<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   ----------


                                    FORM 10-Q

(Mark One)

   X     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
-------- EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1998

                                       or

         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
-------- EXCHANGE ACT OF 1934

        For the transition period from ______________ to ________________


                         Commission File Number: 0-27202


                      ADVANCED LIGHTING TECHNOLOGIES, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


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


       32000 AURORA ROAD, SOLON, OHIO                     44139
--------------------------------------------------------------------------------
   (Address of principal executive offices)             (Zip Code)


                                 440 / 519-0500
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)


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

There were 20,226,257 shares of the Registrant's Common Stock, $.001 par value
per share, outstanding as of January 31, 1999.




<PAGE>   2


                                      INDEX

                      ADVANCED LIGHTING TECHNOLOGIES, INC.


<TABLE>
<CAPTION>
                                                                                                       PAGE NO.

<S>               <C>                                                                                     <C>
PART I            FINANCIAL INFORMATION

Item 1.           Financial Statements (Unaudited)

                      Condensed Consolidated Balance Sheets - December 31, 1998
                           and June 30, 1998........................................................       2

                      Condensed Consolidated Statements of Operations -- Three months
                           and six months ended December 31, 1998 and 1997 .........................       3

                      Condensed Statement of Consolidated Shareholders' Equity --
                           Six months ended December 31, 1998.......................................       4

                      Condensed Consolidated Statements of Cash Flows -
                           Six months ended December 31, 1998 and 1997..............................       5

                      Notes to Condensed Consolidated Financial Statements..........................       6

Item 2.           Management's Discussion and Analysis of Financial Condition
                         and Results of Operations..................................................      13

Item 3.           Quantitative and Qualitative Disclosures about Market Risk........................      27


PART II           OTHER INFORMATION

Item 4.           Submission of Matters to a Vote of Security Holders...............................      28

Item 6.           Exhibits and Reports on Form 8-K..................................................      29


SIGNATURES..........................................................................................      30

EXHIBIT INDEX.......................................................................................      31
</TABLE>






<PAGE>   3

                      ADVANCED LIGHTING TECHNOLOGIES, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                     (Unaudited)       (Audited)
                                                                                     DECEMBER 31,       JUNE 30,
                                                                                        1998              1998
                                                                                   ---------------   ---------------
<S>                                                                                   <C>               <C>      
ASSETS
Current assets:
   Cash and cash equivalents                                                          $  10,656         $  21,917
   Short-term investments                                                                   350               350
   Trade receivables, less allowances of $553 and $397                                   29,552            40,779
   Receivables from related parties                                                       1,697             1,034
   Inventories:
      Finished goods                                                                     29,862            29,556
      Raw materials and work-in-process                                                  21,151            15,184
                                                                                      ---------         ---------
                                                                                         51,013            44,740
   Prepaid expenses                                                                       3,778             3,200
   Deferred taxes                                                                             -             2,192
                                                                                      ---------         ---------
Total current assets                                                                     97,046           114,212

Property, plant and equipment:
   Land and buildings                                                                    38,269            31,429
   Production machinery and equipment                                                    59,435            52,235
   Other equipment                                                                        6,413                 -
   Furniture and fixtures                                                                18,501            18,316
                                                                                      ---------         ---------
                                                                                        122,618           101,980
   Less accumulated depreciation                                                         14,494            11,952
                                                                                      ---------         ---------
                                                                                        108,124            90,028

Deferred taxes                                                                            3,171             2,892
Receivables from related parties                                                          4,919             3,157
Net assets associated with discontinued operations                                          278             5,193
Investments in affiliates                                                                22,109            20,591
Other assets                                                                              7,750             8,878
Intangible assets                                                                        33,610            34,377
Excess of cost over net assets of businesses acquired, net                               53,089            32,524
                                                                                      ---------         ---------
                                                                                      $ 330,096         $ 311,852
                                                                                      =========         =========

LIABILITIES AND SHAREHOLDERS' EQUITY 
Current liabilities:
   Short-term debt and current portion of long-term debt                              $   1,953         $   1,960
   Accounts payable                                                                      19,842            14,967
   Payables to related parties                                                            1,653               618
   Employee-related liabilities                                                           4,620             3,259
   Accrued income and other taxes                                                           664             2,729
   Other accrued expenses                                                                14,512            13,042
                                                                                      ---------         ---------
Total current liabilities                                                                43,244            36,575

Long-term debt                                                                          160,499           117,332
Other liabilities                                                                           465               766
Deferred taxes                                                                            3,171             3,059

Shareholders' equity
   Preferred stock, $.001 par value, 1,000 shares authorized, no shares issued                -                 -
   Common stock, $.001 par value, 80,000 shares authorized, 20,226 shares
       issued and outstanding as of December 31, 1998 and 20,189 shares issued
       and outstanding as of June 30, 1998                                                   20                20
   Paid-in-capital                                                                      190,295           172,900
   Accumulated other comprehensive income                                                    54                 -
   Loan receivable from officer                                                          (9,168)                -
   Retained earnings (deficit)                                                          (58,484)          (18,800)
                                                                                      ---------         ---------
                                                                                        122,717           154,120
                                                                                      ---------         ---------
                                                                                      $ 330,096         $ 311,852
                                                                                      =========         =========
</TABLE>


See notes to condensed consolidated financial statements

                                        2


<PAGE>   4
                      ADVANCED LIGHTING TECHNOLOGIES, INC.
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                 (In thousands, except per share dollar amounts)

<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED                 SIX MONTHS ENDED
                                                                         DECEMBER 31,                      DECEMBER 31,
                                                                  -------------------------         -------------------------
                                                                    1998             1997             1998             1997
                                                                  --------         --------         --------         --------

<S>                                                               <C>              <C>              <C>              <C>     
Net sales                                                         $ 37,944         $ 31,879         $ 88,302         $ 61,816

Costs and expenses:
   Cost of sales                                                    30,073           18,467           59,709           35,793
   Marketing and selling                                            10,283            4,915           19,142            9,331
   Research and development                                          5,405            1,822            9,153            3,221
   General and administrative                                        5,129            2,006            9,450            4,220
   Fiber optic joint venture formation costs                             -                -                -              212
   Special charges                                                  13,292                -           13,292                -
   Amortization of intangible assets                                   678              211            1,237              425
                                                                  --------         --------         --------         --------
Income (loss) from operations                                      (26,916)           4,458          (23,681)           8,614

Other income (expense):
   Interest expense                                                 (3,431)               -           (6,158)            (327)
   Interest income                                                     328              281              566              808
   Loss from equity investments                                       (272)               -             (461)               -
                                                                  --------         --------         --------         --------

Income (loss) from continuing operations
   before income taxes                                             (30,291)           4,739          (29,734)           9,095
Income taxes                                                         3,515            1,706            3,784            3,274
                                                                  --------         --------         --------         --------

Income (loss) from continuing operations                           (33,806)           3,033          (33,518)           5,821
Discontinued operations
   Loss from operations of discontinued business
      (net of income tax benefits of $135 and $303 for the
      three month and six month periods, respectively)                   -             (241)               -             (539)
   Loss on disposal of discontinued business,
      including provision of $1,166 for operating
      losses during phase-out period                                (6,166)               -           (6,166)               -
                                                                  --------         --------         --------         --------

Net income (loss)                                                 $(39,972)        $  2,792         $(39,684)        $  5,282
                                                                  ========         ========         ========         ========

Earnings per share -- Basic:
  Income (loss) from continuing operations                        $  (1.67)        $    .18         $  (1.66)        $    .36
  Loss from discontinued operations                                   (.31)            (.01)            (.30)            (.04)
                                                                  --------         --------         --------         --------
Earnings (loss) per share -- Basic                                $  (1.98)        $    .17         $  (1.96)        $    .32
                                                                  ========         ========         ========         ========

Earnings per share -- Diluted:
  Income (loss) from continuing operations                        $  (1.67)        $    .18         $  (1.66)        $    .35
  Loss from discontinued operations                                   (.31)            (.01)            (.30)            (.03)
                                                                  --------         --------         --------         --------
Earnings (loss) per share -- Diluted                              $  (1.98)        $    .17         $  (1.96)        $    .32
                                                                  ========         ========         ========         ========

Weighted average shares outstanding:
    Basic                                                           20,222           16,506           20,215           16,378
                                                                  ========         ========         ========         ========

    Diluted                                                         20,222           16,778           20,215           16,702
                                                                  ========         ========         ========         ========
</TABLE>



See notes to condensed consolidated financial statements.

                                        3

<PAGE>   5


                      ADVANCED LIGHTING TECHNOLOGIES, INC.
      CONDENSED STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY (UNAUDITED)
                                 (in thousands)



<TABLE>
<CAPTION>
                                                           SIX MONTHS ENDED DECEMBER 31, 1998
                           ---------------------------------------------------------------------------------------------------
                                                                      ACCUMULATED        LOAN
                                COMMON STOCK                             OTHER        RECEIVABLE     RETAINED
                           ------------------------     PAID-IN       COMPREHENSIVE      FROM        EARNINGS
                            SHARES      PAR VALUE       CAPITAL         INCOME         OFFICER       (DEFICIT)       TOTAL
                           ----------   -----------   ------------  ----------------  -----------  ------------- -------------

<S>                           <C>             <C>       <C>              <C>            <C>           <C>           <C>      
Balance at July 1, 1998       20,189          $ 20      $ 172,900        $        -     $      -      $ (18,800)    $ 154,120

Net loss                                                                                                (39,684)      (39,684)

Foreign currency
  translation adjustment                                                         54                                        54

Loan to officer                                                                           (9,168)                      (9,168)

Valuation adjustment of
  shares issued in connection
  with the purchase of
  Ruud Lighting, Inc.                                      16,928                                                      16,928

Issuance of shares in
  connection with the
  purchase of a business           2             -             29                                                          29

Stock options exercised           17             -            279                                                         279

Stock purchases
  by employees                    18             -            159                                                         159
                           ----------   -----------   ------------  ----------------  -----------  ------------- -------------

BALANCE AT
  DECEMBER 31, 1998           20,226          $ 20       $190,295        $       54     $ (9,168)     $ (58,484)     $122,717
                           ==========   ===========   ============  ================  ===========  ============= =============
</TABLE>




See notes to condensed consolidated financial statements



                                       4

<PAGE>   6

                      ADVANCED LIGHTING TECHNOLOGIES, INC.
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                    SIX MONTHS ENDED
                                                                                      DECEMBER 31,
                                                                            ---------------------------------
                                                                                1998               1997
                                                                            -------------      --------------
<S>                                                                            <C>                   <C>    
OPERATING ACTIVITIES
   Income (loss) from continuing operations                                    $ (33,518)            $ 5,821
   Adjustments to reconcile income (loss) from continuing
      operations to net cash used in operating activities:
         Depreciation                                                              3,235               1,403
         Amortization                                                              1,237                 425
         Deferred income taxes                                                     3,429                 868
         Special charges and terminated equipment contracts                       22,116                   -
         Changes in operating assets and liabilities, excluding effects of
            acquisitions and discontinued operations:
            Trade receivables                                                     (4,038)             (2,289)
            Inventories                                                           (5,543)             (4,335)
            Prepaids and other assets                                             (1,427)             (2,496)
            Accounts payable and accrued expenses                                  1,336              (2,551)
            Other                                                                   (266)                  -
                                                                            -------------      --------------
                                Net cash used in operating activities            (13,439)             (3,154)

INVESTING ACTIVITIES
   Capital expenditures                                                          (17,803)             (1,836)
   Purchases of businesses                                                        (5,024)                  -
   Investments in affiliates                                                      (2,837)             (3,252)
   Use of net proceeds from public offering:
      Capital expenditures                                                             -              (8,329)
      Investments in affiliates                                                        -              (4,835)
                                                                            -------------      --------------
                                Net cash used in investing activities            (25,664)            (18,252)

FINANCING ACTIVITIES
   Proceeds from revolving credit facility                                       156,624              35,010
   Payments of revolving credit facility                                        (113,724)            (35,485)
   Proceeds from long-term debt                                                      868               3,165
   Payments of long-term debt and capital leases                                  (2,674)             (2,103)
   Issuance of common stock                                                          438                 532
   Loan to officer                                                                (9,000)                  -
   Net proceeds from public offering                                                   -              69,320
   Use of net proceeds from public offering:
      Payment of long-term debt and revolving credit facility                          -             (33,000)
                                                                            -------------      --------------
                            Net cash provided by financing activities             32,532              37,439

Net cash used in discontinued operations                                          (4,690)             (3,723)
                                                                            -------------      --------------

Increase (Decrease) in cash and cash equivalents                                 (11,261)             12,310
Cash and cash equivalents, beginning of period                                    21,917               4,198
                                                                            -------------      --------------

                             CASH AND CASH EQUIVALENTS, END OF PERIOD           $ 10,656            $ 16,508
                                                                            =============      ==============

SUPPLEMENTAL CASH FLOW INFORMATION
     Interest paid                                                               $ 5,070               $ 587
     Income taxes paid                                                               211               1,077
     Capitalized interest                                                            458                 416
     Noncash transactions
         Equipment acquired through capital leases                                     -                 376
         Stock issued for purchase of business                                        29                   -

     Detail of acquisitions:
         Assets acquired                                                         $ 9,688                   -
         Liabilities assumed                                                      (4,570)                  -
         Stock issued for purchase of business                                       (29)                  -
                                                                            -------------      --------------
         Cash paid                                                                 5,089                   -
             Less cash acquired                                                      (65)                  -
                                                                            -------------      --------------
         Net cash paid for acquisitions                                          $ 5,024                   -
                                                                            =============      ==============
</TABLE>


See notes to condensed consolidated financial statements


                                        5
<PAGE>   7


                      ADVANCED LIGHTING TECHNOLOGIES, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                DECEMBER 31, 1998
                          (Dollar amounts in thousands)



A.    ORGANIZATION

Advanced Lighting Technologies, Inc. (the "Company" or "ADLT") is an
innovation-driven designer, manufacturer and marketer of metal halide lighting
products, including materials, system components, systems and production
equipment.

B. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all the information and
disclosures required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the financial statements
include all material adjustments necessary for a fair presentation, including
adjustments of a normal and recurring nature as well as the special charges
described in Note G. 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, 1998. Operating results for the three
months and six months ended December 31, 1998 are not necessarily indicative of
the results that may be expected for the full-year ending June 30, 1999.

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

In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up
Activities." SOP 98-5 provides authoritative guidance on accounting for and
financial reporting of start-up costs and organization costs. The Company is
required to adopt the SOP on July 1, 1999 and, upon adoption, expense all
previously capitalized start-up costs and organization costs as a cumulative
effect of a change in accounting principle. Management is reviewing its
capitalization policies and determining the impact that the adoption of this SOP
is expected to have on its consolidated results of operations and financial
position. At December 31, 1998, the Company estimates that it had approximately
$2,650 of start-up costs included in its consolidated balance sheet.

C.  COMPREHENSIVE INCOME

During the first quarter of fiscal 1999, the Company adopted Statement of
Financial Accounting Standards (FAS) No. 130, "Reporting Comprehensive Income,"
which requires disclosure of comprehensive income and its components. FAS No.
130 requires companies to report, in addition to net income, other components of
comprehensive income, which for the Company includes foreign currency
translation adjustments.




                                        6

<PAGE>   8


                      ADVANCED LIGHTING TECHNOLOGIES, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                DECEMBER 31, 1998
                          (Dollar amounts in thousands)



C.  COMPREHENSIVE INCOME (CONTINUED)

The Company had a comprehensive loss of $40,184 for the three months ended
December 31, 1998 and comprehensive income of $2,792 for the three months ended 
December 31, 1997. The Company had a comprehensive loss of $39,630 for the six
months ended December 31, 1998 and comprehensive income of $5,282 for the six
months ended December 31, 1997. The Company's adoption of FAS No. 130 had no
effect on the Company's reported results of operations or financial position.

D.  REVOLVING BANK CREDIT FACILITY

On October 19, 1998, the Company voluntarily reduced the maximum committed
availability under its revolving credit facility ("Credit Facility") provided by
several North American financial institutions (the "Lenders") to $65,000 from
$85,000. In February 1999, the Company and the Lenders amended the Credit
Facility to provide for future borrowing under an arrangement pursuant to which
the availability of borrowing is determined by the Company's eligible accounts
receivable, eligible inventories and certain other assets. Borrowings under the
Credit Facility are limited to $55,000 with additional borrowings subject to the
approval of all Lenders. Based on the amended terms of the Credit Facility, the
Company would have had $6,400 in available borrowings as of December 31, 1998.

The Credit Facility has a term expiring April 1, 2000. The Company is   
actively seeking alternative financing sources and intends to replace the
existing Credit Facility.

Interest rates on loans outstanding are based on the agent bank's prime rate
plus 1% to May 31, 1999 and plus 2% thereafter. The Company is also obligated   
to pay a facility fee of .375% on the amount of the facility. The facility
contains certain affirmative and negative covenants customary for this type of
agreement, prohibits cash dividends, and includes financial covenants with
respect to income levels, cash availability and net worth. The principal
security for the facility is substantially all of the personal property of the
Company and each of its North American and United Kingdom subsidiaries, certain
real estate and a pledge of stock of each of the Company's principal
subsidiaries. 

E.  SENIOR NOTES OFFERING

On March 13, 1998, the Company sold $100,000 of Senior Notes due March 15, 2008,
resulting in net proceeds of approximately $96,150. The Notes have an annual
coupon rate of 8% and interest is payable semiannually on March 15 and September
15. There are no sinking fund requirements.



                                        7


<PAGE>   9


                      ADVANCED LIGHTING TECHNOLOGIES, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                DECEMBER 31, 1998
                          (Dollar amounts in thousands)



E.  SENIOR NOTES OFFERING (CONTINUED)

Until completion of a registered exchange offer to existing noteholders, the
Senior Notes bear interest at 8.5%. The offer is expected to be completed within
45 days following the effectiveness of the Company's related registration
statement.

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

F.  RELATED PARTY TRANSACTIONS

Pursuant to a loan agreement dated October 8, 1998, between the Company and its
Chairman and Chief Executive Officer ("the CEO"), the Company has loaned $9,000
to its CEO for a one-year term at an interest rate of 8%. The loan was made
following approval by the Company's Board of Directors. The proceeds of the loan
were used by the Company's CEO to reduce the outstanding principal balance of a
margin account loan, which is secured by 2,053,070 shares of the Company's
Common Stock owned by the CEO and a related entity. In connection with the loan,
the Company's Board of Directors asked for and received the CEO's agreement to
extend the term of his employment agreement to December 31, 2003. The loan
agreement prohibits the CEO from encumbering his shares of the Company's Common
Stock in any manner except pursuant to the existing agreements governing the
CEO's margin account, without the consent of the Company's Board of Directors.
As of December 31, 1998, $168 of interest was accrued on the loan.

In connection with the actions described in Note G, the Company recognized $374
in cost of sales for the write-down of specialty inventory and $764 in research
and development expenses related to transactions with affiliates.

G.  SPECIAL CHARGES AND TERMINATED EQUIPMENT CONTRACTS

During the quarter ended December 31, 1998, the Company recorded special charges
related to significant changes in its operations, which are intended to
accelerate and intensify the Company's focus on its metal halide products and
significantly reduce its use of cash resources.

The special charges principally relate to the execution of the Company's shift
in strategic direction and include: limiting Pacific Rim expansion; changing
global lamp manufacturing strategy; restructuring marketing operations in North
America and Europe; accelerating an exit from noncore product lines; reducing
excess overhead including staffing reductions; consolidating an equipment
manufacturing operation into the Company's Solon, Ohio facility and
significantly reducing the size of the operation; and, reducing capital
expenditures.

The special charges were determined in accordance with formal plans developed by
the Company's management and approved by the Company's Board of Directors using
the best information available to it at the time. Actions associated with
closing facilities began in the second quarter and are expected to be completed
in the third quarter of fiscal 1999. Employees were terminated enterprise-wide
from almost all areas and units of the Company. Substantially all of the 241
terminated employees left the Company

                                        8


<PAGE>   10


                      ADVANCED LIGHTING TECHNOLOGIES, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                DECEMBER 31, 1998
                          (Dollar amounts in thousands)



G.  SPECIAL CHARGES AND TERMINATED EQUIPMENT CONTRACTS (CONTINUED)

before December 31, 1998, with the remainder scheduled to leave by March 31,
1999. Assets that are no longer in use have been sold or were written-down to
their estimated fair values at December 31, 1998. The amounts the Company will
ultimately incur may change as the plans are executed.

Details of the actions and related special charges recorded during the quarter
ended December 31, 1998 are summarized as follows:

<TABLE>
<CAPTION>
                                                             CHARGED TO         CHARGES        BALANCE AS OF
            DESCRIPTION                  CASH/NONCASH        OPERATIONS         UTILIZED      DECEMBER 31, 1998
------------------------------------   ------------------   --------------    ------------    -----------------
<S>                                    <C>                       <C>             <C>                   <C>
Limit Pacific Rim Expansion
     Severance                         Cash                      $    489        $    277              $   212
     Lease/contract cancelations       Cash/Noncash                   779             229                  550
     Write-down of assets              Noncash                      1,700           1,700                    -
     Shut-down costs of facilities     Cash                           197               -                  197

Change in Global Manufacturing Strategy
     Severance                         Cash                           328             218                  110
     Write-down of assets              Noncash                      3,237           3,237                    -
     Shut-down costs of facilities     Cash                           224             208                   16

Restructure Marketing Operations in North America and Europe
     Severance                         Cash                           264             101                  163
     Lease/contract cancelations       Cash                           293              20                  273
     Write-down of assets              Noncash                      1,723           1,723                    -
     Shut-down costs of facilities     Cash                           238               -                  238

Reduce Staffing Requirements           Cash/Noncash                 1,913             688                1,225

Exit Noncore Inventory Products        Noncash                        261             261                    -

Write-off Long-Lived Assets            Cash/Noncash                 2,201           2,009                  192

Other                                  Cash                           253              12                  241
                                                            --------------    ------------    -----------------

                                                                 $ 14,100        $ 10,683              $ 3,417
                                                            ==============    ============    =================
</TABLE>




The special charges of $14,100 are classified in the condensed consolidated
statement of operations as cost of goods sold ($808) and special charges
($13,292). The Company incurred additional costs of $374 and $764, as described
in Note F, related to the above actions.

In addition to the special charges recorded during the quarter ended December
31, 1998, the Company anticipates that, in completing the actions required by
the plans, additional pretax charges estimated to be $2,000 will be incurred
during the third and fourth quarters of fiscal 1999. All actions required by the
plans are expected to be completed by September 30, 1999.



                                        9


<PAGE>   11


                      ADVANCED LIGHTING TECHNOLOGIES, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                DECEMBER 31, 1998
                          (Dollar amounts in thousands)


G.  SPECIAL CHARGES AND TERMINATED EQUIPMENT CONTRACTS (CONTINUED)

In conjunction with limiting its Pacific Rim expansion, the Company terminated
production equipment contracts related to the completion of four lamp   
manufacturing equipment groups. Accordingly, in the quarter ended December 31,
1998, the Company reversed previously recognized sales of $14,961 and cost of
sales of $6,413 related to these contracts, which were accounted for under the
percentage-of-completion method. 

During the fiscal year ended June 30, 1998, the Company recorded special charges
related to an assessment of the Company's global power supply operations. The
special charges of $17,984 principally related to the Company's decision to
refocus and restructure its recently acquired global power supply operations to
concentrate exclusively on opportunities in metal halide. With the January 1998
acquisition of Ruud Lighting, Inc., the Company accelerated the rationalization
of its existing power supply manufacturing operations and distribution
activities in order to capitalize on new opportunities not previously available.
This assessment resulted in the discontinuance of certain power supply products
at the Company's power supply facilities and the write-down of certain
intangible, fixed and other assets. The actions required by the plans related to
the global power supply operations are expected to be completed by March 31,
1999.

Details of the activity related to the fiscal 1998 special charges for the six
months ended December 31, 1998 are summarized as follows:   

<TABLE>
<CAPTION>
                                                              BALANCE AS OF     CHARGES        BALANCE AS OF
            DESCRIPTION                  CASH/NONCASH         JUNE 30, 1998    UTILIZED       DECEMBER 31, 1998
------------------------------------   ------------------   ------------------------------    -----------------

<S>                                    <C>                          <C>             <C>                   <C> 
     Severance                         Cash                         $ 460           $ 417                 $ 43
     Lease/contract cancelations       Cash                           253             139                  114
                                                            --------------    ------------    -----------------

                                                                    $ 713           $ 556                $ 157
                                                            ==============    ============    =================
</TABLE>


The balances of the accruals related to the special charges as of December 31,
1998, were classified in the consolidated balance sheet as other accrued
expenses.






                                       10

<PAGE>   12


                      ADVANCED LIGHTING TECHNOLOGIES, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                DECEMBER 31, 1998
                          (Dollar amounts in thousands)



H. INCOME TAXES

At June 30, 1998, the Company had net operating loss carryforwards ("NOLs") of
$1,960 available to reduce future United States federal taxable income, which
expire 2008 through 2011.

The Company also has research and development credit carryforwards for tax
purposes of approximately $850, which expire 2005 through 2013. Additionally, in
conjunction with the Alternative Minimum Tax ("AMT") rules, the Company had
available AMT credit carryforwards for tax purposes of approximately $1,000,
which may be used indefinitely to reduce regular federal income taxes.

Also, at June 30, 1998, the Company had foreign net operating loss carryforwards
for tax purposes totaling $2,000 that expire in 2006 and $403 that have no
expiration dates.

For the six months ended December 31, 1998, the Company reported a pretax loss
from continuing operations, including special charges, of $29,734 and a pretax
loss on the discontinued operations of the Microsun business of $6,166, which
created $35,900 of operating losses and future tax deductions for financial
reporting purposes. Accordingly, at December 31, 1998, the Company recorded a
valuation allowance for deferred tax assets of $15,503 related to all NOLs, tax
credits and net deductible tax differences.

I.  DISCONTINUED OPERATIONS, MICROSUN BUSINESS

In March 1998, the Company approved a plan to distribute to its shareholders, as
a tax-free spin-off transaction estimated to be completed by December 31, 1998,
all of the ownership of Microsun Technologies, Inc., the subsidiary primarily
responsible for development, design, assembly and marketing of metal halide
portable fixtures for hospitality and residential uses. As a result, the
consolidated financial statements of ADLT were reclassified to reflect the
results of operations of Microsun as a discontinued operation in accordance with
generally accepted accounting principles.

Because of deterioration of the capital markets subsequent to June 30, 1998 and
the inability to raise capital necessary to spin-off the Microsun business, the
Company revised its plan for the disposition of Microsun. During December 1998,
the Company concluded that it would wind-down the operations, close the
manufacturing facilities and liquidate the assets of Microsun.





                                       11



<PAGE>   13


                      ADVANCED LIGHTING TECHNOLOGIES, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                DECEMBER 31, 1998
                          (Dollar amounts in thousands)



I.  DISCONTINUED OPERATIONS, MICROSUN BUSINESS (CONTINUED)

As of December 31, 1998, the wind-down of the business was nearing completion.
In doing so, a provision for disposal of $5,000 was recorded for the write-down
of assets to net realizable value and costs related to shut-down and severance.

Summary operating information for Microsun for the three-month and six-month
periods ended December 31, 1998 and 1997, is presented below for informational
purposes only and does not necessarily reflect what the results of operations
would have been had Microsun operated as a stand-alone entity.

<TABLE>
<CAPTION>
                                    THREE MONTHS ENDED                  SIX MONTHS ENDED
                                       DECEMBER 31,                       DECEMBER 31,
                                ----------------------------      -----------------------------
                                   1998            1997               1998            1997
                                ------------    ------------      -------------   -------------
<S>                                 <C>               <C>              <C>               <C>  
Sales                               $ 1,760           $ 850            $ 2,689         $ 1,155
Costs and expenses                    3,653           1,226              5,878           1,997
                                ------------    ------------      -------------   -------------
Loss before income taxes              1,893             376              3,189             842
Income tax:
   Benefit                              644             135              1,085             303
   Valuation allowance                 (396)              -               (396)              -
                                ------------    ------------      -------------   -------------
Net loss                            $ 1,645           $ 241            $ 2,500           $ 539
                                ============    ============      =============   =============
</TABLE>

Operating losses from the measurement date (March 31, 1998) through the date of
disposal (December 31, 1998) were $10,266 ($6,784, net of income tax benefits of
$3,482). At March 31, 1998, the Company estimated operating losses through the
date of disposal of $9,100 ($6,014, net of income tax benefits of $3,086) based
on losses expected to be incurred through the date of spin-off of the business.
Actual operating losses through the completed disposal date of December 31, 1998
exceeded the estimate by $1,166, given the change in the manner in which the
business was disposed. At December 31, 1998, as further discussed in Note H, a
valuation allowance was recorded for the income tax benefits arising from the
Microsun discontinued operations.

At December 31, 1998, the net assets of the disposed business of $278, consisted
of approximately $3,688 of current assets, $3,529 of current liabilities, $548
of noncurrent assets and $429 of noncurrent liabilities.






                                       12


<PAGE>   14


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

(In thousands, except per share amounts)

This report on Form 10-Q may contain forward-looking statements. 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. There are a
number of factors that could cause the Company's actual results to differ
materially from those indicated by such forward-looking statements. Such factors
are detailed in the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1998 filed with the Securities and Exchange Commission.

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

GENERAL

The Company designs, manufactures and markets metal halide lighting products,
including materials, systems and components. Metal halide lighting is currently
used primarily in commercial and industrial applications such as factories and
warehouses, outdoor site and landscape lighting, sports facilities and large
retail spaces such as superstores. With the January 1998 acquisition of
Deposition Sciences, Inc., the Company also manufactures and markets turnkey
deposition equipment to produce thin film coatings for a variety of
applications. Systems, components and materials revenue is recognized when
products are shipped, and production equipment revenue is recognized under the
percentage of completion method.

Consistent with the Company's strategy for new product introductions, the
Company invests substantial resources in research and development to engineer
materials and system components to be included in customers' specialized
lighting systems. Over the last three fiscal years, the Company has spent an
aggregate of $17,310 on research and development, representing 5.7% of aggregate
net sales from continuing operations over that period. During the six months
ended December 31, 1998, the Company spent $9,153 on research and development,
representing 10.4% of net sales for that period. Such expenditures have enabled
the Company to develop new applications for metal halide lighting, improve the
quality of its materials, and introduce new specialized products, such as the
Uni-Form(R) pulse start products. Uni-Form(R) pulse start products are a new
generation of metal halide 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 expects to continue to make substantial expenditures on research and
development to enhance its position as the leading innovator in the metal halide
lighting industry.

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



                                       13



<PAGE>   15


RECENT DEVELOPMENTS

PLANS ANNOUNCED IN THE SECOND QUARTER-The Company has implemented plans
resulting in changes to its operations intended to accelerate and intensify the
Company's focus on its metal halide products, insulate it from deteriorating
international markets and the anticipated decline of non-core products,
integrate fully its core and acquired U.S. operations to produce profitable
growth, and reduce and redirect its use of cash resources. This comes in
response to a reduction in the Company's revenues in the first quarter of fiscal
1999 as compared to the fourth quarter of fiscal 1998 and due to economic
conditions in general, especially outside the United States. To implement this
strategy, the Company has taken or is taking the following actions:

         -    Limiting Pacific Rim Expansion. In recognition of the near-term
              effects of the crisis in Asian capital markets, the Company
              modified its expansion plans in the Pacific Rim and is acting to
              limit its exposure by limiting further investment in Pacific Rim
              ventures. The Company has retained several lamp manufacturing
              equipment groups, which were originally expected to be shipped to
              Asia pursuant to equipment contracts with Pacific Rim companies,
              and has moved the equipment to its Solon, Ohio facility.

         -    Changing Global Lamp Manufacturing Strategy. The Company is
              revising its current global lamp manufacturing strategy to reduce
              the overall cost of its lamps, including consideration of moving
              some production to the manufacturing facilities of foreign joint
              ventures. In addition, to reduce costs related to its lamp
              production activities, the Company has consolidated its Bellevue,
              Ohio specialty lamp manufacturing operations into its Solon lamp
              manufacturing facility.

         -    Restructuring Marketing Operations in North America and Europe.
              The Company is restructuring its marketing operations in Canada to
              eliminate certain distribution channels and centers. Warehouses in
              Toronto and Vancouver will be closed. OEM and plant growth sales
              channels will be retained and serviced out of Solon, Ohio.
              Aftermarket lamp sales will be serviced through a distributor,
              which the Company is currently seeking.

              The Company is also restructuring its marketing operations in
              Europe and the U.K. to make them more cost efficient. Sales
              offices in France, Italy and Germany will be closed and future
              sales in those locations will be handled by commissioned sales
              agents. Actions in the U.K. include consolidation of locations and
              other related cost reduction activities.

         -    Accelerating Exit from Noncore Products Lines. The Company has
              eliminated the remaining non-metal halide product lines being sold
              by its Canadian operations. The Company has sold these product
              lines and inventory to a third party.

         -    Consolidating Equipment Manufacturing Operation into Solon, Ohio
              Facility. The Company's equipment manufacturing operation in
              Bellevue, Ohio has been closed. Machinery, equipment and research
              and development facilities necessary to allow the Company to
              continue manufacturing and support of lamp production equipment,
              at reduced levels, has been moved to the Company's Solon, Ohio
              facility. The Company has temporarily ceased the manufacturing and
              sale of turnkey lamp production equipment groups.



                                       14


<PAGE>   16


         -    Reducing Corporate and Administrative Overhead. The Company was
              increasing its corporate and administrative staff levels to
              support its aggressive growth goals. In light of its focus on
              internal growth, instead of continued acquisitions and joint
              ventures, the Company has reduced its corporate overhead,
              including a significant reduction in staff levels.

         -    Reducing Capital Expenditures. Previously announced plans to spend
              approximately $20 million on capital expansion, primarily
              production equipment, and approximately $14.5 million on
              facilities improvements in fiscal 1999 have been substantially
              reduced. Capital expenditures for the last two quarters of fiscal
              1999 are estimated to be $4.0 million.

The decision to terminate the foreign equipment contracts resulted in a reversal
of sales of $14,961 and cost of sales of $6,413 in the second quarter, which
were previously recorded under the percentage of completion method. This
reversal reduced operating income by $8,548 ($0.42 per share).  Had the sales
related to the terminated equipment contracts not been reversed, reported sales
and cost of sales would have been as follows:

<TABLE>
<CAPTION>
                                     THREE MONTHS ENDED                  SIX MONTHS ENDED
                                      DECEMBER 31, 1998                 DECEMBER 31, 1998
                                ----------------------------      -----------------------------
                                   SALES        COST OF SALES        SALES        COST OF SALES
                                ------------    ------------      -------------   -------------
<S>                                <C>             <C>                <C>             <C>     
          As reported              $ 37,944        $ 30,073           $ 88,302        $ 59,709

          Pro forma                  52,905          36,486            103,263          66,122
</TABLE>

The remaining actions noted above resulted in $14,100 in special charges ($0.70
per share) during the second quarter. The charges are classified in the
condensed consolidated statement of operations as cost of goods sold ($808) and
special charges  ($13,292). In connection with the above actions, the Company
incurred additional costs of $374 and $764 related to cost of sales and
research and development expense for transactions with affiliates. The Company
anticipates that an additional $2,000 per quarter, related to these actions,
will be incurred during the third and fourth quarters of fiscal 1999.

REVOLVING BANK CREDIT FACILITY-On October 19, 1998, the Company voluntarily
reduced the maximum committed availability under its revolving credit facility
("Credit Facility") provided by several North American financial institutions
(the "Lenders") to $65,000 from $85,000. In February 1999, the Company and the
Lenders amended the Credit Facility to provide for future borrowing under an
arrangement pursuant to which the availability of borrowing is determined by the
Company's eligible accounts receivable, eligible inventories and certain other
assets. Borrowings under the Credit Facility are limited to $55,000 with
additional borrowings subject to the approval of all Lenders. Based on the
amended terms of the Credit Facility, the Company would have had $6,400 in
available borrowings as of December 31, 1998.

The Credit Facility has a term expiring April 1, 2000.  The Company is          
actively seeking alternative financing sources and intends to replace the
existing Credit Facility.

DISCONTINUED OPERATIONS, MICROSUN BUSINESS

In March 1998, the Company approved a plan to distribute to its shareholders, as
a tax-free spin-off transaction estimated to be completed by December 31, 1998,
all of the ownership of Microsun Technologies, Inc., the subsidiary primarily
responsible for development, design, assembly and marketing of metal halide
portable fixtures for hospitality and residential uses. As a result, the
consolidated financial statements of ADLT were reclassified to reflect the
results of operations of Microsun as a discontinued operation in accordance with
generally accepted accounting principles.

Because of deterioration of the capital markets subsequent to June 30, 1998 and
the inability to raise capital necessary to spin-off the Microsun business, the
Company revised its plan for the disposition of Microsun. During December 1998,
the Company concluded that it would wind-down the operations, close the
manufacturing facilities and liquidate the assets of Microsun.

As of December 31, 1998, the wind-down of the business was nearing completion.
In doing so, a loss on disposal of $6,166 was recorded, which included $1,166
for operating losses during the phase-out period and $5,000 related to the
write-down of assets to net realizable value and costs related to shut-down and
severance.


                                       15


<PAGE>   17


UPDATE ON IN-PROCESS RESEARCH AND DEVELOPMENT

In connection with the January 1998 purchase of Deposition Sciences, Inc.
("DSI"), the Company allocated $18.2 million of the $25.4 million purchase price
to in-process research and development projects. This allocation represented the
estimated fair value based on risk-adjusted cash flows related to the incomplete
research and development projects. At the date of acquisition, the development
of these projects had not yet reached technological feasibility and had no
alternative future uses. Accordingly, these costs were expensed as of the
acquisition date.

DSI's in-process research and development value is comprised of five primary
research and development programs, which were in-process at the time of the
acquisition. At December 31, 1998, significant progress had been achieved on
each of the primary in-process research and development efforts that were
underway at DSI as of the acquisition date (January 28, 1998). In general, the
Company believes that DSI's research and development efforts are on track with
management's plans at the time the transaction occurred. DSI is continuing to
invest heavily in the development of new technologies and projects that were
underway at the consummation of the transaction. Through December 31, 1998, no
significant adjustments have been made in the economic assumptions or
expectations which underlie the Company's acquisition decision and related
purchase accounting. All of the cited in-process research and development
projects are active, and DSI is advancing the science and technology at a rate
consistent with both DSI and ADLT expectations.

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:

<TABLE>
<CAPTION>
                                                      Three Months Ended              Six Months Ended
                                                         December 31,                   December 31,
                                                 ---------------------------    --------------------------
                                                     1998           1997           1998            1997
                                                 ------------   ------------    -----------   ------------

<S>                                                <C>               <C>          <C>              <C> 
Net sales                                             100%           100%           100%           100%

Costs and expenses:
   Cost of sales                                     79.3           57.9           67.6           57.9
   Marketing and selling                             27.1           15.4           21.7           15.1
   Research and development                          14.2            5.7           10.4            5.2
   General and administrative                        13.5            6.3           10.7            6.8
   Fiber optic joint venture formation costs            -              -              -            0.4
   Special charges                                   35.0              -           15.0              -
   Amortization of intangible assets                  1.8            0.7            1.4            0.7
                                                   ------          -----          -----          ----- 
Income (loss) from operations                       (70.9)          14.0          (26.8)          13.9

Other income (expense):
   Interest expense                                  (9.1)             -           (7.0)          (0.5)
   Interest income                                    0.9            0.9            0.6            1.3
   Loss from equity investments                      (0.7)             -           (0.5)             -
                                                   ------          -----          -----          ----- 

Income (loss) from continuing operations
  before income taxes                               (79.8)          14.9          (33.7)          14.7
Income taxes                                          9.3            5.4            4.3            5.3
                                                   ------          -----          -----          ----- 

Income from (loss) continuing operations            (89.1)           9.5          (38.0)           9.4
Loss from discontinued operations,
   net of income tax benefits                       (16.2)          (0.7)          (6.9)          (0.9)
                                                   ------          -----          -----          ----- 

Net income (loss)                                  (105.3)%          8.8%         (44.9)%          8.5%
                                                   ======          =====          =====          ===== 
</TABLE>




Factors which have affected the results of operations for the second quarter and
first six months of fiscal 1999 as compared to the second quarter and first six
months of fiscal 1998 are discussed below.

                                       16

<PAGE>   18


QUARTER ENDED DECEMBER 31, 1998 COMPARED WITH QUARTER ENDED DECEMBER 31, 1997

Net sales. Net sales increased 66.0% to $52,905 for the second quarter of fiscal
1999 from $31,879 for the second quarter of fiscal 1998, excluding the
terminated equipment contracts noted above. Net sales, excluding lamp equipment
sales and terminated equipment contracts, rose $23,688 or 82.2% to $52,488 for
the second quarter of fiscal 1999 from $28,800 for the second quarter of fiscal
1998. Ruud Lighting and Deposition Sciences, acquired by the Company in January
1998, contributed $21,254 of this increase.

Fiscal 1999 second quarter sales reflect continued growth in the sales and
earnings of the Company's core U.S. metal halide operations, which was offset by
reductions in overseas sales and in non-metal halide products. The Company's
metal halide sales increased 18% (29% increase in the United States) from the
year ago period, excluding acquisitions and equipment sales and sales reversals.
Metal halide sales grew to 83% of total sales from 76.5% a year earlier. The
Company's core metal halide materials business, a key indicator of industry
trends, was up 21% from the prior year's quarter. Geographically, these sales
grew approximately 21% in the U.S. and 22% outside the U.S.

Sales outside the United States declined 16%, excluding acquisitions. The
Company attributes the soft overseas market to the current international
economic environment. Sales of non-metal halide products, an area where the
Company has been strategically reducing its presence, declined 30% excluding
acquisitions.

Costs and Expenses. The Company's restructuring efforts in the second quarter
resulted in a significant disruption of the ongoing business of the Company, and
as a result, a significant increase in its costs and expenses. The biggest
single area of increased costs occurred as a result of the consolidation of the
lamp and equipment operations. Three manufacturing sites were consolidated into
one, which together with employee terminations, resulted in severe workforce
disruption. Simultaneously, the Company attempted to accelerate production of
new products such as Uni-Form(R) pulse start and began the implementation of
extensive, new information systems. Largely as a result of these initiatives,
the Company incurred significantly higher costs related to quality, rework and
productivity issues, which are estimated to be $5,500, but which are not
classified as special charges.

The Company believes that quality, rework and productivity challenges will 
likely be encountered over the next several quarters as the Company seeks to 
fully-integrate its operations and continues the aggressive launch of the 
Uni-Form(R) pulse start line. It estimates that its higher than normal expenses
in this regard will approximate $3,500 in the third quarter, $2,500 in the 
fourth quarter and $1,000 in the first quarter of fiscal 2000.

Cost of Sales. Cost of sales increased 98.0% to $35,678 in the second quarter of
fiscal 1999 from $18,467 in the second quarter of fiscal 1998, excluding the
$6,413 reduction in cost of sales related to the terminated equipment contracts
discussed above and $808 in inventory write-downs related to special charges.
The increase was primarily attributable to higher sales levels and to the
disruption caused by the Company's restructuring activities noted above. As a
percentage of net sales, excluding the terminated equipment contracts and
inventory write-downs, cost of sales increased to 67.4% in the second quarter of
fiscal 1999 from 57.9% in the second quarter of fiscal 1998. The Company
believes that the benefit of its restructuring actions, together with its
ongoing efforts to cut costs, should begin to gradually reduce the Company's
cost of sales as a percentage of sales to approximately 60% within the next
twelve months.

                                       17


<PAGE>   19


Marketing and Selling Expenses. Marketing and selling expenses increased 109.2%
to $10,283 in the second quarter of fiscal 1999 from $4,915 in the second
quarter of fiscal 1998. As a percentage of net sales, excluding the equipment
sales reversal, marketing and selling expenses increased to 19.4% in the second
quarter of fiscal 1999 from 15.4% in the second quarter of fiscal 1998. This
increase is primarily a result of increased expenses incurred in connection with
the launch of the Company's Uni-Form(R) pulse start products. The Company
anticipates the sales of these products to increase and that the level of
marketing and selling expenses will decline gradually over the next several
quarters to approximately 16.5% of sales.

Research and Development Expenses. Research and development expenses increased
196.7% to $5,405 in the second quarter of fiscal 1999 from $1,822 in the second
quarter of fiscal 1998. This increase arose from increased spending for the: (i)
expansion of the new line of Uni-Form(R) pulse start products (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) development and testing of electronic power supply systems;
(iii) development of new materials for the world's major lighting manufacturers;
and (iv) research and development efforts aimed at 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, excluding the
terminated equipment contracts, research and development expenses increased to
10.2% in the second quarter of fiscal 1999 from 5.7% in the second quarter of
fiscal 1998. The Company anticipates this level of expense to decline gradually
over the next several quarters to approximately 6.0%.

General and Administrative Expenses. General and administrative expenses
increased 155.7% to $5,129 in the second quarter of fiscal 1999 from $2,006 in
the second quarter of fiscal 1998. The increase in general and administrative
expenses of $3,123 relates to an overall increase in the size and complexity of
the Company and relates in part to fully-integrating its core and acquired U.S.
operations and the implementation of extensive, new information systems. Expense
increases primarily reflect travel, personnel and related costs, equipment
depreciation and rent, legal and consultant fees, and communications costs. As a
percentage of net sales, excluding the terminated equipment contracts, general
and administrative expenses increased to 9.7% in the second quarter of fiscal
1999 from 6.3% in the second quarter of fiscal 1998.

Special Charges. See discussion of special charges under "Recent Developments"
and Note G of "Notes to Condensed Consolidated Financial Statements (Unaudited)"
for further discussion.

Amortization of Intangible Assets. Amortization expense increased to $678 in the
second quarter of fiscal 1999 from $211 in the second quarter of fiscal 1998 due
to the amortization of goodwill and other intangible assets related to the
acquisitions of Ruud Lighting and Deposition Sciences which were completed in
January 1998.

Income (Loss) from Operations. As a result of the aforementioned factors, during
the second quarter of fiscal 1999, the Company incurred a loss from operations
of $26,916, as compared to income from operations of $4,458 during the second
quarter of fiscal 1998. Excluding the special charges and terminated equipment
contracts mentioned above, the loss from operations was $4,268.

Interest Expense. Interest expense amounted to $3,431 in the second quarter of
fiscal 1999, as compared to no expense in the second quarter of fiscal 1998.
This increase was the result of the



                                       18


<PAGE>   20


higher average debt outstanding and a reduction in capitalized interest on
self-constructed assets during the second quarter of fiscal 1999 as compared to
the second quarter of fiscal 1998.

Interest Income. Interest income increased to $328 in the second quarter of
fiscal 1999 from $281 earned in the second quarter of fiscal 1998. This increase
is attributable to lower average cash equivalents and short-term investments in
the second quarter of fiscal 1999 as compared to the second quarter of fiscal
1998, offset by $168 in interest earnings from the loan to an officer in the
second quarter of fiscal 1999.

Loss from Equity Investment. The loss from equity investments represents $30 of
earnings from the Company's investment in Fiberstars, Inc., a marketer and
distributor of fiber optic lighting products, offset by a $302 loss from the
Company's investment in Venture Lighting Japan, a manufacturer and marketer of
metal halide lamps in Japan.

Income (Loss) from Continuing Operations before Income Taxes. As a result of the
aforementioned factors, during the second quarter of fiscal 1999, the Company
incurred a loss from continuing operations before income taxes of $30,291, as
compared to income from continuing operations before income taxes of $4,739
during the second quarter of fiscal 1998. Excluding the total special charges
and terminated equipment contracts mentioned above, the Company incurred a loss
from continuing operations before income taxes of $7,643.

Income Taxes. At June 30, 1998, the Company had net operating loss carryforwards
("NOLs") of $1,960 available to reduce future United States federal taxable
income, which expire 2008 through 2011.

The Company also has research and development credit carryforwards for tax
purposes of approximately $850, which expire 2005 through 2013. Additionally, in
conjunction with the Alternative Minimum Tax ("AMT") rules, the Company had
available AMT credit carryforwards for tax purposes of approximately $1,000,
which may be used indefinitely to reduce regular federal income taxes.

Also, at June 30, 1998, the Company had foreign net operating loss carryforwards
for tax purposes totaling $2,000 that expire in 2006 and $403 that have no
expiration dates.

For the three months ended December 31, 1998, the Company reported a pretax loss
from continuing operations, including special charges, of $30,291 and a pretax
loss on the discontinued operations of the Microsun business of $6,166, which
created $36,457 of operating losses and future tax deductions for financial
reporting purposes. Accordingly, at December 31, 1998, the Company recorded a
valuation allowance for deferred tax assets related to all NOLs, tax credits and
net deductible tax differences at December 31, 1998 in the amount of $15,503.

Loss from Discontinued Operations. See discussion of loss from discontinued
operations under "Discontinued Operations, Microsun Business" and Note I of
"Notes to Condensed Consolidated Financial Statements (Unaudited)" for further
discussion.

SIX MONTHS ENDED DECEMBER 31, 1998 COMPARED WITH SIX MONTHS ENDED DECEMBER 31,
1997

Net sales. Net sales increased 67.0% to $103,263 for the first six months of
fiscal 1999 from $61,816 for the first six months of fiscal 1998, excluding the
terminated equipment contracts noted above. Net sales, excluding lamp equipment
sales and terminated equipment contracts, rose



                                       19


<PAGE>   21


83.1% to $100,292 for the first six months of fiscal 1999 from $54,770 for the
first six months of fiscal 1998. Ruud Lighting and Deposition Sciences, acquired
by the Company in January 1998, contributed $40,903 of this increase.

Results for the first six months of fiscal 1999 reflect continued growth in the
sales and earnings of the Company's core U.S. metal halide operations, which was
offset by reductions in overseas sales and in non-metal halide products. The
Company's metal halide sales increased 16% (26% increase in the United States)
from the year ago period, excluding acquisitions and equipment sales and sales
reversals. Metal halide sales grew to 83% of total sales from 76% a year
earlier.

Sales outside the U.S. declined 12%, excluding acquisitions. The Company
attributes the soft overseas market to the current international economic
environment. Sales of non-metal halide products, an area where the Company has
been strategically reducing its presence, declined 33% excluding acquisitions.

Costs and Expenses. The Company's restructuring efforts in the second quarter
resulted in a significant disruption of the ongoing business of the Company, and
as a result, a significant increase in its costs and expenses. The biggest
single area of increased costs occurred as a result of the consolidation of the
lamp and equipment operations. Three manufacturing sites were consolidated into
one, which together with employee terminations, resulted in severe workforce
disruption. Simultaneously, the Company attempted to accelerate production of
new products such as Uni-Form(R) pulse start and began the implementation of
extensive, new information systems. Largely as a result of these initiatives,
the Company incurred significantly higher costs related to quality, rework and
productivity issues, which are estimated to be in the range of $5,500, but which
are not included within the special charges classification.

The Company believes that quality, rework and productivity challenges will 
likely be encountered over the next several quarters as the Company seeks to
fully-integrate its operations and continues the aggressive launch of the 
Uni-Form(R) pulse start line. It estimates that its higher than normal expenses
in this regard will approximate $3,500 in the third quarter, $2,500 in the 
fourth quarter and $1,000 in the first quarter of fiscal 2000.

Cost of Sales. Cost of sales increased 82.5% to $65,314 in the first six months
of fiscal 1999 from $35,793 in the first six months of fiscal 1998, excluding
the $6,413 reduction in cost of sales related to the terminated equipment
contracts discussed and $808 in inventory write-downs related to special
charges. The increase was primarily attributable to higher sales levels and to
the disruption caused by the Company's restructuring activities noted above. As
a percentage of net sales, excluding the terminated equipment contracts and
inventory write-downs, cost of sales increased to 63.3% in the first six months
of fiscal 1999 from 57.9% in the first six months of fiscal 1998. The Company
believes that the benefit of its restructuring actions, together with its
ongoing efforts to cut costs, should begin to gradually reduce the Company's
cost of sales as a percentage of sales to approximately 60% within the next
twelve months.

Marketing and Selling Expenses. Marketing and selling expenses increased 105.1%
to $19,142 in the first six months of fiscal 1999 from $9,331 in the first six
months of fiscal 1998. As a percentage of net sales, excluding the terminated
equipment contracts, marketing and selling expenses increased to 18.5% in the
first six months of fiscal 1999 from 15.1% in the first six months of fiscal
1998. This increase is primarily a result of increased expenses incurred in
connection with the launch of the Company's Uni-Form(R) pulse start products.
The Company



                                       20


<PAGE>   22


anticipates the sales of these products to increase and that the level of
marketing and selling expenses will decline gradually over the next several
quarters to approximately 16.5% of sales.

Research and Development Expenses. Research and development expenses increased
184.2% to $9,153 in the first six months of fiscal 1999 from $3,221 in the first
six months of fiscal 1998. This increase arose from increased spending for the:
(i) expansion of the new line of Uni-Form(R) pulse start products (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) development and testing of electronic power supply systems;
(iii) development of new materials for the world's major lighting manufacturers;
and (iv) research and development efforts aimed at 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, excluding the
terminated equipment contracts, research and development expenses increased to
8.9% in the first six months of fiscal 1999 from 5.2% in the first six months of
fiscal 1998. The Company anticipates this level of expense to decline gradually
over the next several quarters to approximately 6.0%.

General and Administrative Expenses. General and administrative expenses
increased 123.9% to $9,450 in the first six months of fiscal 1999 from $4,220 in
the first six months of fiscal 1998. The increase in general and administrative
expenses of $5,230 relates to an overall increase in the size and complexity of
the company and relates in part to fully-integrating its core and acquired U.S.
operations and the implementation of extensive, new information systems. Expense
increases primarily reflect travel, personnel and related costs, equipment
depreciation and rent, communications costs, and legal and consultant fees. As a
percentage of net sales, excluding the terminated equipment contracts, general
and administrative expenses increased to 9.2% in the first six months of fiscal
1999 from 6.8% in the second quarter of fiscal 1998.

Special Charges. See discussion of special charges under "Recent Developments"
and Note G of "Notes to Condensed Consolidated Financial Statements (Unaudited)"
for further discussion.

Amortization of Intangible Assets. Amortization expense increased to $1,237 in
the first six months of fiscal 1999 from $425 in the first six months of fiscal
1998 due to the amortization of goodwill and other intangible assets related to
the acquisitions of Ruud Lighting and Deposition Sciences which were completed
in January 1998.

Income (Loss) from Operations. As a result of the aforementioned factors, during
the first six months of fiscal 1999, the Company incurred a loss from operations
of $23,681, as compared to income from operations of $8,614 during the first six
months of fiscal 1998. Excluding the special charges and terminated equipment
contracts mentioned above, the Company had a loss from operations of $1,033.

Interest Expense. Interest expense increased to $6,158 in the first six months
of fiscal 1999, as compared to $327 in the first six months of fiscal 1998. This
increase was primarily the result of the higher average debt outstanding.

Interest Income. Interest income decreased to $566 in the first six months of
fiscal 1999 from $808 earned in the first six months of fiscal 1998. This
decrease is attributable to lower average cash equivalents and short-term
investments in the first six months of fiscal 1999 as compared to the first six
months of fiscal 1998, partially offset by $168 in interest earnings from the
loan to an officer in the second quarter of fiscal 1999.

                                       21


<PAGE>   23


Loss from Equity Investment. The loss from equity investments represents $83 of
earnings from the Company's investment in Fiberstars, Inc., a marketer and
distributor of fiber optic lighting products, offset by a $544 loss from the
Company's investment in Venture Lighting Japan, a manufacturer and marketer of
metal halide lamps in Japan.

Income (Loss) from Continuing Operations before Income Taxes. As a result of the
aforementioned factors, during the first six months of fiscal 1999, the Company
incurred a loss from continuing operations before income taxes of $29,734, as
compared to income from continuing operations before income taxes of $9,095
during the first six months of fiscal 1998. Excluding the total special charges
and terminated equipment contracts mentioned above, the Company incurred a loss
from continuing operations before income taxes of $7,806.

Income Taxes. At June 30, 1998, the Company had net operating loss carryforwards
("NOLs") of $1,960 available to reduce future United States federal taxable
income, which expire 2008 through 2011.

The Company also has research and development credit carryforwards for tax
purposes of approximately $850, which expire 2005 through 2013. Additionally, in
conjunction with the Alternative Minimum Tax ("AMT") rules, the Company had
available AMT credit carryforwards for tax purposes of approximately $1,000,
which may be used indefinitely to reduce regular federal income taxes.

Also, at June 30, 1998, the Company had foreign net operating loss carryforwards
for tax purposes totaling $2,000 that expire in 2006 and $403 that have no
expiration dates.

For the six months ended December 31, 1998, the Company reported a pretax loss
from continuing operations, including special charges, of $29,734 and a pretax
loss on the discontinued operations of the Microsun business of $6,166, which
created $35,900 of operating losses and future tax deductions for financial
reporting purposes. Accordingly, at December 31, 1998, the Company recorded a
valuation allowance for deferred tax assets of $15,503 related to all NOLs, tax
credits and net deductible tax differences.

Loss from Discontinued Operations. See discussion of loss from discontinued
operations under "Discontinued Operations, Microsun Business" and Note I of
"Notes to Condensed Consolidated Financial Statements (Unaudited)" for further
discussion.



LIQUIDITY AND CAPITAL RESOURCES

Cash decreased $11,261 during the six months ended December 31, 1998. Uses of
cash consisted of $13,439 used in operating activities, $25,664 used in
investing activities and $4,690 used in discontinued operations. These uses of
cash were offset by net financing activities of $32,532.

Net cash used in operating activities. Net cash used in operating activities
totaled $13,439 in the first six months of fiscal 1999 as compared to $3,154 in
the first six months of fiscal 1998.

Trade receivables increased $4,038 and inventories increased $5,543, excluding
the effect of acquisitions, dispositions, noncash special charges and terminated
equipment contracts. The increase in receivables includes an increase of
approximately $1,800 in accounts receivable related to thin-film deposition
equipment contracts. These contracts affect cash flow because deposition
equipment



                                       22


<PAGE>   24


revenues are recognized under the percentage of completion method of accounting
while cash payments are received in accordance with contract terms. The
remaining increase in receivables resulted from an increase in days sales
outstanding as compared to fiscal 1998's fourth quarter.

Inventory levels increased as a result of the Company's efforts to introduce new
products which are accepted slowly into the marketplace, but must be initially
stocked. Also, during the second quarter, certain inventory was put on
quality-hold and additional product had to be produced due to the workforce
disruption resulting from the consolidation of factories and employee
terminations. This quality-hold product will be reworked, if necessary, during
the next two quarters.

Net cash provided by operating activities totaled $178 in the three months 
ended December 31, 1998, an approximate $14,000 improvement from the first 
quarter. The Company intends to manage its cash resources to generate positive 
cash flow in the quarter ended June 30, 1999 and beyond.

Net cash used in investment activities. During the six months ended December 31,
1998, investing activities used $25,664 of cash including $17,803 for capital
expenditures, $5,024 related to the purchases of businesses and $2,837 related
to investments in affiliates.

Capital expenditures, primarily for production equipment and leasehold and
facility improvements, totaled $17,803 in the first six months of fiscal 1999 as
compared to $10,165 in the first six months of fiscal 1998. Capital expenditures
in fiscal 1999 related to facilities enhancements, primarily at the Company's
headquarters in Solon, Ohio, and at several of its subsidiaries, and additional
machinery and equipment to improve production processes, which should result in
increased productivity and capacity in the production of lamps, power supplies
and other lighting system products.

The Company has modified its current growth and capital expansion plans due to
the present availability of cash resources. Specifically, the Company will limit
its capital expenditures for at least the next twelve months and, as a result,
the Company has postponed certain capital equipment and, for all practical
purposes, facilities expenditures have been completed.

As a result of the Company's decision to terminate joint venture equipment
contracts, approximately $6,500 of new production equipment is available for use
at the Company's Solon, Ohio lamp manufacturing facility. Total capital
expenditures for the remainder of fiscal 1999 are estimated to be $4,000, and
the Company estimates its maintenance level for capital expenditures will
approximate $8,000 over the next twelve months. Future capital expenditures
beyond this level will be discretionary, as the Company presently has sufficient
capacities to support several years of sales growth at its historical rates.

To expand the Company's ability to develop and market new metal halide products
and systems, the Company has made a number of acquisitions and strategic
investments, the most notable of which, completed in fiscal 1998, are described
below.

On January 28, 1998, the Company completed the acquisition of Deposition
Sciences, Inc. ("DSI"), of Santa Rosa, California. DSI is a leader in the
development of sophisticated thin film deposition systems and coatings for
lighting applications, with particular emphasis on coatings for metal halide
lighting systems, and other applications, including aerospace, defense and
automotive applications. The stock of DSI was acquired in a privately-negotiated
transaction. The purchase price consisted of 599,717 shares of the Company's
Common Stock and approximately $14.5 million in cash.

On January 2, 1998, the Company acquired all of the capital stock outstanding of
Ruud Lighting (the "Ruud Stock"), located in Racine, Wisconsin. Ruud Lighting
manufactures and directly markets HID lighting systems, principally focusing on
metal halide installations for commercial,



                                       23


<PAGE>   25


industrial and outdoor lighting applications. The Ruud Stock was acquired from
the five shareholders of Ruud Lighting in a privately negotiated purchase
transaction. The purchase price for the Ruud Stock consisted of three million
shares of the Company's Common Stock and approximately $35.5 million in cash.

Net cash provided by financing activities. During the six months ended December
31, 1998, net financing activities provided cash of $32,532, which included
$42,900 of cash provided from net borrowings under the Credit Facility, payments
of long-term debt and capital leases of $2,674 and a loan to an officer of
$9,000.

On January 2, 1998, the Company replaced its then existing loan agreement and
other borrowings in North America with the Credit Facility described below.
Proceeds from this facility were used to finance the $35,500 cash portion of the
Ruud Lighting acquisition and the $14,500 cash portion of the Deposition
Sciences acquisition. Proceeds were also used to repay $19,200 of existing and
outstanding North American bank borrowings of ADLT, Ruud Lighting and DSI.
During the six months ended December 31, 1998, the net proceeds borrowed under
the Credit Facility were $42,900. In February 1999, the Credit Facility was
amended as discussed below.

On March 13, 1998, the Company sold $100,000 of 8% Senior Notes due March 15,
2008, resulting in net proceeds of $96,150. Approximately $76,300 of the net
proceeds of the Senior Notes were used to repay amounts outstanding under the
Credit Facility, thereby lengthening the average term of the Company's debt,
most of which had been incurred to finance the acquisitions of Ruud Lighting and
DSI. From September 14, 1998 until completion of a registered exchange offer to
existing noteholders, the Senior Notes bear interest at 8.5%. The offer is
expected to be completed within 45 days following effectiveness of the Company's
related registration statement.

Pursuant to a loan agreement dated October 8, 1998, between the Company and its
Chairman and Chief Executive Officer ("the CEO"), the Company has loaned $9,000
to its CEO for a one-year term at an interest rate of 8%. The loan was made
following approval by the Company's Board of Directors. The proceeds of the loan
were used by the Company's CEO to reduce the outstanding principal balance of a
margin account loan, which is secured by 2,053,070 shares of the Company's
Common Stock owned by the CEO and a related entity. In connection with the loan,
the Company's Board of Directors asked for and received the CEO's agreement to
extend the term of his employment agreement to December 31, 2003. The loan
agreement prohibits the CEO from encumbering his shares of the Company's Common
Stock in any manner except pursuant to the existing agreements governing the
CEO's margin account, without the consent of the Company's Board of Directors.

Ability to advance future operations. The Company has begun to implement, and
will continue to implement, changes in its operations and investment activities
intended to reduce the use of its cash resources to a level at or below the cash
flow generated by its operations and investments.

The Company's working capital (current assets less current liabilities) at
December 31, 1998 was $53,802, resulting in a working capital ratio of current
assets to current liabilities of 2.2 to 1.0, as compared to $77,637 or 3.1 to   
1.0 at June 30, 1998. As of December 31, 1998, the Company had $11,006 in cash
and cash equivalents and short-term investments and approximately $6,400
available to it under its Credit Facility, as amended in February 1999. 

As of December 31, 1998, the interest-bearing obligations of the Company totaled
$162,452 and primarily consisted of: $48,275 of borrowings under the Credit
Facility; $100,000 of 8% Senior Notes; mortgages of $7,436; a promissory note
due to an affiliate of $3,000; borrowing of a foreign subsidiary of $1,872;
capital leases of $1,373; and, other obligations of $353.

                                       24


<PAGE>   26


On October 19, 1998, the Company voluntarily reduced the maximum committed
availability under its revolving credit facility ("Credit Facility") provided by
several North American financial institutions (the "Lenders") to $65,000 from
$85,000. In February 1999, the Company and the Lenders amended the Credit
Facility to provide for future borrowing under an arrangement pursuant to which
the availability of borrowing is determined by the Company's eligible accounts
receivable, eligible inventories and certain other assets. Borrowings under the
Credit Facility are limited to $55,000 with additional borrowings subject to the
approval of all lenders. Based on the amended terms of the Credit Facility, the
Company would have had $6,400 in available borrowings as of December 31, 1998.
On February 12, 1999, the availability under the Credit Facility was $1,000
based on the $55,000 limitation with an additional $4,800 availability subject
to approval of all Lenders.

The Credit Facility has a term expiring April 1, 2000. The Company is   
actively seeking alternative financing sources and intends to replace the
existing Credit Facility, although the Company can provide no assurance as to
whether, when and  upon what terms it will obtain such financing.

Interest rates on loans outstanding are based on the agent bank's prime rate
plus 1% to May 31, 1999 and plus 2% thereafter. The Company is also obligated   
to pay a facility fee of .375% on the amount of the facility. The facility
contains certain affirmative and negative covenants customary for this type of
agreement, prohibits cash dividends, and includes financial covenants with
respect to income levels, cash availability and net worth. The principal
security for the facility is substantially all of the personal property of the
Company and each of its North American and United Kingdom subsidiaries, certain
real estate and a pledge of stock of each of the Company's principal
subsidiaries.

The Company's implementation of the cost reduction and cash flow enhancement
initiatives including consolidation of equipment and lamp-making operations,
reductions in facilities expenditures, consolidation of international
operations, reduction of corporate expenses, and workforce reductions should
favorably impact the future cash flow of the Company. The Company intends to
manage its expenditures to generate positive cash flow in the quarter ended June
30, 1999 and beyond.

The Company believes that the available cash, cash flow from operations, and the
initiatives outlined above, along with alternative financing to replace its
existing Credit Facility, will enable the Company to fund its operations for at
least the next 12 months.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1997, the Financial Accounting Standards Board issued FAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information". The
statement requires a "management" approach to reporting financial and
descriptive information about a Company's operating segments. The Company must
adopt this statement in the annual financial statements for fiscal 1999, however
FAS No. 131 need not be applied to interim financial statements in the initial
year of application. Management is currently studying the potential effect of
adopting this statement.

In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position


                                       25


<PAGE>   27


("SOP") 98-5, "Reporting on the Costs of Start-Up Activities." SOP 98-5 provides
authoritative guidance on accounting for and financial reporting of start-up
costs and organization costs. The Company is required to adopt the SOP on July
1, 1999 and, upon adoption, expense all previously capitalized start-up costs
and organization costs as a cumulative effect of a change in accounting
principle. Management is reviewing its capitalization policies and determining
the impact that the adoption of this SOP is expected to have on its consolidated
results of operations and financial position. At December 31, 1998, the Company
estimates that it had approximately $2,650 of start-up costs included in its
consolidated balance sheet.

YEAR 2000 READINESS

State of Readiness. During the past two fiscal years, the Company has been
actively involved in finding and correcting Year 2000 problems within its
information technology structure. The information system correction process is
essentially complete. The Company maintains its critical information technology
systems in close cooperation with its suppliers. The Company is not currently
operating any legacy systems which are no longer being supported by the original
supplier.

The most critical non-information technology systems, such as robots and other
numerically controlled equipment, are relatively new and are being upgraded and
maintained with the help of the Company's various suppliers. To date, the
Company's investigation of these systems has not revealed any Year 2000
problems; however, investigation in this area continues.

Each operating unit's purchasing and production control departments are in the
process of analyzing the unit's key third-party dependencies and working with
each of these key suppliers to determine the suppliers' Year 2000 status. Since
the Company's key suppliers are in the process of conducting similar
investigations with their key suppliers, and so on, the Company has had limited
success in obtaining reliable Year 2000 compliance certifications.

Costs. The Company has had only limited expenditures related to Year 2000
issues, consisting principally of personnel costs incurred in the scope of
normal operations. In addition, software replacements and upgrades in the
ordinary course of business have enhanced the Company's Year 2000 readiness
without incremental costs. The Company does not anticipate that the future Year
2000 costs related to information technology that are beyond the scope of normal
operations will be significant.

The Company is in the process of developing contingency plans to protect it from
Year 2000 failures. These plans will likely result in some expenditures,
primarily increased inventory costs to assure adequate supplies, the exact
amount of which is not known at this time.

Risks. In the early weeks of 2000, the Company may experience some random supply
chain disruptions that may affect its ability to produce and distribute key
products. These disruptions will be material if the U.S. experiences significant
interruptions in basic services, such as the electric power grid, telephone
service or the banking system.

Contingency Plans. The Company, through its various purchasing and production
control departments, is in the early stages of developing contingency plans at
each of its worldwide operations. These plans will be particularly focused on
preparing the operation for the inability of key third-party suppliers to
perform their normal functions. Of critical importance will be the





                                       26


<PAGE>   28


development of alternative suppliers, the enhancements of on-hand materials and
the augmentation of the most critical finished goods.

Completion. Based on management's assessment of current progress, the Company
believes it will complete necessary Year 2000 modifications and contingency
plans by mid-1999. The Company can give no assurance that the Company's Year
2000 preparations will prevent disruptions in its business resulting from Year
2000 problems of the Company, its suppliers or its customers or that the costs
to the Company of its preparations or any disruptions will not be material.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

During the six months ended December 31, 1998, there have been no material
changes in the reported market risks presented in the Company's Annual Report on
Form 10-K for the year ended June 30, 1998.










                                       27

<PAGE>   29


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 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

An annual meeting of shareholders was held on November 19, 1998. The following
sets forth the actions considered and the results of the voting with respect to
each action:


<TABLE>
<CAPTION>
                                                                                      Abstained/
                                                                                        Broker
                                                     For               Against         Nonvotes
                                                     ---               -------         --------

<S>                                                <C>               <C>               <C>      
1. Nominees for director for the term
   expiring in 2001 -- All elected

          Wayne R. Hellman                        17,923,170           589,376               -0-
          Theodore A. Filson                      17,897,309           615,237               -0-

2. Ratify and approve 1998 Incentive
   Award Plan - Passed                             8,785,586         2,767,923         6,958,037

3. Ratify appointment of Ernst & Young LLP
   as independent auditors -- Passed              18,461,561            11,349            39,636
</TABLE>









                                       28

<PAGE>   30


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits

<TABLE>
<CAPTION>
                                                                                               SEQUENTIAL
                                                                                               PAGE NUMBER/
EXHIBIT                                                                                        INCORPORATED
NUMBER            TITLE                                                                        BY REFERENCE
------            -----                                                                        ------------

<S>              <C>                                                                                   <C>
3.1              Amended and Restated Articles of Incorporation.                                         *

3.2              Code of Regulations.                                                                   **

10.1             Loan Agreement dated as of October 8, 1998 between Advanced
                 Lighting Technologies, Inc. and Wayne R. Hellman                                      ___

10.2             Secured Promissory Note of Wayne R. Hellman dated as of
                 October 8, 1998 in the amount of $9,000,000 to Advanced Lighting
                 Technologies, Inc. at the rate of 8% per annum                                        ___

10.3             Letter Amendment dated as of December 22, 1998 amending the
                 Credit Agreement dated January 2, 1998, amount Advanced Lighting
                 Technologies, Inc., National City Bank, and other financial institutions              ___

10.4             Amended and Restated Employment Agreement between
                 Wayne R. Hellman and Advanced Lighting Technologies, Inc.
                 dated as of October 8, 1998                                                           ___

11               Statement Re: Computation of Earnings Per Share                                       ___

12               Statement Re:  Computation of Ratio of Earnings to Fixed Charges                      ___

27               Financial Data Schedule                                                               ___
</TABLE>


*      Incorporated by reference to Exhibit of same number in Company's
       Quarterly Report on Form 10-Q for the Quarterly Period ended December 31,
       1996.

**   Incorporated by reference to Company's Registration Statement on Form S-1,
       Registration No. 33-97902, effective December 11, 1995.


(b) Reports on Form 8-K.

During the quarter ended December 31, 1998, the Company filed one Report on Form
8-K. The Report on Form 8-K was filed on December 23, 1998, reporting under Item
5 certain financial and other information which was included in the Company's
registration statement on Form S-4 (Registration No. 333-58609) relating the
Company's proposed exchange offer of 8% Senior Notes due 2008. The Form 8-K
included the following financial statements:

         Pro Forma Condensed Combined Statements of Operations for the Company 
         and Ruud Lighting, Inc. for the year ended June 30, 1998.



                                       29

<PAGE>   31


                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


Date: February 16, 1999             ADVANCED LIGHTING TECHNOLOGIES, INC.


                                               By:  /s/ Wayne R. Hellman
                                                    --------------------
                                                      Wayne R. Hellman
                                                      Chief Executive Officer

                                               By:  /s/ Nicholas R. Sucic
                                                    ---------------------
                                                      Nicholas R. Sucic
                                                      Chief Financial Officer








                                       30

<PAGE>   32


                                  EXHIBIT INDEX


<TABLE>
<CAPTION>
EXHIBIT
NUMBER      DESCRIPTION OF EXHIBITS
                                                                                                   PAGE NO.
                                                                                                   --------

<S>              <C>                                                                                   <C>
3.1              Amended and Restated Articles of Incorporation.                                         *

3.2              Code of Regulations.                                                                   **

10.1             Loan Agreement dated as of October 8, 1998 between Advanced
                 Lighting Technologies, Inc. and Wayne R. Hellman                                      ___

10.2             Secured Promissory Note of Wayne R. Hellman dated as of
                 October 8, 1998 in the amount of $9,000,000 to Advanced Lighting
                 Technologies, Inc. at the rate of 8% per annum                                        ___

10.3             Letter Amendment dated as of December 22, 1998 amending the
                 Credit Agreement dated January 2, 1998, amount Advanced Lighting
                 Technologies, Inc., National City Bank, and other financial institutions              ___

10.4             Amended and Restated Employment Agreement between
                 Wayne R. Hellman and Advanced Lighting Technologies, Inc.
                 dated as of October 8, 1998                                                           ___

11               Statement Re: Computation of Earnings Per Share                                       ___

12               Statement Re:  Computation of Ratio of Earnings to Fixed Charges                      ___

27               Financial Data Schedule                                                               ___
</TABLE>


*      Incorporated by reference to Exhibit of same number in Company's
       Quarterly Report on Form 10-Q for the Quarterly Period ended December 31,
       1996.

**     Incorporated by reference to Company's Registration Statement on Form
       S-1, Registration No. 33-97902, effective December 11, 1995.





                                       31