |                                                     | (366     | )                           |         |       | (3,274   | )     
|                                              
|                                              
|                                              
|                                              
|                                               | Investments in affiliates                                                                   |                         |                                                     | 10       |                             |         |       | (853     | )     
|                                               |                                                                                             |                         |                                                     |          |                             |         |       |          |       
|                                               |                                                                                             |                         | Net cash used in investing activities               |          |                             | (17,830 | )     |          |        | (8,134  | )
|                                              
|                                              
|                                              
|                                              
|Financing activities                          
|                                              
|                                              
|                                              
|                                              
|                                               | Proceeds from revolving credit facility                                                     |                         |                                                     | 161,997  |                             |         |       | 153,202  |       
|                                              
|                                              
|                                              
|                                              
|                                               | Payments of revolving credit facility                                                       |                         |                                                     | (160,786 | )                           |         |       | (146,145 | )     
|                                              
|                                              
|                                              
|                                              
|                                               | Proceeds from long-term debt                                                                |                         |                                                     | 173      |                             |         |       |         |       
|                                              
|                                              
|                                              
|                                              
|                                               | Payments of long-term debt and capital leases                                               |                         |                                                     | (5,052   | )                           |         |       | (7,568   | )     
|                                              
|                                              
|                                              
|                                              
|                                               | Issuance of preferred stock and stock purchase warrant                                      |                         |                                                     |         |                             |         |       | 20,203   |       
|                                              
|                                              
|                                              
|                                              
|                                               | Loan to officer                                                                             |                         |                                                     | (2,685   | )                           |         |       |         |       
|                                              
|                                              
|                                              
|                                              
|                                               | Net proceeds from public offering                                                           |                         |                                                     | 22,900   |                             |         |       |         |       
|                                              
|                                              
|                                              
|                                              
|                                               | Issuance of common stock                                                                    |                         |                                                     | 662      |                             |         |       | 1,014    |       
|                                               |                                                                                             |                         |                                                     |          |                             |         |       |          |       
|                                               |                                                                                             |                         | Net cash provided by financing activities           |          |                             | 17,209  |       |          |        | 20,706  |  
|                                               |                                                                                             |                         |                                                     |          |                             |         |       |          |       
|Decrease in cash and cash equivalents          |                                                                                             |                         | (221                                                | )        |                             |         | (86   | )       
|                                              
|                                              
|                                              
|                                              
|Cash and cash equivalents, beginning of period |                                                                                             |                         | 3,890                                               |          |                             |         | 3,830 |         
|                                               |                                                                                             |                         |                                                     |          |                             |         |       |          |       
|                                               |                                                                                             |                         | Cash and cash equivalents, end of period            |          | $                           | 3,669   |       |          | $      | 3,744   |  
|                                               |                                                                                             |                         |                                                     |          |                             |         |       |          |       
|Supplemental cash flow information            
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                             | Interest paid           |                                                     | $        | 12,439                      |         |       | $        | 10,937 |        
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                             | Income taxes paid       |                                                     |          | 81                          |         |       |          | 55     |        
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                             | Capitalized interest    |                                                     |          | 363                         |         |       |          | 290    |        
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                             | Detail of acquisitions:
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                             |                         | Assets acquired                                     |          | $                           | 899     |       |          | $      | 14,274  |  
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                             |                         | Liabilities assumed                                 |          |                             | (288    | )     |          |        | (10,375 | )
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                             |                         | Stock or debt issued                                |          |                             | (245    | )     |          |        | (535    | )
|                                               |                                                                                             |                         |                                                     |          |                             |         |       |          |       
|                                               |                                                                                             |                         | Cash paid                                           |          |                             | 366     |       |          |        | 3,364   |  
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                             |                         | Less cash acquired                                  |          |                             |        |       |          |        | (90     | )
|                                               |                                                                                             |                         |                                                     |          |                             |         |       |          |       
|                                               |                                                                                             |                         | Net cash paid for acquisitions                      |          | $                           | 366     |       |          | $      | 3,274   |  
|                                               |                                                                                             |                         |                                                     |          |                             |         |       |          |       

See notes to condensed consolidated financial statements

5



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##### Table of Contents



Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2001
(Dollars in thousands, except per share data)

A. Organization

Advanced Lighting Technologies, Inc. (the Company or ADLT) is an
innovation-driven designer, manufacturer and marketer of metal halide lighting
products, including materials, system components and systems. The Company also
develops, manufactures and markets passive optical telecommunications devices,
components and equipment based on the optical coating technologies of its
wholly-owned subsidiary, Deposition Sciences, Inc.

B. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all the information and
disclosures required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the financial statements
include all material adjustments necessary for a fair presentation, consisting
of normal recurring accruals. For further information, refer to the consolidated
financial statements and notes thereto included in the Companys annual report
on Form 10-K for the year ended June 30, 2000. Operating results for the three
months and nine months ended March 31, 2001 are not necessarily indicative of
the results that may be expected for the full-year ending June 30, 2001.

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

New Accounting Standards

The Company adopted Statement of Financial Accounting Standards (FAS) No. 133
Accounting for Derivative Instruments and Hedging Activities as of July 1,
2000. FAS 133 requires that all derivatives, such as interest rate exchange
agreements (swaps), be recognized on the balance sheet at fair value. The
Company had no derivatives as at July 1, 2000, and therefore, no resulting
transition adjustments.

The Company also adopted Emerging Issues Task Force (EITF) Issue 00-27,
Application of EITF 98-5, Convertible Securities with Beneficial Conversion
Features or Contingently Adjustable Conversion Ratios, to Certain Convertible
Instruments in the quarter ended December 31, 2000. EITF Issue 00-27 requires
that a convertible instruments beneficial conversion feature be measured using
an effective conversion price. As a result, the value assigned to the redeemable
preferred stock was adjusted by $5,329 for the discount related to the
beneficial conversion option. This additional discount was immediately accreted
to paid-in capital in a manner similar to a cumulative effect of an

6



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##### Table of Contents



Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)  Continued
March 31, 2001
(Dollars in thousands, except per share data)

B. Basis of Presentation (continued)

accounting change since the redeemable preferred stock was convertible at the
time of issuance. The impact of this change is noted in the Condensed Statement
of Consolidated Shareholders Equity and in Note I Earnings Per Share.

Financial Statement Presentation Changes

Certain amounts for prior periods have been reclassified to conform to the
current period reporting presentation.

C. Comprehensive Income (Loss)

For the three- and nine-months ended March 31, 2001 the Companys comprehensive
income (loss) was $(1,619) and $(1,809), respectively. For the three- and
nine-months ended March 31, 2000, the Companys comprehensive income was $37 and
$721, respectively.

D. Bank Credit Facility and Senior Notes

The Company maintains a Bank Credit Facility with a $40,000 revolving credit
loan and $20,000 term loan provided by several financial institutions. The
revolving credit loan has a three-year term expiring in May 2002. Interest rates
on revolving credit loans outstanding are based, at the Companys option, on
LIBOR plus 2.25% or the agent banks prime rate. Availability of borrowings is
determined by the Companys eligible account receivable and inventories. The
term loan has a five-year term expiring in May 2004. The Company pays monthly
principal payments that total $3,576 annually, with the unpaid balance due at
maturity. Interest rates on the term loan are based, at the Companys option, on
LIBOR plus 2.75% or the agent banks prime rate.

The Bank Credit Facility contains certain affirmative and negative covenants
customary for this type of agreement, prohibits cash dividends, and includes
financial covenants with respect to the coverage of certain fixed charges. The
principal security for the revolving credit loan is substantially all of the
personal property of the Company and each of its North American and United
Kingdom subsidiaries. The term loan is secured by substantially all of the
Companys machinery and equipment and is cross-collateralized and secured with
the revolving credit loan.

On March 13, 1998, the Company sold $100,000 of Senior Notes due March 15, 2008,
resulting in net proceeds of approximately $96,150. During August 2000, the
Company completed an exchange offer to existing noteholders, which resulted in
reducing the interest rate on the Senior Notes to 8.0% from 8.5%. The notes are
redeemable at the Companys option, in whole or in part, on or after

7



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##### Table of Contents



Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)  Continued
March 31, 2001
(Dollars in thousands, except per share data)

D. Bank Credit Facility and Senior Notes (continued)

March 15, 2003 at certain preset redemption prices. Interest on the Senior Notes
is payable semiannually on March 15 and September 15 of each year. There are no
sinking fund requirements.

The Notes Indenture contains covenants that, among other things, limit the
ability of the Company and its Restricted Subsidiaries (as defined therein) to
incur indebtedness, pay dividends, prepay subordinated indebtedness, repurchase
capital stock, make investments, create liens, engage in transactions with
stockholders and affiliates, sell assets and, with respect to the Company,
engage in mergers and consolidations.

E. General Electric Company Investment

In October 1999, General Electric Company (GE) completed an investment in the
Company of $20,554. In exchange for the investment, GE received 761,250 shares
of the Companys newly-created Series A Preferred Stock convertible at any time
into 3,045,000 shares of Company Common Stock (subject to adjustment). GE also
received a Warrant (the Initial Warrant) to purchase an additional 1,000,000
shares of Company Common Stock (subject to adjustment), which was immediately
exercisable at $.01 per share. During the second quarter ended December 31,
2000, GE exercised the Warrant. GE now holds 1,429,590 shares of Company Common
Stock. The Series A Stock and the Common Stock held by GE represent
approximately 17.0% of the voting power and equity ownership of the Company at
March 31, 2001. The proceeds of the transaction were applied principally to the
reduction of short-term liabilities and outstanding amounts under the Companys
Bank Credit Facility.

The Series A Stock has a liquidation preference of $27 per share, plus an amount
equal to 8% per annum compounded annually from the date of issuance to the date
of payment. The Company is required to redeem any shares of Series A Stock which
have not been converted or retired on September 30, 2010. In addition, GE may,
by notice, require the Company to redeem the outstanding Series A Stock, within
one year following either September 30, 2004, or the occurrence of certain
corporate events.

If the Company fails to maintain certain financial ratios over certain
measurement periods, GE will have the right to acquire a combination of
subscription rights to additional shares and proxies with respect to shares
voted by certain officers of the Company, giving GE the ability to obtain the
majority of the voting power of the Company. The first measurement period was
the six months ended December 31, 1999. Thereafter, the measurement periods are
the six months ending on the last day of each successive fiscal quarter until
September 30, 2010 (excluding the six month periods ended on June 30, 2000 and
September 30, 2000).

8



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##### Table of Contents



Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)  Continued
March 31, 2001
(Dollars in thousands, except per share data)

E. General Electric Company Investment (continued)

The basis for GEs additional rights will be the failure of the Company to
maintain a 2.0 to 1.0 ratio of EBITDA to Interest Expense, as defined, over the
applicable measurement periods. A measurement period for which the Company fails
to maintain the required ratio is referred to as an Occurrence, however, if
the Company maintains a 2.0 to 1.0 ratio in the three fiscal quarters
immediately prior to a failure, a Second Occurrence or Third Occurrence, as
the case may be, would not be effective. The First Occurrence was effective in
the six-month measurement period ended December 31, 1999. The ratio for the six
months ended March 31, 2001, was 2.19 to 1.0 (2.01 to 1.0 for the quarter ended
March 31, 2001 and 2.37 to 1.0 for the quarter ended December 31, 2000).

A Second Occurrence would: (i) give GE the ability to vote the number of shares
currently voted by the Chief Executive Officer (CEO) of the Company,
approximately 3.9 million shares, (ii) give GE the option to purchase shares
from the CEO and the President of the Company which, together with the shares
owned by GE, would represent 25% of the voting power of the Company, and (iii)
require the Company to grant GE an additional warrant to purchase shares, at the
then current market price, approximating 2,422,308 shares at March 31, 2001. The
ability to vote the shares, purchase shares or obtain the warrant would be
dependent upon compliance with antitrust laws. GE is not required to purchase
additional shares of the Company. If GE obtains approval and obtains in excess
of 35% of the voting power of the Company, the terms of the Indenture relating
to the Companys Senior Notes would require that the Company offer to repurchase
the $100,000 principal amount of outstanding Senior Notes due 2008 at a price of
101% of the principal amount thereof, plus accrued interest, and the Companys
banks will have the ability to demand payment of the Bank Credit Facility. Upon
a Third Occurrence, GE would have the right to vote shares currently voted by
the President and be granted a warrant to purchase (at the then current market
price) additional shares of Common Stock sufficient in number to give GE 50%
plus one vote of the voting power of the Company.

As described above, the terms of the Series A Preferred Stock permit the holder
to require the Company to redeem the Series A Preferred Stock, in whole or in
part, if the Company authorizes or issues common stock or warrants or options to
purchase common stock, with certain exceptions. The holder has 90 days to
exercise its right. Pursuant to the terms of the Series A Preferred Stock, if
the holder exercises the right to require redemption, the Company is not
required to redeem the Series A Preferred Stock for a period of one year, or
thereafter, so long as the redemption would cause an event of default under the
Companys indebtedness, including its Bank Credit Facility and its Indenture
relating to its 8% Senior Notes due 2008. The Bank Credit Facility and Indenture
restrictions on redemption of stock are similar to the restrictions on payment
of dividends.

As a result of the authorization of a warrant to purchase 15,000 shares of
Company stock, the holder of the Series A Preferred stock currently may exercise
this right to require redemption. Due to the restrictions in the Indenture and
the Bank Credit Facility, even if the right were exercised, the Company does not
believe that it would be required to redeem the Series A Preferred Stock for
several years.

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Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)  Continued
March 31, 2001
(Dollars in thousands, except per share data)

F. Issuance of Common Stock

On August 31, 2000, the Company completed a public offering of 1,700,000 shares
of its common stock at a price of $15.00 per share under a $300,000 shelf
registration filed with the Securities and Exchange Commission which became
effective in July 2000.

The public offering reduced the amount available for the issuance of various
debt and equity securities under the shelf registration statement to
approximately $274,500. The Company used the net proceeds from the public
offering of approximately $22,900 to repay revolving credit loan borrowings. The
Company expects to borrow a similar amount (including amounts already borrowed
since the offering) under its revolving credit loan facility to fund capital
improvements, including optical coating production equipment, filter testing and
measurement equipment and production facilities, and on research and development
in its telecommunications business unit at Deposition Sciences, Inc.

In addition to the $300,000 shelf registration discussed above, in July 2000 a
$100,000 shelf registration became effective under which the Company may from
time-to-time issue various debt and equity securities to acquire assets,
businesses or securities. The Company has no outstanding securities issued under
this registration statement.

G. Related Party Transaction

Pursuant to an agreement dated October 8, 1998, as amended, between the Company
and its Chairman and Chief Executive Officer (the CEO), the Company, following
approval by the Companys Board of Directors, has loaned a total of $11,685 to
its CEO at an interest rate of 8%, including $785 in the quarter ended March 31,
2001. The proceeds of the loan have been used by the Companys CEO to reduce the
principal balance outstanding of margin loan accounts, which are secured by
2,053,070 shares of the Companys Common Stock owned by the CEO and a related
entity. In connection with the loan, the Companys Board of Directors obtained
the CEOs agreement to an extension of his employment agreement to December 31,
2003. The loan agreement prohibits the CEO from encumbering his shares of the
Companys Common Stock in any manner except pursuant to the existing agreements
governing the CEOs margin accounts, without the consent of the Companys Board
of Directors.

The CEO has paid accrued interest of $720 on the loan through October 6, 1999.
The term of the loan has been extended by the Board to October 6, 2001. Prior to
maturity, the CEO has agreed to repay $1,400 of the loan amount should the
average closing price for the shares reach $11.00 per share for twenty trading
days and the price of ADLTs Common Stock remains at or above $11.00 per share
at the end of such period. The Board reserved the right to require earlier
repayment if ADLT requires the payment to prevent an unacceptable strain on cash
resources.

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Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)  Continued
March 31, 2001
(Dollars in thousands, except per share data)

H. DSI Stock Option Plan

Deposition Sciences, Inc. (DSI), a non-public subsidiary of ADLT, adopted the
2001 Equity Incentive Plan. DSI currently has 100,000,000 shares authorized and
50,000,000 shares outstanding, all of which are owned by ADLT. The 2001 Equity
Incentive Plan initially provides for the granting of stock options to purchase
up to 10,000,000 shares of common stock of DSI. The number of shares available
will be increased by 18% of DSI shares issued after adoption of the plan, up to
a maximum of 16,200,000 shares. The vesting terms of the options vary, including
vesting based on a change in control or public offering of DSI or on a vesting
schedule no more than five years from the date of grant. The options have been
granted at fair value on the date of grant of $.46 per share and expire ten
years from the date of grant. A total of 7,865,000 options have been granted
under the Plan and 1,901,000 of these options are immediately exercisable.

I. Earnings Per Share

Earnings (loss) per share is computed as follows:

|                                         |                                                       |                                 |                                                                                                                    |        |                    |   |                   |        |        |   |      |        |        |        |   |        |        |   | 
|---------------------------------------- | ----------------------------------------------------- | ------------------------------- | ------------------------------------------------------------------------------------------------------------------ | ------ | ------------------ | - | ----------------- | ------ | ------ | - | ---- | ------ | ------ | ------ | - | ------ | ------ | - | 
|                                         |                                                       |                                 |                                                                                                                    |        | Three Months Ended |   | Nine Months Ended
|                                         |                                                       |                                 |                                                                                                                    |        | March 31,          |   | March 31,        
|                                         |                                                       |                                 |                                                                                                                    |        |                    |   |                  
|                                         |                                                       |                                 |                                                                                                                    |        | 2001               |   | 2000              |        | 2001   |   | 2000
|                                         |                                                       |                                 |                                                                                                                    |        |                    |   |                   |        |        |   |     
|Income available to common shareholders:
|                                        
|                                        
|                                        
|                                        
|                                         | Net income                                            |                                 | $                                                                                                                  | (75    | )                  |   | $                 | 1,045  |        |   | $    | 664    |        |        | $ | 1,243  |       
|                                        
|                                        
|                                        
|                                        
|                                         | Less: Preferred shares accretion                      |                                 |                                                                                                                    | (647   | )                  |   |                   | (605   | )      |   |      | (1,905 | )      |        |   | (1,208 | )     
|                                        
|                                        
|                                        
|                                        
|                                         |                                                       |                                 | Additional preferred shares accretion from
cumulative effect of accounting change
for beneficial conversion option |        |                    |  |                   |        |        |  |      |        |        | (5,329 | ) |        |        |  | 
|                                         |                                                       |                                 |                                                                                                                    |        |                    |   |                   |        |        |   |      |        |        |        |   |       
|                                         | Net income (loss) attributable to common shareholders |                                 | $                                                                                                                  | (722   | )                  |   | $                 | 440    |        |   | $    | (6,570 | )      |        | $ | 35     |       
|                                         |                                                       |                                 |                                                                                                                    |        |                    |   |                   |        |        |   |      |        |        |        |   |       
|Weighted average shares  Basic:        
|                                        
|                                        
|                                        
|                                        
|                                         | Outstanding at beginning of period                    |                                 |                                                                                                                    | 23,229 |                    |   |                   | 20,369 |        |   |      | 20,482 |        |        |   | 20,278 |       
|                                        
|                                        
|                                        
|                                        
|                                         | Issued pursuant to public offering                    |                                 |                                                                                                                    |       |                    |   |                   |       |        |   |      | 1,284  |        |        |   |       |       
|                                        
|                                        
|                                        
|                                        
|                                         | Issued in acquisitions                                |                                 |                                                                                                                    |       |                    |   |                   |       |        |   |      |       |        |        |   | 26     |       
|                                        
|                                        
|                                        
|                                        
|                                         | Issued for exercise of warrant                        |                                 |                                                                                                                    |       |                    |   |                   |       |        |   |      | 375    |        |        |   |       |       
|                                        
|                                        
|                                        
|                                        
|                                         | Issued for exercise of stock options                  |                                 |                                                                                                                    |       |                    |   |                   | 15     |        |   |      | 11     |        |        |   | 5      |       
|                                        
|                                        
|                                        
|                                        
|                                         | Issued pursuant to employee stock purchase plan       |                                 |                                                                                                                    | 2      |                    |   |                   | 3      |        |   |      | 6      |        |        |   | 12     |       
|                                        
|                                        
|                                        
|                                        
|                                         | Issued pursuant to 401(k) plan                        |                                 |                                                                                                                    | 7      |                    |   |                   | 7      |        |   |      | 17     |        |        |   | 22     |       
|                                         |                                                       |                                 |                                                                                                                    |        |                    |   |                   |        |        |   |      |        |        |        |   |       
|                                         |                                                       | Basic weighted average shares   |                                                                                                                    |        | 23,238             |   |                   |        | 20,394 |   |      |        | 22,175 |        |   |        | 20,343 |  
|                                         |                                                       |                                 |                                                                                                                    |        |                    |   |                   |        |        |   |      |        |        |        |   |       
|Weighted average shares  Diluted:      
|                                        
|                                        
|                                        
|                                        
|                                         | Basic from above                                      |                                 |                                                                                                                    | 23,238 |                    |   |                   | 20,394 |        |   |      | 22,175 |        |        |   | 20,343 |       
|                                        
|                                        
|                                        
|                                        
|                                         | Effect of warrant prior to exercise                   |                                 |                                                                                                                    |       |                    |   |                   | 1,000  |        |   |      |       |        |        |   | 647    |       
|                                        
|                                        
|                                        
|                                        
|                                         | Effect of stock options                               |                                 |                                                                                                                    |       |                    |   |                   | 299    |        |   |      |       |        |        |   | 96     |       
|                                         |                                                       |                                 |                                                                                                                    |        |                    |   |                   |        |        |   |      |        |        |        |   |       
|                                         |                                                       | Diluted weighted average shares |                                                                                                                    |        | 23,238             |   |                   |        | 21,693 |   |      |        | 22,175 |        |   |        | 21,086 |  
|                                         |                                                       |                                 |                                                                                                                    |        |                    |   |                   |        |        |   |      |        |        |        |   |       

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Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)  Continued
March 31, 2001
(Dollars in thousands, except per share data)

I. Earnings Per Share (continued)

|                                    |  |                                                                                                                    |                                                                         |   |                    |      |                   |   |      |     |      |   |      |      |   |   |      |     | 
|----------------------------------- |  | ------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------- | - | ------------------ | ---- | ----------------- | - | ---- | --- | ---- | - | ---- | ---- | - | - | ---- | --- | 
|                                    |  |                                                                                                                    |                                                                         |   | Three Months Ended |      | Nine Months Ended
|                                    |  |                                                                                                                    |                                                                         |   | March 31,          |      | December 31,     
|                                    |  |                                                                                                                    |                                                                         |   |                    |      |                  
|                                    |  |                                                                                                                    |                                                                         |   | 2001               |      | 2000              |   | 2001 |     | 2000
|                                    |  |                                                                                                                    |                                                                         |   |                    |      |                   |   |      |     |     
|Earnings (loss) per share  Basic  
|                                   
|                                   
|                                   
|                                   
|                                    |  | Net income                                                                                                         |                                                                         | $ | .00                |      |                   | $ | .05  |     |      | $ | .03  |      |   | $ | .06  |    
|                                   
|                                   
|                                   
|                                   
|                                    |  | Preferred shares accretion                                                                                         |                                                                         |   | (.03               | )    |                   |   | (.03 | )   |      |   | (.09 | )    |   |   | (.06 | )  
|                                    |  |                                                                                                                    |                                                                         |   |                    |      |                   |   |      |     |      |   |      |      |   |  
|                                    |  | Earnings (loss) per share before cumulative effect
of accounting change                                            |                                                                         |   | (.03               | )    |                   |   | .02  |     |      |   | (.06 | )    |   |   | .00  |    
|                                   
|                                   
|                                   
|                                   
|                                    |  | Additional preferred shares accretion from
cumulative effect of accounting change
for beneficial conversion option |                                                                         |   |                   |      |                   |   |     |     |      |   | (.24 | )    |   |   |     |    
|                                    |  |                                                                                                                    |                                                                         |   |                    |      |                   |   |      |     |      |   |      |      |   |  
|                                    |  |                                                                                                                    | Earnings (loss) per share attributable to
common shareholders  basic   |   | $                  | (.03 | )                 |   | $    | .02 |      |   | $    | (.30 | ) |   | $    | .00 | 
|                                    |  |                                                                                                                    |                                                                         |   |                    |      |                   |   |      |     |      |   |      |      |   |  
|Earnings (loss) per share  Diluted
|                                   
|                                   
|                                   
|                                   
|                                    |  | Net income                                                                                                         |                                                                         | $ | .00                |      |                   | $ | .05  |     |      | $ | .03  |      |   | $ | .06  |    
|                                   
|                                   
|                                   
|                                   
|                                    |  | Preferred shares accretion                                                                                         |                                                                         |   | (.03               | )    |                   |   | (.03 | )   |      |   | (.09 | )    |   |   | (.06 | )  
|                                    |  |                                                                                                                    |                                                                         |   |                    |      |                   |   |      |     |      |   |      |      |   |  
|                                    |  | Earnings (loss) per share before cumulative effect
of accounting change                                            |                                                                         |   | (.03               | )    |                   |   | .02  |     |      |   | (.06 | )    |   |   | .00  |    
|                                   
|                                   
|                                   
|                                   
|                                    |  | Additional preferred shares accretion from
cumulative effect of accounting change
for beneficial conversion option |                                                                         |   |                   |      |                   |   |     |     |      |   | (.24 | )   
|                                    |  |                                                                                                                    |                                                                         |   |                    |      |                   |   |      |     |      |   |      |      |   |  
|                                    |  |                                                                                                                    | Earnings (loss) per share attributable to
common shareholders  diluted |   | $                  | (.03 | )                 |   | $    | .02 |      |   | $    | (.30 | ) |   |      | .00 | 
|                                    |  |                                                                                                                    |                                                                         |   |                    |      |                   |   |      |     |      |   |      |      |   |  

The diluted weighted average shares calculation excludes the antidilutive effect
of outstanding stock options and warrants which totaled 3,000 shares for the
three months ended March 31, 2001 and 972,000 shares for the nine months ended
March 31, 2001.

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Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)  Continued
March 31, 2001
(Dollars in thousands, except per share data)

J. Contingency

In April and May 1999, three class action suits were filed in the United States
District Court, Northern District of Ohio, by certain alleged shareholders of
the Company on behalf of themselves and purported classes consisting of Company
shareholders, other than the defendants and their affiliates, who purchased
stock during the period from December 30, 1997 through September 30, 1998 or
various portions thereof. A First Amended Class Action Complaint, consolidating
the three lawsuits, was filed on September 30, 1999, and the action is now
pending before a single judge. The named defendants in the case  styled In re
Advanced Lighting Technologies, Inc. Securities Litigation, Master File No.
1:99CV836, pending before the United States District Court, Northern District of
Ohio  are the Company and its Chairman and Chief Executive Officer (CEO).

The First Amended Class Action Complaint alleges generally that certain
disclosures attributed to the Company contained misstatements and omissions
alleged to be violations of Section 10(b) of the Securities Exchange Act of 1934
and Rule 10b-5, including claims for fraud on the market arising from alleged
misrepresentations and omissions with respect to the Companys financial
performance and prospects and alleged violations of generally accepted
accounting principles by, among other things, improperly recognizing revenue and
improper inventory accounting. The Complaint seeks certification of the
purported class, unspecified compensatory and punitive damages, pre- and
post-judgment interest and attorneys fees and costs.

The Company and the CEO believe that these claims lack merit. The Company and
its CEO filed a Motion to Dismiss the Complaint, which was denied. The case will
now proceed. The Company and the CEO intend to continue to vigorously defend
against these actions.

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

(Dollar amounts in thousands, except per share amounts)

This report on Form 10-Q may contain forward-looking statements that involve
risks and uncertainties. Covenants in the Companys Bank Credit Facility, the
Indenture relating to the Companys 8% Senior Notes and the Companys agreements
with General Electric Company limit certain corporate actions. As a result,
implementation of certain strategic alternatives relating to the
telecommunications unit may require consent or require replacement of these ADLT
financing sources. The Company has no assurance that such consents or
replacement financing can be obtained in a manner to permit timely
implementation of these strategic alternatives. Other risks and uncertainties
include the strength of the recovery of the U.S. economy, the Companys
financing plans, trends affecting the Companys financial condition or results
of operations, continued growth of the metal halide lighting market, the
Companys operating strategy and growth strategy, potential acquisitions or
joint ventures by the Company, the declaration and payment of dividends,
litigation affecting the Company, the timely development and market acceptance
of new products, the possibility that any success at Deposition Sciences,
Inc.(an ADLT subsidiary) will not be reflected in the value of the ADLT common
stock, the ability to provide adequate incentives to retain and attract key
employees, the impact of competitive products and pricing, and other risks which
are detailed in the Companys Form 10-K for the fiscal year ended June 30, 2000,
in particular, see Risk Factors. For this purpose, any statement contained
herein that is not a statement of historical fact may be deemed to be a
forward-looking statement. Without limiting the foregoing, the words believes,
anticipates, plans, expects, and similar expressions are intended to
identify forward-looking statements. The Companys actual results may differ
materially from those indicated by such forward-looking statements based on the
factors outlined above.

The following is managements discussion and analysis of certain significant
factors which have affected the results of operations and should be read in
conjunction with the accompanying unaudited Condensed Consolidated Financial
Statements and notes thereto.

General

The Company designs, manufactures and markets metal halide lighting products,
including materials, systems and components. Metal halide lighting is currently
used primarily in commercial and industrial applications such as factories and
warehouses, outdoor site and landscape lighting, sports facilities and large
retail spaces such as superstores. The Company also develops, manufactures and
markets passive optical telecommunications devices, components and equipment
based on the optical coating technologies of its wholly-owned subsidiary,
Deposition Sciences, Inc. (DSI). Systems, components and materials revenue is
recognized when products are shipped, and deposition equipment revenue is
recognized under the percentage of completion method.

Consistent with the Companys strategy for new product introductions, the
Company invests substantial resources in research and development to engineer
materials and system components to be included in customers specialized
lighting systems. Over the last three fiscal years, the Company has spent an
aggregate of $43,286 on research and development, representing 7.4% of aggregate
net sales over that period. Such expenditures have enabled the Company to
develop new applications for metal halide lighting, improve the quality of its
materials, and introduce new specialized products, such as

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the Uni-Form® pulse start products. Uni-Form® pulse start products are a new
generation of metal halide components and systems which permit (a) increased
light output with lower power utilization, (b) faster starting, (c) a quicker
restart of lamps which have been recently turned off, and (d) better color
uniformity.

The Company has spent additional amounts for manufacturing process and
efficiency enhancements, which were charged to cost of goods sold when incurred.
The Company expects to continue to make substantial expenditures on research and
development to enhance its position as the leading innovator in the metal halide
lighting industry.

The Company also has invested substantial resources in acquisitions and
strategic investments. In January 1998, the Company acquired Ruud Lighting, Inc.
and DSI. These acquisitions enabled the Company to complete the assembly of the
necessary operations to take a leadership role in the development, manufacturing
and marketing of new and better systems in the growing metal halide lighting
industry.

Recent Developments

Telecommunications Business Unit

In February 2000, the Company announced the creation of its Fiber Optic
Telecommunications Business Unit, which develops and manufactures passive
optical telecommunications devices and components based on its optical coating
technology. The telecommunications operations are located in Santa Rosa,
California, at the DSI business campus. The Telecommunications Unit exploits the
proprietary coating equipment, advanced thin film technologies, and measurement
capabilities developed by DSI over the last fifteen years for a wide variety of
demanding products in both military and commercial applications.

Prior to the formation of the telecommunications unit the development and
coating of telecommunications products was performed by DSIs R&D Engineering
unit. With the formation of the telecommunications unit, two employees were
transferred from the R&D Engineering unit to the telecommunications unit with
additional engineering and sales personnel being hired for the unit. Also, DSI
assigned thin film coating machines from other areas of the company as well as
purchasing and constructing additional equipment to be used in the
telecommunication business.

A portion of the in-process research and development which was acquired when the
Company acquired DSI was for research and development projects directed at
telecommunications applications (the Fiber Optics Project). These projects
involved the development of processes for the application of optical coatings to
products for telecommunications applications. At the time of the acquisition the
future importance of these technologies and optical products to
telecommunications infrastructure was not clear. (For more information, see Update
on In-Process Research and Development.)

The Fiber Optics Project was directed at development of (i) optical coatings
that reduce insertion losses in fiber optic communications systems, including
wavelength division multiplexing (WDM) and dense wavelength division
multiplexing (DWDM) systems; (ii) collimating micro-optics for use

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in WDM and DWDM systems; (iii) filter elements for use in WDM systems; (iv)
secondary filter elements for use in DWDM systems; (v) narrow bandpass filter
elements for use in the multiplex/demultiplex function of DWDM systems. WDM and
DWDM are technologies that allow multiple wavelengths of light to be
simultaneously transmitted through a single fiber optic cable. The first four
projects have resulted in commercial products, and sales of these products
reached $1,453 in fiscal 2000, an increase of 46% over the $993 recognized in
fiscal 1999. Telecommunication product sales for the first nine months of fiscal
2001 approximated $2,013, up 115% from $936 in the first nine months of fiscal
2000. Backorders in the telecom product area grew to $4,600. The Company has
demonstrated key DWDM filter manufacturing capabilities using its patented
MicroDyn® technology. The Company believes that it will develop and market
commercial narrow bandpass filter products that take advantage of the Companys
patented MicroDyn® sputtering technology.

While the Company does apply optical coatings to elements supplied by its
customers, an increasing portion of its business is the supply of entire
assemblies and components. The Company expects that this trend to forward
integration will continue and accelerate. The Company has existing manufacturing
capacity to support sales of up to $10,000 per year of existing products.
Following additional capital investments, the Company anticipates achieving
additional manufacturing capability and revenue for DWDM products using
MicroDyn® technology. The Company believes that it can increase its production
capacity for its telecommuncations products beyond existing levels with
additional capital expenditures, on which this growing business depends.

DSI believes that the current demand exceeds supply for these thin film
coating products for the telecommunications industry. The principal
competitors for the Companys products are certain large OEMs, such as
JDS Uniphase Corporation, Corning Incorporated, Nortel Networks Corporation,
and Lucent Technologies, Inc., which have significant internal capability to
manufacture thin film filter products, and a variety of smaller companies
which specialize in optical coatings, such as Precision Optics Corp., Inc.,
Barr Associates, Inc., Iridian Spectral Technologies, Ltd., Thin Film
Technologies, Inc., and Evaporated Coatings, Inc. The Company also
believes that the large OEMs also represent substantial opportunities
for sales of its products.

The Company believes that the competitive environment for its products is based
primarily on technical performance, delivery and service, rather than price. The
Company believes that DSIs fifteen-year history of high volume, efficient
production of high quality optical components provides it with significant
advantages in this regard. Furthermore, the Company believes that its core
competencies in optical coating and coating equipment development and
manufacture, its experienced workforce and its ability to develop
telecommunications solutions, backed by the required measurement technology,
will permit it to continue to compete successfully in this product area.

The Company recognizes that the successful, full-scale development of its
telecommunications business unit requires a level of focus and resources that
the Company may not be able to provide while this unit resides within a
subsidiary of the Company. In pursuit of maximizing shareholder value, the
Company is exploring several strategic alternatives that would enable the
telecommunications business unit to pursue an aggressive, focused strategy with
sufficient assets and cash to compete in this market.

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No final decisions have been made about the future courses of action to be
pursued. However, the Company is in discussions with several investment banking
firms to assist in identifying and implementing the best strategic alternative
for the telecommunications unit.

Fiber Development and Production Center

Construction has begun at the Companys Solon headquarters of a fiber
development and production center. The project is being managed by Fiberstars,
Inc., ADLTs partner in the development of energy efficient fiber optic
lighting, funded in part from a grant from the Advanced Technology Program of
the National Institute of Standards and Technology, a unit of the Department of
Commerce.

Using patents and process technology initiated by Rohm & Haas Corp. and acquired
by Fiberstars last year, work at the new fiber development and pilot production
facility will focus on developing energy efficient metal halide based fiber
optic lighting systems to serve the large retail store lighting market.

New Product Introduction

The Company has launched a 300 watt Uni-Form® Pulse Start Lighting Retrofit
Kit in response to the growing demand for enery saving products. The Companys
Uni-Form® Pulse Start products were designed primarily for new installations
where the Company expects to sell approximately $40-50 million. However, the
opportunity now exists for a retrofit kit using this technology to replace much
of the already installed, old metal halide systems, which will result in
significant energy savings. The kit is being sold at a price that will allow a
payback in less than one year for most installations. Southern California Edison
has announced that they will rebate up to $40 for each kit to their customers.
The Company believes that other utility companies may offer similar rebates to
their customers as energy costs continue to rise.

Update on In-Process Research and Development

In connection with the January 1998 purchase of DSI, the Company allocated
$18,220 of the $24,100 purchase price to in-process research and development
projects. This allocation represented the estimated fair value based on
risk-adjusted cash flows related to the incomplete research and development
projects. At the date of acquisition, the development of these projects had not
yet reached technological feasibility and had no alternative future uses.
Accordingly, these costs were expensed as of the acquisition date. DSIs
in-process research and development value was comprised of five primary research
and development programs, which were in-process at the time of the acquisition.

The MicroDyn/Automation Project was intended to improve the coating process of
optical thin-films to both rigid and flexible surfaces so that the process can
be used in a wider array of applications. The Plastics (Acrylic) Coating Project
was designed to produce a method for applying thin-film coatings to plastics or
other similar materials that cannot withstand the heat generated during the
standard coating process. The goal of the Deposition Material Development
Project was to develop new thin-film materials that can be used in coatings and
to improve existing coating materials. The Lighting-Focused Projects were
intended to develop improvements to existing lighting technologies by using
coatings to improve efficiency and increase the longevity of lamp life;
including ultra-violet

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blockers, color enhancement/correction and lumen maintenance. The Fiber Optic
Project was intended to improve telecommunications by providing optical
thin-film coatings that are used in conjunction with optical fibers to increase
the transmission capacity of the fiber. The two segments of the original Fiber
Optic Project, directed at the development of filters to reduce insertion loss
in fiber optic communication systems and filters for wavelength division
multiplexing (WDM), have reached commercial feasibility. The third segment of
the project, which is an expansion of the original project, related to the
development of filters for dense wavelength division multiplexing (DWDM), has
not achieved commercial feasibility as of March 31, 2001.

Currently, the focus of the Company's efforts is on the MicroDyn/Automation and
Deposition Material Development Projects. The Lighting-Focused Projects were
completed in fiscal 2001. The Company has made significant progress on all of
these projects resulting in some commercial implementation. However, the
Plastics (Acrylic) Coating Project was abandoned in light of DSI's focus on the
telecommunications business. Annual Company expenditures related to these
projects included $800 in fiscal 1998, $1,800 in fiscal 1999, $2,100 in fiscal
2000, and $1,800 expended through March 31, 2001.

Certain projects within the in-process research and development programs, if
successful, will not be fully complete for some time after attaining technical
feasibility. Additionally, even if successfully completed, these projects will
require maintenance research and development after they have reached a state of
technological and commercial feasibility. However, there is substantial risk
associated with the completion of the above active projects and there is no
steadfast assurance that each will meet with either technological or commercial
success. The delay or outright failure of the DSI programs may materially impact
the Company's financial condition.

The original Fiber Optics Project related to telecommunications was
substantially completed as of September 30, 2000. However, because of the growth
of the telecommunications market and the rate of advancement in
telecommunication products, the Company has focused its efforts to the
production process (MicroDyn/Automation Project) and the development of
additional telecommunications products and the expenditures related thereto will
be greater than described above. See also "Telecommunications Business Unit."

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Results of Operations  Selected Items as a Percentage of Net Sales

The following table sets forth, as a percentage of net sales, certain items in
the Companys Condensed Consolidated Statements of Operations for the indicated
periods:

|                                                       |                                       |  |                    |      |                   |  |      |      |      |  |     |      |   |  |     |      |  
|------------------------------------------------------ | ------------------------------------- |  | ------------------ | ---- | ----------------- |  | ---- | ---- | ---- |  | --- | ---- | - |  | --- | ---- | -
|                                                       |                                       |  | Three Months Ended |      | Nine Months Ended
|                                                       |                                       |  | March 31,          |      | March 31,        
|                                                       |                                       |  |                    |      |                  
|                                                       |                                       |  | 2001               |      | 2000              |  | 2001 |      | 2000
|                                                       |                                       |  |                    |      |                   |  |      |      |     
|Net sales                                              |                                       |  | 100                | %    |                   |  | 100  | %    |      |  | 100 | %    |   |  | 100 | %   
|                                                      
|                                                      
|                                                      
|                                                      
|Costs and expenses:                                   
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Cost of sales                         |  |                    | 59.4 |                   |  |      | 58.7 |      |  |     | 59.9 |   |  |     | 60.8 |  
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Marketing and selling                 |  |                    | 20.5 |                   |  |      | 18.8 |      |  |     | 19.5 |   |  |     | 18.2 |  
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Research and development              |  |                    | 5.9  |                   |  |      | 6.7  |      |  |     | 6.0  |   |  |     | 6.2  |  
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | General and administrative            |  |                    | 6.8  |                   |  |      | 6.7  |      |  |     | 6.6  |   |  |     | 6.9  |  
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Special charge                        |  |                    |     |                   |  |      | (0.4 | )    |  |     |     |   |  |     | (0.1 | )
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Amortization of intangible assets     |  |                    | 1.3  |                   |  |      | 1.3  |      |  |     | 1.3  |   |  |     | 1.2  |  
|                                                       |                                       |  |                    |      |                   |  |      |      |      |  |     |      |   |  |     |     
|Income from operations                                 |                                       |  | 6.1                |      |                   |  | 8.2  |      |      |  | 6.7 |      |   |  | 6.8 |     
|                                                      
|                                                      
|                                                      
|                                                      
|Other income (expense):                               
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Interest expense                      |  |                    | (6.5 | )                 |  |      | (6.5 | )    |  |     | (6.6 | ) |  |     | (6.3 | )
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Interest income                       |  |                    | 0.5  |                   |  |      | 0.4  |      |  |     | 0.4  |   |  |     | 0.4  |  
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Income (loss) from equity investments |  |                    | (0.2 | )                 |  |      | 0.2  |      |  |     | 0.0  |   |  |     | 0.1  |  
|                                                       |                                       |  |                    |      |                   |  |      |      |      |  |     |      |   |  |     |     
|Income before income taxes and minority interest       |                                       |  | (0.1               | )    |                   |  | 2.3  |      |      |  | 0.5 |      |   |  | 1.0 |     
|                                                      
|                                                      
|                                                      
|                                                      
|Income taxes                                           |                                       |  | 0.0                |      |                   |  | 0.4  |      |      |  | 0.1 |      |   |  | 0.3 |     
|                                                       |                                       |  |                    |      |                   |  |      |      |      |  |     |      |   |  |     |     
|Income before minority interest                        |                                       |  | (0.1               | )    |                   |  | 1.9  |      |      |  | 0.4 |      |   |  | 0.7 |     
|                                                      
|                                                      
|                                                      
|                                                      
|Minority interest in income of consolidated subsidiary |                                       |  | 0.0                |      |                   |  | 0.0  |      |      |  | 0.0 |      |   |  | 0.0 |     
|                                                       |                                       |  |                    |      |                   |  |      |      |      |  |     |      |   |  |     |     
|Net income                                             |                                       |  | (0.1               | %)   |                   |  | 1.9  | %    |      |  | 0.4 | %    |   |  | 0.7 | %   
|                                                       |                                       |  |                    |      |                   |  |      |      |      |  |     |      |   |  |     |     

Factors which have affected the results of operations for the third quarter and
first nine months of fiscal 2001 as compared to the third quarter and first nine
months of fiscal 2000 are discussed below.

Quarter Ended March 31, 2001 Compared with Quarter Ended March 31, 2000

Net sales.Net sales decreased 3.4% to $53,073 in the third quarter of fiscal
2001 from $54,945 in the third quarter of fiscal 2000. Sales of Uni-Form®
pulse start lamps increased 21% to $3,988 from $3,289 and total pulse start
product sales increased 26% to $10,468 from $8,308 in the same quarter a year
ago. Sales of APL materials, a key indicator of industry trends, increased 9%
over the same quarter a year ago. Geographically, these sales of materials
increased 16% in the U.S. and 5% outside the U.S. Non-metal halide lighting
sales declined 16% due to the elimination of certain non-metal halide products.
Changes in the foreign currency exchange rates from a year ago also negatively
impacted sales in Europe and Australia. Due to the strong dollar, the reported
sales for these operations were reduced by approximately $1,096 from what these
sales would have been at the year earlier exchange rates.

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DSIs telecommunication product sales for the third quarter of fiscal 2001 were
$805, up 127% from $354 in the third quarter of fiscal 2000. However, sales of
DSIs non-telecom products were down 13% due to the Companys transitioning of
its emphasis to the telecommunications market. During the quarter, DSI
introduced a new family of forward integrated components and has received new
orders for its DWDM filters and for IsoFiber and IsoSphere products.
Backorders in the telecom product area grew to $4,600 as of March 31, 2001.

Lighting sales inside the U.S. remained flat for the third quarter of fiscal
2001 as compared to the same period a year ago. While sales of metal halide
system components, lamps and power supplies, were up 6%, this increase was
offset by the managed decline of non-metal halide product sales and a 5% decline
in sales of metal halide fixture products. Lighting sales outside the U.S.
decreased 10%, which the Company primarily attributes to foreign currency
exchange and managed decline of non-metal halide product sales noted above.

Pricing in the metal halide lighting business is competitive, and prices for the
Companys products have remained flat or declined slightly. The introduction of
new products has helped to stabilize the Companys product pricing.

The Company expects fourth quarter sales will be in the $55,000 range, which
would be a slight increase over the fourth quarter of fiscal 2000. The Company
expects earnings per share for the fourth quarter to range between a loss per
share of four cents and a gain of two cents per share. The Company also believes
that fiscal 2002 sales will be in the range of $245,000 to $255,000, with
diluted earnings per share of between $.15 and $.25.

Cost of Sales.Cost of sales decreased 2.3% to $31,533 in the third quarter of
fiscal 2001 from $32,270 in the third quarter of fiscal 2000. The decrease was
primarily attributable to decreased unit volume. As a percentage of net sales,
cost of sales increased to 59.4% in the third quarter of fiscal 2001 from 58.7%
in the third quarter of fiscal 2000.

Marketing and Selling Expenses.Marketing and selling expenses increased 5.2% to
$10,907 in the third quarter of fiscal 2001 from $10,367 in the third quarter of
fiscal 2000. Marketing and selling expenses, as a percentage of net sales,
increased to 20.5% in the third quarter of fiscal 2001 as compared to 18.8% in
the third quarter of fiscal 2000. The increase in marketing and selling expenses
were related to more aggressive marketing efforts in fixtures and
telecommunication products.

Research and Development Expenses.Research and development expenses declined
15.5% in the third quarter of fiscal 2001 to $3,098 from $3,665 in the third
quarter of fiscal 2000. Research and development expenses are incurred related
to: (i) expansion and improvement of the line of Uni-Form® pulse start lamps
and fixtures (with improved energy efficiency, quicker starting and restarting
and a more compact arc source, which improves the light and reduces material
costs) intended to replace many first generation metal halide lamps and fixtures
in industrial and commercial applications; (ii) improving the coating process of
optical thin-films to broaden the applications, developing new thin-film
materials, and using coatings to develop improvements to lighting and
telecommunications technologies; (iii) development of new materials for the
worlds major lighting manufacturers; and, (iv) development and testing of
electronic and electromagnetic power supply systems. As a percentage of net
sales, research and development expenses decreased to 5.9% in the third quarter
of fiscal 2001 from 6.7% in the third quarter of fiscal 2000.

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General and Administrative Expenses.General and administrative expenses
decreased 1.7% to $3,606 in the third quarter of fiscal 2001 from $3,669 in the
third quarter of fiscal 2000. The decrease reflects the Companys continued
efforts to control corporate general and administrative costs. As a percentage
of net sales, general and administrative expenses increased to 6.8% in the third
quarter of fiscal 2001 from 6.7% in the third quarter of fiscal 2000.

Amortization of Intangible Assets.Amortization expense increased slightly to
$709 in the third quarter of fiscal 2001 from $706 in the third quarter of
fiscal 2000. Amortization expense relates primarily to the amortization of
goodwill and other intangible assets related to the January 1998 acquisitions of
Ruud Lighting, Inc. and Deposition Sciences, Inc.

Income from Operations.As a result of the items noted above, income from
operations in the third quarter of fiscal 2001 decreased to $3,220 from $4,502
in the third quarter of fiscal 2000. As a percentage of net sales, income from
operations decreased to 6.1% in the third quarter of fiscal 2001 from 8.2% in
the third quarter of fiscal 2000.

Interest Expense.Interest expense decreased to $3,436 in the third quarter of
fiscal 2001 from $3,580 in the third quarter of fiscal 2000. Both the average
debt outstanding and the weighted average interest rates remained relatively
comparable during the quarters.

Interest Income.Interest income increased slightly to $262 in the third quarter
of fiscal 2001 from $242 in the third quarter of
fiscal 2000.

Income (Loss) from Equity Investments.The income (loss) from equity investments
in the third quarter of fiscal 2001 of $(81) and fiscal 2000 of $104 represent
the earnings (loss) from the Companys investment in Fiberstars, Inc., a
marketer and distributor of fiber optic lighting products.

Income (Loss) before Income Taxes and Minority Interest.The company had a loss
before income taxes and minority interest of $35 in the third quarter of fiscal
2001 as compared to income before income taxes and minority interest of $1,268
in the third quarter of fiscal 2000.

Income Taxes. Income tax expense was $9 for the third quarter of fiscal 2001 as
compared to income tax expense of $210 in the third quarter of fiscal 2000. The
income tax expense in the third quarters of fiscal 2001 and 2000 related
primarily to certain of the Companys foreign operations.

At June 30, 2000, the Company had net operating loss carryforwards of $82,484
available to reduce future United States federal taxable income, which expire in
varying amounts from 2008 to 2020.

The Company also has research and development credit carryforwards for tax
purposes of approximately $3,818, which expire in varying amounts from 2008 to
2015. Additionally, in conjunction with the Alternative Minimum Tax (AMT)
rules, the Company had available AMT credit carryforwards for tax purposes of
approximately $112, which may be used indefinitely to reduce regular federal
income taxes.

Also at June 30, 2000, the Company had foreign net operating loss carryforwards
for tax purposes totaling $3,693 that expire in varying amounts from 2001 to
2006 and $9,303 that have no expiration dates.

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Nine Months Ended March 31, 2001 Compared with Nine Months Ended March 31, 2000

Net sales.Net sales decreased 5.3% to $161,911 in the first nine months of
fiscal 2001 from $171,010 in the first nine months of fiscal 2000. Sales of
Uni-Form® pulse start lamps increased 59% to $11,671 from $7,352 and total
pulse start product sales increased 40% to $33,262 from $23,704 in the first
nine months a year ago. Sales of APL materials, a key indicator of industry
trends, increased 3% over the year-ago period. Geographically, these sales of
materials decreased 7% in the U.S. and increased 12% outside the U.S. One reason
for the decline in the U.S. may have been due to increased customer orders in
fiscal 2000 as customers prepared for year 2000 concerns. Non-metal halide
lighting sales declined 10% due to the elimination of certain non-metal halide
products. Changes in the foreign currency exchange rates from a year ago also
negatively impacted sales in Europe and Australia. Due to the strong dollar, the
reported sales for these operations were reduced by approximately $3,100 from
what these sales would have been at the year earlier exchange rates.

DSIs telecommunication product sales for the first nine months of fiscal 2001
were $2,013, up 115% from $936 in the first nine months of fiscal 2000. However,
sales of DSIs non-telecom products were down 48% due to the Companys
transitioning of its emphasis to the telecommunications market.

Lighting sales inside the U.S. remained flat for the first nine months of fiscal
2001 as compared to the same period a year ago. While sales of metal halide
system components, lamps and power supplies, were up 7%, this increase was
offset by the managed decline of non-metal halide product sales and a 3% decline
in sales of metal halide fixture products. Lighting sales outside the U.S.
decreased 10%, which the Company primarily attributes to foreign currency
exchange and managed decline of non-metal halide product sales noted above.

Pricing in the metal halide lighting business is competitive, and prices for the
Companys products have remained flat or declined slightly. The introduction of
new products has helped to stabilize the Companys product pricing.

Cost of Sales.Cost of sales decreased 6.6% to $97,085 in the first nine months
of fiscal 2001 from $103,966 in the first nine months of fiscal 2000. The
decrease was primarily attributable to decreased unit volume. As a percentage of
net sales, cost of sales decreased to 59.9% in the first nine months of fiscal
2001 from 60.8% in the first nine months of fiscal 2000.

Marketing and Selling Expenses.Marketing and selling expenses increased 1.5% to
$31,611 in the first nine months of fiscal 2001 from $31,159 in the first nine
months of fiscal 2000. Marketing and selling expenses, as a percentage of net
sales, increased to 19.5% in the first nine months of fiscal 2001 as compared to
18.2% in the first nine months of fiscal 2000. The increase in marketing and
selling expenses were related to more aggressive marketing efforts for fixtures
and telecommunication products.

Research and Development Expenses.Research and development expenses declined
9.0% to $9,681 from $10,643 in the third quarter of fiscal 2001. Research and
development expenses are incurred related to: (i) expansion and improvement of
the line of Uni-Form® pulse start lamps and fixtures (with improved energy
efficiency, quicker starting and restarting and a more compact arc source, which
improves the light and reduces material costs) intended to replace many first
generation metal

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halide lamps and fixtures in industrial and commercial applications; (ii)
improving the coating process of optical thin-films to broaden the applications,
developing new thin-film materials, and using coatings to develop improvements
to lighting and telecommunications technologies; (iii) development of new
materials for the worlds major lighting manufacturers; and, (iv) development
and testing of electronic and electromagnetic power supply systems. As a
percentage of net sales, research and development expenses decreased to 6.0% in
the first nine months of fiscal 2001 as compared to 6.2% for the first nine
months of fiscal 2000.

General and Administrative Expenses.General and administrative expenses
decreased 10.0% to $10,614 in the first nine months of fiscal 2001 from $11,790
in the first nine months of fiscal 2000. The decrease reflects the Companys
continued efforts to control corporate general and administrative costs,
particularly a reduction in legal services of $773. Also, in fiscal 2001,
expenses were reduced by the elimination of a $500 litigation-related accrual
that, based on review with legal counsel, is no longer required. As a percentage
of net sales, general and administrative expenses declined to 6.6% in the first
nine months of fiscal 2001 from 6.9% in the first nine months of fiscal 2000. In
future quarters, the Company expects that general and administrative expenses
will approximate 7% of sales.

Amortization of Intangible Assets. Amortization expense increased slightly to
$2,118 in the first nine months of fiscal 2001 from $2,053 in the first nine
months of fiscal 2000. Amortization expense relates primarily to the
amortization of goodwill and other intangible assets related to the January 1998
acquisitions of Ruud Lighting, Inc. and Deposition Sciences, Inc.

Income from Operations.As a result of the items noted above, income from
operations in the first nine months of fiscal 2001 decreased to $10,802 from
$11,633 in the first nine months of fiscal 2000. As a percentage of net sales,
income from operations decreased to 6.7% in the first nine months of fiscal 2001
from 6.8% in the first nine months of fiscal 2000.

Interest Expense.Interest expense decreased slightly to $10,663 in the first
nine months of fiscal 2001 from $10,693 in the first nine months of fiscal 2000.
Both the average debt outstanding and the weighted average interest rates
remained relatively comparable during the periods.

Interest Income. Interest income increased slightly to $749 in the first nine
months of fiscal 2001 from $676 in the first nine months of fiscal 2000.

Income (Loss) from Equity Investments.The income (loss) from equity investments
in the first nine months of fiscal 2001 of $(63) and fiscal 2000 of $189
represent the earnings from the Companys investment in Fiberstars, Inc., a
marketer and distributor of fiber optic lighting products.

Income before Income Taxes and Minority Interest.Income before income taxes and
minority interest decreased to $825 in the first nine months of fiscal 2001 from
$1,805 in the first nine months of fiscal 2000.

Income Taxes.Income tax expense was $106 for the first nine months of fiscal
2001 as compared to income tax expense of $549 for the first nine months of
fiscal 2000. The income tax expense is related primarily to certain of the
Companys foreign operations.

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At June 30, 2000, the Company had net operating loss carryforwards of $82,484
available to reduce future United States federal taxable income, which expire in
varying amounts from 2008 to 2020.

The Company also has research and development credit carryforwards for tax
purposes of approximately $3,818, which expire in varying amounts from 2008 to
2015. Additionally, in conjunction with the Alternative Minimum Tax (AMT)
rules, the Company had available AMT credit carryforwards for tax purposes of
approximately $112, which may be used indefinitely to reduce regular federal
income taxes.

Also at June 30, 2000, the Company had foreign net operating loss carryforwards
for tax purposes totaling $3,693 that expire in varying amounts from 2001 to
2006 and $9,303 that have no expiration dates.

Liquidity and Capital Resources

The Companys principal financial requirements are for market development
activities, research and development efforts, acquisitions and strategic
investments, and working capital. These requirements have been, and the Company
expects they will continue to be, financed through a combination of cash flow
from operations, borrowings under credit facilities and the sale of stock and
debt under two shelf registration statements for $300,000 and $100,000.

Cash decreased $221 during the first nine months of fiscal 2001. Cash provided
by operating activities totaled $400 and cash provided by financing activities
totaled $17,209. Cash used in investing activities totaled $17,830.

Net cash provided by (used in) operating activities.Net cash provided by
operating activities totaled $400 during the first nine months of fiscal 2001 as
compared to a cash usage of $12,658 in the first nine months of fiscal 2000. Net
income plus depreciation and amortization provided $9,226, while the decrease in
accounts payable and accrued expenses of $7,670 was the primary usage of cash.
This decrease was primarily a result of a plan to bring payables to suppliers
more current and a result of the semi-annual interest payment related to the
Companys Senior Notes. The Company intends to manage its cash resources to
generate positive cash flow from operating activities for the full fiscal year
2001 and beyond.

Net cash used in investment activities.During the first nine months of fiscal
2001, investing activities used $17,830 of which $17,474 represented capital
expenditures. Capital expenditures in fiscal 2001 related primarily to
additional machinery and equipment to improve production processes, which should
result in increased productivity and capacity in the production of
telecommunications and lighting products.

The Company will continue to limit its capital expenditures for the next twelve
months, except for its telecommunications business. Under its $300,000 shelf
registration, in September 2000, the Company sold 1,700,000 shares of common
stock for $15.00 per share to fund the future expansion of its
telecommunications business. The net proceeds from the stock offering of $22,900
were used to repay indebtedness outstanding under the Bank Credit Facility. The
Company expects that it will use $22,900 of borrowings (including borrowings
already made since the stock offering) under the Bank Credit Facility for
expenditures on capital improvements, including optical coating production

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equipment, filter testing and measuring testing and measuring equipment and
production facilities, and on research and development, in the
telecommunications business.

As a result of the Companys fiscal 1999 decision to terminate joint venture
equipment contracts, approximately $6,500 of new production equipment was made
available for installation at the Companys lamp manufacturing facilities. The
Company has transferred approximately $2,000 of this equipment to its
manufacturing facility in Chennai (Madras) India, and has placed $1,700 of
equipment into service in its Solon, Ohio lamp manufacturing facility, leaving
approximately $2,800 of equipment available for future manufacturing
requirements. The Company estimates its maintenance level for capital
expenditures in the lighting business will approximate $6,000 to $8,000 over the
next twelve months. Future capital expenditures (excluding the
telecommunications business) beyond this level will be discretionary, as the
Company presently has sufficient operating capacities to support several years
of sales growth at its historical rates.

Net cash provided by financing activities.During the first nine months of
fiscal 2001, net financing activities provided cash of $17,209 which included
$22,900 of net proceeds from an offering of 1,700,000 shares of the Companys
common stock and net repayments of debt of $3,668.

On March 13, 1998, the Company sold $100,000 of 8% Senior Notes due March 15,
2008, resulting in net proceeds of $96,150. Approximately $76,300 of the net
proceeds of the Senior Notes were used to repay amounts outstanding under the
Companys former bank credit facility, thereby lengthening the average term of
the Companys debt, most of which had been incurred to finance the acquisitions
of Ruud Lighting, Inc. and Deposition Sciences, Inc. From September 1998 until
August 2000, interest on these notes was calculated at 8.5%. During August 2000,
the Company completed a registered exchange offer to existing noteholders, which
resulted in reducing the interest rate on the Senior Notes to 8.0% from 8.5%.

Pursuant to an agreement dated October 8, 1998, as amended, between the Company
and its Chairman and Chief Executive Officer (the CEO), the Company, following
approval by the Companys Board of Directors, has loaned a total of $11,685 to
its CEO at an interest rate of 8%, including $785 in the quarter ended March 31,
2001. The proceeds of the loan have been used by the Companys CEO to reduce the
principal balance outstanding of margin loan accounts, which are secured by
2,053,070 shares of the Companys Common Stock owned by the CEO and a related
entity. In connection with the loan, the Companys Board of Directors obtained
the CEOs agreement to an extension of his employment agreement to December 31,
2003. The loan agreement prohibits the CEO from encumbering his shares of the
Companys Common Stock in any manner except pursuant to the existing agreements
governing the CEOs margin accounts, without the consent of the Companys Board
of Directors.

The CEO has paid accrued interest of $720 on the loan through October 6, 1999.
The term of the loan has been extended by the Board to October 6, 2001. Prior to
maturity, the CEO has agreed to repay $1,400 of the loan amount should the
average closing price for the shares reach $11.00 per share for twenty trading
days and the price of ADLTs Common Stock remains at or above $11.00 per share
at the end of such period. The Board reserved the right to require earlier
repayment if ADLT requires the payment to prevent an unacceptable strain on cash
resources.

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Ability to advance future operations.The Company has begun to implement, and
will continue to implement, changes in its operational activities intended to
reduce the use of its cash resources to a level at or below the cash flow
generated by its operations. The Companys working capital (current assets less
current liabilities) at March 31, 2001 was $49,702 resulting in a working
capital ratio of current assets to current liabilities of 2.3 to 1.0, as
compared to $39,949 or 1.9 to 1.0 at June 30, 2000. As of March 31, 2001, the
Company had $3,669 in cash and cash equivalents.

The interest-bearing obligations of the Company totaled $161,428 as of March 31,
2001, and consisted of: $37,987 of borrowings under the Bank Credit Facility;
$100,000 of 8% Senior Notes; mortgages of $15,509; promissory notes of $2,446;
obligations of foreign subsidiaries of $5,137; and, capital leases of $349.

The Company maintains a Bank Credit Facility with a $40,000 revolving credit
loan and $20,000 term loan provided by several financial institutions. The
revolving credit loan has a three-year term expiring in May 2002. Interest rates
on revolving credit loans outstanding are based, at the Companys option, on
LIBOR plus 2.25% or the agent banks prime rate. Availability of borrowings is
determined by the Companys eligible accounts receivable and inventories. The
term loan has a five-year term expiring in May 2004. The Company pays monthly
principal payments that total $3,576 annually, with the unpaid balance due at
maturity. Interest rates on the term loan are based, at the Companys option, on
LIBOR plus 2.75% or the agent banks prime rate.

The Bank Credit Facility contains certain affirmative and negative covenants
customary for this type of agreement, prohibits cash dividends, and includes a
financial covenant with respect to the coverage of certain fixed charges. The
principal security for the revolving credit loan is substantially all of the
personal property of the Company and each of its North American and United
Kingdom subsidiaries. The term loan is secured by substantially all of the
Companys machinery and equipment and is cross-collateralized and secured with
the revolving credit loan.

As discussed above, the Company is in discussions with several investment
banking firms to assist in identifying and implementing the best strategic
alternative for the telecommunications business unit.

On August 31, 2000, the Company completed a public offering of 1,700,000 shares
of its common stock at a price of $15.00 per share under a $300,000 shelf
registration filed with the Securities and Exchange Commission that became
effective in July 2000.

The public offering reduced the amount available for the issuance of various
debt and equity securities under the shelf registration statement to
approximately $274,500. The Company used the net proceeds from the public
offering of approximately $22,900 to repay revolving credit loan borrowings. The
Company expects to borrow a similar amount (including amounts already borrowed
since the offering) under its revolving credit loan facility to fund capital
improvements, including optical coating production equipment, filter testing and
measurement equipment and production facilities, and on research and development
in its telecommunications business unit at Deposition Sciences, Inc.

26



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##### Table of Contents



In addition to the $300,000 shelf registration discussed above, in July 2000 a
$100,000 shelf registration became effective under which the Company may from
time-to-time issue various debt and equity securities to acquire assets,
businesses or securities. The Company has no outstanding securities issued under
this registration statement.

The Company believes that the available cash, anticipated cash flow from
operations, along with the availability under its existing Bank Credit Facility,
will enable the Company to fund its operations for at least the next 12 months.
Additionally, the Company is working to amend and increase its existing Bank
Credit Facility. Beyond the next year, the Company believes a return to
profitability and positive cash flow from operations, the growth in the
popularity and applications for metal halide products and systems, and
opportunities in the telecommunications business should enable the Company to
access additional capital resources, as needed.

Impact of Recently Issued Accounting Standards

The Company adopted Statement of Financial Accounting Standards (FAS) No. 133
Accounting for Derivative Instruments and Hedging Activities as of July 1,
2000. FAS 133 requires that all derivatives, such as interest rate exchange
agreements (swaps), be recognized on the balance sheet at fair value. The
Company had no derivatives as at July 1, 2000, and therefore, no resulting
transition adjustments.

The Company also adopted Emerging Issues Task Force (EITF) Issue 00-27,
Application of EITF 98-5, Convertible Securities with Beneficial Conversion
Features or Contingently Adjustable Conversion Ratios, to Certain Convertible
Instruments in the quarter ended December 31, 2000. EITF Issue 00-27 requires
that a convertible instruments beneficial conversion feature be measured using
an effective conversion price. As a result, the value assigned to the redeemable
preferred stock was adjusted by $5,329 for the discount related to the
beneficial conversion option. This additional discount was immediately accreted
to paid-in capital in a manner similar to a cumulative effect of an accounting
change since the redeemable preferred stock was convertible at the time of
issuance. The impact of this change is noted in the Condensed Statement of
Consolidated Shareholders Equity and in Note I Earnings Per Share.

Foreign Currency

Approximately 27% of the Companys net sales in fiscal 2000 were denominated in
currencies other than U.S. dollars, principally Pounds Sterling, Australian
dollars and Canadian dollars. A weakening of such currencies versus the U.S.
dollar could have a material adverse effect on the Company. The Company
currently does not hedge its foreign currency exposure.




Item 3. Quantitative and Qualitative Disclosures about Market Risk

During the nine months ended March 31, 2001, there have been no material changes
in the reported market risks presented in the Companys Annual Report on Form
10-K for the year ended June 30, 2000.

27



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##### Table of Contents






Part II. Other Information

Except as noted below, the items in Part II are inapplicable or, if applicable,
would be answered in the negative. These items have been omitted and no other
reference is made thereto.




Item 5. Other Information

On March 15, 2001, ADLT announced the launch of a new family of
forward-integrated components at the 2001 Optical Fiber Communication
Conference. ADLTs press release, dated March 15, 2001, relating to the launch
of these products is attached hereto as Exhibit 99.1.

On March 29, 2001, ADLT announced new orders for DWDM filters, IsoFiber and
IsoSphere products. ADLTs press release, dated March 29, 2001, relating to
these orders is attached hereto as Exhibit 99.2.

On March 30, 2001, ADLT announced the receipt of an order for its patented
MicroDyn® Optical Coating equipment from Osram, a subsidiary of Siemens.
ADLTs press release, dated March 30, 2001, relating to the order is attached
hereto as Exhibit 99.3.

On April 3, 2001, ADLT announced the launch of its 300-watt Uni-Form® Pulse
Start Lighting Retrofit Kit. ADLTs press release, dated April 3, 2001, relating
to the launch is attached hereto as Exhibit 99.4.

On April 6, 2001, ADLT announced that Southern California Edison had responded
to the launch of the 300-watt Uni-Form® Pulse Start Lighting Retrofit Kit by
offering rebates to customers for the purchase of the energy-saving kit. ADLTs
press release, dated April 6, 2001, relating to this announcement is attached
hereto as Exhibit 99.5.

On April 11, 2001, ADLT announced the construction at its Solon headquarters of
a fiber development and production center managed by Fiberstars, Inc., ADLTs
partner in the development of energy efficient fiber optic lighting. ADLTs
press release, dated April 11, 2001, relating to this announcement is attached
hereto as Exhibit 99.6.

On May 7, 2001, ADLT announced its results of operations for the third quarter
and first nine months of fiscal 2001 ended March 31, 2001. ADLTs press release,
dated May 7, 2001, relating to the results of its operations is attached hereto
as Exhibit 99.7.

28



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##### Table of Contents






Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

|        |  |                                                                                                                                                                                                                                                                                                         |  |              |    |  
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | -- | -
|        |  |                                                                                                                                                                                                                                                                                                         |  | Sequential  
|        |  |                                                                                                                                                                                                                                                                                                         |  | Page Number/
|Exhibit |  |                                                                                                                                                                                                                                                                                                         |  | Incorporated
|Number  |  | Title                                                                                                                                                                                                                                                                                                   |  | by Reference
|        |  |                                                                                                                                                                                                                                                                                                         |  |             
|3.1     |  | Second Amended and Restated Articles of Incorporation filed
September 26, 1995                                                                                                                                                                                                                          |  |              | (1 | )
|       
|3.2     |  | Certificate of Adoption of Third Amendment to Second Amended
and Restated Articles of Incorporation filed October 6, 1999                                                                                                                                                                               |  |              | (2 | )
|       
|3.3     |  | Certificate of Adoption of Fourth Amendment to Second Amended
and Restated Articles of Incorporation filed March 16, 2000                                                                                                                                                                               |  |              | (3 | )
|       
|3.4     |  | Code of Regulations                                                                                                                                                                                                                                                                                     |  |              | (4 | )
|       
|4.1     |  | Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4                                                                                                                                                                                                                                                    
|       
|10.1    |  | Second Amendment to Loan Agreement, Secured Promissory Note
and Security Agreement between Wayne R. Hellman and Advanced
Lighting Technologies, Inc. dated as of March 15, 2001                                                                                                                        
|       
|10.2    |  | Seventh Amendment Agreement by and among Advanced Lighting
Technologies, Inc. and certain of its subsidiaries and PNC Bank,
National Association, as agent for certain other banks dated as of
March 27, 2001, and amending the Credit Agreement by and among the
same parties dated as of May 21, 1999
|       
|10.3    |  | Deposition Sciences, Inc. 2001 Equity Incentive Plan                                                                                                                                                                                                                                                   
|       
|12      |  | Statement Re: Computation of Ratio of Earnings to Fixed Charges                                                                                                                                                                                                                                        
|       
|99.1    |  | Press Release of Advanced Lighting Technologies, Inc. dated
March 15, 2001                                                                                                                                                                                                                             
|       
|99.2    |  | Press Release of Advanced Lighting Technologies, Inc. dated
March 29, 2001                                                                                                                                                                                                                             
|       
|99.3    |  | Press Release of Advanced Lighting Technologies, Inc. dated
March 30, 2001                                                                                                                                                                                                                             

29



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##### Table of Contents



(a) Exhibits (continued)

|        |  |                                                                            |  |              |  | 
|------- |  | -------------------------------------------------------------------------- |  | ------------ |  | 
|        |  |                                                                            |  | Page Number/
|Exhibit |  |                                                                            |  | Incorporated
|Number  |  | Title                                                                      |  | by Reference
|        |  |                                                                            |  |             
|99.4    |  | Press Release of Advanced Lighting Technologies, Inc. dated
April 3, 2001 
|       
|       
|       
|       
|99.5    |  | Press Release of Advanced Lighting Technologies, Inc. dated
April 6, 2001 
|       
|       
|       
|       
|99.6    |  | Press Release of Advanced Lighting Technologies, Inc. dated
April 11, 2001
|       
|       
|       
|       
|99.7    |  | Press Release of Advanced Lighting Technologies, Inc. dated
May 7, 2001   



---



|(1) |  | Incorporated by reference to Exhibit of same number in Companys Quarterly
Report on Form 10-Q for the Quarterly Period ended December 31, 1996.                          
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Incorporated by reference to Exhibit of same number in Companys Quarterly
Report on Form 10-Q/A for the Quarterly Period ended September 30, 1999
filed January 14, 2000.
|   
|(3) |  | Incorporated by reference to Exhibit of same number in Companys Annual
Report on Form 10-K for the Annual Period ended June 30, 2000 filed
September 27, 2000.           
|   
|(4) |  | Incorporated by reference to Exhibit 3.2 in Companys Registration
Statement on Form S-1, Registration No. 33-97902, effective December 11,
1995.                         
|   
|(b) |  | Reports on Form 8-K.                                                                                                                                                      

No reports on Form 8-K have been filed during the quarter ended March 31, 2001.

30



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##### Table of Contents






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 hereunto duly authorized.

|                   |                                      |                          
|------------------ | ------------------------------------ | -------------------------
|                   | ADVANCED LIGHTING TECHNOLOGIES, INC.
|                  
|Date: May 15, 2001 |                                      | By:  /s/ Wayne R. Hellman
|                   |                                      |                          
|                   |                                      | Wayne R. Hellman         
|                   |                                      | Chief Executive Officer  
|                  
|                  
|Date: May 15, 2001 |                                      | By:  /s/ Steven C. Potts 
|                   |                                      |                          
|                   |                                      | Steven C. Potts          
|                   |                                      | Chief Financial Officer  

31



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##### Table of Contents






EXHIBIT INDEX

|        |  |                                                                                                                                                                                                                                                                                                         |  |          |    |  
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- | -- | -
|Exhibit
|Number  |  | Title                                                                                                                                                                                                                                                                                                   |  | Page No.
|        |  |                                                                                                                                                                                                                                                                                                         |  |         
|3.1     |  | Second Amended and Restated Articles of Incorporation filed
September 26, 1995                                                                                                                                                                                                                          |  |          | (1 | )
|       
|3.2     |  | Certificate of Adoption of Third Amendment to Second Amended
and Restated Articles of Incorporation filed October 6, 1999                                                                                                                                                                               |  |          | (2 | )
|       
|3.3     |  | Certificate of Adoption of Fourth Amendment to Second Amended
and Restated Articles of Incorporation filed March 16, 2000                                                                                                                                                                               |  |          | (3 | )
|       
|3.4     |  | Code of Regulations                                                                                                                                                                                                                                                                                     |  |          | (4 | )
|       
|4.2     |  | Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4                                                                                                                                                                                                                                                    
|       
|10.1    |  | Second Amendment to Loan Agreement, Secured Promissory Note
and Security Agreement between Wayne R. Hellman and Advanced
Lighting Technologies, Inc. dated as of March 15, 2001                                                                                                                        
|       
|10.2    |  | Seventh Amendment Agreement by and among Advanced Lighting
Technologies, Inc. and certain of its subsidiaries and PNC Bank,
National Association, as agent for certain other banks dated as of
March 27, 2001, and amending the Credit Agreement by and among the
same parties dated as of May 21, 1999
|       
|10.3    |  | Deposition Sciences, Inc. 2001 Equity Incentive Plan                                                                                                                                                                                                                                                   
|       
|12      |  | Statement Re: Computation of Ratio of Earnings to Fixed Charges                                                                                                                                                                                                                                        
|       
|99.1    |  | Press Release of Advanced Lighting Technologies, Inc. dated
March 15, 2001                                                                                                                                                                                                                             
|       
|99.2    |  | Press Release of Advanced Lighting Technologies, Inc. dated
March 29, 2001                                                                                                                                                                                                                             
|       
|99.3    |  | Press Release of Advanced Lighting Technologies, Inc. dated
March 30, 2001                                                                                                                                                                                                                             

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##### Table of Contents



EXHIBIT INDEX (Continued)

|        |  |                                                                            |  |             
|------- |  | -------------------------------------------------------------------------- |  | ------------
|        |  |                                                                            |  | Page Number/
|Exhibit |  |                                                                            |  | Incorporated
|Number  |  | Title                                                                      |  | by Reference
|        |  |                                                                            |  |             
|99.4    |  | Press Release of Advanced Lighting Technologies, Inc. dated
April 3, 2001 
|       
|       
|       
|       
|99.5    |  | Press Release of Advanced Lighting Technologies, Inc. dated
April 6, 2001 
|       
|       
|       
|       
|99.6    |  | Press Release of Advanced Lighting Technologies, Inc. dated
April 11, 2001
|       
|       
|       
|       
|99.7    |  | Press Release of Advanced Lighting Technologies, Inc. dated
May 7, 2001   



---



|(1) |  | Incorporated by reference to Exhibit of same number in Companys Quarterly
Report on Form 10-Q for the Quarterly Period ended December 31, 1996.                          
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Incorporated by reference to Exhibit of same number in Companys Quarterly
Report on Form 10-Q/A for the Quarterly Period ended September 30, 1999
filed January 14, 2000.
|   
|(3) |  | Incorporated by reference to Exhibit of same number in Companys Annual
Report on Form 10-K for the Annual Period ended June 30, 2000 filed
September 27, 2000.           
|   
|(4) |  | Incorporated by reference to Exhibit 3.2 in Companys Registration
Statement on Form S-1, Registration No. 33-97902, effective December 11,
1995.                         

33