##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




---




FORM 10-Q

(Mark One)

|       |  |                                                                                        
|------ |  | ---------------------------------------------------------------------------------------
|(XBOX) |  | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

|                               |  |                |  | 
|------------------------------ |  | -------------- |  | 
|For the quarterly period ended |  | March 31, 2002 | 
|                               |  |                | 

or

|      |  |                                                                                         
|----- |  | ----------------------------------------------------------------------------------------
|(BOX) |  | 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
(State or other jurisdiction of incorporation or organization)     |  | 34-1803229
(I.R.S. Employer Identification No.)
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |  |                                                
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|32000 Aurora Road, Solon, Ohio
(Address of principal executive offices) |  | 44139
(Zip Code)                               

440 / 519-0500

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(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 (CHECKBOX)
No (BOX)

There were 23,525,328 shares of the Registrants Common Stock, $.001 par value
per share, outstanding as of April 15, 2002.





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TABLE OF CONTENTS



|                                                  |                                                                                                |  |  |  |  |  |  | 
|------------------------------------------------- | ---------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|FORM 10-Q                                        
|INDEX                                            
|                                                  | 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 1. Legal Proceedings                                                                     
|                                                  | Item 6. Exhibits and Reports on Form 8-K                                                      
|SIGNATURES                                       
|EXHIBIT INDEX                                    
|EX-10.1 11th Amendment Agreement                 
|EX-10.2 12th Amendment Agreement                 
|EX-10.3 5th Amendment to Contingent Warrant Agrmt
|EX-12 Computation-Ratio of Earnings:Fixed Charges



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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, 2002 and June 30, 2001                                                      |  | 2   
|          
|          
|          
|          
|           |  |                                                                                       |  |     
|          
|          
|          
|          
|           |  | Condensed Consolidated Statements of Operations                                      |  |     
|          
|          
|          
|          
|           |  | Three months and nine months
ended March 31, 2002 and 2001                            |  | 3   
|          
|          
|          
|          
|           |  |                                                                                       |  |     
|          
|          
|          
|          
|           |  | Condensed Consolidated Statement of Shareholders Equity                             |  |     
|          
|          
|          
|          
|           |  | Nine months ended March 31, 2002                                                      |  | 4   
|          
|          
|          
|          
|           |  |                                                                                       |  |     
|          
|          
|          
|          
|           |  | Condensed Consolidated Statements of Cash Flows                                      |  |     
|          
|          
|          
|          
|           |  | Nine months ended March 31, 2002 and 2001                                             |  | 5   
|          
|          
|          
|          
|           |  |                                                                                       |  |     
|          
|          
|          
|          
|           |  | Notes to Condensed Consolidated Financial Statements                                  |  | 6   
|          
|          
|          
|          
|           |  |                                                                                       |  |     
|          
|          
|          
|          
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition
and Results of Operations |  | 16  
|          
|          
|          
|          
|           |  |                                                                                       |  |     
|          
|          
|          
|          
|Item 3.    |  | Quantitative and Qualitative Disclosures about Market Risk                            |  | 31  
|          
|          
|          
|          
|           |  |                                                                                       |  |     
|          
|          
|          
|          
|Part II    |  | Other Information                                                                     |  |     
|          
|          
|          
|          
|           |  |                                                                                       |  |     
|          
|          
|          
|          
|Item 1.    |  | Legal Proceedings                                                                     |  | 32  
|          
|          
|          
|          
|           |  |                                                                                       |  |     
|          
|          
|          
|          
|Item 6.    |  | Exhibits and Reports on Form 8-K                                                      |  | 32  
|          
|          
|          
|          
|           |  |                                                                                       |  |     
|          
|          
|          
|          
|Signatures |  |                                                                                       |  | 34  
|          
|          
|          
|          
|           |  |                                                                                       |  |     
|          
|          
|          
|          
|           |  |                                                                                       |  |     

1



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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, 
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   |         | 2002        |        | 2001     
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   |         |             |        |          
|Assets                                                                                                                                                                                                   |                                                                                                                                                                                 |                                   |         |             |        |           |         |         
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|Current assets:                                                                                                                                                                                          |                                                                                                                                                                                 |                                   |         |             |        |           |         |         
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Cash and cash equivalents                                                                                                                                                       |                                   | $       | 2,360       |        |           | $       | 3,652    |       
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Trade receivables, less allowances of $1,809 and $1,248                                                                                                                         |                                   |         | 27,678      |        |           |         | 32,762   |       
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Inventories:                                                                                                                                                                    |                                   |         |             |        |           |         |          |       
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         |                                                                                                                                                                                 | Finished goods                    |         |             | 18,168 |           |         |          | 27,122 | 
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         |                                                                                                                                                                                 | Raw materials and work-in-process |         |             | 10,400 |           |         |          | 22,207 | 
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   |         |             |        |           |         |         
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   | 28,568  |             |        |           | 49,329  |         
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Prepaid expenses                                                                                                                                                                |                                   |         | 2,372       |        |           |         | 3,140    |       
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   |         |             |        |           |         |         
|Total current assets                                                                                                                                                                                     |                                                                                                                                                                                 |                                   | 60,978  |             |        |           | 88,883  |         
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|Property, plant and equipment:                                                                                                                                                                           |                                                                                                                                                                                 |                                   |         |             |        |           |         |         
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Land and buildings                                                                                                                                                              |                                   |         | 29,411      |        |           |         | 44,399   |       
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Machinery and equipment                                                                                                                                                         |                                   |         | 80,833      |        |           |         | 84,116   |       
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Furniture and fixtures                                                                                                                                                          |                                   |         | 15,535      |        |           |         | 21,830   |       
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Assets held for sale                                                                                                                                                            |                                   |         | 5,454       |        |           |         | 2,479    |       
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   |         |             |        |           |         |         
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   | 131,233 |             |        |           | 152,824 |         
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Less accumulated depreciation                                                                                                                                                   |                                   |         | 28,783      |        |           |         | 30,734   |       
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   |         |             |        |           |         |         
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   | 102,450 |             |        |           | 122,090 |         
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|Receivables from related parties                                                                                                                                                                         |                                                                                                                                                                                 |                                   | 7,589   |             |        |           | 2,177   |         
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|Investments in affiliates                                                                                                                                                                                |                                                                                                                                                                                 |                                   | 10,280  |             |        |           | 13,761  |         
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|Other assets                                                                                                                                                                                             |                                                                                                                                                                                 |                                   | 7,981   |             |        |           | 7,955   |         
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|Intangible assets                                                                                                                                                                                        |                                                                                                                                                                                 |                                   | 3,313   |             |        |           | 30,890  |         
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|Excess of cost over net assets of businesses acquired, net                                                                                                                                               |                                                                                                                                                                                 |                                   | 4,267   |             |        |           | 50,245  |         
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   |         |             |        |           |         |         
|                                                                                                                                                                                                         |                                                                                                                                                                                 | $                                 | 196,858 |             |        | $         | 316,001 |         
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   |         |             |        |           |         |         
|Liabilities and shareholders equity                                                                                                                                                                     |                                                                                                                                                                                 |                                   |         |             |        |           |         |         
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|Current liabilities:                                                                                                                                                                                     |                                                                                                                                                                                 |                                   |         |             |        |           |         |         
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Short-term debt and current portion of long-term debt                                                                                                                           |                                   | $       | 7,872       |        |           | $       | 8,858    |       
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Accounts payable                                                                                                                                                                |                                   |         | 14,226      |        |           |         | 20,944   |       
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Payables to related parties                                                                                                                                                     |                                   |         | 408         |        |           |         | 1,200    |       
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Employee-related liabilities                                                                                                                                                    |                                   |         | 3,072       |        |           |         | 3,759    |       
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Accrued income and other taxes                                                                                                                                                  |                                   |         | 547         |        |           |         | 1,030    |       
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Other accrued expenses                                                                                                                                                          |                                   |         | 6,770       |        |           |         | 7,036    |       
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   |         |             |        |           |         |         
|Total current liabilities                                                                                                                                                                                |                                                                                                                                                                                 |                                   | 32,895  |             |        |           | 42,827  |         
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|Long-term debt                                                                                                                                                                                           |                                                                                                                                                                                 |                                   | 133,523 |             |        |           | 154,914 |         
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|Minority interest                                                                                                                                                                                        |                                                                                                                                                                                 |                                   | 561     |             |        |           | 416     |         
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|Preferred stock, $.001 par value, per share; 1,000 shares authorized;
761 Series A convertible redeemable shares issued and outstanding at
March 31, 2002 (redemption value  $24,909 at March 31, 2002) |                                                                                                                                                                                 |                                   | 21,594  |             |        |           | 19,554  |         
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|Common shareholders equity                                                                                                                                                                              |                                                                                                                                                                                 |                                   |         |             |        |           |         |         
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Common stock, $.001 par value, 80,000 shares authorized,
23,516 shares issued and outstanding as of March 31, 2002
and 23,288 shares issued and outstanding as of June 30, 2001 |                                   |         | 24          |        |           |         | 23       |       
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Paid-in-capital                                                                                                                                                                 |                                   |         | 215,425     |        |           |         | 217,030  |       
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Accumulated other comprehensive income (loss)                                                                                                                                   |                                   |         | (4,103      | )      |           |         | (5,058   | )     
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Loan and interest receivable from officer, less reserve of $5,500 and $0                                                                                                        |                                   |         | (8,644      | )      |           |         | (13,140  | )     
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                        
|                                                                                                                                                                                                         | Retained earnings (deficit)                                                                                                                                                     |                                   |         | (194,417    | )      |           |         | (100,565 | )     
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   |         |             |        |           |         |         
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   | 8,285   |             |        |           | 98,290  |         
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   |         |             |        |           |         |         
|                                                                                                                                                                                                         |                                                                                                                                                                                 | $                                 | 196,858 |             |        | $         | 316,001 |         
|                                                                                                                                                                                                         |                                                                                                                                                                                 |                                   |         |             |        |           |         |         

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,        
|                                                                                                |                                                              |   |                    |        |                  
|                                                                                                |                                                              |   | 2002               |        | 2001              |   | 2002   |        | 2001
|                                                                                                |                                                              |   |                    |        |                   |   |        |        |     
|Net sales                                                                                       |                                                              | $ | 33,841             |        |                   | $ | 53,890 |        |      | $ | 134,535 |        |   | $ | 164,697 |        
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Costs and expenses:                                                                             |                                                              |   |                    |        |                   |   |        |        |      |   |         |        |   |   |         |        
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Cost of sales                                                |   |                    | 22,706 |                   |   |        | 32,589 |      |   |         | 87,859 |   |   |         | 100,075 |  
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Marketing and selling                                        |   |                    | 5,868  |                   |   |        | 10,668 |      |   |         | 25,322 |   |   |         | 31,407  |  
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Research and development                                     |   |                    | 1,529  |                   |   |        | 3,098  |      |   |         | 6,863  |   |   |         | 9,681   |  
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | General and administrative                                   |   |                    | 3,602  |                   |   |        | 3,606  |      |   |         | 11,857 |   |   |         | 10,614  |  
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Provision for loan impairment                                |   |                    | 900    |                   |   |        |       |      |   |         | 5,500  |   |   |         |        |  
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Gain on settlement of lawsuit                                |   |                    |       |                   |   |        |       |      |   |         | (554   | ) |   |         |        |  
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Special charges                                              |   |                    |       |                   |   |        |       |      |   |         | 9,009  |   |   |         |        |  
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Amortization of intangible assets                            |   |                    | 83     |                   |   |        | 709    |      |   |         | 253    |   |   |         | 2,118   |  
|                                                                                                |                                                              |   |                    |        |                   |   |        |        |      |   |         |        |   |   |         |        
|Income (loss) from operations                                                                   |                                                              |   | (847               | )      |                   |   | 3,220  |        |      |   | (11,574 | )      |   |   | 10,802  |        
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Other income (expense):                                                                         |                                                              |   |                    |        |                   |   |        |        |      |   |         |        |   |   |         |        
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Interest expense                                             |   |                    | (2,559 | )                 |   |        | (3,436 | )    |   |         | (8,616 | ) |   |         | (10,663 | )
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Interest income                                              |   |                    | 82     |                   |   |        | 262    |      |   |         | 144    |   |   |         | 749     |  
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Income (loss) from investments                               |   |                    | (2,121 | )                 |   |        | (81    | )    |   |         | (2,332 | ) |   |         | (63     | )
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Gain from sale of fixture subsidiaries                       |   |                    |       |                   |   |        |       |      |   |         | 227    |   |   |         |        |  
|                                                                                                |                                                              |   |                    |        |                   |   |        |        |      |   |         |        |   |   |         |        
|Income (loss) before income taxes, minority
interest and cumulative effect of accounting
change |                                                              |   | (5,445             | )      |                   |   | (35    | )      |      |   | (22,151 | )      |   |   | 825     |        
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Income tax expense                                                                              |                                                              |   | 152                |        |                   |   | 9      |        |      |   | 386     |        |   |   | 106     |        
|                                                                                                |                                                              |   |                    |        |                   |   |        |        |      |   |         |        |   |   |         |        
|Income (loss) before minority interest and
cumulative effect of accounting change               |                                                              |   | (5,597             | )      |                   |   | (44    | )      |      |   | (22,537 | )      |   |   | 719     |        
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Minority interest in income of consolidated
subsidiary                                          |                                                              |   | (63                | )      |                   |   | (31    | )      |      |   | (145    | )      |   |   | (55     | )      
|                                                                                                |                                                              |   |                    |        |                   |   |        |        |      |   |         |        |   |   |         |        
|Income (loss) before cumulative
effect of accounting change                                     |                                                              |   | (5,660             | )      |                   |   | (75    | )      |      |   | (22,682 | )      |   |   | 664     |        
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Cumulative effect of accounting change                                                          |                                                              |   |                   |        |                   |   |       |        |      |   | (71,171 | )      |   |   |        |        
|                                                                                                |                                                              |   |                    |        |                   |   |        |        |      |   |         |        |   |   |         |        
|Net income (loss)                                                                               |                                                              | $ | (5,660             | )      |                   | $ | (75    | )      |      | $ | (93,853 | )      |   | $ | 664     |        
|                                                                                                |                                                              |   |                    |        |                   |   |        |        |      |   |         |        |   |   |         |        
|Earnings (loss) per share  basic and diluted:                                                  |                                                              |   |                    |        |                   |   |        |        |      |   |         |        |   |   |         |        
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Income (loss) before cumulative
effect of accounting changes |   | $                  | (.27   | )                 |   | $      | (.03   | )    |   | $       | (1.06  | ) |   | $       | (.06    | )
|                                                                                                |                                                              |   |                    |        |                   |   |        |        |      |   |         |        |   |   |         |        
|                                                                                                | Earnings (loss) per share  basic and diluted                |   | $                  | (.27   | )                 |   | $      | (.03   | )    |   | $       | (4.10  | ) |   | $       | (.30    | )
|                                                                                                |                                                              |   |                    |        |                   |   |        |        |      |   |         |        |   |   |         |        
|Weighted average shares outstanding:                                                            |                                                              |   |                    |        |                   |   |        |        |      |   |         |        |   |   |         |        
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Basic and diluted                                            |   |                    | 23,462 |                   |   |        | 23,238 |      |   |         | 23,383 |   |   |         | 22,175  |  
|                                                                                                |                                                              |   |                    |        |                   |   |        |        |      |   |         |        |   |   |         |        

See notes to condensed consolidated financial statements

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##### Table of Contents



Advanced Lighting Technologies, Inc.
Condensed Consolidated Statement of Shareholders Equity (Unaudited)
Nine Months Ended March 31, 2002(in thousands)

|                                                                               |  |           |        |        |  |              |        |               |  |               |    |          |  |            |         |          |  |             |        |          |  |          |         |   |  |   |          |   |  |   |         |  
|------------------------------------------------------------------------------ |  | --------- | ------ | ------ |  | ------------ | ------ | ------------- |  | ------------- | -- | -------- |  | ---------- | ------- | -------- |  | ----------- | ------ | -------- |  | -------- | ------- | - |  | - | -------- | - |  | - | ------- | -
|                                                                               |  |           |        |        |  |              |        |               |  |               |    |          |  |            |         |          |  |             |        |          |  | Loan and |         |   |  |   |          |   |  |  
|                                                                               |  |           |        |        |  |              |        |               |  |               |    |          |  |            |         |          |  | Accumulated |        | Interest |  |          |         |   |  |   |          |  
|                                                                               |  |           |        |        |  | Common Stock |        |               |  |               |    | Other    |  | Receivable |         | Retained |  |             |        |         
|                                                                               |  | Preferred |        |        |  | Paid-In      |        | Comprehensive |  | From          |    | Earnings |  |            |         |         
|                                                                               |  | Stock     |        | Shares |  | Par Value    |        | Capital       |  | Income (Loss) |    | Officer  |  | (Deficit)  |         | Total   
|                                                                               |  |           |        |        |  |              |        |               |  |               |    |          |  |            |         |         
|Balance at July 1, 2001                                                        |  | $         | 19,554 |        |  |              | 23,288 |               |  | $             | 23 |          |  | $          | 217,030 |          |  | $           | (5,058 | )        |  | $        | (13,140 | ) |  | $ | (100,564 | ) |  | $ | 117,845 |  
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Net loss                                                                       |  |           |       |        |  |              |       |               |  |               |   |          |  |            |        |          |  |             |       |          |  |          |        |   |  |   | (93,853  | ) |  |   | (93,853 | )
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Preferred shares accretion                                                     |  |           | 2,040  |        |  |              |       |               |  |               |   |          |  |            | (2,040  | )        |  |             |       |          |  |          |        |   |  |   |         |   |  |   |        |  
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Loan to officer                                                                |  |           |       |        |  |              |       |               |  |               |   |          |  |            |        |          |  |             |       |          |  |          | (1,004  | ) |  |   |         |   |  |   | (1,004  | )
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Reserve for loan impairment                                                    |  |           |       |        |  |              |       |               |  |               |   |          |  |            |        |          |  |             |       |          |  |          | 5,500   |   |  |   |         |   |  |   | 5,500   |  
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Stock purchases by employees                                                   |  |           |       |        |  |              | 61     |               |  |               |   |          |  |            | 112     |          |  |             |       |          |  |          |        |   |  |   |         |   |  |   | 112     |  
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Stock issued to
employee benefit plan                                          |  |           |       |        |  |              | 167    |               |  |               | 1  |          |  |            | 323     |          |  |             |       |          |  |          |        |   |  |   |         |   |  |   | 324     |  
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Reversal of foreign currency
translation adjustments due
to sale of subsidiary |  |           |       |        |  |              |       |               |  |               |   |          |  |            |        |          |  |             | 573    |          |  |          |        |   |  |   |         |   |  |   | 573     |  
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Foreign currency
translation adjustment                                        |  |           |       |        |  |              |       |               |  |               |   |          |  |            |        |          |  |             | 382    |          |  |          |        |   |  |   |         |   |  |   | 382     |  
|                                                                               |  |           |        |        |  |              |        |               |  |               |    |          |  |            |         |          |  |             |        |          |  |          |         |   |  |   |          |   |  |   |         |  
|Balance at
March 31, 2002                                                      |  | $         | 21,594 |        |  |              | 23,516 |               |  | $             | 24 |          |  | $          | 215,425 |          |  | $           | (4,103 | )        |  | $        | (8,644  | ) |  | $ | (194,417 | ) |  | $ | 29,879  |  
|                                                                               |  |           |        |        |  |              |        |               |  |               |    |          |  |            |         |          |  |             |        |          |  |          |         |   |  |   |          |   |  |   |         |  

See notes to condensed consolidated financial statements

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

|                                               |                                                                                                    |                                              |                                        |                                                     |        |                   |         |          |       |        |         |  
|---------------------------------------------- | -------------------------------------------------------------------------------------------------- | -------------------------------------------- | -------------------------------------- | --------------------------------------------------- | ------ | ----------------- | ------- | -------- | ----- | ------ | ------- | -
|                                               |                                                                                                    |                                              |                                        |                                                     |        | Nine Months Ended
|                                               |                                                                                                    |                                              |                                        |                                                     |        | March 31,        
|                                               |                                                                                                    |                                              |                                        |                                                     |        |                  
|                                               |                                                                                                    |                                              |                                        |                                                     |        | 2002              |         | 2001    
|                                               |                                                                                                    |                                              |                                        |                                                     |        |                   |         |         
|Operating activities                           |                                                                                                    |                                              |                                        |                                                     |        |                   |         |         
|                                               | Net income (loss)                                                                                  |                                              | $                                      | (93,853                                             | )      |                   | $       | 664      |      
|                                               | Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities: |                                              |                                        |                                                     |        |                   |         |          |      
|                                               |                                                                                                    | Depreciation                                 |                                        |                                                     | 5,458  |                   |         |          | 6,444 |       
|                                               |                                                                                                    | Amortization                                 |                                        |                                                     | 253    |                   |         |          | 2,118 |       
|                                               |                                                                                                    | Provision for doubtful accounts              |                                        |                                                     | 1,215  |                   |         |          | 181   |       
|                                               |                                                                                                    | Loss from investments                        |                                        |                                                     | 2,443  |                   |         |          | 64    |       
|                                               |                                                                                                    | Gain on sale of subsidiaries                 |                                        |                                                     | (227   | )                 |         |          |      |       
|                                               |                                                                                                    | Cumulative effect of accounting change       |                                        |                                                     | 71,171 |                   |         |          |      |       
|                                               |                                                                                                    | Special charges                              |                                        |                                                     | 4,337  |                   |         |          |      |       
|                                               |                                                                                                    | Provision for loan impairment                |                                        |                                                     | 5,500  |                   |         |          |      |       
|                                               |                                                                                                    | Changes in operating assets and liabilities: |                                        |                                                     |        |                   |         |          |       |       
|                                               |                                                                                                    |                                              | Trade receivables                      |                                                     |        | (1,655            | )       |          |       | (961   | )      
|                                               |                                                                                                    |                                              | Inventories                            |                                                     |        | 5,206             |         |          |       | 898    |        
|                                               |                                                                                                    |                                              | Prepaid and other assets               |                                                     |        | (1,151            | )       |          |       | 421    |        
|                                               |                                                                                                    |                                              | Accounts payable and accrued
expenses  |                                                     |        | (2,918            | )       |          |       | (7,670 | )      
|                                               |                                                                                                    |                                              | Liabilities related to special
charges |                                                     |        | 2,302             |         |          |       | (96    | )      
|                                               |                                                                                                    |                                              | Other                                  |                                                     |        | 930               |         |          |       | (1,653 | )      
|                                               |                                                                                                    |                                              |                                        |                                                     |        |                   |         |         
|                                               |                                                                                                    |                                              |                                        | Net cash provided by (used in) operating activities |        |                   | (989    | )        |       |        | 410     |  
|Investing activities                           |                                                                                                    |                                              |                                        |                                                     |        |                   |         |         
|                                               | Capital expenditures                                                                               |                                              |                                        | (11,330                                             | )      |                   |         | (17,474  | )    
|                                               | Proceeds from sale of preferred stock investment                                                   |                                              |                                        | 1,000                                               |        |                   |         |         |      
|                                               | Net proceeds from sale of subsidiaries                                                             |                                              |                                        | 24,166                                              |        |                   |         |         |      
|                                               | Investment in affiliate                                                                            |                                              |                                        | (88                                                 | )      |                   |         |         |      
|                                               | Purchase of business                                                                               |                                              |                                        |                                                    |        |                   |         | (366     | )    
|                                               |                                                                                                    |                                              |                                        |                                                     |        |                   |         |         
|                                               |                                                                                                    |                                              |                                        | Net cash provided by (used in) investing activities |        |                   | 13,748  |          |       |        | (17,840 | )
|Financing activities                           |                                                                                                    |                                              |                                        |                                                     |        |                   |         |         
|                                               | Proceeds from revolving credit facility                                                            |                                              |                                        | 125,457                                             |        |                   |         | 161,997  |      
|                                               | Payments of revolving credit facility                                                              |                                              |                                        | (124,385                                            | )      |                   |         | (160,786 | )    
|                                               | Proceeds from long-term debt                                                                       |                                              |                                        | 132                                                 |        |                   |         | 173      |      
|                                               | Payments of long-term debt and capital leases                                                      |                                              |                                        | (14,687                                             | )      |                   |         | (5,052   | )    
|                                               | Loan to officer                                                                                    |                                              |                                        | (1,004                                              | )      |                   |         | (2,685   | )    
|                                               | Net proceeds from public offering                                                                  |                                              |                                        |                                                    |        |                   |         | 22,900   |      
|                                               | Issuance of common stock                                                                           |                                              |                                        | 436                                                 |        |                   |         | 662      |      
|                                               |                                                                                                    |                                              |                                        |                                                     |        |                   |         |         
|                                               |                                                                                                    |                                              |                                        | Net cash provided by (used in) financing activities |        |                   | (14,051 | )        |       |        | 17,209  |  
|                                               |                                                                                                    |                                              |                                        |                                                     |        |                   |         |         
|Decrease in cash and cash equivalents          |                                                                                                    |                                              | (1,292                                 | )                                                   |        |                   | (221    | )       
|Cash and cash equivalents, beginning of period |                                                                                                    |                                              | 3,652                                  |                                                     |        |                   | 3,890   |         
|                                               |                                                                                                    |                                              |                                        |                                                     |        |                   |         |         
|                                               |                                                                                                    |                                              |                                        | Cash and cash equivalents, end of period            |        | $                 | 2,360   |          |       | $      | 3,669   |  
|                                               |                                                                                                    |                                              |                                        |                                                     |        |                   |         |         
|Supplemental cash flow information             |                                                                                                    |                                              |                                        |                                                     |        |                   |         |         
|                                               | Interest paid                                                                                      |                                              | $                                      | 11,201                                              |        |                   | $       | 12,439   |      
|                                               | Income taxes paid                                                                                  |                                              |                                        | 129                                                 |        |                   |         | 81       |      
|                                               | Capitalized interest                                                                               |                                              |                                        | 892                                                 |        |                   |         | 363      |      
|                                               | Details of acquisition                                                                             |                                              |                                        |                                                     |        |                   |         |          |      
|                                               |                                                                                                    | Assets acquired                              |                                        |                                                     |       |                   |         | $        | 899   |       
|                                               |                                                                                                    | Liabilities assumed                          |                                        |                                                     |       |                   |         |          | (288  | )     
|                                               |                                                                                                    | Stock or debt issued                         |                                        |                                                     |       |                   |         |          | (245  | )     
|                                               |                                                                                                    |                                              |                                        |                                                     |        |                   |         |         
|                                               |                                                                                                    | Net cash paid for acquisition                |                                        |                                                     |       |                   |         | $        | 366   |       
|                                               |                                                                                                    |                                              |                                        |                                                     |        |                   |         |         

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, 2002
(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, systems and equipment. 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 and Accounting Change

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, including adjustments of a normal and recurring nature as well as
the special charges described in Note H, a gain on the settlement of a lawsuit,
the reserve for loan impairment described in Note G, and the effects of the
accounting change for goodwill and intangible assets acquired in a business
combination described below. 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, 2001. Operating results
for the three months and nine months ended March 31, 2002 are not necessarily
indicative of the results that may be expected for the full-year ending June
30, 2002.

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.

Accounting Change  Goodwill and Intangible Assets

In July 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (FAS) No. 141, Business Combinations, and FAS
142, Goodwill and Intangible Assets. FAS 141 is effective for all business
combinations completed after June 30, 2001 and requires using the purchase
method of accounting. The pooling of interest method of accounting is
prohibited except for transactions initiated before July 1, 2001.

FAS 142 is effective for fiscal years beginning after December 15, 2001,
however, certain provisions of this Statement apply to goodwill and other
intangible assets acquired between July 1, 2001 and the effective date of FAS
142. Early adoption of FAS 142 is permitted. Major provisions of FAS 142
require intangible assets acquired in a business combination to be recorded
separately from goodwill if they arise from contractual or other legal rights
or are separable from the acquired entity and can
6Table of Contents

Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2002
(Dollars in thousands, except per share data)

B.     Basis of Presentation and Change in Accounting Principles (continued)

be sold, transferred, licensed, rented or exchanged, either individually or as
part of a related contract, asset or liability. In addition, goodwill, as well
as intangible assets with indefinite lives, will no longer be subject to
amortization effective July 1, 2001. Finally, goodwill and intangible assets
with indefinite lives will be tested for impairment annually and whenever there
is an impairment indicator. Previously, the Company measured goodwill and
intangibles (to be held and used) with indefinite lives for impairment using
undiscounted cash flows under the guidance of FAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.

The Company adopted FAS 142 as of July 1, 2001. The Company evaluated goodwill
of $66,172 and intangible assets with indefinite lives of $11,874, which
represents tradenames. The Company used third party appraisals and expected
future discounted cash flows to determine the fair value of the reporting units
and whether any impairment of goodwill or indefinite lived intangible assets
existed as of the above date. As a result of this evaluation, the Company
recorded a cumulative effect of change in accounting principle for the
estimated impairment of goodwill and other indefinite lived intangible assets
of $71,171, or $(3.04) per share, as of the beginning of fiscal 2002. Also,
the impact of adopting FAS 142 was to reduce amortization and, consequently,
the loss before cumulative effect of accounting change for the third quarter of
fiscal 2002 by $109, or $.00 per share. The impact of adopting FAS 142 was to
reduce the loss before cumulative effect of accounting change for the first
nine months of fiscal 2002 by $1,206, or $.05 per share. Amortization of
intangible assets in the third quarter of fiscal 2001 would have been $68, a
reduction of $641, or $.03 per share if the accounting change related to
acquired intangible amortization required by FAS 142 had been applied to that
quarter. Amortization of intangible assets in the first nine months of fiscal
2001 would have been $244, a reduction of $1,874, or $.09 per share if the
accounting change related to acquired intangible amortization required by FAS
142 had been applied to that period.

Reclassification of Certain Sales Incentives and Financial Statement
Presentation Changes

The Company adopted Emerging Issues Task Force (EITF) Issue 01-9 Accounting
for Consideration Given by a Vendor to a Customer in the quarter ended March
31, 2002. EITF Issue 01-9 requires that expense associated with a free product
or service delivered at the time of sale of another product or service should
be classified as cost of sales. The Companys fixture subsidiaries that were
sold in the second quarter of fiscal 2002 had incurred and included such costs
in marketing and selling expense. Accordingly, the Company has reclassified
such amounts to cost of sales within these financial statements. The amounts
reclassified for the three months ended March 31, 2002 and 2001 are $0 and
$1,098, respectively. The amounts reclassified for the nine months ended March
31, 2002 and 2001 are $1,836 and $3,090, respectively. Also, certain amounts
for prior periods have been reclassified to conform to the current period
reporting presentation.

7



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##### Table of Contents



Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2002
(Dollars in thousands, except per share data)

C.     Comprehensive Income (Loss)

For the three- and nine-months ended March 31, 2002 the Companys comprehensive
income (loss) was $(5,438) and $(92,898), respectively. For the three- and
nine-months ended March 31, 2001, the Companys comprehensive income (loss) was
$(1,619) and $(1,809), respectively. These amounts include net income (loss)
and the Companys other component of comprehensive income, foreign currency
translation adjustments.

D.     Bank Credit Facility and Senior Notes

During the quarter ended December 31, 2001, in connection with the sale of the
fixture subsidiaries, the Company amended its Bank Credit Facility to reduce
the revolving credit loan to $25,000 from $40,000 and the term loan to $13,000
from $25,000 and change certain covenants under the agreement. Availability of
borrowings under the revolving credit loan is determined by the Companys
eligible account receivables and inventories. Prior to the amendment described
below, interest rates on the revolving credit loans outstanding were based, at
the Companys option, on LIBOR plus 2.75% or the agent banks prime rate. Under
the term loan, the Company pays monthly principal payments that total $3,576
annually, with the unpaid balance due at maturity. Prior to the amendment
described below, interest rates on the term loan were based, at the Companys
option, on LIBOR plus 3.25% or the agent banks prime rate. The Bank Credit
Facility matures on July 1, 2004.

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. At
March 31, 2002, the Company was not in compliance with this financial covenant.
The Company obtained a waiver for non-compliance from its lenders for the
quarter then ended. In addition, the Bank Credit Facility was amended to
provide for a new measurement period for this covenant commencing April 1,
2002. The Company expects to meet this covenant at future determination dates.
The Companys ability to elect LIBOR-based interest rates on its loans was
suspended pursuant to this amendment. 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.

The Company has $100,000 of 8% Senior Notes due March 15, 2008. The notes are
redeemable at the Companys option, in whole or in part, on or after 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.

8



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##### Table of Contents



Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2002
(Dollars in thousands, except per share data)

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 GE has
fully exercised to acquire 998,703 shares of Common Stock of the Company. GE
now holds 1,429,590 shares of Company Common Stock. The Series A Stock and
the Common Stock held by GE represent approximately 16.8% of the voting power
and equity ownership of the Company at March 31, 2002.

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 the Chief Executive Officer (CEO) of the Company and Alan J. Ruud,
giving GE the ability to obtain the majority of the voting power of the
Company. 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. 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, September 30, 2000, June 30, 2001, September 30, 2001, December 31, 2001,
and March 31, 2002, as amended by agreements between GE and the Company).

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,
2002, was .78 to 1.0 (.23 to 1.0 for the quarter ended March 31, 2002 and 1.24
to 1.0 for the quarter ended December 31, 2001).

A Second Occurrence would: (i) give GE the ability to vote the number of
shares currently voted by the CEO of the Company, approximately 2.0 million
shares at March 31, 2002, (ii) give GE the option to purchase shares from the
CEO of the Company and Alan J. Ruud 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 6,365,618 shares at March 31, 2002. The
ability to vote the shares, purchase shares or
9Table of Contents

Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2002
(Dollars in thousands, except per share data)

E.     General Electric Company Investment (continued)

obtain the warrant would be dependent upon compliance with antitrust laws. GE
is not required to purchase additional shares of the Company. If GE owns
and/or obtains the immediate right to acquire and/or vote 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 Alan J. Ruud 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.

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 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 initially used the net proceeds from the
public offering of approximately $22,900 to repay revolving credit loan
borrowings. The Company has expended substantially the entire amount as of
December 31, 2001 on 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.

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.

10



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##### Table of Contents



Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2002
(Dollars in thousands, except per share data)

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
$14,144 to its CEO, including interest accrued at an interest rate of 8%. The
proceeds of the loan were used by the Companys CEO to reduce the principal
balance outstanding of margin loan accounts. The margin loans were fully
repaid in the quarter ended March 31, 2002. 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.
On January 22, 2002, the Board and CEO agreed in principle to a plan that
extends the maturity of the loan to July 31, 2007. Under the terms of the
plan, the CEO will sell certain assets in an orderly manner in order to
maximize the net proceeds, which will be used to pay a portion of the loan.
The CEO will continue his 10b5-1 plan to sell shares he now owns pursuant to
Rule 144 when the stock price exceeds $15 per share. In addition, the CEO will
be expected to apply after-tax cash bonuses earned from the Company toward
repayment of the loan. Interest on the loan in the future will accrue at the
same rate that the Company pays on its revolving credit loan. The loan will be
repayable immediately if the CEO ceases to be employed by the Company. The
Board reserved the right to demand payment to prevent an unacceptable strain on
cash resources.

The Companys ability to collect amounts due according to the contractual terms
of the loan agreement is largely dependent on the ultimate realization from the
sale of assets owned by the CEO, including the CEOs investment in common stock
of the Company. When determining the fair value of investments in common
stock, the Company considers both the current market price and also volatility
in the stock price over the period in which the Company estimates it would take
to sell those shares into the market.

Loan receivables are measured for impairment based on either the present value
of expected future cash flows discounted at the loans effective interest rate
or the fair value of the underlying collateral or other assets available to
repay the loan. A loan is considered impaired when, based on current
information and events, it is probable that the Company will be unable to
collect all amounts due according to the contractual terms of the loan
agreement. The Company evaluates the collectibility of both the interest and
principal when assessing the need for a possible impairment on the loan. During
the nine months ended March 31, 2002, in accordance with the provisions of FAS
Statement No. 5, Accounting for Contingencies, and FAS Statement No. 114,
Accounting by Creditors for Impairment of a Loan, the Company recorded a
valuation reserve for an impaired loan of $5,500 related to the amount by which
the carrying value of the loan exceeded the underlying fair value of the assets
available to repay the loan. During the nine months ended March 31, 2002, no
interest was recognized or paid on the loan. The Company will recognize
recoveries on amounts previously reserved for after considering both the fair
value of the underlying assets and evidence of repayments on the loan.

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##### Table of Contents



Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2002
(Dollars in thousands, except per share data)

H.     Special Charges

During the quarter ended September 30, 2001, the Company recorded special
charges related to changes in its operations, which are intended to improve
efficiencies and reduce costs world-wide. The special charges principally
relate to consolidating the Companys power supply manufacturing operations
into its high-efficiency facility in Chennai (Madras), India; reducing staffing
levels at most locations and evaluating certain equipment and investments in
light of its long-term strategies.

The special charges were determined in accordance with formal plans developed
by the Companys management, approved by the CEO and subsequently reviewed with
the Companys Board of Directors using the best information available to it at
the time. Actions associated with closing facilities began in the first
quarter and are expected to be substantially completed by the end of fiscal
2002. A total of approximately 250 employees were terminated enterprise-wide
from almost all units of the Company. Assets related to the above actions are
no longer in use or are held for sale and were written-down to their estimated
fair values. The amount the Company will ultimately incur may change as the
Companys plans are executed and actions are completed.

Details of the actions and related special charges recorded during the nine
months ended March 31, 2002 are summarized as follows:

|                                    |                               |         |       |         |         |          |       |               |                |   |       |       |  |   |       |       | 
|----------------------------------- | ----------------------------- | ------- | ----- | ------- | ------- | -------- | ----- | ------------- | -------------- | - | ----- | ----- |  | - | ----- | ----- | 
|                                    |                               |         | Total |         | Noncash |          | Cash  |               | Liabilities at
|Description                         |                               | Charges |       | Charges |         | Payments |       | Mar. 31, 2002
|                                    |                               |         |       |         |         |          |       |              
|Consolidate power supply operations |                               |         |       |         |         |          |       |               |                |   |       |       |  |   |       |      
|                                   
|                                   
|                                   
|                                   
|                                    | Severance                     |         | $     | 1,243   |         |          | $     |              |                |   | $     | 1,131 |  |   | $     | 112   | 
|                                   
|                                   
|                                   
|                                   
|                                    | Lease cancellations           |         |       | 1,835   |         |          |       |              |                |   |       | 163   |  |   |       | 1,672 | 
|                                   
|                                   
|                                   
|                                   
|                                    | Write-down of assets          |         |       | 2,579   |         |          |       | 2,579         |                |   |       |      |  |   |       |      | 
|                                   
|                                   
|                                   
|                                   
|                                    | Shut-down costs of facilities |         |       | 265     |         |          |       |              |                |   |       | 177   |  |   |       | 88    | 
|                                   
|                                   
|                                   
|                                   
|Reduce staffing requirements        |                               |         | 2,017 |         |         |          |      |               |                |   | 1,587 |       |  |   | 430   |      
|                                   
|                                   
|                                   
|                                   
|Impairment of long-lived assets     |                               |         | 1,425 |         |         |          | 1,425 |               |                |   |      |       |  |   |      |      
|                                   
|                                   
|                                   
|                                   
|Other                               |                               |         | 333   |         |         |          | 333   |               |                |   |      |       |  |   |      |      
|                                    |                               |         |       |         |         |          |       |               |                |   |       |       |  |   |       |      
|                                    |                               | $       | 9,697 |         |         | $        | 4,337 |               |                | $ | 3,058 |       |  | $ | 2,302 |      
|                                    |                               |         |       |         |         |          |       |               |                |   |       |       |  |   |       |      

Total special charges for the nine months ended March 31, 2002 of $9,697 are
classified in the consolidated statement of operations as cost of sales ($688)
and special charges ($9,009).

I.     Sale of Preferred Stock Investment

On March 13, 2002, the Company sold its preferred stock investment in Venture
Lighting Japan for $1,300, consisting of $1,000 in cash and $300 due in
November 2002. The sale resulted in a loss of $2,007 during the quarter ended
March 31, 2002. The loss is included in the caption Income (loss) from
investments in the consolidated statement of operations.

12



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##### Table of Contents



Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2002
(Dollars in thousands, except per share data)

J.     Earnings Per Share

Earnings (loss) per share is computed as follows:

|                                                                                  |                                                                                                                    |                                                             |                                             |                                                                                                                    |        |                    |      |                   |        |        |       |       |         |        |      |      |        |        |        |  
|--------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------- | ------------------------------------------- | ------------------------------------------------------------------------------------------------------------------ | ------ | ------------------ | ---- | ----------------- | ------ | ------ | ----- | ----- | ------- | ------ | ---- | ---- | ------ | ------ | ------ | -
|                                                                                  |                                                                                                                    |                                                             |                                             |                                                                                                                    |        | Three Months Ended |      | Nine Months Ended
|                                                                                  |                                                                                                                    |                                                             |                                             |                                                                                                                    |        | March 31,          |      | March 31,        
|                                                                                  |                                                                                                                    |                                                             |                                             |                                                                                                                    |        |                    |      |                  
|                                                                                  |                                                                                                                    |                                                             |                                             |                                                                                                                    |        | 2002               |      | 2001              |        | 2002   |       | 2001 
|                                                                                  |                                                                                                                    |                                                             |                                             |                                                                                                                    |        |                    |      |                   |        |        |       |      
|Income available to common shareholders:                                          |                                                                                                                    |                                                             |                                             |                                                                                                                    |        |                    |      |                   |        |        |       |       |         |        |      |     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                                                                    | Income (loss) before cumulative effect of accounting change |                                             | $                                                                                                                  | (5,660 | )                  |      | $                 | (75    | )      |       | $     | (22,682 | )      |      | $    | 664    |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                                                                    | Cumulative effect of accounting change                      |                                             |                                                                                                                    |       |                    |      |                   |       |        |       |       | (71,171 | )      |      |      |       |       
|                                                                                  |                                                                                                                    |                                                             |                                             |                                                                                                                    |        |                    |      |                   |        |        |       |       |         |        |      |     
|                                                                                  |                                                                                                                    | Net income (loss)                                           |                                             |                                                                                                                    | (5,660 | )                  |      |                   | (75    | )      |       |       | (93,853 | )      |      |      | 664    |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                                                                    | Less: Preferred shares accretion                            |                                             |                                                                                                                    | (693   | )                  |      |                   | (647   | )      |       |       | (2,040  | )      |      |      | (1,905 | )     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                                                                    |                                                             |                                             | Additional preferred shares accretion from
cumulative effect of accounting change
for beneficial conversion option |        |                    |     |                   |        |        |      |       |         |        |     |      |        |        | (5,329 | )
|                                                                                  |                                                                                                                    |                                                             |                                             |                                                                                                                    |        |                    |      |                   |        |        |       |       |         |        |      |     
|                                                                                  |                                                                                                                    | Net income (loss) attributable to common shareholders       |                                             | $                                                                                                                  | (6,353 | )                  |      | $                 | (722   | )      |       | $     | (95,893 | )      |      | $    | (6,570 | )     
|                                                                                  |                                                                                                                    |                                                             |                                             |                                                                                                                    |        |                    |      |                   |        |        |       |       |         |        |      |     
|Weighted average shares  basic and diluted                                      
|                                                                                  |                                                                                                                    | Outstanding at beginning of period                          |                                             |                                                                                                                    | 23,437 |                    |      |                   | 23,229 |        |       |       | 23,288  |        |      |      | 20,482 |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                                                                    | Issued pursuant to public offering                          |                                             |                                                                                                                    |       |                    |      |                   |       |        |       |       |        |        |      |      | 1,284  |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                                                                    | Issued for exercise of warrant                              |                                             |                                                                                                                    |       |                    |      |                   |       |        |       |       |        |        |      |      | 375    |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                                                                    | Issued for exercise of stock options                        |                                             |                                                                                                                    |       |                    |      |                   |       |        |       |       |        |        |      |      | 11     |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                                                                    | Issued pursuant to employee stock purchase plan             |                                             |                                                                                                                    | 8      |                    |      |                   | 2      |        |       |       | 27      |        |      |      | 6      |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                                                                    | Issued pursuant to 401(k) plan                              |                                             |                                                                                                                    | 17     |                    |      |                   | 7      |        |       |       | 68      |        |      |      | 17     |       
|                                                                                  |                                                                                                                    |                                                             |                                             |                                                                                                                    |        |                    |      |                   |        |        |       |       |         |        |      |     
|                                                                                  |                                                                                                                    |                                                             | Weighted average shares  basic and diluted |                                                                                                                    |        | 23,462             |      |                   |        | 23,238 |       |       |         | 23,383 |      |      |        | 22,175 |       
|                                                                                  |                                                                                                                    |                                                             |                                             |                                                                                                                    |        |                    |      |                   |        |        |       |       |         |        |      |     
|Earnings (loss) per share  basic and diluted:                                    |                                                                                                                    |                                                             |                                             |                                                                                                                    |        |                    |      |                   |        |        |       |       |         |        |      |     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Income (loss) before cumulative effect of accounting changes                                                       |                                                             | $                                           | (.24                                                                                                               | )      |                    | $    | .00               |        |        | $     | (.97  | )       |        | $    | .03  |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Preferred shares accretion                                                                                         |                                                             |                                             | (.03                                                                                                               | )      |                    |      | (.03              | )      |        |       | (.09  | )       |        |      | (.09 | )     
|                                                                                  |                                                                                                                    |                                                             |                                             |                                                                                                                    |        |                    |      |                   |        |        |       |       |         |        |      |     
|                                                                                  | Income (loss) before cumulative effect of accounting
changes including preferred shares accretion                  |                                                             |                                             | (.27                                                                                                               | )      |                    |      | (.03              | )      |        |       | (1.06 | )       |        |      | (.06 | )     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Cumulative effect of accounting change                                                                             |                                                             |                                             |                                                                                                                   |        |                    |      |                  |        |        |       | (3.04 | )       |        |      |     |       
|                                                                                  |                                                                                                                    |                                                             |                                             |                                                                                                                    |        |                    |      |                   |        |        |       |       |         |        |      |     
|                                                                                  | Earnings (loss) per share before cumulative effect of
accounting change for beneficial conversion option           |                                                             |                                             | (.27                                                                                                               | )      |                    |      | (.03              | )      |        |       | (4.10 | )       |        |      | (.06 | )     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Additional preferred shares accretion from cumulative effect
of accounting change for beneficial conversion option |                                                             |                                             |                                                                                                                   |        |                    |      |                  |        |        |       |      |         |        |      | (.24 | )     
|                                                                                  |                                                                                                                    |                                                             |                                             |                                                                                                                    |        |                    |      |                   |        |        |       |       |         |        |      |     
|Earnings (loss) per share
attributable to common shareholders  basic and diluted |                                                                                                                    | $                                                           | (.27                                        | )                                                                                                                  |        | $                  | (.03 | )                 |        | $      | (4.10 | )     |         | $      | (.30 | )   
|                                                                                  |                                                                                                                    |                                                             |                                             |                                                                                                                    |        |                    |      |                   |        |        |       |       |         |        |      |     

At March 31, 2002, options and warrants to purchase 2,311,947 shares of common
stock were outstanding, but were not included in the calculations of diluted
earnings per share because their inclusion would have been antidilutive.
Options to purchase 3,431,661 shares of common stock were outstanding at March
31, 2001, but were not included in the calculations of diluted earnings per
share because their inclusion would have been antidilutive.

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##### Table of Contents



Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2002
(Dollars in thousands, except per share data)

K.     Sale of Subsidiaries

On December 12, 2001 the Company completed the sale of a significant portion of
its lamp fixture business (its Ruud Lighting, Inc., Kramer Lighting, Inc. and
Ruud Lighting Europe subsidiaries) to an investor group led by Alan J. Ruud.
From January 1998 until the time of the transaction, Mr. Ruud was a director of
the Company and served as Vice Chairman and Chief Operating Officer of the
Company and holds in excess of 5% of the Companys outstanding common stock.
The fixture subsidiaries assets consisted primarily of manufacturing
equipment, inventory and accounts receivable and the Ruud Lighting
manufacturing facility located in Racine, Wisconsin.

The consideration received by the Company consisted of a cash payment of
$28,000 (adjusted dollar for dollar to reflect the amount of any changes in
working capital and funded indebtedness between September 2, 2001 and December
3, 2001) and promissory notes totaling $6,000. Preliminary estimates of the
adjustment in the cash consideration resulted in a net reduction of $2,458 in
the cash received at closing. The preliminary estimates are subject to a
review process under the agreement that is expected to be completed prior to
year end. The notes will be payable December 1, 2006, although, upon receipt of
consent from the holders of its 8% Senior Notes, the Company may require
payment of $3,000 in principal amount by surrender of 1,500,000 shares of
Company common stock at any time prior to December 1, 2002. As part of this
transaction, funded indebtedness of $9,005 continued to be the obligation of
Ruud Lighting and the Company retained title to the Rhode Island manufacturing
facility of Kramer Lighting. Upon sale of the facility, the Company will pay
Ruud Lighting the lesser of $500 or one-third of the net proceeds of the sale.

The sale of the subsidiaries resulted in a gain of $227 in the quarter ended
December 31, 2001. The final amount of proceeds to be received and gain or
loss realized will be based upon a review process under the purchase agreement
that is expected to be completed prior to year end.

L.     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
14Table of Contents

Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2002
(Dollars in thousands, except per share data)

L.     Contingency (continued)

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, and intend to
continue to vigorously defend this action. The Company and its CEO filed a
Motion to Dismiss the Complaint, which was denied. The Company participated in
a mediation in December 2001 that did not result in a settlement of this
action. The case will now proceed. A trial has been scheduled for December 3,
2002.

On December 4 and December 12, 2001 and January 10, 2002, separate lawsuits
were filed by separate shareholders of the Company allegedly on behalf of the
Company, derivatively, against officers and directors of the Company. The
allegations in the three cases are substantially similar, and the two cases
filed in Ohio court have been removed to the United States District Court,
Northern District of Ohio, where the two cases, Gobble v Hellman, et al.
1:02CV0076-AAand Miller v Hellman, et al. 1:02CV342, are pending. The suit
originally filed in Federal Court, Tanigawa v Ruud, et al. 1:01CV2807was
voluntarily dismissed by the plaintiff. The Company is a nominal defendant in
these actions. The individual defendants in the Tanigawacase included, among
others, Wayne R. Hellman, the Chief Executive Officer and Chairman of the
Board, who is also beneficial owner of more than 5% of the outstanding common
stock of the Company, Alan J. Ruud, former Chief Operating Officer and Vice
Chairman of the Board, who is also beneficial owner of more than 5% of the
outstanding common stock of the Company, and Messrs. Francis H. Beam, John E.
Breen, John R. Buerkle, Theodore A. Filson, Louis S. Fisi, Thomas K. Lime and A
Gordon Tunstall, directors of the Company. The Gobbleand Millercomplaints
name the same defendants, but also name Steven C. Potts, who is Chief Financial
Officer and is a director.

The suits allege breaches of duties by the defendants relating to the matters
which are the subject of The Advanced Lighting Technologies, Inc Securities
Litigation, to alleged insider trading by certain directors, to a loan made to
Mr. Hellman and to the sale of certain fixture facilities to an investment
group led by Mr. Ruud. The Complaints primarily seek unspecified money or
compensatory and punitive damages and attorneys fees and costs.

The plaintiffs in the Gobbleand Millercases submitted formal motions to
remand these actions back to state court. The Federal judge denied their
motions and the cases are currently pending in Federal court. The Company and
the defendants believe that these claims lack merit and intend to vigorously
defend these actions.

The Company, from time to time, is subject to routine litigation incidental to
its business. Although there can be no assurance as to the ultimate
disposition of routine litigation, management of the Company believes, based
upon information available at this time, that the ultimate outcome of these
matters will not have a material adverse effect on the operations and financial
condition of the Company.

15



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##### Table of Contents






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 may require consent or
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, 2001, 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, system components, systems and equipment. 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
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
systems. 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 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. While research and
development expenditures have declined over the last three fiscal years

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in connection with the Companys commitment to generate positive operating cash
flow, 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.

Recent Developments

Sale of Fixture Subsidiaries

On December 12, 2001 the Company completed the sale of a significant portion of
its lamp fixture business (its Ruud Lighting, Inc., Kramer Lighting, Inc. and
Ruud Lighting Europe subsidiaries) to an investor group led by Alan J. Ruud.
From January 1998 until the time of the transaction, Mr. Ruud was a director of
the Company and served as Vice Chairman and Chief Operating Officer of the
Company and holds in excess of 5% of the Companys outstanding common stock.
The fixture subsidiaries assets consisted primarily of manufacturing
equipment, inventory and accounts receivable and the Ruud Lighting
manufacturing facility located in Racine, Wisconsin.

The consideration received by the Company consisted of a cash payment of
$28,000 (adjusted dollar for dollar to reflect the amount of any changes in
working capital and funded indebtedness between September 2, 2001 and December
3, 2001) and promissory notes totaling $6,000. Preliminary estimates of the
adjustment in the cash consideration resulted in a net reduction of $2,458 in
the cash received at closing. The preliminary estimates are subject to a
review process under the agreement that is expected to be completed prior to
year-end. The notes will be payable December 1, 2006, although, upon receipt
of consent from the holders of its 8% Senior Notes, the Company may require
payment of $3,000 in principal amount by surrender of 1,500,000 shares of
Company common stock at any time prior to December 1, 2002. As part of this
transaction, funded indebtedness of $9,005 continued to be the obligation of
Ruud Lighting and the Company retained title to the Rhode Island manufacturing
facility of Kramer Lighting. Upon sale of the facility, the Company will pay
Ruud Lighting the lesser of $500 or one-third of the net proceeds of the sale.

The sale of the subsidiaries resulted in a gain of $227 in the quarter ended
December 31, 2001. The final amount of proceeds to be received and gain or
loss realized will be based upon a review process under the purchase agreement
that is expected to be completed prior to year end.

Consolidation of Power Supply Production Operations and Restructuring of
Worldwide Operations

The Company has implemented plans to improve efficiencies in its power supply
business, reduce costs world-wide and assess certain equipment and investments
in light of its long-term strategies. The following paragraphs provide
information related to special charges as a result of certain actions taken by
the Company:



| |  | Centralize Certain Power Supply Manufacturing Operations into India
Operations.A charge of $5,922 was recorded in the first quarter of
fiscal 2002 relating to restructuring and centralizing certain power
supply manufacturing operations into the Companys high-efficiency and
low-cost manufacturing plant in Chennai (Madras), India. Of this charge,
costs of $2,301 were recorded for the closing of the Companys
manufacturing facilities in the United Kingdom, Australia and U.S.,
including costs of $2,036 associated with a non-cancelable lease.
Amounts related to the lease will be paid over the term of the lease,
which expires in 2006. Severance and benefits to approximately 160
terminated employees at the above locations totaled $1,243 and will be
paid by the end of fiscal 2002. Property, primarily consisting of
building, equipment and intangibles, was disposed of or is for sale, and
written down to net realizable value resulting in a charge of $2,041. In
addition, certain
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  | power supply product lines were exited which resulted in a write-down of
inventory of $337. This amount is included in cost of goods sold.                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Staffing Reductions.During the first quarter of fiscal 2002 a program
was completed to reduce the number of employees across all business
units. Approximately 90 employees, exclusive of the above-noted
employees, were terminated and total severance and benefits costs for
this program were $2,017. All employees will be paid by the end of
fiscal 2002.                                                                                                                                                                              
|
| |  | Impairment of Long-lived Assets and Other Charges.Due to the decline in
current business conditions, certain long-lived assets and product lines
were evaluated for impairment in light of future growth areas of the
business and a focus on profit margins and core opportunities. As a
result, a charge of $1,425 was recorded in the first quarter of fiscal
2002 to recognize a write-down in investments and equipment. In
addition, a $333 charge was taken for the abandonment of certain projects
and exiting several product lines.

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. The Telecommunications Unit uses 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.

The major focus of the telecommunications business unit is directed at
providing (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 in WDM and DWDM systems; (iii) filter elements for use in
WDM systems; (iv) secondary filter elements for use in DWDM systems; and, (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.

Telecommunication product sales for the first nine months of fiscal 2002 were
$866, a 57% decrease from $2,013 in the first nine months of fiscal 2001.
Backorders in the telecom product area are approximately $3,600 on contracts
scheduled to commence throughout the remainder of calender 2002. 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, the supply of components is expected to be an increasing portion of
its business. 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
telecommunications products beyond existing levels with additional capital
expenditures, on which this business depends.

DSI believes that the current supply exceeds demand for many of these thin film
coating products for the telecommunications industry. This situation is
expected to continue for the next one to two

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years. The principal competitors for the Companys products are certain large
OEMs, such as JDS Uniphase Corporation, Corning Incorporated, 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 Cierra Photonics, Inc., 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 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 has and will continue to explore various 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.

No final decisions have been made about the future courses of action to be
pursued. However, the Company has had discussions with several investment
banking firms to assist in identifying and implementing the best strategic
alternative for the telecommunications 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,        
|                                                                                                |                                        |  |                    |      |                  
|                                                                                                |                                        |  | 2002               |      | 2001              |  | 2002 |      | 2001
|                                                                                                |                                        |  |                    |      |                   |  |      |      |     
|Net sales                                                                                       |                                        |  | 100                | %    |                   |  | 100  | %    |      |  | 100   | %    |   |  | 100 | %   
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Costs and expenses:                                                                             |                                        |  |                    |      |                   |  |      |      |      |  |       |      |   |  |     |     
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Cost of sales                          |  |                    | 67.1 |                   |  |      | 60.5 |      |  |       | 65.3 |   |  |     | 60.8 |  
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Marketing and selling                  |  |                    | 17.3 |                   |  |      | 19.8 |      |  |       | 18.8 |   |  |     | 19.0 |  
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Research and development               |  |                    | 4.5  |                   |  |      | 5.7  |      |  |       | 5.1  |   |  |     | 5.9  |  
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | General and administrative             |  |                    | 10.6 |                   |  |      | 6.7  |      |  |       | 8.8  |   |  |     | 6.4  |  
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Provision for loan impairment          |  |                    | 2.7  |                   |  |      |     |      |  |       | 4.1  |   |  |     |     |  
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Gain on settlement of lawsuit          |  |                    |     |                   |  |      |     |      |  |       | (0.4 | ) |  |     |     |  
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Special charges                        |  |                    |     |                   |  |      |     |      |  |       | 6.7  |   |  |     |     |  
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Amortization of intangible assets      |  |                    | 0.3  |                   |  |      | 1.3  |      |  |       | 0.2  |   |  |     | 1.3  |  
|                                                                                                |                                        |  |                    |      |                   |  |      |      |      |  |       |      |   |  |     |     
|Income (loss) from operations                                                                   |                                        |  | (2.5               | )    |                   |  | 6.0  |      |      |  | (8.6  | )    |   |  | 6.6 |     
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Other income (expense):                                                                         |                                        |  |                    |      |                   |  |      |      |      |  |       |      |   |  |     |     
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Interest expense                       |  |                    | (7.6 | )                 |  |      | (6.4 | )    |  |       | (6.4 | ) |  |     | (6.5 | )
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Interest income                        |  |                    | 0.3  |                   |  |      | 0.5  |      |  |       | 0.1  |   |  |     | 0.4  |  
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Income (loss) from investments         |  |                    | (6.3 | )                 |  |      | (0.2 | )    |  |       | (1.8 | ) |  |     | 0.0  |  
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Gain from sale of fixture subsidiaries |  |                    |     |                   |  |      |     |      |  |       | 0.2  |   |  |     |     |  
|                                                                                                |                                        |  |                    |      |                   |  |      |      |      |  |       |      |   |  |     |     
|Income (loss) before income taxes, minority
interest and cumulative effect of accounting change |                                        |  | (16.1              | )    |                   |  | (0.1 | )    |      |  | (16.5 | )    |   |  | 0.5 |     
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Income tax expense                                                                              |                                        |  | 0.4                |      |                   |  | 0.0  |      |      |  | 0.3   |      |   |  | 0.1 |     
|                                                                                                |                                        |  |                    |      |                   |  |      |      |      |  |       |      |   |  |     |     
|Income (loss) before minority interest and
cumulative effect of accounting change               |                                        |  | (16.5              | )    |                   |  | (0.1 | )    |      |  | (16.8 | )    |   |  | 0.4 |     
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Minority interest in income of consolidated
subsidiary                                          |                                        |  | (0.2               | )    |                   |  | 0.0  |      |      |  | (0.1  | )    |   |  | 0.0 |     
|                                                                                                |                                        |  |                    |      |                   |  |      |      |      |  |       |      |   |  |     |     
|Income (loss) before cumulative
effect of accounting change                                     |                                        |  | (16.7              | )    |                   |  | (0.1 | )    |      |  | (16.9 | )    |   |  | 0.4 |     
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Cumulative effect of accounting change                                                          |                                        |  |                   |      |                   |  |     |      |      |  | (52.9 | )    |   |  |    |     
|                                                                                                |                                        |  |                    |      |                   |  |      |      |      |  |       |      |   |  |     |     
|Net income (loss)                                                                               |                                        |  | (16.7              | %)   |                   |  | (0.1 | %)   |      |  | (69.8 | %)   |   |  | 0.4 | %   
|                                                                                                |                                        |  |                    |      |                   |  |      |      |      |  |       |      |   |  |     |     

Factors that have affected the results of operations for the third quarter of
fiscal 2002 as compared to the third quarter of fiscal 2001 are discussed
below.

Quarter Ended March 31, 2002 Compared with Quarter Ended March 31, 2001

Net Sales. Net sales decreased 37.2% to $33,841 in the third quarter of fiscal
2002 from $53,890 in the third quarter of fiscal 2001. The decrease in sales
is primarily due to the sale of the fixture subsidiaries. Excluding the
fixture subsidiaries, sales for the third quarter of fiscal 2002 were
$33,841 compared with $35,672 for the third quarter of fiscal 2001. Third
quarter metal halide sales, excluding the fixture subsidiaries, declined 3% to
$25,963 compared with $26,791 in the same period last year. The Company
attributes the decline to weakness in the U.S. economy and the lighting market,
in general. The U.S. metal halide market declined 10% during the first nine
months of the current fiscal year. During this time the Company has increased
its market share from prior year

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levels and believes that a stronger U.S.
economy will result in an improved lighting market for the Companys products.
From 1990 to 2000, the U.S. metal halide lighting market grew at a compound
annual rate of 12% per year, and the Company believes that the market will
return to a positive growth rate as the U.S. economy improves.

Excluding the fixture subsidiaries, fiscal 2002 third quarter sales of the
Companys second-generation metal halide lighting product line, Uni-Form® pulse
start, grew 25% to $6,934 from $5,564 in the comparable quarter a year ago.
About half of the increase in pulse start sales are due to the sales to the
former fixture subsidiaries that are now part of the Companys external sales.
Sales of APL materials decreased 10% over the same quarter a year ago.
Geographically, these sales of materials decreased 17% in the U.S. and
decreased 4% outside the U.S. The decline in the U.S. is reflective of the
decline in the U.S. metal halide market. Excluding the fixture subsidiaries,
non-metal halide lighting sales declined 11%, due to the managed decline of
some non-metal halide product sales and weakness in the lighting market.

Excluding the fixture subsidiaries, lighting sales inside the U.S. increased 5%
in the third quarter of fiscal 2002 as compared to the same period a year ago.
The increase is due to the sales to the former fixture subsidiaries that are
now part of the Companys external sales. Without these sales, lighting sales
inside the U.S. would have declined 6%, which the Company attributes to
weakness in the lighting industry and the U.S. economy in general. Lighting
sales outside the U.S. declined 14%, primarily due to a temporary reduction in
power supply sales resulting from the transition of production from the United
Kingdom to India.

DSIs telecommunication product sales for the third quarter of fiscal 2002 were
$216, a decrease of 73% from $805 in the third quarter of fiscal 2001. The
decrease is attributed to the overall decline in the telecommunications
industry. However, sales of DSIs non-telecom materials and equipment
increased 7% to $2,826 in the third quarter of fiscal 2002 from $2,635 in the
third quarter of fiscal 2001 as the Company capitalized on DSIs expertise in
thin-film optical coatings and optical coating equipment manufacturing
opportunities.

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 30.3% to $22,706 in the third quarter
of fiscal 2002 from $32,589 in the third quarter of fiscal 2001. The decrease
is primarily attributable to the sale of the fixture subsidiaries. As a
percentage of net sales, cost of sales increased to 67.1% in the third quarter
of fiscal 2002 from 60.5% in the third quarter of fiscal 2001. Cost of sales
was negatively impacted by several unusual items including inventory
writedowns, additional costs related to the move of the European power supply
production to India, and unfavorable overhead variance resulting from the
decrease in production due to the Companys commitment to significant
reductions in inventory levels. The increase in cost of sales as a percentage
of sales was reflected across all areas of the Companys sales including
materials, system components and systems. The margins were also negatively
impacted by the shift in the mix of product sales reflecting increases in lower
margin power supply and equipment sales and decreases in higher margin
materials sales. The Company
believes that cost of sales as a percent of sales will decline to approximately
60% of sales by the end of calendar 2002.

Marketing and Selling Expenses.Marketing and selling expenses decreased
45.0% to $5,868 in the third quarter of fiscal 2002 from $10,668 in the third
quarter of fiscal 2001. As a percentage of net sales, marketing and selling
expenses declined to 17.3% in the third quarter of fiscal 2002 from

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19.8% in
the third quarter of fiscal 2001. The decrease in both amount and percentage
of net sales is primarily attributable to the sale of the fixture subsidiaries,
as marketing and selling expenses were higher as a percentage of net sales for
the fixture subsidiaries.

Research and Development Expenses. Research and development expenses declined
50.6% in the third quarter of fiscal 2002 to $1,529 from $3,098 in the third
quarter of fiscal 2001. The decrease is primarily attributable to the sale of
the fixture subsidiaries. Research and development expenses incurred related
to: (i) expansion and continued improvement of the line of Uni-Form® pulse
start lamps (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 4.5% in the third quarter
of fiscal 2002 from 5.7% in the third quarter of fiscal 2001. While research
and development expenditures declined in connection with the Companys
commitment to generate positive operating cash flow, 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.

General and Administrative Expenses.General and administrative expenses of
$3,602 were 0.1% lower in the third quarter of fiscal 2002 compared to $3,606
in the third quarter of fiscal 2001. The decrease resulted from the sale of
the fixture subsidiaries resulting in the elimination of approximately $900 of
expenses, offset by an increase in corporate expenses of approximately $800
(including legal and consulting fees of $510).

Provision for Loan Impairment.In the quarter ended March 31, 2002, the
Company recorded an additional valuation reserve for an impaired loan of $900
related to the amount by which the carrying value of the loan receivable from
officer exceeded the underlying fair value of the assets available to repay the
loan. In the quarter ended March 31, 2002, no interest income was recognized
or paid on the loan.

Amortization of Intangible Assets.Amortization expense decreased to $83 in
the third quarter of fiscal 2002 from $709 in the third quarter of fiscal 2001.
The decrease in amortization expense is due to the adoption in the fiscal 2002
first quarter of Statement of Financial Accounting Standards (FAS) No. 142,
Goodwill and Intangible Assets. As a result, goodwill, as well as intangible
assets with indefinite lives, are no longer subject to amortization.

Income (Loss) from Operations.As a result of the items noted above, the
Company realized loss from operations in the third quarter of fiscal 2002 of
$(847) as compared to income from operations of $3,220 in the third quarter of
fiscal 2001.

Interest Expense.Interest expense decreased to $2,559 in the third quarter of
fiscal 2002 from $3,436 in the third quarter of fiscal 2001. The decrease is
primarily attributable to the reduction in
debt outstanding resulting from the sale of the fixture subsidiaries and a
significant reduction in interest rates related to a portion of the Companys
debt.

Interest Income.Interest income decreased to $82 in the third quarter of
fiscal 2002 from $262 in the third quarter of fiscal 2001. The decrease is
primarily attributable to the cessation of interest income recognition on the
loan receivable from officer.

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Income (Loss) from Investments.The income (loss) from investments in the
third quarter of fiscal 2002 of ($2,121) consists of a loss on the sale of a
preferred stock investment in Venture Lighting Japan of $(2,007) and an equity
loss of $(114) from the Companys investment in Fiberstars, Inc., a marketer
and distributor of fiber optic lighting products. The loss in the third
quarter of fiscal 2001 of $(81) represents the equity loss from the Companys
investment in Fiberstars.

Income (Loss) before Income Taxes and Minority Interest.The Company had a
loss before income taxes and minority interest of $(5,445) in the third quarter
of fiscal 2002 as compared to a loss before income taxes and minority interest
of $(35) in the third quarter of fiscal 2001.

Income Taxes.Income tax expense was $152 for the third quarter of fiscal
2002 as compared to $9 in the third quarter of fiscal 2001. The income tax
expense in the third quarters of fiscal 2002 and 2001 related primarily to
certain of the Companys foreign operations.

At June 30, 2001, the Company had net operating loss carryforwards of $88,901
available to reduce future United States federal taxable income, which expire
in varying amounts from 2008 to 2021.

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 $259, which may be used indefinitely to reduce regular federal
income taxes.

Also at June 30, 2001, the Company had foreign net operating loss carryforwards
for tax purposes totaling $1,698 that expire in varying amounts from 2002 to
2007 and $8,053 that have no expiration dates.

Nine Months Ended March 31, 2002 Compared with Nine Months Ended March 31, 2001

Net Sales. Net sales decreased 18.3% to $134,535 in the first nine months of
fiscal 2002 from $164,697 in the first nine months of fiscal 2001. The
decrease in sales is primarily attributed to the sale of the fixture
subsidiaries. Excluding the fixture subsidiaries, sales for the first nine
months of fiscal 2002 were $99,451 compared with $101,939 for the first nine
months of fiscal 2001. Metal halide sales, excluding the fixture subsidiaries,
declined 3% to $76,352 for the first nine months of fiscal 2002 compared with
$78,404 for the first nine months of fiscal 2001. The Company attributes the
decline to weakness in the U.S. economy and the lighting market, in general.
The U.S. metal halide market declined 10% during the first nine months of the
current fiscal year. During this time the Company has increased its market
share from prior year levels and believes that a stronger U.S. economy will
result in an improved lighting market for the Companys products. From 1990 to
2000, the U.S. metal halide lighting market grew at a compound annual rate of
12% per year, and the Company believes that the market will return to a
positive growth rate as the U.S. economy improves.

Excluding the fixture subsidiaries, sales of the Companys second-generation
metal halide lighting product line, Uni-Form® pulse start, grew 27% to $22,167
for the first nine months of fiscal 2002 from $17,438 for the first nine months
of fiscal 2001. Sales of APL materials decreased 8% over the same nine months
a year ago. Geographically, these sales of materials decreased 18% in the U.S.,
but outside the U.S. remained flat as compared to the prior year. The decline
in the U.S. is reflective of the decline in the U.S. metal halide market.
Excluding the fixture subsidiaries, non-metal halide lighting sales declined
5%, due to the managed decline of some non-metal halide product lines and
weakness in the lighting market.

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Excluding the fixture subsidiaries, lighting sales inside the U.S. decreased 4%
in the first nine months of fiscal 2002 as compared to the same period a year
ago, due to weakness in the general U.S. economy and U.S. lighting market
during that period as compared to the year ago period. Lighting sales outside
the U.S. declined 4%, primarily due to a temporary reduction in power supply
sales resulting from the transition of production from the United Kingdom to
India.

DSIs telecommunication product sales for the nine months of fiscal 2002 were
$866, a decrease of 57% from $2,013 in the first nine months of fiscal 2001.
The decrease is attributed to the overall decline in the telecommunications
industry. However, sales of DSIs non-telecom materials and equipment
increased 26% to $7,484 in the first nine months of fiscal 2002 from $5,918 in
the first nine months of fiscal 2001 as the Company capitalized on DSIs
expertise in thin-film optical coatings and optical coating equipment
manufacturing opportunities.

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 12.2% to $87,859 in the first nine
months of fiscal 2002 from $100,075 in the first nine months of fiscal 2001. As
a percentage of net sales, cost of sales increased to 65.3% in the first nine
months of fiscal 2002 from 60.8% in the first nine months of fiscal 2001. Cost
of sales was negatively impacted by several unusual items including inventory
writedowns, additional costs related to the move of the European power supply
production to India, and unfavorable overhead variance resulting from the
decrease in production due to the Companys commitment to significant
reductions in inventory levels. The increase in cost of sales as a percentage
of sales was reflected across all areas of the Companys sales including
materials, system components and systems. The margins were also negatively
impacted by the shift in the mix of product sales reflecting increases in lower
margin power supply and equipment sales and decreases in higher margin
materials sales. The Company believes that cost of sales as a percent of sales
will decline to approximately 60% of sales by the end of calendar 2002.

Marketing and Selling Expenses.Marketing and selling expenses decreased
19.4% to $25,322 in the first nine months of fiscal 2002 from $31,407 in the
first nine months of fiscal 2001. The decrease is primarily attributable to the
sale of the fixture subsidiaries, and is comparable with the decrease in sales.

Research and Development Expenses.Research and development expenses declined
29.1% in the first nine months of fiscal 2002 to $6,863 from $9,681 in the
first nine months of fiscal 2001. The decrease is primarily related to the
sale of the fixture subsidiaries. Research and development expenses incurred
related to: (i) expansion and continued improvement of the line of Uni-Form®
pulse start lamps (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
5.1% in the first nine months of fiscal 2002 from 5.9% in the first nine months
of fiscal 2001. While research and development expenditures declined in
connection with the Companys commitment to generate positive operating cash
flow, the Company expects to continue to make substantial expenditures on

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research and development to enhance its position as the leading innovator in
the metal halide lighting industry.

General and Administrative Expenses.General and administrative expenses
increased 11.7% to $11,857 in the first nine months of fiscal 2002 from $10,614
in the first nine months of fiscal 2001. The increase included an increase in
corporate expenses of approximately $1,350 (including legal and consulting fees
of $957), net of a reduction in general and administrative expenses of $500
related to the fixture subsidiaries that were sold in the second quarter.
Also, in fiscal 2001, expenses were reduced by the elimination of a $500
litigation-related accrual that, based on review with legal counsel, was no
longer required.

Provision for Loan Impairment.During the first nine months of fiscal 2002, the
Company recorded a valuation reserve for an impaired loan of $5,500 related to
the amount by which the carrying value of the loan receivable from officer
exceeded the underlying fair value of the assets available to repay the loan.
In fiscal 2002, no interest income has been recognized or paid on the loan.

Gain on Settlement of Claim.The Company recorded a gain on the settlement of
a claim, net of legal fees, as a result of the enforcement of a non-compete
agreement with several former employees of a subsidiary of the Company. The
terms of the settlement are expected to result in an additional receipt by the
Company of $525 in June 2002, however, the Company will not reflect this
contingent gain amount until realized.

Special Charges.See Consolidation of Power Supply Production Operations and
Restructuring of Worldwide Operations above.

Amortization of Intangible Assets.Amortization expense decreased to $253 in
the first nine months of fiscal 2002 from $2,118 in the first nine months of
fiscal 2001. The decrease in amortization expense is due to the adoption in
the fiscal 2002 first quarter of Statement of Financial Accounting Standards
(FAS) No. 142, Goodwill and Intangible Assets. As a result, goodwill, as well
as intangible assets with indefinite lives, is no longer subject to
amortization.

Income (Loss) from Operations.As a result of the items noted above, the
Company incurred a loss from operations in the first nine months of fiscal 2002
of $(11,574) as compared to income from operations of $10,802 in the first nine
months of fiscal 2001. Excluding special charges of $(9,697), the provision for
loan impairment of $(5,500) and the gain on settlement of claim of $554, the
Company realized income from operations of $3,465 in the first nine months of
fiscal 2002.

Interest Expense.Interest expense decreased to $8,616 in the first nine
months of fiscal 2002 from $10,663 in the first nine months of fiscal 2001.
The decrease is primarily attributable to the significant reduction in interest
rates related to a portion of the Companys debt and the reduction in debt
outstanding resulting from the sale of the fixture subsidiaries.

Interest Income.Interest income decreased to $144 in the first nine months of
fiscal 2002 from $749 in the first nine months of fiscal 2001. The decrease is
primarily attributable to the cessation of interest income recognition in the
first quarter of fiscal 2002 related to the loan receivable from officer as
mentioned above.

Income (Loss) from Investments.The income (loss) from investments in the
first nine months of fiscal 2002 of ($2,332) consists of a loss on the sale of
a preferred stock investment in Venture Lighting Japan of $(2,007) and an
equity loss of $(325) from the Companys investment in Fiberstars, Inc., a
marketer and distributor of fiber optic lighting products. The loss in the
first nine

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months of fiscal 2001 of $(63) represents the equity loss from the
Companys investment in Fiberstars.

Gain from Sale of Fixture Subsidiaries.See Sale of Fixture Subsidiaries
above.

Income (Loss) before Income Taxes, Minority Interest and Cumulative Effect of
Accounting Change.The Company had a loss before income taxes, minority
interest and cumulative effect of accounting change of $(22,151) in the first
nine months of fiscal 2002 as compared to income before income taxes, minority
interest and cumulative effect of accounting change of $825 in the first nine
months of fiscal 2001. Excluding special charges of $(9,697), the provision for
loan impairment of $(5,500), the gain on settlement of claim of $554, the loss
on the sale of the preferred stock investment of $(2,007), and the gain on sale
of the fixture subsidiaries of $227, the Company realized a loss before income
taxes, minority interest and cumulative effect of accounting change of $(5,728)
in the first nine months of fiscal 2002.

Income Taxes.Income tax expense was $386 for the first nine months of fiscal
2002 as compared to income tax expense of $106 in the first nine months of
fiscal 2001. The income tax expense in the first nine months of fiscal 2002
and 2001 related primarily to certain of the Companys foreign operations.

At June 30, 2001, the Company had net operating loss carryforwards of $88,901
available to reduce future United States federal taxable income, which expire
in varying amounts from 2008 to 2021.

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 $259, which may be used indefinitely to reduce regular federal
income taxes.

Also at June 30, 2001, the Company had foreign net operating loss carryforwards
for tax purposes totaling $1,698 that expire in varying amounts from 2002 to
2007 and $8,053 that have no expiration dates.

Cumulative Effect of Accounting Change.The Company adopted FAS 142 in the
first quarter of fiscal 2002 and recorded a cumulative effect of change in
accounting principle for the impairment of goodwill and other indefinite lived
intangible assets of $71,171, or $(3.04) per share, as of the beginning of
fiscal 2002 (July 1, 2001).

Liquidity and Capital Resources

The Companys principal financial requirements are for working capital, capital
expenditures, market development activities, and research and development
efforts. These requirements have been, and
the Company expects they will continue to be, financed primarily through a
combination of cash flow from operations, borrowings under credit arrangements
and the sale of stock and debt under two shelf registration statements for
$300,000 and $100,000. These shelf registration statements will not be
available for offerings, other than investment grade debt securities, until the
market value of common equity held by non-affiliates again exceeds $75,000.

Cash decreased $1,292 during the first nine months of fiscal 2002. Cash used in
operating activities totaled $989, cash provided by investing activities
totaled $13,748, and cash used in financing activities totaled $14,051.

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Net Cash Provided by (Used in) Operating Activities.Net cash used in operating
activities totaled $989 during the first nine months of fiscal 2002 as compared
to net cash provided by operating activities of $410 in the first nine months
of fiscal 2001.

Net Cash Provided by (Used in) Investing Activities.During the first nine
months of fiscal 2002, net cash provided by investing activities totaled
$13,748, which consisted primarily of net proceeds from the sale of the fixture
subsidiaries of $24,166, net of capital expenditures of $11,330. Capital
expenditures in fiscal 2002 related to building improvements and 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 plans to limit its capital expenditure program
for the next twelve months.

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 initially used to repay indebtedness outstanding under
the Bank Credit Facility. The Company has expended substantially the entire
amount as of December 31, 2001 on capital improvements, including optical
coating production equipment, filter testing and measuring equipment,
production facilities, and on research and development, in the
telecommunications business. Future telecommunications capital expenditures
will be determined based upon the economic recovery of the telecommunications
industry.

The Company estimates its capital expenditures will approximate $4,000 to
$6,000 over the next twelve months. Future capital expenditures 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 (Used in) Financing Activities.During the first nine
months of fiscal 2002, net cash used in financing activities was $14,051. This
primarily represents repayments of bank debt under the Companys credit
facilities.

The Company has $100,000 of 8% Senior Notes due March 15, 2008. The notes are
redeemable at the Companys option, in whole or in part, on or after 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.

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
$14,144 to its CEO, including interest accrued at an interest rate of 8%. The
proceeds of the loan were used by the Companys CEO to reduce the principal
balance outstanding of margin loan accounts. The margin loans were fully
repaid in the quarter ended March 31, 2002. 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.
On January 22, 2002, the Board and CEO agreed in principle to a plan that
extends the maturity of the loan to July 31, 2007. Under the terms of the
plan, the CEO will sell certain assets in an orderly manner in order to
maximize the net proceeds, which will be used to pay a portion of the loan.
The CEO will continue his 10b5-1 plan to sell shares he now owns pursuant to
Rule 144 when the stock price

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exceeds $15 per share. In addition, the CEO will
be expected to apply after-tax cash bonuses earned from the Company toward
repayment of the loan. Interest on the loan in the future will accrue at the
same rate that the Company pays on its revolving credit loan. The loan will be
repayable immediately if the CEO ceases to be employed by the Company. The
Board reserved the right to require earlier repayment if ADLT requires the
payment to prevent an unacceptable strain on cash resources.

The Companys ability to collect amounts due according to the contractual terms
of the loan agreement is largely dependent on the ultimate realization from the
sale of assets owned by the CEO, including the CEOs investment in common stock
of the Company. When determining the fair value of investments in common
stock, the Company considers both the current market price and also volatility
in the stock price over the period in which the Company estimates it would take
to sell those shares into the market.

Loan receivables are measured for impairment based on either the present value
of expected future cash flows discounted at the loans effective interest rate
or the fair value of the underlying collateral or other assets available to
repay the loan. A loan is considered impaired when, based on current
information and events, it is probable that the Company will be unable to
collect all amounts due according to the contractual terms of the loan
agreement. The Company evaluates the collectibility of both the interest and
principal when assessing the need for a possible loss accrual. During the
first nine months of fiscal 2002, the Company recorded a valuation reserve for
an impaired loan of $5,500 related to the amount by which the carrying value of
the loan exceeded the underlying fair value of the assets available to repay
the loan. The Company will recognize recoveries on amounts previously reserved
for after considering the fair value of the underlying assets and evidence of
repayments on the loan.

Ability to Advance Future Operations.The Company has implemented, 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, 2002 was $28,083, resulting in a working capital
ratio of current assets to current liabilities of 1.9 to 1.0, as compared to
$46,056 or 2.1 to 1.0 at June 30, 2001. As of March 31, 2002, the Company had
$2,360 in cash and cash equivalents.

The interest-bearing obligations of the Company totaled $141,395 as of March
31, 2002, and consisted of: $29,213 of borrowings under the Bank Credit
Facility; $100,000 of 8% Senior Notes; mortgages of $5,503; promissory notes of
$2,300; obligations of foreign subsidiaries of $4,356; and, capital leases of
$23.

During the quarter ended December 31, 2001, in connection with the sale of the
fixture subsidiaries, the Company amended its Bank Credit Facility to reduce
the revolving credit loan to $25,000 from $40,000 and the term loan to $13,000
from $25,000 and change certain covenants under the agreement. Availability of
borrowings under the revolving credit loan is determined by the
Companys eligible account receivables and inventories. Prior to the amendment
described below, interest rates on the revolving credit loans outstanding were
based, at the Companys option, on LIBOR plus 2.75% or the agent banks prime
rate. Under the term loan, the Company pays monthly principal payments that
total $3,576 annually, with the unpaid balance due at maturity. Prior to the
amendment described below, interest rates on the term loan were based, at the
Companys option, on LIBOR plus 3.25% or the agent banks prime rate. The Bank
Credit Facility matures on July 1, 2004.

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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. At
March 31, 2002, the Company was not in compliance with this financial covenant.
The Company obtained a waiver for non-compliance from its lenders for the
quarter then ended. In addition, the Bank Credit Facility was amended to
provide for a new measurement period for this covenant commencing April 1,
2002. The Company expects to meet this covenant at future determination dates.
The Companys ability to elect LIBOR-based interest rates on its loans was
suspended pursuant to this amendment. 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 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 net proceeds from the public offering of
approximately $22,900 were initially used to repay indebtedness outstanding
under the Bank Credit Facility. The Company has expended substantially the
entire amount as of December 31, 2001 on capital improvements, including
optical coating production equipment, filter testing and measurement equipment,
production facilities, and on research and development in its
telecommunications business unit.

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. These shelf registration statements will not
be available for offerings, other than investment grade debt securities, until
the market value of common equity held by non-affiliates again exceeds $75,000.

The Company has implemented a working capital improvement program to conserve
and generate cash. In addition, the Company is actively managing its cash,
especially as it relates to any discretionary expenditures. The Companys
ability in the future to fund operations, service debt and provide for capital
expenditures is dependent on the success of its working capital improvement
plan.

The Company believes that an improvement in its working capital, along with its
available cash, anticipated cash flow from operations, certain building sales,
and availability under its Bank Credit Facility, should enable the Company to
fund its operations for at least the next 12 months. 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 telecommunications and optical
coatings should enable the Company to access additional capital resources, as
needed.

Impact of Recently Issued Accounting Standards

In July, 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (FAS) No. 141, Business Combinations, and FAS
142, Goodwill and Intangible Assets. FAS 141 is effective for all business
combinations completed after June 30, 2001

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and requires using the purchase method of accounting. The pooling of interest
method of accounting is prohibited except for transactions initiated before
July 1, 2001.

FAS 142 is effective for fiscal years beginning after December 15, 2001,
however, certain provisions of this Statement apply to goodwill and other
intangible assets acquired between July 1, 2001 and the effective date of FAS
142. Early adoption of FAS 142 is permitted. Major provisions of FAS 142
require intangible assets acquired in a business combination to be recorded
separately from goodwill if they arise from contractual or other legal rights
or are separable from the acquired entity and can be sold, transferred,
licensed, rented or exchanged, either individually or as part of a related
contract, asset or liability. In addition, goodwill, as well as intangible
assets with indefinite lives, will no longer be subject to amortization
effective July 1, 2001. Finally, goodwill and intangible assets with indefinite
lives will be tested for impairment annually and whenever there is an
impairment indicator. Previously, the Company measured goodwill and
intangibles (to be held and used) with indefinite lives for impairment using
undiscounted cash flows under the guidance of FAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.

The Company adopted FAS 142 as of July 1, 2001. The Company evaluated goodwill
of $66,172 and intangible assets with indefinite lives of $11,874, which
represents tradenames. The Company used third party appraisals and expected
future discounted cash flows to determine the fair value of the reporting units
and whether any impairment of goodwill or indefinite lived intangible assets
existed as of the above date. As a result of this evaluation, the Company
recorded a cumulative effect of change in accounting principle for the
estimated impairment of goodwill and other indefinite lived intangible assets
of $71,171, or $(3.04) per share, as of the beginning of fiscal 2002.
The impact of adopting FAS 142 was to reduce amortization and, consequently,
the loss before cumulative effect of accounting change for the third quarter of
fiscal 2002 by $109, or $.00 per share. The impact of adopting FAS 142 was to
reduce the loss before cumulative effect of accounting change for the first
nine months of fiscal 2002 by $1,206, or $.05 per share. Amortization of
intangible assets in the third quarter of fiscal 2001 would have been $68, a
reduction of $641, or $.03 per share if the accounting change related to
acquired intangible amortization required by FAS 142 had been applied to that
quarter. Amortization of intangible assets in the first nine months of fiscal
2001 would have been $244, a reduction of $1,874, or $.09 per share if the
accounting change related to acquired intangible amortization required by FAS
142 had been applied to that period.

The Company adopted Emerging Issues Task Force (EITF) Issue 01-9 Accounting
for Consideration Given by a Vendor to a Customer in the quarter ended March
31, 2002. EITF Issue 01-9 requires that expense associated with a free product
or service delivered at the time of sale of another product or service should
be classified as cost of sales. The Companys fixture subsidiaries that were
sold in the second quarter of fiscal 2002 had incurred and included such costs
in marketing and selling expense. Accordingly, the Company has reclassified
such amounts to cost of sales within these financial statements. The amounts
reclassified for the three months ended March 31, 2002 and 2001 are $0 and
$1,098, respectively. The amounts reclassified for the nine months ended March
31, 2002 and 2001 are $1,836 and $3,090, respectively.

In August 2001, the Financial Accounting Standards Board issued FAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets.This statement
addresses financial accounting for the impairment and disposal of long-lived
assets, and supersedes FAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of.The Company must adopt FAS
No. 144 on July 1, 2002. Management is currently studying the potential effect
of adopting this statement.

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Foreign Currency

Approximately 22% of the Companys net sales in fiscal 2001 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
started a program in fiscal 2002 to hedge a portion of its foreign currency
balance sheet exposures which is intended to reduce any significant impact on
earnings and cash flow.




Item 3. Quantitative and Qualitative Disclosures about Market Risk

During the nine months ended March 31, 2002, 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, 2001.

The Company enters into forward exchange contracts to reduce its exposure to
fluctuations in related foreign currencies. These contracts are with a major
financial institution and the risk of loss is considered remote. The Company
does not hold or issue derivative financial instruments for trading purposes.
The total value of open contracts and any risk to the Company as a result of
these arrangements is not material to the Companys financial position,
liquidity or results of operations.

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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 1. Legal Proceedings

The information included in Note L of the Notes to Condensed Consolidated
Financial Statements (Unaudited) included in this Report on Form 10-Q is
hereby incorporated by reference.




Item 6. Exhibits and Reports on Form 8-K



|(a) |  | Exhibits
|--- |  | --------

|        |  |                                                                                                                                                                                                                                                                                                                                                                                        |  |             
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------
|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    |  | Eleventh 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
April 23, 2002 amending the Credit Agreement by and among the
same parties dated as of May 21, 1999                                                                                    |  |             
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                        |  |             
|       
|       
|       
|       
|10.2    |  | Twelfth 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 May 13, 2002 amending the Credit Agreement by and among
the same parties dated as of May 21, 1999.                                                                                      |  |             
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                        |  |             
|10.3    |  | Fifth Amendment to Contingent Warrant Agreement dated as of
March 31, 2002 by and among Advanced Lighting Technologies,
Inc., General Electric Company, Wayne R. Hellman, individually and as
voting trustee under Voting Trust Agreement dated October 10, 1995,
Hellman Ltd. And Alan J. Ruud, individually and as voting trustee
under Voting Trust Agreement dated January 2, 1998 |  |             
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                        |  |             
|       
|       
|       
|       
|12      |  | Statement Re: Computation of Ratio of Earnings to Fixed Charges                                                                                                                                                                                                                                                                                                                        |  |             



---

|(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.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   

32



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##### Table of Contents



|(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,
2002.

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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, 2002 |  | By:                                  |  | /s/ Wayne R. Hellman    |  | 
|                   |  |                                      |  |                         |  | 
|                   |  |                                      |  | Wayne R. Hellman        |  | 
|                  
|                  
|                  
|                  
|                   |  |                                      |  | Chief Executive Officer |  | 
|                  
|                  
|                  
|                  
|                   |  |                                      |  |                         |  | 
|                  
|                  
|                  
|                  
|Date: May 15, 2002 |  | By:                                  |  | /s/ Steven C. Potts     |  | 
|                   |  |                                      |  |                         |  | 
|                   |  |                                      |  | Steven C. Potts         |  | 
|                  
|                  
|                  
|                  
|                   |  |                                      |  | Chief Financial Officer |  | 

34



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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)     
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                        |  |         
|       
|       
|       
|       
|4.1     |  | Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4                                                                                                                                                                                                                                                                                                                                    |  |         
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                        |  |         
|       
|       
|       
|       
|10.1    |  | Eleventh 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
April 23, 2002, amending the Credit Agreement by and among the
same parties dated as of May 21, 1999                                                                                   |  |         
|        |  |                                                                                                                                                                                                                                                                                                                                                                                        |  |         
|       
|       
|       
|       
|10.2    |  | Twelfth 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 May 13, 2002 amending the Credit Agreement by and among
the same parties dated as of May 21, 1999.                                                                                      |  |         
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                        |  |         
|10.3    |  | Fifth Amendment to Contingent Warrant Agreement dated as of
March 31, 2002 by and among Advanced Lighting Technologies,
Inc., General Electric Company, Wayne R. Hellman, individually and as
voting trustee under Voting Trust Agreement dated October 10, 1995,
Hellman Ltd. And Alan J. Ruud, individually and as voting trustee
under Voting Trust Agreement dated January 2, 1998 |  |         
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                        |  |         
|       
|       
|       
|       
|12      |  | Statement Re: Computation of Ratio of Earnings to Fixed Charges                                                                                                                                                                                                                                                                                                                        |  |         



---

|(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.                         

35