##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 
  FORM 10-Q (Mark One)[X]
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the quarterly period ended March 31, 2004or[   ]
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the transition period from  to
 Commission File Number: 0-27202 ADVANCED LIGHTING TECHNOLOGIES, INC. 
 Ohio
    
    34-1803229(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)32000 Aurora Road, Solon, Ohio
    
    44139(Address of principal executive offices)
    
    (Zip Code)
 440 / 519-0500 
 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 [Ö] No [   ] Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [   ] No
[Ö] There were 1,099 shares of the Registrants Common Stock, $.001 par value per
share, outstanding as of May 10, 2004.




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INDEX Advanced Lighting Technologies, Inc. Page No.Part I
    
    Financial InformationItem 1.
    
    Financial Statements (Unaudited)Condensed Consolidated Balance Sheets -
March 31, 2004, December 31, 2003 and June 30, 2003
    
    
    2Condensed Consolidated Statements of Operations -
Three months ended March 31, 2004 and 2003,
six months ended December 31, 2003, and
nine months ended March 31, 2003
    
    
    4Condensed Consolidated Statement of Shareholders Equity -
Nine months ended March 31, 2004
    
    
    5Condensed Consolidated Statements of Cash Flows -
Three months ended March 31, 2004, six months ended
December 31, 2003 and nine months ended March 31, 2003
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    18Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    30Item 4.
    
    Controls and Procedures
    
    
    31Part II
    
    Other InformationItem 1.
    
    Legal Proceedings
    
    
    32Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    32Item 6.
    
    Exhibits and Reports on Form 8-K
    
    
    32Signatures
    
    
    
    
    35MANAGEMENTS RIGHTS AGREEMENTFOURTH AMEND TO HELLMAN LOAN AGREEMENTFIFTH AMEND TO HELLMAN LOAN AGREEMENTAMENDMENT AND CONSENTS TO AGREEMENTSSETTLEMENT AGREEMENTFIRST AMENDMENT TO SETTLEMENT AGREEMENTCOMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES302-CEO-CERTIFICATION302-CHIEF ACCOUNTING OFFICER-CERTIFICATION906 CEO-CERTIFICATION906 CHIEF ACCOUNTING OFFICER-CERTIFICATION
  1




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##### Table of Contents



Advanced Lighting Technologies, Inc. 
 Consolidated Balance Sheets
 (in thousands, except per share amounts)
 (Unaudited)
    
    (Unaudited)
    
    
    (Audited)Reorganized
    
    Reorganized
    
    
    PredecessorCompany
    
    Company
    
    
    CompanyMarch 31,
    
    December 31,
    
    
    June 30,2004
    
    2003
    
    
    2003AssetsCurrent assets:Cash and cash equivalents
    
    $
    3,450
    
    
    $
    9,635
    
    
    
    $
    4,167Trade receivables, less allowances of $799, $727 and $979
    
    
    28,883
    
    
    
    28,982
    
    
    
    
    31,312Inventories:Finished goods
    
    
    15,332
    
    
    
    15,156
    
    
    
    
    15,242Raw materials and work-in-process
    
    
    8,438
    
    
    
    7,902
    
    
    
    
    8,69323,770
    
    
    
    23,058
    
    
    
    
    23,935Prepaid expenses
    
    
    2,105
    
    
    
    2,513
    
    
    
    
    1,374Total current assets
    
    
    58,208
    
    
    
    64,188
    
    
    
    
    60,788Property, plant and equipment:Land and buildings
    
    
    18,061
    
    
    
    18,030
    
    
    
    
    33,822Machinery and equipment
    
    
    27,385
    
    
    
    27,029
    
    
    
    
    72,583Furniture and fixtures
    
    
    1,543
    
    
    
    1,371
    
    
    
    
    17,91246,989
    
    
    
    46,430
    
    
    
    
    124,317Less accumulated depreciation
    
    
    1,052
    
    
    
    
    
    
    
    
    35,98145,937
    
    
    
    46,430
    
    
    
    
    88,336Receivables from related parties
    
    
    4,214
    
    
    
    4,279
    
    
    
    
    6,463Investments in affiliates
    
    
    2,262
    
    
    
    2,262
    
    
    
    
    8,668Other assets
    
    
    3,831
    
    
    
    4,064
    
    
    
    
    2,976Intangible assets, net
    
    
    24,898
    
    
    
    24,675
    
    
    
    
    2,572Goodwill
    
    
    50,411
    
    
    
    50,411
    
    
    
    
    4,473$
    189,761
    
    
    $
    196,309
    
    
    
    $
    174,276
 See Notes to Consolidated Financial Statements, including Basis of
Presentation describing the Reorganized Company and Predecessor Company. 2




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##### Table of Contents



Advanced Lighting Technologies, Inc.
Consolidated Balance Sheets(in thousands, except per share amounts) (Unaudited)
    
    (Unaudited)
    
    
    (Audited)Reorganized
    
    Reorganized
    
    
    PredecessorCompany
    
    Company
    
    
    CompanyMarch 31,
    
    December 31,
    
    
    June 30,2004
    
    2003
    
    
    2003Liabilities and shareholders equityLiabilities not subject to compromise:Current liabilities:Short-term debt and current portion of long-term debt
    
    $
    6,650
    
    
    $
    5,060
    
    
    
    $
    2,241Accounts payable
    
    
    8,468
    
    
    
    14,421
    
    
    
    
    10,814Payables to related parties
    
    
    2,703
    
    
    
    2,219
    
    
    
    
    790Employee-related liabilities
    
    
    5,257
    
    
    
    3,551
    
    
    
    
    2,895Accrued income and other taxes
    
    
    1,928
    
    
    
    1,905
    
    
    
    
    1,294Other accrued expenses
    
    
    7,285
    
    
    
    9,862
    
    
    
    
    6,839Debtor-in-Possession Facility
    
    
    
    
    
    
    
    
    
    
    
    25,126Total current liabilities
    
    
    32,291
    
    
    
    37,018
    
    
    
    
    49,999Long-term debt
    
    
    127,387
    
    
    
    128,072
    
    
    
    
    5,324Total liabilities not subject to compromise
    
    
    159,678
    
    
    
    165,090
    
    
    
    
    55,323Liabilities subject to compromise
    
    
    
    
    
    
    
    
    
    
    
    116,214Total liabilities
    
    
    159,678
    
    
    
    165,090
    
    
    
    
    171,537Minority interest
    
    
    1,360
    
    
    
    1,219
    
    
    
    
    968New preferred stock, $.001 par value, 239 shares authorized;
29 shares issued and outstanding
    
    
    29,000
    
    
    
    29,000
    
    
    
    
    Old preferred stock, $.001 par value, 1,000 shares authorized;
761 Series A convertible redeemable shares issued and outstanding
    
    
    
    
    
    
    
    
    
    
    
    24,475Common shareholders equity (deficit)New common stock, $.001 par value, 80,000 shares authorized;
1 share issued and outstanding
    
    
    1
    
    
    
    1
    
    
    
    
    Old common stock, $.001 par value, 80,000 shares authorized,
23,807 shares issued and outstanding
    
    
    
    
    
    
    
    
    
    
    
    24Paid-in-capital
    
    
    1,060
    
    
    
    999
    
    
    
    
    212,724Accumulated other comprehensive income (loss)
    
    
    15
    
    
    
    
    
    
    
    
    (640
    )Loan and interest receivable from officer, less reserve of $9,800
    
    
    
    
    
    
    
    
    
    
    
    (4,344
    )Retained earnings (accumulated deficit)
    
    
    (1,353
    )
    
    
    
    
    
    
    
    (230,468
    )(277
    )
    
    
    1,000
    
    
    
    
    (22,704
    )$
    189,761
    
    
    $
    196,309
    
    
    
    $
    174,276
 See Notes to Consolidated Financial Statements, including Basis of
Presentation describing the Reorganized Company and Predecessor Company. 3




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##### Table of Contents



Advanced Lighting Technologies, Inc. 
 Condensed Consolidated Statements of Operations (Unaudited)
 (In thousands)
 ReorganizedCompany
    
    
    Predecessor CompanyQuarter
    
    
    Quarter
    
    Six Months
    
    Nine MonthsEnded
    
    
    Ended
    
    Ended
    
    EndedMarch 31,
    
    
    March 31,
    
    December 31,
    
    March 31,2004
    
    
    2003
    
    2003
    
    2003Net sales
    
    $
    36,944
    
    
    
    $
    36,703
    
    
    $
    70,510
    
    
    $
    108,423Costs and expenses:Cost of sales
    
    
    22,475
    
    
    
    
    22,892
    
    
    
    43,361
    
    
    
    69,134Marketing and selling
    
    
    5,729
    
    
    
    
    5,457
    
    
    
    11,311
    
    
    
    16,808Research and development
    
    
    1,507
    
    
    
    
    1,649
    
    
    
    3,095
    
    
    
    4,760General and administrative
    
    
    4,617
    
    
    
    
    2,628
    
    
    
    6,208
    
    
    
    8,934Provision for loan impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,700Refinancing and non-recurring items
    
    
    
    
    
    
    
    84
    
    
    
    
    
    
    
    2,387Gain on sale of property
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (62
    )Special charges and asset impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,714Amortization of intangible assets
    
    
    227
    
    
    
    
    86
    
    
    
    177
    
    
    
    256Income (loss) from operations
    
    
    2,389
    
    
    
    
    3,907
    
    
    
    6,358
    
    
    
    (3,208
    )Other income (expense):Interest expense
    
    
    (3,410
    )
    
    
    
    (2,722
    )
    
    
    (7,459
    )
    
    
    (8,732
    )Interest income
    
    
    110
    
    
    
    
    140
    
    
    
    188
    
    
    
    415Income (loss) from investments
    
    
    
    
    
    
    
    (104
    )
    
    
    3
    
    
    
    (756
    )Gain on restructuring
    
    
    
    
    
    
    
    
    
    
    
    1,184
    
    
    
    Write-off of deferred loan costs
    
    
    
    
    
    
    
    
    
    
    
    (2,251
    )
    
    
    Reorganization expenses
    
    
    
    
    
    
    
    (3,963
    )
    
    
    (11,258
    )
    
    
    (3,963
    )Income (loss) before income taxes
and minority interest
    
    
    (911
    )
    
    
    
    (2,742
    )
    
    
    (13,235
    )
    
    
    (16,244
    )Income tax expense
    
    
    301
    
    
    
    
    224
    
    
    
    360
    
    
    
    658Income (loss) before minority interest
    
    
    (1,212
    )
    
    
    
    (2,966
    )
    
    
    (13,595
    )
    
    
    (16,902
    )Minority interest in income
of consolidated subsidiary
    
    
    (141
    )
    
    
    
    (108
    )
    
    
    (251
    )
    
    
    (267
    )Net income (loss)
    
    $
    (1,353
    )
    
    
    $
    (3,074
    )
    
    $
    (13,846
    )
    
    $
    (17,169
    )
 See Notes to Consolidated Financial Statements, including Basis of
Presentation describing the Reorganized Company and Predecessor Company. 4




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##### Table of Contents



Advanced Lighting Technologies, Inc. 
 Condensed Consolidated Statement of Shareholders Equity (Unaudited)
 Nine Months Ended March 31, 2004
 (in thousands)
 Loan andAccumulated
    
    Interest
    
    
    
    
    
    CommonCommon Stock
    
    
    
    
    
    Other
    
    Receivable
    
    Retained
    
    Shareholders'Preferred
    
    
    
    Paid-In
    
    Comprehensive
    
    From
    
    Earnings
    
    EquityStock
    
    Shares
    
    Par Value
    
    Capital
    
    Income (Loss)
    
    Officer
    
    (Deficit)
    
    (Deficit)
    
    TotalBalance at July 1, 2003
    
    $
    24,475
    
    
    
    23,807
    
    
    $
    24
    
    
    $
    212,724
    
    
    $
    (640
    )
    
    $
    (4,344
    )
    
    $
    (230,468
    )
    
    $
    (22,704
    )
    
    $
    1,771Net income (loss) -
predecessor company
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,846
    )
    
    
    (13,846
    )
    
    
    (13,846
    )Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,359
    
    
    
    
    
    
    
    
    
    
    
    1,359
    
    
    
    1,359Effect of reorganization
and fresh start reporting:Reclassification to
related party receivables
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,344
    
    
    
    
    
    
    
    4,344
    
    
    
    4,344Extinguishment of old stock
    
    
    (24,475
    )
    
    
    (23,807
    )
    
    
    (24
    )
    
    
    (212,724
    )
    
    
    (719
    )
    
    
    
    
    
    
    244,314
    
    
    
    30,847
    
    
    
    6,372Issuance of new stock
    
    
    29,000
    
    
    
    1
    
    
    
    1
    
    
    
    999
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    30,000Balance at
December 31, 2003
    
    $
    29,000
    
    
    
    1
    
    
    $
    1
    
    
    $
    999
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,000
    
    
    $
    30,000Net income (loss) -
reorganized company
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,353
    )
    
    
    (1,353
    )
    
    
    (1,353
    )Stock purchases by
executive management
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61
    
    
    
    61Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    15Balance at March 31, 2004
    
    $
    29,000
    
    
    
    1
    
    
    $
    1
    
    
    $
    1,060
    
    
    $
    15
    
    
    $
    
    
    
    $
    (1,353
    )
    
    $
    (277
    )
    
    $
    28,723
 See Notes to Consolidated Financial Statements, including Basis of
Presentation describing the Reorganized Company and Predecessor Company. 5




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##### Table of Contents



Advanced Lighting Technologies, Inc. 
 Condensed Consolidated Statements of Cash Flows (Unaudited)
 (in thousands)
 ReorganizedCompany
    
    
    Predecessor CompanyQuarter
    
    
    Six Months
    
    Nine MonthsEnded
    
    
    Ended
    
    EndedMarch 31,
    
    
    December 31,
    
    March 31,2004
    
    
    2003
    
    2003Operating activitiesNet income (loss)
    
    $
    (1,353
    )
    
    
    $
    (13,846
    )
    
    $
    (17,169
    )Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:Depreciation
    
    
    1,056
    
    
    
    
    3,412
    
    
    
    4,789Amortization
    
    
    227
    
    
    
    
    177
    
    
    
    256Provision for doubtful accounts
    
    
    177
    
    
    
    
    381
    
    
    
    (771
    )Loss (income) from investments
    
    
    
    
    
    
    
    (3
    )
    
    
    756Gain on sale of property
    
    
    
    
    
    
    
    
    
    
    
    (62
    )Special charges and asset impairment
    
    
    
    
    
    
    
    
    
    
    
    6,714Provision for loan impairment
    
    
    
    
    
    
    
    
    
    
    
    2,700Gain on restructuring
    
    
    
    
    
    
    
    (1,184
    )
    
    
    Write-off of deferred loan costs
    
    
    
    
    
    
    
    2,251
    
    
    
    Reorganization expenses in excess of (less than)
cash payments of reorganization expenses
    
    
    (4,743
    )
    
    
    
    2,968
    
    
    
    2,756Senior note interest accrued but not paid
    
    
    
    
    
    
    
    4,000
    
    
    
    4,000Payment of pre-petition payables
    
    
    (4,214
    )
    
    
    
    
    
    
    
    Changes in current assets and liabilities and other
    
    
    3,147
    
    
    
    
    6,032
    
    
    
    3,589Net cash provided by (used in) operating activities
    
    
    (5,703
    )
    
    
    
    4,188
    
    
    
    7,558Investing activitiesCapital expenditures
    
    
    (608
    )
    
    
    
    (1,799
    )
    
    
    (3,703
    )Purchase of business
    
    
    (827
    )
    
    
    
    
    
    
    
    Investment in affiliate
    
    
    
    
    
    
    
    (592
    )
    
    
    Proceeds from sale of investment
    
    
    
    
    
    
    
    
    
    
    
    300Proceeds from sale of real estate
    
    
    
    
    
    
    
    
    
    
    
    1,326Net cash used in investing activities
    
    
    (1,435
    )
    
    
    
    (2,391
    )
    
    
    (2,077
    )Financing activitiesNet borrowings (payments) under revolving credit loan
    
    
    2,045
    
    
    
    
    
    
    
    
    (11,944
    )Net borrowings (payments) under debtor in possession facility
    
    
    
    
    
    
    
    (25,126
    )
    
    
    12,841Proceeds from long-term debt
    
    
    
    
    
    
    
    11,000
    
    
    
    Payments of long-term debt and capital leases
    
    
    (1,153
    )
    
    
    
    (1,522
    )
    
    
    (6,007
    )Investment by Saratoga Lighting Holdings, LLC
    
    
    
    
    
    
    
    18,000
    
    
    
    Officer loan repayment
    
    
    
    
    
    
    
    1,334
    
    
    
    Stock purchases by executive management
    
    
    61
    
    
    
    
    
    
    
    
    107Net cash provided by (used in) financing activities
    
    
    953
    
    
    
    
    3,686
    
    
    
    (5,003
    )Increase (decrease) in cash and cash equivalents
    
    
    (6,185
    )
    
    
    
    5,483
    
    
    
    478Cash and cash equivalents, beginning of period
    
    
    9,635
    
    
    
    
    4,167
    
    
    
    2,874Cash and cash equivalents, end of period
    
    $
    3,450
    
    
    
    $
    9,650
    
    
    $
    3,352Supplemental cash flow informationInterest paid
    
    $
    3,418
    
    
    
    $
    1,200
    
    
    $
    2,414Income taxes paid
    
    
    159
    
    
    
    
    159
    
    
    
    109Capitalized interest
    
    
    42
    
    
    
    
    37
    
    
    
    339
 See Notes to Consolidated Financial Statements, including Basis of
Presentation describing the Reorganized Company and Predecessor Company. 6




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##### Table of Contents



Advanced Lighting Technologies, Inc. 
 Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2004
 A. Organization Advanced Lighting Technologies, Inc. (the Company or ADLT) is an
innovation-driven designer, manufacturer and marketer focused on metal halide
lighting products, including materials, system components, systems and
equipment. B. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have
been prepared in conformity with accounting principles generally accepted in
the United States of America 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 adjustments related to the Companys
Chapter 11 Filing. 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, 2003. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect reported amounts and
related disclosures. Actual results could differ from those estimates. On December 10, 2003, Advanced Lighting Technologies, Inc. and six of its
United States subsidiaries, (collectively, the Debtors), completed their
previously announced financial restructuring when their Fourth Amended Chapter
11 Plan of Reorganization (the Final Plan) under the U.S. Bankruptcy Code
(the Bankruptcy Code) became effective and was substantially consummated.
ADLTs non-U.S. operating subsidiaries and Deposition Sciences, Inc., a U.S.
subsidiary, were not a part of the proceedings under the Bankruptcy Code. For
financial reporting purposes, the Company used an effective date of December
31, 2003. The results of operations for the period from December 10, 2003 to
December 31, 2003 were not material. References in these financial statements
to Predecessor Company refer to the Company prior to December 31, 2003.
References to Reorganized Company refer to the Company on and after December
31, 2003, after giving effect to the issuance of new securities in exchange for
the previously outstanding securities in accordance with the Plan and, with
respect Saratoga Lighting Holdings, LLC, additional investment in the Company,
and implementation of fresh start and push down accounting. The events which
occurred during fiscal 2003 and the first two quarters of fiscal 2004 relating
to the Chapter 11 proceedings, the securities issued in accordance with the
Plan, and the fresh start accounting adjustments are described in Company
Restructuring and Reorganization, Fresh Start and Push Down Adjustments
below. 7




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Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2004
(Dollars in thousands) B. Basis of Presentation (continued) Company Restructuring The Debtors filed for reorganization under the Bankruptcy Code on February 5,
2003 (the Filing). From February 5, 2003 to December 10, 2003, the Debtors
operated their businesses as debtors-in-possession under court protection from
their creditors and claimants. Following approval by the creditors, preferred
shareholders and the common shareholders of the Predecessor Company entitled to
vote on the reorganization plan, on December 8, 2003, the Bankruptcy Court
entered an order confirming the Final Plan. On December 10, 2003, the
Effective Date of the Final Plan occurred and the reorganization of the Company
was substantially completed. Plan of ReorganizationPursuant to the terms of the Final Plan, Saratoga
Lighting Holdings, LLC (Saratoga Lighting) received, in exchange for
cancellation of its holdings of the Predecessor Companys Series A Preferred
Stock and Common Stock, and an $18,000 cash investment, new redeemable
preferred stock of the Reorganized Company, with an initial liquidation
preference of $29,000, and approximately 91% of the common stock of the
Reorganized Company (on a diluted basis, assuming issuance of common stock of
the Reorganized Company to its senior management pursuant to the new management
incentive plan). Under the management incentive plan, shares equal to
approximately 9% of the common stock of the Reorganized Company have been
issued. The Final Plan also provided management fees to an affiliate of
Saratoga Lighting. The fees consist of an one-time advisory fee of $1,800,
which is expected to be paid from excess working capital within the first year
following plan confirmation, and a quarterly management fee of $150 payable in
advance. The advisory fee is included in payables to related parties. The Final Plan provided that the holders of the Predecessor Companys Common
Stock (other than Saratoga Lighting and the Predecessor Companys Chief
Executive Officer) receive the benefit of certain equity investments held by
the Predecessor Company in Fiberstars, Inc. and Hexagram, Inc., as well as a
possible future payment, based on 3% of amounts received by Saratoga Lighting
after providing Saratoga Lighting with a return of capital plus an agreed rate
of return, as more fully described in the Final Plan. Options and warrants to
purchase Predecessor Company Common Stock which were not exercised prior to the
Effective Date were cancelled. Effective December 10, 2003, the Predecessor Companys secured banking facility
was amended and restated to provide financing for the Reorganized Company
following emergence from bankruptcy (the amended facility is referred to as the
Exit Facility). The Exit Facility consists of a $19,000 revolving credit
loan and an $11,000 term loan. Interest rates on the revolving credit loan are
based on Libor plus 2.75% or Prime plus .75% (4.75% at March 31, 2004).
Interest rates on the term loan are based on Libor plus 3.50% or Prime plus
1.50% (5.50% at March 31, 2004). The term loan requires principal payments of
$183 per month beginning January 1, 2004. The final maturity of the revolving
credit facility and the term loan is December 10, 2008. The Reorganized
Company paid a closing fee of $110 in connection with the establishment of the
Exit Facility. The financing arrangements are described in greater detail in
Note D, Financing Facilities. 8




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Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2004
(Dollars in thousands) B. Basis of Presentation (continued) With respect to the Predecessor Companys $100,000 8% Senior Notes due 2008
(the Old Notes), the Company had not made the semi-annual interest payments
due on September 16, 2002, March 15, 2003,
and September 15, 2003. The Company had continued to accrue interest on the
Old Senior Notes at 8%
through December 31, 2003, and accrued and unpaid interest on the Old Senior
Notes would have been
$14,400 as of that date. The Final Plan provided that the Old Notes be
exchanged for an aggregate principal amount of $114,400 11% Senior Notes due
2009 (the New Notes). The New Notes bear interest at 11% from January 1,
2004, and become due on March 31, 2009. Upon the Effective Date of the Final
Plan, pursuant to the approval of the Plan by holders of the Old Senior Notes,
all then existing defaults under the Indenture relating to the Old Senior Notes
were waived. The Final Plan permitted other unsecured creditors of the Debtors to choose
payment of their claims (in the full amount agreed or determined by the
Bankruptcy Court, with interest at 1.32% per year from February 5, 2003 to
December 10, 2003) in full, over 12 months following the Effective Date with
interest at 1.32% per year, or within 45 days following the Effective Date or,
if later, the date that the amount of claim is determined, at 85% of the amount
of the claim. Elections of the 85% Now alternative resulted in a $241
reduction in the amounts payable in respect of claims. The Final Plan provided
that obligations of the Debtors to General Electric Company (GE) and its
subsidiaries would be offset against obligations of GE and its subsidiaries to
the Debtors and Deposition Sciences Inc., a non-Debtor subsidiary of the
Company, and that any remaining pre-petition obligations of the Debtors to GE
would be treated as unsecured indebtedness under the Final Plan. Additionally,
the Company and GE agreed to a settlement of disputed amounts that, together
with GEs election of the 85% Now treatment of the remaining pre-petition
amounts, resulted in a loss of $247. As described in the Disclosure Statement
relating to the Plan, the Company has established incentives to GE for
incremental purchases from the Company (other than APL Engineered Materials,
Inc.). Upon the confirmation of the Final Plan, the Companys investment banker became
entitled to receive, in addition to monthly fees and reimbursement of expenses,
fees based on formulas contained in the Companys agreement with the investment
banker, which have been agreed between the parties to be $2,500, and the fee
has been approved by the Bankruptcy Court. The Company recorded $1,000 of
these fees as reorganization expenses in fiscal 2003 and $2,000 in the first
quarter of fiscal 2004. Based on the agreed settlement at $2,500, the Company
reduced its accrual by $500 in the second quarter of fiscal 2004. The Company
incurred reorganization expenses of $5,635 during the quarter ended December
31, 2003, and $11,258 for the six months ended December 31, 2003, for
consultants, investment bankers, attorneys and other costs related to the
Companys efforts to reorganize under Chapter 11 Bankruptcy. As described in the Disclosure Statement relating to the Plan, the Company has
established a bonus plan for its executive officers. Pursuant to the bonus
plan, senior officers will be entitled to bonuses based on business objectives
for the Company or its subsidiaries. The aggregate amount of these bonuses for
fiscal 2004 would range from $435 if base goals are achieved, to $1,255 if
superior levels are achieved. 9




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Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2004
(Dollars in thousands) B. Basis of Presentation (continued) In addition, the employment agreement with the Companys Chief Executive
Officer (CEO) includes a retention bonus program pursuant to which the CEO
will receive a retention bonus payable in two equal installments, as follows:
(1) on July 1, 2004, $2,027 (of which $1,350 will be applied against the
Companys loan to the CEO); and (2) on July 1, 2005, $2,027 (of which $1,350
will be applied against the Companys loan to the CEO). Notwithstanding the
foregoing, however, the CEO will not be entitled to receive such retention
bonus if the CEO has resigned or been terminated for cause prior to the date
each such retention bonus payment is to be made. See Note F, Related Party
Transactions. Reorganization, Fresh Start and Push Down Adjustments The Companys emergence from Chapter 11 bankruptcy proceedings resulted in a
new reporting entity and adoption of fresh start reporting in accordance with
Statement of Position No. 90-7, Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code. The consolidated financial
statements as of and for the six months ended December 31, 2003 reflect
reorganization adjustments for the discharge of debt and adoption of fresh
start reporting. The reorganization value of the assets of the consolidated
group, which served as the basis for the Plan approved by the Bankruptcy Court,
is $170,000 prior to the investment by Saratoga Lighting. This amount was used
to determine the value allocated to the assets and liabilities of the
Reorganized Company in proportion to their relative fair values in conformity
with Statement of Financial Accounting Standards (FAS) No. 141, Business
Combinations. The reorganization value of the Company was determined after negotiations
between Saratoga Lighting and the Creditors Committee, and in consideration of
several factors and by reliance on various valuation methods, including
discounting cash flow and price/earnings and other applicable calculations.
The factors considered by the parties to the bankruptcy included forecasted
operating and cash flow results, discounted residual values at the end of the
forecast period based on capitalized cash flows for the last year of that
period, market share and position, competition and general economic
considerations, projected sales growth, and potential profitability. A black line has been drawn between the accompanying condensed consolidated
balance sheet as of December 31, 2003 and June 30, 2003 to distinguish between
the Reorganized Company and the Predecessor Company. A black line has also
been drawn between the condensed consolidated statement of operations and of
cash flows for the quarter ended March 31, 2004 and the other periods presented
to distinguish between the Reorganized Company and the Predecessor Company.
The results of the interim periods shown are for the Predecessor Company and
are not considered as being indicative of the results of operations that are
expected for the full year, nor are they considered to be comparable to those
of the Reorganized Company. 10




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##### Table of Contents



Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2004
(Dollars in thousands) B. Basis of Presentation (continued) Reorganization adjustments in the December 31, 2003 condensed consolidated
financial statements result primarily from the following:  
    
    Exchange of $100,000 of 8% Senior Notes and accrued interest
through December 31, 2003 of $14,400 for $114,400 of 11% Senior
Notes;
    
    Issuance to Saratoga Lighting of 29,000 shares of the
Companys new Series A Preferred Shares and 1,000 of its Common
Shares in exchange for $18,000 and all of the equity interests of
Saratoga Lighting in the Company purchased from GE for $12,000,
including the 761,250 shares of the Companys Old Preferred Stock
and 1,429,590 shares of the Companys Old Common Stock, and
push-down of Saratoga Lightings investment;
    
    Cancellation of the existing common stock in exchange for two
investments of the company with a net book value of $7,192 as of the
effective date of the Plan; and,
    
    Increase in the receivable from officer of $1,169 resulting
from a court-approved settlement and reclassification of the
receivable to related party receivables from the equity section of
the condensed consolidated balance sheet. Fresh start adjustments in the December 31, 2003 condensed consolidated
financial statements result primarily from the following:  
    
    Reduction of property, plant and equipment carrying values,
including reduction of the Companys real estate by $11,644 and
personal property by $28,790;
    
    Adjustment of the identifiable intangible assets to $24,675
including customer contracts and relationships of $10,000,
trademarks and tradenames of $8,635, and technology of $6,040;
    
    Reduction in the value of inventory of $1,997 related to
inventory being disposed of by June 30, 2004; and,
    
    Increase in the value of inventory of $1,500 related to an
adjustment in accordance with FAS No. 141, which requires that
inventory be recorded at fair value on the reorganized companys
balance sheet. The increase in inventory of $1,500 above
manufacturing cost reduced reported gross margin and net profit in
the third quarter of fiscal 2004 as the written-up inventory was
sold. These preliminary adjustments were based upon the work of outside appraisers,
as well as internal valuation estimates using discounted cash flow analyses, to
determine the relative fair values of the Companys assets and liabilities and
are not expected to differ materially. 11




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Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2004
(Dollars in thousands) B. Basis of Presentation (continued) As encouraged under SEC Staff Accounting Bulletin No. 54, Push Down Basis of
Accounting Required in Certain Limited Circumstances, the Company has reflected
an additional adjustment to establish a new basis for its assets and
liabilities based on the amount paid by Saratoga Lighting for its ownership at
December 31, 2003. The following table reflects the reorganization, fresh
start and push down adjustments to the Companys Consolidated Balance Sheet
discussed above: Unaudited Balance Sheet as of December 31, 2003Push-DownPredecessor
    
    Reorganization
    
    Fresh Start
    
    Accounting
    
    ReorganizedCompany
    
    Adjustments
    
    Adjustments
    
    Adjustments
    
    CompanyCurrent assets
    
    $
    61,524
    
    
    
    3,188
    
    
    
    (524
    )
    
    
    
    
    
    $
    64,188Property, plant and equipment, net
    
    
    86,864
    
    
    
    
    
    
    
    (40,434
    )
    
    
    
    
    
    
    46,430Investments and other assets
    
    
    13,616
    
    
    
    (3,012
    )
    
    
    1
    
    
    
    
    
    
    
    10,605Intangible assets, net
    
    
    2,597
    
    
    
    
    
    
    
    22,078
    
    
    
    
    
    
    
    24,675Goodwill
    
    
    4,573
    
    
    
    
    
    
    
    22,529
    
    
    
    23,309
    
    
    
    50,411Total assets
    
    $
    169,174
    
    
    
    176
    
    
    
    3,650
    
    
    
    23,309
    
    
    $
    196,309Short-term debt and current
portion of long-term debt
    
    $
    5,060
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    5,060Accounts payable and
accrued liabilities
    
    
    46,078
    
    
    
    (15,515
    )
    
    
    1,395
    
    
    
    
    
    
    
    31,958Long-term debt
    
    
    128,672
    
    
    
    (600
    )
    
    
    
    
    
    
    
    
    
    
    128,072Total liabilities
    
    
    179,810
    
    
    
    (16,115
    )
    
    
    1,395
    
    
    
    
    
    
    
    165,090Minority interest
    
    
    1,219
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,219New preferred stock
    
    
    
    
    
    
    
    
    
    
    5,691
    
    
    
    23,309
    
    
    
    29,000Old preferred stock
    
    
    24,475
    
    
    
    (24,475
    )
    
    
    
    
    
    
    
    
    
    
    New common stock
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Old common stock
    
    
    24
    
    
    
    (24
    )
    
    
    
    
    
    
    
    
    
    
    Accumulated deficit
    
    
    (245,453
    )
    
    
    1,139
    
    
    
    244,314
    
    
    
    
    
    
    
    Other shareholders equity
    
    
    209,099
    
    
    
    39,651
    
    
    
    (247,751
    )
    
    
    
    
    
    
    999Total liabilities and
shareholders equity
    
    $
    169,174
    
    
    
    176
    
    
    
    3,650
    
    
    
    23,309
    
    
    $
    196,309
 The application of SOP 90-7 and SEC Staff Accounting Bulletin No. 54, Push Down
Basis of Accounting Required in Certain Limited Circumstances, resulted in the
elimination of the existing goodwill and the establishment of a new amount of
goodwill of $50,411, that represents the reorganization value in excess of
amounts allocable to identifiable assets. In accordance with the provisions
of Statement of Financial Accounting Standards (FAS) No. 142, Goodwill and
Other Intangible Assets, the newly-established goodwill will not be amortized.
Rather, the Company will evaluate this asset for impairment at least annually
and whenever there is an impairment indicator using the fair value guidelines
of FAS No. 142. 12




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Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2004
(Dollars in thousands) B. Basis of Presentation (continued) Accounting Changes In January 2003, the FASB issued Interpretation (FIN) No. 46, Consolidation of
Variable Interest Entities, an Interpretation of Accounting Research Bulletin
No. 51, Consolidated Financial Statements.The Company was required to account
for interests in VIEs existing on January 31, 2003, under the provisions of FIN
No. 46 as of July 1, 2003. The FIN addresses the consolidation of business
enterprises of variable interest entities and certain required disclosures
related to such relationships. The Company has determined that none of its
investments meet the requirement for consolidation or disclosure under this
FIN. In May 2003, the FASB issued Statement of Financial Accounting Standards (FAS)
No. 150, Accounting for Certain Financial Instruments with Characteristics of
Both Liabilities and Equity. FAS No. 150 changes the classification in the
statement of financial position of certain common financial instruments from
either equity or mezzanine presentation to liabilities and requires an issuer
of those financial statements to recognize changes in fair value or redemption
amount, as applicable, in earnings. FAS No. 150 is effective for the Company
as of July 1, 2003. The provisions of FAS No. 150 had no impact on the
condensed consolidated financial statements. Income Taxes Actual income tax expense for the three month interim periods differ from the
amounts computed by applying the U.S. Federal income tax rate of 35% to the
income (loss) before income taxes because under FAS No. 109, Accounting for
Income Taxes, the tax benefit related to the loss for these interim periods
was required to be reserved in a valuation allowance due to the uncertainty
regarding the ultimate realization of the tax benefit of such losses. The
income tax expense recognized for the interim periods relates to income taxes
on certain foreign subsidiaries income. Earnings Per Share Due to the Companys emergence from bankruptcy and the implementation of Fresh
Start Reporting, the presentation of earnings per share is not meaningful for
the periods presented in the accompanying condensed consolidated financial
statements. C. Comprehensive Income (Loss) For the quarters ended March 31, 2004 and 2003, the Companys comprehensive
loss was $(1,338) and $(2,479), respectively. For the six months ended
December 31, 2003, the Companys comprehensive loss was $(12,487). The
Companys comprehensive loss for the nine months ended March 31, 2003 was
$(16,364). These amounts include the periods net loss and the Companys other
component of comprehensive income, foreign currency translation adjustments. 13




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Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2004
(Dollars in thousands) D. Financing Facilities Effective December 10, 2003, the Companys Debtor-in-Possesion (DIP) Facility
was amended and restated to provide financing for the company following
emergence from bankruptcy (the amended facility is referred to as the Exit
Facility). The Exit Facility consists of a $19,000 revolving credit loan and
an $11,000 term loan. Availability of borrowings under the revolving credit
loan is determined by the Companys eligible account receivables and
inventories. Interest rates on the revolving credit loan are based on Libor
plus 2.75% or Prime plus .75% (4.75% at March 31, 2004). Interest rates on the
term loan are based on Libor plus 3.50% or Prime plus 1.50% (5.50% at March 31,
2004). The term loan requires principal payments of $183 per month. The final
maturity of the revolving credit facility and the term loan is December 10,
2008. The Company paid a closing fee of $110 in connection with the
establishment of the Exit Facility. At March 31, 2004, the Company had $2,044
outstanding under the revolving credit loan and $10,450 outstanding under the
term loan. The revolving credit loan amount at March 31, 2004 has been
classified as a current liability in accordance with the provisions of Emerging
Issues Task Force Issue No. 95-22, Balance Sheet Classification of Borrowings
Outstanding under Revolving Credit Agreements that include Both a Subjective
Acceleration Clause and a Lock-box Arrangement. The Exit Facility includes affirmative and negative covenants customary for
this type of agreement, prohibits cash dividends and includes financial
covenants relating to Minimum Adjusted EBITDA and Capital Expenditures. The
principal security for the Exit Facility was substantially all of the personal
property of the Company and each of its North American and United Kingdom
subsidiaries. The term loan was secured by substantially all of the Companys
machinery and equipment in North America and the United Kingdom and the
Companys facility in Urbana, Illinois, and is cross-collateralized and secured
with the revolving credit loan. On December 10, 2003, in connection with the Companys emergence from
bankruptcy proceedings, the Companys Old Senior Notes were cancelled and, in
exchange for such Old Senior Notes, the Company issued $114,400 of 11% Senior
Notes due March 2009 (New Notes). The aggregate principal amount of the New
Notes is equal to the aggregate principal amount of the Companys Old Senior
Notes, plus interest, which would have accrued and been unpaid through December
31, 2003. The New Notes bear interest at 11%. The New Notes are redeemable at
the Companys option, in whole or in part, at any time at a redemption price
equal to the principal amount of the New Notes plus accrued interest. Interest
on the New Notes is payable semi-annually on March 31 and September 30. The Indenture for the New Notes 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. There are no sinking fund
requirements. 14




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Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2004
(Dollars in thousands) E. Saratoga Lighting Holdings, LLC Investment Saratoga Lighting acquired all of the Common and Preferred shares owned by GE
on August 15, 2003. As a result, Saratoga Lighting held 1,429,590 shares of
Company Common Stock and 761,250 shares of the Companys then existing Old
Preferred Stock. Saratoga Lighting received, in exchange for cancellation of
its holdings of the Predecessor Companys Common Stock and Old Preferred Stock,
and an $18,000 cash investment, new redeemable preferred stock (the New Series
A Preferred) of the Reorganized Company, with an initial liquidation
preference of $29,000, and approximately 91% of the common stock of the
Reorganized Company (on a diluted basis, assuming issuance of common stock of
the Reorganized Company to its senior management pursuant to the new management
incentive plan). Under the management incentive plan, shares equal to
approximately 9% of the common stock of the Reorganized Company have been
issued. The New Series A Preferred has a liquidation preference of $1 per share, plus
dividends at the rate of 8% per annum, when and if declared. The cumulative
undeclared dividends were $710 as of March 31, 2004. The initial carrying
amount of the New Series A Preferred was set at $29,000, the estimated fair
value at the date of issuance. The Holder of the New Series A Preferred may,
by notice, require the Company to redeem the outstanding New Series A Preferred
within 21 days following the occurrence of certain corporate events. The
Company may redeem the New Series A Preferred in whole, but not in part, at any
time. The redemption price for the New Series A Preferred is equal to the
liquidation preference amount for such shares. The New Series A Preferred
shares are each entitled to one vote on each matter presented to shareholders
of the Company, as well as one vote on each matter required to be voted upon by
the New Series A Preferred as a class. As a consequence, the New Series A
Preferred represents approximately 96.3% of the voting power of the Company at
March 31, 2004. As of March 31, 2004, Saratoga Lighting held 99.7% of the
voting power of the Company. 15




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Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2004
(Dollars in thousands) F. Related Party Transactions Pursuant to an agreement dated October 8, 1998, as amended, between the
Predecessor Company and its Chairman and Chief Executive Officer (the CEO),
the Predecessor Company, following approval by its Board of Directors, had a
loan recorded for $14,144 to its CEO, including principal of $12,789 and
accrued interest. The proceeds of the loan were used by the CEO to reduce the
principal balance outstanding of margin loan accounts, which was subsequently
repaid. In connection with the loan, the Predecessor Companys Board of
Directors obtained the CEOs agreement to an extension of his employment
agreement to December 31, 2003. On July 26, 2002, the Predecessor Company and
the CEO executed an amendment to the loan documents, implementing the agreement
in principle, reached in January 2002, to extend the maturity of the loan to
July 31, 2007. 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 Predecessor Company determined the above loan was
impaired and recorded a valuation reserve against the loan. The Predecessor
Company recorded an impairment loss of $2,700 in the second quarter of fiscal
2003 reflecting the amount by which the carrying value of the loan exceeded the
underlying estimated fair value of the assets available to repay the loan at
that time. The Company did not record interest income of $335 in the first six
months of fiscal 2004 or $829 in fiscal 2003. Interest on the loan accrues at
the same rate as the Company pays on its credit facility and totaled $37 in the
quarter ended March 31, 2004. As discussed in the Disclosure Statement approved October 3, 2003, as part of
the reorganization, the Predecessor Company, Saratoga Lighting and the CEO,
agreed in principle, subject to formal approval of the special committee (of
independent directors) of the Predecessor Companys Board of Directors, formal
documentation and Bankruptcy Court approval of the treatment of the CEO loan
pursuant to a separate motion to be filed with the bankruptcy court, that the
CEO loan documents would be modified to reduce the amount of the outstanding
indebtedness owed by the CEO to an amount (the Designated Amount) equal to
the difference between (1) the fair market value of the CEOs personal assets
and (2) the amounts owing to other secured creditors of the CEO that hold
mortgages, liens and/or security interests upon or in property of the CEO, on a
priority senior to the liens and security interests securing the CEOs loan
from the Company, to the extent of the fair market value of such property. The
Designated Amount was set at $4,024. Additionally, the Company received on the
Effective Date of the Plan, the proceeds from the CEOs settlement of
litigation of approximately $1,300 and the proceeds of an investment by the CEO
in an affiliate of the Company. Other than reducing the amount of the CEO loan
as described above, the loan would otherwise remain in full force and effect.
The loan may be accelerated if the CEO ceases to be employed by the Company as
a result of his voluntary resignation or termination for cause. On January 8,
2004, the Bankruptcy Court approved the terms of the settlement, which had
previously been approved by the independent directors of the Predecessor
Company, and the agreement became effective January 21, 2004. The condensed
consolidated balance sheet for the Reorganized Company includes the effects of
the reduction of the loan to the Designated Amount, eliminates the valuation
reserve with respect to the loan, and reflects the reclassification of the loan
to related party receivables from the equity section of the balance sheet. 16




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Advanced Lighting Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2004
(Dollars in thousands) F. Related Party Transactions (continued) In connection with the formation of the Company, on September 15, 1995, one of
the predecessors of the Company transferred its noncore assets to H&F Five,
Inc., a company owned by Mr. Hellman and certain other employees of the
Company, for a demand promissory note from H&F Five, Inc. in the amount of $200
bearing interest at 8.5% per annum. At June 30, 2003, the total amount of the
loan, including accrued interest, was $351. H&F Five, Inc. subsequently
transferred these assets in return for a minority interest in a limited
liability company that makes specialty chemicals. Based on an independent
appraisal of the interest of H&F Five, Inc. in the limited liability company at
$592, the H&F Five Inc. shareholders received cash payments for that value,
less the outstanding balance of the loan, in respect of their respective
shares. The payment of $121 that would otherwise have been made to Mr. Hellman
was applied to the principal amount of his loan from the Company. Effective
December 31, 2003, H&F Five, Inc. was merged with a wholly-owned subsidiary of
the Company. G. Contingencies On May 9, 2003, a complaint was filed in the Cuyahoga County, Ohio Court of
Common Pleas by the widow of an employee of Venture Lighting International,
Inc., who died following an industrial accident at Venture Lightings Solon
facility. The suit, styled Karnosh, etc. v ADLT Realty Corp I, Inc., et al (CV
03 500755),alleges that Venture Lighting knowingly exposed the employee to an
unreasonably dangerous risk. In addition, the suit names ADLT Realty Corp I,
Inc., the owner of the facility, and certain named and unnamed defendants
involved in the installation and repair of an industrial garage door involved
in the accident, alleging liability on various theories involving the failure
to maintain the door safely. The suit seeks compensatory damages from all
defendants in an amount of approximately $3,200, together with unspecified
damages for loss of consortium, pain and suffering and punitive damages. The
damages sought are in addition to the employees prior recoveries under
workers compensation laws. The Company believes the lawsuit is without merit
and intends to vigorously defend this action. 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. 17




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Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations (Dollars in thousands) This report on Form 10-Q may contain forward-looking statements that involve
risks and uncertainties. On February 5, 2003, the Company and six of its
United States subsidiaries (the Debtors), filed voluntary petitions for
reorganization under Chapter 11 of the United States Bankruptcy Code.
Effective December 10, 2003, the Debtors emerged from bankruptcy protection
pursuant to the Bankruptcy Courts confirmation of the Debtors Fourth Amended
Chapter 11 Plan of Reorganization (the Plan). The operation of the Company
and its subsidiaries following emergence from bankruptcy court protection
involves risks and uncertainties, including uncertainties associated with the
ability of the Company to successfully emerge from bankruptcy and disruptions
to the Companys business relationships during the restructuring process. The
Company currently has an agreement under a secured financing facility (Exit
Facility) to continue to provide financing until December 10, 2008, which
includes restrictions on amounts available to the Company and its subsidiaries,
as well as financial and other covenants. The availability of continued
financing under the Exit Facility is critical to the adequate liquidity of the
Company and its subsidiaries. Other risks and uncertainties include the
strength of the recovery of the U.S. economy, 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, litigation affecting
the Company, the timely development and market acceptance of new products, 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, 2003, 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 is an innovation-driven designer, manufacturer and marketer focused
on 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 distribution
centers, outdoor site and landscape lighting, sports facilities and large
retail spaces such as superstores. 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. The Company 18




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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 Emergence from Bankruptcy On December 10, 2003, Advanced Lighting Technologies, Inc. and six of its
United States subsidiaries, (collectively, the Debtors), completed their
previously announced financial restructuring when their
Fourth Amended Chapter 11 Plan of Reorganization (the Final Plan) under the
U.S. Bankruptcy Code (the Bankruptcy Code) became effective and was
substantially consummated. ADLTs non-U.S. operating subsidiaries and DSI, a
U.S. subsidiary, were not a part of the proceedings under the Bankruptcy Code.
For financial reporting purposes, the Company used an effective date of
December 31, 2003. The results of operations for the period from December 10,
2003 to December 31, 2003 were not material. The Debtors filed for reorganization under the Bankruptcy Code on February 5,
2003 (the Filing). From February 5, 2003 to December 10, 2003, the Debtors
operated their businesses as debtors-in-possession under court protection from
their creditors and claimants. Following approval by the creditors, preferred
shareholders and the common shareholders of the Predecessor Company entitled to
vote on the reorganization plan, on December 8, 2003, the Bankruptcy Court
entered an order confirming the Final Plan. On December 10, 2003, the
Effective Date of the Final Plan occurred and the reorganization of the Company
was substantially completed. Pursuant to the terms of the Final Plan, Saratoga Lighting Holdings, LLC
(Saratoga Lighting) received, in exchange for cancellation of its holdings of
the Predecessor Companys Series A Preferred Stock and Common Stock, and an
$18,000 cash investment, new redeemable preferred stock of the Reorganized
Company, with an initial liquidation preference of $29,000, and approximately
91% of the common stock of the Reorganized Company (on a diluted basis,
assuming issuance of common stock of the Reorganized Company to its senior
management pursuant to the new management incentive plan). Under the
management incentive plan, shares equal to approximately 9% of the common stock
of the Reorganized Company have been issued. The Final Plan also provided
management fees to an affiliate of Saratoga Lighting. The fees consist of an
one-time advisory fee of $1,800, which is expected to be paid from excess
working capital within the first year following plan confirmation, and a
quarterly management fee of $150 payable in advance. The Final Plan provided that the holders of the Predecessor Companys Common
Stock (other than Saratoga Lighting and the Predecessor Companys Chief
Executive Officer) receive the benefit of certain equity investments held by
the Predecessor Company in Fiberstars, Inc. and Hexagram, Inc., as well as a
possible future payment, based on 3% of amounts received by Saratoga Lighting
after providing Saratoga Lighting with a return of capital plus an agreed rate
of return, as more fully described in the Final Plan. Options and warrants to
purchase Predecessor Company Common Stock which were not exercised prior to the
Effective Date were cancelled. Effective December 10, 2003, the Predecessor Companys secured banking facility
was amended and restated to provide financing for the Reorganized Company
following emergence from bankruptcy (the amended facility is referred to as the
Exit Facility). The Exit Facility consists of a $19,000 revolving credit
loan and an $11,000 term loan. Interest rates on the revolving credit loan are
based on Libor plus 2.75% or Prime plus .75% (4.75% at March 31, 2004).
Interest rates on the term loan are based on Libor plus 3.50% or Prime plus
1.50% (5.50% at March 31, 2004). The term loan requires principal payments 19




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of
$183 per month. The final maturity of the revolving credit facility and the
term loan is December 10, 2008. The Reorganized Company paid a closing fee of
$110 in connection with the establishment of the Exit Facility. With respect to the Predecessor Companys 8% Senior Notes due 2008, the Final
Plan provided that they be exchanged for an aggregate principal amount of
$114,400 11% Senior Notes due 2009 (the New Notes). The New Notes bear
interest at 11%, payable semi-annually on March 31 and September, and become
due on March 31, 2009. Other unsecured creditors of the Debtors were permitted
to choose payment of their claims (in the full amount agreed or determined by
the Bankruptcy Court, with interest at 1.32% per year from February 5, 2003 to
December 10, 2003) in full, over 12 months following the Effective Date with
interest at 1.32% per year, or within 45 days following the Effective Date or,
if later, the date that the amount of claim is determined, at 85% of the amount
of the claim. Elections of the 85% Now alternative resulted in a $241
reduction in the amounts payable in respect of claims. For a description of the
related adjustment see Fresh Start Adjustments below. The Final Plan
provided that obligations of the Debtors to General Electric Company (GE) and
its subsidiaries would be offset against obligations of GE and its subsidiaries
to the Debtors and Deposition Sciences Inc., a non-Debtor subsidiary of the
Company, and that any remaining pre-petition obligations of the Debtors to GE
would be treated as unsecured indebtedness under the Final Plan. Additionally,
the Company and GE agreed to a settlement of disputed amounts that, together
with GEs election of the 85% Now treatment of the remaining pre-petition
amounts, resulted in a
loss of $247. As described in the Disclosure Statement relating to the Plan,
the Company has established incentives to GE for incremental purchases from the
Company (other than APL Engineered Materials, Inc.). Upon the confirmation of the Final Plan, the Companys investment banker became
entitled to receive, in addition to monthly fees and reimbursement of expenses,
fees based on formulas contained in the Companys agreement with the investment
banker, which have been agreed between the parties to be $2,500, and the fee
has been approved by the Bankruptcy Court. The Company recorded $1,000 of
these fees as reorganization expenses in fiscal 2003 and $2,000 in the first
quarter of fiscal 2004. Based on the agreed settlement at $2,500, the Company
reduced its accrual by $500 in the second quarter of fiscal 2004. The Company
incurred reorganization expenses of $5,635 during the quarter ended December
31, 2003, and $11,258 for the six months ended December 31, 2003, for
consultants, investment bankers, attorneys and other costs related to the
Companys efforts to reorganize under Chapter 11 Bankruptcy. Saratoga Lighting Holdings, LLC Investment Saratoga Lighting acquired all of the Common and Preferred shares owned by GE
on August 15, 2003. As a result, Saratoga Lighting held 1,429,590 shares of
Company Common Stock and 761,250 shares of the Companys then existing Old
Preferred Stock. Saratoga Lighting received, in exchange for cancellation of
its holdings of the Predecessor Companys Common Stock and Old Preferred Stock,
and an $18,000 cash investment, new redeemable preferred stock (the New Series
A Preferred) of the Reorganized Company, with an initial liquidation
preference of $29,000, and approximately 91% of the common stock of the
Reorganized Company (on a diluted basis, assuming issuance of common stock of
the Reorganized Company to its senior management pursuant to the new management
incentive plan). Under the management incentive plan, shares equal to
approximately 9% of the common stock of the Reorganized Company have been
issued. The New Series A Preferred has a liquidation preference of $1 per share,
plus dividends at the rate of 8% per annum, when and if declared. The
cumulative undeclared dividends were $710 as of March 31, 2004. The initial
carrying amount of the New Series A Preferred was set at $29,000, the estimated
fair value at the date of issuance. The Holder of the New Series A Preferred
may, by notice, require the 20




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Company to redeem the outstanding New Series A
Preferred within 21 days following the occurrence of certain corporate events.
The Company may redeem the New Series A Preferred in whole, but not in part, at
any time. The redemption price for the New Series A Preferred is equal to the
liquidation preference amount for such shares. The New Series A Preferred
shares are each entitled to one vote on each matter presented to shareholders
of the Company, as well as one vote on each matter required to be voted upon by
the New Series A Preferred as a class. As a consequence, the New Series A
Preferred represented approximately 96.3% of the voting power of the Company at
March 31, 2004. As of March 31, 2004, Saratoga Lighting held 99.7% of the
voting power of the Company. Highlights of Financial Performance After Emergence from Bankruptcy The performance of the Company in the first quarter after emergence from
bankruptcy was generally in line with expectations. Sales for the quarter
ended March 31, 2004 were $36,944 as compared with the companys projections
for this quarter of $37,219 in its October 3, 2003 Disclosure Statement.
Income from operations was $2,389 in the quarter ended March 31, 2004. The
Disclosure Statement projection of income from operations for the quarter ended
March 31, 2004 was $4,993. The difference between the actual income from
operations for the quarter and the projection in the Disclosure Statement is
primarily related to two items. First, in accordance with accounting standards generally accepted in the United
States, inventory at December 31, 2003 was recorded at fair value in the
Companys condensed consolidated balance sheet for the Reorganized Company,
which amount approximated $1,500 above manufacturing cost. Cost of sales in
the third quarter of fiscal 2004 includes this additional amount above the
Companys manufacturing cost and reduced reported gross margin and net profit
as the inventory was sold. The second most significant difference related to
the CEO retention bonus of $1,014 recorded in the third quarter of fiscal 2004.
The after-tax amount of this bonus, approximately $675, is scheduled to be
applied against the Companys receivable from the CEO in July 2004. An
additional retention bonus amount of $1,013 is expected to be recorded in the
fourth quarter of fiscal 2004. While other differences occurred, the Company
is largely performing to its plan and expectations and believes that this will
continue in the
fourth quarter. A further discussion of the quarterly results is provided
below. Management expects to provide investors and other interested
parties an update on the Companys progress on its annual
investor conference call shortly after the filing of its Form 10-K
for the fiscal year ending June 30, 2004. 21




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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: ReorganizedCompany
    
    
    Predecessor CompanyQuarter
    
    
    Quarter
    
    Six Months
    
    Nine MonthsEnded
    
    
    Ended
    
    Ended
    
    EndedMarch 31,
    
    
    March 31,
    
    December 31,
    
    March 31,2004
    
    
    2003
    
    2003
    
    2003Net sales
    
    
    100.0
    %
    
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Costs and expenses:Cost of sales
    
    
    60.8
    
    
    
    
    62.4
    
    
    
    61.5
    
    
    
    63.8Marketing and selling
    
    
    15.5
    
    
    
    
    14.9
    
    
    
    16.0
    
    
    
    15.5Research and development
    
    
    4.1
    
    
    
    
    4.5
    
    
    
    4.4
    
    
    
    4.4General and administrative
    
    
    12.5
    
    
    
    
    7.2
    
    
    
    8.8
    
    
    
    8.2Provision for loan impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.5Refinancing and non-recurring items
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    2.2Gain on sale of property
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.1
    )Special charges and asset impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6.2Amortization of intangible assets
    
    
    0.6
    
    
    
    
    0.2
    
    
    
    0.3
    
    
    
    0.2Income (loss) from operations
    
    
    6.5
    
    
    
    
    10.6
    
    
    
    9.0
    
    
    
    (2.9
    )Other income (expense):Interest expense
    
    
    (9.3
    )
    
    
    
    (7.4
    )
    
    
    (10.6
    )
    
    
    (8.1
    )Interest income
    
    
    0.3
    
    
    
    
    0.4
    
    
    
    0.3
    
    
    
    0.4Income (loss) from investments
    
    
    
    
    
    
    
    (0.3
    )
    
    
    
    
    
    
    (0.7
    )Gain on restructuring
    
    
    
    
    
    
    
    
    
    
    
    1.7
    
    
    
    Write-off of deferred loan costs
    
    
    
    
    
    
    
    
    
    
    
    (3.2
    )
    
    
    Reorganization expenses
    
    
    
    
    
    
    
    (10.8
    )
    
    
    (16.0
    )
    
    
    (3.7
    )Income (loss) before income taxes
and minority interest
    
    
    (2.5
    )
    
    
    
    (7.5
    )
    
    
    (18.8
    )
    
    
    (15.0
    )Income tax expense
    
    
    0.8
    
    
    
    
    0.6
    
    
    
    0.5
    
    
    
    0.6Income (loss) before minority interest
    
    
    (3.3
    )
    
    
    
    (8.1
    )
    
    
    (19.3
    )
    
    
    (15.6
    )Minority interest in income
of consolidated subsidiary
    
    
    (0.4
    )
    
    
    
    (0.3
    )
    
    
    (0.3
    )
    
    
    (0.2
    )Net income (loss)
    
    
    (3.7
    %)
    
    
    
    (8.4
    %)
    
    
    (19.6
    %)
    
    
    (15.8
    %)
 Factors that have affected the results of operations for the third quarter of
fiscal 2004 as compared to the third quarter fiscal 2003 are discussed below.
The third quarter of fiscal 2004 was the Companys first quarter of operations
following the restructuring. Quarter Ended March 31, 2004 Compared with Quarter Ended March 31, 2003 Net Sales. Net sales increased 0.7% to $36,944 in the third quarter of fiscal
2004 from $36,703 in the third quarter of fiscal 2003. Third quarter metal
halide product sales increased 4% to $29,004 compared with $27,811 in the same
period last year. This increase in metal halide product sales is the result of
an increase in lamp and material sales. Sales of APL materials increased 1%
over the same quarter a year 22




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ago. Geographically, these materials sales
increased 1% in the U.S. and 1% outside the U.S. Non-metal halide lighting
product sales decreased 16% over the
year ago period due primarily to a decrease in power supply sales. Sales of
lamp manufacturing equipment decreased to $312 in the third quarter of fiscal
2004 from $1,177 in the third quarter of fiscal 2003. Total lighting product sales inside the U.S. decreased 7% in the third quarter
of fiscal 2004 as compared to the same period a year ago due to a reduction in
power supply sales that have a lower margin than the Companys other products.
Total lighting product sales outside the U.S. increased 9% as compared to the
year ago period due to increases in lamp and material sales. 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 1.8% to $22,475 in the third quarter of
fiscal 2004 from $22,892 in the third quarter of fiscal 2003. In accordance
with fresh-start accounting principles, inventory as of December 31, 2003,
was recorded at fair value, which amount approximated $1,500 above
manufacturing cost in the Companys condensed consolidated balance sheet as of
December 31, 2003. Cost of sales in the third quarter of fiscal 2004 includes
this additional amount above the Companys manufacturing cost and reduced
reported gross margin and net profit as the inventory was sold. As a
percentage of net sales, cost of sales, including the $1,500 described above,
decreased to 60.8% in the third quarter of fiscal 2004 from 62.4% in the third
quarter of fiscal 2003. The additional $1,500 represented 4.1% of sales for the
quarter. The reduction in cost of sales as a percentage of sales is due to the
transfer of lamp and power supply production to India, improvements in cost
management, an improvement in the product mix (more lamp and material sales and
less power supply sales), and a reduction in depreciation expense of $593
related primarily to the effects of the application of fresh-start accounting
principles. Marketing and Selling Expenses.Marketing and selling expenses increased 5.0%
to $5,729 in the third quarter of fiscal 2004 from $5,457 in the third quarter
of fiscal 2003. As a percentage of net sales, marketing and selling expenses
increased to 15.5% in the third quarter of fiscal 2004 from 14.9% in the third
quarter of fiscal 2003. Research and Development Expenses. Research and development expenses decreased
8.6% in the third quarter of fiscal 2004 to $1,507 from $1,649 in the third
quarter of fiscal 2003. 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 in industrial and
commercial applications; (ii) continual development of new materials for the
worlds major lighting manufacturers; (iii) development and testing of
electronic and electromagnetic power supply systems; and, (iv) 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. As a percentage of net sales, research
and development expenses decreased to 4.1% in the third quarter of fiscal 2004
from 4.5% in the third quarter of fiscal 2003. 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
increased 75.7% to $4,617 in the third quarter of fiscal 2004 from $2,628 in
the third quarter of fiscal 2003. The increase in general and administrative
expenses was primarily due to the accrual of $1,531 of bonuses, including
$1,014 for the CEO retention bonus. The after-tax amount of this bonus
accrual, approximately $675, is scheduled 23




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to be applied against the Companys
receivable from the CEO in July 2004. Fiscal 2004 also includes the Saratoga
Lighting quarterly management fee of $150. Refinancing and Non-recurring Items.Refinancing and non-recurring items in
fiscal 2003 reflect the cost of consultants, investment bankers and attorneys
related to the Companys efforts to refinance its Bank Credit Facility and to
restructure its $100,000 8% Senior Notes prior to the Companys Chapter 11
filing. Amortization of Intangible Assets.Amortization expense increased to $227 in
the third quarter of fiscal 2004 from $86 in the third quarter of fiscal 2003.
The increase was due to the amortization of identifiable intangibles
established in accordance with the provisions of fresh-start accounting. Income (Loss) from Operations.As a result of the items noted above, including
the $1,500 inventory adjustment and the retention bonus of $1,014, the Company
realized income from operations in the third quarter of fiscal 2004 of $2,389
as compared to income from operations of $3,907 in the year ago period. Interest Expense.Interest expense increased to $3,410 in the third quarter of
fiscal 2004 from $2,722 in the third quarter of fiscal 2003. The increase in
interest expense is primarily due to the increase in the interest rate on the
Companys New Senior Notes to 11% from 8% for the Old Senior Notes. Interest Income.Interest income decreased to $110 in the third quarter of
fiscal 2004 from $140 in the third quarter of fiscal 2003 due primarily to the
settlement with Ruud Lighting, Inc and its shareholders, which lowered the
amount of notes receivable from them. Income (Loss) from Investments.The loss from investments in the third quarter
of fiscal 2003 of $(104) represents the equity loss from the Companys
investment in Fiberstars, Inc., a marketer and distributor of fiber optic
lighting products. The Final Plan provided that the holders of the Predecessor
Companys Common Stock (other than Saratoga Lighting and the Predecessor
Companys CEO) receive the benefit of certain equity investments held by the
Predecessor in Fiberstars. As a result, no further equity income or loss will
be recorded subsequent to December 31, 2003. Reorganization Expenses.Reorganization expenses, totaling $3,963 in the
second quarter, reflect the cost of consultants, investment bankers and
attorneys related to the Companys efforts to reorganize under Chapter 11
Bankruptcy. Income (Loss) before Income Taxes and Minority Interest.The Company had a
loss before income taxes and minority interest of $(911) in the third quarter
of fiscal 2004 as compared to a loss before income taxes and minority interest
of $(2,742) in the third quarter of fiscal 2003. Income Tax Expense.Income tax expense was $302 for the third quarter of
fiscal 2004 as compared to $224 in the third quarter of fiscal 2003. The
income tax expense in both quarters related to certain of the Companys foreign
operations. At June 30, 2003, the Company had net operating loss carryforwards of $114,000
available to reduce future United States federal taxable income, which expire
in varying amounts from 2008 to 2023. On August 15, 2003, Saratoga Lighting
purchased the preferred and common shares owned by GE. This transaction caused
an ownership change greater than 50% which will limit the annual net operating
loss the Company can use to offset any future taxable income pursuant to
Section 382 of the Internal Revenue Code. This limitation will be effective
with the fiscal year ending June 30, 2004. The Company also had a capital loss
carryforward of approximately $40,118 available to reduce future capital gains.
The usage 24




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of this carryforward will also be limited as a result of the
ownership change. This carryforward expires in 2007. See Deferred Tax Assets
and Valuation Allowance in Critical Accounting Policies below. The Company also had research and development credit carryforwards for tax
purposes of approximately $3,818, which expire 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 $97, which
may be used indefinitely to reduce regular federal income taxes. The usage of
these credits will also be limited as a result of the ownership change. Also at June 30, 2003, the Company had foreign net operating loss carryforwards
for tax purposes totaling $1,562 that expire in 2006 and 2007 and $6,890 that
have no expiration dates. Liquidity and Capital Resources The Companys sources of liquidity include cash and cash equivalents, cash flow
from operations and amounts available under its bank credit facility (the Exit
Facility). See Note D to the Condensed Consolidated Financial Statements for a
description of the Exit Facility. The Company believes these sources of
liquidity are sufficient for at least the next several years. As a result of
the exchange of the $100,000 8% Senior Notes due March 2008 for
$114,400 11% Senior Notes due March 2009, the Company has extended the maturity
of most of its debt until 2009. The Company believes that its cash flow from
operations will be more than adequate to service the debt. The Exit Facility consists of a $19,000 revolving credit loan and an $11,000
term loan. Interest rates on the revolving credit loan are based on Libor plus
2.75% or Prime plus .75% (4.75% at March 31, 2004). Interest rates on the term
loan are based on Libor plus 3.50% or Prime plus 1.50% (5.50% at March 31,
2004). The term loan requires principal payments of $183 per month. The final
maturity of the revolving credit facility and the term loan is December 10,
2008. The Company paid a closing fee of $110 in connection with the
establishment of the Exit Facility. The Exit Facility contains certain affirmative and negative covenants customary
for this type of agreement, prohibits cash dividends, and includes financial
covenants related to Minimum Adjusted EBITDA and Capital Expenditures. At
March 31, 2004, the Company was in compliance with the terms of the Exit
Facility. The principal security for the Exit Facility 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 in North America and the United Kingdom as
well as the Companys facility in Urbana, Illinois, and is cross-collateralized
and secured with the revolving credit loan. Cash decreased $6,185 during the three months ended March 31, 2004. Cash used
in operating activities totaled $5,703, cash used in investing activities
totaled $1,435, and cash provided by financing activities totaled $953. Net Cash Provided by (Used in) Operating Activities.Net cash used in
operating activities totaled $(5,703) for the three months ended March 31,
2004. This included payments of reorganization expenses totaling $4,743 and
pre-petition liabilities of $4,214 as a result of the Companys emergence from
Chapter 11. Excluding these bankruptcy-related payments, net cash provided by
operating activities during the quarter totaled $3,254. Net Cash Used in Investing Activities.In the third quarter of fiscal 2004,
net cash used in investing activities totaled $1,435, of which $608 related to
capital expenditures for plant and equipment, primarily 25




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machinery and
equipment. The Company plans to limit its capital expenditure program for the
next twelve months and expects that its capital expenditures will approximate
$4,000 in fiscal 2004 and $5,000 in fiscal 2005. 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. During the fiscal 2004 third quarter, the Company acquired
certain assets of Narva Lighting Limited (Narva), located in London, England,
for $827. Narva specializes in the distribution and marketing of metal halide
lighting products in the United Kingdom and Europe. Net Cash Provided by (Used in) Financing Activities.In the three months ended
March 31, 2004, net cash provided by financing activities was $953 resulting
from an increase in the Companys total debt to $134,037 at March 31, 2004 from
$133,132 at December 31, 2003. The interest-bearing obligations of the Company totaled $134,037 as of March
31, 2004, and consisted of: $12,494 of borrowings under the Exit Facility;
$114,400 of 11% Senior Notes; mortgages of $4,483; a promissory note of $1,970;
and obligations of foreign subsidiaries and other debt of $690. Critical Accounting Policies The discussion and analysis of our financial condition and results of
operations is based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements
requires us to make estimates and judgments that effect the reported amounts of
our assets, liabilities, revenues and costs and expenses, and related
disclosure of contingent assets and liabilities. On an on-going basis, we
evaluate our estimates, including those related to: valuation of accounts and
notes receivable and loan receivable from officer, valuation of investments,
valuation of long-lived assets, valuation of inventory valuation reserves,
revenue recognition, and deferred tax assets. We base our estimates on
historical experience and on various other assumptions that we believe
reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying value
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or
conditions. We have identified the following policies as critical to our business
operations and the understanding of our results of operations. For a detailed
discussion on the application of these and other accounting policies, see Note
C of the Notes to Consolidated Financial Statements in the Annual Report on
Form 10-K for the Period Ended June 30, 2003. New Reporting Entity and Adoption of Fresh Start Accounting The Companys emergence from Chapter 11 bankruptcy proceedings resulted in a
new reporting entity and adoption of fresh start reporting in accordance with
Statement of Position (SOP) No. 90-7, Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code. The consolidated financial
statements as of and for the quarter ended December 31, 2003 reflect
reorganization adjustments for the discharge of debt and adoption of fresh
start reporting. The reorganization value of the assets of the consolidated
group of $170,000 prior to the investment by Saratoga Lighting, which served as
the basis for the Plan approved by the bankruptcy court, was used to determine
the value allocated to the assets and liabilities of the Reorganized Company in
proportion to their relative fair values in conformity with Statement of
Financial Accounting Standards No. 141, Business Combinations(FAS No. 141). 26




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The reorganization value of the Company was determined after negotiations
between Saratoga Lighting and the Creditors Committee, and in consideration of
several factors and by reliance on various valuation methods, including
discounting cash flow and price/earnings and other applicable calculations.
The factors considered by the parties to the bankruptcy included forecasted
operating and cash flow results, discounted residual values at the end of the
forecast period based on capitalized cash flows for the last year of that
period, market share and position, competition and general economic
considerations, projected sales growth, and potential profitability. A black line has been drawn between the accompanying condensed consolidated
balance sheet as of December 31, 2003 and June 30, 2003 to distinguish between
the Reorganized Company and the Predecessor Company. A black line has also
been drawn between the accompanying condensed consolidated statement of
operations and of cash flows for the quarter ended March 31, 2004 and the other
periods presented to distinguish between the Reorganized Company and the
Predecessor Company. The results of the interim periods shown are for the
Predecessor Company and are not considered as being indicative of the results
of operations that are expected for the full year. These results will not be
comparable to those of the Reorganized Company. Reorganization adjustments in the December 31, 2003 condensed consolidated
financial statements result primarily from the following:  
    
    Exchange of $100,000 of 8% Senior Notes and accrued interest
through December 31, 2003 of $14,400 for $114,400 of 11% Senior
Notes;
    
    Issuance to Saratoga Lighting of 29,000 shares of the
Companys new Series A Preferred Shares and 1,000 of its Common
Shares in exchange for $18,000 and all of the equity interests of
Saratoga Lighting in the Company purchased from GE for $12,000,
including the 761,250 shares of the Companys Old Preferred Stock
and 1,429,590 shares of the Companys Old Common Stock, and
push-down of Saratoga Lightings investment;
    
    Cancellation of the existing common stock in exchange for two
investments of the company with a net book value of $7,192 as of the
effective date of the Plan; and,
    
    Increase in the receivable from officer of $1,169 resulting
from a court-approved settlement and reclassification of the
receivable to related party receivables from the equity section of
the condensed consolidated balance sheet. Fresh start adjustments in the December 31, 2003 condensed consolidated
financial statements result primarily from the following:  
    
    Reduction of property, plant and equipment carrying values,
including reduction of the Companys real estate by $11,644 and
personal property by $28,790;
    
    Adjustment of the identifiable intangible assets to $24,675
including customer contracts and relationships of $10,000,
trademarks and tradenames of $8,635, and technology of $6,040;
    
    Reduction in the value of inventory of $1,997 related to
inventory being disposed of by June 30, 2004; and,
    
    Increase in the value of inventory of $1,500 related to an
adjustment in accordance with FAS No. 141, which requires that
inventory be recorded at fair value on the reorganized companys
balance sheet. The increase in inventory of $1,500 above
manufacturing cost reduced reported gross margin and net profit in
the third quarter of fiscal 2004 as the inventory was sold. 27




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These preliminary adjustments were based upon the work of outside appraisers,
as well as internal valuation estimates using discounted cash flow analyses, to
determine the relative fair values of the Companys assets and liabilities and
are not expected to differ materially. As encouraged under SEC Staff Accounting Bulletin No. 54, Push Down Basis of
Accounting Required in Certain Limited Circumstances, the Company has reflected
an additional adjustment to establish a new basis for its assets and
liabilities based on the amount paid by Saratoga Lighting for its ownership at
December 31, 2003. Valuation of Accounts and Notes Receivable and Loan Receivable from Officer Management evaluates and makes estimates of the collectibility of the Companys
accounts and notes receivable, including unbilled accounts receivable related
to long-term equipment contracts, based on a combination of factors.
Management analyzes historical bad debts, customer credit-worthiness, and
current economic trends in evaluating the adequacy of the allowance for
doubtful accounts and whether there is any impairment in its notes receivable.
In circumstances where the Company is aware of a certain customers inability
to meet its financial obligation, a specific reserve is recorded to reduce the
receivable to the amount the Company believes will be collected. Material
changes in the allowance for doubtful accounts may occur if the results of
managements evaluation change or if a different method is used to estimate
possible losses. The accounts receivable balance was $28,883, net of an
allowance of $799 as of March 31, 2004. The Company has notes receivable plus accrued interest from the Ruud Lighting,
Inc. shareholders in the aggregate amount of $3,137. These notes are due
December 1, 2006, but rebates earned on purchases by Ruud Lighting, Inc.
pursuant to its current agreement with the Debtors will be credited toward
prepayment of the principal and interest on the notes. The Company believes
the total receivable amount will be realized in accordance with the terms of
the notes. The Company has a loan receivable from an officer. Management periodically
evaluates the adequacy of the underlying assets to repay this loan and when it
estimates the proceeds from the sale of such assets are not adequate records a
reserve. Based on its estimates, Management recorded an impairment charge of
$2,700 on the loan receivable during fiscal 2003. No interest related to the
loan has been recorded in first six months of fiscal 2004 and all of fiscal
2003. Interest on the loan accrues at the same rate as the Company pays on its
credit facility and totaled $37 in the quarter ended March 31, 2004. As part of the reorganization, the officer loan documents were modified to
reduce the amount of the outstanding indebtedness owed by the officer to an
amount (the Designated Amount) equal to the difference between (1) the fair
market value of the CEOs personal assets and (2) the amounts owing to other
secured creditors of the CEO that hold mortgages, liens and/or security
interests upon or in property of the CEO, on a priority senior to the liens and
security interests securing the CEOs loan from the Company, to the extent of
the fair market value of such property. The Designated Amount was set at
$4,024. The Company believes the loan receivable amount will be realized in
accordance with the terms of loan documents. Valuation of Long-Lived Assets The Companys emergence from Chapter 11 bankruptcy proceedings resulted in a
new reporting entity and adoption of fresh start reporting in accordance with
SOP No. 90-7, Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code. The Companys tangible assets were adjusted in accordance
with SOP 90-7 which resulted in a decrease in the Companys real estate of
$11,644 and a 28




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decrease in personal property (machinery and equipment and furniture and
fixtures) of $28,790. The Companys identifiable intangible assets were
adjusted to $24,675 representing customer contracts and relationships of
$10,000, trademarks and tradenames of $8,635, and technology of $6,040. In addition to the above, the application of SOP 90-7 and SEC Staff Accounting
Bulletin No. 54, Push Down Basis of Accounting Required in Certain Limited
Circumstances, resulted in the elimination of the existing goodwill and the
establishment of a new amount of goodwill of $50,411, that represents the
reorganization value in excess of amounts allocable to identifiable assets.
In accordance with the provisions of Statement of Financial Accounting
Standards (FAS) No. 142, Goodwill and Other Intangible Assets, no
amortization of goodwill was recorded in fiscal 2003 or fiscal 2004.
Additionally, the newly-established goodwill will not be amortized. Rather,
the Company will evaluate this asset for impairment at least annually and
whenever there is an impairment indicator using the fair value guidelines of
FAS No. 142. The Company evaluates the carrying value of its investment in other long-lived
assets for impairment such as property, plant and equipment whenever there is
an impairment indicator, generally using an undiscounted cash flow methodology.
During fiscal 2003, the Company recognized a $10,844 charge primarily related
to the abandonment of certain of its telecommunication fixed assets due to the
uncertainty of the recovery of the global telecom industry, and the write down
of certain assets held for sale. Inventory Valuation Reserves The Company values its inventory for accounting purposes at the lower of cost
(first-in, first-out method) or market. In circumstances where the Company is
aware of a problem in the valuation of a certain item, a specific reserve is
recorded to reduce the item to its net realizable value. For all other
inventory, the Company records a reserve based on a combination of factors,
including actual usage in recent history and projected usage in the future. If
expected circumstances should change due to general economic or product
obsolescence issues resulting in lower-than-expected usage, managements
estimate of the net realizable value could be reduced by a material amount. Revenue Recognition The Company has entered into certain contracts with customers for the
construction of lighting and thin-film coating equipment. Revenue is
recognized on these contracts as work on the contract progresses using the
percentage of completion method of accounting, which relies on estimates of
total expected contract revenues and costs. Under this method reasonable
estimates of the costs applicable to the various stages of a contract are made,
thus, impacting the level of recognized revenue. Since the financial reporting
of these contracts depends on estimates, which are assessed continually during
the term of the contract, recognized revenues and profit are subject to
revisions as the contract progresses toward completion. Revisions in profit
estimates are reflected in the period in which the facts that give rise to the
revision become known. Should estimates indicate a loss is expected to be
incurred under a contract, cost of sales is charged with a provision for such
loss. Deferred Tax Assets and Valuation Allowance The Company had approximately $71,100 of net deferred tax assets related
principally to certain unused tax credits and loss carryforwards as of June 30,
2003. The realization of these assets is based upon the Company generating
future taxable income. Due to the Companys historical results it is uncertain
as to when it will realize taxable income that will allow it to utilize its tax
credits and loss carryforwards and, 29




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##### Table of Contents



accordingly, has recorded a valuation allowance of approximately $71,100.
Additionally, on August 15, 2003, Saratoga Lighting purchased the preferred and
common shares owned by GE. This transaction caused an ownership change greater
than 50% which will limit the annual net operating loss and tax credit
carryforwards the Company can use to offset any future taxable income pursuant
to Section 382 of the Internal Revenue Code. This limitation is effective with
the fiscal year ending June 30, 2004. Management will continue to evaluate the
realization of these deferred tax assets that are subject to the Companys
future operations. The Companys future operations will be influenced by the
overall business environment, which is difficult to predict and beyond the
control of the Company. To the extent that the Company generates taxable
income in the future, a decrease in the valuation allowance would be required
to recognize the deferred tax assets. Impact of Recently Issued Accounting Standards In January 2003, the FASB issued FIN No. 46 Consolidation of Variable Interest
Entities, an Interpretation of Accounting Research Bulletin No. 51,
Consolidated Financial Statements.The Company was required to account for
interests in VIEs existing on January 31, 2003, under the provisions of FIN No.
46 as of July 1, 2003, the beginning of the Companys fiscal 2004 first
quarter. The FIN addresses the consolidation of business enterprises of
variable interest entities and certain required disclosures related to such
relationships. The Company determined that none of its investments meet the
requirement for consolidation or disclosure under this FIN. In May 2003, the FASB issued Statement of Financial Accounting Standards
(FAS) No. 150, Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity.FAS No. 150 changes the
classification in the statement of financial position of certain common
financial instruments from either equity or mezzanine presentation to
liabilities and requires an issuer of those financial statements to recognize
changes in fair value or redemption amount, as applicable, in earnings. FAS No.
150 was effective for the Company as of July 1, 2003. The provisions of FAS
No. 150 had no impact on the condensed consolidated financial statements. Foreign Currency Approximately 31% of the Companys net sales in fiscal 2003 were denominated in
currencies other than U.S. dollars, principally pounds sterling, Australian
dollars, Canadian dollars, Euros and Japanese yen. A significant weakening of
such currencies versus the U.S. dollar could have a material adverse effect on
the Company. 
 Item 3. Quantitative and Qualitative Disclosures about Market Risk During the three months ended March 31, 2004, there have been no material
changes in the reported market risks presented in the Companys Quarterly
Report on Form 10-Q for the quarter ended December 31, 2003. 30




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Item 4. Controls and Procedures The Company evaluated the design and operation of its disclosure controls and
procedures as of March 31, 2004, to determine whether they are effective in
ensuring that the disclosure of required information is timely made in
accordance with the Exchange Act and the rules and forms of the Securities and
Exchange Commission. This evaluation was made under the supervision and with
the participation of management, including the Companys principal executive
officer and chief accounting officer. The principal executive officer and chief
accounting officer have concluded, based on their review, that the Companys
disclosure controls and procedures, as defined at Exchange Act Rules 13a-14(c)
and 15d-14(c), are effective to ensure that information required to be
disclosed by the Company in reports that it files under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms. No significant changes
were made to the Companys internal controls or other factors that could
significantly affect these controls subsequent to the date of their evaluation. 31




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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 G of the Notes to Condensed Consolidated
Financial Statements (Unaudited) included in this Report on Form 10-Q is
hereby incorporated by reference. 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. The Company sold 99.12 shares of its Common Stock to members of the senior
management of the Company pursuant to the Companys 2003 Equity Incentive Plan.
The shares were sold pursuant to awards under the plan made on January 21,
2004 and February 2, 2004. The consideration was $1,000 per share. The
proceeds were used for general corporate purposes. The sale of the shares was exempt from registration under the Securities Act of
1933, as amended (the Securities Act), pursuant Section 4(2) of the
Securities Act. The sales were made to five senior officers of the Company for
investment. The shares were not offered to other investors. 
 Item 6. Exhibits and Reports on Form 8-K  (a)
    
    Exhibits Exhibit
    
    
    
    IncorporatedNumber
    
    Title
    
    by Reference2.1
    
    Venture Lighting International, Inc. et al. Fourth Amended Chapter 11
Plan of Reorganization confirmed December 8, 2003 effective
December 10, 2003
    
    
    (1
    )3.1
    
    Second Amended and Restated Articles of Incorporation filed
September 26, 1995
    
    
    (2
    )3.2
    
    Certificate of Adoption of Amended Articles of Incorporation filed
February 12, 1997
    
    
    (2
    )3.3
    
    Certificate of Adoption of Third Amendment to Second Amended
and Restated Articles of Incorporation filed October 6, 1999
    
    
    (3
    )3.4
    
    Certificate of Adoption of Fourth Amendment to Second Amended
and Restated Articles of Incorporation filed March 16, 2000
    
    
    (4
    )3.5
    
    Certificate of Reorganization filed December 9, 2003
    
    
    (5
    )3.6
    
    Certificate of Adoption of Amendment to Article Fourth to Second
Amended and Restated Articles of Incorporation filed December 10, 2003
    
    
    (5
    )3.7
    
    Code of Regulations
    
    
    (6
    )
 32




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##### Table of Contents



(a)
    
    Exhibits (continued) Exhibit
    
    
    
    IncorporatedNumber
    
    Title
    
    by Reference4.1
    
    Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4, 3.5, 3.6 and 3.710.1
    
    Management Rights Agreement between Saratoga Partners IV, L.P. and
the Company dated March 22, 200410.2
    
    Fourth Amendment to Loan Agreement, Secured Promissory Note and
Security Agreement between Wayne R. Hellman and the Company dated
January 5, 200410.3
    
    Fifth Amendment to Loan Agreement, Secured Promissory Note and
Security Agreement between Wayne R. Hellman and the Company dated
February 19, 200410.4
    
    Amendment and Consent to the Amended and Restated Loan Agreement
by and among the Company and certain of its subsidiaries and Wells Fargo
Foothill, Inc., dated December 30, 2003.10.5
    
    Settlement Agreement dated January 5, 2004 by and among the
the Company, Wayne R. Hellman, and Saratoga Lighting
Holdings LLC10.6
    
    First Amendment to Settlement Agreement by and among the
the Company, Wayne R. Hellman, and Saratoga Lighting
Holdings LLC dated February 19, 200412
    
    Statement Re: Computation of Ratio of Earnings to Fixed Charges31.1
    
    Rule 13a-14(a)/15d-14(a) Certification31.2
    
    Rule 13a-14(a)/15d-14(a) Certification32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  (1)
    
    Incorporated by reference to Exhibit of same number in Companys Current
Report on Form 8-K dated December 8, 2003, filed December 23, 2003.(2)
    
    Incorporated by reference to Exhibit of same number in Companys Annual
Report on Form 10-K for the fiscal year ended June 30, 2002.(3)
    
    Incorporated by reference to Exhibit 3.2 in Companys Quarterly Report on
Form 10-Q/A for the Quarterly Period ended September 30, 1999 filed
January 14, 2000.(4)
    
    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.(5)
    
    Incorporated by reference to Exhibit of same number in Companys
Quarterly Report on Form 10-Q for the Quarterly Period ended December 31,
2003 filed March 18, 2004. 33




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(6)
    
    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 were filed during the quarter ended March 31, 2004. 34




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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 13, 2004
    
    By:
    
    /s/ Wayne R. HellmanWayne R. Hellman
Chief Executive OfficerDate: May 13, 2004
    
    By:
    
    /s/ Christopher F. ZerullChristopher F. Zerull
Vice President and Chief Accounting Officer
 35




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##### Table of Contents



EXHIBIT INDEX Exhibit
    
    
    
    IncorporatedNumber
    
    Title
    
    by Reference2.1
    
    Venture Lighting International, Inc. et al. Fourth Amended Chapter 11
Plan of Reorganization confirmed December 8, 2003 effective
December 10, 2003
    
    
    (1
    )3.1
    
    Second Amended and Restated Articles of Incorporation filed
September 26, 1995
    
    
    (2
    )3.2
    
    Certificate of Adoption of Amended Articles of Incorporation filed
February 12, 1997
    
    
    (2
    )3.3
    
    Certificate of Adoption of Third Amendment to Second Amended
and Restated Articles of Incorporation filed October 6, 1999
    
    
    (3
    )3.4
    
    Certificate of Adoption of Fourth Amendment to Second Amended
and Restated Articles of Incorporation filed March 16, 2000
    
    
    (4
    )3.5
    
    Certificate of Reorganization filed December 9, 2003
    
    
    (5
    )3.6
    
    Certificate of Adoption of Amendment to Article Fourth to Second
Amended and Restated Articles of Incorporation filed December 10, 2003
    
    
    (5
    )3.7
    
    Code of Regulations
    
    
    (6
    )4.1
    
    Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4, 3.5, 3.6 and 3.710.1
    
    Management Rights Agreement between Saratoga Partners IV, L.P. and
the Company dated March 22, 200410.2
    
    Fourth Amendment to Loan Agreement, Secured Promissory Note and
Security Agreement between Wayne R. Hellman and the Company dated
January 5, 200410.3
    
    Fifth Amendment to Loan Agreement, Secured Promissory Note and
Security Agreement between Wayne R. Hellman and the Company dated
February 19, 200410.4
    
    Amendment and Consent to the Amended and Restated Loan Agreement
by and among the Company and certain of its subsidiaries and Wells Fargo
Foothill, Inc., dated December 30, 2003.10.5
    
    Settlement Agreement dated January 5, 2004 by and among the
the Company, Wayne R. Hellman, and Saratoga Lighting
Holdings LLC10.6
    
    First Amendment to Settlement Agreement by and among the
the Company, Wayne R. Hellman, and Saratoga Lighting
Holdings LLC dated February 19, 200412
    
    Statement Re: Computation of Ratio of Earnings to Fixed Charges




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##### Table of Contents



(a)
    
    Exhibits (continued) Exhibit
    
    
    
    IncorporatedNumber
    
    Title
    
    by Reference31.1
    
    Rule 13a-14(a)/15d-14(a) Certification31.2
    
    Rule 13a-14(a)/15d-14(a) Certification32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  (1)
    
    Incorporated by reference to Exhibit of same number in Companys Current
Report on Form 8-K dated December 8, 2003, filed December 23, 2003.(2)
    
    Incorporated by reference to Exhibit of same number in Companys Annual
Report on Form 10-K for the fiscal year ended June 30, 2002.(3)
    
    Incorporated by reference to Exhibit 3.2 in Companys Quarterly Report on
Form 10-Q/A for the Quarterly Period ended September 30, 1999 filed
January 14, 2000.(4)
    
    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.(5)
    
    Incorporated by reference to Exhibit of same number in Companys
Quarterly Report on Form 10-Q for the Quarterly Period ended December 31,
2003 filed March 18, 2004.(6)
    
    Incorporated by reference to Exhibit 3.2 in Companys Registration
Statement on Form S-1, Registration No. 33-97902, effective December 11,
1995.