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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



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FORM 10-K

|                                                                                                 
|-------------------------------------------------------------------------------------------------
|(Mark One)                                                                                       
|[X]
   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934      
|For the fiscal year ended June 30, 2002                                                          
|                                                                                                 
|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.

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(Exact name of registrant as specified in its charter)


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

|                                                                    
|--------------------------------------------------------------------
|440 / 519-0500

(Registrants telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$.001 Par Value

Indicate by check (ü) 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
üNo

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [X]

The aggregate market value of the voting stock held by nonaffiliates of the
Registrant as of August 31, 2002 was $16,337,682.

There were 23,653,159 shares of the Registrants Common Stock, $.001 par value
per share, outstanding as of
August 31, 2002.

Documents Incorporated by Reference

None





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TABLE OF CONTENTS



|                                                          |                                                                                                                 |  |  |  |  |  |  | 
|--------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
|RISK FACTORS                                             
|PART I                                                   
|                                                          | Item 1. Business                                                                                               
|                                                          | Item 2. Properties                                                                                             
|                                                          | Item 3. Legal Proceedings                                                                                      
|                                                          | Item 4. Submission of Matters to a Vote of Security Holders                                                    
|PART II                                                  
|                                                          | Item 5. Market for the Registrants Common Equity and Related Shareholder Matters                              
|                                                          | Item 6. Selected Financial Data                                                                                
|                                                          | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.                 
|                                                          | Item 7A. Quantitative and Qualitative Disclosures about Market Risk                                            
|                                                          | Item 8. Financial Statements and Supplementary Data                                                            
|                                                          | The following consolidated financial statements of Advanced Lighting Technologies, Inc. are included in Item 8:
|                                                          | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                   
|PART III                                                 
|                                                          | Item 10. Directors and Officers of the Registrant                                                              
|                                                          | Item 11. Executive Compensation                                                                                
|                                                          | Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters        
|                                                          | Item 13. Certain Relationships and Related Transactions                                                        
|PART IV                                                  
|                                                          | Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K                                       
|SIGNATURES                                               
|CERTIFICATIONS                                           
|CERTIFICATIONS                                           
|EXHIBIT INDEX                                            
|EX-3.1 Second Amendment and Restated Articles            
|EX-3.2 Certificate of Adoption                           
|EX-10.1.7 Third Amendment to Loan Agreement              
|EX-10.1.15 Release and Settlement Agreement              
|EX-10.1.16 Addendum to Release & Settlement Agrmnt       
|EX-10.15 6th Amendment to Contingent Warrant Agrmt       
|EX-12 Stment re: Computation of Ratio of Earnings        
|EX-21 Subsidiaries of the Registrant                     
|EX-23 Consent of Independent Auditors                    
|EX-99.1 Certification of Chief Executive Officer         
|EX-99.2 Certification of Chief Financial Officer         



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INDEX

Advanced Lighting Technologies, Inc.

|                                                          |  |                                                                                       |    |      |    | 
|--------------------------------------------------------- |  | ------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                                                          |  |                                                                                       |    | Page
|                                                         
|Cautionary Statement Regarding Forward Looking Statements |  |                                                                                       | 2  |     
|                                                          |  |                                                                                       |    |      |    | 
|Risk Factors                                              |  |                                                                                       | 2  |     
|                                                          |  |                                                                                       |    |      |    | 
|                                                          |  | PART I                                                                                |    |      |    | 
|                                                          |  |                                                                                       |    |      |    | 
|Item 1.                                                   |  | Business                                                                              |    |      | 13 | 
|                                                          |  |                                                                                       |    |      |    | 
|Item 2.                                                   |  | Properties                                                                            |    |      | 31 | 
|                                                          |  |                                                                                       |    |      |    | 
|Item 3.                                                   |  | Legal Proceedings                                                                     |    |      | 31 | 
|                                                          |  |                                                                                       |    |      |    | 
|Item 4.                                                   |  | Submission of Matters to a Vote of Security Holders                                   |    |      | 32 | 
|                                                          |  |                                                                                       |    |      |    | 
|                                                          |  | PART II                                                                               |    |      |    | 
|                                                          |  |                                                                                       |    |      |    | 
|Item 5.                                                   |  | Market for Registrants Common Equity and Related Shareholder
Matters                 |    |      | 33 | 
|                                                          |  |                                                                                       |    |      |    | 
|Item 6.                                                   |  | Selected Financial Data                                                               |    |      | 34 | 
|                                                          |  |                                                                                       |    |      |    | 
|Item 7.                                                   |  | Managements Discussion and Analysis of Financial Condition
and Results of Operations |    |      | 37 | 
|                                                          |  |                                                                                       |    |      |    | 
|Item 7A                                                   |  | Quantitative and Qualitative Disclosures about Market Risk                            |    |      | 55 | 
|                                                          |  |                                                                                       |    |      |    | 
|Item 8.                                                   |  | Financial Statements and Supplementary Data                                           |    |      | 56 | 
|                                                          |  |                                                                                       |    |      |    | 
|Item 9.                                                   |  | Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure  |    |      | 58 | 
|                                                          |  |                                                                                       |    |      |    | 
|                                                          |  | PART III                                                                              |    |      |    | 
|                                                          |  |                                                                                       |    |      |    | 
|Item 10.                                                  |  | Directors and Executive Officers of the Registrant                                    |    |      | 58 | 
|                                                          |  |                                                                                       |    |      |    | 
|Item 11.                                                  |  | Executive Compensation                                                                |    |      | 60 | 
|                                                          |  |                                                                                       |    |      |    | 
|Item 12.                                                  |  | Security Ownership of Certain Beneficial Owners and Management                        |    |      | 65 | 
|                                                          |  |                                                                                       |    |      |    | 
|Item 13.                                                  |  | Certain Relationships and Related Transactions                                        |    |      | 68 | 
|                                                          |  |                                                                                       |    |      |    | 
|                                                          |  | PART IV                                                                               |    |      |    | 
|                                                          |  |                                                                                       |    |      |    | 
|Item 14.                                                  |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                      |    |      | 71 | 
|                                                          |  |                                                                                       |    |      |    | 
|Signatures                                                |  |                                                                                       | 81 |     
|                                                          |  |                                                                                       |    |      |    | 
|Exhibit Index                                             |  |                                                                                       | 84 |     

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CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS

This Report contains statements which constitute forward looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. These statements appear in a number of
places in this Report and include statements regarding the intent, belief or
current expectations of Advanced Lighting Technologies, Inc. and its
subsidiaries (the Company or ADLT), its directors or its officers with
respect to, among other things: (i) the Companys financing plans; (ii) trends
affecting the Companys financial condition or results of operations; (iii)
continued growth of the metal halide lighting market; (iv) the Companys
operating strategy and growth strategy; (v) potential acquisitions or joint
ventures by the Company; (vi) the declaration and payment of dividends; (vii)
litigation affecting the Company; (viii) the timely development and market
acceptance of new products; (ix) the ability to provide adequate incentives to
retain and attract key employees; and (x) the impact of competitive products
and pricing. Prospective investors are cautioned that any such forward looking
statements are not guarantees of future performance and involve risks and
uncertainties, and that actual results may differ materially from those
projected in the forward looking statements as a result of various factors. The
accompanying information contained in this Report, including without limitation
the information set forth under the headings Risk Factors, Managements
Discussion and Analysis of Financial Condition and Results of Operations and
Business, identifies important factors that could cause such differences.




RISK FACTORS

You should consider carefully the following factors, as well as the other
information that we include or incorporate by reference in this report, in
evaluating an investment in our securities. To make the discussion of these
factors easier to read, when we discuss the Company we refer to it as we.

We are in Default Under Our Current Bank Facility and Our Banks Could Exercise
Rights Which Would Prevent Normal Operation of Our Businesses

We are currently in default on our obligations to our banks under our $38
million bank credit facility, because of a failure to maintain a required
financial ratio. We have entered into an agreement with the banks that they
will not take any actions to enforce their rights prior to October 18, 2002,
unless we have additional defaults under our bank credit facility. In order to
obtain this agreement, we did not make the interest payment due September 16,
2002 on our 8% Senior Notes. We believe that our banks will allow us continued
access to credit under our existing facility after October 18, 2002, if we are
negotiating in good faith for a replacement credit facility and if the holders
of our 8% Senior Notes do not take certain actions adverse to us. We believe
that we must replace our existing bank credit facility promptly. We do not
have any assurance that the banks will allow us continued access to our credit
facility or that the banks will not declare our bank loans to be due
immediately after October 18, 2002. If the banks refuse continued access to
the credit facility and/or foreclose on the collateral for their loans, we will
not have adequate resources to continue normal operations and we may be forced
to seek relief from the effects of the banks actions, which may include
seeking protection under bankruptcy laws.

We Must Replace Our Existing Bank Credit Facility in Order to Continue Normal
Operations

We are actively seeking a lender or lenders to provide financing to replace our
existing $38 million bank credit facility with a facility better suited to our
expanded foreign operations. We use our bank credit facility to provide the
cash for our daily operations and to finance a portion of our investment in
machinery and equipment. If we do not obtain a replacement facility on a
schedule acceptable to our current banks, we believe they will demand that we
repay all existing loans and may exercise their rights against the collateral
for the these loans. The collateral includes our machinery, equipment, accounts

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receivable, inventory and cash in the United States, Canada and the
United Kingdom. Based on preliminary negotiations with potential replacement
lenders, recent operating results and the amount of collateral available to
secure a replacement loan facility, we believe that we will be able to obtain a
replacement facility. However, we have no assurance that such financing will
be available, or that the terms of available replacement financing facilities
will be acceptable to us. Because we do not expect to have replacement
financing in place by October 18, 2002, we cannot be sure that our banks will
allow us to operate our business normally until we are able to complete
replacement financing.

If We Do Not Pay Overdue Interest on Our Senior Notes or Reach an Agreement
with the Holders of Our Senior Notes, Our Senior Note Holders Could Require Us
to Pay $100 Million Immediately On or After October 16, 2002

We did not make the September 16, 2002 interest payment due on our Senior
Notes and will not make the interest payment within the 30-day grace period.
The trustee for the Senior Notes may demand immediate payment of the $100
million principal amount of the Notes. Holders of $25 million in principal
amount of Senior Notes can require the trustee to demand immediate payment on
all of the Senior Notes. We are having discussions with certain holders of the
Senior Notes, to prevent acceleration of the Senior Notes while we are seeking
replacement credit facility financing. We cant be sure that we can get an
agreement to prevent acceleration of the Senior Notes. We do not have the cash
resources to pay the Senior Notes if the trustee requires immediate payment.
If we are unable to pay the interest or reach an accommodation with the trustee
and the holders of our Senior Notes, we may be forced to seek relief from the
effects of the trustees actions, which may include seeking protection under
bankruptcy laws. In addition, the trustee could enforce the rights of the
Senior Note holders, including the right to start involuntary bankruptcy
proceedings against us.

If Metal Halide Lighting Does Not Gain Wider Market Acceptance, Our Business
and Financial Performance May Suffer

We derive a substantial portion of our net sales and income from selling metal
halide materials, systems and components, and production equipment. Revenues
from metal halide products represented approximately 76% of net sales in fiscal
2002 and 75% of net sales in fiscal 2001. Our current operations and growth
strategy are focused on metal halide lighting and optical coating technologies.
Metal halide is the newest of all commercial lighting technologies. Metal
halide lamp sales represented approximately 9.4% of domestic lamp sales in
calendar year 2001 compared to 9.7% in calendar 2002 and compared to
fluorescent and incandescent lamps which represented approximately 85.9% of the
same market in 2001 and 85.4% in 2000. The metal halide market has been the
fastest growing segment of the domestic lighting market over the past decade.
We attribute this to the increased acceptance of metal halide lighting in
commercial and industrial uses. Our future results are dependent upon continued
growth of metal halide lighting for these and other uses. However, metal halide
lamps are not compatible with the substantial installed base of incandescent
and fluorescent lighting fixtures, and the installation of a metal halide
lighting system typically involves higher initial costs than incandescent and
fluorescent lighting systems. Metal halide products may not continue to gain
market share within the overall lighting market or competitors may introduce
better lighting technologies, displacing metal halide lighting in the market.
Either of these occurrences could have a material adverse effect on our
business and our results of operations and the value of our securities.

General Electric Companys Relationship with Us Could Limit Our Ability to Grow

On October 6, 1999, GE made an investment of $20.6 million for 761,250 shares
of our convertible preferred stock and a warrant, which GE has exercised to
acquire 998,703 shares of our common stock. Pursuant to the terms of the GE
investment agreement, GE has the right, by converting its preferred

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shares, to acquire approximately 3,000,000 of our common shares. GE now holds 1,429,590
shares of Company Common Stock. The Series A Stock and the Common Stock
represent approximately 17% of the voting power and equity ownership of the
Company at August 31, 2002. GE may get additional rights in the future if we
are unable to maintain a 2 to 1 ratio of earnings before interest, taxes,
depreciation and amortization to net interest expense for a six-month
measurement period. Measurement periods are the six months ending on the last
day of each fiscal quarter until September 30, 2010. We did not maintain this
ratio for the six months ended December 31, 1999, September 30, 2000, June 30,
2001, September 30, 2001, December 31, 2001, March 31, 2002 or June 30, 2002,
and we do not expect to maintain the ratio for the six months ended September
30, 2002, but we did for the six-month periods ended March 31, 2001, December
31, 2000, June 30, 2000, and March 31, 2000. Due to amendments to our
agreements with GE, GE waived its rights to obtain shares as a result of our
failure to maintain these ratios in the past. GE recently agreed to such a
waiver regarding our failure to maintain the ratio for the six months ended
June 30, 2002. If we fail to maintain the ratio in future measurement periods
and we do not maintain the ratio in the three calendar quarters immediately
prior to the failure, GE would obtain the right to purchase and vote additional
shares of our stock and acquire voting control of our company.

On the first future failure, if it happens, GE would obtain rights to purchase
and/or vote a number of shares determined by a formula at the time of the
failure. The number of shares owned or available to GE at that time would be
greater than 35% but less than a majority of our stock. At the time of a
second future failure, if it happens, GE would own or have the right to
purchase and/or vote the number of shares, which would be a majority of our
stock. The existence of a large block of shares which could effectively
control our shareholder votes, or which could be sold in public or private
sales, may limit our ability to obtain financing in the future from other
sources, including public offerings or private sale of our common stock.

If GE or Another Investor Can Vote More Than 35% of Our Stock, We May Have to
Repay Loans

If GE, or any investor or group of investors, other than Mr. Hellman or his
family, own or get the right to vote and/or acquire, a total of more than 35%
of our stock, our credit facility banks will have the right to demand payment
of the revolving and term loans pursuant to our bank credit facility, and our
Senior Note indenture requires us to offer to repurchase our 8% Notes at a
purchase price of 101% of the face amount, together with unpaid interest. These
provisions may make it more difficult for someone to take us over. We cant be
sure that we will have adequate resources to meet our obligations relating to
these loans and our 8% Notes if an investor gains a 35% voting interest. Even
if we can meet these obligations, if we have to repay the credit facility banks
and repurchase our 8% Notes, it could hurt our ability to finance operations
and future growth.

General Electric Companys Rights Could Strain Our Financial Resources

In October 2004, GE has a one-time right to make us redeem their preferred
stock, although we have up to one year to arrange financing. GE also has the
right to make us redeem their preferred stock if GE does not get the necessary
governmental approvals of their rights to acquire more of our shares in the
future, if we issue additional common shares, if any of our subsidiaries issue
additional common shares or if we borrow more than a total of $210 million.
The existence of these limits may reduce our ability to obtain financing in the
future. If we have to redeem the preferred stock, our financial resources will
be reduced, and could cause us to default under the indenture governing our 8%
Notes. We are required to redeem shares of this preferred stock, which have
not been converted to common stock by October 2010. Although GE cannot make us
redeem their preferred stock if a default results, the failure to redeem GEs
preferred stock after GE makes a request for redemption could adversely affect
our relationship with GE.

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If the Bid Price of Our Common Shares on the Nasdaq National Market Does Not
Recover, Our Common Shares Could Be Transferred to the Nasdaq SmallCap Market
or Delisted

Our common shares currently trade on the Nasdaq National Market. On July 26,
2002, Nasdaq notified us that unless the bid price of the common shares regains
compliance prior to October 22, 2002 with the $1.00 per share minimum bid price
requirement, Nasdaq will notify us that our common shares will be delisted from
trading on the Nasdaq National Market. Our common shares have not regained
compliance as of the date of filing of this report. We cannot guarantee that
our common shares will remain eligible for trading on the Nasdaq National
Market. We are exploring alternatives, including presenting a reverse split of
our common shares for approval by our shareholders and applying to transfer our
securities to the Nasdaq SmallCap Market. No assurances can be given that we
can comply with the minimum bid price requirement even if the reverse split is
approved by shareholders and put into effect or that we will be permitted to
transfer to the Nasdaq SmallCap Market. If our shares are transferred to the
Nasdaq SmallCap Market, or are quoted on Nasdaqs OTC Bulletin Board or in the
pink sheets maintained by the National Quotation Bureau, Inc., our common
share price, as well as the liquidity of our common shares, may be adversely
impacted.

General Electric Companys Relationship with Us Could Harm Our Relationship
with Other Lighting Companies

Some of our significant suppliers and customers are also lighting companies.
We have not experienced any adverse impact from these other companies since the
March 1999 public announcement of the agreement in principle regarding GEs
investment. However, we do not yet know if this continuing investment will
have an adverse affect on our relationship with other major companies in the
lighting business.

We Will Require Substantial Expenditures to Exploit Our Technology for Optical
Coating Products

DSI has technology that can be used in optical coating applications including
telecommunications. However, the effort to exploit this technology for
production of additional optical coating products and the completion of
production capabilities for current and future products, could require us to
make substantial expenditures for equipment and research and development. We
have recently expended substantial resources for new facilities and equipment
geared to the production of thin film coatings, assemblies and components used
in telecommunications. We may be required to seek additional equity or debt
financing to compete effectively in these markets. We cannot precisely
determine the timing and amount of funding requirements and each will depend on
several factors, including the demand for our products and products under
development. Such additional financing may not be available when needed, or, if
available, may not be on terms satisfactory to us.

Our Degree of Indebtedness Could Limit Our Ability to Grow and React to Changes
in Market Conditions

At June 30, 2002, we had approximately $139.7 million of total indebtedness
outstanding and $25.6 million of redeemable preferred stock and common
shareholders equity. At June 30, 2002, we also had $4.7 million available
(subject to borrowing base compliance and other limitations) to be drawn under
our bank credit facility.

The indentures under which we have issued and may issue our debt securities
permit us and our subsidiaries to incur substantial amounts of additional
indebtedness in the future. The degree to

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which we are leveraged could have important consequences to holders of our
securities, including the following:



| |  | our ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions or other purposes may be
limited, and                  
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | our flexibility in planning for or reacting to changes in market
conditions may be limited, causing us to be more vulnerable in the event
of a downturn in our business.

Operating Without Additional Cash Resources Could Limit Our Operations and
Growth

Subsequent to our year ended June 30, 2001, we instituted cost reduction
measures intended to allow our operations to produce more cash revenues than we
spend on operations. We have spent more money on our operations than the
revenues our operations have generated in four of our last five fiscal years,
and have spent more money on operations and investing in our business than our
operations have generated in each of our last six fiscal years. While we
believe we will generate more cash in our operations than we are spending on
operations, we cant assure investors that the cost-saving measures implemented
will generate positive cash flow from our operations in the future. In
addition, we are not currently generating sufficient cash in our business to
make the investments in our future growth that we would like. Our ability to
borrow additional money under our $38 million bank credit facility is limited.
In order to have enough cash for future operations and growth, we must generate
greater net cash flow and/or demonstrate our ability to achieve acceptable
financial results in order to increase our access to additional cash resources
from lenders and investors.

Allocation of ADLT Resources to DSI May Not be in the Best Interest of ADLT
Shareholders

The success of DSIs business may depend not only on access to external sources
of capital and the expansion of the telecommunications infrastructure but also
the internal resources of ADLTs consolidated business. Although we are
allocating financial and human resources to DSI because we believe the
investment will ultimately return enhanced value to ADLT and our shareholders,
there can be no assurance of such success. Failure to achieve success from our
investments in DSI may have a material adverse effect on our business,
financial condition and operating results. In addition, the allocation of
resources to DSI may result in us allocating fewer resources to our core
lighting business. As a result, until such time, if any, that we achieve a
positive return on our investment in DSIs business, our future liquidity may
be adversely affected and our operating results will be adversely affected.

Our Loan to Mr. Hellman May Impair Our Capital Resources

On October 8, 1998, we made a $9 million loan to Wayne R. Hellman, our Chairman
and CEO. The loan was originally due on October 6, 1999. Mr. Hellman has paid
interest accrued on the loan through October 6, 1999. We made additional
advances to Mr. Hellman of $3.789 million in fiscal 2001 and 2002. The term of
the loan has been extended to July 31, 2007. If Mr. Hellman doesnt repay the
loan in accordance with the revised terms, it could materially and adversely
affect our ability to obtain money from lenders and investors. If we take
action to make Mr. Hellman pay the loan, it may hurt Mr. Hellmans performance,
which could hurt our operations.

If We Are Unable to Develop and Broaden Product Lines Our Business May Suffer

We have broadened our systems and components product line. The marketing
efforts and strategies for such product extensions are quite different from
those we have used for our historical operations. These differences are based
on the need to focus efforts on sales to the user of the products rather than
lighting

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fixture original equipment manufacturers. We may not be successful in
adding new products to our current product categories or in developing new
categories of products. If we are unable to successfully add new products or
develop new product categories, this could adversely affect our future growth
and financial results.

Our Business Success Has Been Based on New Products, and If We Do Not Introduce
New Products, Our Business May Suffer

We attribute our historical success, in large part, to the introduction of new
products in each of our product lines to meet the requirements of our
customers. Our future success will depend upon our continued ability to develop
and introduce innovative metal halide lighting and optical coating products.
Even though we spent significant amounts on research and development in fiscal
2002 and in prior years, we may not be able to develop or introduce innovative
products in the future. Even if a new product is developed for a particular
use, the product may not be commercially successful. In addition, competitors
occasionally have followed our introduction of successful metal halide lighting
products with similar product offerings. As a result of these and other
factors, we may not continue to be successful in introducing new products. If
we are unable to successfully introduce new products, this inability could
adversely affect our financial results and the value of our securities.

Our Significant Past Growth and Future Growth Objectives Strain Our Resources

We have experienced significant growth in our core business over the past
decade while also divesting interests in other areas. More recently, growth in
our core business has slowed, which we attribute to weakness in the U.S. and
world economies. Our growth over time has placed a strain on our management,
employees, finances and operations. In light of current economic conditions, we
have taken actions to reduce costs and our workforce. Nevertheless, we have set
growth objectives for net sales and net income in our remaining businesses,
which may continue to strain our resources. These objectives may be
increasingly difficult to achieve. To achieve these objectives, we will seek to
develop new products and new uses for our products and seek to expand our
distribution capabilities. We may also seek to acquire and/or invest in
related businesses inside and outside of the United States. Any of our efforts
in pursuit of these objectives may expose us to risks that could adversely
affect our results of operations and financial condition. To manage growth
effectively, we must continue to implement changes in many aspects of our
business; expand our information systems; increase the capacity and
productivity of our materials, components, systems and production equipment
operations; develop our metal halide systems capability; and hire, develop,
train and manage an increasing number of managerial, production and other
employees. Also, we have made and may continue to extend our product lines
through acquisitions. The success of these acquisitions will depend on the
integration of the acquired operations with our existing operations. If we are
unable to anticipate or manage growth effectively, our operating results could
be adversely affected. Likewise, if we are unable to successfully integrate
acquired operations and manage expenses and risks associated with integrating
the administration and information systems of acquired companies, our operating
results could be adversely affected.

We May Be Unable to Realize Benefits from Acquisitions and Investments

In order to implement our business strategy, we may from time-to-time consider
expansion of our products and services through joint ventures, strategic
partnerships and acquisitions of, and/or investments in, other business
entities. We have no agreement or understanding with any significant
prospective acquisition or investment candidate in respect of a specific
transaction. We cannot be certain as to the timing or amount of any return or
anticipated benefits that we might realize on any acquisition or investment.
In addition, the indenture governing our 8% Notes currently limits the amount
available for investments (but not acquisitions) to a total available amount of
approximately $1 million.

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Acquisitions or investments could require us to commit funds, which could
reduce our future liquidity. Our possible future acquisitions or investments
could result in additional debt, contingent liabilities and amortization
expenses related to certain intangible assets, as well as write-offs of
unsuccessful acquisitions, any or all of which could materially adversely
affect our performance, and, therefore, holders of our securities. We have made
several acquisitions since 1997 and we have subsequently sold some of the
acquired businesses. There can be no assurance that we will be able to
integrate future acquisitions or to manage any expanded operations effectively.
In addition, since 1997 we have made substantial investments in entities that
we do not and will not be able to control. We may find it difficult or
impossible to realize cash flows from these investments, or to liquidate these
investments, which could adversely affect the holders of our securities.

The Extent of Our International Business Operations Could Hurt Our Performance

We have derived, and expect to derive in the future, a substantial portion of
our net sales from our international business. Revenues from customers outside
of the United States represented approximately 37% of our net sales for fiscal
2002 (46% excluding the fixture subsidiaries sold in fiscal 2002 by the
Company). Our international joint ventures and operations and our export sales
are subject to the risks inherent in doing business abroad, including delays in
shipments, adverse fluctuations in currency exchange rates, increases in import
duties and tariffs, and changes in foreign regulations and political climate.
We have granted and will grant our joint ventures and operations in foreign
countries rights to use our technology. While we will attempt to protect our
intellectual property rights in these foreign joint ventures and operations,
the laws of many foreign countries do not protect intellectual property rights
to the same extent as the laws of the United States.

Approximately 29% of our net sales in fiscal 2002 were denominated in
currencies other than U.S. dollars, principally pounds sterling, Australian
dollars and Canadian dollars (36% excluding the fixture subsidiaries sold in
fiscal 2002). A weakening of these currencies versus the U.S. dollar could have
a material adverse effect on our business and results of operations and,
therefore, holders of our securities. We started a program in fiscal 2002 to
hedge some foreign currency balance sheet exposures which is intended to reduce
any significant impact on earnings or cash flows.

If We Are Unable to Protect Our Important Patents and Trade Secrets or If
Others Enforce Rights Against Us, Our Business May Suffer

We rely primarily on trade secret, trademark and patent laws to protect some of
our rights to our products, like proprietary manufacturing processes and
technologies, product research, concepts and trademarks. These rights are
important to the success of our products and our competitive position. The
actions that we take to protect our proprietary rights may not be adequate to
prevent imitation of our products, processes or technology. Our proprietary
information may become known to competitors; we may not be able to effectively
protect our rights to non-patented proprietary information; and others may
independently develop substantially equivalent or better products that do not
infringe on our intellectual property rights. Other parties may assert rights
in, and ownership of, our patents and other proprietary rights. Any of these
developments could adversely affect the way we currently conduct our business.
The patent positions of companies such as ADLT and its subsidiaries can be
highly uncertain and involve complex legal and factual questions, and therefore
the breadth of claims allowed in such patents and their enforceability cannot
be predicted. Therefore, we cannot assure you that the claims in any existing
or subsequently issued patent will be sufficient to protect ADLTs or its
subsidiaries intellectual property; or that such patent will not be challenged,
invalidated, held unenforceable or circumvented; or that the rights granted
thereunder will provide proprietary protection or competitive advantages.

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Any litigation involving misappropriation of our trade secrets or other
intellectual property rights could require us to increase significantly the
resources devoted to such efforts. In addition, an adverse determination in
litigation could subject us to the loss of our rights to a particular trade
secret, trademark or patent; could require us to grant licenses to third
parties; could prevent us from manufacturing, selling or using related aspects
of our products; or could subject us to substantial liability. Because we are
a company that relies on advanced technology and innovation, any of these
occurrences could have a material adverse effect on our results of operations.

If We Lose Our Key Personnel, It Could Adversely Affect Our Business

We are highly dependent on the continued services of Wayne R. Hellman, our
founder, Chairman, Chief Executive Officer, and a principal shareholder. We and
Mr. Hellman have entered into an employment agreement providing for a term
ending December 31, 2003. The loss of the services of Mr. Hellman for any
reason could have a material adverse effect on our business and, in turn, to
investors in our securities. We are the beneficiary of life insurance that we
maintain with respect to Mr. Hellman, in the amount of $8 million.

Control of Our Stock by Principal Shareholders May Allow Them to Significantly
Influence Shareholder Decisions, Which Could Adversely Affect Interests of
Other Holders of Our Securities

Mr. Hellman individually owns approximately 2.6% of the outstanding shares of
our common stock and, individually and in other capacities, has the power to
vote a total of 8.3% of the outstanding shares of common stock (or
approximately 7.3% of the shareholder voting power). Mr. Alan J. Ruud
individually owns approximately 9.1% of the outstanding shares of common stock
and, individually and as a voting trustee, has the power to vote a total of
approximately 15.5% of the outstanding shares of common stock (or approximately
13.7% of the shareholder voting power). GE owns shares of our preferred stock
with voting power equivalent to approximately 11.4% of our common stock and GE
owns approximately 6.1% of our common stock. This gives GE approximately 16.8%
of total shareholder voting power. In addition to GEs ownership, in the
future, GE may gain the right to vote shares owned or voted by Mr. Hellman and
Mr. Ruud. As a result, although GE, Mr. Hellman, and Mr. Ruud have no
arrangement or understanding of any kind with each other as to the current
voting of their shares, either GE, Mr. Hellman, or Mr. Ruud, or any combination
of them, may be able to significantly influence, and may be able effectively to
control, all matters requiring shareholder approval, including the election of
directors (which could control our affairs and our management), amendments to
our articles of incorporation, mergers, share exchanges, the sale of all or
substantially all of our assets, going-private transactions and other
fundamental transactions. Accordingly, the decisions of our principal
shareholders could have a material adverse effect on the market price of our
common stock or the value of our other securities.

Our Stock Price Has Varied Widely and May Vary Widely in the Future. Wide
Variation May Make it Difficult for Us to Sell Our Stock and Strain Our
Financial Resources

Our common stock first became publicly traded in December 1995. After the
initial public offering, the stock price rose substantially from the initial
public offering price of $10 per share. The price of our common stock has
varied widely. During fiscal 2002, the price for our common stock ranged from
$.56 to $5.86 per share. Since the end of fiscal 2002, our stock price has been
as low as $.28 per share. This wide variation and the possibility of wide
variation in the future may make it difficult for us to sell shares of our
common stock at prices which we believe reflect the value of our stock or make
it difficult to sell our common stock at all. If we cant sell our common stock
to obtain the money we need, it may be difficult to operate and grow.

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Environmental Regulations Could Strain Our Resources

Our operations are subject to federal, state, local and foreign laws and
regulations governing, among other things, emissions to air, discharge to
waters, and the generation, handling, storage, transportation, treatment and
disposal of waste and other materials. We believe that our business operations
and facilities are being operated in compliance in all material respects with
applicable environmental, health and safety laws and regulations, many of which
provide for substantial fines and criminal sanctions for violations. However,
the operations of manufacturing plants entail risks in these areas, and we
could incur material costs or liabilities. In addition, we could be required to
make potentially significant expenditures to comply with evolving
environmental, health and safety laws, regulations or requirements that may be
adopted or imposed in the future. The imposition of significant environmental
liabilities on us could have a material adverse effect on our business and
financial results.

Because Our Primary Competitors Are More Established and Have More Resources
Than We Do, We May Lack the Resources to Capture Increased Market Share

We compete with respect to our major lighting products with numerous
well-established producers of materials, components, and systems and equipment,
many of which possess greater financial, manufacturing, marketing and
distribution resources than we do. In addition, many of these competitors
products utilize technology that has been broadly accepted in the marketplace
(i.e., incandescent and fluorescent lighting) and is better known to consumers
than is our metal halide technology. We compete with GE, Philips Electronics
N.V. and Siemens A.G.s OSRAM/Sylvania, Inc. subsidiary in the sale of metal
halide lamps. We estimate, based on published industry data, that these three
companies had a combined domestic market share of approximately 85% for metal
halide lamps based on units sold and approximately 95% of the total domestic
lamp market. Accordingly, these companies dominate the lamp industry and exert
significant influence over the channels through which all lamp products,
including ours, are distributed and sold. Our component products and systems
also face strong competition, particularly in the power supply market, in which
our two largest competitors, Advance Transformer Co. (a division of Philips)
and Magnetek, Inc., each have a larger market share than we do. Our competitors
may increase their focus on metal halide materials, systems and components, and
expand their product lines to compete with our products. This type of increase
or expansion could make it more difficult for us to maintain sales or grow.

DSI competes with respect to its major telecommunications products with
numerous producers of components and systems, many of which possess greater
financial, manufacturing, marketing and distribution resources than DSI. The
principal competitors for DSIs products are certain large OEMs, such as JDS
Uniphase Corporation, Corning Incorporated, and Lucent Technologies, Inc.,
which have significant internal capability to manufacture thin film filter
products, and a variety of smaller companies which specialize in optical
coatings, such as Cierra Photonics, Inc., Precision Optics Corp., Inc., Barr
Associates, Inc., Iridian Spectral Technologies, Ltd., Thin Film Technologies,
Inc., and Evaporated Coatings, Inc. DSIs failure to effectively compete in the
telecommunications market could adversely affect the trading price of our
common stock.

We Sell Products to Our Competitors and Purchase Components from Our
Competitors, and These Relationships Could Change Based on Our Competitors
Interests. This Creates a Risk of Potential Declines in Sales and Reduced
Access to Components.

Although we compete with GE, Philips and Sylvania in the sale of our lighting
products, we also purchase a significant quantity of raw materials and private
label lamps from these three companies (aggregating $6.1 million in fiscal 2002, of which $3.4 million was from GE)
and derive significant revenue from sales of our materials, components, and
systems to each of these three companies

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(aggregating $21.6 million in fiscal
2002, of which $5.9 million was to GE). Any significant change in our
relationships with these companies, or in the manner in which these companies
participate in the manufacturing, distribution, and sale of metal halide
lighting products, could have a material adverse effect on our business and, in
turn, holders of our securities.

If the Telecommunications Business Does Not Achieve Acceptable Manufacturing
Volumes, Yields or Sufficient Product Reliability, Our Operating Results Could
Suffer

The manufacture of DSIs products involves highly complex and precise
processes, requiring production in highly controlled and clean environments.
Changes in DSIs manufacturing processes, or those of its suppliers, or
inadvertent use of defective or contaminated materials, could significantly
reduce DSIs manufacturing yields and product reliability. To the extent that
the telecommunications business does not achieve acceptable manufacturing
yields or experiences product shipment delays, our business, operating results
and financial condition could be materially and adversely affected.

If we are successful in expanding the market for DSIs telecommunications
products, we must increase our manufacturing volumes to meet customers needs
and satisfy customer demand. Failure to do so may materially harm our business,
operating results and financial condition. In some cases, existing
manufacturing techniques, which involve substantial manual labor, may be
insufficient to achieve the volume or cost targets of our customers. As such,
we will need to develop new manufacturing processes and techniques, which are
anticipated to involve higher levels of automation, to achieve the targeted
volume and cost levels. In addition, it may be difficult to hire qualified
manufacturing personnel in a timely fashion, if at all, when customer demands
increase over shortened time periods. While we continue to devote research and
development efforts to improvement of our manufacturing techniques and
processes, we may not achieve manufacturing volumes and cost levels that will
fully satisfy customer demands.

If DSIs Customers Do Not Qualify DSIs Manufacturing Lines for Volume
Shipments, Our Operating Results Could Suffer

Customers will not purchase any of DSIs products (other than limited numbers
of evaluation units) prior to qualification of the manufacturing line for the
product. Each new manufacturing line must go through varying levels of
qualification with our customers. This qualification process determines
whether the manufacturing line achieves the customers quality, performance and
reliability standards. Delays in qualification can result in significant lost
revenue opportunity over the term of that program. DSI may experience delays
in obtaining customer qualification of new facilities. If DSI fails in the
timely qualification of these or other new manufacturing lines, our operating
results and customer relationships would be adversely affected.

Fiber Optic Component Average Selling Prices Are Declining

Prices for telecommunications fiber optic components are generally declining
because of, among other things, increased competition and greater unit volumes
as telecommunications service providers continue to deploy fiber optic
networks. We anticipate that average-selling prices will decrease in the future
in response to product introductions by competitors and DSI or to other
factors, including price pressures from significant customers. Therefore, DSI
must (1) timely develop and introduce new products that incorporate features
that can be sold at higher selling prices and (2) reduce its manufacturing
costs. Failure to achieve any or all of the foregoing may have a material
adverse effect on our business, financial condition and operating results.

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Our Agreements with Creditors Impose Restrictions that Could Impede Our Growth

The bank credit facility and the 8% Notes indenture contain restrictive
covenants, including



| |  | covenants limiting our ability and our subsidiaries ability to incur
additional indebtedness, pay dividends, make investments, consummate asset
sales, enter into transactions with affiliates and incur liens; and                                           
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | covenants imposing restrictions on the ability of our subsidiaries to pay
dividends or make payments to us, merge or consolidate with any other
person or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of our assets.

Although the covenants are subject to exceptions that were designed to allow us
and our subsidiaries to operate without undue restraint, these covenants could
adversely affect our ability to finance our future operations or capital needs
or engage in other business activities, which may be in our interest. In
addition, our bank credit facility requires that we maintain financial ratios.
Our growth will depend in part upon our ability to fund acquisitions and
investments, any of which may make it more difficult to maintain financial
ratios. Our ability to comply with these provisions may be affected by events
beyond our control.

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PART I




Item 1. Business

Background

The Company was formed on May 19, 1995 and acquired ownership, primarily by
merger of affiliated companies that were previously under common ownership and
management (the Predecessors). Unless the context otherwise requires, the
Company refers to Advanced Lighting Technologies, Inc., its subsidiaries and
the Predecessors. Industry data in this Report with respect to the lighting
industry is reported on a calendar year basis and includes the industrial,
commercial and residential sectors but not the automotive sector. Unless
otherwise stated herein, such industry data is derived from selected reports
published by the National Electrical Manufacturers Association (NEMA).

The Company

Advanced Lighting Technologies, Inc. is an innovation-driven designer,
manufacturer and marketer of metal halide lighting products. Metal halide
lighting combines superior energy efficient illumination with long lamp (i.e.,
light bulb) life, excellent color rendition and compact lamp size. The Company
believes that it is the only designer and manufacturer in the world focused
primarily on metal halide lighting. As a result of this unique focus, the
Company has developed substantial expertise in all aspects of metal halide
lighting. The Company believes that this focus enhances its responsiveness to
customer demand and has contributed to its technologically advanced product
development and manufacturing capabilities.

The metal halide market is the fastest growing segment of the domestic lighting
market, demonstrated by metal halide lamp sales having grown at a compound
annual rate of approximately 12% since 1993, although growth has varied
substantially from year to year. However, over the past several years, sales of
metal halide products have declined, primarily due to the weakness of the U.S.
economy. In calendar year 2000, NEMA data indicated the first year over year
decline in metal halide dollar sales since 1991, and calendar year 2001
declined further still from the prior year. Based on recent increases in the
Companys metal halide material sales (which have historically been a leading
indicator regarding the metal halide market), the Company believes the U.S.
metal halide industry is beginning to recover and that sales of metal halide
lighting will begin to grow again. The Companys strong market position, new
product development capabilities, strategic acquisitions and participation in
international markets have enabled the Company to increase its revenues in its
core metal halide operations at rates in excess of the growth of the domestic
metal halide market.

The Company has integrated vertically to design, manufacture and market a broad
range of metal halide products, including materials used in the production of
lamps, and lamps and other components for lighting systems as well as metal
halide lighting systems. The Companys materials and components are used in
the manufacture of its own lighting systems for sale to end-users and are sold
to

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third-party manufacturers for use in the production of their metal halide
products. The vertical integration of the Companys approach to its products is
illustrated below:

flow chart


Metal Halide

Invented approximately 40 years ago, metal halide is the newest of all major
lighting technologies and can produce the closest simulation to sunlight of any
available lighting technology. 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. In addition, due to metal halides superior
lighting characteristics, the Company believes many opportunities exist to
metal halidize applications currently dominated by older incandescent and
fluorescent lighting technologies. For example, a 100-watt metal halide lamp,
which is approximately the same size as a household incandescent lamp, produces
as much light as five 100-watt incandescent lamps and as much as three 34-watt,
four-foot long fluorescent lamps. However, metal halide lamps are not
compatible with the substantial installed base of incandescent and fluorescent
lighting fixtures. While metal halide systems generally offer lower costs over
the life of a system, the installation of a metal halide lighting system
typically involves higher initial costs than incandescent and fluorescent
lighting systems.

While domestic sales of incandescent and fluorescent lamps have grown at a
compound annual rate of approximately 2% since 1993, domestic metal halide lamp
sales have grown at a compound annual rate of approximately 12% over the same
period, making metal halide the fastest growing segment of the
approximately $2.6 billion domestic lamp market. In 2001, metal halide
accounted for approximately 9.4% of domestic lamp sales by dollar volume.

The Company believes that the majority of the growth of metal halide lighting
has occurred in commercial and industrial applications. Metal halide systems
have been introduced in fiber optic, projection television and automotive
headlamp applications. The Company believes that additional opportunities for
metal halide lighting exist in other applications where energy efficiency and
light quality are important. As a result of the Companys dominant position in
metal halide materials, the

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Company expects to benefit from continued growth in
metal halide markets. In addition, the Company expects to be a leader in metal
halides continued market expansion by providing innovative metal halide system
components and integrated systems.

Recent Developments

Impact of Credit Facility Default

In fiscal 2002, the Company incurred a loss from operations of $(15.5) million
and, at June 30, 2002, was in default on its fourth quarter fixed charge
coverage ratio under its $38 million Bank Credit Facility. On September 16,
2002, the Company and its bank group entered into a Forbearance Agreement, which was subsequently
extended, allowing the Company access to its existing
revolving credit facility and precluding the acceleration of the Bank Credit
Facility maturity until at least October 18, 2002. The Forbearance Agreement
contains various requirements that must be met by the Company, including the
non-payment of its semi-annual interest payment on its $100 million 8% Senior
Notes due on September 16, 2002 and increasing the interest rate to 2% over the
banks prime rate. Further, the bank group is permitted to terminate the
Forbearance Agreement if holders of the Companys 8% Senior Notes take certain actions
adverse to the Company. The other requirements of the Forbearance Agreement include
providing the bank group with increased financial information, and covenants
regarding its operations during the forbearance period. Management believes
that it will be able to meet these requirements during this forbearance period.
However, unless a subsequent agreement is reached with the bank group on or
before October 18, 2002, which the Company expects will require
engaging an investment banker for advice on its restructuring efforts, the bank group will be entitled to take legal and
other action against the Company, including acceleration of the loans
outstanding under the Bank Credit Facility, cessation of future loans under the
Bank Credit Facility and/or action to foreclose on the collateral securing
those loans. The estimated collateral value for these loans at June 30, 2002
approximated $69 million and included the accounts receivable, inventory, and
machinery and equipment of the Company in the United States, Canada and the
United Kingdom.

The Company is negotiating with the bank group to extend the Forbearance
Agreement. Under the Senior Note Indenture, if the Company fails to make its
September 16, 2002 interest payment within a 30-day grace period, an Event of
Default will exist. An Event of Default would also exist under the Indenture
if the bank group accelerates the maturity of the loans and if the loans are
not repaid or the acceleration is not reversed within a 30-day grace period.
If an Event of Default exists under the Indenture, the Trustee may, and upon
the instruction of the holders of 25% of the Senior Notes must, declare the
entire principal amount of the Senior Notes to be immediately due and payable,
and may take any actions to enforce the terms of the Senior Notes. Due to the
uncertainty surrounding the acceleration of payment related to the Bank Credit
Facility and Senior Notes, the Company has classified both debt issues to
current liabilities in the June 30, 2002 balance sheet.

The Company will not make the Senior Note interest payment within the grace
period. Management is working with its banks, investment bankers and other
stakeholders on various alternatives available to the Company. In addition,
the Company is in discussions with several lenders to refinance its current
Bank Credit Facility with a replacement credit facility or other facilities, to
more effectively utilize its global assets and allow the Company to make its
semi-annual interest payment on its Senior Notes. Management believes that a
new credit facility can be obtained within 120 days. As a result, the Company
is in discussions with its Senior Note holders to provide the Company with
additional time to obtain new financing even though it is unable to pay the
September 16, 2002 interest payment within the normal 30-day grace period.

The Company has hired consultants to assist in completing a replacement credit
facility, restructuring its operations and improving its financial results.
The Company has developed a detailed plan to address its

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future cash
requirements, including cost reductions and, if necessary, the sale of non-core
assets. The Companys ability to extend the Forbearance Agreement, obtain a
new lending arrangement or make the Senior Notes interest payment is uncertain
and raises substantial doubt about the Companys ability to continue as a going
concern and may result in the Senior Notes holders forcing the Company to seek
alternative solutions. The consolidated financial statements do not include
any adjustments that might result from the outcome of these uncertainties.

The Company does not know whether it will be successful in obtaining a
replacement credit facility, or what the terms of a replacement credit facility
will be. Descriptions of terms of the current Bank Credit Facility contained
in this annual report may or may not reflect the final terms of a replacement
credit facility when and if a replacement credit facility is completed by the
Company.

Sale of Fixture Subsidiaries

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

The consideration received by the Company consisted of a cash payment of $28
million (adjusted dollar for dollar to reflect the amount of any changes in
working capital and funded indebtedness between September 2, 2001 and December
3, 2001) and promissory notes totaling $6 million. Preliminary estimates of
the adjustment in the cash consideration resulted in a net reduction of
approximately $2.5 million in the cash received at closing. The preliminary
estimates are subject to a review process under the agreement. The notes will
be payable December 1, 2006, although, upon receipt of consent from the holders
of its 8% Senior Notes, the Company may require payment of $3 million in
principal amount by surrender of 1,500,000 shares of Company common stock at
any time prior to December 1, 2002. As part of this transaction, funded
indebtedness of $9 million continued to be the obligation of Ruud Lighting and
the Company retained title to the Rhode Island manufacturing facility of Kramer
Lighting. Upon sale of the facility, the Company is obligated to pay Ruud
Lighting the lesser of $500,000 or one-third of the net proceeds of the sale.

The sale of the subsidiaries resulted in a gain of $227,000 in the quarter
ended December 31, 2001. The final amount of proceeds to be received and gain
or loss realized will be based upon a review process under the purchase
agreement.

Consolidation of Power Supply
Operations and Restructuring of Worldwide Operations

In the first quarter of fiscal 2002 the Company relocated and consolidated its
power supply operations from Draycott, England into its existing high
efficiency lamp factory in Chennai (Madras), India. The consolidation has
resulted in lower manufacturing costs and has provided a central manufacturing
location to serve the Companys international operations. The Company also
reduced its workforce by an additional 90 employees relating to a restructuring
of its worldwide operations. Also, as a result of a decline in business
conditions, certain long-lived assets and product lines were evaluated for
impairment in light of future growth areas of the business and a focus on
profit margins and core opportunities. The Company recorded special charges
and asset impairment of $11.2 million in the fiscal 2002 related to these
actions.

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In the first quarter of fiscal 2003 the Company announced that it would
relocate some of its power supply production from Nova Scotia, Canada into the
Chennai (Madras), India production facility in order to further reduce its
costs. The relocation should result in the elimination of approximately 125
positions at the Canadian facility during the second and third quarter of
fiscal 2003. Severance and other costs related to this relocation are expected
to be minimal.

Executive Offices

The Companys principal executive offices are located at 32000 Aurora Road,
Solon, Ohio 44139 and its telephone number is 440/519-0500.

Lighting Industry and Opportunities in Metal Halide Lighting

The Company currently produces metal halide lighting products primarily for
commercial and industrial applications. Until recently, metal halide technology
served primarily the industrial and outdoor sectors, which the Company
estimates, represents approximately 32% of U.S. lighting fixture sales.
However, with the miniaturization of metal halide lamps and fixtures and the
recognition of the benefits of metal halide technology, including improved
light color, energy efficiency, lower operating temperature and safety of metal
halide products relative to other technologies, significant opportunities for
growth exist. Key factors driving growth in the metal halide industry include:

Demand for Specialized Lamps. The demand for specialized metal halide lamps has
increased as the Companys original equipment manufacturer (OEM) and lighting
agent customers have recognized the benefits associated with using specialized
metal halide products. Although GE, Philips and Sylvania are the lighting
industry leaders, these companies have traditionally focused on the larger
incandescent and fluorescent markets and have limited production of metal
halide lamps to general applications, such as commercial and industrial
applications. While these standard-type metal halide lamps represent a
substantial majority of total metal halide lamp sales, they do not afford the
OEM or lighting agent complete flexibility in designing lighting contract bids.
When an agent places his bid for a lighting contract, he may specify the
Companys specialized metal halide lamps that give better light and greater
energy savings in an attempt to differentiate his bid from a competitor who
only specifies standard products.

Development of New and Advanced Metal Halide Power Supplies. Historically, the
introduction of new metal halide lamps and systems has been constrained by the
lack of complementary metal halide power supplies. Significant engineering
expertise is required to adapt existing power supplies for new metal halide
products. The Company believes that while domestic sales of metal halide power
supplies approximated $200 million in 2001, power supply manufacturers, like
lamp manufacturers, have focused on the larger fluorescent power supply market
and, to a lesser extent, on the standard-type metal halide lamp market rather
than development of new power supply products for specialized metal halide
products and applications. Since the Company acquired its power supply
manufacturing operations in 1997, the development of appropriate power supply
sources focused on metal halide has enhanced the expansion of metal halide
applications, reduced the development time required to introduce new metal
halide products and improved the reliability and durability of existing metal
halide products.

Opportunity for Integrated Metal Halide Systems. Metal halide systems for
commercial and industrial applications are assembled primarily by fixture
manufacturers, lighting agents, and intermediaries who are limited in their
ability to integrate different components that comprise a metal halide system.
The Company believes that significant growth opportunities exist through the
packaging of compatible, reliable system components for OEM customers from a
single supplier. In addition, the Company believes that metal halide systems
have significant potential to displace older lighting technologies in

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traditional applications. Other more recent applications for metal halide
systems include fiber optic systems and automotive headlamps.

International Demand for Metal Halide. International markets represent
long-term attractive opportunities for metal halide products as developing
nations continue to build infrastructure to support their growing economies.
Facilities such as train stations, airports, government buildings, highways and
factories all require substantial lighting for which metal halide products are
well suited. In addition, given the high energy efficiency of metal halide and
the high cost of energy in developing nations (including the high cost of power
plant construction), the Company believes that the international metal halide
market will grow faster than the United States market in the long term.

Strategy  Lighting

The Company believes that metal halide technology represents the best lighting
technology for a wide variety of applications, many of which are not yet served
by an appropriate metal halide product. As the principal supplier of metal
halide materials to the metal halide lamp industry, the Company expects to
benefit from continued growth in metal halide markets. The Company also expects
to lead metal halides continued market expansion, by providing innovative
metal halide system components and systems through the operating and growth
strategies highlighted below.

The Companys strategic objective for lighting is to remain focused on the
metal halide market and expand its leadership position in the metal halide
lighting industry by: (i) continuing to use its vertical integration to
introduce new products and applications; (ii) using its experience and
technology to continually reduce cost and improve quality to improve cash flow
from operations; (iii) strengthening the Companys relationships with OEMs and
lighting agents to increase the number of metal halide applications and the
penetration of the Companys products in new metal halide installations; and
(iv) seeking to demonstrate the superiority of metal halide lighting solutions,
thereby stimulating domestic and international demand for the Companys
products.

The Company has sought to achieve its strategic objective through internal
growth, acquisitions and strategic investments, and focus on cost and quality.
The Companys acquisitions and investments have been made in businesses that,
when combined with the Companys existing capabilities and metal halide focus,
are intended to provide technological, product or distribution synergies and
offer the potential to enhance the Companys competitive position or accelerate
development of additional metal halide market opportunities. In the future,
the Company expects to achieve its strategic objectives primarily through
internal growth and focus on cost and quality. However, to the extent its
capital resources allow, the Company may consider other possible acquisition
and strategic investment opportunities.

Operating Strategy  Lighting

The Company focuses its resources primarily on designing, manufacturing and
marketing metal halide materials, system components, and systems. By focusing
on metal halide, the Company believes it has developed unique design,
manufacturing and marketing expertise. Such expertise provides the Company with
significant competitive advantages, which enable the Company to deliver highly
customized products to meet customer needs. The Companys experienced workforce
is dedicated to improving metal halide lighting products, production processes
and developing new applications for this technology.
In order to increase the number of metal halide applications and the
penetration of the Companys products, the Company pursues the following
operating strategies:

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Continue to Use Vertical
Integration

The Company began operations as a manufacturer of metal halide salts and
expanded into production of system components, initially lamps. The Company has
expanded its focus to include magnetic and electronic power supplies. The
Company has broadened its materials manufacturing capabilities to include
filtering and optical coatings for lighting applications, through its
acquisition of DSI in 1998. Through this vertical integration, the Company is
able to develop and package complementary system components which enable metal
halide lighting to penetrate applications and markets currently served by older
technologies. The Company will continue to use vertically integrated
operations where we have competitive advantages based on patent-protected
technology and first-to-market product leadership.

Improve Operating Cash Flow

The Company has historically depended on outside capital sources to fund
growth. In order to reduce this dependence and to improve its operating
results, the Company continues to focus primarily on its metal halide products
and to use its experience in the design and manufacture of metal halide
materials, components and systems and focused metal halide technology to reduce
operating costs by improving production processes and product quality without
substantial capital investment. The Company has also transferred a significant
portion of its component manufacturing to India resulting in further
significant reductions in its production cost. Management believes that
achieving cost and quality goals will enhance operating cash flow to allow for
profitable growth in a tight capital environment. The anticipated improvements
should also improve overall financial performance, which will improve the
Companys access to capital for future investments in its business.

Strengthen OEM and Lighting Agent
Relationships

The Company concentrates on developing strong relationships with lighting
fixture OEMs by providing the key system components for a lighting fixture,
either alone or packaged as a unit, tailored to meet their needs. Historically,
the Company provided specialized lamps tailored to meet OEM needs. With its
ability to design and manufacture power supplies, the Company expects to better
meet OEM needs by packaging the principal system components (lamps, power
supplies, switches and controls) for a lighting fixture. Frequent interaction
with OEMs serves dual purposes, providing the Company with valuable ideas for
new component products and providing OEMs with the information necessary to
market the Companys new products. Lamps and power supplies designed for a
specific fixture are included with the fixture when sold by the OEM, increasing
distribution of the Companys products. The Company has also entered into
agreements with lighting agents to pay commissions for selling the Companys
lamps. Such commissions, unique among lamp manufacturers, provide the agent an
incentive to include the Companys metal halide lamps in its bids on a
construction or renovation project.

Seek to Demonstrate Superiority of
Metal Halide Lighting Solutions

The Company seeks to demonstrate the superiority of metal halide lighting
solutions to its customer base, including OEMs, lighting agents and
contractors, thereby stimulating domestic and international demand for the
Companys products. The Company believes that metal halide lighting systems
have significant potential to displace older lighting technologies in
traditional applications, as well as more recent applications such as fiber
optic systems and automotive headlamps.

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Long-Term Growth Strategy  Lighting

The Company is continuing to introduce more products for new applications and
to expand the distribution channels for its products. The key elements of the
Companys long-term growth strategy include:

Introduce New Products and
Systems

The Company believes it has introduced a majority of the new lamps in the
domestic, metal halide lamp industry since 1985. As applications become
increasingly complex, the advantage of simultaneous design of components as an
integrated system is becoming more significant. The Company now manufactures
and markets complementary component packages for OEMs. The Company intends to
develop, manufacture and market additional types of high performance and
technologically advanced metal halide materials, components and systems.
Capitalizing on its expanding production and design capability and unique metal
halide focus, the Company expects to work with others in the further
development of additional specialty systems, such as fiber optic lighting
systems.

Increase Sales of Existing
Products

By expanding existing relationships and developing new relationships with
lighting agents and OEMs, the Company expects to increase sales of existing
specialty lamps and power supplies. The Company also expects its sales of
replacement lamps, as well as power supplies, to increase as the installed base
of fixtures for the Companys specialty lamps and power supplies increases. The
Company expects to increase sales in the replacement lamp market, in part
through a novel direct marketing approach to end users. The Company prints its
toll-free phone number and e-commerce web site address on each lamp, and
customers can order replacement lamps directly from the Company for express
delivery. In addition, this interaction with customers provides the Company
with the opportunity to market additional metal halide products.

Participate in International
Markets

The Company intends to capitalize on opportunities in international markets in
three ways. First, the Company directly exports its products to countries that
do not impose restrictive tariffs, local content laws and other trade barriers.
The primary countries and regions in which the Company directly markets
products are the United Kingdom, Western Europe, Australia, Canada and Japan.
Since July 1995, the Company has strengthened its distribution capabilities by
acquiring or investing in its distributors in these countries. Second, the
Company has pursued and may pursue strategic acquisitions and has built or may
build manufacturing facilities in international markets. Third, in countries
that impose trade restrictions, the Company has sold production equipment or
has entered into joint ventures with local lamp manufacturers. Purchasers of
production equipment have become customers for the Companys metal halide salts
and other materials. The Company has existing joint ventures in China and
Korea.

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Products

The Company designs, manufactures and sells metal halide materials, components
and systems, which are used in a wide variety of applications and locations
including:

|                              |  |                                        |  |                                             
|----------------------------- |  | -------------------------------------- |  | --------------------------------------------
|- floodlighting               |  | - sports arena lighting                |  | - general lighting                          
|- architectural area lighting |  | - commercial downlighting              |  | - industrial highbays                       
|- general industrial lighting |  | - airport and railway station lighting |  | - tunnel lighting                           
|- billboard and sign lighting |  | - gas station canopy lighting          |  | - indirect indoor sports and office lighting
|- site lighting               |  | - interior downlighting                |  | - parking garage lighting                   
|- soffit lighting             |  | - decorative lighting                  |  | - security lighting                         
|- hazardous location lighting |  | - retail store downlighting            |  | - landscape lighting                        
|- accent lighting             |  | and track lighting                     |  |                                             

The Company also designs, manufactures and sells thin film deposition equipment
for the lighting, telecommunications, ophthalmic and optics industries.

Materials

The Company produces and sells metal halide salts, electrodes, amalgams and
getters. Metal halide salts are the primary ingredients within the arc tube of
metal halide lamps, which determine the lighting characteristics of the lamp.
Electrodes form the electrical connections within the lamp. Amalgams are
chemicals that are used in the arc tubes of high pressure sodium (HPS) lamps
and in fluorescent lamps. Getters are devices required to be included in each
metal halide lamp to prevent impurities from interfering with lamp operation.

The Company produces over 300 different metal halide salts that can be used in
metal halide lamps to produce different lighting characteristics. In addition
to meeting its own needs, the Company believes it produces all of the metal
halide salts used in metal halide lamps manufactured in the United States,
including those manufactured by GE, Philips and Sylvania, and 80% of the metal
halide salts used in metal halide lamps manufactured overseas. The Company
serves all major lamp manufacturers, each of which uses different metal halide
salts. The Company vigorously guards each customers specific formulas from
other customers, including the Companys own lamp engineers. Because of its
ability to produce these ultra pure metal halide doses, the Company has also
been called upon by its lamp
manufacturer customer base to produce most of the amalgams used in the domestic
production of HPS lighting and, most recently, to develop and supply a new
amalgam for fluorescent applications.

Through DSI, the Company also now produces optical thin film coatings,
including coatings for lighting applications with particular emphasis on
coatings on lamp burners, as well as antireflection coatings, and coatings for
telecommunications products, multilayer magnetic films and emissivity
modification films for classified government applications, and infrared
multilayer optical films on flexible polymeric substrates. Through a reactive
sputtering process, these coatings are chemically bonded to a product surface.
When used in lighting applications, these coatings can significantly improve
the optical performance of the light source, protect the system and its
components from harmful ultra-violet and infrared radiation, and increase the
energy efficiency of the entire system. See also Telecommunication
Applications of Company Technology.

Components and Systems

The Companys component products include specialty and standard lamps, magnetic
and electronic power supplies, system controls and fiber optic components.
Specialty lamps are lamps designed and

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manufactured for particular OEM applications. Standard lamps are
high-volume lamps, which the Company primarily manufactures at its lamp
manufacturing facility in India or sources from other lamp manufacturers. Power
supplies are devices that regulate power and are necessary for operation of HID
and fluorescent lamps. System controls are electrical components included in
fixtures and systems.

The Company believes it differentiates itself from other metal halide lamp
manufacturers by offering a wider variety of lamps, many of which have been
customized to offer a specific solution to a lighting problem. Since 1985, the
Company believes that it has introduced a majority of the new lamps in the
domestic, metal halide lamp industry. Currently, the Company offers 89
specialty, 262 second-generation Uni-Form® pulse start and 88 standard-type
lamps in 20 different watt variations ranging from 50 watts to 2,000 watts for
over 30 different applications. In certain instances, the Company produces
these products for its competitors on a private label basis in order to capture
sales through competitors distribution channels. The Company also sells
standard-type lamps, which it manufactures at its factory in India or sources
from other manufacturers.

In fiscal 1999, the Company introduced its new line of Uni-Form® pulse start
products. Uni-Form® pulse start products are a new generation of metal halide
components and systems which permit (a) increased light output with lower
power utilization, (b) faster starting, (c) a quicker restart of lamps which
have been recently turned off, and (d) better color uniformity. In fiscal
2001, the Company began to offer an expanded line of Uni-Form® pulse start
lighting components and systems. As part of the expanded line, the Company
offers unique retrofit kits that enable customers to convert to
second-generation metal halide products without having to replace the entire
lighting system. Many utility companies are offering rebates to their
customers who purchase the energy-efficient retrofit kits in order to encourage
energy conservation.

Venture Lighting Power Systems, North America (formerly Ballastronix), the
Companys Canadian subsidiary and Venture Power Systems India Limited, the
Companys Indian subsidiary, manufacture magnetic power supplies for HID
lighting systems, currently offering over 450 power supply products. The
Company also sells electronic power supplies and controls for metal halide
lighting systems.

A metal halide lighting system consists of at least a lamp and power supply,
but may include a fixture, electronic controls, optical systems, housing,
support systems or any other necessary components assembled into a product for
an end user. The Company believes it will be able to combine its metal halide
expertise and manufacturing capabilities to assist and encourage its customers
to design, develop, produce and market metal halide systems for innovative
applications.

The Company also believes that it has a significant opportunity to work with
others on the application of metal halide technology to fiber optic lighting
systems. Because of metal halide lightings ability to produce varied lighting
effects, it is particularly well suited to be adapted as the light source for
fiber optic lighting systems. Fiber optic lighting systems are currently used
in accent applications, such as swimming pool lighting or as replacement
lighting for neon lighting. In applications such as these, it is important that
electricity and heat be located separately from the desired point of light
emission.

Production Equipment

In fiscal 1999, due to economic conditions in general, especially outside the
United States, and as a result of the Companys cash preservation strategy, the
Companys equipment manufacturing operation in Bellevue, Ohio was 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, was moved to the Companys Solon, Ohio facility. The
Company temporarily ceased the manufacture and sale of turnkey lamp production
manufacturing groups in fiscal 1999. The Company

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has resumed its production equipment business in a limited manner and is currently manufacturing two
equipment groups for unrelated entities in China.

A metal halide lamp production equipment group consists of up to 50 different
production machines. Each lamp production equipment group sells for between
$1.0 million to $6.0 million. In order to maintain manufacturing flexibility,
the Company must continually update its own component production equipment,
through the internal design and fabrication of production equipment. The
Company has leveraged its manufacturing expertise by selling lamp production
equipment groups in international markets to independent companies or to joint
ventures with local lamp manufacturers. In connection with each lamp
production equipment group sale, the Company is required to provide lamp
designs and specifications, and production training, at the same time, creating
a customer for its materials products.

Through DSI, a leader in the development of sophisticated thin film deposition
equipment and thin film products, the Company also has the capability to
manufacture and market turnkey deposition equipment to produce thin film
coatings for a variety of applications. These systems employ sputtering
technology to place optically precise thin coatings on lighting components and
other materials. When DSI sells a system to a customer, DSI will either operate
the system for the customer at DSIs facility or transfer the system to the
customers facility. See also Telecommunication Applications of Company
Technology.

International Sales

International sales aggregated $62.2 million (37% of net sales) for fiscal
2002, $72.1 million (33% of net sales) for fiscal 2001, and $79.1 million (35%
of net sales) for fiscal 2000. The sale of the Companys fixture subsidiaries
has increased the percentage of Company net sales represented by international
sales. For information regarding the Companys international operations, see
Note P to Notes to Consolidated Financial Statements.

Product Design and Development

Management believes one of its key strengths is its ability to design and
develop new products. The Company has dedicated research and development
efforts in each of its product lines having invested $36.3 million or 5.9% of
net sales into research and development over the last three full fiscal years.
In fiscal 2002, the Company invested $8.8 million (5.3% of net sales); in
fiscal 2001, $12.7 million (5.8% of net sales) in research and development; and
in fiscal 2000, $14.8 million (6.5% of net sales). The Company has developed
new applications for metal halide lighting, improved the quality of its
materials, and introduced new specialized products, such as the Uni-Form® pulse
start products. Uni-Form® pulse start products are a new generation of metal
halide components and systems which permit (a) increased light output with
lower power consumption, (b) faster starting, (c) a quicker restart of lamps
which have been recently turned off, and (d) better color uniformity.
Historically, the Companys efforts primarily have been focused on the
development of materials and system components.

Materials

The Company is focused on improving the purity of, and production processes
for, metal halide salts. The Company pursues these efforts proactively as well
as in response to customer requests for specific metal halide salts. The
Company also focuses on designing and developing improved electrodes, amalgams
and getters used in lamp manufacturing. Through DSI, the Company expects to
continue producing thin film coatings primarily for lighting applications with
particular emphasis on coatings on lamp burners, as well as develop related
software, and reliable, cost-effective application processes. See also
Telecommunication Applications of Company Technology.

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Components and Systems

The Companys product design and development has focused on developing
innovative components to meet the specialized needs of various customers,
including lighting fixture OEMs. The Companys product design teams work
together with OEMs on the design, development and commercialization of new
system components. Such collaborative development efforts have resulted in the
design of improved metal halide lamps with reduced wattage, better energy
efficiency, smaller size and increased life expectancy.

Marketing and Distribution

The marketing and distribution of the Companys diverse range of commercial
products varies by individual product and by product category, as described
below. All sales data are exclusive of inter-company sales.

Materials

The Company markets materials (metal halide and other salts) directly to all
high intensity discharge lamp manufacturers, primarily GE, Philips and Sylvania
for use in their manufacture of lamps. The Company also markets lamp materials
to its joint venture partners. In addition, the Company works very closely with
its customers to manufacture materials according to their specifications.
Certain customer-developed materials are considered proprietary to the
Companys customers. The other lamp components manufactured by the Company are
used primarily in the manufacture of its own lamps; however, some outside sales
are made to other lamp manufacturers. The principal customers for the
thin-film coating products of the Company include major lamp manufacturers. In
addition, the Company markets its thin-film coatings to government suppliers
for use in aerospace applications and to fiber optic telecommunications systems
manufacturers. See also Telecommunication Applications of Company Technology.
Sales of materials accounted for approximately 15.5% of the Companys revenues
in fiscal 2002, 13.3% in fiscal 2001 and 13.2% in 2000.

System Components

Electrical distributors typically market only standard-type lamps, and the
Company believes that its specialty lamp products do not lend themselves to the
traditional marketing channels associated with standard-type lamp products.
Accordingly, the Company has adopted innovative marketing techniques for its
lamps. As a result, in initial distribution, the Company markets its metal
halide system components through OEMs, which generally have been involved in
the design of the lamp, and commissioned lighting agents, who package the
Companys lamps and power supplies in their bids on construction or renovation
projects. Due to the fact that the Companys lamps are produced to the
specifications required to match a particular fixture or use by an OEM, the
Companys lamp will generally be included with the fixture each time the
fixture is sold. The Company intends to market complementary lamps and power
supplies as a package to provide better service to its OEM customers and
lighting agents, as well as to increase sales.

The Company also has distributed its metal halide lamps through lighting
agents. Unlike GE, Philips and Sylvania that each have extensive local
distributor relationships, the Company has entered into agency agreements with
lighting agents who represent a full line of fixture manufacturers, under which
the agent receives a commission for selling the Companys lamps. The Company
believes it is the only major lamp manufacturer to distribute its products
through lighting agents. This relationship allows the lighting agent to package
the Companys metal halide lamps with the other products included in its bid on
a project. By bidding a more complete or unique package, the lighting agent has
a competitive advantage over less

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complete bids and, if selected, earns a
commission on Company lamps sold, which agents generally do not receive from
other lamp suppliers.

The Company intends to increase its sales of replacement lamps through direct
marketing by exploiting both the Companys internally developed capabilities.
Since 1994, the Company has printed its toll-free number on each lamp that it
sells, allowing a customer to call the Company, rather than an electrical
distributor, to order a replacement lamp. This enables the customer to speak to
a more knowledgeable representative, thereby increasing the accuracy and
efficiency of service to the end user. This interaction also allows the Company
to suggest enhanced products better suited for the end users needs. In
addition, the Company telemarkets replacement lamps in connection with
catalogue distributions. Lamps are delivered by express courier to end users,
thereby providing service efficiency comparable to local electrical
distributors. Replacement lamps are typically sold at a higher gross margin
than lamps sold initially through OEMs or lighting agents.

In addition to packaging power supplies with lamps, the Company is continuing
direct marketing to OEMs and sales through electrical distributors. Sales of
system components accounted for approximately 55.4% of the Companys revenues
in fiscal 2002, 44.1% in fiscal 2001 and 44.4% in fiscal 2000.

Systems

Several of the Companys foreign operations market Ruud Lighting systems.
Prior to the sale of the Companys fixture subsidiaries in December 2001, most
of the Companys commercial lighting system sales were made by these
subsidiaries and were marketed primarily under the trade name
Ruud Lighting. Ruud Lighting marketed and distributed its products primarily by direct
marketing to lighting contractors. In addition to fixture products that are
sold by some of the Companys foreign operations including fixtures purchased
from Ruud Lighting, the Companys remaining system products are retrofit
kits, which combine the Companys lamps, power supplies and/or other
components in a single system. These retrofit kits allow an end user to
replace the lighting system within an installed fixture to improve lighting
and/or energy efficiency with minimal out-of-pocket cost. By marketing these
retrofit metal halide systems, the Company believes it may capture a greater
market share in the metal halide industry. See also Recent Developments.

Systems accounted for approximately 26.6% of the Companys revenues in fiscal
2002, 40.9% in fiscal 2001 and 40.0% in fiscal 2000.

Production Equipment

The Companys production equipment is manufactured for internal use and is
marketed to existing companies for turnkey production of thin-film coatings and
metal halide lamps. External sales of production equipment accounted for
approximately 2.5% of the Companys revenues in fiscal 2002, 1.8% in fiscal
2001 and 2.5% in fiscal 2000.

Manufacturing and Operations

The Companys lamp manufacturing facility in Chennai (Madras), India operates
six days a week, 16 hours a day, with the Companys lamp manufacturing
employees working in two eight-hour shifts each day. The Companys lamp
manufacturing facility in Solon, Ohio operates five days a week with one full
shift and a partial second shift. The manufacturing of metal halide lamps
consists of three primary processes. First, the quartz arc tube is shaped,
electrodes for carrying the current are installed, the metal halide salt dose
is introduced and the arc tube is sealed. The process is performed at high
temperatures in

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carefully controlled conditions to ensure that the arc tube is
properly sealed and that no impurities enter the arc tube. Second, the arc tube
is mounted inside a borosilicate glass container and sealed. Finally, the lamp
is finished by adding an electrical contact. Although light output of metal
halide lamps is not affected by ambient temperatures, an outer bulb is used to
prevent contact with the arc tube, which operates at extremely high
temperatures. Quartz and borosilicate glass are used in the production of metal
halide lamps because of their durability and ability to retain shape and
function at extremely high temperatures. Finished lamps are inspected, tested
and then shipped in accordance with customer instructions. The Solon facility
also houses research and development operations and lamp production equipment
operations.

The Company produces magnetic power supplies at its facility in Amherst, Nova
Scotia, which operates five days a week with one full shift and a partial
second shift. The Company also produces magnetic power supplies at its facility
in Chennai (Madras) India, which operates six days a week with two full shifts.
The manufacture of magnetic power supplies is a combination of batch and
production line processes. The production line process starts with a coil
winding department, progresses to an in-line coil and core operation and then
to final assembly. Subassemblies for ignitors and capacitors are located
off-line in a batch operation for inclusion in final assembly.

The Company produces all of the metal halide salts it uses and sells at its
facility in Urbana, Illinois. The Urbana facility, with approximately 90
employees working a single shift, also produces precision metal pieces and
high-speed dispensers for salts and metal pieces that are used by the Company
and sold to other metal halide lamp manufacturers.

At the Companys DSI facility in Santa Rosa, California, the Company produces
optical thin film coatings for a variety of applications, as well as equipment
for deposition of thin film coatings. The facility operates five days per week
with three eight-hour shifts per day. Coatings and systems are produced in
accordance with exacting customer specifications. Management believes that DSI
has expertise over a broad range of thin film deposition technologies allowing
application of the coating technology most suitable for a particular client
need. See also Telecommunication Applications of Company Technology.

Raw Materials and Suppliers

The Company sources its raw materials from a variety of suppliers. Presently,
it sources most of its quartz tubing and borosilicate glass bulbs for lamps
from GE and Osram-Sylvania. Although an interruption in these supplies could
disrupt the Companys operations, the Company believes that alternative sources
of supply exist and could be arranged prior to the interruption having a
material adverse effect on the Companys operations or sales. The materials for
the Companys power supply products are readily available on the open market.
The Company also purchases certain of its industrial standard-type lamps from
GE and Sylvania. This enables the Company to devote its production equipment to
higher margin specialty lamps.

Most of the raw materials used in the production of metal halide salts can be
sourced from several suppliers. The Company has been the dominant supplier of
metal halide salts to the metal halide lamp industry for many years. Therefore,
the Company has focused on addressing any circumstance that could jeopardize
the continued production of these vital materials. Since the Company is the
primary supplier of metal halide salts to the metal halide lamp industry, any
disruption in supply would also affect each producer of the affected lamp type.

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Raw materials and components for DSI coatings and equipment are sourced from
outside suppliers. The Company has multiple qualified sources for critical
materials and components. See also Telecommunication Applications of Company
Technology.

Competition

General

Metal halide systems compete with other types of lighting technology for many
applications. The Companys metal halide lamps compete with lamps produced by
other metal halide lamp manufacturers, primarily GE, Philips and
Osram-Sylvania. Metal halide technology is the newest of all lighting
technologies and although the market awareness and the uses of metal halide
lamps continue to grow, competition exists from older technologies in each
metal halide application.

Materials

The Company produces materials that are used by the Company and virtually all
other manufacturers of metal halide lamps. In metal halide salts, where the
Company has successfully used its technology focus and manufacturing capability
to develop superior products, the Company believes it has no competitors in the
United States. In overseas markets, one lamp manufacturer produces metal halide
salts, principally for its own use. The competition in salts is based on the
technological ability to develop salt formulation for customers and maintain
product uniformity and purity. The Company believes it is the leading producer
of salts because it is the leader in uniformity and purity. In other materials
categories, the Companys chief competition is internal production by GE,
Philips and Sylvania. The competition in these products is based primarily on
price and delivery, with some competition based on technological ability to
create solutions for unique applications. The Companys products compete most
effectively for external sales where they are created for unique applications.

DSI has one or two principal competitors in each of its traditional markets
(lighting, coating equipment and government/aerospace). The Company believes
that competition in thin film coatings is generally based on quality of
coatings, technological expertise to design and deliver customized coating
solutions and customer service. The Company believes that it competes
successfully on the basis of all three of these measures. While competition
is strenuous with these existing competitors, management believes that the high
technical content of the products and services in these markets make entry by
new thin film coating manufacturers relatively difficult. See also
Telecommunication Applications of Company Technology.

System Components

GE, Philips and Sylvania are the Companys principal competitors in the
production of metal halide lamps. Although GE, Philips and Sylvania have
focused their efforts on the larger incandescent and fluorescent markets, all
three companies produce metal halide lamps. These three companies have
emphasized sales of a relatively small variety of standard-type metal halide
lamps, such as those found in the most common commercial and industrial
applications, which the Company believes represents approximately 75% of the
total metal halide lamp segment.

Although the Company believes its technical and engineering expertise in the
production of specialty metal halide lamps and its unique marketing approach
give it a competitive advantage in this market, the Companys three primary
competitors have significantly longer operating histories, substantially
greater financial, technical and other resources and larger marketing and
distribution organizations than the Company and could expand their focus into
specialty lamps.

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The Company does not believe that the foreign lamp manufacturers to whom the
Company has sold lamp production equipment compete with the Companys specialty
products. Due to the technical and engineering expertise required to produce a
new type of metal halide lamp, these purchasers have typically only produced
the standard-type lamps in which the Company has trained them. Although these
purchasers could potentially produce specialty lamp types to compete with the
Company, these purchasers would need to develop or acquire the expertise
required to produce specialty metal halide lamps.

The Companys power supply products compete primarily with products of two
manufacturers, Advance Transformer, a subsidiary of Philips, and
Universal/MagneTek, both headquartered in the United States. Both these
companies have focused on the large fluorescent power supply market whereas the
focus of the Companys power supply operations has been in HID magnetic power
supplies for use primarily in metal halide applications. Competition in power
supplies has traditionally depended on price and delivery, which has resulted
in the failure to develop power supplies to optimize metal halide lighting
systems. The Companys power supply operations intend to compete on the
ability to deliver power supplies that are designed to enhance performance of
metal halide lighting systems.

Systems

Lighting systems compete on the basis of system cost, operating cost, quality
of light and service. The Company feels that metal halide systems compete
effectively against other technologies in each of these areas in many
applications. The lighting systems market is highly fragmented. Competitors
generally market their systems through distributors and lighting agents.

DSI has one or two principal competitors in each of its traditional markets
(lighting, coating equipment and government/aerospace). While competition is
strenuous with these existing competitors, management believes that the high
technical content of the products and services in these markets make entry by
new thin film coating manufacturers relatively difficult.

DSI competes with respect to its major telecommunications products with
numerous producers of components and systems, many of which possess greater
financial, manufacturing, marketing and distribution resources than DSI. The
principal competitors for DSIs products are certain large OEMs, such as JDS
Uniphase Corporation, Corning Incorporated, and Lucent Technologies, Inc.,
which have significant internal capability to manufacture thin film filter
products, and a variety of smaller companies which specialize in optical
coatings, such as Cierra Photonics, Inc., Precision Optics Corp., Inc., Barr
Associates, Inc., Iridian Spectral Technologies, Ltd., Thin Film Technologies,
Inc., and Evaporated Coatings, Inc.

Intellectual Property

The Company relies primarily on trade secret, trademark, and patent laws to
protect its rights to certain aspects of its products, including proprietary
manufacturing processes and technologies, product research and concepts and
trademarks, all of which the Company believes are important to the success of
its products and its competitive position. In the past, the Company has
successfully taken legal action to enjoin misappropriation of trade secrets by
other parties. Any litigation involving misappropriation of the Companys trade
secrets or other intellectual property rights could require the Company to
increase significantly the resources devoted to such efforts. In addition, an
adverse determination in litigation could subject the Company to the loss of
its rights to a particular trade secret, trademark or patent; could require the
Company to grant licenses to third parties; could prevent the Company from
manufacturing, selling or using certain aspects of its products; or could
subject the Company to substantial liability, any

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of which could have a
material adverse effect on the Companys results of operations. The patent
positions of companies such as ADLT and its subsidiaries can be highly
uncertain and involve complex legal and factual questions, and therefore the
breadth of claims allowed in such patents and their enforceability cannot be
predicted. Therefore, we cannot provide assurance that the claims in any
existing or subsequently issued patent will be sufficient to protect ADLTs or
its subsidiaries intellectual property or that such patent will not be
challenged, invalidated, held unenforceable or circumvented, or that the rights
granted thereunder will provide proprietary protection or competitive
advantages.

Telecommunication Applications of Company Technology

Telecommunications Business Unit

In February 2000, the Company announced the creation of its Fiber Optic
Telecommunications Business Unit, which develops and manufactures passive
optical telecommunications devices and components, based on its optical coating
technology. The telecommunications operations are located in Santa Rosa,
California. The Telecommunications Unit uses the proprietary coating
equipment, advanced thin film technologies, and measurement capabilities
developed by DSI over the last sixteen years for a wide variety of demanding
products in both military and commercial applications. Due to the downturn in
telecommunication product sales, the Company combined the telecommunications
unit into its commercial products unit.

The major focus of the telecommunications business is directed at providing (i)
optical coatings that reduce insertion losses in fiber optic communications
systems, including wavelength division multiplexing (WDM) and dense wavelength
division multiplexing (DWDM) systems; (ii) collimating micro-optics for use in
WDM and DWDM systems; (iii) filter elements for use in WDM systems; (iv)
secondary filter elements for use in DWDM systems; and, (v) narrow bandpass
filter elements for use in the multiplex/demultiplex function of DWDM systems.
WDM and DWDM are technologies that allow multiple wavelengths of light to be
simultaneously transmitted through a single fiber optic cable.

Telecommunication product sales for fiscal 2002 were $978,000, a 63% decrease
from $2.61 million for fiscal 2001. Fiscal 2001 sales were 80% more than
fiscal 2000 sales of $1.45 million. Backorders in the telecom product area
were approximately $3.2 million at June 30, 2001. Due to the weakness in the
telecommunications market, the Companys backorders have declined sharply and
are not significant at June 30, 2002. The Company has demonstrated key DWDM
filter manufacturing capabilities using its patented MicroDyn® technology. The
Company believes that it will develop and market commercial narrow bandpass
filter products that take advantage of the Companys patented MicroDyn®
sputtering technology. DSIs development of MicroDyn® coating technology for
telecommunications filters has also resulted in second generation equipment for
the manufacture of precision coated optics. DSI believes that it can expand
the benefits of its coating technology to the medical instrumentation and
projection display markets.

The Company has existing manufacturing capacity to support sales of up to $10
million per year of existing products. The Company believes that it can
increase its production capacity for its telecommunications products beyond
existing levels with additional capital expenditures, on which this business
depends.

DSI believes that the current supply exceeds demand for many of these thin film
coating products for the telecommunications industry. This situation is
expected to continue for the next one to two years. The principal competitors
for the Companys products are certain large OEMs, such as JDS Uniphase
Corporation, Corning Incorporated, and Lucent Technologies, Inc., which have
significant internal capability to manufacture thin film filter products, and a
variety of smaller companies which specialize in

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optical coatings, such as
Cierra Photonics, Inc., Precision Optics Corp., Inc., Barr Associates, Inc.,
Iridian Spectral Technologies, Ltd., Thin Film Technologies, Inc., and
Evaporated Coatings, Inc. The Company also believes that the large OEMs also
represent opportunities for sales of its products.

Environmental Regulation

The Companys operations are subject to federal, state, local and foreign laws
and regulations governing, among other things, emissions to air, discharge to
waters and the generation, handling, storage, transportation, treatment and
disposal of waste and other materials as well as laws relating to occupational
health and safety. The Company believes that its business, operations and
facilities are being operated in compliance in all material respects with
applicable environmental and health and safety laws and regulations, many of
which provide for substantial fines and criminal sanctions for violations.
However, the operations of manufacturing plants entail risks in these areas,
which could potentially result in significant expenditures in order to comply
with evolving environmental and health and safety laws, regulations or
requirements that may be adopted or imposed in the future.

The Company believes that the overall impact of compliance with regulations and
legislation protecting the environment will not have a material effect on its
future financial position or results of operations. Capital expenditures and
operating expenses in fiscal 2002, fiscal 2001 and fiscal 2000 attributable to
compliance with such legislation were not material.

Employees

As of June 30, 2002, the Company had approximately 1,329 full-time employees,
consisting of employees engaged in the designing, manufacturing and marketing
of materials (185 employees), system components and systems (1,114 employees),
and production equipment (16 employees) and 14 employees in
corporate/administrative services. The Company believes that its employee
relations are good. The Companys employees are not represented by any
collective bargaining organization, and the Company has never experienced a
work stoppage.

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Item 2. Properties

The Companys headquarters are located in Solon, Ohio, and the Company
maintains manufacturing facilities in California, Ohio, Illinois, Chennai
(Madras), India, and Nova Scotia, Canada. Set forth below is certain
information with respect to the Companys principal facilities as of June 30,
2002:

|                                    |  |                                    |  |         |         |                                |  |        |             |  |        |  |  |  | 
|----------------------------------- |  | ---------------------------------- |  | ------- | ------- | ------------------------------ |  | ------ | ----------- |  | ------ |  |  |  | 
|                                    |  |                                    |  |         |         |                                |  |        | Approximate |  |        |  | 
|                                    |  |                                    |  |         |         |                                |  |        | Square      |  | Owned/
|Facility Location                   |  | Activities                         |  | Footage |         | Leased                        
|                                    |  |                                    |  |         |         |                               
|North America                       |  |                                    |  |         |         |                                |  |        |            
|                                   
|                                   
|                                   
|                                   
|Solon, Ohio                         |  | System components manufacturing,   |  |         | 330,000 |                                |  | Owned 
|                                    |  |                                    |  |         |         | distribution warehouse, office |  |        |             |  |        |  |  | 
|                                   
|                                   
|                                   
|                                   
|Santa Rosa, California              |  | Manufacturing, office              |  |         | 144,000 |                                |  | Leased
|                                   
|                                   
|                                   
|                                   
|Urbana, Illinois                    |  | Materials manufacturing, office    |  |         | 120,000 |                                |  | Owned 
|                                   
|                                   
|                                   
|                                   
|Amherst, Nova Scotia, Canada        |  | Power supply manufacturing, office |  |         | 45,000  |                                |  | Owned 
|                                   
|                                   
|                                   
|                                   
|Mississauga, Ontario, Canada        |  | Distribution warehouse             |  |         | 13,000  |                                |  | Leased
|                                   
|                                   
|                                   
|                                   
|Other                               |  |                                    |  |         |         |                                |  |        |             |  |       
|                                   
|                                   
|                                   
|                                   
|Draycott, England                   |  | Distribution warehouse, office     |  |         | 125,000 |                                |  | Leased
|                                   
|                                   
|                                   
|                                   
|Chennai (Madras) India              |  | System components manufacturing    |  |         | 40,000  |                                |  | Owned 
|                                   
|                                   
|                                   
|                                   
|Wantirna South, Victoria, Australia |  | Distribution warehouse, office     |  |         | 33,000  |                                |  | Owned 
|                                   
|                                   
|                                   
|                                   
|Mitcham, Victoria, Australia        |  | Distribution warehouse             |  |         | 15,000  |                                |  | Leased

The owned facilities are subject to mortgages in the following approximate
outstanding amounts as of June 30, 2002: Solon  $4.5 million; and Urbana 
$421,000. The aggregate annual rental cost of leased facilities is
approximately $1.4 million, and the average remaining lease term is 8.1 years.




Item 3. Legal Proceedings

On September 11, 2002, the Company entered into an agreement to settle all
pending shareholder litigation, described below, subject to the execution of
final settlement documents and court approval. The agreement to settle these
lawsuits calls for a payment of $8.4 million in cash by the Companys insurance
carriers. The agreement does not constitute any admission of wrongdoing on the
part of the Company or the individual defendants.

In April and May 1999, three class action suits were filed in the United States
District Court, Northern District of Ohio, by certain alleged shareholders of
the Company on behalf of themselves and purported classes consisting of Company
shareholders, other than the defendants and their affiliates, who purchased
stock during the period from December 30, 1997 through September 30, 1998 or
various portions thereof. A First Amended Class Action Complaint, consolidating
the three lawsuits, was filed on September 30, 1999. The named defendants in
the case  styled In re Advanced Lighting Technologies, Inc. Securities
Litigation, Master File No. 1:99CV836,pending before the United States
District Court, Northern District of Ohio  are the Company and its Chairman
and Chief Executive Officer (CEO).
The First Amended Class Action Complaint alleged generally that certain
disclosures attributed to the Company contained misstatements and omissions
alleged to be violations of Section 10(b) of the Securities Exchange Act of
1934 and Rule 10b-5, including claims for fraud on the market arising from
alleged misrepresentations and omissions with respect to the Companys
financial performance and prospects and alleged violations of generally
accepted accounting principles by, among other things,

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improperly recognizing
revenue and improper inventory accounting. The Complaint sought certification
of the purported class, unspecified compensatory and punitive damages, pre- and
post-judgment interest and attorneys fees and costs.

On December 4 and December 12, 2001 and January 10, 2002, separate lawsuits
were filed by separate shareholders of the Company allegedly on behalf of the
Company, derivatively, against officers and directors of the Company. The
allegations in the three cases are substantially similar, and the two cases
filed in Ohio court, Gobble v Hellman, et al. 1:02CV0076-AAand Miller v
Hellman, et al. 1:02CV342, were removed to the United States District Court,
Northern District of Ohio, where they are pending. The suit originally filed in
Federal Court, Tanigawa v Ruud, et al. 1:01CV2807, was previously voluntarily
dismissed by the plaintiff. The Company was a nominal defendant in these
actions. The individual defendants in the Tanigawacase included, among others,
Wayne R. Hellman, the Chief Executive Officer and Chairman of the Board, who is
also beneficial owner of more than 5% of the outstanding common stock of the
Company, Alan J. Ruud, former Chief Operating Officer and Vice Chairman of the
Board, who is also beneficial owner of more than 5% of the outstanding common
stock of the Company, and Messrs. Francis H. Beam, John E. Breen, John R.
Buerkle, Theodore A. Filson, Louis S. Fisi, Thomas K. Lime and A Gordon
Tunstall, directors of the Company. The Gobbleand Millercomplaints named the
same defendants, but also named Steven C. Potts, who is Chief Financial Officer
and is a former director.

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

Excluding the case noted above, the Company does not have pending any
litigation which, separately or in the aggregate, if adversely determined,
could reasonably be expected to have a material adverse effect on the Company.
The Company and its subsidiaries may, from time to time, be a party to
litigation or administrative proceedings that arise in the normal course of
their business.




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

An annual meeting of shareholders was held on April 24, 2002. The following
sets forth the actions considered and the results of the voting with respect to
each action:

| |    |  |  |                                                                           |                    |  |            |            |         |  |          |           |  |  |            |           | 
| | -- |  |  | ------------------------------------------------------------------------- | ------------------ |  | ---------- | ---------- | ------- |  | -------- | --------- |  |  | ---------- | --------- | 
| |    |  |  |                                                                           |                    |  |            |            |         |  |          |           |  |  | Abstained/
| |    |  |  |                                                                           |                    |  |            |            |         |  |          |           |  |  | Broker    
| |    |  |  |                                                                           |                    |  | For        |            | Against |  | Nonvotes
| |    |  |  |                                                                           |                    |  |            |            |         |  |         
| | 1. |  |  | Nominees for director for the term
expiring in 2004  All elected         |                    |  |            |            |         |  |          |           |  |  |            |          
|
|
|
|
| |    |  |  |                                                                           | Wayne R. Hellman   |  |            | 15,810,501 |         |  |          | 2,086,218 |  |  |            | 3,045,000 | 
|
|
|
|
| |    |  |  |                                                                           | Theodore A. Filson |  |            | 17,708,842 |         |  |          | 187,877   |  |  |            | 3,045,000 | 
|
|
|
|
| |    |  |  |                                                                           | James E. Mohn      |  |            | 20,773,083 |         |  |          | 168,636   |  |  |            | - 0 -     | 
|
|
|
|
| | 2. |  |  | Ratify the Companys 2001
Employee Stock Purchase Plan  Passed           |                    |  | 17,591,389 |            |         |  | 275,361  |           |  |  | 3,074,969  |          
|
|
|
|
| | 3. |  |  | Ratify appointment of Grant Thornton LLP
as independent auditors  Passed |                    |  | 17,771,488 |            |         |  | 54,110   |           |  |  | 3,116,121  |          

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##### Table of Contents






PART II




Item 5. Market for the Registrants Common Equity and Related Shareholder
Matters

The Common Stock is quoted on the Nasdaq National Market under the symbol
ADLT. The following table sets forth for the periods indicated the range of
high and low sale prices for the Common Stock, as reported on the Nasdaq
National Market:

|                                |                |  |      |       |     |  |   |       | 
|------------------------------- | -------------- |  | ---- | ----- | --- |  | - | ----- | 
|                                |                |  | High |       | Low
|                                |                |  |      |       |    
|Fiscal Year Ended June 30, 2002 |                |  |      |       |     |  |   |      
|                               
|                               
|                               
|                               
|                                | First Quarter  |  | $    | 5.86  |     |  | $ | 1.30  | 
|                               
|                               
|                               
|                               
|                                | Second Quarter |  |      | 2.40  |     |  |   | 1.10  | 
|                               
|                               
|                               
|                               
|                                | Third Quarter  |  |      | 1.94  |     |  |   | .56   | 
|                               
|                               
|                               
|                               
|                                | Fourth Quarter |  |      | 1.72  |     |  |   | .65   | 
|                               
|                               
|                               
|                               
|Fiscal Year Ended June 30, 2001 |                |  |      |       |     |  |   |      
|                               
|                               
|                               
|                               
|                                | First Quarter  |  | $    | 19.94 |     |  | $ | 11.31 | 
|                               
|                               
|                               
|                               
|                                | Second Quarter |  |      | 12.81 |     |  |   | 4.00  | 
|                               
|                               
|                               
|                               
|                                | Third Quarter  |  |      | 9.88  |     |  |   | 4.00  | 
|                               
|                               
|                               
|                               
|                                | Fourth Quarter |  |      | 6.73  |     |  |   | 3.90  | 

As of June 30, 2002 there were approximately 304 holders of record of the
Companys Common Stock. The Company has never declared or paid a cash
dividend. The terms of the Companys $38 million Bank Credit Facility prohibit
the payment of dividends, other than dividends consisting of Company stock,
without the consent of the lending banks. The Companys Indenture relating to
its 8% Senior Notes limits the payment of cash dividends by the Company to
certain amounts determined by the Companys earnings and equity investment in
the Company after March 31, 1998. In addition, financial covenants, including
ratios, contained in the Bank Credit Facility, may limit payment of dividends
indirectly.

The Company does not intend to declare or pay any cash dividends for the
foreseeable future and intends to retain earnings, if any, for the future
operation and expansion of the Companys business.

33



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##### Table of Contents






Item 6. Selected Financial Data

The following table contains certain selected financial data and is qualified
by the more detailed Consolidated Financial Statements and Notes thereto of the
Company. The selected financial data should be read in conjunction with the
Consolidated Financial Statements and Notes thereto and Managements
Discussion and Analysis of Financial Condition and Results of Operations
included in Items 7 and 8 below.

|                                                                                                                      |                                                                                      |   |                                                 |         |      |   |         |         |      |   |         |         |   |   |         |         |   |   |         |         |  
|--------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------ | - | ----------------------------------------------- | ------- | ---- | - | ------- | ------- | ---- | - | ------- | ------- | - | - | ------- | ------- | - | - | ------- | ------- | -
|                                                                                                                      |                                                                                      |   | Fiscal Year Ended June 30,                     
|                                                                                                                      |                                                                                      |   |                                                
|                                                                                                                      |                                                                                      |   | 2002                                            |         | 2001 |   | 2000    |         | 1999 |   | 1998   
|                                                                                                                      |                                                                                      |   |                                                 |         |      |   |         |         |      |   |        
|                                                                                                                      |                                                                                      |   | (In thousands, except per share dollar amounts)
|Operating Statement Data:                                                                                             |                                                                                      |   |                                                 |         |      |   |         |         |      |   |         |         |   |   |         |         |   |   |         |        
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Net sales (1)                                                                                                         |                                                                                      | $ | 166,978                                         |         |      | $ | 219,448 |         |      | $ | 228,596 |         |   | $ | 196,428 |         |   | $ | 169,900 |        
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Costs and expenses:                                                                                                   |                                                                                      |   |                                                 |         |      |   |         |         |      |   |         |         |   |   |         |         |   |   |         |        
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Cost of sales (1)                                                                    |   |                                                 | 109,126 |      |   |         | 134,638 |      |   |         | 139,624 |   |   |         | 139,321 |   |   |         | 102,473 |  
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Marketing and selling (1)                                                            |   |                                                 | 31,636  |      |   |         | 42,594  |      |   |         | 40,622  |   |   |         | 44,712  |   |   |         | 30,765  |  
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Research and development                                                             |   |                                                 | 8,809   |      |   |         | 12,693  |      |   |         | 14,763  |   |   |         | 17,680  |   |   |         | 10,843  |  
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | General and administrative                                                           |   |                                                 | 15,502  |      |   |         | 13,831  |      |   |         | 15,385  |   |   |         | 21,192  |   |   |         | 12,208  |  
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Provision for loan impairment                                                        |   |                                                 | 7,100   |      |   |         |        |      |   |         |        |   |   |         |        |   |   |         |        |  
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Gain on settlement of lawsuit (2)                                                    |   |                                                 | (554    | )    |   |         |        |      |   |         |        |   |   |         |        |   |   |         |        |  
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Gain on sale of property                                                             |   |                                                 | (80     | )    |   |         | (1,115  | )    |   |         |        |   |   |         |        |   |   |         |        |  
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Fiber optic joint venture formation costs                                            |   |                                                 |        |      |   |         |        |      |   |         |        |   |   |         |        |   |   |         | 212     |  
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Purchased research and development (3)                                               |   |                                                 |        |      |   |         |        |      |   |         |        |   |   |         |        |   |   |         | 18,220  |  
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Special charges and asset impairment (3)                                             |   |                                                 | 10,561  |      |   |         |        |      |   |         | (475    | ) |   |         | 31,107  |   |   |         | 15,918  |  
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Amortization of intangible assets                                                    |   |                                                 | 336     |      |   |         | 2,862   |      |   |         | 2,766   |   |   |         | 2,789   |   |   |         | 1,691   |  
|                                                                                                                      |                                                                                      |   |                                                 |         |      |   |         |         |      |   |         |         |   |   |         |         |   |   |         |        
|Income (loss) from operations                                                                                         |                                                                                      |   | (15,458                                         | )       |      |   | 13,945  |         |      |   | 15,911  |         |   |   | (60,373 | )       |   |   | (22,430 | )      
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Interest income (expense), net                                                                                        |                                                                                      |   | (11,777                                         | )       |      |   | (12,824 | )       |      |   | (13,393 | )       |   |   | (12,767 | )       |   |   | (2,388  | )      
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Income (loss) from investments (4)                                                                                    |                                                                                      |   | (2,347                                          | )       |      |   | (234    | )       |      |   | 70      |         |   |   | (6,318  | )       |   |   | (501    | )      
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Gain from sale of fixture subsidiaries                                                                                |                                                                                      |   | 227                                             |         |      |   |        |         |      |   |        |         |   |   |        |         |   |   |        |        
|                                                                                                                      |                                                                                      |   |                                                 |         |      |   |         |         |      |   |         |         |   |   |         |         |   |   |         |        
|Income (loss) before income taxes, minority
interest, extraordinary charge and
cumulative effect of accounting change |                                                                                      |   | (29,355                                         | )       |      |   | 887     |         |      |   | 2,588   |         |   |   | (79,458 | )       |   |   | (25,319 | )      
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Income taxes                                                                                                          |                                                                                      |   | 252                                             |         |      |   | 516     |         |      |   | 635     |         |   |   | 2,281   |         |   |   | (1,311  | )      
|                                                                                                                      |                                                                                      |   |                                                 |         |      |   |         |         |      |   |         |         |   |   |         |         |   |   |         |        
|Income (loss) before minority interest, extraordinary
charge and cumulative effect of accounting change               |                                                                                      |   | (29,607                                         | )       |      |   | 371     |         |      |   | 1,953   |         |   |   | (81,739 | )       |   |   | (24,008 | )      
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Minority interest                                                                                                     |                                                                                      |   | (219                                            | )       |      |   | (100    | )       |      |   | (25     | )       |   |   |        |         |   |   |        |        
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Recontinuance of previously discontinued operations (5)                                                               |                                                                                      |   |                                                |         |      |   |        |         |      |   |        |         |   |   | 1,331   |         |   |   | (1,331  | )      
|                                                                                                                      |                                                                                      |   |                                                 |         |      |   |         |         |      |   |         |         |   |   |         |         |   |   |         |        
|Income (loss) before extraordinary charge
and cumulative effect of accounting change                                  |                                                                                      |   | (29,826                                         | )       |      |   | 271     |         |      |   | 1,928   |         |   |   | (80,408 | )       |   |   | (25,339 | )      
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Extraordinary charge, net of
applicable income tax benefits (6)                                                       |                                                                                      |   |                                                |         |      |   |        |         |      |   |        |         |   |   | (902    | )       |   |   | (604    | )      
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Cumulative effect of accounting change (7)                                                                            |                                                                                      |   | (71,171                                         | )       |      |   |        |         |      |   |        |         |   |   | (2,443  | )       |   |   |        |        
|                                                                                                                      |                                                                                      |   |                                                 |         |      |   |         |         |      |   |         |         |   |   |         |         |   |   |         |        
|Net income (loss)                                                                                                     |                                                                                      | $ | (100,997                                        | )       |      | $ | 271     |         |      | $ | 1,928   |         |   | $ | (83,753 | )       |   | $ | (25,943 | )      
|                                                                                                                      |                                                                                      |   |                                                 |         |      |   |         |         |      |   |         |         |   |   |         |         |   |   |         |        
|Earnings (loss) per share  diluted (8):                                                                              |                                                                                      |   |                                                 |         |      |   |         |         |      |   |         |         |   |   |         |         |   |   |         |        
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Income (loss) before extraordinary charge and
cumulative effect of accounting change |   | $                                               | (1.39   | )    |   | $       | (.10    | )    |   | $       | .01     |   |   | $       | (4.04   | ) |   | $       | (1.32   | )
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Recontinuance of previously discontinued operations                                  |   |                                                 |        |      |   |         |        |      |   |         |        |   |   |         | .07     |   |   |         | (.07    | )
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Extraordinary charge                                                                 |   |                                                 |        |      |   |         |        |      |   |         |        |   |   |         | (.05    | ) |   |         | (.04    | )
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Cumulative effect of accounting change (8)                                           |   |                                                 | (3.04   | )    |   |         | (.24    | )    |   |         |        |   |   |         | (.12    | ) |   |         |        |  
|                                                                                                                      |                                                                                      |   |                                                 |         |      |   |         |         |      |   |         |         |   |   |         |         |   |   |         |        
|Net earnings (loss) per share  diluted                                                                               |                                                                                      | $ | (4.43                                           | )       |      | $ | (.34    | )       |      | $ | .01     |         |   | $ | (4.14   | )       |   | $ | (1.43   | )      
|                                                                                                                      |                                                                                      |   |                                                 |         |      |   |         |         |      |   |         |         |   |   |         |         |   |   |         |        
|Shares used for computing per share amounts  diluted                                                                 |                                                                                      |   | 23,423                                          |         |      |   | 22,446  |         |      |   | 21,331  |         |   |   | 20,232  |         |   |   | 18,195  |        
|                                                                                                                      |                                                                                      |   |                                                 |         |      |   |         |         |      |   |         |         |   |   |         |         |   |   |         |        

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|                    |                             |  |                            |         |      |  |      |         |      |  |      |         |  |  |   |         |  |  |   |         | 
|------------------- | --------------------------- |  | -------------------------- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- |  |  | - | ------- |  |  | - | ------- | 
|                    |                             |  | Fiscal Year Ended June 30,
|                    |                             |  |                           
|                    |                             |  | 2002                       |         | 2001 |  | 2000 |         | 1999 |  | 1998
|                    |                             |  |                            |         |      |  |      |         |      |  |     
|                    |                             |  | (In thousands)            
|Balance Sheet Data: |                             |  |                            |         |      |  |      |         |      |  |      |         |  |  |   |         |  |  |   |        
|                   
|                   
|                   
|                   
|                    | Cash and cash equivalents   |  | $                          | 2,874   |      |  | $    | 3,652   |      |  | $    | 3,890   |  |  | $ | 3,830   |  |  | $ | 21,917  | 
|                   
|                   
|                   
|                   
|                    | Working capital             |  |                            | (99,473 | )    |  |      | 46,056  |      |  |      | 40,004  |  |  |   | 18,629  |  |  |   | 79,852  | 
|                   
|                   
|                   
|                   
|                    | Total assets                |  |                            | 193,700 |      |  |      | 316,001 |      |  |      | 304,475 |  |  |   | 284,506 |  |  |   | 329,434 | 
|                   
|                   
|                   
|                   
|                    | Long-term debt              |  |                            | 7,356   |      |  |      | 154,914 |      |  |      | 158,110 |  |  |   | 152,496 |  |  |   | 117,756 | 
|                   
|                   
|                   
|                   
|                    | Preferred stock             |  |                            | 22,290  |      |  |      | 19,554  |      |  |      | 16,999  |  |  |   |        |  |  |   |        | 
|                   
|                   
|                   
|                   
|                    | Common shareholders equity |  |                            | 3,282   |      |  |      | 98,290  |      |  |      | 82,783  |  |  |   | 77,441  |  |  |   | 170,837 | 



|(1) |  | Net sales have been adjusted to include shipping and handling fees
charged to customers. Prior to fiscal 2002, these amounts were classified
in marketing and selling expense as an offset to freight costs incurred.
This reclassification reflects the adoption of Emerging Issues Task Force
(EITF) Issue 00-10, Accounting for Shipping and Handling Fees and
Costs. EITF Issue 00-10 requires that all amounts billed to a customer
in a sales transaction related to shipping and handling be classified as
revenue. Net sales and marketing and selling expenses were both increased
by $3,729 in fiscal 2001, $3,560 in fiscal 2000, $3,225 in fiscal 1999,
and $1,551 in fiscal 1998.                                                                                                                                                                                                                                                                                                                              
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The Company adopted Emerging Issues Task Force (EITF) Issue 01-9
Accounting for Consideration Given by a Vendor to a Customer in fiscal
2002. EITF Issue 01-9 requires that expense associated with a free product
or service delivered at the time of sale of another product or service
should be classified as cost of sales. The Companys fixture subsidiaries
that were sold in the second quarter of fiscal 2002 had incurred and
included such costs in marketing and selling expense. Accordingly, the
Company has reclassified such amounts to cost of sales within these
financial statements. The amounts reclassified were $1,836 in fiscal 2002,
$4,157 in fiscal 2001, $4,510 in fiscal 2000, $3,972 in fiscal 1999 and
$1,057 in fiscal 1998.                                                                                                                                                                                                                                                               
|   
|(2) |  | The Company recorded a gain on the settlement of a claim, net of legal
fees, as a result of the enforcement of a non-compete agreement with
several former employees of a subsidiary of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|(3) |  | Fiscal 2002 results include special charges related to the consolidation
of the Companys power supply manufacturing operations into its
high-efficiency facility in Chennai (Madras), India, reduction of
staffing levels at most locations, and evaluation of equipment and
investments in light of its long-term strategies. The amounts are
classified in the fiscal 2002 statement of operations as: cost of sales 
$688 and, special charges  $10,561.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|    |  | Fiscal 1999 results include special charges related to the Companys plans
to accelerate its focus on metal halide products, insulate it from
deteriorating economic conditions in the Pacific Rim, exit its non-core
products, integrate fully its core and acquired U.S. operations to produce
profitable growth and reduce its use of cash. Specific initiatives by the
Company included principally: (a) limiting further Pacific Rim expansion,
(b) changing global lamp manufacturing strategy, (c) restructuring marketing
operations in North America and Europe, (d) accelerating exit from non-core
product lines, (e) consolidating equipment manufacturing operations, (f)
reducing corporate and administrative overhead, and (g) evaluating
long-lived assets. Also, included in special charges are amounts related to
the wind-down of portable fixture manufacturing operations. The amounts are
classified in the fiscal 1999 statement of operations as: cost of sales
$3,956 and, special charges $31,107.
|   
|    |  | Fiscal 1998 results include special charges related to the purchase price
allocation for Deposition Sciences, Inc. (DSI) of $18,220 for purchased
in-process research and development. The special charges also include
$17,984 principally relating to the rationalization of the Companys global
power supply operations, principally: (a) the discontinuance of certain
power supply products at the Companys power supply facilities, (b) the
write-down of certain intangible and fixed assets and (c) charges related to
the consolidation and rationalization cost of distribution activities and of
new information systems and a reassessment of investments. The amounts are
classified in the fiscal 1998 statement of operations as: cost of sales 
$2,066; purchased in-process research and development  $18,220; and,
special charges  $15,918.                                                                                                                                                           

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|(4) |  | In fiscal 2002, the loss from investments includes a loss from the sale
of a preferred stock investment in Venture Lighting Japan of $2,007. In
fiscal 1999, the loss from investments includes a pretax noncash
write-down of $5,883 related to the Companys investment in the Unison
joint venture.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(5) |  | Microsun Technologies, Inc. (Microsun) was identified in March 1998 for
disposition through a plan to distribute to ADLT shareholders all of the
ownership of Microsun in a tax-free spin-off transaction estimated to be
completed by December 1998. Because of the deterioration of the capital
markets and the inability to raise capital necessary to spin-off the
Microsun business, the Company concluded that it would wind-down the
operations, close the manufacturing facilities and liquidate the assets of
Microsun. In October 1999, management decided, with the approval of the Board of Directors to retain
the Microsun business  the portable lighting fixture products business that
uses metal halide lighting technology  as part of the Companys continuing
operation. In accordance with the accounting requirements for
re-continuance, the financial statements have been reclassified to present
Microsun within continuing operations.                                                                                                                             
|   
|(6) |  | In fiscal 1999 and 1998, the Company incurred an extraordinary loss on
the early extinguishment of debt of $902 and $604, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|(7) |  | In fiscal 2002, the Company recorded $71,171 as a cumulative effect of
accounting change relating to the impairment of goodwill and other
indefinite lived intangible assets in accordance with the Financial
Accounting Standards Board Statement of Accounting Standards (FAS) No.
142, Goodwill and Intangible Assets. FAS 142 provides authoritative
guidance on accounting for and financial reporting of goodwill and
intangible assets acquired in business combinations. FAS 142 requires
that these assets be tested for impairment, and as a result, the Company
recorded $71,171 as a cumulative effect of accounting change as of July 1,
2001.                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|    |  | In fiscal 1999, the Company recorded $2,443 as a cumulative change in
accounting principle relating to the write-off of start up costs in
accordance with the American Institute of Certified Public Accountants
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, and required
that the Company expense all previously capitalized start-up costs and
organization costs as a cumulative effect of accounting change.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|(8) |  | Net earnings (loss) per share is based upon the income attributable to
holders of Common Stock. Such income has been decreased by preferred
share accretion of $2,736 ($.12 per share) in fiscal 2002, $7,884 ($.36
per share) in fiscal 2001 and $1,796 ($.08 per share) in fiscal 2000. The
Company adopted Emerging Issues Task Force (EITF) Issue 00-27,
Application of EITF 98-5, Convertible Securities with Beneficial
Conversion Features or Contingently Adjustable Conversion Ratios, to
Certain Convertible Instruments in the quarter ended December 31, 2000.
EITF Issue 00-27 requires that a convertible instruments beneficial
conversion feature be measured using an effective conversion price. As a
result, the value assigned to the redeemable preferred stock was adjusted
by $5,329 for the discount related to the beneficial conversion option.
This additional discount was immediately accreted to paid-in capital in a
manner similar to a cumulative effect of accounting change since the
redeemable preferred stock was convertible at the time of issuance.

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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.

(Dollars in thousands, except per share data amounts)

The following discussion should be read in connection with the Companys
Consolidated Financial Statements and Notes thereto included in Item 8 
Financial Statements and Supplementary Data.

General

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

Consistent with the Companys strategy for new product introductions, the
Company invests substantial resources in research and development to engineer
materials and system components to be included in customers specialized
systems. Such expenditures have enabled the Company to develop new applications
for metal halide lighting, improve the quality of its materials, and introduce
new specialized products, such as the Uni-Form® pulse start products.
Uni-Form® pulse start products are a new generation of metal halide components
and systems which permit (a) increased light output with lower power
utilization, (b) faster starting, (c) a quicker restart of lamps which have
been recently turned off, and (d) better color uniformity. The Company has
spent additional amounts for manufacturing process and efficiency enhancements,
which were charged to cost of goods sold when incurred. While research and
development expenditures have declined over the last three fiscal years in
connection with the Companys commitment to generate positive operating cash
flow, the Company expects to continue to make substantial expenditures on
research and development to enhance its position as the leading innovator in
the metal halide lighting industry. See also Item 1. Business  Recent
Developments above and Liquidity and Capital Resources below.

Recent Developments

Impact of Credit Facility Default

In fiscal 2002, the Company incurred a loss from operations of $(15,458) and,
at June 30, 2002, was in default on its fourth quarter fixed charge coverage
ratio under its $38,000 Bank Credit Facility. On September 16, 2002, the
Company and its bank group entered into a Forbearance Agreement, which was subsequently extended,
allowing the Company access to its existing revolving
credit facility and precluding the acceleration of the Bank Credit Facility
maturity until at least October 18, 2002. The Forbearance Agreement contains
various requirements that must be met by the Company, including the non-payment
of its semi-annual interest payment on its 8% Senior Notes due on September 16,
2002 and increasing the interest rate to 2% over the banks prime rate.
Further, the bank group is permitted to terminate the Forbearance Agreement if holders of
the Companys 8% Senior Notes take certain actions adverse to the Company. The
other requirements of the Forbearance Agreement include providing the bank group with
increased financial information, and covenants regarding its operations during
the forbearance period. Management believes that it will be able to meet these
requirements during this forbearance period. However, unless a subsequent
agreement is reached with the bank group on or before
October 18, 2002, which the Company expects will require
engaging an investment banker for advice on its restructuring efforts, the
bank group will be entitled to take legal and other action against the Company,
including acceleration of the loans outstanding under the Bank Credit Facility,
cessation of future loans under the Bank Credit Facility

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and/or action to foreclose on the collateral securing those loans. The estimated collateral
value for these loans at June 30, 2002 approximated $69,000 and included the
accounts receivable, inventory, and machinery and equipment of the Company in
the United States, Canada and the United Kingdom.

The Company is negotiating with the bank group to extend the Forbearance
Agreement. Under the Senior Note Indenture, if the Company fails to make its
September 16, 2002 interest payment within a 30-day grace period, an Event of
Default will exist. An Event of Default would also exist under the Indenture
if the bank group accelerates the maturity of the loans and if the loans are
not repaid or the acceleration is not reversed within a 30-day grace period.
If an Event of Default exists under the Indenture, the Trustee may, and upon
the instruction of the holders of 25% of the Senior Notes must, declare the
entire principal amount of the Senior Notes to be immediately due and payable,
and may take any actions to enforce the terms of the Senior Notes. Due to the
uncertainty surrounding the acceleration of payment related to the Bank Credit
Facility and Senior Notes, the Company has classified both debt issues to
current liabilities in the June 30, 2002 balance sheet.

The Company will not make the Senior Note interest payment within the grace
period. Management is working with its banks, investment bankers and other
stakeholders on various alternatives available to the Company. In addition,
the Company is in discussions with several lenders to refinance its current
Bank Credit Facility with a replacement credit facility or other facilities, to
more effectively utilize its global assets and allow the Company to make its
semi-annual interest payment on its Senior Notes. Management believes that a
credit facility can be obtained within 120 days. As a result, the Company is
in discussions with its Senior Note holders to provide the Company with
additional time to obtain new financing even though it is unable to pay the
September 16, 2002 interest payment within the normal 30-day grace period.

The Company has hired consultants to assist in completing a replacement credit
facility, restructuring its operations and improving its financial results.
The Company has developed a detailed plan to address its future cash
requirements, including cost reductions and, if necessary, the sale of non-core
assets. The Companys ability to extend the Forbearance Agreement, obtain a
new lending arrangement or make the Senior Notes interest payment is uncertain
and raises substantial doubt about the Companys ability to continue as a going
concern and may result in the Senior Notes holders forcing the Company to seek
alternative solutions. The consolidated financial statements do not include
any adjustments that might result from the outcome of these uncertainties.

The Company does not know whether it will be successful in obtaining a
replacement credit facility, or what the terms of a replacement credit facility
will be. Descriptions of terms of the current Bank Credit Facility contained
in this annual report may or may not reflect the final terms of a replacement
credit facility when and if a replacement credit facility is completed by the
Company.

Sale of Fixture Subsidiaries

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

The consideration received by the Company consisted of a cash payment of
$28,000 (adjusted dollar for dollar to reflect the amount of any changes in
working capital and funded indebtedness between

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

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

Consolidation of Power Supply Production Operations and Restructuring of Worldwide Operations

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



| |  |  | Centralize Certain Power Supply Manufacturing Operations into India
Operations.A charge of $6,082 was recorded in fiscal 2002 relating to
the first quarter restructuring and centralizing certain power supply
manufacturing operations into the Companys high-efficiency and low-cost
manufacturing plant in Chennai (Madras), India. Of this charge, costs of
$2,293 were recorded for the closing of the Companys manufacturing
facilities in the United Kingdom, Australia and U.S., including costs of
$2,036 associated with a non-cancelable lease. Amounts related to the
lease will be paid over the term of the lease, which expires in 2006.
Severance and benefits to approximately 160 terminated employees at the
above locations totaled $1,411 and were paid by the end of fiscal 2002.
Property, primarily consisting of building, equipment and intangibles,
was disposed of or written down to net realizable value resulting in a
charge of $2,041. In addition, certain power supply product lines were
exited which resulted in a write-down of inventory of $337. This amount
is included in cost of goods sold.
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Staffing Reductions. During the first quarter of fiscal 2002, a program
was completed to reduce the number of employees across all business
units. Approximately 90 employees, exclusive of the above-noted
employees, were terminated and total severance and benefits costs for
this program were $1,857. All employees were paid by the end of fiscal
2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  |  | Write-off of Long-lived Assets and Other Charges.Due to the decline in
current business conditions, certain long-lived assets and product lines
were evaluated for impairment in light of future growth areas of the
business and a focus on profit margins and core opportunities. As a
result, charges of $1,425 and $1,552 were recorded in the first and third
quarter of fiscal 2002, respectively, to recognize write-downs in
investments and equipment. In addition, a $333 charge was taken for the
abandonment of certain projects and exiting several product lines.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

In the first quarter of fiscal 2003 the Company announced that it would
relocate some of its power supply production from Nova Scotia, Canada into the
Chennai (Madras), India production facility in order to further reduce its
costs. The relocation should result in the elimination of approximately 125
positions at

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the Canadian facility during the second and third quarter of
fiscal 2003. Severance and other costs related to this relocation are expected
to be minimal.

General Electric Company Investment

On October 6, 1999, General Electric Company (GE) completed an investment in
the Company of $20,554. In addition, GE and the Company entered into a
five-year, renewable agreement for the supply of metal halide salts to GE.

The GE investment includes 761,250 shares of the Companys newly created Series
A Stock convertible at any time into 3,045,000 shares of Company Common Stock
(subject to adjustment). GE also received a Warrant (the Initial Warrant)
which GE has exercised to acquire 998,703 shares of Common Stock. GE now holds
1,429,590 shares of Company Common Stock. The Series A Stock and the Common
Stock held by GE represent approximately 16.8% of the voting power and equity
ownership of the Company. See Terms of the Series A Stock below. Pursuant
to the terms of the stock purchase agreement, GE provided the Company with
candidates for the Companys Board of Directors who are not directors,
officers, employees or 10% shareholders of GE. The Company is required to
cause the number of such candidates serving on the Board to be equal to the
greater of 20% of the number of members of the Board or the number of members
which most nearly corresponds to GEs percentage ownership interest in the
Company. Two GE candidates now serve on the Board of Directors.

The proceeds of the GE transaction were applied principally to the reduction of
short-term liabilities and outstanding amounts under the Companys Bank Credit
Facility. The following summaries of the terms of the Series A Stock, the
Terms of the Initial Warrant and Additional Terms of the GE Transaction are
summaries of the definitive documents in connection with the GE investment.

Terms of the Series A Stock

The Series A Stock is a preferred stock of the Company created for issuance in
the GE transaction. 761,250 shares of Series A Stock were authorized and issued
to GE. The Series A Stock has a liquidation preference of $27 per share, plus
an amount equal to 8% per annum compounded annually from the date of issuance
to the date of payment (Liquidation Preference Amount).

Each outstanding share of Series A Stock is convertible at any time into four
shares (subject to adjustment as described below) of Common Stock of the
Company. Prior to conversion, holders of Series A Stock are entitled to vote
in all shareholder matters together with the holders of Company Common Stock as
a single class. In any such vote, the holders of Series A Stock are entitled
to four votes (equal to the number of shares of Common Stock into which the
Series A Stock held may initially be converted).

The Company is required to redeem any shares of Series A Stock, which have not
been converted or retired on September 30, 2010. Any such redemption would be
made at the Liquidation Preference Amount. In addition, holders of the Series
A Stock may require the Company to redeem their shares of Series A Stock by
giving notice to the Company on or before September 30, 2004. If such notice
is given, the Company will be required to make such redemption on or prior to
September 30, 2005. In addition, holders of Series A Stock will be entitled to
require the Company to redeem the Series A Stock following the occurrence of
any of the following events (each a Triggering Event): any action by the
Company to give effect to certain major corporate actions, including actions to
merge, sell all or a substantial portion of its assets (other than in the
ordinary course of business), issue capital stock, incur or have outstanding
indebtedness for borrowed money in excess of $210,000. Upon the occurrence of
a Triggering Event, the holders of the Series A Stock may require the Company
to redeem their shares of

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Series A Stock by giving notice to the Company within 90 days following the Triggering Event. If such notice is given, the Company
will be required to make such redemption within one year following such notice.
Any such redemption would be made at the Liquidation Preference Amount. Under
the terms of the Companys Bank Credit Facility and the indenture (the
Indenture) relating to the Companys 8% Senior Notes due 2008, the redemption
of the Series A Stock would currently constitute an event of default,
permitting acceleration of the related indebtedness. If prior consent of the
banks is obtained, the redemption is permitted under the Bank Credit Facility.
Payments for the redemption of equity securities are Restricted Payments
under the Indenture. The total of all Restricted Payments under the
Indenture (with exceptions not applicable to stock redemption) cannot exceed
one-half of the total of
consolidated net earnings of the Company (excluding consideration of certain
unusual items) from April 1, 1998 (taken as a single period) plus the amount of
proceeds received from sales of non-redeemable stock. As of June 30, 2002, the
Company had a net loss, excluding extraordinary items, of $109,134 for the
period. Proceeds of qualifying stock sales for the period have been
approximately $29,049. Until this deficit has been cured, and sufficient
proceeds are received and/or earnings are achieved, the Company cannot redeem
the Series A Stock without causing an event of default with respect to the
Senior Notes. In addition, the Indenture prohibits Restricted Payments (with
exceptions not applicable to stock redemptions) at any time where the ratio of
EBITDA to Interest Expense for the preceding four fiscal quarters does not
exceed 2.5 to 1.

If the Company fails to make any redemption as required (subject to permitted
deferrals in the event that such redemption would cause an event of default
with respect to certain indebtedness of the Company), the conversion ratio of
the Series A Stock would be increased from four shares of Common Stock to eight
shares of Common Stock per share of Series A Stock. In addition, the
conversion ratio is subject to adjustment to prevent dilution of the interest
of GE by the issuance of Common Stock after October 6, 1999. Except for
issuance of shares under existing employee benefit plans, and certain other
enumerated exceptions, any shares of Common Stock issued at a price below $6.75
per share, or, if higher, below the then current market price, would result in
adjustment of the conversion ratio. Any adjustment in the conversion ratio
would not affect the voting power represented by shares of Series A Stock prior
to conversion.

Upon liquidation, each share of Series A Stock will be entitled to be paid the
Liquidation Preference Amount prior to any payment or distribution to the
holders of Company Common Stock. Following such payment, holders of Series A
Stock will be entitled to a proportional share of any distribution to holders
of Company Common Stock based on the number of shares of Common Stock into
which the Series A Stock could have been converted at the time of the
liquidation.

Additional Terms of the GE Transaction

In addition to GEs initial investment, under certain circumstances, GE will be
entitled to make additional investments in the Company and receive the right to
vote additional shares of Company Common Stock. The exercise of certain of
these rights is subject to applicable law, including the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (HSR Approval). GE and the Company
entered into a Contingent Warrant Agreement (Contingent Warrant Agreement).
The Contingent Warrant Agreement identifies certain occurrences, which will
entitle GE to exercise these rights.

Upon the Second Occurrence (defined below), if it occurs, GE would receive the
right to vote the number of shares then owned by Wayne R. Hellman and Hellman,
Ltd. pursuant to proxies granted by Messrs. Hellman and Ruud. GE would receive
the right to vote the number of shares as to which Mr. Hellman then has voting
power pursuant to the Hellman Voting Trust or Irrevocable Proxies granted with
respect to shares removed from the Hellman Voting Trust (all shares voted by
Mr. Hellman, approximately 1.9 million shares at June 30, 2002, are referred to
collectively as the Hellman Shares). GE would also

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have an option, at the then current market price, to purchase from Messrs. Hellman and Ruud, the
number of shares of Common Stock which, together with the shares owned by GE,
would represent 25% of the voting power of the Company. The Company would also
be required to grant to GE an additional warrant (the First Contingent
Warrant) to purchase shares of Company Common Stock at the then current market
price. The number of shares subject to the First Contingent Warrant would be
equal to the number of shares required to allow GE to have a majority of the
voting power of the Company, assuming GE had effective proxies with respect to
all shares as to which Messrs. Hellman and Ruud then have voting power. At
August 31, 2002, the number of shares subject to the First Contingent Warrant
would have been approximately 6.6 million shares. The number of shares subject
to the First Contingent Warrant increases on a one-for-one basis for each share
newly issued by the Company and increases on a two-for-one basis for each share
sold as to which Messrs. Hellman or Ruud have voting power.

The issuance of the First Contingent Warrant, the options on shares held by
Messrs. Hellman and Ruud, and effectiveness of GEs proxy with respect to any
such shares is subject to HSR Approval unless the market value of shares held
by GE and subject to the option, is less than $50,000 at any time within the
previous 45 days. HSR Approval requires the Company and GE to provide
information to the federal government to allow it to determine whether to
contest an increase by GE to an interest in the Company in excess of 25%
pursuant to antitrust law. If the proxies become effective after the Second
Occurrence, GE will have the proxies to vote the number of Hellman Shares and
will be entitled to exercise approximately 37.9% of the then outstanding voting
power of the Company (assuming that none of the Hellman Shares have been
transferred by the beneficial owners and no issuance of additional shares by
the Company other than pursuant to the GE transaction) or approximately 36.2%
of the voting power of the Company on a fully diluted basis. Therefore, upon a
Second Occurrence and the ability to exercise the First Contingent Warrant, GE
would have the right to obtain in excess of 35% of the voting power of the
Company on a fully diluted basis and the terms of the Indenture relating to the
Senior Notes would require that the Company offer to repurchase the $100,000
principal amount of outstanding Senior Notes due 2008 at a price of 101% of the
principal amount thereof, plus accrued interest (Offer to Repurchase Notes).
In addition, the Companys banks will have the ability to demand payment of the
Bank Credit Facility.

Upon the Third Occurrence (defined below), GE would receive the right to vote
the number of shares then owned by Mr. Ruud, and the right to vote the number
of shares as to which Mr. Ruud then has voting power pursuant to the Ruud
Voting Trust or Irrevocable Proxies granted with respect to shares removed from
the Ruud Voting Trust, currently approximately 3.6 million shares (the Ruud
Shares). The effectiveness of this right requires that the conditions for the
effectiveness of the proxies following the Second Occurrence have been
satisfied. If the proxies on the Ruud Shares become effective after the Third
Occurrence, GE will have the right to vote the Ruud Shares and will be entitled
to exercise approximately 50.0% of the then outstanding voting power of the
Company (assuming that none of the Hellman Shares or the Ruud Shares have been
sold by the beneficial owners, no exercise by GE of the Contingent Warrants and
no issuance of additional shares by the Company other than pursuant to the GE
transaction) or approximately 47.8% of the voting power of the Company on a
fully diluted basis. If the Company has not already been required to make an
Offer to Repurchase Notes, it will be required to make the offer upon
effectiveness of the proxy on the Ruud Shares and the Companys banks will have
the ability to demand payment of the Bank Credit Facility. In addition, GE
will receive an additional warrant (the Second Contingent Warrant) which will
entitle GE to purchase additional shares of Common Stock at the then current
market price. The number of shares subject to the Second Contingent Warrant
will be the number of shares necessary to give GE 50% plus one vote of the
voting power of the Company (including the exercise of all outstanding
Warrants, shares subject to irrevocable proxies, the shares subject to the
Second Contingent Warrant and all proxies held with respect to Hellman Shares
and Ruud Shares). After the Third Occurrence, if the Company issues additional
shares of Common Stock to

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anyone other than GE, GE will be entitled to purchase, on the same terms given to the third party, the number of shares
required to maintain GEs voting power.

The basis for GEs additional rights will be the failure of the Company to
maintain a 2.0 to 1.0 ratio of EBITDA (as defined) to Interest Expense (as
defined) over the applicable measurement periods. The
first measurement period was the six months ended December 31, 1999.
Thereafter, the measurement periods are the six months ending on the last day
of each successive fiscal quarter until September 30, 2010. The first failure
to maintain the required ratio would be the First Occurrence, the second such
failure would be the Second Occurrence and the third such failure would be
the Third Occurrence. The ratio for the six months ended December 31, 1999,
was 1.9 to 1.0 and, therefore, the First Occurrence has taken place. However,
after the First Occurrence, if the Company maintains the required ratio in the
three fiscal quarters immediately prior to the failure, a Second Occurrence or
Third Occurrence, as the case may be, would not be effective as a result of
such failure. In August 2000 in connection with the Companys public offering
and sale of 1.7 million shares of its Common Stock, GE agreed that there would
be no measurement periods for the six-month periods ended June 30, 2000 or
September 30, 2000. GE has also agreed that there would be no measurement
period for the six-month periods ended June 30, 2001, September 30, 2001,
December 31, 2001, March 31, 2002, and June 30, 2002. The Company did not
maintain at least a 2.0 to 1.0 ratio of EBITDA to Interest Expense in each of
the last three quarters of fiscal 2002 and does not believe that it will
maintain a 2.0 to 1.0 ratio of EBITDA to Interest Expense for the six month
period ending September 30, 2002. Under the terms of the transaction, EBITDA
consists of net earnings, plus interest expense, plus depreciation and
amortization, plus income taxes, less extraordinary gains and gains from asset
sales plus extraordinary losses and losses from asset sales. Interest Expense
consists of interest expense (net of interest income) calculated in accordance
with generally accepted accounting principles, but excludes amortization of
deferred financing costs up to a maximum of $125 in any fiscal quarter.

The Company also entered into a number of other agreements with GE in
connection with the transaction. The Company has entered into a standard
registration rights agreement, which will require the Company, upon GEs
request, to register the sale of the shares of Company Common Stock issued in
connection with the investment. If GE were to require such registration and
sell a substantial number of shares, it could adversely affect the market price
of Company shares and the ability of the Company to sell equity securities.

In addition to the proxies granted to GE by Messrs. Hellman and Ruud, Messrs.
Hellman and Ruud have granted to GE a first refusal right on the sale of their
shares. This agreement requires that if Messrs. Hellman and Ruud, or Hellman
Ltd., wish to sell shares of Company stock, they must first offer the shares to
GE on the same terms. The effect of sales of Company stock by Messrs. Hellman
and Ruud and Hellman Ltd. to third parties would be to increase the number of
shares which GE would have to buy from the Company pursuant to the Contingent
Warrants to obtain voting control of the Company. After issuance of the Second
Contingent Warrant, such sales would eliminate GEs contractual right to
achieve complete voting control. In addition, upon a Second Occurrence, GE
will have an option to purchase shares from Messrs. Hellman and Ruud, which
would permit GE to raise its ownership to 25% of the outstanding shares of
Company Common Stock.

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Results of Operations

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

|                                                                                  |                                        |  |                     |      |      |  |       |      |   |  |       |      |  
|--------------------------------------------------------------------------------- | -------------------------------------- |  | ------------------- | ---- | ---- |  | ----- | ---- | - |  | ----- | ---- | -
|                                                                                  |                                        |  | Year Ended June 30,
|                                                                                  |                                        |  |                    
|                                                                                  |                                        |  | 2002                |      | 2001 |  | 2000 
|                                                                                  |                                        |  |                     |      |      |  |      
|Net sales                                                                         |                                        |  | 100.0               | %    |      |  | 100.0 | %    |   |  | 100.0 | %   
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                        |  |                     |      |      |  |       |      |   |  |       |     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Costs and expenses:                                                               |                                        |  |                     |      |      |  |       |      |   |  |       |     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Cost of sales                          |  |                     | 65.3 |      |  |       | 61.3 |   |  |       | 61.0 |  
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Marketing and selling                  |  |                     | 18.9 |      |  |       | 19.4 |   |  |       | 17.8 |  
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Research and development               |  |                     | 5.3  |      |  |       | 5.8  |   |  |       | 6.5  |  
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | General and administrative             |  |                     | 9.3  |      |  |       | 6.3  |   |  |       | 6.7  |  
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Provision for loan impairment          |  |                     | 4.3  |      |  |       |     |   |  |       |     |  
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Gain on settlement of lawsuit          |  |                     | (0.3 | )    |  |       |     |   |  |       |     |  
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Gain on sale of property               |  |                     | 0.0  |      |  |       | (0.5 | ) |  |       |     |  
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Special charges and asset impairment   |  |                     | 6.3  |      |  |       |     |   |  |       | (0.2 | )
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Amortization of intangible assets      |  |                     | 0.2  |      |  |       | 1.3  |   |  |       | 1.2  |  
|                                                                                  |                                        |  |                     |      |      |  |       |      |   |  |       |     
|Income (loss) from operations                                                     |                                        |  | (9.3                | )    |      |  | 6.4   |      |   |  | 7.0   |     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                        |  |                     |      |      |  |       |      |   |  |       |     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Other income (expense):                                                           |                                        |  |                     |      |      |  |       |      |   |  |       |     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Interest expense                       |  |                     | (7.2 | )    |  |       | (6.3 | ) |  |       | (6.3 | )
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Interest income                        |  |                     | 0.2  |      |  |       | 0.4  |   |  |       | 0.4  |  
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Income (loss) from investments         |  |                     | (1.4 | )    |  |       | (0.1 | ) |  |       | 0.0  |  
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Gain from sale of fixture subsidiaries |  |                     | 0.1  |      |  |       |     |   |  |       |     |  
|                                                                                  |                                        |  |                     |      |      |  |       |      |   |  |       |     
|Income (loss) before income taxes,
minority interest and accounting change        |                                        |  | (17.6               | )    |      |  | 0.4   |      |   |  | 1.1   |     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Income taxes                                                                      |                                        |  | 0.2                 |      |      |  | 0.2   |      |   |  | 0.3   |     
|                                                                                  |                                        |  |                     |      |      |  |       |      |   |  |       |     
|Income (loss) before minority interest and
cumulative effect of accounting change |                                        |  | (17.8               | )    |      |  | 0.2   |      |   |  | 0.8   |     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Minority interest in income of consolidated subsidiary                            |                                        |  | (0.1                | )    |      |  | (0.1  | )    |   |  | 0.0   |     
|                                                                                  |                                        |  |                     |      |      |  |       |      |   |  |       |     
|Income (loss) before cumulative effect of accounting change                       |                                        |  | (17.9               | )    |      |  | 0.1   |      |   |  | 0.8   |     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Cumulative effect of accounting change                                            |                                        |  | (42.6               | )    |      |  |      |      |   |  |      |     
|                                                                                  |                                        |  |                     |      |      |  |       |      |   |  |       |     
|Net income (loss)                                                                 |                                        |  | (60.5               | %)   |      |  | 0.1   | %    |   |  | 0.8   | %   
|                                                                                  |                                        |  |                     |      |      |  |       |      |   |  |       |     

Factors, which have affected the results of operations and net income during
fiscal 2002 as compared to fiscal 2001 and during fiscal 2001 as compared to
fiscal 2000, are discussed below.

Overview of the Results of Operations  Fiscal 2002 Compared to Fiscal 2001

The Companys operations for fiscal 2002 resulted in a loss before cumulative
effect of accounting change of $(29,826) compared to income before cumulative
effect of accounting change of $271 for fiscal 2001. The Company realized a
net loss of $(100,997) for fiscal 2002, compared to net income of $271 for
fiscal 2001.

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The following factors should be considered in comparing the Companys
operations for fiscal 2002 and fiscal 2001:



| |  |  | Results for fiscal 2002 include special charges and asset
impairment of $11,249 ($.48 per share), provision for loan impairment
of $7,100 ($.30 per share), a loss on sale of preferred stock
investment of $2,007 ($.09 per share), a gain on settlement of lawsuit
of $554 ($.02 per share), a gain on the sale of fixture subsidiaries
of $227 ($.01 per share), and a gain on the sale of property of $80
($.00 per share)
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Results for fiscal 2001 include a gain on the sale of property of
$1,115 ($.05 per share)                                                                                                                                                                                                                                                                                                                                     

After excluding the items noted above, the Companys operating activities would
have resulted in a loss before accounting change of $(10,331) for fiscal 2002,
as compared to a loss before accounting change of $(844) for fiscal 2001.

Fiscal 2002 Compared with Fiscal 2001

Net Sales. Net sales decreased 23.9% to $166,978 in fiscal 2002 from $219,448
in fiscal 2001. The decrease in sales is primarily attributed to the sale of
the fixture subsidiaries. Excluding the fixture subsidiaries, sales for fiscal
2002 were $131,895 compared with $136,181 for fiscal 2001. Metal halide sales,
excluding the fixture subsidiaries, declined 3% to $101,485 for fiscal 2002
compared with $104,200 for fiscal 2001. The Company attributes the decline to
weakness in the U.S. economy and in the lighting market, in general. The U.S.
metal halide market declined 8% during the current fiscal year. During this
time, the Company maintained its market share and believes that a stronger U.S.
economy will result in an improved lighting market for the Companys products.
From 1990 to 2000, the U.S. metal halide lighting market grew at a compound
annual rate of 12% per year, and the Company believes that the market will
return to a positive growth rate as the U.S. economy improves.

Excluding the fixture subsidiaries, fiscal 2002 sales of the Companys
second-generation metal halide lighting product line, Uni-Form® pulse start,
grew 25% to $29,366 from $23,437 as compared to fiscal 2001. Sales of APL
materials decreased 3% as compared to fiscal 2001. Geographically, these sales
of materials decreased 11% in the U.S., but outside of the U.S. increased 2% as
compared to the prior year. The decline in the U.S. is reflective of the
decline in the U.S. metal halide market. Excluding the fixture subsidiaries,
non-metal halide lighting sales declined 10%, due to the managed decline of
some non-metal halide product sales and weaknesses in the lighting market.

Excluding the fixture subsidiaries, lighting sales inside the U.S. increased 1%
in fiscal 2002 as compared to fiscal 2001. The increase is due to sales to the
former fixture subsidiaries that are now part of the Companys external sales.
Without these sales, lighting sales inside the U.S. would have declined 6%
which the Company attributes to weakness in the lighting industry and the U.S.
economy in general. Lighting sales outside the U.S. declined 9%, due in part
to a temporary reduction in power supply sales resulting from the transition of
production from the United Kingdom to India and also due to weakness in the
global economy.

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

DSIs telecommunication product sales for fiscal 2002 were $978, a decrease of
63% from $2,613 in fiscal 2001. The decrease is attributed to the overall
decline in the telecommunications industry. However, sales of DSIs
non-telecom products increased 26% to $10,715 in fiscal 2002 from $8,473 in

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fiscal 2001 as the Company capitalized on DSIs expertise in thin-film optical
coatings and optical coating equipment manufacturing opportunities.

Cost of Sales.Cost of sales decreased 18.9% to $109,126 in fiscal 2002 from
$134,638 in fiscal 2001. The decrease is primarily attributable to the sale of
the fixture subsidiaries. As a percentage of net sales, cost of sales
increased to 65.3% in fiscal 2002 from 61.3% in fiscal 2001. Cost of sales was
negatively impacted by several unusual items including inventory write-downs,
additional costs related to the move of the European power supply production to
India, and an unfavorable overhead variance resulting from the decrease in
production due to the Companys commitment to significant reductions in
inventory levels. The increase in cost of sales as a percentage of sales was
reflected across all areas of the Companys sales including materials, system
components and systems. The margins were also negatively impacted by the shift
in the mix of product sales reflecting increases in lower margin power supply
sales and decreases in higher margin materials sales.

Marketing and Selling Expenses.Marketing and selling expenses decreased
25.7% to $31,636 in fiscal 2002 from $42,594 in fiscal 2001. As a percentage of
net sales, marketing and selling expenses declined to 18.9% in fiscal 2002 from
19.4% in fiscal 2001. The decrease is primarily attributable to the sale of the
fixture subsidiaries, as marketing and selling expenses are comparable with the
decrease in sales.

Research and Development Expenses.Research and development expenses declined
30.6% in fiscal 2002 to $8,809 from $12,693 in fiscal 2001. The decrease is
primarily attributable to the sale of the fixture subsidiaries. Research and
development expenses incurred related to: (i) expansion and continued
improvement of the line of Uni-Form® pulse start lamps and fixtures (with
improved energy efficiency, quicker starting and restarting and a more compact
arc source, which improves the light and reduces material costs) intended to
replace many first generation metal halide lamps in industrial and commercial
applications; (ii) improving the coating process of optical thin-films to
broaden the applications, developing new thin-film materials, and using
coatings to develop improvements to lighting and telecommunications
technologies; (iii) development of new materials for the worlds major lighting
manufacturers; and, (iv) development and testing of electronic and
electromagnetic power supply systems. As a percentage of net sales, research
and development expenses decreased to 5.3% in fiscal 2002 from 5.8% in fiscal
2001. While research and development expenditures declined in connection with
the Companys commitment to generate positive operating cash flow, the Company
expects to continue to make substantial expenditures on research and
development to enhance its position as the leading innovator in the metal
halide lighting industry.

General and Administrative Expenses.General and administrative (G&A)
expenses increased 12.1% to $15,502 in fiscal 2002 from $13,831 in fiscal 2001.
G&A expenses for fiscal 2001 were reduced by the elimination of
acquisition-related litigation accruals of $1,847, that, based on review with
legal counsel, were no longer required. G&A expenses for fiscal 2002 reflect a
reduction in G&A expenses of $2,455 related to the fixture subsidiaries that
were sold in the second quarter. This decrease was offset by an increase in
legal and consulting fees of $1,550 and directors and officers liability
insurance of $381.

Provision for Loan Impairment.The Company recorded a valuation reserve for an
impaired loan of $7,100 related to the amount by which the carrying value of
the loan receivable from officer exceeded the underlying fair value of the
assets available to repay the loan. In fiscal 2002, no interest income has
been recognized or paid on the loan.

Gain on Settlement of Lawsuit.The Company recorded a gain on the settlement
of a lawsuit, net of legal fees, as a result of the enforcement of a
non-compete agreement with several former employees of a subsidiary of the
Company.

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Gain on Sale of Property.DSI operations have moved into a much larger leased
facility in Santa Rosa, California. Previously, the Company owned four
buildings and leased several others that comprised the DSI business campus in
Santa Rosa. Three of the buildings were sold in fiscal 2001. The fourth
building was sold in fiscal 2002 resulting in a gain of $80.

Special Charges and Asset Impairment.See Consolidation of Power Supply
Production Operations and Restructuring of Worldwide Operations above. Also,
during the fourth quarter, the Company evaluated for impairment certain
telecommunication equipment that is being held for sale. As a result, a charge
of $1,552 was recorded for the difference between the carrying amount and the
estimated fair value of the equipment.

Amortization of Intangible Assets.Amortization expense decreased to $336 in
fiscal 2002 from $2,862 in fiscal 2001. The decrease in amortization expense
is due to the adoption in the fiscal 2002 first quarter of Statement of
Financial Accounting Standards No. 142, Goodwill and Intangible Assets. As a
result, goodwill, as well as intangible assets with indefinite lives, is no
longer subject to amortization, but rather to periodic evaluation for
impairment.

Income (Loss) from Operations.As a result of the items noted above, the
Company incurred a loss from operations in fiscal 2002 of $(15,458) as compared
to income from operations of $13,945 in fiscal 2001. Excluding special charges
and asset impairment of $(11,249), the provision for loan impairment of
$(7,100), gain on settlement of lawsuit of $554, and the gain from the sale of
property of $80, the Company realized income from operations of $2,257 in
fiscal 2002. Income from operations in fiscal 2001 was $12,830, excluding the
gain on the sale of property of $1,115.

Interest Expense.Interest expense decreased to $12,121 in fiscal 2002 from
$13,839 in fiscal 2001. The decrease is primarily attributable to the
significant reduction in interest rates related to its Bank Credit Facility
debt and the reduction in debt outstanding resulting from the sale of the
fixture subsidiaries. Offsetting this decrease was the write-off of deferred
loan fees of $532 in the fourth quarter of fiscal 2002 related to the Companys Bank Credit Facility.

Interest Income.Interest income decreased to $344 in fiscal 2002 from $1,015
in fiscal 2001. The decrease is primarily attributable to the cessation of
interest income recognition in the first quarter of fiscal 2002 related to the
loan receivable from officer as mentioned above.

Income (Loss) from Investments.The income (loss) from investments in fiscal
2002 of $(2,347) consists of a loss on the sale of a preferred stock investment
in Venture Lighting Japan of $(2,007) and a loss of $(340) from the Companys
investment in Fiberstars, Inc., a marketer and distributor of fiber optic
lighting products. The loss in fiscal 2001 of $(234) represents the loss from
the Companys investment in Fiberstars.

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

Income (Loss) before Income Taxes, Minority Interest and Cumulative Effect of
Accounting Change.The Company had a loss before income taxes, minority
interest and cumulative effect of accounting change of $(29,355) in fiscal 2002
as compared to income before income taxes, minority interest and cumulative
effect of accounting change of $887 in fiscal 2001. Excluding special charges
and asset impairment of $(11,249), the provision for loan impairment of
$(7,100), the gain on settlement of lawsuit of $554, the gain from the sale of
property of $80, the loss on the sale of the preferred stock investment of
$(2,007), and the gain on sale of the fixture subsidiaries of $227, the Company
realized a loss before income taxes, minority interest and cumulative effect of
accounting change of $(9,860) in fiscal 2002. The loss before

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income taxes,
minority interest and cumulative effect of accounting change in fiscal 2001 was
$(228), excluding the gain on the sale of property of $1,115.

Income Taxes.Income tax expense was $252 for fiscal 2002 as compared to
income tax expense of $516 in fiscal 2001. The income tax expense in fiscal
2002 and 2001 related primarily to certain of the Companys foreign operations.

At June 30, 2002, the Company had net operating loss carryforwards of $96,923
available to reduce future United States federal taxable income, which expire
2008 to 2022. The Company also had a capital loss carryforward of
approximately $35,000 available to reduce future capital gains. This
carryforward expires in 2007.

The Company also has research and development credit carryforwards for tax
purposes of approximately $3,818, which expire 2008 to 2015. Additionally, in
conjunction with the Alternative Minimum Tax (AMT) rules, the Company had
available AMT credit carryforwards for tax purposes of approximately $98, which
may be used indefinitely to reduce regular federal income taxes.

Also at June 30, 2002, the Company had foreign net operating loss carryforwards
for tax purposes totaling $1,375 that expire 2003 to 2007 and $7,268 that have
no expiration dates.

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

Overview of the Results of Operations  Fiscal 2001 Compared to Fiscal 2000

The Companys operations for fiscal 2001 resulted in net income of $271
compared to net income of $1,928 for fiscal 2000.

The following factors should be considered in comparing the Companys
operations for fiscal 2001 and fiscal 2000:



| |  |  | Results for fiscal 2001 include a gain on the sale of property of
$1,115 ($.05 per share).
| | - |  | ------------------------------------------------------------------------------------------
|
| |  |  | Results for fiscal 2000 include a special charge reversal of $475
($.02 per share).       

After excluding the items noted above, the Companys operating activities would
have resulted in a net loss of $(844) for fiscal 2001, as compared to net
income of $1,453 for fiscal 2000.

Fiscal 2001 Compared with Fiscal 2000

Net sales. Net sales decreased 4.0% to $219,448 in fiscal 2001from $228,596 in
fiscal 2000. The decrease in sales in fiscal 2001 is mainly attributable to
lost sales resulting from the Companys strategic decision to exit additional
non-core business lines, as well as the devaluation of foreign currencies
relative to the strength of the U.S. dollar. During fiscal 2001, the Company
lost about $6,000 in sales by exiting certain non-metal halide lighting product
lines, about $4,000 by exiting non-telecommunications optical coating product
lines, and about $4,000 in sales due to the strength of the U.S. dollar.

Metal halide sales for fiscal 2001 were $163,676, down 1% from $164,793 in
fiscal 2000. Total pulse start product sales increased 39% to $46,240 in
fiscal 2001 from $33,166 in fiscal 2000. Sales of the Companys core metal
halide materials, a key indicator of industry trends, declined 7% as compared
to fiscal 2000. Geographically, these sales of materials declined 4% in the
U.S. and 9% outside the U.S.

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Non-metal halide lighting sales declined 9% due
to the elimination of certain non-metal halide lighting products.

Lighting sales inside the U.S. declined 1% in fiscal 2001 as compared to fiscal
2000. While sales of metal halide system components, lamps and power supplies,
increased 5%, this increase was offset by the managed decline of non-metal
halide product sales and a 3% decline in sales of metal halide fixture
products. Lighting sales outside the U.S. declined 6%, which the Company
primarily attributes to foreign currency exchange and the managed decline of
non-metal halide product sales noted above.

DSIs telecommunications product sales for fiscal 2001 were $2,613, up 80% from
$1,453 in fiscal 2000. During fiscal 2001, DSI introduced a new family of
forward-integrated components. Backorders in the telecom product area grew to
$3,200 as of June 30, 2001.

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

Cost of Sales.Cost of sales decreased 3.6% to $134,638 in fiscal 2001 from
$139,624 in fiscal 2000. The decrease was primarily attributable to decreased
unit volume. As a percentage of net sales, cost of sales increased slightly to
61.3% in fiscal 2001 from 61.0% in fiscal 2000, resulting in gross margins of
38.7% in fiscal 2001 and 39.0% in fiscal 2000. The Company experienced lower
gross profit in fiscal
2001 in its fixture operations and at its DSI subsidiary compared with fiscal
2000. However, partially offsetting this loss was an increase in gross profit
from its other metal halide lamp, power supply and specialty materials
operations.

Marketing and Selling Expenses.Marketing and selling expenses increased 4.9%
to $42,594 in fiscal 2001 from $40,622 in fiscal 2000. As a percentage of net
sales, marketing and selling expenses increased to 19.4% in fiscal 2001 from
17.8% in fiscal 2000. The increase in marketing and selling expenses were
related to more aggressive marketing efforts for fixtures and
telecommunications products.

Research and Development Expenses. Research and development expenses declined
14.0% to $12,693 in fiscal 2001 from $14,763 in fiscal 2000. Research and
development expenses are incurred related to: (i) expansion of the line of
Uni-Form® pulse start lamps and fixtures (with improved energy efficiency,
quicker starting and restarting and a more compact arc source, which improves
the light and reduces material costs) intended to replace many first generation
metal halide lamps and fixtures in industrial and commercial applications; (ii)
improving the coating process of optical thin-films to broaden the
applications, developing new thin-film materials, and using coatings to develop
improvements to lighting and telecommunications technologies; (iii) development
of new materials for the worlds major lighting manufacturers; and, (iv)
development and testing of electronic and electromagnetic power supply systems.
The decrease in research and development was primarily a result of a reduction
in spending related to the development of Uni-Form® pulse start lamps and the
Companys efforts to control the level of its research and development
spending. As a percentage of net sales, research and development expenses
decreased to 5.8% in fiscal 2001 from 6.5% in fiscal 2000.

General and Administrative Expenses.General and administrative expenses
declined 10.1% to $13,831 in fiscal 2001 from $15,385 in fiscal 2000. The
Company reduced corporate legal expenses by $436, which was offset by an
increase in the provision for doubtful accounts of $579. Also, fiscal 2001
general and administrative expenses were reduced by the elimination of
acquisition-related litigation accruals of $1,847 that, based on review with
legal counsel, are no longer required. As a percentage of net sales, general
and administrative expenses decreased to 6.3% in fiscal 2001 from 6.7% in
fiscal 2000.

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Gain on Sale of Property.DSI operations were in the process of moving into a
much larger leased facility in Santa Rosa, California. Previously, the Company
owned four buildings and leased several others that comprised the DSI business
campus in Santa Rosa. Three of the buildings were sold in fiscal 2001
resulting in net proceeds of $2,117 and a gain on the sale of $1,115.

Special Charges.During fiscal 2000, the Company revised certain estimates
related to its plans and reversed $475 of previously recorded special charges
that were no longer deemed necessary. The reversal resulted primarily from the
settlement of a lease cancellation for less than the estimated amount and
revised estimates for severance and related costs.

Amortization of Intangible Assets.Amortization expense remained relatively
constant at $2,862 in fiscal 2001 as compared to $2,766 in fiscal 2000.
Amortization expense relates primarily to the amortization of goodwill and
other intangible assets related to the January 1998 acquisitions of Ruud
Lighting, Inc. and Deposition Sciences, Inc.

Income (Loss) from Operations.As a result of the items noted above, income
from operations in fiscal 2001 was $13,945 as compared to income from
operations in fiscal 2000 of $15,911. Income from operations represented 6.9%
of sales in fiscal 2001 as compared with 7.0% in fiscal 2000.

Interest Expense.Interest expense decreased to $13,839 in fiscal 2001 from
$14,314 in fiscal 2000. This decrease resulted primarily from the lower
average debt outstanding during fiscal 2001 as compared to fiscal 2000.

Interest Income.Interest income increased to $1,015 in fiscal 2001 from $921
in fiscal 2000. This increase is attributable to an increase of $107 in
interest income from the loan to officer.

Income (Loss) from Investments.The loss from investments in fiscal 2001
represents $234 of losses from the Companys investment in Fiberstars, Inc., a
marketer and distributor of fiber optic lighting products. The income from
investments in fiscal 2000 represents $70 of earnings from the Companys
investment in Fiberstars, Inc.

Income (Loss) from Operations before Income Taxes and Minority Interest.The
Company had income from operations before income taxes and minority interest of
$887 in fiscal 2001 as compared to income from operations before income taxes
and minority interest of $2,588 in fiscal 2000.

Income Taxes.Income tax expense was $516 in fiscal 2001 as compared to $635
in fiscal 2000. The income tax expense in both years relates primarily to
certain of the Companys foreign operations.

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

The Company also has research and development credit carryforwards for tax
purposes of approximately $3,818, which expire in varying amounts from 2008 to
2015. Additionally, in conjunction with the Alternative Minimum Tax (AMT)
rules, the Company had available AMT credit carryforwards for tax purposes of
approximately $259, which may be used indefinitely to reduce regular federal
income taxes.

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

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Liquidity and Capital Resources

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

Cash decreased $778 during fiscal 2002. Cash provided by operating activities
totaled $2,913 and cash provided by investing activities totaled $11,688. Cash
used in financing activities totaled $15,379.

Net Cash Provided by Operating Activities.Net cash provided by operating
activities totaled $2,913 during fiscal 2002 as compared to net cash provided
by operating activities of $2,376 in fiscal 2001. The Company recorded
significant noncash adjustments to reconcile net loss to net cash provided by
operating activities including depreciation of $6,972, cumulative effect of
accounting change of $71,171, special charges and asset impairment of $5,889
and provision for loan impairment of $7,100. Inventories decreased by $7,082
due to the Companys commitment to significant reductions in inventory levels.

Net Cash Provided by (Used in) Investing Activities.During fiscal 2002, net
cash provided by investing activities totaled $11,688, which consisted
primarily of net proceeds from the sale of the fixture subsidiaries of $24,166,
net of capital expenditures of $14,825. Capital expenditures in fiscal 2002
related to building improvements and additional machinery and equipment, which
should result in increased capacity and productivity for optical coating and
lighting products and processes.

Under its $300,000 shelf registration, in September 2000, the Company sold
1,700,000 shares of common stock for $15.00 per share to fund the future
expansion of its telecommunications business. The net proceeds from the stock
offering of $22,900 were initially used to repay indebtedness outstanding under
the Bank Credit Facility. The Company has expended the entire amount on
capital improvements, including optical coating production equipment, filter
testing and measuring equipment, production facilities, and on research and
development, in the telecommunications business.

The Company estimates its capital expenditures will approximate $4,000 over the
next twelve months. Future capital expenditures beyond this level will be
discretionary, as the Company presently has sufficient operating capacities to
support several years of sales growth at its historical rates.

Net Cash Provided by (Used in) Financing Activities.During fiscal 2002, net
cash used in financing activities was $15,379, which primarily represents
repayments of bank debt under the Companys credit facilities.

The interest-bearing obligations of the Company totaled $139,687 as of June 30,
2002, and consisted of: $28,218 of borrowings under the Bank Credit Facility;
$100,000 of 8% Senior Notes; mortgages of $5,944; promissory note of $2,300;
obligations of foreign subsidiaries of $3,221; and, capital lease of $4.

Availability of borrowings under the revolving credit loan is determined by the
Companys eligible account receivables and inventory. Under the term loan, the
Company pays monthly principal payments that total $3,571 annually, with the
unpaid balance due at maturity. The principal security for the revolving
credit loan is substantially all of the personal property of the Company and
each of its North American and United Kingdom subsidiaries. The term loan is
secured by all of the Companys machinery and equipment in North America and
the United Kingdom and is cross-collateralized and

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secured with the revolving
credit loan. The 8% Senior Notes are due March 15, 2008, there are no sinking
fund requirements and interest is payable semiannually on March 15 and
September 15. The Bank Credit Facility and Senior Notes are presented as
current liabilities as a result of the factors discussed below.

Ability to Advance Future Operations.As discussed under Recent Developments
the Company was in default under its Bank Credit Facility and entered into a
Forbearance Agreement, which was subsequently extended, with its current bank
group that expires October 18, 2002 and could adversely limit its capital
resources. The Company had $28,218 outstanding under this facility as of June
30, 2002. While the Company is in negotiations with prospective lenders to
provide a new lending facility, it can not be assured that it will be
successful in obtaining a facility. In addition, the Company will not make its
$4,000 semi-annual interest payment on its 8% Senior Notes within a 30-day
grace period which would permit acceleration of the entire principal amount of
the Senior Notes. Further, if the bank group would accelerate the maturity of
the Back Credit Facility, it would permit acceleration of the entire principal
of the Senior Notes 30 days after acceleration of the maturity of the Bank
Credit Facility unless the acceleration is reversed or the Bank Credit Facility
is repaid. Because of the uncertainty resulting from the possible acceleration
of the maturity of the Bank Credit Facility and Senior Notes, both the Bank
Credit Facility and Senior Notes have been classified as current liabilities in
the balance sheet as of June 30, 2002.

The Company has approximately $3,000 of cash as of August 31, 2002 that may not
be adequate to fund it future operations, especially under the circumstances
noted above. During the fourth quarter of fiscal 2002 the Company hired
consultants to assist it in developing a plan to improve its operations and
cash flow. The impact and benefits of this plan and other changes are
beginning to be realized in the first quarter of fiscal 2003. In addition, the
Company has plans to improve cash flow from further cost reductions during the
year and, if necessary, from the sale of non-core assets. The Company is
actively managing its cash, especially as it relates to any discretionary
expenditure. The Companys ability in the future to fund operations, service
debt and provide for capital expenditures is dependent on the success of
obtaining a replacement lending facility to replace its existing Bank Credit
Facility, the payment of the interest due on its 8% Senior Notes, or the
re-negotiation of the terms of its Senior Notes, and its working capital
improvement plan.

The Companys ability to advance future operations will be significantly
impacted by the results of its effort to obtain a replacement lending facility
and negotiate with its existing bank group and Senior Note holders. From an
operational standpoint, the Company has implemented, and will continue to
implement, changes in its operational activities intended to reduce the use of
its cash resources to a level at or below the cash flow generated by its
operations. The Companys working capital (current assets less current
liabilities) at June 30, 2002 was $(99,473), as compared to $46,056 at June 30,
2001. The primary reason for the significant change in its working capital
relates to the above noted reclassification of its Bank Credit Facility and 8%
Senior Notes to current liabilities.

Pursuant to an agreement dated October 8, 1998, as amended, between the Company
and its Chairman and Chief Executive Officer (the CEO), the Company,
following approval by the Companys Board of Directors, has a loan recorded for
$14,144 to its CEO, including principal of $12,789 and accrued interest. The
proceeds of the loan were used by the Companys CEO to reduce the principal
balance outstanding of margin loan accounts. The margin loans were fully
repaid in the quarter ended March 31, 2002. In connection with the loan, the
Companys Board of Directors obtained the CEOs agreement to an extension of
his employment agreement to December 31, 2003. The loan agreement prohibits
the CEO from encumbering his shares of the Companys Common Stock in any manner
without the consent of the Companys Board of Directors.

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The CEO has paid accrued interest of $720 on the loan through October 6, 1999.
On July 26, 2002, the Company and CEO executed an amendment to the loan
documents, implementing the agreement in principle, reached in January 2002, to
extend the maturity of the loan to July 31, 2007. Under the terms of the
amendment, the CEO will sell certain assets in an orderly manner in order to
maximize the net proceeds, which will be used to pay a portion of the loan.
The CEO will continue his 10b5-1 plan to sell shares he now owns pursuant to
Rule 144 when the stock price exceeds $15 per share. In addition, the CEO has
agreed to apply any after-tax cash bonuses earned from the Company toward
repayment of the loan. Interest on the loan in the future will accrue at the
same rate that the Company pays on its revolving credit loan and totaled $674
in fiscal 2002. During fiscal 2002, no interest income was recognized or paid
on the loan. Further, the Company recorded a valuation reserve for this
impaired loan of $7,100 related to the amount by which the carrying value of
the loan exceeded the underlying estimated fair value of the assets available
to repay the loan. The loan may be accelerated if the CEO ceases to be
employed by the Company as a result of his voluntary resignation or termination
for cause. The Board reserved the right to demand payment to prevent an
unacceptable strain on cash resources. The Companys ability to collect
amounts due according to the contractual terms of the loan agreement is largely
dependent on the ultimate realization of proceeds from the sale of assets owned
by the CEO, including the CEOs investment in common stock of the Company.

Market Risk Disclosures

Market Risk Disclosures.The following discussion about the Companys market
risk disclosures involves forward-looking statements. Actual results could
differ materially from those projected in the forward-looking statements. The
Company is exposed to market risk related to changes in interest rates and
foreign currency exchange rates. The Company does not use derivative financial
instruments for speculative or trading purposes.

Interest Rate Sensitivity.The following table provides information about the
Companys debt obligations and financial instruments that are sensitive to
changes in interest rates. For debt obligations, the table
presents principle cash flows and related weighted-average interest rates by
maturity dates as set forth in the respective lending agreement. No potential
acceleration of the maturity of the Bank Credit Facility and 8% Senior Notes or
changes in interest rates as discussed above have been reflected in the
following table. Weighted-average variable rates are based on implied forward
rates as derived from published spot rates.

|                      |                                           |                       |  |          |     |            |  |      |     |      |  |            |      |       |  |      |     |   |  |   |     |   |  |   |       |   |  |   |       |  |  |   |      | 
|--------------------- | ----------------------------------------- | --------------------- |  | -------- | --- | ---------- |  | ---- | --- | ---- |  | ---------- | ---- | ----- |  | ---- | --- | - |  | - | --- | - |  | - | ----- | - |  | - | ----- |  |  | - | ---- | 
|                      |                                           |                       |  | June 30, |     | Fair Value
|                      |                                           |                       |  |          |     | June 30,  
|(dollars in millions) |                                           | 2003                  |  | 2004     |     | 2005       |  | 2006 |     | 2007 |  | Thereafter |      | Total |  | 2002
|                      |                                           |                       |  |          |     |            |  |      |     |      |  |            |      |       |  |     
|Liabilities           |                                           |                       |  |          |     |            |  |      |     |      |  |            |      |       |  |      |     |   |  |   |     |   |  |   |       |   |  |   |       |  |  |  
|                     
|                     
|                     
|                     
|                      | Long-term Debt, including
Current Portion |                       |  |          |     |            |  |      |     |      |  |            |      |       |  |      |     |   |  |   |     |   |  |   |       |   |  |   |       |  |  |   |     
|                     
|                     
|                     
|                     
|                      |                                           | Fixed Rate            |  | $        | 2.5 |            |  | $    | 0.3 |      |  | $          | 0.2  |       |  | $    | 4.3 |   |  | $ | 0.1 |   |  | $ | 100.0 |   |  | $ | 107.4 |  |  | $ | 48.0 | 
|                     
|                     
|                     
|                     
|                      |                                           | Average Interest Rate |  |          | 8.1 | %          |  |      | 8.0 | %    |  |            | 8.0  | %     |  |      | 8.0 | % |  |   | 8.0 | % |  |   | 8.0   | % |  |   |       |  |  |   |      | 
|                     
|                     
|                     
|                     
|                      |                                           |                       |  |          |     |            |  |      |     |      |  |            |      |       |  |      |     |   |  |   |     |   |  |   |       |   |  |   |       |  |  |  
|                     
|                     
|                     
|                     
|                      |                                           | Variable Rate         |  | $        | 5.2 |            |  | $    | 4.9 |      |  | $          | 21.5 |       |  | $    | 0.3 |   |  | $ | 0.1 |   |  | $ | 0.3   |   |  | $ | 32.3  |  |  | $ | 32.3 | 
|                     
|                     
|                     
|                     
|                      |                                           | Average Interest Rate |  |          | 4.8 | %          |  |      | 5.3 | %    |  |            | 10.2 | %     |  |      | 9.7 | % |  |   | 9.1 | % |  |   | 9.4   | % |  |   |       |  |  |   |      | 

Liabilities at June 30, 2001, included $109,348 of fixed-rate debt and $54,634
of variable-rate debt. Interest rates on the fixed-rate debt to maturity
ranged from 0% to 9.50%, while interest rates on the variable-rate debt to
maturity ranged from 6.00% to 15.00% as of June 30, 2001. In fiscal 1999, the
Company entered into an interest rate swap with a notional amount of $10,000.
During the fourth quarter of fiscal 2000, the Company early-terminated the
interest rate swap, resulting in a realized gain of $120.

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Foreign Currency Exchange Risk. The Company is exposed to foreign exchange
rate differences and during fiscal 2002 minimized the effects of these
exposures through the use of derivatives. During fiscal 2001 and prior years,
the Company did not hedge its foreign currency exposure and, therefore, did not
enter into any foreign currency derivative financial instruments.

The Company sells products in foreign currencies, mainly the pound sterling,
Euro, Canadian dollar, Japanese yen and Australian dollar. The majority of
these products costs are incurred in U.S. dollars. Therefore, the Company is
exposed to currency movements in that if the U.S. dollar strengthens, the
translated value of the foreign currency and the resulting margin will be
reduced. The Company does not change the price of its products for short-term
exchange rate movements. Presently, the Company does not hedge this exposure,
but does hedge its balance sheet exposure for receivables and liabilities due
in U.S. dollars and pound sterling. The Company enters into foreign currency
forward contracts to reduce its exposure to fluctuations in related foreign
currencies. These contracts are with a major financial institution and the
Company does not anticipate counterparty default. The notional value of the
outstanding foreign currency forward contracts that hedge this exposure at June
30, 2002 was $3,668.

Impact of Recently Issued Accounting Standards

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

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

The Company adopted FAS 142 as of July 1, 2001. The Company evaluated goodwill
of $66,172 and intangible assets with indefinite lives of $11,874, which
represents tradenames. The Company used third party appraisals and expected
future discounted cash flows to determine the fair value of the reporting units
and whether any impairment of goodwill or indefinite lived intangible assets
existed as of the above date. As a result of this evaluation, the Company
recorded a cumulative effect of accounting change for the estimated impairment
of goodwill and other indefinite lived intangible assets of $71,171, or $(3.04)
per share, as of the beginning of fiscal 2002. The impact of adopting FAS 142
was to reduce amortization and, consequently, the loss before cumulative effect
of accounting change for fiscal 2002 by $1,315, or $.06 per share.
Amortization of intangible assets in fiscal 2001 would have been $330, a
reduction of $2,532, or $.11 per share if the accounting change related to
acquired intangible amortization required by FAS 142 had been applied to that
year. Amortization of intangible assets in fiscal 2000 would have been $316, a
reduction of $2,450, or $.11 per share if the accounting change related to
acquired intangible amortization required by FAS 142 had been applied to that
year.

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The Company adopted Emerging Issues Task Force (EITF) Issue 01-9 Accounting
for Consideration Given by a Vendor to a Customer in the quarter ended March
31, 2002. EITF Issue 01-9 requires that expense associated with a free product
or service delivered at the time of sale of another product or service should
be classified as cost of sales. The Companys fixture subsidiaries that were
sold in the second quarter of fiscal 2002 had incurred and included such costs
in marketing and selling expense. Accordingly, the Company has reclassified
such amounts to cost of sales within these financial statements. The amounts
reclassified for fiscal 2002, 2001, and 2000 are $1,836, $4,157, and $4,510,
respectively.

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

Impact of Inflation

Although inflation has slowed in recent years, it continues to be a factor in
our economy. However, management does not believe that inflation has or will
have a significant impact on its operations. Although the Company has not
raised prices significantly in recent years, it has been able to lower overall
costs sufficiently to offset inflation.




Item 7A. Quantitative and Qualitative Disclosures about Market Risk

The information set forth under the subcaption Market Risk Disclosures
contained in Item 7. Managements Discussion and Analysis of Financial
Condition and Results of Operations is incorporated herein by reference.

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Item 8. Financial Statements and Supplementary Data

ANNUAL REPORT ON FORM 10-K

ITEM 8, ITEM 14(a)(1) AND (2), (c) AND (d)

LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

CERTAIN EXHIBITS

FINANCIAL STATEMENT SCHEDULES

YEAR ENDED JUNE 30, 2002

ADVANCED LIGHTING TECHNOLOGIES, INC.

SOLON, OHIO

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REPORT OF MANAGEMENT

Management of Advanced Lighting Technologies, Inc. is responsible for the
preparation of the accompanying consolidated financial statements of the
Company and its subsidiaries. The financial statements have been prepared in
conformity with accounting principles generally accepted in the United States
of America.

The Company is responsible for the integrity and objectivity of the financial
statements and, accordingly, the financial statements include amounts reported
based upon informed judgments and estimates made by management to reflect the
expected results of certain events and transactions. The Company maintains a
system of internal accounting controls designed to provide reasonable assurance
that the books and records reflect the transactions of the Company. The
concept of reasonable assurance is based on the recognition that the cost of a
system of internal controls must be related to the benefits derived.

The accompanying consolidated financial statements have been audited by Grant
Thornton LLP and their report is included herein. Their audits were made in
accordance with auditing standards generally accepted in the United States of
America. They obtained an understanding of the Companys system of internal
controls sufficient to plan their audit and determine the nature, timing and
extent of procedures to be performed during their audit.

The Company has an audit committee composed of four independent Directors who
are not members of management. The committee meets regularly with management
and the independent auditors in connection with its review of matters relating
to the Companys financial statements, the Companys internal audit program,
the Companys system of internal accounting controls and the services of the
independent auditors. The committee also meets with the independent auditors,
without management present, to discuss appropriate matters. The committee also
recommends to the Directors the appointment of the independent auditors.

September 16, 2002



|                                                      |  |                                                                 
|----------------------------------------------------- |  | ----------------------------------------------------------------
|/s/ Wayne R. Hellman                                  |  | /s/ Steven C. Potts                                             
|Wayne R. Hellman
Chairman and
Chief Executive Officer |  | Steven C. Potts
Chief Financial Officer,
Treasurer and Secretary

57



---



##### Table of Contents



LIST OF FINANCIAL STATEMENTS AND FINANCIAL
STATEMENT SCHEDULES

Form 10-KItem 14(a)(1) and (2), (c) and (d)
ADVANCED LIGHTING TECHNOLOGIES, INC.




The following consolidated financial statements of Advanced Lighting
Technologies, Inc. are included in Item 8:



|                                           |                                                                                                  |  |      |     | 
|------------------------------------------ | ------------------------------------------------------------------------------------------------ |  | ---- | --- | 
|Audited Consolidated Financial Statements: |                                                                                                  |  | Page
|                                           |                                                                                                  |  |     
|                                           | Report of Grant Thornton LLP, Independent Auditors                                               |  |      | F-2 | 
|                                           | Consolidated Balance Sheets as of June 30, 2002 and 2001                                         |  |      | F-3 | 
|                                           | Consolidated Statements of Operations for the Years Ended
June 30, 2002, 2001 and 2000           |  |      | F-4 | 
|                                           | Consolidated Statements of Shareholders Equity for the
Years Ended June 30, 2002, 2001 and 2000 |  |      | F-5 | 
|                                           | Consolidated Statements of Cash Flows for the
Years Ended June 30, 2002, 2001 and 2000           |  |      | F-6 | 
|                                           | Notes to Consolidated Financial Statements                                                       |  | F-8  |    

Financial Statement Schedules:



| |  |  | None                                                                                                                                                                                                                            
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | All schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable and therefore have
been omitted.

F-1



---



##### Table of Contents



Report of Grant Thornton LLP, Independent Auditors

Board of Directors and Shareholders
Advanced Lighting Technologies, Inc.

We have audited the accompanying consolidated balance sheets of Advanced
Lighting Technologies, Inc. as of June 30, 2002 and 2001, and the related
consolidated statements of operations, shareholders equity and cash flows, for
each of the three years in the period ended June 30, 2002. These financial
statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Advanced Lighting Technologies, Inc. as of June 30, 2002 and 2001 and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended June 30, 2002, in conformity with accounting
principles generally accepted in the United States of America.

As discussed in Note C to the consolidated financial statements, in fiscal 2002
the Company changed its accounting method for goodwill and intangible assets.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note B to
the consolidated financial statements, in 2002 the Company incurred a
significant loss from operations and, as of June 30, 2002, the Company was in
default of the fixed charge coverage ratio required under its Bank Credit
Facility. As a result, on September 16, 2002, the Company entered into a
Forbearance Agreement with the bank group. The Forbearance Agreement was
subsequently amended on October 10, 2002 to extend the forbearance period to
October 18, 2002. Consequently, the entire amounts outstanding under the Bank
Credit Facility and Senior Notes have been classified as current liabilities at
June 30, 2002. These factors, among others, as discussed in Note B, raise
substantial doubt about the Companys ability to continue as a going concern.
Managements plans in regard to these matters are also described in Note B.
The consolidated financial statements do not include any adjustments that might
result from the outcome of these uncertainties.



| | / s / Grant Thornton LLP
| | ------------------------

Cleveland, Ohio
September 16, 2002 (except for the first paragraph
  of Note B, as to which the date is October 10, 2002)

F-2



---



##### Table of Contents



ADVANCED LIGHTING TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

|                                                                                                                                                                                      |                                                                                                                                                                                           |                                   |         |          |        |          |         |          |        | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------- | ------- | -------- | ------ | -------- | ------- | -------- | ------ | 
|                                                                                                                                                                                      |                                                                                                                                                                                           |                                   |         | June 30, |        | June 30,
|                                                                                                                                                                                      |                                                                                                                                                                                           |                                   |         | 2002     |        | 2001    
|                                                                                                                                                                                      |                                                                                                                                                                                           |                                   |         |          |        |         
|Assets                                                                                                                                                                                |                                                                                                                                                                                           |                                   |         |          |        |          |         |         
|Current assets:                                                                                                                                                                       |                                                                                                                                                                                           |                                   |         |          |        |          |         |         
|                                                                                                                                                                                      | Cash and cash equivalents                                                                                                                                                                 |                                   | $       | 2,874    |        |          | $       | 3,652    |       
|                                                                                                                                                                                      | Trade receivables, less allowances of $1,874 and $1,248                                                                                                                                   |                                   |         | 29,124   |        |          |         | 32,762   |       
|                                                                                                                                                                                      | Inventories:                                                                                                                                                                              |                                   |         |          |        |          |         |          |       
|                                                                                                                                                                                      |                                                                                                                                                                                           | Finished goods                    |         |          | 17,873 |          |         |          | 27,122 | 
|                                                                                                                                                                                      |                                                                                                                                                                                           | Raw materials and work-in-process |         |          | 8,818  |          |         |          | 22,207 | 
|                                                                                                                                                                                      |                                                                                                                                                                                           |                                   |         |          |        |          |         |          |       
|                                                                                                                                                                                      |                                                                                                                                                                                           |                                   | 26,691  |          |        |          | 49,329  |         
|                                                                                                                                                                                      | Prepaid expenses                                                                                                                                                                          |                                   |         | 1,975    |        |          |         | 3,140    |       
|                                                                                                                                                                                      |                                                                                                                                                                                           |                                   |         |          |        |          |         |          |       
|Total current assets                                                                                                                                                                  |                                                                                                                                                                                           |                                   | 60,664  |          |        |          | 88,883  |         
|Property, plant and equipment:                                                                                                                                                        |                                                                                                                                                                                           |                                   |         |          |        |          |         |         
|                                                                                                                                                                                      | Land and buildings                                                                                                                                                                        |                                   |         | 32,839   |        |          |         | 44,399   |       
|                                                                                                                                                                                      | Machinery and equipment                                                                                                                                                                   |                                   |         | 76,929   |        |          |         | 84,116   |       
|                                                                                                                                                                                      | Furniture and fixtures                                                                                                                                                                    |                                   |         | 16,709   |        |          |         | 21,830   |       
|                                                                                                                                                                                      | Assets held for sale                                                                                                                                                                      |                                   |         | 4,557    |        |          |         | 2,479    |       
|                                                                                                                                                                                      |                                                                                                                                                                                           |                                   |         |          |        |          |         |          |       
|                                                                                                                                                                                      |                                                                                                                                                                                           |                                   | 131,034 |          |        |          | 152,824 |         
|                                                                                                                                                                                      | Less accumulated depreciation                                                                                                                                                             |                                   |         | 29,535   |        |          |         | 30,734   |       
|                                                                                                                                                                                      |                                                                                                                                                                                           |                                   |         |          |        |          |         |          |       
|                                                                                                                                                                                      |                                                                                                                                                                                           |                                   | 101,499 |          |        |          | 122,090 |         
|Receivables from related parties                                                                                                                                                      |                                                                                                                                                                                           |                                   | 7,982   |          |        |          | 2,177   |         
|Investments in affiliates                                                                                                                                                             |                                                                                                                                                                                           |                                   | 10,264  |          |        |          | 13,761  |         
|Other assets                                                                                                                                                                          |                                                                                                                                                                                           |                                   | 5,842   |          |        |          | 7,955   |         
|Intangible assets                                                                                                                                                                     |                                                                                                                                                                                           |                                   | 3,191   |          |        |          | 30,890  |         
|Excess of cost over net assets of businesses acquired, net                                                                                                                            |                                                                                                                                                                                           |                                   | 4,258   |          |        |          | 50,245  |         
|                                                                                                                                                                                      |                                                                                                                                                                                           |                                   |         |          |        |          |         |          |       
|                                                                                                                                                                                      |                                                                                                                                                                                           | $                                 | 193,700 |          |        | $        | 316,001 |         
|                                                                                                                                                                                      |                                                                                                                                                                                           |                                   |         |          |        |          |         |          |       
|Liabilities and shareholders equity                                                                                                                                                  |                                                                                                                                                                                           |                                   |         |          |        |          |         |         
|Current liabilities:                                                                                                                                                                  |                                                                                                                                                                                           |                                   |         |          |        |          |         |         
|                                                                                                                                                                                      | Short-term debt and current portion of long-term debt                                                                                                                                     |                                   | $       | 4,113    |        |          | $       | 8,858    |       
|                                                                                                                                                                                      | Accounts payable                                                                                                                                                                          |                                   |         | 15,485   |        |          |         | 20,944   |       
|                                                                                                                                                                                      | Payables to related parties                                                                                                                                                               |                                   |         | 452      |        |          |         | 1,200    |       
|                                                                                                                                                                                      | Employee-related liabilities                                                                                                                                                              |                                   |         | 2,788    |        |          |         | 3,759    |       
|                                                                                                                                                                                      | Accrued income and other taxes                                                                                                                                                            |                                   |         | 180      |        |          |         | 1,030    |       
|                                                                                                                                                                                      | Other accrued expenses                                                                                                                                                                    |                                   |         | 8,901    |        |          |         | 7,036    |       
|                                                                                                                                                                                      | Senior unsecured 8% notes, due March 2008                                                                                                                                                 |                                   |         | 100,000  |        |          |         |         |       
|                                                                                                                                                                                      | Bank Credit Facility, in default                                                                                                                                                          |                                   |         | 28,218   |        |          |         |         |       
|                                                                                                                                                                                      |                                                                                                                                                                                           |                                   |         |          |        |          |         |          |       
|Total current liabilities                                                                                                                                                             |                                                                                                                                                                                           |                                   | 160,137 |          |        |          | 42,827  |         
|Long-term debt                                                                                                                                                                        |                                                                                                                                                                                           |                                   | 7,356   |          |        |          | 154,914 |         
|Minority interest                                                                                                                                                                     |                                                                                                                                                                                           |                                   | 635     |          |        |          | 416     |         
|Preferred stock, $.001 par value, per share; 1,000 shares authorized;
761 Series A convertible redeemable shares issued and outstanding
(redemption value  $25,387 at June 30, 2002) |                                                                                                                                                                                           |                                   | 22,290  |          |        |          | 19,554  |         
|                                                                                                                                                                                      |                                                                                                                                                                                           |                                   |         |          |        |          |         |         
|Common shareholders equity:                                                                                                                                                          |                                                                                                                                                                                           |                                   |         |          |        |          |         |         
|                                                                                                                                                                                      | Common stock, $.001 par value, per share; 80,000 shares authorized;
23,588 shares issued and outstanding as of June 30, 2002 and
23,288 shares issued and outstanding as of June 30, 2001 |                                   |         | 24       |        |          |         | 23       |       
|                                                                                                                                                                                      | Paid-in-capital                                                                                                                                                                           |                                   |         | 214,804  |        |          |         | 217,030  |       
|                                                                                                                                                                                      | Accumulated other comprehensive income (loss)                                                                                                                                             |                                   |         | (2,940   | )      |          |         | (5,058   | )     
|                                                                                                                                                                                      | Loan and interest receivable from officer, less reserve of $7,100 and $0                                                                                                                  |                                   |         | (7,044   | )      |          |         | (13,140  | )     
|                                                                                                                                                                                      | Retained earnings (deficit)                                                                                                                                                               |                                   |         | (201,562 | )      |          |         | (100,565 | )     
|                                                                                                                                                                                      |                                                                                                                                                                                           |                                   |         |          |        |          |         |          |       
|                                                                                                                                                                                      |                                                                                                                                                                                           |                                   | 3,282   |          |        |          | 98,290  |         
|                                                                                                                                                                                      |                                                                                                                                                                                           |                                   |         |          |        |          |         |          |       
|                                                                                                                                                                                      |                                                                                                                                                                                           | $                                 | 193,700 |          |        | $        | 316,001 |         
|                                                                                                                                                                                      |                                                                                                                                                                                           |                                   |         |          |        |          |         |          |       

See notes to consolidated financial statements
F-3Table of Contents

ADVANCED LIGHTING TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share dollar amounts)

|                                                                                                 |                                                             |         |          |                     |        |      |         |         |        |   |         |         |        | 
|------------------------------------------------------------------------------------------------ | ----------------------------------------------------------- | ------- | -------- | ------------------- | ------ | ---- | ------- | ------- | ------ | - | ------- | ------- | ------ | 
|                                                                                                 |                                                             |         |          | Year Ended June 30,
|                                                                                                 |                                                             |         |          |                    
|                                                                                                 |                                                             |         |          | 2002                |        | 2001 |         | 2000   
|                                                                                                 |                                                             |         |          |                     |        |      |         |        
|Net sales                                                                                        |                                                             | $       | 166,978  |                     |        | $    | 219,448 |         |        | $ | 228,596 |        
|                                                                                                 |                                                             |         |          |                     |        |      |         |         |        |   |         |        
|Costs and expenses:                                                                              |                                                             |         |          |                     |        |      |         |         |        |   |         |        
|                                                                                                 | Cost of sales                                               |         |          | 109,126             |        |      |         | 134,638 |        |   |         | 139,624 |       
|                                                                                                 | Marketing and selling                                       |         |          | 31,636              |        |      |         | 42,594  |        |   |         | 40,622  |       
|                                                                                                 | Research and development                                    |         |          | 8,809               |        |      |         | 12,693  |        |   |         | 14,763  |       
|                                                                                                 | General and administrative                                  |         |          | 15,502              |        |      |         | 13,831  |        |   |         | 15,385  |       
|                                                                                                 | Provision for loan impairment                               |         |          | 7,100               |        |      |         |        |        |   |         |        |       
|                                                                                                 | Gain on settlement of lawsuit                               |         |          | (554                | )      |      |         |        |        |   |         |        |       
|                                                                                                 | Gain on sale of property                                    |         |          | (80                 | )      |      |         | (1,115  | )      |   |         |        |       
|                                                                                                 | Special charges and asset impairment                        |         |          | 10,561              |        |      |         |        |        |   |         | (475    | )     
|                                                                                                 | Amortization of intangible assets                           |         |          | 336                 |        |      |         | 2,862   |        |   |         | 2,766   |       
|                                                                                                 |                                                             |         |          |                     |        |      |         |         |        |   |         |        
|Income (loss) from operations                                                                    |                                                             |         | (15,458  | )                   |        |      | 13,945  |         |        |   | 15,911  |        
|                                                                                                 |                                                             |         |          |                     |        |      |         |         |        |   |         |        
|Other income (expense):                                                                          |                                                             |         |          |                     |        |      |         |         |        |   |         |        
|                                                                                                 | Interest expense                                            |         |          | (12,121             | )      |      |         | (13,839 | )      |   |         | (14,314 | )     
|                                                                                                 | Interest income                                             |         |          | 344                 |        |      |         | 1,015   |        |   |         | 921     |       
|                                                                                                 | Income (loss) from investments                              |         |          | (2,347              | )      |      |         | (234    | )      |   |         | 70      |       
|                                                                                                 | Gain from sale of fixture subsidiaries                      |         |          | 227                 |        |      |         |        |        |   |         |        |       
|                                                                                                 |                                                             |         |          |                     |        |      |         |         |        |   |         |        
|Income (loss) before income taxes, minority interest,
and cumulative effect of accounting change |                                                             |         | (29,355  | )                   |        |      | 887     |         |        |   | 2,588   |        
|Income taxes                                                                                     |                                                             |         | 252      |                     |        |      | 516     |         |        |   | 635     |        
|                                                                                                 |                                                             |         |          |                     |        |      |         |         |        |   |         |        
|Income (loss) before minority interest and
cumulative effect of accounting change                |                                                             |         | (29,607  | )                   |        |      | 371     |         |        |   | 1,953   |        
|Minority interest in income of consolidated subsidiary                                           |                                                             |         | (219     | )                   |        |      | (100    | )       |        |   | (25     | )      
|                                                                                                 |                                                             |         |          |                     |        |      |         |         |        |   |         |        
|Income (loss) before cumulative effect of accounting change                                      |                                                             |         | (29,826  | )                   |        |      | 271     |         |        |   | 1,928   |        
|Cumulative effect of accounting change                                                           |                                                             |         | (71,171  | )                   |        |      |        |         |        |   |        |        
|                                                                                                 |                                                             |         |          |                     |        |      |         |         |        |   |         |        
|Net income (loss)                                                                                |                                                             | $       | (100,997 | )                   |        | $    | 271     |         |        | $ | 1,928   |        
|                                                                                                 |                                                             |         |          |                     |        |      |         |         |        |   |         |        
|                                                                                                 |                                                             |         |          |                     |        |      |         |         |        |   |         |        
|Earnings (loss) per share  basic and diluted:                                                   |                                                             |         |          |                     |        |      |         |         |        |   |         |        
|                                                                                                 | Income (loss) before cumulative effect of accounting change |         | $        | (1.39               | )      |      | $       | (.10    | )      |   | $       | .01     |       
|                                                                                                 | Cumulative effect of accounting change                      |         |          | (3.04               | )      |      |         | (.24    | )      |   |         |        |       
|                                                                                                 |                                                             |         |          |                     |        |      |         |         |        |   |         |        
|Earnings (loss) per share  basic and diluted                                                    |                                                             | $       | (4.43    | )                   |        | $    | (.34    | )       |        | $ | .01     |        
|                                                                                                 |                                                             |         |          |                     |        |      |         |         |        |   |         |        
|Weighted average shares outstanding:                                                             |                                                             |         |          |                     |        |      |         |         |        |   |         |        
|                                                                                                 |                                                             | Basic   |          |                     | 23,423 |      |         |         | 22,446 |   |         |         | 20,372 | 
|                                                                                                 |                                                             |         |          |                     |        |      |         |         |        |   |         |        
|                                                                                                 |                                                             |         |          |                     |        |      |         |         |        |   |         |        
|                                                                                                 |                                                             | Diluted |          |                     | 23,423 |      |         |         | 22,446 |   |         |         | 21,331 | 
|                                                                                                 |                                                             |         |          |                     |        |      |         |         |        |   |         |        

See notes to consolidated financial statements.

F-4Table of ContentsADVANCED LIGHTING TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
For the Three Years Ended June 30, 2002
(in thousands)

|                                                                                                                   |                       |   |           |   |        |  |              |    |               |   |               |   |          |   |               |     |          |   |             |   |          |   |          |   |  |   |          |   |  |   |          |     |  |   |          |     | 
|------------------------------------------------------------------------------------------------------------------ | --------------------- | - | --------- | - | ------ |  | ------------ | -- | ------------- | - | ------------- | - | -------- | - | ------------- | --- | -------- | - | ----------- | - | -------- | - | -------- | - |  | - | -------- | - |  | - | -------- | --- |  | - | -------- | --- | 
|                                                                                                                   |                       |   |           |   |        |  |              |    |               |   |               |   |          |   |               |     |          |   |             |   |          |   | Loan and |   |  |   |          |   |  |   |          |     |  |   |         
|                                                                                                                   |                       |   |           |   |        |  |              |    |               |   |               |   |          |   |               |     |          |   | Accumulated |   | Interest |   |          |   |  |   |          |   |  |   |          |     | 
|                                                                                                                   |                       |   |           |   |        |  | Common Stock |    |               |   |               |   | Other    |   | Receivable    |     | Retained |   | Common      |   |          |   |         
|                                                                                                                   |                       |   | Preferred |   |        |  | Paid-In      |    | Comprehensive |   | From          |   | Earnings |   | Shareholders' |     |          |   |            
|                                                                                                                   |                       |   | Stock     |   | Shares |  | Par Value    |    | Capital       |   | Income (Loss) |   | Officer  |   | (Deficit)     |     | Equity   |   | Total      
|                                                                                                                   |                       |   |           |   |        |  |              |    |               |   |               |   |          |   |               |     |          |   |            
|Balance at June 30, 1999                                                                                           |                       |   |          |   |        |  | 20,278       |    |               | $ | 20            |   |          | $ | 190,654       |     |          | $ | (949        | ) |          | $ | (9,520   | ) |  | $ | (102,764 | ) |  | $ | 77,441   |     |  | $ | 77,441   |    
|                                                                                                                   |                       |   |           |   |        |  |              |    |               |   |               |   |          |   |               |     |          |   |             |   |          |   |          |   |  |   |          |   |  |   |          |     |  |   |          |    
|Net income                                                                                                         |                       |   |          |   |        |  |             |    |               |   |              |   |          |   |              |     |          |   |            |   |          |   |         |   |  |   | 1,928    |   |  |   | 1,928    |     |  |   | 1,928    |    
|Foreign currency
translation adjustment                                                                            |                       |   |          |   |        |  |             |    |               |   |              |   |          |   |              |     |          |   | (1,710      | ) |          |   |         |   |  |   |         |   |  |   | (1,710   | )   |  |   | (1,710   | )  
|                                                                                                                   |                       |   |           |   |        |  |              |    |               |   |               |   |          |   |               |     |          |   |             |   |          |   |          |   |  |   |          |   |  |   |          |     |  |   |          |    
|Comprehensive income                                                                                               |                       |   |           |   |        |  |              |    |               |   |               |   |          |   |               |     |          |   |             |   |          |   |          |   |  |   |          |   |  |   | 218      |     |  |   | 218      |    
|Net proceeds from
issuance of preferred
shares and warrant                                                         |                       | $ | 15,203    |   |        |  |             |    |               |   |              |   |          |   | 5,000         |     |          |   |            |   |          |   |         |   |  |   |         |   |  |   | 5,000    |     |  |   | 20,203   |    
|Preferred shares accretion                                                                                         |                       |   | 1,796     |   |        |  |             |    |               |   |              |   |          |   | (1,796        | )   |          |   |            |   |          |   |         |   |  |   |         |   |  |   | (1,796   | )   |  |   |         |    
|Interest on loan to officer                                                                                        |                       |   |          |   |        |  |             |    |               |   |              |   |          |   |              |     |          |   |            |   |          |   | (728     | ) |  |   |         |   |  |   | (728     | )   |  |   | (728     | )  
|Interest payment received                                                                                          |                       |   |          |   |        |  |             |    |               |   |              |   |          |   |              |     |          |   |            |   |          |   | 720      |   |  |   |         |   |  |   | 720      |     |  |   | 720      |    
|Issuance of shares in connection with the purchase of a business                                                   |                       |   |          |   |        |  | 40           |    |               |   |              |   |          |   | 535           |     |          |   |            |   |          |   |         |   |  |   |         |   |  |   | 535      |     |  |   | 535      |    
|Stock options exercised                                                                                            |                       |   |          |   |        |  | 71           |    |               |   |              |   |          |   | 718           |     |          |   |            |   |          |   |         |   |  |   |         |   |  |   | 718      |     |  |   | 718      |    
|Stock purchases by employees                                                                                       |                       |   |          |   |        |  | 29           |    |               |   |              |   |          |   | 195           |     |          |   |            |   |          |   |         |   |  |   |         |   |  |   | 195      |     |  |   | 195      |    
|Stock issued pursuant to                                                                                           |                       |   |           |   |        |  |              |    |               |   |               |   |          |   |               |     |          |   |             |   |          |   |          |   |  |   |          |   |  |   |         |     |  |   |         |    
|                                                                                                                   | employee benefit plan |   |           |  |        |  |              | 64 |               |   |               |  |          |   |               | 480 |          |   |             |  |          |   |          |  |  |   |          |  |  |   |          | 480 |  |   |          | 480 | 
|                                                                                                                   |                       |   |           |   |        |  |              |    |               |   |               |   |          |   |               |     |          |   |             |   |          |   |          |   |  |   |          |   |  |   |          |     |  |   |          |    
|                                                                                                                   |                       |   |           |   |        |  |              |    |               |   |               |   |          |   |               |     |          |   |             |   |          |   |          |   |  |   |          |   |  |   |          |     |  |   |          |    
|Balance at June 30, 2000                                                                                           |                       |   | 16,999    |   |        |  | 20,482       |    |               |   | 20            |   |          |   | 195,786       |     |          |   | (2,659      | ) |          |   | (9,528   | ) |  |   | (100,836 | ) |  |   | 82,783   |     |  |   | 99,782   |    
|                                                                                                                   |                       |   |           |   |        |  |              |    |               |   |               |   |          |   |               |     |          |   |             |   |          |   |          |   |  |   |          |   |  |   |          |     |  |   |          |    
|Net income                                                                                                         |                       |   |          |   |        |  |             |    |               |   |              |   |          |   |              |     |          |   |            |   |          |   |         |   |  |   | 271      |   |  |   | 271      |     |  |   | 271      |    
|Foreign currency
translation adjustment                                                                            |                       |   |          |   |        |  |             |    |               |   |              |   |          |   |              |     |          |   | (2,399      | ) |          |   |         |   |  |   |         |   |  |   | (2,399   | )   |  |   | (2,399   | )  
|                                                                                                                   |                       |   |           |   |        |  |              |    |               |   |               |   |          |   |               |     |          |   |             |   |          |   |          |   |  |   |          |   |  |   |          |     |  |   |          |    
|Comprehensive loss                                                                                                 |                       |   |           |   |        |  |              |    |               |   |               |   |          |   |               |     |          |   |             |   |          |   |          |   |  |   |          |   |  |   | (2,128   | )   |  |   | (2,128   | )  
|Net proceeds from
public offering
of common shares                                                                 |                       |   |          |   |        |  | 1,700        |    |               |   | 2             |   |          |   | 22,888        |     |          |   |            |   |          |   |         |   |  |   |         |   |  |   | 22,890   |     |  |   | 22,890   |    
|Preferred shares accretion                                                                                         |                       |   | 2,555     |   |        |  |             |    |               |   |              |   |          |   | (2,555        | )   |          |   |            |   |          |   |         |   |  |   |         |   |  |   | (2,555   | )   |  |   |         |    
|Value of beneficial conversion option of preferred shares                                                          |                       |   | (5,329    | ) |        |  |             |    |               |   |              |   |          |   | 5,329         |     |          |   |            |   |          |   |         |   |  |   |         |   |  |   | 5,329    |     |  |   |         |    
|Additional preferred shares accretion from cumulative
effect of accounting
change for beneficial
conversion option |                       |   | 5,329     |   |        |  |             |    |               |   |              |   |          |   | (5,329        | )   |          |   |            |   |          |   |         |   |  |   |         |   |  |   | (5,329   | )   |  |   |         |    
|Loan to officer                                                                                                    |                       |   |          |   |        |  |             |    |               |   |              |   |          |   |              |     |          |   |            |   |          |   | (2,785   | ) |  |   |         |   |  |   | (2,785   | )   |  |   | (2,785   | )  
|Interest on loan to officer                                                                                        |                       |   |          |   |        |  |             |    |               |   |              |   |          |   |              |     |          |   |            |   |          |   | (827     | ) |  |   |         |   |  |   | (827     | )   |  |   | (827     | )  
|Issuance of warrant                                                                                                |                       |   |          |   |        |  |             |    |               |   |              |   |          |   | 37            |     |          |   |            |   |          |   |         |   |  |   |         |   |  |   | 37       |     |  |   | 37       |    
|GE warrant exercised                                                                                               |                       |   |          |   |        |  | 999          |    |               |   | 1             |   |          |   | (1            | )   |          |   |            |   |          |   |         |   |  |   |         |   |  |   |         |     |  |   |         |    
|Stock options exercised                                                                                            |                       |   |          |   |        |  | 12           |    |               |   |              |   |          |   | 148           |     |          |   |            |   |          |   |         |   |  |   |         |   |  |   | 148      |     |  |   | 148      |    
|Stock purchases
by employees                                                                                       |                       |   |          |   |        |  | 28           |    |               |   |              |   |          |   | 167           |     |          |   |            |   |          |   |         |   |  |   |         |   |  |   | 167      |     |  |   | 167      |    
|Stock issued pursuant to
employee benefit plan                                                                     |                       |   |          |   |        |  | 67           |    |               |   |              |   |          |   | 560           |     |          |   |            |   |          |   |         |   |  |   |         |   |  |   | 560      |     |  |   | 560      |    
|                                                                                                                   |                       |   |           |   |        |  |              |    |               |   |               |   |          |   |               |     |          |   |             |   |          |   |          |   |  |   |          |   |  |   |          |     |  |   |          |    
|                                                                                                                   |                       |   |           |   |        |  |              |    |               |   |               |   |          |   |               |     |          |   |             |   |          |   |          |   |  |   |          |   |  |   |          |     |  |   |          |    
|Balance at June 30, 2001                                                                                           |                       |   | 19,554    |   |        |  | 23,288       |    |               |   | 23            |   |          |   | 217,030       |     |          |   | (5,058      | ) |          |   | (13,140  | ) |  |   | (100,565 | ) |  |   | 98,290   |     |  |   | 117,844  |    
|                                                                                                                   |                       |   |           |   |        |  |              |    |               |   |               |   |          |   |               |     |          |   |             |   |          |   |          |   |  |   |          |   |  |   |          |     |  |   |          |    
|Net loss                                                                                                           |                       |   |          |   |        |  |             |    |               |   |              |   |          |   |              |     |          |   |            |   |          |   |         |   |  |   | (100,997 | ) |  |   | (100,997 | )   |  |   | (100,997 | )  
|Foreign currency
translation adjustment                                                                            |                       |   |          |   |        |  |             |    |               |   |              |   |          |   |              |     |          |   | 1,545       |   |          |   |         |   |  |   |         |   |  |   | 1,545    |     |  |   | 1,545    |    
|                                                                                                                   |                       |   |           |   |        |  |              |    |               |   |               |   |          |   |               |     |          |   |             |   |          |   |          |   |  |   |          |   |  |   |          |     |  |   |          |    
|Comprehensive loss                                                                                                 |                       |   |           |   |        |  |              |    |               |   |               |   |          |   |               |     |          |   |             |   |          |   |          |   |  |   |          |   |  |   | (99,452  | )   |  |   | (99,452  | )  
|Preferred shares accretion                                                                                         |                       |   | 2,736     |   |        |  |             |    |               |   |              |   |          |   | (2,736        | )   |          |   |            |   |          |   |         |   |  |   |         |   |  |   | (2,736   | )   |  |   |         |    
|Loan to officer                                                                                                    |                       |   |          |   |        |  |             |    |               |   |              |   |          |   |              |     |          |   |            |   |          |   | (1,004   | ) |  |   |         |   |  |   | (1,004   | )   |  |   | (1,004   | )  
|Reserve for loan impairment                                                                                        |                       |   |          |   |        |  |             |    |               |   |              |   |          |   |              |     |          |   |            |   |          |   | 7,100    |   |  |   |         |   |  |   | 7,100    |     |  |   | 7,100    |    
|Stock purchases
by employees                                                                                       |                       |   |          |   |        |  | 79           |    |               |   |              |   |          |   | 112           |     |          |   |            |   |          |   |         |   |  |   |         |   |  |   | 112      |     |  |   | 112      |    
|Stock issued pursuant to
employee benefit plan                                                                     |                       |   |          |   |        |  | 221          |    |               |   | 1             |   |          |   | 398           |     |          |   |            |   |          |   |         |   |  |   |         |   |  |   | 399      |     |  |   | 399      |    
|Reversal of foreign currency
translation adjustments due
to sale of subsidiary                                     |                       |   |          |   |        |  |             |    |               |   |              |   |          |   |              |     |          |   | 573         |   |          |   |         |   |  |   |         |   |  |   | 573      |     |  |   | 573      |    
|                                                                                                                   |                       |   |           |   |        |  |              |    |               |   |               |   |          |   |               |     |          |   |             |   |          |   |          |   |  |   |          |   |  |   |          |     |  |   |          |    
|                                                                                                                   |                       |   |           |   |        |  |              |    |               |   |               |   |          |   |               |     |          |   |             |   |          |   |          |   |  |   |          |   |  |   |          |     |  |   |          |    
|Balance at June 30, 2002                                                                                           |                       | $ | 22,290    |   |        |  | 23,588       |    |               | $ | 24            |   |          | $ | 214,804       |     |          | $ | (2,940      | ) |          | $ | (7,044   | ) |  | $ | (201,562 | ) |  | $ | 3,282    |     |  | $ | 25,572   |    
|                                                                                                                   |                       |   |           |   |        |  |              |    |               |   |               |   |          |   |               |     |          |   |             |   |          |   |          |   |  |   |          |   |  |   |          |     |  |   |          |    

See notes to consolidated financial statements

F-5



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##### Table of Contents



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

|                                                 |                                                                                      |                                                                                                  |       |                                                       |        |                              |         |          |        |      |         |          |       |   |         |  
|------------------------------------------------ | ------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------ | ----- | ----------------------------------------------------- | ------ | ---------------------------- | ------- | -------- | ------ | ---- | ------- | -------- | ----- | - | ------- | -
|                                                 |                                                                                      |                                                                                                  |       |                                                       |        | For the Years Ended June 30,
|                                                 |                                                                                      |                                                                                                  |       |                                                       |        |                             
|                                                 |                                                                                      |                                                                                                  |       |                                                       |        | 2002                         |         | 2001     |        | 2000
|                                                 |                                                                                      |                                                                                                  |       |                                                       |        |                              |         |          |        |     
|Operating activities                             |                                                                                      |                                                                                                  |       |                                                       |        |                              |         |          |        |      |         |         
|                                                 | Net income (loss)                                                                    |                                                                                                  | $     | (100,997                                              | )      |                              | $       | 271      |        |      | $       | 1,928    |      
|                                                 | Adjustments to reconcile net income (loss)
to net cash used in operating activities: |                                                                                                  |       |                                                       |        |                              |         |          |        |      |         |          |      
|                                                 |                                                                                      | Depreciation                                                                                     |       |                                                       | 6,972  |                              |         |          | 8,490  |      |         |          | 7,245 |  
|                                                 |                                                                                      | Amortization                                                                                     |       |                                                       | 336    |                              |         |          | 2,862  |      |         |          | 2,766 |  
|                                                 |                                                                                      | Provision for doubtful accounts                                                                  |       |                                                       | 1,275  |                              |         |          | 867    |      |         |          | 288   |  
|                                                 |                                                                                      | Loss (income) from investments                                                                   |       |                                                       | 2,347  |                              |         |          | 234    |      |         |          | (70   | )
|                                                 |                                                                                      | Gain on sale of property                                                                         |       |                                                       | (80    | )                            |         |          | (1,115 | )    |         |          |      |  
|                                                 |                                                                                      | Special charges and asset impairment                                                             |       |                                                       | 5,889  |                              |         |          |       |      |         |          | (475  | )
|                                                 |                                                                                      | Gain on sale of subsidiaries                                                                     |       |                                                       | (227   | )                            |         |          |       |      |         |          |      |  
|                                                 |                                                                                      | Provision for loan impairment                                                                    |       |                                                       | 7,100  |                              |         |          |       |      |         |          |      |  
|                                                 |                                                                                      | Cumulative effect of accounting change                                                           |       |                                                       | 71,171 |                              |         |          |       |      |         |          |      |  
|                                                 |                                                                                      | Changes in operating assets and liabilities, excluding
effects of acquisitions and dispositions: |       |                                                       |        |                              |         |          |        |      |         |          |       |  
|                                                 |                                                                                      |                                                                                                  |       | Trade receivables                                     |        |                              | (2,781  | )        |        |      | (1,597  | )        |       |   | (5,275  | )
|                                                 |                                                                                      |                                                                                                  |       | Inventories                                           |        |                              | 7,082   |          |        |      | (698    | )        |       |   | (5,178  | )
|                                                 |                                                                                      |                                                                                                  |       | Prepaid and other assets                              |        |                              | 1,286   |          |        |      | (495    | )        |       |   | (1,826  | )
|                                                 |                                                                                      |                                                                                                  |       | Accounts payable and accrued expenses                 |        |                              | 236     |          |        |      | (4,816  | )        |       |   | (7,786  | )
|                                                 |                                                                                      |                                                                                                  |       | Net liabilities (payments) related to special charges |        |                              | 1,627   |          |        |      | (96     | )        |       |   | (3,196  | )
|                                                 |                                                                                      |                                                                                                  |       | Other                                                 |        |                              | 1,677   |          |        |      | (1,531  | )        |       |   | (1,695  | )
|                                                 |                                                                                      |                                                                                                  |       |                                                       |        |                              |         |          |        |      |         |         
|                                                 |                                                                                      |                                                                                                  |       | Net cash provided by (used in) operating activities   |        |                              | 2,913   |          |        |      | 2,376   |          |       |   | (13,274 | )
|                                                 |                                                                                      |                                                                                                  |       |                                                       |        |                              |         |          |        |      |         |         
|Investing activities                             |                                                                                      |                                                                                                  |       |                                                       |        |                              |         |          |        |      |         |         
|                                                 | Capital expenditures                                                                 |                                                                                                  |       | (14,825                                               | )      |                              |         | (24,209  | )      |      |         | (5,636   | )    
|                                                 | Proceeds from sale of real estate                                                    |                                                                                                  |       | 1,435                                                 |        |                              |         | 2,117    |        |      |         |         |      
|                                                 | Proceeds from sale of subsidiaries                                                   |                                                                                                  |       | 24,166                                                |        |                              |         |         |        |      |         |         |      
|                                                 | Proceeds from sale of preferred stock investment                                     |                                                                                                  |       | 1,000                                                 |        |                              |         |         |        |      |         |         |      
|                                                 | Sale of short-term investments, net                                                  |                                                                                                  |       |                                                      |        |                              |         |         |        |      |         | 350      |      
|                                                 | Purchases of businesses                                                              |                                                                                                  |       |                                                      |        |                              |         | (366     | )      |      |         | (3,274   | )    
|                                                 | Investments in affiliates                                                            |                                                                                                  |       | (88                                                   | )      |                              |         | 149      |        |      |         | (72      | )    
|                                                 |                                                                                      |                                                                                                  |       |                                                       |        |                              |         |          |        |      |         |         
|                                                 |                                                                                      |                                                                                                  |       | Net cash provided by (used in) investing activities   |        |                              | 11,688  |          |        |      | (22,309 | )        |       |   | (8,632  | )
|                                                 |                                                                                      |                                                                                                  |       |                                                       |        |                              |         |          |        |      |         |         
|Financing activities                             |                                                                                      |                                                                                                  |       |                                                       |        |                              |         |          |        |      |         |         
|                                                 | Proceeds from revolving credit facility                                              |                                                                                                  |       | 150,420                                               |        |                              |         | 215,339  |        |      |         | 201,534  |      
|                                                 | Payments of revolving credit facility                                                |                                                                                                  |       | (148,894                                              | )      |                              |         | (221,141 | )      |      |         | (192,463 | )    
|                                                 | Proceeds from long-term debt                                                         |                                                                                                  |       | 151                                                   |        |                              |         | 11,388   |        |      |         | 121      |      
|                                                 | Payments of long-term debt and capital leases                                        |                                                                                                  |       | (16,562                                               | )      |                              |         | (6,908   | )      |      |         | (8,822   | )    
|                                                 | Issuance of preferred stock and stock purchase warrant                               |                                                                                                  |       |                                                      |        |                              |         |         |        |      |         | 20,203   |      
|                                                 | Issuance of common stock and warrants                                                |                                                                                                  |       | 510                                                   |        |                              |         | 912      |        |      |         | 1,393    |      
|                                                 | Loan to officer                                                                      |                                                                                                  |       | (1,004                                                | )      |                              |         | (2,785   | )      |      |         |         |      
|                                                 | Net proceeds from public offering                                                    |                                                                                                  |       |                                                      |        |                              |         | 22,890   |        |      |         |         |      
|                                                 |                                                                                      |                                                                                                  |       |                                                       |        |                              |         |          |        |      |         |         
|                                                 |                                                                                      |                                                                                                  |       | Net cash provided by (used in) financing activities   |        |                              | (15,379 | )        |        |      | 19,695  |          |       |   | 21,966  |  
|                                                 |                                                                                      |                                                                                                  |       |                                                       |        |                              |         |          |        |      |         |         
|Increase (decrease) in cash and cash equivalents |                                                                                      |                                                                                                  | (778  | )                                                     |        |                              | (238    | )        |        |      | 60      |         
|Cash and cash equivalents, beginning of year     |                                                                                      |                                                                                                  | 3,652 |                                                       |        |                              | 3,890   |          |        |      | 3,830   |         
|                                                 |                                                                                      |                                                                                                  |       |                                                       |        |                              |         |          |        |      |         |         
|                                                 |                                                                                      |                                                                                                  |       | Cash and cash equivalents, end of year                |        | $                            | 2,874   |          |        | $    | 3,652   |          |       | $ | 3,890   |  
|                                                 |                                                                                      |                                                                                                  |       |                                                       |        |                              |         |          |        |      |         |         

See notes to consolidated financial statements

F-6



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##### Table of Contents



ADVANCED LIGHTING TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS  CONTINUED
(in thousands)

|                                   |                                              |                                              |                    |        |                     |   |      |        |      |   |   |        |         |     |  
|---------------------------------- | -------------------------------------------- | -------------------------------------------- | ------------------ | ------ | ------------------- | - | ---- | ------ | ---- | - | - | ------ | ------- | --- | -
|                                   |                                              |                                              |                    |        | Year Ended June 30,
|                                   |                                              |                                              |                    |        |                    
|                                   |                                              |                                              |                    |        | 2002                |   | 2001 |        | 2000
|                                   |                                              |                                              |                    |        |                     |   |      |        |     
|Supplemental cash flow information |                                              |                                              |                    |        |                     |   |      |        |      |   |   |       
|                                   | Interest paid                                |                                              | $                  | 11,765 |                     |   | $    | 13,483 |      |   | $ | 14,887 |        
|                                   | Income taxes paid (refunds received), net    |                                              |                    | (25    | )                   |   |      | 302    |      |   |   | (23    | )      
|                                   | Capitalized interest                         |                                              |                    | 900    |                     |   |      | 619    |      |   |   | 458    |        
|                                   | Noncash transactions                         |                                              |                    |        |                     |   |      |        |      |   |   |        |        
|                                   | Stock/Note issued for purchase of businesses |                                              |                    |       |                     |   |      | 245    |      |   |   | 535    |        
|                                   | Detail of acquisitions:                      |                                              |                    |        |                     |   |      |        |      |   |   |        |        
|                                   |                                              | Assets acquired                              |                    | $      |                    |   |      | $      | 899  |   |   | $      | 14,428  |    
|                                   |                                              | Liabilities assumed                          |                    |        |                    |   |      |        | (288 | ) |   |        | (10,529 | )  
|                                   |                                              | Stock/Note issued for purchase of businesses |                    |        |                    |   |      |        | (245 | ) |   |        | (535    | )  
|                                   |                                              |                                              |                    |        |                     |   |      |        |      |   |   |       
|                                   |                                              | Cash paid                                    |                    |        |                    |   |      |        | 366  |   |   |        | 3,364   |    
|                                   |                                              |                                              | Less cash acquired |        |                     |  |      |        |      |  |   |        |         | (90 | )
|                                   |                                              |                                              |                    |        |                     |   |      |        |      |   |   |       
|                                   |                                              | Net cash paid for acquisitions               |                    | $      |                    |   |      | $      | 366  |   |   | $      | 3,274   |    
|                                   |                                              |                                              |                    |        |                     |   |      |        |      |   |   |       

See notes to consolidated financial statements

F-7



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##### Table of Contents



Advanced Lighting Technologies, Inc.
Notes to Consolidated Financial Statements
June 30, 2002
(Dollars in thousands, except per share data)

A. Organization

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

B. Ability to Continue Operations

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. In fiscal 2002, the Company
incurred a loss from operations of $(15,458) and, at June 30, 2002, was in
default on its fourth quarter fixed charge coverage ratio under its $38,000 Bank
Credit Facility. On September 16, 2002, the Company and its bank
group entered into a Forbearance
Agreement, which was extended on October 10, 2002, allowing
the Company access to its existing revolving credit facility and precluding the
acceleration of the Bank Credit Facility maturity until at least October 18,
2002. The Forbearance Agreement contains various requirements that must be met
by the Company, including the non-payment of its semi-annual interest payment on
its 8% Senior Notes due on September 16, 2002 and increasing the interest rate
to 2% over the banks prime rate. Further, the bank group is permitted to
terminate the Forbearance Agreement if holders of the Companys 8% Senior Notes
take certain actions adverse to the Company. The other requirements of the
Forbearance Agreement include providing the bank group with increased financial information,
and covenants regarding its operations during the forbearance period. Management
believes that it will be able to meet these requirements during this forbearance
period. However, unless a subsequent agreement is reached with the bank group on
or before October 18, 2002, which the Company expects will
require engaging an investment banker for advice on its restructuring
efforts, the bank group will be entitled to take legal and
other action against the Company, including acceleration of the loans
outstanding under the Bank Credit Facility, cessation of future loans under the
Bank Credit Facility and/or action to foreclose on the collateral securing those
loans. The collateral for these loans at June 30, 2002 includes the accounts
receivable, inventory, and machinery and equipment of the Company in the United
States, Canada and the United Kingdom.

The Company is negotiating with the bank group to extend the Forbearance
Agreement. The Company will not make the September 16, 2002 semi-annual interest
payment on its 8% Senior Notes within a 30-day grace period, which will result
in an Event of Default. An Event of Default would also exist under the Indenture
if the bank group accelerates the maturity of the loans and if the loans are not
repaid or the acceleration is not reversed within a 30-day grace period. If an
Event of Default exists under the Indenture, the Trustee may, and upon the
instruction of the holders of 25% of the Senior Notes must, declare the entire
principal amount of the Senior Notes to be immediately due and payable, and may
take any actions to enforce the terms of the Senior Notes. Due to the
uncertainty surrounding the acceleration of payment related to the Bank Credit
Facility and Senior Notes, the Company has classified both debt issues to
current liabilities in the June 30, 2002 balance sheet.

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Advanced Lighting Technologies, Inc.
Notes to Consolidated Financial Statements
June 30, 2002
(Dollars in thousands, except per share data)

B. Ability to Continue Operations (continued)

Management is working with its existing bank group, investment bankers and other
stakeholders on various alternatives available to the Company. In addition, the
Company is in discussions with several lenders to refinance its current Bank
Credit Facility with a replacement credit facility or other facilities, to more
effectively utilize its global assets and allow the Company to make its
semi-annual interest payment on its Senior Notes. Management believes that a new
credit facility can be obtained within 120 days. As a result, the Company is in
discussions with its Senior Note holders to provide for an extended grace
period.

The Company has hired consultants to assist in completing a replacement credit
facility, restructuring its operations and improving its financial results. The
Company has developed a detailed plan to address its future cash requirements,
including cost reductions and, if necessary, the sale of non-core assets. The
Companys ability to extend the Forbearance Agreement, obtain a new lending
arrangement or make the Senior Notes interest payment is uncertain and raises
substantial doubt about the Companys ability to continue as a going concern and
may result in the Senior Notes holders forcing the Company to seek alternative
solutions. The consolidated financial statements do not include any adjustments
that might result from the outcome of these uncertainties.

C. Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and
its majority-owned subsidiaries, after elimination of all significant
inter-company accounts and transactions and related revenues and expenses.
Investments in 50% or less owned companies and joint ventures over which the
Company has the ability to exercise significant influence are accounted for
under the equity method. All other investments and investments of less than 20%
are accounted for under the cost method.

Accounting Estimates

The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions in certain circumstances that
affect amounts reported in the consolidated financial statements and notes.
Actual results could differ from those estimates.

Translation of Foreign Currency

All assets and liabilities of applicable foreign subsidiaries are translated
into United States dollars at year-end exchange rates while revenues and
expenses are translated at weighted-average exchange rates in effect during the
year. The net effect of these translation adjustments is shown in the
accompanying financial statements as a component of shareholders equity.

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Advanced Lighting Technologies, Inc.
Notes to Consolidated Financial Statements
June 30, 2002
(Dollars in thousands, except per share data)

C. Significant Accounting Policies (continued)

Cash Equivalents

The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of
credit risks consist primarily of temporary cash and cash equivalents,
short-term investments and trade receivables. Any investment of cash by the
Company is primarily in high quality institutional money-market portfolios and
high quality securities with the amount of credit exposure limited to any one
financial institution.

The Company provides credit in the normal course of business, primarily to major
manufacturers and distributors in the lighting industry and, generally,
collateral or other security is not required. The Company conducts ongoing
credit evaluations of its customers and maintains allowances for potential
credit losses which, when realized, have been within the range of managements
expectations. Accounts written off, net of recoveries totaled $370 in fiscal
2002, $748 in fiscal 2001 and $416 in fiscal 2000. Credit risk on trade
receivables is minimized as a result of the large and diverse nature of the
Companys worldwide customer base.

Inventories

Inventories are valued at the lower of cost (first-in, first-out method) or
market.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. The cost of self-constructed
assets includes related materials, labor, overhead and interest. At June 30,
2002 and 2001, self-constructed assets in progress, classified as machinery and
equipment, were $22,675 and $20,778, respectively. Repair and maintenance costs
are expensed as incurred.

Depreciation is computed for financial reporting purposes by the straight-line
method based on the estimated useful lives of the assets, both those owned and
under capital lease, as follows: buildings, 15 to 40 years; machinery and
equipment, 5 to 25 years; furniture and fixtures, 5 to 15 years; and, leasehold
improvements, the lease periods.

Intangible Assets and Accounting Change for Goodwill and Certain Intangible Assets

Intangible assets are amortized using the straight-line method over the
following lives:

|                                      |  |               |  | 
|------------------------------------- |  | ------------- |  | 
|Patents and trademarks                |  | 17 years     
|                                     
|                                     
|                                     
|                                     
|Other intangibles with definite lives |  | 10 - 15 years

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Advanced Lighting Technologies, Inc.
Notes to Consolidated Financial Statements
June 30, 2002
(Dollars in thousands, except per share data)

C. Significant Accounting Policies (continued)

In July 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (FAS) No. 141, Business Combinations, and FAS
142, Goodwill and Intangible Assets. FAS 141 is effective for all business
combinations completed after June 30, 2001 and requires using the purchase
method of accounting. The pooling of interest method of accounting is prohibited
except for transactions initiated before July 1, 2001. FAS 142 is effective for
fiscal years beginning after December 15, 2001, however, certain provisions of
this Statement apply to goodwill and other intangible assets acquired between
July 1, 2001 and the effective date of FAS 142. Early adoption of FAS 142 is
permitted. Major provisions of FAS 142 require intangible assets acquired in a
business combination to be recorded separately from goodwill if they arise from
contractual or other legal rights or are separable from the acquired entity and
can be sold, transferred, licensed, rented or exchanged, either individually or
as part of a related contract, asset or liability. In addition, goodwill, as
well as intangible assets with indefinite lives, will no longer be subject to
amortization effective July 1, 2001. Finally, goodwill and intangible assets
with indefinite lives are tested for impairment annually and whenever there is
an impairment indicator. Previously, the Company measured goodwill and
intangibles (to be held and used) with indefinite lives for impairment using
undiscounted cash flows under the guidance of FAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.

The Company adopted FAS 142 as of July 1, 2001. The Company evaluated goodwill
of $66,172 and intangible assets with indefinite lives of $11,874, which
represents tradenames. The Company used third party appraisals and expected
future discounted cash flows to determine the fair value of the reporting units
and whether any impairment of goodwill or indefinite lived intangible assets
existed as of the above date. As a result of this evaluation, the Company
recorded a cumulative effect of accounting change for the estimated impairment
of goodwill and other indefinite lived intangible assets of $71,171, or $(3.04)
per share, as of the beginning of fiscal 2002. The impact of adopting FAS 142
was to reduce amortization and, consequently, the loss before cumulative effect
of accounting change for fiscal 2002 by $1,315, or $.06 per share. Amortization
of intangible assets in fiscal 2001 would have been $330, a reduction of $2,532,
or $.11 per share if the accounting change related to acquired intangible
amortization required by FAS 142 had been applied to that year. Amortization of
intangible assets in fiscal 2000 would have been $316, a reduction of $2,450, or
$.11 per share if the accounting change related to acquired intangible
amortization required by FAS 142 had been applied to that year. Accumulated
amortization was $2,740 and $9,684 at June 30, 2002 and 2001, respectively.

Valuation of Loan Receivables

Loan receivables are measured for impairment based on either the present value
of expected future cash flows discounted at the loans effective interest rate
or the estimated fair value of the underlying collateral or other assets
available to repay the loan. A loan is considered impaired when, based on
current information and events, it is probable that the Company will be unable
to collect all amounts due according to the contractual terms of the loan
agreement. The Company evaluates the collectibility of both the interest and
principal when assessing the need for a possible impairment on the loan.

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Advanced Lighting Technologies, Inc.
Notes to Consolidated Financial Statements
June 30, 2002
(Dollars in thousands, except per share data)

C. Significant Accounting Policies (continued)

Revenue Recognition

The Company follows the provisions of Staff Accounting Bulletin No. 101 (SAB
101), Revenue Recognition in Financial Statements, which codifies the
requirements for recognizing revenue. Revenues from the sale of metal halide
materials, system components (lamps, power supplies, system controls, fiber
optic cable) and systems are recognized when products are shipped and revenues
on production equipment contracts are recognized under the percentage of
completion method.

Advertising Expense

External costs incurred in providing media advertising and promoting products
are expensed the first time the advertising or promotion takes place.

Research and Development

Research and development costs, primarily the development of new products and
modifications of existing products, are charged to expense as incurred.

Stock Compensation Arrangements

In accordance with Statement of Financial Accounting Standards (FAS) No. 123,
Accounting and Disclosure of Stock-Based Compensation, the Company accounts
for stock compensation arrangements using the intrinsic value based method in
APB Opinion No. 25 Accounting for Stock Issued to Employees, and discloses the
effect on net income (loss) and earnings (loss) per share of the fair value
based method in FAS No. 123.

Derivative Financial Instruments

The Company adopted Statement of Financial Accounting Standards (FAS) No. 133,
Accounting for Derivative Instruments and Hedging Activities as of July 1,
2000. FAS 133 requires the Company to recognize all derivatives on the balance
sheet date at fair value. Any gains or losses from changes in fair value of
derivative instruments designated as hedges and having a high correlation with
the underlying exposures are deferred.

The Company uses foreign currency forward contracts that mature in 30 days to
reduce its exposure to adverse fluctuations in foreign currency exchange rates.
These foreign exchange hedging activities do not create exchange rate risk since
gains and losses on these contracts offset losses and gains on the underlying
positions. The Company has elected not to treat these instruments as hedges for
accounting purposes and, accordingly, both realized and unrealized gains and
losses on these derivative instruments have been recorded in general and
administrative expense. Derivative financial instruments are not entered into
for trading or speculative purposes.

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Advanced Lighting Technologies, Inc.
Notes to Consolidated Financial Statements
June 30, 2002
(Dollars in thousands, except per share data)

C. Significant Accounting Policies (continued)

Other Accounting Standards

The Company adopted Emerging Issues Task Force (EITF) Issue 00-27,
Application of EITF 98-5, `Convertible Securities with Beneficial Conversion
Features or Contingently Adjustable Conversion Ratios, to Certain Convertible
Instruments in the quarter ended December 31, 2000. EITF Issue 00-27 requires
that a convertible instruments beneficial conversion feature be measured using
an effective conversion price. As a result, the value assigned to the redeemable
preferred stock was adjusted in fiscal 2001 by $5,329 for the discount related
to the beneficial conversion option. This additional discount was immediately
accreted to paid-in capital in a manner similar to a cumulative effect of
accounting change since the redeemable preferred stock was convertible at the
time of issuance. The impact of this change is noted in the Statements of
Consolidated Shareholders Equity and in Note L Earnings Per Share.

The Company adopted Emerging Issues Task Force (EITF) Issue 01-9 Accounting
for Consideration Given by a Vendor to a Customer in the quarter ended March
31, 2002. EITF Issue 01-9 requires that expense associated with a free product
or service delivered at the time of sale of another product or service should be
classified as cost of sales. The Companys fixture subsidiaries that were sold
in the second quarter of fiscal 2002 had incurred and included such costs in
marketing and selling expense. Accordingly, the Company has reclassified such
amounts to cost of sales within these financial statements. The amounts
reclassified for fiscal 2002, 2001 and 2000 were $1,836, $4,157 and $4,510,
respectively.

The Company adopted EITF Issue 00-10, Accounting for Shipping and Handling Fees
and Costs in the year ended June 30, 2001. EITF Issue 00-10 requires that all
amounts billed to a customer in a sales transaction related to shipping and
handling is classified as revenue. Accordingly, the Company has reclassified
such amounts to revenue within these financial statements. EITF Issue 00-10 also
requires the disclosure of the amount and classification of shipping and
handling costs. The Company records shipping and handling costs as Marketing
and Selling costs, and these amounts totaled $5,342 in fiscal 2002, $8,799 in
fiscal 2001, and $8,272 in fiscal 2000.

Also, certain amounts for prior periods have been reclassified to conform to the
current period reporting presentation.

New Accounting Standards

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

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Advanced Lighting Technologies, Inc.
Notes to Consolidated Financial Statements
June 30, 2002
(Dollars in thousands, except per share data)

D. Acquisitions

During fiscal 2001 and 2000, the Company completed the following business
combinations, all of which were accounted for by the purchase method and,
accordingly, results of operations for the acquired businesses have been
included in the consolidated statement of operations from their respective dates
of acquisition. Assets acquired and liabilities assumed have been recorded at
fair value based on the best estimates available.

On October 2, 2000, the Company acquired all of the assets and liabilities of
Ruud Lighting New Zealand Ltd., (RLNZ), located in Auckland, New Zealand. RLNZ
was the exclusive distributor of the Companys fixture products in New Zealand.
The total purchase price of $611 consisted of $366 in cash and a note payable of
$245. The purchase price resulted in an excess of cost over net assets acquired
of $286.

During the third quarter of fiscal 2000, the Company increased to 93% its
ownership of Asian Lighting Resources, Ltd., its lamp manufacturing joint
venture in Chennai (Madras), India. Subsequently, the name of this entity was
changed to Venture Lighting India Limited. The total purchase price for this
additional ownership interest consisted of $2,993 in cash, and resulted in an
excess of the investment over the net tangible assets acquired of $2,018.
Beginning with the third quarter of fiscal 2001, the Company began consolidating
the results of this subsidiary into its financial statements and deducting the
minority interest share in arriving at net income. The Companys investment in
the joint venture was previously accounted for by the cost method.

On October 1, 1999, the Company acquired the remaining 50% ownership interest in
Lighting Sciences, Inc. (LSI), its joint venture in Scottsdale, Arizona, which
specializes in the testing and development of lighting products and technology.
The total purchase price consisted of 40,000 shares of the Companys Common
Stock (valued at $535). The purchase price resulted in an excess of cost over
net assets acquired of $323. The Company sold LSI during the second quarter of
fiscal 2002.

In fiscal 2001, general and administrative expenses were reduced by the
elimination of acquisition-related litigation accruals of $1,847 that, based on
review with legal counsel, were no longer required.

E. Sale of Subsidiaries and Investments

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

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Advanced Lighting Technologies, Inc.
Notes to Consolidated Financial Statements
June 30, 2002
(Dollars in thousands, except per share data)

E. Sale of Subsidiaries and Investments (continued)

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

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

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

F. Fiber Optics Joint Venture and Transactions with Unison and Fiberstars, Inc.

In February 2000, the Company acquired Rohm and Haas Companys 50% interest in
Unison Fiber Optics Lighting Systems LLC (Unison), a joint venture between the
Company and Rohm and Haas Company that focused on the manufacture and sale of
fiber optic lighting systems to the worldwide lighting market. Simultaneously,
Unison transferred a substantial portion of its personal property (including
intellectual property) to Fiberstars, Inc. (Fiberstars). The transaction
included cross licensing of technology and a commitment by the Company to
continue support of fiber optic lighting research and development. The Company
paid $3,000, of which $2,300 is represented by a note payable to obtain the
remaining interest in Unison. As consideration for the transferred assets to
Fiberstars, the Company received four warrants to purchase a total of 1,000,000
shares of Fiberstars common stock for nominal consideration. These warrants are
exercisable based on stock price and sales of products using Unison technology
but may be converted into at least 674,375 shares of Fiberstars common stock at
any time. The Company also owns approximately 1,023,000 common shares of
Fiberstars, or 22% of Fiberstars shares outstanding, and accounts for its
investment on the equity method.

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##### Table of Contents



Advanced Lighting Technologies, Inc.
Notes to Consolidated Financial Statements
June 30, 2002
(Dollars in thousands, except per share data)

G. Financing Arrangements

Short-term debt consisted of the following:

|                                  |  |          |       |      |  |   |       | 
|--------------------------------- |  | -------- | ----- | ---- |  | - | ----- | 
|                                  |  | June 30,
|                                  |  |         
|                                  |  | 2002     |       | 2001
|                                  |  |          |       |     
|Trade facility                    |  | $        | 224   |      |  | $ | 549   | 
|                                 
|                                 
|                                 
|                                 
|Current portion of long-term debt |  |          | 3,889 |      |  |   | 8,309 | 
|                                  |  |          |       |      |  |   |       | 
|                                  |  | $        | 4,113 |      |  | $ | 8,858 | 
|                                  |  |          |       |      |  |   |       | 

The Company, on behalf of a foreign subsidiary, maintains a multi-option
borrowing facility with a foreign bank that includes a trade facility with
borrowing capacity of $618 as of June 30, 2002. The trade facility, along with
other borrowings with a foreign bank, is collateralized with substantially all
the assets of the subsidiary. This facility allows the foreign subsidiary to
issue documentary letters of credit for imports and term-trade finance for
importing its inventory. The interest rate of this facility varies, depending
upon the denomination of the currency advanced, and ranged from 4.37% to 7.36%
in fiscal 2002. The weighted average interest rate on the trade facility was
approximately 6.5% and 8.0% during fiscal 2002 and fiscal 2001, respectively.

Long-term debt consisted of the following:

|                                             |                                           |   |          |          |      |   |         |   | 
|-------------------------------------------- | ----------------------------------------- | - | -------- | -------- | ---- | - | ------- | - | 
|                                             |                                           |   | June 30,
|                                             |                                           |   |         
|                                             |                                           |   | 2002     |          | 2001
|                                             |                                           |   |          |          |     
|Senior unsecured 8% notes, due March 2008    |                                           | $ | 100,000  |          |      | $ | 100,000 |  
|                                            
|                                            
|                                            
|                                            
|Bank Credit Facility  revolving credit loan |                                           |   | 17,560   |          |      |   | 16,034  |  
|                                            
|                                            
|                                            
|                                            
|Bank Credit Facility  term loan             |                                           |   | 10,658   |          |      |   | 25,000  |  
|                                            
|                                            
|                                            
|                                            
|Mortgage notes payable                       |                                           |   | 5,944    |          |      |   | 15,380  |  
|                                            
|                                            
|                                            
|                                            
|Term loan                                    |                                           |   | 2,015    |          |      |   | 3,023   |  
|                                            
|                                            
|                                            
|                                            
|Promissory note                              |                                           |   | 2,300    |          |      |   | 2,300   |  
|                                            
|                                            
|                                            
|                                            
|Other                                        |                                           |   | 986      |          |      |   | 1,486   |  
|                                             |                                           |   |          |          |      |   |         |  
|                                             |                                           |   | 139,463  |          |      |   | 163,223 |  
|                                            
|                                            
|                                            
|                                            
|Less current portion of long-term debt       |                                           |   | (3,889   | )        |      |   | (8,309  | )
|                                            
|                                            
|                                            
|                                            
|Reclassification to current liabilities:     |                                           |   |          |          |      |   |         |  
|                                            
|                                            
|                                            
|                                            
|                                             | Senior unsecured 8% notes, due March 2008 |   |          | (100,000 | )    |   |         |   | 
|                                            
|                                            
|                                            
|                                            
|                                             | Bank Credit Facility, in default          |   |          | (28,218  | )    |   |         |  | 
|                                             |                                           |   |          |          |      |   |         |  
|                                             |                                           | $ | 7,356    |          |      | $ | 154,914 |  
|                                             |                                           |   |          |          |      |   |         |  

In connection with the sale of the fixture subsidiaries, the Company amended its
Bank Credit Facility to reduce the revolving credit loan to $25,000 from $40,000
and the term loan to $13,000 from $25,000 and change certain covenants under the
agreement. Availability of borrowings under the revolving credit loan is
determined by the Companys eligible account receivables and inventories. Under
the term loan, the Company pays monthly principal payments that total $3,571
annually, with the unpaid balance due at maturity. Prior to the amendment
described below, interest rates on the revolving credit loan and term loan were
based, at the Companys option, on LIBOR plus 2.75% and 3.25%, respectively, or
the agent

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##### Table of Contents



Advanced Lighting Technologies, Inc.
Notes to Consolidated Financial Statements
June 30, 2002
(Dollars in thousands, except per share data)

G. Financing Arrangements (continued)

banks prime rate (4.75% at June 30, 2002). The Companys ability to elect
LIBOR-based interest rate loans was suspended pursuant to such amendment. The
Company is also obligated to pay a commitment fee of .375% on the unused portion
of the loan. The Bank Credit Facility maturity was July 1, 2004.

The Bank Credit Facility is with a group of banks and contains certain
affirmative and negative covenants customary for this type of agreement,
prohibits cash dividends, and includes a financial covenant with respect to the
coverage of certain fixed charges. At March 31, 2002, the Company was not in
compliance with the financial covenant and obtained a waiver for the quarter
then ended. The Bank Credit Facility was amended to provide for a new
measurement period for this covenant commencing April 1, 2002 and the Companys
ability to elect LIBOR-based interest rates on its loans was suspended. As of
June 30, 2002, the Company was also unable to meet this financial covenant and
was in default under its Bank Credit Facility. As a result, on September 16,
2002 the Company entered into a Forbearance Agreement, which was subsequently
extended, with its bank group allowing the Company access to its existing
revolving credit facility and precluding the acceleration of the Bank Credit
Facility maturity in accordance with the terms of the Forbearance Agreement
until at least October 18, 2002. The Forbearance Agreement contains various
requirements that must be met by the Company including the non-payment of the
semi-annual interest payment on its 8% Senior Notes due on September 16, 2002,
increasing the interest rate to 2% over the banks prime rate, providing the
bank group with increased financial information, and covenants regarding its
operations during this forbearance period. Further, the bank group is permitted
to terminate the Forbearance Agreement if holders of the Companys 8% Senior
Notes take certain actions adverse to the Company. Unless a subsequent agreement
is reached with the bank group on or before October 18, 2002, the bank group
will be entitled to take legal and other action against the Company, including
acceleration of the loans outstanding, cessation of future loans and/or action
to foreclosure on the collateral securing those loans (see Note B). Since the
bank group can accelerate payment, the revolving loan and term loan have been
classified as current liabilities as of June 30, 2002.

The principal security for the revolving credit loan is substantially all of the
personal property of the Company and each of its North American and United
Kingdom subsidiaries. The term loan is secured by substantially all of the
Companys machinery and equipment and is cross-collateralized and secured
with the revolving credit loan.

The Company sold $100,000 of Senior Notes due March 2008, resulting in net
proceeds of approximately $96,150. The Notes are redeemable at the Companys
option, in whole or in part, on or after March 15, 2003 at certain preset
redemption prices. During August 2000, the Company completed an exchange offer
to existing noteholders, which resulted in reducing the interest rate on the
Notes to 8.0% from 8.5%. Interest on the Notes is payable semi-annually on March
15 and September 15 of each year. In connection with the above noted Forbearance
Agreement entered into with the Credit Facility bank group, the Company did not
make its semi-annual interest payment due on September 16, 2002. The Company
will not make the September 16, 2002 semi-annual interest payment on its Senior
Notes within a 30-day grace period which will result in an Event of Default.
Further, if the Bank Credit Facility

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##### Table of Contents



Advanced Lighting Technologies, Inc.
Notes to Consolidated Financial Statements
June 30, 2002
(Dollars in thousands, except per share data)

G. Financing Arrangements (continued)

is accelerated and the acceleration is not reversed or the Bank Credit Facility
loans are not repaid within a 30-day grace period, an Event of Default will
exist under the Indenture which could require the Senior Notes to be immediately
due and payable (see Note B). Due to the uncertainty surrounding the
acceleration of the Bank Credit Facility and the Senior Notes, the Senior Notes
have been classified as current liabilities as of June 30, 2002.

The Notes Indenture contains covenants that, among other things, limit the
ability of the Company and its Restricted Subsidiaries (as defined therein) to
incur indebtedness, pay dividends, prepay subordinated indebtedness, repurchase
capital stock, make investments, create liens, engage in transactions with
stockholders and affiliates, sell assets and, with respect to the Company,
engage in mergers and consolidations. There are no sinking fund requirements.

Mortgage notes payable consisted of four separate notes at various rates of
interest, ranging from 4.75% to 9.39%, and at June 30, 2002 were collateralized
by land and buildings with a net carrying value of $15,418.

In connection with the Companys investment in Venture Lighting India Limited,
the Company assumed a term loan with a balance at June 30, 2002 of $2,015 that
bears interest at LIBOR plus 3% and matures January 10, 2004. The loan is
secured by the subsidiarys facility, machinery and equipment, and inventory.

As part of the purchase price for Rohm and Haas Companys 50% interest in Unison
Fiber Optic Systems LLC (Unison), the Company entered into a $2,300 promissory
note to Rohm and Haas that bears interest at 6.65% compounded quarterly. The
note is currently payable; however, the Company is in negotiations to
restructure the payment terms.

Aggregate maturities of long-term debt, after taking into account the possible
acceleration of the Bank Credit Facility and Senior Notes (including capital
lease obligations) for the five fiscal years subsequent to June 30, 2002, were
as follows: 2003  $132,107; 2004  $1,635; 2005  $565; 2006  $4,571; and
2007  $198.

The fair value of the Companys Senior Notes at June 30, 2002 and 2001
approximated $40,000 and $69,000, respectively. The estimated fair value of the
Companys remaining debt at June 30, 2002 and 2001 approximated carrying value,
as the effective rates for this debt were comparable to market rates. Debt
issuance costs, classified with other assets, are being amortized over the terms
of the related debt. During fiscal 1999, the Company entered into an interest
rate swap agreement for a notional amount of $10,000 with a fixed pay rate of
6.63% and a receive rate of LIBOR. During fiscal 2000, the Company
early-terminated the interest rate swap agreement, which resulted in a realized
gain of $120.

The Company uses standby letters of credit to satisfy certain security deposits
with service providers, to make borrowings, and as security for a loan to a
foreign investee. These letters are irrevocable and

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##### Table of Contents



Advanced Lighting Technologies, Inc.
Notes to Consolidated Financial Statements
June 30, 2002
(Dollars in thousands, except per share data)

G. Financing Arrangements (continued)

expire within 12 months of issuance. Standby letters of credit outstanding as of
June 30, 2002 were $261. Historically, the Company has not experienced any
significant claims against these financial instruments. Management does not
expect any material losses to result from these off-balance-sheet instruments
because performance is not expected to be required, and therefore, is of the
opinion that the fair value of these instruments is zero.

H. Shareholders Equity

Issuance of Common Stock

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

The public offering reduced the amount available for the issuance of various
debt and equity securities under the shelf registration statement to
approximately $274,500. The net proceeds from the public offering of
approximately $22,900 were initially used to repay indebtedness outstanding
under the Bank Credit Facility. The Company has expended the entire amount on
capital improvements, including optical coating production equipment, filter
testing and measurement equipment, production facilities, and on research and
development in its telecommunications business unit at DSI.

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

General Electric Company Investment

In October 1999, General Electric Company (GE) completed an investment in the
Company of $20,554. In exchange for the investment, GE received 761,250 shares
of the Companys newly created Series A Preferred Stock convertible at any time
into 3,045,000 shares of Company Common Stock (subject to adjustment). GE also
received a Warrant (the Initial Warrant) to purchase an additional 1,000,000
shares of Company Common Stock (subject to adjustment), which GE has fully
exercised to acquire 998,703 shares of Common Stock of the Company. GE now holds
1,429,590 shares of Company Common Stock. The Series A Stock and the Common
Stock held by GE represent approximately 16.8% of the voting power and equity
ownership of the Company at June 30, 2002. The proceeds of the transaction were
applied principally to the reduction of short-term liabilities and outstanding
amounts under the Companys Bank Credit Facility.

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##### Table of Contents



Advanced Lighting Technologies, Inc.
Notes to Consolidated Financial Statements
June 30, 2002
(Dollars in thousands, except per share data)

H. Shareholders Equity (continued)

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

If the Company fails to maintain certain financial ratios over certain
measurement periods, GE will have the right to acquire a combination of
subscription rights to additional shares and proxies with respect to shares
voted by certain officers of the Company, giving GE the ability to obtain the
majority of the voting power of the Company. The first measurement period was
the six months ended December 31, 1999. Thereafter, the measurement periods are
the six months ending on the last day of each successive fiscal quarter until
September 30, 2010 (excluding the six month periods ending on June 30, 2000,
September 30, 2000, June 30, 2001, September 30, 2001, December 31, 2001, March
31, 2002, and June 30, 2002, as amended by agreements between GE and the
Company).

The basis for GEs additional rights will be the failure of the Company to
maintain a 2.0 to 1.0 ratio of EBITDA to Interest Expense, as defined, over the
applicable measurement periods. The ratio for the six months ended June 30,
2002, was (.35) to 1.0 (.23 to 1.0 for the quarter ended March 31, 2002 and
(.77) to 1.0 for the quarter ended June 30, 2002).

A measurement period for which the Company fails to maintain the required ratio
is referred to as an Occurrence, however, if the Company maintains a 2.0 to
1.0 ratio in the three fiscal quarters immediately prior to a failure, a Second
Occurrence or Third Occurrence, as the case may be, would not be effective.
The First Occurrence was effective in the six-month measurement period ended
December 31, 1999.

A Second Occurrence would: (i) give GE the ability to vote the number of shares
currently voted by the CEO of the Company, approximately 1.9 million shares at
June 30, 2002, (ii) give GE the option to purchase shares from the CEO of the
Company and Alan J. Ruud which, together with the shares owned by GE, would
represent 25% of the voting power of the Company, and (iii) require the Company
to grant GE an additional warrant to purchase shares, at the then current market
price, approximating 6,551,000 shares at June 30, 2002. The ability to vote the
shares, purchase shares or obtain the warrant would be dependent upon compliance
with antitrust laws. GE is not required to purchase additional shares of the
Company. If GE owns and/or obtains the immediate right to acquire and/or vote in
excess of 35% of the voting power of the Company, the terms of the Indenture
relating to the Companys Senior Notes would require that the Company offer to
repurchase the $100,000 principal amount of outstanding Senior Notes due 2008 at
a price of 101% of the principal amount thereof, plus accrued interest, and the
Companys banks will have the ability to demand payment of the Bank Credit
Facility. Upon a Third Occurrence, GE would have the right to vote shares
currently voted by Alan J. Ruud and be granted a warrant to purchase (at the
then current market price) additional shares of Common Stock sufficient in
number to give GE 50% plus one vote of the voting power of the Company.

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##### Table of Contents



Advanced Lighting Technologies, Inc.
Notes to Consolidated Financial Statements
June 30, 2002
(Dollars in thousands, except per share data)

H. Shareholders Equity (continued)

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

ADLT Stock Option Plans

The Companys 1995 Incentive Award Plan and 1998 Incentive Award Plan provide
for the granting of A and B incentive stock options to purchase common stock
of the Company. The A options become exercisable based on stock price or over
one-to-five years from the date of grant depending on the Companys operating
performance. The B options become exercisable at the rate of 25% after one
year, 35% after two years, and 40% after three years. The Companys 1997
Billion-Dollar Market Capitalization Incentive Award Plan provides for the
granting of incentive stock options to purchase common stock of the Company. The
options become exercisable when the Companys market capitalization, excluding
the impact of stock issued in completing acquisitions, reaches one billion
dollars or after six years, whichever comes first. All options have been granted
at market value on the date of grant and expire ten years from the date of
grant. At June 30, 2002, the Company had 3,800,471 shares reserved for future
issuance upon exercise of stock options granted under the option plans.

Information related to stock options for the years ended June 30 are as follows:

|                                                                |  |         |            |       |  |           |       |       |  |         |           |           |  |   |       |  |  |           |           |   |  |   |       | 
|--------------------------------------------------------------- |  | ------- | ---------- | ----- |  | --------- | ----- | ----- |  | ------- | --------- | --------- |  | - | ----- |  |  | --------- | --------- | - |  | - | ----- | 
|                                                                |  | 2002    |            | 2001  |  | 2000     
|                                                                |  |         |            |       |  |          
|                                                                |  |         |            |       |  | Weighted- |       |       |  |         |           | Weighted- |  |   |       |  |  | Weighted-
|                                                                |  |         |            |       |  | Average   |       |       |  |         |           | Average   |  |   |       |  |  | Average  
|                                                                |  |         |            |       |  | Exercise  |       |       |  |         |           | Exercise  |  |   |       |  |  | Exercise 
|                                                                |  | Options |            | Price |  | Options   |       | Price |  | Options |           | Price    
|                                                                |  |         |            |       |  |           |       |       |  |         |           |          
|Outstanding, beginning of year                                  |  |         | 3,538,769  |       |  | $         | 13.01 |       |  |         | 3,445,137 |           |  | $ | 14.58 |  |  |           | 2,751,866 |   |  | $ | 16.36 | 
|                                                               
|                                                               
|                                                               
|                                                               
|Granted                                                         |  |         | 1,215,000  |       |  |           | .92   |       |  |         | 562,997   |           |  |   | 5.59  |  |  |           | 1,038,000 |   |  |   | 9.71  | 
|                                                               
|                                                               
|                                                               
|                                                               
|Exercised                                                       |  |         |           |       |  |           |      |       |  |         | (12,704   | )         |  |   | 9.72  |  |  |           | (70,365   | ) |  |   | 10.56 | 
|                                                               
|                                                               
|                                                               
|                                                               
|Forfeited                                                       |  |         | (1,498,722 | )     |  |           | 13.86 |       |  |         | (456,661  | )         |  |   | 15.30 |  |  |           | (274,364  | ) |  |   | 15.09 | 
|                                                                |  |         |            |       |  |           |       |       |  |         |           |           |  |   |       |  |  |           |           |   |  |   |       | 
|Outstanding, end of year                                        |  |         | 3,255,047  |       |  |           | 8.17  |       |  |         | 3,538,769 |           |  |   | 13.01 |  |  |           | 3,445,137 |   |  |   | 14.58 | 
|                                                                |  |         |            |       |  |           |       |       |  |         |           |           |  |   |       |  |  |           |           |   |  |   |       | 
|Weighted -average fair value of
options granted during the year |  | $       | .55        |       |  |           |       |       |  | $       | 3.47      |           |  |   |       |  |  | $         | 5.14      |   |  |   |       | 

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##### Table of Contents



Advanced Lighting Technologies, Inc.
Notes to Consolidated Financial Statements
June 30, 2002
(Dollars in thousands, except per share data)

H. Shareholders Equity (continued)

The following table summarizes additional information concerning outstanding and
exercisable options at June 30, 2002:

|                  |                |         |           |         |                     |             |                     |           |           |       |           |      |   |          |         |         |           |       |       |     
|----------------- | -------------- | ------- | --------- | ------- | ------------------- | ----------- | ------------------- | --------- | --------- | ----- | --------- | ---- | - | -------- | ------- | ------- | --------- | ----- | ----- | ----
|                  |                |         |           |         | Options Outstanding |             | Options Exercisable
|                  |                |         |           |         |                     |             |                    
|                  |                |         |           |         |                     |             |                     |           | Weighted- |       |           |      |   |          |         |         |           |       |       |     
|                  |                |         |           |         |                     |             |                     |           | Average   |       | Weighted- |      |   |          |         |         | Weighted-
|Range of          |                |         |           |         |                     | Remaining   |                     | Average   |           |       |           |      |   | Average 
|Exercise          |                |         |           |         |                     | Contractual |                     | Exercise  |           |       |           |      |   | Exercise
|Prices            |                | Options |           | Life    |                     | Price       |                     | Options   |           | Price
|                  |                |         |           |         |                     |             |                     |           |           |      
|$    .80 to $3.99 |                |         | 1,215,000 |         |                     | 9.9 years   |                     | $         | .92       |       |           |      |  |          |         |         |          |      
|                 
|                 
|                 
|                 
|                  | 4.00 to 7.99   |         |           |         |                     | 905,740     |                     |           | 7.8 years |       |           | 6.46 |   |          |         | 188,632 |           |       | $     | 6.56
|                 
|                 
|                 
|                 
|                  | 8.00 to 15.99  |         |           |         | 411,612             |             |                     | 6.9 years |           |       | 12.90     |      |   |          | 275,912 |         |           |       | 12.55 |     
|                 
|                 
|                 
|                 
|                  | 16.00 to 22.99 |         |           | 562,322 |                     |             | 5.2 years           |           |           | 18.64 |           |      |   | 219,517  |         |         |           | 18.84 |      
|                 
|                 
|                 
|                 
|                  | 23.00 to 26.00 |         |           | 160,373 |                     |             | 5.5 years           |           |           | 23.99 |           |      |   | 160,373  |         |         |           | 23.99 |      
|                  |                |         |           |         |                     |             |                     |           |           |       |           |      |   |          |         |         |           |       |       |     
|                  |                |         | 3,255,047 |         |                     |             |                     |           |           |       |           |      |   |          | 844,434 |         |           |       |       |     
|                  |                |         |           |         |                     |             |                     |           |           |       |           |      |   |          |         |         |           |       |       |     

DSI Stock Option Plan

Deposition Sciences, Inc. (DSI), a non-public subsidiary of ADLT, adopted the
2001 Equity Incentive Plan. DSI currently has 100,000,000 shares authorized and
50,000,000 shares outstanding, all of which are owned by ADLT. The 2001 Equity
Incentive Plan initially provides for the granting of stock options to purchase
up to 10,000,000 shares of common stock of DSI. The number of shares available
will be increased by 18% of DSI shares issued, up to a maximum of 16,200,000
shares. The vesting terms of the options vary; including vesting based on a
change in control or public offering of DSI or on a vesting schedule no more
than five years from the date of grant. The options have been granted at fair
value on the date of grant of $.46 or $.47 per share and expire ten years from
the date of grant. A total of 623,500 and 7,885,000 options were granted under
the Plan in fiscal 2002 and 2001, respectively. No options were cancelled in
fiscal 2001 and 1,875,500 were cancelled in fiscal 2002. Options for 3,921,159
shares are exercisable at June 30, 2002.

Accounting for Stock-Based Compensation

If the Company had elected to report compensation expense for the ADLT Incentive
Award Plans and the DSI Equity Incentive Plan based on the fair value at the
grant dates for all awards consistent with the methodology prescribed by
Statement of Financial Accounting Standard No. 123, Accounting for Stock-Based
Compensation, net income and earnings per share would be as follows:

|                                      |  |                     |          |      |  |      |        |   |  |   |       |  
|------------------------------------- |  | ------------------- | -------- | ---- |  | ---- | ------ | - |  | - | ----- | -
|                                      |  | Year Ended June 30,
|                                      |  |                    
|                                      |  | 2002                |          | 2001 |  | 2000
|                                      |  |                     |          |      |  |     
|Net income (loss) as reported         |  | $                   | (100,997 | )    |  | $    | 271    |   |  | $ | 1,928 |  
|                                     
|                                     
|                                     
|                                     
|Pro forma                             |  |                     | (101,836 | )    |  |      | (1,417 | ) |  |   | (321  | )
|                                     
|                                     
|                                     
|                                     
|Earnings (loss) per share as reported |  | $                   | (4.43    | )    |  | $    | (.34   | ) |  | $ | .01   |  
|                                     
|                                     
|                                     
|                                     
|Pro forma                             |  |                     | (4.46    | )    |  |      | (.41   | ) |  |   | (.10  | )

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##### Table of Contents



Advanced Lighting Technologies, Inc.
Notes to Consolidated Financial Statements
June 30, 2002
(Dollars in thousands, except per share data)

H. Shareholders Equity (continued)

The fair values of the ADLT stock options issued by the Company and included in
the calculation of the pro forma net income and pro forma earnings per share
were estimated using the Black-Scholes option pricing model with the following
weighted-average assumptions used for grants in fiscal 2002, 2001 and 2000,
respectively: expected volatility of 78%, 71%, and 61%; risk-free interest rates
of 3.86%, 5.17%, and 6.54%; and expected lives of 4 years, 4 years, and 4 years
with no dividend yield.

The fair values of the stock options issued by DSI and included in the
calculation of the pro forma net income and pro forma earnings per share were
estimated using the Black-Scholes option pricing model with the following
weighted-average assumptions used for grants in fiscal 2002 and 2001,
respectively: expected volatility of 80% and 80%; risk-free interest rate of
4.48% and 4.60%; and expected life of 4 years and 4 years with no dividend
yield.

Employee Stock Purchase Plan

The Companys 1997 Employee Stock Purchase Plan authorized and made available
for sale to employees, at a discount of 15%, a total of 100,000 shares of the
Companys Common Stock. All of the shares authorized under the 1997 Plan have
been issued. The Companys 2001 Employee Stock Purchase Plan authorized and made
available for sale to employees, at a discount of 15%, a total of 250,000 shares
of the Companys Common Stock. The Plan provides substantially all employees who
have completed six months of service an opportunity to purchase shares through
payroll deductions, up to 10% of eligible compensation.

The purchase price of each share is 85% of the month-end closing market price of
the Companys Common Stock. Employees purchased 78,595 shares in fiscal 2002,
28,167 shares in fiscal 2001 and 28,967 shares in fiscal 2000. At June 30, 2002,
there were 163,461 shares available for future purchases.

Shares Issued Pursuant to Defined Contribution Plan

Beginning in February 1999, pursuant to the terms of the Companys 401(k)
Retirement and Savings Plan, the Company partially matches, with its Common
Stock, the contributions made by employees to their plan accounts. The Company
has authorized and made available for contribution a total of 500,000 shares of
Common Stock, and contributed 220,941 shares in fiscal 2002, 67,474 shares in
fiscal 2001 and 64,318 shares in fiscal 2000. At June 30, 2002, there were
119,160 shares available for future contributions.

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##### Table of Contents



Advanced Lighting Technologies, Inc.
Notes to Consolidated Financial Statements
June 30, 2002
(Dollars in thousands, except per share data)

I. Employee Benefits

The Company has defined contribution elective savings and retirement plans that
cover substantially all full-time employees in its domestic and foreign
subsidiaries. The Company matches the contributions of participating employees
on the basis of the percentages specified in the respective plans, ranging from
1% to 4% of eligible employee earnings. Contributions charged to income for
the defined contribution plans, including expense associated with the Common
Stock issuances related to the 401(k) Retirement and Savings Plan described in
Note H, were $1,107 in fiscal 2002, $1,526 in fiscal 2001 and $1,215 in fiscal
2000.

J. Income Taxes

Income (loss) from operations before income taxes, minority interest, and
cumulative effect of accounting change were attributable to the following
sources:

|              |  |                     |         |      |  |      |        |   |  |   |       | 
|------------- |  | ------------------- | ------- | ---- |  | ---- | ------ | - |  | - | ----- | 
|              |  | Year Ended June 30,
|              |  |                    
|              |  | 2002                |         | 2001 |  | 2000
|              |  |                     |         |      |  |     
|United States |  | $                   | (27,161 | )    |  | $    | (1,720 | ) |  | $ | 2,372 | 
|Foreign       |  |                     | (2,194  | )    |  |      | 2,607  |   |  |   | 216   | 
|              |  |                     |         |      |  |      |        |   |  |   |       | 
|Totals        |  | $                   | (29,355 | )    |  | $    | 887    |   |  | $ | 2,588 | 
|              |  |                     |         |      |  |      |        |   |  |   |       | 

The provision for income taxes is computed using the liability method and is
based on applicable federal and state statutory rates adjusted for permanent
differences between financial and taxable income.

Income taxes have been provided as follows:

|         |                 |   |                     |      |      |   |      |      |   |   |     |      |  
|-------- | --------------- | - | ------------------- | ---- | ---- | - | ---- | ---- | - | - | --- | ---- | -
|         |                 |   | Year Ended June 30,
|         |                 |   |                    
|         |                 |   | 2002                |      | 2001 |   | 2000
|         |                 |   |                     |      |      |   |     
|Current  |                 |   |                     |      |      |   |      |      |   |   |     |     
|         | Federal         |   | $                   | (162 | )    |   | $    | (162 | ) |   | $   | 19   |  
|         | State and local |   |                     | (32  | )    |   |      | (131 | ) |   |     | (172 | )
|         | Foreign         |   |                     | 163  |      |   |      | 269  |   |   |     | 305  |  
|         |                 |   |                     |      |      |   |      |      |   |   |     |     
|         |                 |   | (31                 | )    |      |   | (24  | )    |   |   | 152 |     
|Deferred |                 |   |                     |      |      |   |      |      |   |   |     |     
|         | Federal         |   |                     |     |      |   |      |     |   |   |     |     |  
|         | State and local |   |                     |     |      |   |      |     |   |   |     |     |  
|         | Foreign         |   |                     | 283  |      |   |      | 540  |   |   |     | 483  |  
|         |                 |   |                     |      |      |   |      |      |   |   |     |     
|         |                 |   | 283                 |      |      |   | 540  |      |   |   | 483 |     
|         |                 |   |                     |      |      |   |      |      |   |   |     |     
|         |                 | $ | 252                 |      |      | $ | 516  |      |   | $ | 635 |     
|         |                 |   |                     |      |      |   |      |      |   |   |     |     

Deferred income taxes reflect the tax effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes.

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##### Table of Contents



Advanced Lighting Technologies, Inc.
Notes to Consolidated Financial Statements
June 30, 2002
(Dollars in thousands, except per share data)

J. Income Taxes (continued)

Significant components of the Companys net deferred tax assets and liabilities
at June 30, 2002 and 2001 are as follows:

|                                                   |                                                                     |   |                     |        |      |   |         |        | 
|-------------------------------------------------- | ------------------------------------------------------------------- | - | ------------------- | ------ | ---- | - | ------- | ------ | 
|                                                   |                                                                     |   | Year Ended June 30,
|                                                   |                                                                     |   |                    
|                                                   |                                                                     |   | 2002                |        | 2001
|                                                   |                                                                     |   |                     |        |     
|Deferred tax assets:                               |                                                                     |   |                     |        |      |   |         |       
|                                                   | Net operating loss carryforwards                                    |   | $                   | 32,953 |      |   | $       | 30,226 | 
|                                                   | Capital loss carryforward                                           |   |                     | 13,663 |      |   |         |       | 
|                                                   | Research and development tax credits                                |   |                     | 3,818  |      |   |         | 3,818  | 
|                                                   | Tax under financial reporting special charges
and equity write-down |   |                     | 4,233  |      |   |         | 2,938  | 
|                                                   | Impairment of officer loan                                          |   |                     | 2,769  |      |   |         |       | 
|                                                   | Other                                                               |   |                     | 6,355  |      |   |         | 3,778  | 
|                                                   |                                                                     |   |                     |        |      |   |         |       
|                                                   |                                                                     |   | 63,791              |        |      |   | 40,760  |       
|Deferred tax liabilities:                          |                                                                     |   |                     |        |      |   |         |       
|                                                   | Tax over financial reporting depreciation and amortization          |   |                     | 6,142  |      |   |         | 8,191  | 
|                                                   |                                                                     |   |                     |        |      |   |         |       
|                                                   |                                                                     |   | 6,142               |        |      |   | 8,191   |       
|                                                   |                                                                     |   |                     |        |      |   |         |       
|Net deferred tax assets before valuation allowance |                                                                     |   | 57,649              |        |      |   | 32,569  |       
|Valuation allowance                                |                                                                     |   | (57,649             | )      |      |   | (32,569 | )     
|                                                   |                                                                     |   |                     |        |      |   |         |       
|Net deferred tax assets                            |                                                                     | $ |                    |        |      | $ |        |       
|                                                   |                                                                     |   |                     |        |      |   |         |       

Due to the uncertainty of the ultimate realization of the deferred tax asset,
valuation allowances of $57,441 and $32,569 were recorded by the Company for
the years ended June 30, 2002 and 2001, respectively. The net change in the
valuation allowance for fiscal 2002 and fiscal 2001 was $25,080
and $2,726, respectively.

The statutory federal income tax rate and the effective income tax rate are
reconciled as follows:

|                                                     |  |                     |       |      |  |      |       |   |  |  |       |  
|---------------------------------------------------- |  | ------------------- | ----- | ---- |  | ---- | ----- | - |  |  | ----- | -
|                                                     |  | Year Ended June 30,
|                                                     |  |                    
|                                                     |  | 2002                |       | 2001 |  | 2000
|                                                     |  |                     |       |      |  |     
|Statutory tax rate                                   |  |                     | (35.0 | )%   |  |      | 35.0  | % |  |  | 35.0  | %
|State and local income taxes, net of federal benefit |  |                     | (0.1  | )    |  |      | (9.6  | ) |  |  | (4.4  | )
|Capital loss                                         |  |                     | (44.8 | )    |  |      |      |   |  |  |      |  
|Research and development tax credit                  |  |                     |      |      |  |      | (70.1 | ) |  |  | (7.3  | )
|Foreign tax rate differential                        |  |                     | 4.6   |      |  |      | (11.7 | ) |  |  | 6.9   |  
|Nondeductible permanent items                        |  |                     | 0.2   |      |  |      | 44.7  |   |  |  | 8.1   |  
|Valuation allowance change                           |  |                     | 76.6  |      |  |      | 92.0  |   |  |  | (18.5 | )
|Adjustment to estimated accruals                     |  |                     |      |      |  |      | (18.2 | ) |  |  |      |  
|Other                                                |  |                     | (0.7  | )    |  |      | (3.9  | ) |  |  | 4.8   |  
|                                                     |  |                     |       |      |  |      |       |   |  |  |       |  
|Effective tax rate                                   |  |                     | 0.8   | %    |  |      | 58.2  | % |  |  | 24.6  | %
|                                                     |  |                     |       |      |  |      |       |   |  |  |       |  

Income taxes paid (net of refunds) were $(25) in fiscal 2002, $302 in fiscal
2001 and $(23) in fiscal 2000.

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##### Table of Contents



Advanced Lighting Technologies, Inc.
Notes to Consolidated Financial Statements
June 30, 2002
(Dollars in thousands, except per share data)

J. Income Taxes (continued)

At June 30, 2002, the Company had net operating loss carryforwards of $96,923
available to reduce future United States federal taxable income, which expire
2008 through 2022. The Company also has a capital loss carryforward of
approximately $35,000 available to reduce future capital gains. This
carryforward expires in 2007.

The Company also had research and development credit carryforwards of
approximately $3,818, which expire 2008 through 2015. Additionally, in
conjunction with the Alternative Minimum Tax (AMT) rules, the Company had
available AMT credit carryforwards for tax purposes of approximately $98, which
may be used indefinitely to reduce regular federal income taxes.

Also, at June 30, 2002, the Company had foreign net operating loss
carryforwards for tax purposes totaling $1,375 that expire 2003 to 2007 and
$7,268 that have no expiration dates.

K. Special Charges and Asset Impairment

During the year ended June 30, 2002, the Company recorded special charges
related to changes in its operations, which are intended to improve
efficiencies and reduce costs world-wide. The special charges principally
relate to consolidating the Companys power supply manufacturing operations
into its high-efficiency facility in Chennai (Madras), India; reducing staffing
levels at most locations and evaluating certain equipment and investments for
impairment in light of its long-term strategies.

The special charges were determined in accordance with formal plans developed
by the Companys management, approved by the CEO and subsequently reviewed with
the Companys Board of Directors using the best information available to it at
the time. Actions associated with closing facilities began in the first
quarter of fiscal 2002 and were substantially completed by the end of fiscal
2002. A total of approximately 250 employees were terminated enterprise-wide
from almost all units of the Company. Assets related to the above actions are
no longer in use or are held for sale and were written-down to their estimated
fair values. During the year, the Company revised certain estimates related to
its plans. As of June 30, 2002, all actions required by the plans were
completed and the remaining liabilities relate primarily to a long-term lease
obligation that terminates in August 2006.

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##### Table of Contents



Advanced Lighting Technologies, Inc.
Notes to Consolidated Financial Statements
June 30, 2002
(Dollars in thousands, except per share data)

K. Special Charges and Asset Impairment (continued)

Details of the actions and related special charges recorded during the fiscal
year ended June 30, 2002 are summarized as follows:

|                                    |                               |         |         |            |            |           |           |          |         |               |                |  |       |       |       |  |   |       |       |  | 
|----------------------------------- | ----------------------------- | ------- | ------- | ---------- | ---------- | --------- | --------- | -------- | ------- | ------------- | -------------- |  | ----- | ----- | ----- |  | - | ----- | ----- |  | 
|                                    |                               |         | Cash/   |            | Charged to |           | Reclassi- |          | Charges |               | Liabilities at
|Description                         |                               | Noncash |         | Operations |            | fications |           | Utilized |         | June 30, 2002
|                                    |                               |         |         |            |            |           |           |          |         |              
|Consolidate power supply operations |                               |         |         |            |            |           |           |          |         |               |                |  |       |       |       |  |   |       |       | 
|                                    | Severance                     |         | Cash    |            | $          | 1,243     |           |          | $       | 168           |                |  | $     | 1,411 |       |  | $ |      |      
|                                    | Lease cancellations           |         | Cash    |            |            | 1,835     |           |          |         |              |                |  |       | 225   |       |  |   | 1,610 |      
|                                    | Write-down of assets          |         | Noncash |            |            | 2,579     |           |          |         |              |                |  |       | 2,579 |       |  |   |      |      
|                                    | Shut-down costs of facilities |         | Cash    |            |            | 265       |           |          |         | (8            | )              |  |       | 240   |       |  |   | 17    |      
|Reduce staffing requirements        |                               | Cash    |         |            | 2,017      |           |           |          | (160    | )             |                |  | 1,857 |       |       |  |  |      
|Impairment of long-lived assets     |                               | Noncash |         |            | 2,977      |           |           |          |        |               |                |  | 2,977 |       |       |  |  |      
|Other                               |                               | Noncash |         |            | 333        |           |           |          |        |               |                |  | 333   |       |       |  |  |      
|                                    |                               |         |         |            |            |           |           |          |         |               |                |  |       |       |       |  |   |       |       | 
|                                    |                               |         |         |            |            | $         | 11,249    |          |         | $             |               |  |       | $     | 9,622 |  |   | $     | 1,627 | 
|                                    |                               |         |         |            |            |           |           |          |         |               |                |  |       |       |       |  |   |       |       | 

Total special charges for the first quarter of the fiscal year ended June 30,
2002 of $9,697 are classified in the consolidated statement of operations as
cost of sales ($688) and special charges ($9,009). During the fourth quarter,
the Company evaluated for impairment certain telecommunication equipment that
is being held for sale. As a result, a charge of $1,552 was recorded for the
difference between the carrying amount and the fair value of the equipment.

During the year ended June 30, 1999, the Company recorded special charges
related to significant changes in its operations, which accelerated and
intensified the Companys focus on its metal halide products.

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. All actions required by
the plans were substantially completed by the end of fiscal 2000.

During fiscal 2000, the Company revised certain estimates related to its plans
and reversed $475 of previously recorded special charges that were no longer
deemed necessary. The reversal results primarily from the settlement of a
lease cancellation for less than the estimated amount and revised estimates for
severance and related costs.

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##### Table of Contents



Advanced Lighting Technologies, Inc.
Notes to Consolidated Financial Statements
June 30, 2002
(Dollars in thousands, except per share data)

L. Earnings Per Share

Earnings (loss) per share is computed as follows:

|                                                                                  |                                                                                           |                                                                                                 |                                 |                                                                                                                    |          |                     |        |      |        |        |        |      |        |        |        |  
|--------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------- | ------------------------------- | ------------------------------------------------------------------------------------------------------------------ | -------- | ------------------- | ------ | ---- | ------ | ------ | ------ | ---- | ------ | ------ | ------ | -
|                                                                                  |                                                                                           |                                                                                                 |                                 |                                                                                                                    |          | Year Ended June 30,
|                                                                                  |                                                                                           |                                                                                                 |                                 |                                                                                                                    |          |                    
|                                                                                  |                                                                                           |                                                                                                 |                                 |                                                                                                                    |          | 2002                |        | 2001 |        | 2000  
|                                                                                  |                                                                                           |                                                                                                 |                                 |                                                                                                                    |          |                     |        |      |        |       
|Income available to common shareholders:                                          |                                                                                           |                                                                                                 |                                 |                                                                                                                    |          |                     |        |      |        |        |        |     
|                                                                                  |                                                                                           | Income (loss) before minority interest
and cumulative effect of accounting change               |                                 | $                                                                                                                  | (29,607  | )                   |        | $    | 371    |        |        | $    | 1,953  |       
|                                                                                  |                                                                                           | Less: Minority interest in income of consolidated subsidiary                                    |                                 |                                                                                                                    | (219     | )                   |        |      | (100   | )      |        |      | (25    | )     
|                                                                                  |                                                                                           |                                                                                                 |                                 | Preferred shares accretion                                                                                         |          |                     | (2,736 | )    |        |        | (2,555 | )    |        |        | (1,796 | )
|                                                                                  |                                                                                           |                                                                                                 |                                 |                                                                                                                    |          |                     |        |      |        |        |        |     
|                                                                                  |                                                                                           | Income (loss) before cumulative effect of accounting
change attributable to common shareholders |                                 | $                                                                                                                  | (32,562  | )                   |        | $    | (2,284 | )      |        | $    | 132    |       
|                                                                                  |                                                                                           |                                                                                                 |                                 |                                                                                                                    |          |                     |        |      |        |        |        |     
|                                                                                  |                                                                                           | Net income (loss)                                                                               |                                 | $                                                                                                                  | (100,997 | )                   |        | $    | 271    |        |        | $    | 1,928  |       
|                                                                                  |                                                                                           | Less: Preferred shares accretion                                                                |                                 |                                                                                                                    | (2,736   | )                   |        |      | (2,555 | )      |        |      | (1,796 | )     
|                                                                                  |                                                                                           |                                                                                                 |                                 | Additional preferred shares accretion from
cumulative effect of accounting change for
beneficial conversion option |          |                     |       |      |        |        | (5,329 | )    |        |        |       |  
|                                                                                  |                                                                                           |                                                                                                 |                                 |                                                                                                                    |          |                     |        |      |        |        |        |     
|                                                                                  |                                                                                           | Net income (loss) attributable to common shareholders                                           |                                 | $                                                                                                                  | (103,733 | )                   |        | $    | (7,613 | )      |        | $    | 132    |       
|                                                                                  |                                                                                           |                                                                                                 |                                 |                                                                                                                    |          |                     |        |      |        |        |        |     
|Weighted average shares  basic:                                                  |                                                                                           |                                                                                                 |                                 |                                                                                                                    |          |                     |        |      |        |        |        |     
|                                                                                  |                                                                                           | Outstanding at beginning of period                                                              |                                 |                                                                                                                    | 23,288   |                     |        |      | 20,482 |        |        |      | 20,278 |       
|                                                                                  |                                                                                           | Issued pursuant to public offering                                                              |                                 |                                                                                                                    |         |                     |        |      | 1,388  |        |        |      |       |       
|                                                                                  |                                                                                           | Issued in acquisitions                                                                          |                                 |                                                                                                                    |         |                     |        |      |       |        |        |      | 30     |       
|                                                                                  |                                                                                           | Issued for exercise of warrant                                                                  |                                 |                                                                                                                    |         |                     |        |      | 530    |        |        |      |       |       
|                                                                                  |                                                                                           | Issued for exercise of stock options                                                            |                                 |                                                                                                                    |         |                     |        |      | 11     |        |        |      | 18     |       
|                                                                                  |                                                                                           | Issued pursuant to employee stock purchase plan                                                 |                                 |                                                                                                                    | 37       |                     |        |      | 10     |        |        |      | 16     |       
|                                                                                  |                                                                                           | Issued pursuant to 401(k) plan                                                                  |                                 |                                                                                                                    | 98       |                     |        |      | 25     |        |        |      | 30     |       
|                                                                                  |                                                                                           |                                                                                                 |                                 |                                                                                                                    |          |                     |        |      |        |        |        |     
|                                                                                  |                                                                                           |                                                                                                 | Basic weighted average shares   |                                                                                                                    |          | 23,423              |        |      |        | 22,446 |        |      |        | 20,372 |       
|                                                                                  |                                                                                           |                                                                                                 |                                 |                                                                                                                    |          |                     |        |      |        |        |        |     
|Weighted average shares  diluted:                                                |                                                                                           |                                                                                                 |                                 |                                                                                                                    |          |                     |        |      |        |        |        |     
|                                                                                  |                                                                                           | Basic from above                                                                                |                                 |                                                                                                                    | 23,423   |                     |        |      | 22,446 |        |        |      | 20,372 |       
|                                                                                  |                                                                                           | Effect of stock options and warrant                                                             |                                 |                                                                                                                    |         |                     |        |      |       |        |        |      | 959    |       
|                                                                                  |                                                                                           |                                                                                                 |                                 |                                                                                                                    |          |                     |        |      |        |        |        |     
|                                                                                  |                                                                                           |                                                                                                 | Diluted weighted average shares |                                                                                                                    |          | 23,423              |        |      |        | 22,446 |        |      |        | 21,331 |       
|                                                                                  |                                                                                           |                                                                                                 |                                 |                                                                                                                    |          |                     |        |      |        |        |        |     
|Earnings (loss) per share  basic and diluted:                                    |                                                                                           |                                                                                                 |                                 |                                                                                                                    |          |                     |        |      |        |        |        |     
|                                                                                  | Income (loss) before preferred share accretion
and cumulative effect of accounting change |                                                                                                 | $                               | (1.27                                                                                                              | )        |                     | $      | .02  |        |        | $      | .09  |       
|                                                                                  | Preferred shares accretion                                                                |                                                                                                 |                                 | (.12                                                                                                               | )        |                     |        | (.12 | )      |        |        | (.08 | )     
|                                                                                  |                                                                                           |                                                                                                 |                                 |                                                                                                                    |          |                     |        |      |        |        |        |     
|                                                                                  | Income (loss) before cumulative effect of accounting change                               |                                                                                                 |                                 | (1.39                                                                                                              | )        |                     |        | (.10 | )      |        |        | .01  |       
|                                                                                  | Cumulative effect of accounting change                                                    |                                                                                                 |                                 | (3.04                                                                                                              | )        |                     |        | (.24 | )      |        |        |     |       
|                                                                                  |                                                                                           |                                                                                                 |                                 |                                                                                                                    |          |                     |        |      |        |        |        |     
|Earnings (loss) per share
attributable to common shareholders  basic and diluted |                                                                                           | $                                                                                               | (4.43                           | )                                                                                                                  |          | $                   | (.34   | )    |        | $      | .01    |     
|                                                                                  |                                                                                           |                                                                                                 |                                 |                                                                                                                    |          |                     |        |      |        |        |        |     

At June 30, 2002, options and warrants to purchase 3,255,047 shares of common
stock were outstanding, but were not included in the calculations of diluted
earnings per share because their inclusion would have been antidilutive.
Options to purchase 3,538,769 shares of common stock were outstanding at June
30, 2001, but were not included in the calculations of diluted earnings per
share because their inclusion would have been antidilutive.

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##### Table of Contents



Advanced Lighting Technologies, Inc.
Notes to Consolidated Financial Statements
June 30, 2002
(Dollars in thousands, except per share data)

M. Related Party Transactions

Pursuant to an agreement dated October 8, 1998, as amended, between the Company
and its Chairman and Chief Executive Officer (the CEO), the Company,
following approval by the Companys Board of Directors, has a loan recorded for
$14,144 to its CEO, including principal of $12,789 and accrued interest. The
proceeds of the loan were used by the Companys CEO to reduce the principal
balance outstanding of margin loan accounts. The CEOs margin loans were fully
repaid in the quarter ended March 31, 2002. In connection with the officer
loan, the Companys Board of Directors obtained the CEOs agreement to an
extension of his employment agreement to December 31, 2003. The loan agreement
prohibits the CEO from encumbering his shares of the Companys Common Stock in
any manner without the consent of the Companys Board of Directors.

The CEO has paid accrued interest of $720 on the loan through October 6, 1999.
On July 26, 2002, the Company and CEO executed an amendment to the loan
documents, implementing the agreement in principle, reached in January 2002, to
extend the maturity of the loan to July 31, 2007. Under the terms of the
amendment, the CEO will sell certain assets in an orderly manner in order to
maximize the net proceeds, which will be used to pay a portion of the loan.
The CEO will continue his 10b5-1 plan to sell shares he now owns pursuant to
Rule 144 when the stock price exceeds $15 per share. In addition, the CEO has
agreed to apply any after-tax cash bonuses earned from the Company toward
repayment of the loan. Interest on the loan now accrues at the same rate that
the Company pays on its revolving credit loan and totaled $674 in fiscal 2002.
During fiscal 2002, no interest income was recognized or paid on the loan. The
loan may be accelerated if the CEO ceases to be employed by the Company as a
result of his voluntary resignation or termination for cause. The Board
reserved the right to demand payment to prevent an unacceptable strain on cash
resources.

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

During fiscal 2002, in accordance with the provisions of FAS Statement No. 5,
Accounting for Contingencies, and FAS Statement No. 114, Accounting by
Creditors for Impairment of a Loan, the Company recorded a valuation reserve
for an impaired loan of $7,100 related to the amount by which the carrying
value of the loan exceeded the underlying estimated fair value of the assets
available to repay the loan. The Company will recognize recoveries on amounts
previously reserved after considering both the fair value of the underlying
assets and evidence of cash repayments on the loan.

The Company had sales to GE (materials, lamps and lamp components) totaling
$5,903 in fiscal 2002, $7,575 in fiscal 2001 and $7,869 in fiscal 2000. The
Company purchased lamps and raw materials from GE totaling $3,353 in fiscal
2002, $9,396 in fiscal 2001 and $13,928 in fiscal 2000. Included in the
balance sheet caption of trade receivables are receivables from GE in the
amount of $2,060 at

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##### Table of Contents



Advanced Lighting Technologies, Inc.
Notes to Consolidated Financial Statements
June 30, 2002
(Dollars in thousands, except per share data)

M. Related Party Transactions (continued)

June 30, 2002 and $1,942 at June 30, 2001. Included in the balance sheet
caption of trade payables are payables to GE of $1,962 at June 30, 2002 and
$3,318 at June 30, 2001.

The Company had sales to Ruud Lighting (primarily lamps and power supplies)
totaling $4,134 subsequent to the sale of Ruud Lighting in December 2001. The
Company purchased fixtures from Ruud Lighting totaling $1,500 during the same
period. Included in the balance sheet caption of trade receivables are
receivables from Ruud Lighting in the amount of $1,350 at June 30, 2002.
Included in the balance sheet caption of trade payables are payables to Ruud
Lighting of $927 at June 30, 2002.

During May 1998, the Company began to charter airplanes from an unrelated
company. This unrelated company leased the airplanes from an affiliate of the
Company owned by certain officers of the Company. These officers guaranteed
the repayment of $6,400 of indebtedness incurred by the affiliate to purchase
an airplane. The airplanes have been sold and no further costs related thereto
are being incurred. Fees paid by the Company under these arrangements were $56
in fiscal 2001 and $474 in fiscal 2000.

The Company incurred fees for consulting services to two directors of the
Company and to a consulting firm owned by another director of the Company. The
fees totaled $400 in fiscal 2002, $201 in fiscal 2001, and $203 in fiscal 2000.

The Company sold lamps and lamp components to an overseas company aggregating
$1,373 in fiscal 2001 and $1,194 in fiscal 2000. The Company purchased lamps
from this overseas company aggregating $1,377 in fiscal 2001 and $1,108 in
fiscal 2000. An executive officer and director of the overseas company was a
Director of the Company from January 1996 until January 2001.

During fiscal 1996, one of the Companys subsidiaries sold the assets of its
non-lamp product line to an affiliate of the Company owned principally by
certain officers of the Company for an amount equal to the carrying amount of
such assets as of June 30, 1995. As of June 30, 2002 and 2001, the Company had
an 8.5% note from the affiliate for $220 related to the sale of the assets of
the non-lamp product line which is recorded as a long-term receivable from
related parties in the consolidated balance sheet. Total principal and accrued
interest at June 30, 2002 was $322.

N. Commitments

The Company leases buildings and certain equipment under non-cancelable
operating lease agreements. The Company paid $1,150 in April 2001 for a
non-refundable option to purchase for $11,500 a building currently leased by
DSI. The cost of the option, if exercised, will be applied to the purchase
price of the building. The option expires in April 2004. Total rent expense
was $2,764 in 2002, $2,212 in 2001, and $1,778 in 2000. Future minimum lease
commitments for the five fiscal years subsequent to June 30, 2002, were as
follows: 2003  $2,050; 2004  $1,437; 2005  $1,378; 2006  $1,361; 2007
 $1,286; thereafter  $5,228; Total  $12,740.

F-30



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##### Table of Contents



Advanced Lighting Technologies, Inc.
Notes to Consolidated Financial Statements
June 30, 2002
(Dollars in thousands, except per share data)

O. Quarterly Results of Operations (Unaudited)

The following is a summary of the quarterly results of operations for the years
ended June 30, 2002 and 2001:

|                                                                                            |      |   |                                 |      |            |   |            |      |            |   |        |      |  |   |         |      | 
|------------------------------------------------------------------------------------------- | ---- | - | ------------------------------- | ---- | ---------- | - | ---------- | ---- | ---------- | - | ------ | ---- |  | - | ------- | ---- | 
|                                                                                            |      |   | Fiscal 2002, Three Months Ended
|                                                                                            |      |   |                                
|                                                                                            |      |   | Jun 30 (a)                      |      | Mar 31 (b) |   | Dec 31 (c) |      | Sep 30 (d)
|                                                                                            |      |   |                                 |      |            |   |            |      |           
|Net sales                                                                                   |      | $ | 32,443                          |      |            | $ | 33,841     |      |            | $ | 48,804 |      |  | $ | 51,890  |     
|Gross profit                                                                                |      |   | 11,176                          |      |            |   | 11,135     |      |            |   | 17,641 |      |  |   | 17,900  |     
|Income (loss) before cumulative
effect of accounting change                                 |      |   | (7,144                          | )    |            |   | (5,660     | )    |            |   | (1,365 | )    |  |   | (15,657 | )   
|Net income (loss)                                                                           |      | $ | (7,144                          | )    |            | $ | (5,660     | )    |            | $ | (1,365 | )    |  | $ | (86,828 | )   
|                                                                                            |      |   |                                 |      |            |   |            |      |            |   |        |      |  |   |         |     
|Earnings (loss) per share before cumulative effect
of accounting change  basic and diluted |      | $ | (.33                            | )    |            | $ | (.27       | )    |            | $ | (.09   | )    |  | $ | (1.06   | )   
|                                                                                            |      |   |                                 |      |            |   |            |      |            |   |        |      |  |   |         |     
|Price Range of Common Stock:                                                                |      |   |                                 |      |            |   |            |      |            |   |        |      |  |   |         |     
|                                                                                            | High |   | $                               | 1.72 |            |   | $          | 1.94 |            |   | $      | 2.40 |  |   | $       | 5.86 | 
|                                                                                            | Low  |   |                                 | 0.65 |            |   |            | 0.56 |            |   |        | 1.10 |  |   |         | 1.30 | 

|                                                                                            |      |   |                                 |      |        |   |        |      |        |   |        |       |  |   |        |       | 
|------------------------------------------------------------------------------------------- | ---- | - | ------------------------------- | ---- | ------ | - | ------ | ---- | ------ | - | ------ | ----- |  | - | ------ | ----- | 
|                                                                                            |      |   | Fiscal 2001, Three Months Ended
|                                                                                            |      |   |                                
|                                                                                            |      |   | Jun 30 (e)                      |      | Mar 31 |   | Dec 31 |      | Sep 30
|                                                                                            |      |   |                                 |      |        |   |        |      |       
|Net sales                                                                                   |      | $ | 54,751                          |      |        | $ | 53,890 |      |        | $ | 57,036 |       |  | $ | 53,771 |      
|Gross profit                                                                                |      |   | 20,188                          |      |        |   | 21,301 |      |        |   | 22,398 |       |  |   | 20,923 |      
|Income (loss) before cumulative
effect of accounting change                                 |      |   | (393                            | )    |        |   | (75    | )    |        |   | 1,260  |       |  |   | (521   | )    
|Net income (loss)                                                                           |      | $ | (393                            | )    |        | $ | (75    | )    |        | $ | 1,260  |       |  | $ | (521   | )    
|                                                                                            |      |   |                                 |      |        |   |        |      |        |   |        |       |  |   |        |      
|Earnings (loss) per share before cumulative effect
of accounting change  basic and diluted |      | $ | (.04                            | )    |        | $ | (.03   | )    |        | $ | .03    |       |  | $ | (.05   | )    
|                                                                                            |      |   |                                 |      |        |   |        |      |        |   |        |       |  |   |        |      
|Price Range of Common Stock:                                                                |      |   |                                 |      |        |   |        |      |        |   |        |       |  |   |        |      
|                                                                                            | High |   | $                               | 6.73 |        |   | $      | 9.88 |        |   | $      | 12.81 |  |   | $      | 19.94 | 
|                                                                                            | Low  |   |                                 | 3.90 |        |   |        | 4.00 |        |   |        | 4.00  |  |   |        | 11.31 | 



|(a) |  | Fourth Quarter 2002  Net income was reduced by: (i) asset impairment of $(1,552) related to certain
telecommunication equipment, (ii) provision for loan impairment of $(1,600), and (iii) the write-off
of deferred loan fees related to the Bank Credit Facility $(532).                                                          
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Third Quarter 2002  Net income was reduced by: (i) provision for loan impairment of $(900)
and (ii) loss on sale of preferred stock investment of $(2,007).                                                                                                                                                                         
|   
|(c) |  | Second Quarter 2002  Net income was increased by a gain from sale of fixture subsidiaries of $227.                                                                                                                                                                                                                                  
|   
|(d) |  | First Quarter 2002  Net income was reduced by: (i) special charges and asset impairmen of $(9,697)
related to consolidation of power supply production operations and restructuring of worldwide
operations and (ii) provision for loan impairment of $(4,600). Net income was increased by a gain on
settlement of lawsuit of $554.
|   
|(e) |  | Fourth Quarter 2001  Net income was increased by a gain on sale of property of $1,115.                                                                                                                                                                                                                                              

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##### Table of Contents



Advanced Lighting Technologies, Inc.
Notes to Consolidated Financial Statements
June 30, 2002
(Dollars in thousands, except per share data)

P. Segment and Geographic Information

The Company has one reportable business segment: the design, manufacture and
sales of metal halide lighting products including materials, system components,
systems and production equipment. The Companys telecommunications business
unit does not meet reportable operating segment criteria and has been
aggregated in the following information.

Net sales by country, based on the location of the business unit, for fiscal
2002, 2001, and 2000 follows:

|               |  |                     |         |      |  |      |         |  |  |   |         | 
|-------------- |  | ------------------- | ------- | ---- |  | ---- | ------- |  |  | - | ------- | 
|               |  | Year Ended June 30,
|               |  |                    
|               |  | 2002                |         | 2001 |  | 2000
|               |  |                     |         |      |  |     
|United States  |  | $                   | 111,144 |      |  | $    | 165,698 |  |  | $ | 170,887 | 
|Canada         |  |                     | 23,058  |      |  |      | 18,802  |  |  |   | 22,624  | 
|United Kingdom |  |                     | 20,040  |      |  |      | 20,831  |  |  |   | 21,450  | 
|Australia      |  |                     | 11,304  |      |  |      | 11,864  |  |  |   | 11,837  | 
|Other          |  |                     | 1,432   |      |  |      | 2,253   |  |  |   | 1,798   | 
|               |  |                     |         |      |  |      |         |  |  |   |         | 
|               |  | $                   | 166,978 |      |  | $    | 219,448 |  |  | $ | 228,596 | 
|               |  |                     |         |      |  |      |         |  |  |   |         | 

Long-lived assets by country, based on the location of the asset, as of June
30, 2002 and 2001 follows:

|               |  |          |         |      |  |   |         | 
|-------------- |  | -------- | ------- | ---- |  | - | ------- | 
|               |  | June 30,
|               |  |         
|               |  | 2002     |         | 2001
|               |  |          |         |     
|United States  |  | $        | 90,831  |      |  | $ | 184,326 | 
|Canada         |  |          | 3,202   |      |  |   | 2,521   | 
|United Kingdom |  |          | 1,265   |      |  |   | 5,798   | 
|Australia      |  |          | 3,811   |      |  |   | 3,899   | 
|India          |  |          | 15,681  |      |  |   | 13,021  | 
|Other          |  |          |        |      |  |   | 1,615   | 
|               |  |          |         |      |  |   |         | 
|               |  | $        | 114,790 |      |  | $ | 211,180 | 
|               |  |          |         |      |  |   |         | 

In fiscal 2002, 2001, and 2000, no single customer accounted for 10% or more of
the Companys net sales.

Q. Contingency

On September 11, 2002, the Company entered into an agreement to settle all
pending shareholder litigation, described below, subject to the execution of
final settlement documents and court approval. The agreement to settle these
lawsuits calls for a payment of $8.4 million in cash, all of which is to be
paid by the Companys insurance carriers. The agreement does not constitute any
admission of wrongdoing on the part of the Company or the individual
defendants.

In April and May 1999, three class action suits were filed in the United States
District Court, Northern District of Ohio, by certain alleged shareholders of
the Company on behalf of themselves and purported

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##### Table of Contents



Advanced Lighting Technologies, Inc.
Notes to Consolidated Financial Statements
June 30, 2002
(Dollars in thousands, except per share data)

Q. Contingency (continued)

classes consisting of Company shareholders, other than the defendants and their
affiliates, who purchased stock during the period from December 30, 1997
through September 30, 1998 or various portions thereof. A First Amended Class
Action Complaint, consolidating the three lawsuits, was filed on September 30,
1999. The named defendants in the case  styled In re Advanced Lighting
Technologies, Inc. Securities Litigation, Master File No. 1:99CV836,pending
before the United States District Court, Northern District of Ohio  are the
Company and its Chairman and Chief Executive Officer (CEO).
The First Amended Class Action Complaint alleged generally that certain
disclosures attributed to the Company contained misstatements and omissions
alleged to be violations of Section 10(b) of the Securities Exchange Act of
1934 and Rule 10b-5, including claims for fraud on the market arising from
alleged misrepresentations and omissions with respect to the Companys
financial performance and prospects and alleged violations of generally
accepted accounting principles by, among other things, improperly recognizing
revenue and improper inventory accounting. The Complaint sought certification
of the purported class, unspecified compensatory and punitive damages, pre- and
post-judgment interest and attorneys fees and costs.

On December 4 and December 12, 2001 and January 10, 2002, separate lawsuits
were filed by separate shareholders of the Company allegedly on behalf of the
Company, derivatively, against officers and directors of the Company. The
allegations in the three cases are substantially similar, and the two cases
filed in Ohio court, Gobble v Hellman, et al. 1:02CV0076-AAand Miller v
Hellman, et al. 1:02CV342, were removed to the United States District Court,
Northern District of Ohio, where they are pending. The suit originally filed in
Federal Court, Tanigawa v Ruud, et al. 1:01CV2807, was previously voluntarily
dismissed by the plaintiff. The Company was a nominal defendant in these
actions. The individual defendants in the Tanigawacase included, among others,
Wayne R. Hellman, the Chief Executive Officer and Chairman of the Board, who is
also beneficial owner of more than 5% of the outstanding common stock of the
Company, Alan J. Ruud, former Chief Operating Officer and Vice Chairman of the
Board, who is also beneficial owner of more than 5% of the outstanding common
stock of the Company, and Messrs. Francis H. Beam, John E. Breen, John R.
Buerkle, Theodore A. Filson, Louis S. Fisi, Thomas K. Lime and A Gordon
Tunstall, directors of the Company. The Gobbleand Millercomplaints named the
same defendants, but also named Steven C. Potts, who is Chief Financial Officer
and is a former director.

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

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

F-33



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##### Table of Contents






Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

None.




PART III




Item 10. Directors and Officers of the Registrant

The following table sets forth certain information regarding each of the
Companys current directors and executive officers:

|                         |  |     |    |          |  |                                       |  |  |      |            |  | 
|------------------------ |  | --- | -- | -------- |  | ------------------------------------- |  |  | ---- | ---------- |  | 
|                         |  |     |    |          |  |                                       |  |  |      | Director's
|Name                     |  | Age |    | Position |  | Term Expires                         
|                         |  |     |    |          |  |                                      
|Wayne R. Hellman         |  |     | 56 |          |  | Chief Executive Officer and           |  |  | 2004 |           
|                         |  |     |    |          |  | Chairman of the Board of Directors    |  |  |      |           
|Francis H. Beam          |  |     | 66 |          |  | Director                              |  |  | 2003 |           
|John E. Breen            |  |     | 57 |          |  | Director                              |  |  | 2002 |           
|Theodore A. Filson       |  |     | 63 |          |  | Director                              |  |  | 2004 |           
|Louis S. Fisi            |  |     | 67 |          |  | Director                              |  |  | 2003 |           
|John Gonzalez            |  |     | 71 |          |  | Director                              |  |  | 2002 |           
|James E. Mohn            |  |     | 54 |          |  | Director                              |  |  | 2004 |           
|A Gordon Tunstall        |  |     | 58 |          |  | Director                              |  |  | 2002 |           
|Lee Bartolomei*          |  |     | 63 |          |  | Vice President                        |  |  |      |           
|Wayne Platt*             |  |     | 63 |          |  | Vice President                        |  |  |      |           
|Steven C. Potts*         |  |     | 49 |          |  | Chief Financial Officer and Treasurer |  |  |      |           
|James Schoolenberg*      |  |     | 59 |          |  | Vice President                        |  |  |      |           
|* Executive officer only |  |     |    |          |  |                                       |  |  |      |            |  | 

Wayne R. Hellmanhas served as the chief executive and a director of the
Company since 1995 and as chief executive or other senior officer of each of
the Companys predecessor companies since 1983. From 1968 to 1983 he was
employed by the lighting division (GE Lighting) of General Electric Company.
While at General Electric, Mr. Hellman served as Manager of Strategy Analysis
for the Lighting Business Group; Manager of Engineering for the Photo Lamp
Department; Halarc Project Venture Manager; Manager of Quartz Halogen
Engineering and Manager of Metal Halide Engineering. As the Halarc Project
Venture Manager, he was given the responsibility of developing metal halide
technology. Mr. Hellman is also currently a director of Fiberstars, Inc., a
manufacturer and marketer of fiber optic lighting systems. The Company owns
approximately 20% of the issued and outstanding shares of Fiberstars, Inc. In
1998, Mr. Hellman married Diane Mazzola, who is Mr. Fisis step-daughter.

Francis H. Beamhas served as a director of the Company since 1995. From 1988
to 1999, Mr. Beam served as President of Pepper Capital Corp., a venture
capital firm which he formed. Mr. Beam retired from Pepper Capital effective at
the end of 1999. Mr. Beam is also a director of The Lamson & Sessions Co., a
manufacturer of thermoplastic conduit and pipe, enclosures, wiring devices and
accessories. From 1959 to 1988 he was employed by Ernst &Young LLP (and its
predecessors). Beginning in 1967 he held various partnership positions with
that firm until his retirement in 1988 as Vice Chairman and Regional Managing
Partner.

John E. Breenwas appointed to the Companys Board in December 1999. Dr. Breen
served as Vice President of Technology for GE Lighting from 1990 until his
retirement in 1998. Dr. Breen spent 26

58



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##### Table of Contents



years at GE Lighting focused on technology for all lighting applications and on new product introductions.

Theodore A. Filsonhas been a director of the Company since 1995. Mr. Filson
has served as an independent consultant to the lighting industry since 1994.
From 1986 to 1994 he was employed as president and chief executive officer of
Advance Transformer, Inc., the largest manufacturer of lighting system power
supplies in the world.

Louis S. Fisiserved as the executive vice president of the Company from 1995
until his retirement in 1999, and has served as a director of the Company since
1995. He has also served as chief financial officer of the Company from 1995 to
November 1996 and chief financial officer of one or more of the Companys
predecessors from 1985 to November 1996, and assisted Mr. Hellman in the
founding of the predecessors. From 1976 to 1985, Mr. Fisi was employed in
executive and financial capacities by the Smithers Company, an international
industrial company. From 1967 to 1976, he was employed as a certified public
accountant by an international accounting and consulting firm currently known
as Ernst & Young LLP.

John Gonzalezretired as Vice Chairman of Lincoln Electric Company in 1994, a
position which he had held since 1991. Prior to his appointment as Vice
Chairman Mr. Gonzalez had held various management positions with Lincoln
Electric since joining that company in 1953. Following his retirement, Mr.
Gonzalez has been an executive consultant to public and private companies. Mr.
Gonzalez joined the Board in January 2001, to fill the unexpired term of Mr.
Harada.

James E. Mohnretired from General Electric in 2001 as President and CEO at GE
Capital Information Technology Solutions. During his 32 year GE career he spent
over 16 years at GE Lighting, including nine years as vice president and chief
financial officer. He currently provides productivity consulting services to
public and private companies. Mr. Mohn joined the Board in February 2002 to
fill the unexpired term of Mr. Thomas K. Lime.

A Gordon Tunstallhas served as a director of the Company since June 1996. He
is the founder of, and for more than 20 years has served as President of
Tunstall Consulting, Inc., a provider of strategic consulting and financial
planning services. Mr. Tunstall is also currently a director of Kforce Inc., a
professional and technical placement firm; JLM Industries, Inc., a manufacturer
and marketer of performance chemicals and specialty plastics, and Horizon
Medical Products, a medical device manufacturer and distributor.

Lee Bartolomeihas been President of Deposition Sciences, Inc. since its
formation in 1985. Prior to that, Mr. Bartolomei was employed by Optical
Coating Laboratory, Inc., where his last position was Senior Vice President of
Operations. Mr. Bartolomei holds several patents for thin film components and
processing.

Wayne Plattjoined Venture Lighting International as President in 1998. From
1996 to 1997, he served as Vice President of Manufacturing and Engineering of
Sylvania Lighting International in Geneva, Switzerland. Prior to that, he
served for eight years as Plant Manager of the High Intensity Discharge
division of Osram Sylvania in New Hampshire.

Steven C. Pottsjoined the Company as Chief Financial Officer and Treasurer in
October 2000. Mr. Potts served as a Director of the Company from his
appointment on January 22, 2002, to fill the vacancy created by the resignation
of Mr. Alan J. Ruud, until he resigned May 29,2002. Before joining the Company,
Mr. Potts served in several financial positions for General Dynamics, Inc. from
1975 until
59Table of Contents1999.     From 1995 to 1999, Mr. Potts served as Vice President of
Finance and Controller of General Dynamics, Land Systems Division. In this
position, Mr. Potts was responsible for directing financial operations and
information resource management for Land Systems and played a key role in
domestic and international acquisitions for General Dynamics.James Schoolenbergjoined APL Engineered Materials, Inc. in 1975 and has served
as President and Chief Executive Officer of APL since 1994. He holds a Bachelor
of Arts degree with majors in Physics and Chemistry. Prior to joining APL, Mr.
Schoolenberg was a faculty member of the Physics Department at Western Michigan
University. Mr. Schoolenberg was responsible for the development of numerous
new techniques and procedures improving the efficiency of production runs and
the quality of APLs metal halide products.SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCESection 16(a) of the Securities Exchange Act of 1934 (the Exchange Act)
requires the Companys executive officers and directors, and persons who own
more than ten percent of a registered class of the Companys equity securities,
to file reports of ownership with the Securities and Exchange Commission and
the Nasdaq National Market. Specific due dates for these reports have been
established, and the Company is required to report any failure to file by those
dates during fiscal 2002. All of these fiscal 2002 filing requirements were
satisfied by the Companys Executive Officers and directors, and persons who
own more than ten percent of a registered class of the Companys equity
securities.
Item 11. Executive CompensationCOMPENSATION OF EXECUTIVE OFFICERSThe following tables set forth certain information with respect to all
compensation paid or earned for services rendered to the Company in all
capacities for the fiscal years ended June 30, 2002, 2001 and 2000 by the
Companys Executive Officers. The Company has not granted any stock
appreciation rights, nor does it have any defined benefit employee pension
plan.SUMMARY COMPENSATION TABLE

|                            |                        |                                       |      |        |      |       |         |                         |         |     |   |   |   |  |   |              |         |  |    |    |    |  
|--------------------------- | ---------------------- | ------------------------------------- | ---- | ------ | ---- | ----- | ------- | ----------------------- | ------- | --- | - | - | - |  | - | ------------ | ------- |  | -- | -- | -- | -
|                            |                        |                                       |      |        |      |       |         | Annual Compensation ($)
|                            |                        |                                       |      |        |      |       |         |                        
|                            |                        |                                       |      |        |      |       |         |                         |         |     |   |   |   |  |   | Other Annual
|Name and Principal Position |                        | Year                                  |      | Salary |      | Bonus |         | Compensation           
|                            |                        |                                       |      |        |      |       |         |                        
|Wayne R. Hellman            |                        |                                       | 2002 |        |      | $     | 250,000 | (1)                     |         |     |  |   |   |  |  |              |         |  | (2 | ) 
|                            |                        | Chairman and Chief Executive Officer  |      |        | 2001 |       |         |                         | 237,061 | (1) |   |   |  |  |   |              |        |  |    |    | (2 | )
|                            |                        |                                       | 2000 |        |      |       | 218,514 | (1)                     |         |     |  |   |   |  |  |              |         |  | (2 | ) 
|                            | Steven C. Potts (3)    |                                       |      | 2002   |      |       |         | 190,192                 |         |     |   |  |   |  |   |             |         |  |    | (2 | ) 
|                            |                        | Chief Financial Officer and Treasurer |      |        | 2001 |       |         |                         | 114,423 |     |   |   |  |  |   | $            | 135,877 |  |    |    | (4 | )
|                            | Lee Bartolomei (5)     |                                       |      | 2002   |      |       |         | 166,154                 |         |     |   |  |   |  |   |             |         |  |    | (2 | ) 
|                            |                        | Vice President                        |      |        |      |       |         |                         |         |     |   |   |   |  |   |              |         |  |    |    |    |  
|                            | Wayne Platt (5)        |                                       |      | 2002   |      |       |         | 182,358                 |         |     |   |  |   |  |   |             |         |  |    | (2 | ) 
|                            |                        | Vice President                        |      |        |      |       |         |                         |         |     |   |   |   |  |   |              |         |  |    |    |    |  
|                            | James Schoolenberg (5) |                                       |      | 2002   |      |       |         | 179,318                 |         |     |   |  |   |  |   |             |         |  |    | (2 | ) 
|                            |                        | Vice President                        |      |        |      |       |         |                         |         |     |   |   |   |  |   |              |         |  |    |    |    |  

60



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##### Table of Contents



SUMMARY COMPENSATION TABLE (Continued)

|                            |                        |                                       |      |            |      |             |                        |             |         |                  |         |        |         |           |   |   |   |  |   |       |       |       |    |   |  | 
|--------------------------- | ---------------------- | ------------------------------------- | ---- | ---------- | ---- | ----------- | ---------------------- | ----------- | ------- | ---------------- | ------- | ------ | ------- | --------- | - | - | - |  | - | ----- | ----- | ----- | -- | - |  | 
|                            |                        |                                       |      |            |      |             | Long-Term Compensation
|                            |                        |                                       |      |            |      |             |                       
|                            |                        |                                       |      |            |      |             | Awards                 |             | Payouts
|                            |                        |                                       |      |            |      |             |                        |             |        
|                            |                        |                                       |      |            |      |             |                        | Restricted  |         | Securities       |         |        |         |           |   |   |   |  |   |       |       |      
|                            |                        |                                       |      |            |      |             |                        | Stock       |         | Underlying       |         | LTIP   |         | All Other
|Name and Principal Position |                        | Year                                  |      | Awards ($) |      | Options (#) |                        | Payouts ($) |         | Compensation ($)
|                            |                        |                                       |      |            |      |             |                        |             |         |                  |         |       
|Wayne R. Hellman            |                        |                                       | 2002 |            |      |             |                       |             |         |                  | 800,000 | (6)    |         |           |  |   |   |  | $ | 358   | (7    | )     |    |  
|                            |                        | Chairman and Chief Executive Officer  |      |            | 2001 |             |                        |             |        |                  |         |        | 750,000 | (8)       |   |   |  |  |   |       |       | 4,918 | (7 | ) |  | 
|                            |                        |                                       | 2000 |            |      |             |                       |             |         |                  | 200,000 | (6)    |         |           |  |   |   |  |   | 2,986 | (7    | )     |    |  
|                            | Steven C. Potts (3)    |                                       |      | 2002       |      |             |                        |            |         |                  |         |       |         |           |   |  |   |  |   |       |      |       |    |   | 
|                            |                        | Chief Financial Officer and Treasurer |      |            | 2001 |             |                        |             |        |                  |         |        | 50,000  | (6)       |   |   |  |  |   |       |       |      |    |   |  | 
|                            |                        |                                       |      |            |      |             |                        |             |         |                  | 15,000  | (8)    |         |           |   |   |   |  |   |       |       |       |    |  
|                            | Lee Bartolomei (5)     |                                       |      | 2002       |      |             |                        |            |         |                  |         | 30,000 | (6)     |           |   |  |   |  |   |       | 5,536 | (7    | )  |   | 
|                            |                        | Vice President                        |      |            |      |             |                        |             |         |                  |         |        |         |           |   |   |   |  |   |       |       |       |    |   |  | 
|                            | Wayne Platt (5)        |                                       |      | 2002       |      |             |                        |            |         |                  |         | 90,000 | (6)     |           |   |  |   |  |   |       |      |       |    |   | 
|                            |                        | Vice President                        |      |            |      |             |                        |             |         |                  |         |        |         |           |   |   |   |  |   |       |       |       |    |   |  | 
|                            | James Schoolenberg (5) |                                       |      | 2002       |      |             |                        |            |         |                  |         | 50,000 | (6)     |           |   |  |   |  |   |       | 5,380 | (7    | )  |   | 
|                            |                        | Vice President                        |      |            |      |             |                        |             |         |                  |         |        |         |           |   |   |   |  |   |       |       |       |    |   |  | 



|(1) |  | Mr. Hellman is a party to an Employment Agreement with the Company. The
Employment Agreement had an initial term expiring December 31, 1998. In
fiscal 1999, Mr. Hellmans Employment Agreement was extended through
December 31, 2003. Through this Employment Agreement, Mr. Hellman is
entitled to receive annual base compensation of $195,000. In addition, Mr.
Hellman is entitled to receive a bonus in amounts determined by the
Compensation Committee. This Employment Agreement provides for annual
increases in annual base compensation in amounts determined by the
Compensation Committee during the term of this Employment Agreement.
During fiscal 2002, Mr. Hellmans annual base compensation was set at
$250,000. The Compensation Committee has not yet determined whether there
will be an increase in compensation for Mr. Hellman in fiscal 2003. Also
includes compensation deferred pursuant to the Companys 401(k) deferred
compensation plan. Under the Employment Agreement, Mr. Hellman
participates in Company sponsored life, health, and disability insurance
coverage.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Perquisites provided to these executive officers consisted primarily of
life, dental and medical insurance costs, the total of which did not
exceed 10% of the persons salary and bonus.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|(3) |  | Mr. Potts was elected to the office of Chief Financial Officer effective
on October 20, 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(3) |  | Perquisites included relocation expenses of $131,251, and life, dental
and medical insurance costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(5) |  | Each was appointed as an executive officer of the Company on January 22,
2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|(6) |  | Options to purchase shares of common stock of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(7) |  | Company contributions to the 401(k) plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|(8) |  | Options to purchase shares of common stock of Deposition Sciences, Inc.
(DSI), a subsidiary of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

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COMPANY OPTION GRANTS IN LAST FISCAL YEAR

|                   |  |                   |         |               |  |          |      |            |  |                   |     |  |  |  |           |  |  |   |         |    
|------------------ |  | ----------------- | ------- | ------------- |  | -------- | ---- | ---------- |  | ----------------- | --- |  |  |  | --------- |  |  | - | ------- | ---
|                   |  | Individual Grants |         |               |  |          |      |            |  |                   |     |  |  | 
|                   |  |                   |         |               |  |          |      |            |  |                   |     |  |  | 
|                   |  | Number of         |         | Percent of    |  |          |      |            |  |                   |     |  |  |  |           | 
|                   |  | Securities        |         | Total Options |  | Exercise |      |            |  |                   |     |  |  | 
|                   |  | Underlying        |         | Granted to    |  | or Base  |      |            |  |                   |     |  |  | 
|                   |  | Options           |         | Employees in  |  | Price    |      | Expiration |  | Grant Date       
|Name               |  | Granted (#)       |         | Fiscal Year   |  | ($/Sh)   |      | Date       |  | Present Value ($)
|                   |  |                   |         |               |  |          |      |            |  |                  
|Wayne R. Hellman   |  |                   | 800,000 | (1)           |  |          | 74.1 | %          |  | $                 | .80 |  |  |  | 6/28/2012 |  |  | $ | 384,000 | (2)
|Steven C. Potts    |  |                   |        |               |  |          |     |            |  |                   |    |  |  |  |          |  |  |   |        |    
|Lee Bartolomei     |  |                   | 30,000  | (3)           |  |          | 2.7  | %          |  |                   | .80 |  |  |  | 6/28/2012 |  |  |   | 14,400  | (2)
|Wayne Platt        |  |                   | 90,000  | (3)           |  |          | 8.0  | %          |  |                   | .80 |  |  |  | 6/28/2012 |  |  |   | 43,200  | (2)
|James Schoolenberg |  |                   | 50,000  | (3)           |  |          | 4.5  | %          |  |                   | .80 |  |  |  | 6/28/2012 |  |  |   | 24,000  | (2)



|(1) |  | This June 28, 2002 grant of non-qualified options will vest one-third each
year for three years, subject to acceleration of the vesting of one half of
the option shares upon the Companys Common Stock attaining a market value
of $6 per share and of the remaining option shares upon the Companys
Common Stock attaining a market value of $12 per share, in each case as
determined by the Companys Board of Directors or such committee thereof as
it may designate.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | The grant date value of the stock options was estimated using the
Black-Scholes option pricing model with the following assumptions: expected
volatility  78.2%; risk-free interest rate  3.8%; time of exercise  4
years; and no dividend yield.                                                                                                                                                                                                                         
|   
|(3) |  | The options, granted on June 28, 2002 as incentive options and, to the
extent the grants to Messrs. Platt and Schoolenberg exceeded the limitation
on incentive stock options under Section 422(d) of the Internal Revenue
Code, non-qualified options, will vest 25% after one year, 35% after two
years and 40% after three years.                                                                                                                                         

AGGREGATED COMPANY OPTION EXERCISES IN LAST FISCAL YEAR
AND 2002 FISCAL YEAR END COMPANY OPTION VALUES

|                   |  |              |   |              |  |                           |   |                           |  |                        |  |                      |  |  |   |  |  |  |  | 
|------------------ |  | ------------ | - | ------------ |  | ------------------------- | - | ------------------------- |  | ---------------------- |  | -------------------- |  |  | - |  |  |  |  | 
|                   |  |              |   |              |  |                           |   |                           |  | Number of Securities   |  |                      |  |  |   |  |  | 
|                   |  |              |   |              |  |                           |   |                           |  | Underlying Unexercised |  | Value of Unexercised |  |  |   | 
|                   |  | Shares       |   |              |  |                           |   | Options at Fiscal         |  | In-the-Money Options   |  |                      |  | 
|                   |  | Acquired on  |   | Value        |  | Year-End (#)              |   | at Fiscal Year-End ($)    |  |                        |  |                     
|Name               |  | Exercise (#) |   | Realized ($) |  | Exercisable/Unexercisable |   | Exercisable/Unexercisable |  |                        |  |                     
|                   |  |              |   |              |  |                           |   |                           |  |                        |  |                     
|Wayne R. Hellman   |  |              |  |              |  |                           |  |                           |  | 20,000/                |  | 980,000              |  |  | * |  |  |  |  | 
|Steven C. Potts    |  |              |  |              |  |                           |  |                           |  | 12,500/                |  | 37,500               |  |  | * |  |  |  |  | 
|Lee Bartolomei     |  |              |  |              |  |                           |  |                           |  | --- /                  |  | 30,000               |  |  | * |  |  |  |  | 
|Wayne Platt        |  |              |  |              |  |                           |  |                           |  | 20,300/                |  | 158,000              |  |  | * |  |  |  |  | 
|James Schoolenberg |  |              |  |              |  |                           |  |                           |  | --- /                  |  | 118,000              |  |  | * |  |  |  |  | 

|* |  | None of the unexercised options held were in-the-money at fiscal year-end.
|- |  | --------------------------------------------------------------------------

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DEPOSITION SCIENCES, INC. OPTION EXERCISES
IN LAST FISCAL YEAR AND 2002 FISCAL YEAR END
DEPOSITION SCIENCES INC. OPTION VALUES

|                   |  |              |   |              |  |                           |   |                           |  |                        |  |                      |  |  |   |  |  |  |  | 
|------------------ |  | ------------ | - | ------------ |  | ------------------------- | - | ------------------------- |  | ---------------------- |  | -------------------- |  |  | - |  |  |  |  | 
|                   |  |              |   |              |  |                           |   |                           |  | Number of Securities   |  |                      |  |  |   |  |  | 
|                   |  |              |   |              |  |                           |   |                           |  | Underlying Unexercised |  | Value of Unexercised |  |  |   | 
|                   |  | Shares       |   |              |  |                           |   | Options at Fiscal         |  | In-the-Money Options   |  |                      |  | 
|                   |  | Acquired on  |   | Value        |  | Year-End (#)              |   | at Fiscal Year-End ($)    |  |                        |  |                     
|Name               |  | Exercise (#) |   | Realized ($) |  | Exercisable/Unexercisable |   | Exercisable/Unexercisable |  |                        |  |                     
|                   |  |              |   |              |  |                           |   |                           |  |                        |  |                     
|Wayne R. Hellman   |  |              |  |              |  |                           |  |                           |  | --- /                  |  | 750,000              |  |  | * |  |  |  |  | 
|Steven C. Potts    |  |              |  |              |  |                           |  |                           |  | --- /                  |  | 15,000               |  |  | * |  |  |  |  | 
|Lee Bartolomei     |  |              |  |              |  |                           |  |                           |  | 777,777 /              |  | 222,223              |  |  | * |  |  |  |  | 
|Wayne Platt        |  |              |  |              |  |                           |  |                           |  | --- /                  |  | 25,000               |  |  | * |  |  |  |  | 
|James Schoolenberg |  |              |  |              |  |                           |  |                           |  | --- /                  |  | 25,000               |  |  | * |  |  |  |  | 

|* |  | All of DSIs issued and outstanding stock is held by the Company. There is
no meaningful basis on which to establish a market value per share for
purposes of determining whether or the extent to which the unexercised
options held were in-the-money at fiscal year-end.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

COMPENSATION OF DIRECTORS

All directors of the Company receive reimbursement for reasonable out-of-pocket
expenses incurred in connection with meetings of the Board of Directors. In
addition, through December 31, 2001, the nonemployee directors were compensated
$2,500 for each meeting of the full Board attended. Such directors were entitled
to a minimum of $10,000 in fiscal 2001 if they attend 75% or more meetings of
the Board and committees to which they belong or any committee. Effective
January 1, 2002, the nonemployee directors are compensated at $12,000 per year
(which was prorated for fiscal 2002), payable in cash or Company common stock,
and $1,000 for each meeting of the full Board or committee attended. No director
who is an employee of the Company receives separate compensation for services
rendered as a director. Each of the nonemployee directors of the Company was
granted options to purchase 15,000 shares of Company Common Stock in 1995 and
1996. Also, upon appointment or reelection, each of the nonemployee directors of
the Company receives an option grant under the 1998 Incentive Award Plan equal
to 5,000 shares for each year in the directors term. Non-employee directors
serving on the Executive Committee receives additional compensation of $1,000
per day for attendance at Executive Committee meetings or time spent on
Executive Committee matters.

In December 1995, the Company granted options to purchase 9,600 shares of Common
Stock at $10.00 per share under the Incentive Award Plan to each of its then
nonemployee directors (including current directors Beam and Filson), all of
which are currently exercisable. In June 1996, the Company granted options to
purchase 15,000 shares of Common Stock at $17.00 per share under the Incentive
Award Plan to Mr. Tunstall upon appointment to the Board of Directors, all of
which options are currently exercisable. In June 1996, nonemployee directors
Beam and Filson were each granted options to purchase an additional 5,400 shares
at an exercise price of $17.00 per share, all of which options are currently
exercisable. In September 1997, Mr. Filson was granted an option to purchase
30,000 shares of Common Stock at $23.75 per share, which option is currently
exercisable. In February 2000, Dr. Breen and Mr. Tunstall were each granted
options to purchase 15,000 shares of Common Stock at $6.50 per share, 9,000 of
each of which are currently exercisable; and Messrs. Fisi and Beam were each
granted options to purchase 5,000 shares at $6.50 per share, 3,000 of which are
currently exercisable. In January 2001, Messrs. Beam and Fisi were each granted
options to purchase 15,000 shares of Common Stock at $6.094 per share, 3,750 of
each of which are currently exercisable. In April 2002, Messrs. Filson and Mohn were each granted options to purchase 15,000 shares of Common Stock at $1.15 per
share.

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Concurrently, Messrs. Beam and Tunstall were each granted options to
purchase 15,000 shares of Common Stock at $1.15 per share in connection with
their respective appointments as the chairmen of the Audit and Compensation
Committees, and Mr. Beam was granted an option to purchase 35,000 shares of
Common Stock in connection with his appointment as a member of the Executive
Committee. No portion of these April 2002 option grants is currently
exercisable. No additional director options become exercisable within the 60
days of August 31, 2002. Each grant was made at the market price of the
Companys Common Stock on the date of grant. Each option vests 25% in the first
year, 35% in the second year, and 40% in the third year from the date of grant.
In connection with his appointment as Chairman of the Executive Committee of the
Companys Board of Directors, Dr. Breen was granted options to purchase 150,000
shares of Common Stock on January 22, 2002 at a price of $1.55, of which options
on 75,000 shares vested on July 23, 2002 and on the remaining 75,000 shares vest
on January 23, 2003.

In fiscal 2002, Mr. Filson provided consulting services to the Company and
received fees in the amount of $101,443. In fiscal 2002, Mr. Fisi earned
consulting fees from the Company for services under his December 31, 1999
consulting agreement with the Company and for additional consulting services
beyond the scope of that engagement in an aggregate amount of $132,500. Mr. Fisi
has agreed to provide consulting services to the Company in fiscal 2003 for a
fee of $93,000, subject to increase for consulting services beyond those to be
rendered under his consulting agreement.

EMPLOYMENT AGREEMENTS

Mr. Hellman is a party to an Employment Agreement with the Company. The
Employment Agreement had an initial term expiring December 31, 1998 but was
extended through December 31, 2003 in fiscal 1999. Through this Employment
Agreement, Mr. Hellman is entitled to receive annual base compensation of
$195,000. In addition, Mr. Hellman will be entitled to receive a bonus in
amounts determined by the Compensation Committee. This Employment Agreement
provides for annual increases in the annual base compensation as determined by
the Compensation Committee during the term of this Employment Agreement. During
fiscal 2002, Mr. Hellmans annual base compensation was set at $250,000. Mr.
Hellmans base compensation for fiscal year 2003 is currently $250,000. Under
this Employment Agreement, Mr. Hellman participates in Company sponsored life,
health and disability insurance coverage. Pursuant to this Employment Agreement,
Mr. Hellman has agreed not to compete with the Company for a period of two years
after termination of employment.

Mr. Potts is a party to an agreement with the
Company, pursuant to which the Company will employ Mr. Potts through January 14, 2003, at his
current salary of $190,000 per year, unless Mr. Potts accepts other employment prior to that
date. In addition, Mr. Potts will be entitled to salary continuation for a period of up to
six months thereafter, or, if earlier, until Mr. Potts accepts other employment. Mr. Potts
is also entitled to reimbursement of certain expenses and payment for accrued, unused
vacation.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee of the Board of Directors requires a majority to be
independent directors. During fiscal 2002, this Committee consisted of Messrs.
Tunstall, Filson and Gonzalez. Mr. Filson was a consultant to the Company during
fiscal 2002 and received consulting fees of $101,443.

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The Compensation Committee also serves as the Incentive Award Plan Committee.
The Incentive Award Plan Committee administers the 1995 Incentive Award Plan,
the 1997 Billion Dollar Market Capitalization Incentive Award Plan and the 1998
Incentive Award Plan. This committee will make all determinations as to future
grants of stock and stock options under these plans. Awards under the 1997
Billion Dollar Market Capitalization Incentive Award Plan and the 1998 Incentive
Award Plan to members of the Incentive Award Plan Committee are subject to
approval by the entire Board of Directors. Awards to any executive officer or
director under the 1995 Incentive Award Plan, the 1997 Billion Dollar Market
Capitalization Plan and the Incentive Award Plan will be approved by the entire
Board of Directors.




Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters

EQUITY COMPENSATION PLAN INFORMATION

The following table sets forth certain aggregated information with respect to
the Company compensation plans under which Company equity securities were
authorized for issuance as of the end of the Companys last fiscal year.
Information with respect to the Company equity securities issuable to employees
electing to invest therein through the Companys 401(k) plan is not required to
be included and is not reflected in the totals presented. The Company securities
issuable under all of the plans reflected in the table consist of shares of its
Common Stock, and each of such plans has been previously approved by the
Companys shareholders.

|                                                           |       |                        |                         |                    |                       |                            |                         |      |  |  |         |         | 
|---------------------------------------------------------- | ----- | ---------------------- | ----------------------- | ------------------ | --------------------- | -------------------------- | ----------------------- | ---- |  |  | ------- | ------- | 
|                                                           |       |                        | Number of Securities to |                    | Weighted-Average      |                            | Number of Securities   
|                                                           |       |                        | be Issued upon Exercise |                    | Exercise Price of     |                            | Remaining Available for
|                                                           |       |                        | of Options, Warrants    |                    | Options, Warrants and |                            | Future Issuance under  
|Plan Category                                              |       | and Rights Outstanding |                         | Rights Outstanding |                       | Equity Compensation Plans*
|                                                           |       |                        |                         |                    |                       |                           
|Equity compensation
plans approved by
security holders     |       |                        | 3,255,047               |                    |                       | $                          | 8.17                    |      |  |  | 708,885 |        
|Equity compensation
plans not approved
by security holders |       |                        | **                      |                    |                       |                            | **                      |      |  |  | **      |        
|                                                           | Total |                        |                         | 3,255,047          |                       |                            | $                       | 8.17 |  |  |         | 708,885 | 

|*  |  | The number of securities shown in this column includes 163,461 shares which
were available at June 30, 2002 for issuance under the Companys employee
stock purchase plan after giving effect to the employee purchases
thereunder through the June 2002 monthly plan purchase period. The plans
(other than the employee stock purchase plan) under which the balance of
the securities shown are issuable provide for their issuance in the form of
either (as determined by the Compensation Committee of the Companys Board
of Directors with respect to each award or grant) awards of restricted
stock or upon the exercise of stock options granted under such plans. The
number of securities listed in this column as remaining available for
future plan issuances is exclusive of the number of securities listed in
the first column as issuable under outstanding options, warrants and
rights.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|** |  | The Company does not have any compensation plans under which its equity securities are authorized for issuance that have not been
approved by its shareholders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

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CERTAIN HOLDERS OF VOTING SECURITIES

The following table sets forth information regarding the ownership of the
Companys Common Stock as of August 31, 2002, by each of the continuing
directors and executive officers of the Company, by each person or group known
by the Company to be the beneficial owner of more than five percent of the
Companys outstanding Common Stock, and by all directors and executive officers
of the Company as a group.

|                                                                        |  |        |           |       |  |                               |      |            |  |  |      |  
|----------------------------------------------------------------------- |  | ------ | --------- | ----- |  | ----------------------------- | ---- | ---------- |  |  | ---- | -
|                                                                        |  |        |           |       |  | Shares Beneficially Owned (2)
|                                                                        |  |        |           |       |  |                              
|                                                                        |  |        |           |       |  | Percent of                    |      | Percent of
|Name and Address (1)                                                    |  | Number |           | Class |  | Voting Power                 
|                                                                        |  |        |           |       |  |                              
|Wayne R. Hellman (3)                                                    |  |        | 1,970,795 | (5)   |  |                               | 8.2  | %          |  |  | 7.3  | %
|Steven C. Potts                                                         |  |        | 12,500    |       |  |                               | *    |            |  |  | *    |  
|Francis H. Beam                                                         |  |        | 30,750    |       |  |                               | *    |            |  |  | *    |  
|John E. Breen                                                           |  |        | 84,000    |       |  |                               | *    |            |  |  | *    |  
|Theodore A. Filson                                                      |  |        | 45,000    |       |  |                               | *    |            |  |  | *    |  
|Louis S. Fisi (4)                                                       |  |        | 126,490   |       |  |                               | *    |            |  |  | *    |  
|John Gonzalez                                                           |  |        |          |       |  |                               | *    |            |  |  | *    |  
|James E. Mohn                                                           |  |        |          |       |  |                               | *    |            |  |  | *    |  
|A Gordon Tunstall                                                       |  |        | 24,000    |       |  |                               | *    |            |  |  | *    |  
|Lee Bartolomei                                                          |  |        | 294,692   | (5)   |  |                               | 1.2  | %          |  |  | 1.1  | %
|Wayne Platt                                                             |  |        | 20,300    |       |  |                               | *    |            |  |  | *    |  
|James Schoolenberg                                                      |  |        | 15,681    | (5)   |  |                               | *    |            |  |  | *    |  
|All Directors and Executive Officers
    as a Group (12 persons) (3)(4) |  |        | 2,505,302 | (5)   |  |                               | 10.5 | %          |  |  | 9.3  | %
|General Electric Company (6)                                            |  |        | 4,475,351 |       |  |                               | 16.8 | %          |  |  | 16.8 | %
|Alan J. Ruud (7)                                                        |  |        | 3,637,000 |       |  |                               | 15.4 | %          |  |  | 13.7 | %

|* |  | Less than one percent
|- |  | ---------------------



|(1) |  | The business address of each of Messrs. Hellman, Fisi, Potts, Beam, Filson,
Gonzalez, Mohn and Platt and Dr. Breen is 32000 Aurora Road, Solon, Ohio
44139; and Mr. Tunstall Tunstall Consulting, Inc., 13153 North Dale
Mabry, Suite 200, Tampa, Florida, 33618. The business address of General
Electric Company (GE) is 3135 Easton Turnpike, Fairfield, CT 06431. The
business address of Mr. Ruud is Ruud Lighting, Inc., 9201 Washington
Avenue, Racine, Wisconsin 53406. The business address for Mr. Bartolomei is
Deposition Sciences, Inc., 3300 Coffey Lane, Santa Rosa, CA 95403. The
business address for Mr. Schoolenberg is APL Engineered Materials Inc.,
2401 N. Willow Road, Urbana, IL 61801.                                                                                                                                                                                                             
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Shares beneficially owned include the following shares which may be
acquired within 60 days of August 31, 2002 by exercise of options
granted pursuant to the incentive award plans: Mr. Hellman  20,000; Mr.
Fisi  6,750; Mr. Potts  12,500; Mr. Beam  21,750; Dr. Breen 
84,000; Mr. Filson  45,000; Mr. Tunstall  24,000; and Mr. Platt 
20,300. Shares beneficially owned by GE include 3,045,761 shares of Common
Stock which may be acquired by GE at any time upon conversion of the Series
A Stock. Percentage ownership is calculated on the basis of shares
outstanding, plus shares which may be acquired within 60 days of August 31,
2002 upon exercise or conversion by the named holder of options,
warrants and Series A Stock. Percentage voting power is calculated on the
same basis as percentage ownership, except the calculation includes for all
holders the voting power of the Series A Stock.

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|(3) |  | Includes 601,520 shares owned by Mr. Hellman individually; 125,000 shares
owned by a limited liability company (Hellman Ltd.) of which Mr. Hellman
is the manager and as to which Mr. Hellman has sole voting and investment
power; and 1,200,771 shares beneficially owned by certain shareholders of
the Company formerly held under a voting trust which expires in 2009 (the
Trust) and as to which Mr. Hellman holds an irrevocable proxy. These
shares are referred to herein as the Trust Shares. The Trust Shares
include all shares individually owned by Mr. Fisi, Mr. Brian Hellman and
Mr. Juris Sulcs and Ms. Christine Hellman, Ms. Lisa Barry and Ms. Mary
Sarver. Pursuant to the terms of the Trust and the irrevocable proxies, Mr.
Wayne Hellman is empowered to vote the Trust Shares for all purposes at his
sole discretion, but is not provided with investment power with respect to
the Trust Shares. Beneficial owners of the Trust Shares may remove the
shares from the Trust or release the shares from the irrevocable proxy, as
the case may be, to effect a bona fide sale free of the restrictions of the
Trust. All share distributions on account of the Trust Shares become
subject to the Trust, and all cash and other nonshare distributions on
account of the Trust Shares are to be paid over to the grantors of the
Trust. The expiration of the Trust may be accelerated under certain
circumstances. Mr. Hellman does not receive any compensation for serving as
voting trustee of the Trust. Mr. Hellman has granted to the GE irrevocable
proxies with respect to shares owned by him individually and by Hellman,
Ltd. and with respect to the Trust Shares. The proxies will be effective
only if the Company fails to maintain a ratio of earnings before interest,
taxes, depreciation and amortization to interest charges of 2:1 for any
two-quarter measurement period and if certain other conditions are met.
Also includes shares beneficially owned by Mr. Hellmans wife as to which
Mr. Hellman disclaims beneficial ownership, consisting of 11,818 shares
owned and 10,750 shares subject to options exercisable within 60 days of
August 31, 2002.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(4) |  | 119,740 individually owned shares are Trust Shares subject to voting
control by Mr. Hellman.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|(5) |  | Includes 936, 3,928, and 3,045 shares received pursuant to the Company
401(k) plan for Messrs. Hellman, Bartolomei and Schoolenberg, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(6) |  | Consists of 1,429,590 shares of Common Stock held by GE plus 3,045,761
shares issuable upon conversion of the Series A Stock held by GE. GE owns
100% of the issued and outstanding shares of Series A Stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|(7) |  | Includes 2,139,857 shares of Common Stock owned by Mr. Ruud individually
and 1,497,143 shares of Common Stock which are subject to the terms of a
voting trust agreement dated January 2, 1998 (the Voting Trust) or an
irrevocable proxy similar to the irrevocable proxies held by Mr. Hellman,
discussed above (collectively, the Voting Trust Shares). The purpose of
the Voting Trust Agreement and proxies is to provide Mr. Ruud with the
power to vote all of the 1,497,143 shares of Common Stock held by the
signatories to the Voting Trust Agreement. The Voting Trust Shares include
all shares individually owned by Messrs. Donald Wandler, Theodore O.
Sokoly, Christopher A. Ruud, and Ms. Cynthia A. Johnson. Mr. Ruud has
granted to GE proxies with respect to shares owned by him individually and
with respect to the Voting Trust Shares. These proxies will be effective
only if the Company fails to maintain a ratio of earnings before interest,
taxes, depreciation and amortization to interest charges of 2:1 for any
two-quarter measurement period and if certain other conditions are met.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

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Item 13. Certain Relationships and Related Transactions

CERTAIN TRANSACTIONS WITH DIRECTORS, OFFICERS AND SHAREHOLDERS

The Company was formed on May 19, 1995, and acquired ownership, primarily by
merger (the Combination) of 17 affiliated operating corporations that were
previously under common ownership and management (the Predecessors). On
September 15, 1995, one of the Predecessors transferred its nonlamp assets to
H&F Five, Inc., a company owned by Messrs. Hellman, Fisi and certain other
employees of the Company, for a demand promissory note from H&F Five, Inc. in
the amount of $200,000 bearing interest at 8.5% per annum. Total principal and
accrued interest at June 30, 2002 was $322,000, which was the largest amount
outstanding at any time during fiscal 2002.

Mr. Filson provided consulting services to the Company during fiscal 2002
through December 31, 2001, for which he received fees in the amount of $101,443.
Mr. Filsons consulting services included taking an active role in
sales/marketing through the development of key customer relationships, obtaining
commitments from customer companies to introduce new lighting products that
include ADLT components and the establishment of major sales agreements. Mr.
Filsons services during fiscal 2002 also encompassed other activities,
including joint venture activities and recruitment of key personnel.

In fiscal 2002, Mr. Fisi earned consulting fees from the Company for services
under his December 31, 1999 consulting agreement with the Company and for
additional consulting services beyond the scope of that engagement in an
aggregate amount of $132,500. Mr. Fisi has agreed to provide consulting services
to the Company in fiscal 2003 for a fee of $93,000 per fiscal year, subject to
increase for consulting services beyond those to be rendered under his
consulting agreement. The consulting services have consisted of assistance to
the Company on special projects.

Pursuant to a loan agreement dated October 8, 1998, as amended, between the
Company and Mr. Hellman, its Chairman and Chief Executive Officer (the Hellman
Loan Agreement), the Company has loaned $12,789,350 to Mr. Hellman. The loans
were made following approval by the Companys Board of Directors (Messrs.
Hellman and Fisi did not participate in the deliberations). The proceeds of the
loans were used to reduce the outstanding principal balance of a margin account
loan, which was originally secured by 2,053,070 shares of Company Common Stock
owned by Mr. Hellman and Hellman Ltd. (the Hellman Personal Shares). The
margin loans were fully repaid in the quarter ended March 31, 2002. In
connection with the original loan, the Board asked for and received Mr.
Hellmans agreement to extend the term of his employment agreement to December
31, 2003. The Hellman Loan Agreement prohibits Mr. Hellman from encumbering the
Hellman Personal Shares in any manner without consent of the Boards
representative. Mr. Hellman has paid accrued interest of $720,000 on the loan
through October 6, 1999. Loans under the Hellman Loan Agreement included loans
of $1,004,350 in fiscal 2002. At June 30, 2002, the total amount of the loan,
including accrued interest, was $14,818,623.

On July 26, 2002, the Board and Mr. Hellman executed an amendment to the Hellman
Loan Agreement implementing the agreement in principle reached in January 2002
to extend the maturity of the loan to July 31, 2007. Under the terms of the
amendment, Mr. Hellman will sell certain assets in an orderly manner in order to
maximize the net proceeds, which will be used to pay a portion of the loan. Mr.
Hellman will continue his 10b5-1 plan to sell shares he now owns pursuant to
Rule 144 when the stock price exceeds $15. In addition, Mr. Hellman will be
expected to apply after-tax cash bonuses earned from the Company toward
repayment of the loan. Interest on the loan in the future will accrue at the
same rate which the Company pays on its revolving credit facility. The loan will
be repayable immediately if Mr. Hellman ceases to be employed by the Company as
a result of his voluntary resignation or termination

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for cause. The Board of
Directors reserved the right to demand payment of the loan if the Company
requires the payment to prevent an unacceptable strain on cash resources.

Diane Hellman, Mr. Hellmans wife, has served the Company in various marketing
positions since 1985, and currently serves as Executive Vice President of Sales
and Logistics. In fiscal 2002, Mrs. Hellmans salary, benefits and perquisites
were $154,642. Matthew Mazzola, Mrs. Hellmans son, serves as Quotations Manager
for the Companys Venture Lighting International, Inc. subsidiary (Venture
Lighting International). In fiscal 2002, Mr. Mazzolas salary, benefits and
perquisites were $65,450. Josh Barry, Mr. Hellmans son-in-law, serves the
Company as Technical Leader for Venture Lighting International. In fiscal 2002,
Mr. Barrys salary, benefits and perquisites were $82,057. Michael Tommervik,
Mr. Bartolomeis stepson, serves the Company as Process Engineer for its
Deposition Sciences, Inc. subsidiary. In fiscal 2002, Mr. Tommerviks salary,
benefits and perquisites were $63,152.

The Company had sales to General Electric Company, which holds a beneficial
interest in the Common Stock of the Company in excess of 5% and 100% of the
Companys Series A Stock. The sales consisted primarily of materials, lamps and
lamp components, totaling $5,903,000 in fiscal 2002, $7,575,000 in fiscal 2001
and $7,869,000 in fiscal 2000. The Company purchased lamps and raw materials
from GE totaling $3,353,000 in fiscal 2002, $9,396,000 in fiscal 2001 and
$13,928,000 in fiscal 2000.

On December 12, 2001, the Company completed the sale of its fixture
subsidiaries, Ruud Lighting, Inc., Kramer Lighting, Inc. and Ruud Lighting
Europe (collectively, the Former Fixture Subsidiaries), to an investor group
led by Alan J. Ruud. From January 1998 until the time of the transaction, Mr.
Ruud was a director of the Company and served as Vice Chairman and Chief
Operating Officer of the Company and holds in excess of 5% of the Companys
outstanding common stock. Mr. Ruuds individual interest is approximately 51% of
the investor groups interest. The investor group includes Mr. Ruuds two
children. The Former Fixture Subsidiaries assets consisted primarily of
manufacturing equipment, inventory and accounts receivable and the Ruud Lighting
manufacturing facility located in Racine, Wisconsin.

Under the terms of the transaction, the consideration paid for these fixture
subsidiaries was $28,000,000 in cash (adjusted dollar for dollar to reflect the
amount of any changes in net working capital and funded indebtedness between
September 2, 2001 and December 3, 2001) plus a $3,000,000 subordinated note from
Ruud Lighting, Inc. and subordinated notes from each member of the investor
group, aggregating an additional $3,000,000. In addition, the Company was
relieved of its obligations regarding the funded debt of the fixture
subsidiaries, in an amount equal to approximately $9,000,000. Preliminary
estimates of the adjustment in the cash consideration resulted in a net
reduction of approximately $2,500,000 in the cash received at closing. These
preliminary estimates are subject to a review process under the agreement.

The notes from Ruud Lighting, Inc. and the investor group have a five year term.
Principal and interest are payable at maturity. The notes bear interest at 8%,
compounded semi-annually. At June 30, 2002, the outstanding principal and
accrued interest under these notes totaled $6,268,000. With regard to the notes
from the investor group, the Company may require, at any time prior to December
5, 2002, that the investors deliver Company common stock in satisfaction of the
notes at the rate of one share of Company common stock for each $2 in principal
amount. The indenture governing the Companys 8% Senior Notes currently
prohibits the acquisition by the Company of its common stock. If that
restriction lapses, or the Company receives the required consent from its Senior
Noteholders, prior to December, 2002, the Company expects to exercise its right
to acquire 1,500,000 shares of its common stock as payment in full for the
investors notes. The Company has no assurance that it will be able to exercise
its right to acquire these shares.

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The consideration was arrived at following negotiations between Messrs. Hellman
and Potts and advisors of the Company and Mr. Ruud and his advisors, based on
two guiding principles: the purchase price would have to be at least fair market
value and the Company would receive consideration of cash and shares of common
stock (in addition to cash consideration, the Company issued 3,000,000 shares of
its common stock in connection with the Companys acquisition of Ruud Lighting,
Inc. in 1998). Since the Company was unable to take its common stock from the
investor group as a portion of the consideration, the investor group agreed to
make shares available as payment for the purchase notes delivered at closing. In
the parties original letter of intent, signed September 20, 2001, the
transaction involved cash consideration of approximately $32,000,000 (subject to
the same adjustments described above), with $6,000,000 in purchase notes,
subject to payment with 3,000,000 shares of Company common stock. In
mid-October, Mr. Ruud informed the Company that he would be unable to finance
the transaction originally contemplated, and negotiations resumed, which
resulted in the revised transaction terms described above. In addition to the
changes in the payment terms described, the Company was permitted to retain the
real property used by Kramer Lighting, Inc. Upon sale of the facility, Ruud
Lighting, Inc. is entitled to one-third of the net proceeds, up to $500,000. The
Companys Board of Directors considered the alternatives to the Company
regarding the fixture subsidiaries at meetings, including meetings on October 25
and 29 and November 20, 2001. After lengthy consideration and consultation with
advisors to the Company, the Board of Directors approved the final terms of the
transaction at the special meeting held November 20, 2001.

During the remainder of fiscal 2002 following the sale, the Company had sales to
the Former Fixture Subsidiaries totaling $4,134,000, consisting primarily of
lamps and power supplies, and purchased fixtures from the Former Fixture
Subsidiaries totaling $1,500,000.

The Company does not intend to enter into any material transaction with officers
or directors, or their family members, without the approval of a majority of the
disinterested directors in the future. All above-described transactions since
March 1997 were approved by a majority of disinterested directors except Mr.
Filsons consulting service fees and the employment and compensation of the
Hellman and Bartolomei family members.

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PART IV




Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)(1) and (2). The following consolidated financial statements of Advanced
Lighting Technologies, Inc. are included in Item 8:

| |  |                                                                                                       
| |  | ------------------------------------------------------------------------------------------------------
| |  | Report of Grant Thornton LLP, Independent Auditors                                                    
| |  | Consolidated Balance Sheets as of June 30, 2002 and 2001                                              
| |  | Consolidated
Statements of Operations for the Years Ended
     June 30, 2002, 2001 and 2000           
| |  | Consolidated Statements of Shareholders Equity for the
     Years Ended June 30, 2002, 2001, and 2000
| |  | Consolidated Statements of Cash Flows for the
     Years Ended June 30, 2002, 2001 and 2000           
| |  | Notes to Consolidated Financial Statements                                                            

Financial Statement Schedules:

(2)  The following Financial Statement Schedules are included in Item 14(d):

None. All schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and therefore have been omitted.

(3)  List of Exhibits (Exhibits available upon request)

|        |     |             |  |                                                                                                                                                                                                                                |  |                 |  |     
|------- | --- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | --------------- |  | ----
|        |     |             |  |                                                                                                                                                                                                                                |  | Previous Filing
|        |     |             |  |                                                                                                                                                                                                                                |  | If             
|Exhibit |     |             |  | Incorporated                                                                                                                                                                                                                  
|Number  |     | Description |  | by Reference                                                                                                                                                                                                                  
|        |     |             |  |                                                                                                                                                                                                                               
|        | 2.1 |             |  | Stock Redemption and Purchase Agreement Among Advanced Lighting
Technologies, Inc., Ruud Lighting, Inc., and Alan J. Ruud, Susan Ruud,
Theodore O. Sokoly, Christopher A. Ruud and Cynthia A. Johnson dated
November 14, 2001. |  |                 |  | (18)
|        |     |             |  |                                                                                                                                                                                                                                |  |                 |  |     
|        | 2.2 |             |  | First Amendment to Stock Redemption and Purchase Agreement dated December
12, 2001.                                                                                                                                            |  |                 |  | (18)
|        |     |             |  |                                                                                                                                                                                                                                |  |                 |  |     
|        | 3.1 |             |  | Second Amended and Restated Articles of Incorporation filed September 26,
1995.                                                                                                                                                |  |                 |  |     
|        |     |             |  |                                                                                                                                                                                                                                |  |                 |  |     
|        | 3.2 |             |  | Certificate of Adoption of Amended Articles of Incorporation filed February
12, 1997.                                                                                                                                          |  |                 |  |     
|        |     |             |  |                                                                                                                                                                                                                                |  |                 |  |     
|        | 3.3 |             |  | Certificate of Adoption of Third Amendment to Second Amended and Restated
Articles of Incorporation filed October 6, 1999 (Form 10-Q/A Exhibit
3.2)                                                                            |  |                 |  | (8) 
|        |     |             |  |                                                                                                                                                                                                                                |  |                 |  |     
|        | 3.4 |             |  | Certificate of Adoption of Fourth Amendment to Second Amended and Restated
Articles of Incorporation filed March 16, 2000.                                                                                                     |  |                 |  | (11)

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|        |      |  |  |                                                                                                                                                                                                                             |  |                                                                                                                                                                   |     |                 |    |  
|------- | ---- |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------- | --- | --------------- | -- | -
|        |      |  |  |                                                                                                                                                                                                                             |  |                                                                                                                                                                   |     | Previous Filing
|        |      |  |  |                                                                                                                                                                                                                             |  |                                                                                                                                                                   |     | If             
|Exhibit |      |  |  |                                                                                                                                                                                                                             |  | Incorporated                                                                                                                                                     
|Number  |      |  |  | Description                                                                                                                                                                                                                 |  | by Reference                                                                                                                                                     
|        |      |  |  |                                                                                                                                                                                                                             |  |                                                                                                                                                                  
|        | 3.5  |  |  | Code
of Regulations                                                                                                                                                                                                         |  |                                                                                                                                                                   | (1  | )              
|        |      |  |  |                                                                                                                                                                                                                             |  |                                                                                                                                                                   |     |                 |    |  
|        | 4.1  |  |  | Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4 and 3.5                                                                                                                                                                    |  |                                                                                                                                                                   |     |                
|        |      |  |  |                                                                                                                                                                                                                             |  |                                                                                                                                                                   |     |                 |    |  
|        | 4.2  |  |  | Form of Stock Certificate for Common Stock of Advanced Lighting
Technologies, Inc (Form 10-K Exhibit 4.2)                                                                                                                   |  |                                                                                                                                                                   | (11 | )              
|        |      |  |  |                                                                                                                                                                                                                             |  |                                                                                                                                                                   |     |                 |    |  
|        | 4.3  |  |  | Indenture between Advanced Lighting Technologies, Inc. and The Bank of New
York, as Trustee, dated as of March 18, 1998 (Form 10-Q/A Exhibit 4.3)                                                                           |  |                                                                                                                                                                   | (3  | )              
|        |      |  |  |                                                                                                                                                                                                                             |  |                                                                                                                                                                   |     |                 |    |  
|        | 4.4  |  |  | Registration Rights Agreement between Advanced Lighting Technologies, Inc.
and Morgan Stanley & Co., Incorporated dated as of March 18, 1998 (Form S-4
Exhibit 4.2)                                                         |  |                                                                                                                                                                   | (2  | )              
|        |      |  |  |                                                                                                                                                                                                                             |  |                                                                                                                                                                   |     |                 |    |  
|        | 4.5  |  |  | Form of Security for 8% Senior Notes due 2008 originally issued by Advanced
Lighting Technologies, Inc. on March 18, 1998 (Form S-4 Exhibit 4.3)                                                                            |  |                                                                                                                                                                   | (2  | )              
|        |      |  |  |                                                                                                                                                                                                                             |  |                                                                                                                                                                   |     |                 |    |  
|        | 4.6  |  |  | Form of Security for 8% Senior Notes due 2008 issued by Advanced Lighting
Technologies, Inc. and registered under the Securities Act of 1933 (Form
S-4 Exhibit 4.4)                                                         |  |                                                                                                                                                                   | (2  | )              
|        |      |  |  |                                                                                                                                                                                                                             |  |                                                                                                                                                                   |     |                 |    |  
|        | 4.7  |  |  | First Supplemental Indenture dated September 25, 1998 between Advanced
Lighting Technologies, Inc. and The Bank of New York amending the Indenture
dated March 18, 1998 (Form 10-Q/A No. 2 Exhibit 4.1)                     |  |                                                                                                                                                                   | (5  | )              
|        |      |  |  |                                                                                                                                                                                                                             |  |                                                                                                                                                                   |     |                 |    |  
|        | 4.8  |  |  | Registration Rights Agreement dated as of September 30, 1999 by and between
Advanced Lighting Technologies, Inc. and General Electric Company (Form
10-Q/A Exhibit 4.2)                                                     |  |                                                                                                                                                                   | (5  | )              
|        |      |  |  |                                                                                                                                                                                                                             |  |                                                                                                                                                                   |     |                 |    |  
|        | 9.1  |  |  | Amended and Restated Voting Trust Agreement dated as of October 1, 1999 by
and among Wayne R. Hellman, as voting trustee, and the Shareholders listed
on Exhibit A thereto (Hellman Voting Trust) (Form 10-K Exhibit 9.3) |  |                                                                                                                                                                   | (11 | )              
|        |      |  |  |                                                                                                                                                                                                                             |  |                                                                                                                                                                   |     |                 |    |  
|        | 9.2  |  |  | Amended and Restated Voting Trust Agreement dated as of October 1, 1999
among Alan J. Ruud, as voting trustee, and the Shareholders listed on
Exhibit A thereto (Schedule 13D Exhibit 1)                                    |  |                                                                                                                                                                   | (21 | )              
|        |      |  |  |                                                                                                                                                                                                                             |  |                                                                                                                                                                   |     |                 |    |  
|        | 10.1 |  |  | Management Contracts, Compensatory Plans and Arrangements                                                                                                                                                                   |  |                                                                                                                                                                   |     |                
|        |      |  |  |                                                                                                                                                                                                                             |  |                                                                                                                                                                   |     |                 |    |  
|        |      |  |  | 10.1.1                                                                                                                                                                                                                      |  | Employment Agreement dated as of January 2, 1998 among Ruud
Lighting, Inc., Advanced Lighting Technologies, Inc. and Alan J.
Ruud (Form 10-K/A No.2 Exhibit 10.1) |     |                 | (4 | )
|        |      |  |  |                                                                                                                                                                                                                             |  |                                                                                                                                                                   |     |                 |    |  
|        |      |  |  | 10.1.2                                                                                                                                                                                                                      |  | Employment Agreement dated as of February 12, 1998 between
Advanced Lighting Technologies, Inc. and Nicholas R. Sucic (Form
10-Q/A Exhibit 10.5)                  |     |                 | (4 | )

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|        |  |         |  |                                                                                                                                                                                                            |  |                 |     |  
|------- |  | ------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------- | --- | -
|        |  |         |  |                                                                                                                                                                                                            |  | Previous Filing
|        |  |         |  |                                                                                                                                                                                                            |  | If             
|Exhibit |  |         |  |                                                                                                                                                                                                            |  | Incorporated   
|Number  |  |         |  | Description                                                                                                                                                                                                |  | by Reference   
|        |  |         |  |                                                                                                                                                                                                            |  |                
|        |  | 10.1.3  |  | Loan Agreement dated as of October 8, 1998 between Advanced Lighting
Technologies, Inc. and Wayne R. Hellman (Form 10-Q/A Exhibit 10.1)                                                                    |  |                 | (6  | )
|        |  |         |  |                                                                                                                                                                                                            |  |                 |     |  
|        |  | 10.1.4  |  | 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. (Form 10-Q/A Exhibit 10.2)                                     |  |                 | (6  | )
|        |  |         |  |                                                                                                                                                                                                            |  |                 |     |  
|        |  | 10.1.5  |  | First Amendment to Loan Agreement, Secured Promissory
Note and Security Agreement between Wayne R. Hellman and Advanced
Lighting Technologies, Inc. dated as of November 22, 2000 (Form
10-Q Exhibit 10.1) |  |                 | (6  | )
|        |  |         |  |                                                                                                                                                                                                            |  |                 |     |  
|        |  | 10.1.6  |  | Second Amendment to Loan Agreement, Secured Promissory Note and
Security Agreement between Wayne R. Hellman and Advanced Lighting
Technologies, Inc. dated as of March 15, 2001 (Form 10-Q Exhibit
10.1)   |  |                 | (15 | )
|        |  |         |  |                                                                                                                                                                                                            |  |                 |     |  
|        |  | 10.1.7  |  | Third Amendment to Loan Agreement, Secured Promissory
Note and Security Agreement between Wayne R. Hellman and Advanced
Lighting Technologies, Inc. dated as of April 25, 2002.                            |  |                 |     |  
|        |  |         |  |                                                                                                                                                                                                            |  |                 |     |  
|        |  | 10.1.8  |  | Amended and Restated Employment Agreement between Wayne R. Hellman
and Advanced Lighting Technologies, Inc. dated as of October 8,
1998 (Form 10-Q/A Exhibit 10.4)                                         |  |                 | (6  | )
|        |  |         |  |                                                                                                                                                                                                            |  |                 |     |  
|        |  | 10.1.9  |  | Advanced Lighting Technologies, Inc. Amended and Restated 1995
Incentive Award Plan (Form S-1 Exhibit 10.1 and 10.1/A)                                                                                     |  |                 | (1  | )
|        |  |         |  |                                                                                                                                                                                                            |  |                 |     |  
|        |  | 10.1.10 |  | Advanced Lighting Technologies, Inc. 1997 Billion Dollar Market
Capitalization Incentive Award Plan (Form 10-K/A No. 2 Exhibit
10.11)                                                                      |  |                 | (7  | )
|        |  |         |  |                                                                                                                                                                                                            |  |                 |     |  
|        |  | 10.1.11 |  | Advanced Lighting Technologies, Inc. Amended and Restated 1998
Incentive Award Plan (Form 10-K/A No. 2 Exhibit 10.12)                                                                                      |  |                 | (7  | )
|        |  |         |  |                                                                                                                                                                                                            |  |                 |     |  
|        |  | 10.1.12 |  | Deposition Sciences, Inc. 2001 Equity Incentive Plan
(Form 10-Q Exhibit 10.3)                                                                                                                              |  |                 | (15 | )
|        |  |         |  |                                                                                                                                                                                                            |  |                 |     |  
|        |  | 10.1.13 |  | Mutual Release and Indemnification Agreement by and between
Advanced Lighting Technologies, Inc. and Louis S. Fisi dated as of
December 31, 1999 (Form10-Q Exhibit 10.9)                                   |  |                 | (9  | )
|        |  |         |  |                                                                                                                                                                                                            |  |                 |     |  
|        |  | 10.1.14 |  | Consulting Agreement by and between Advanced Lighting
Technologies, Inc. and Louis S. Fisi dated as of December 31, 1999
(Form 10-Q Exhibit 10.10)                                                         |  |                 | (9  | )

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|        |  |                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                
|------- |  | -------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------
|        |  |                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                         |  | Previous Filing
|        |  |                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                         |  | If             
|Exhibit |  |                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                         |  | Incorporated   
|Number  |  |                            |  | Description                                                                                                                                                                                                                                                                                                                                                                                                             |  | by Reference   
|        |  |                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                
|        |  | 10.1.15                    |  | Release and Settlement Agreement by and between Advanced Lighting
Technologies, Inc. and Steven C. Potts dated as of May 29, 2002.                                                                                                                                                                                                                                                                                      |  |                
|        |  |                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                
|        |  | 10.1.16                    |  | Addendum to Release and Settlement Agreement by and between
Advanced Lighting Technologies, Inc. and Steven C. Potts dated as
of September 6, 2002.                                                                                                                                                                                                                                                                     |  |                
|        |  |                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                
|10.2    |  | Credit Facility Agreements |  |                                                                                                                                                                                                                                                                                                                                                                                                                        
|        |  |                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                
|        |  | 10.2.1                     |  | Credit Agreement by and among Advanced Lighting Technologies, Inc.
and certain of its subsidiaries and PNC Bank, National
Association, as agent for certain other banks dated as of May 21,
1999 (Form 10-K/A No. 2 Exhibit 10.13)                                                                                                                                                                                      |  | (7)            
|        |  |                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                
|        |  | 10.2.2                     |  | Market Clearance Side Letter dated May 21, 1999 by and among PNC
Bank, National Association, PNC Capital Markets, Inc., Advanced
Lighting Technologies, Inc., Ballastronix, Incorporated, Canadian
Lighting Systems Holding Incorporated, Parry Power Systems Limited
and Venture Lighting Europe Ltd. (Form 10-K/A No. 2 Exhibit
10.18)                                                                                |  | (7)            
|        |  |                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                
|        |  | 10.2.3                     |  | Side Letter Agreement dated August 5, 1999 by and among Advanced
Lighting Technologies, Inc. and certain of its subsidiaries, PNC
Bank, National Association and BankBoston, N.A. relating to the
Credit Agreement by and among Advanced Lighting Technologies, Inc.
and certain of its subsidiaries and PNC Bank, National
Association, as agent for certain other banks dated May 21,
1999 (Form 10-Q/A Exhibit 10.1) |  | (8)            
|        |  |                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                
|        |  | 10.2.4                     |  | Assignment of Acceptance Agreement by and among Advanced Lighting
Technologies, Inc., PNC Bank, National Association and BankBoston,
N.A. dated as of August 5, 1999 (Form 10-Q/A Exhibit 10.2)                                                                                                                                                                                                                         |  | (8)            
|        |  |                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                
|        |  | 10.2.5                     |  | First Amendment Agreement by and among Advanced Lighting
Technologies, Inc. and certain of its subsidiaries and PNC Bank,
National Association, as agent for certain other banks dated as of
August 17, 1999, amending the Credit Agreement by and among the
same parties dated as of May 21, 1999 (Form 10-Q/A Exhibit 10.3)                                                                                           |  | (8)            

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|        |  |         |  |                                                                                                                                                                                                                                                                                                                                  |  |                 |     |  
|------- |  | ------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------- | --- | -
|        |  |         |  |                                                                                                                                                                                                                                                                                                                                  |  | Previous Filing
|        |  |         |  |                                                                                                                                                                                                                                                                                                                                  |  | If             
|Exhibit |  |         |  |                                                                                                                                                                                                                                                                                                                                  |  | Incorporated   
|Number  |  |         |  | Description                                                                                                                                                                                                                                                                                                                      |  | by Reference   
|        |  |         |  |                                                                                                                                                                                                                                                                                                                                  |  |                
|        |  | 10.2.6  |  | Second Amendment Agreement by and among Advanced Lighting
Technologies, Inc. and certain of its subsidiaries and PNC Bank,
National Association, as agent for certain other banks dated as of
August 18, 1999, amending the Credit Agreement by and among the
same parties dated as of May 21, 1999 (Form 10-Q/A Exhibit 10.4)   |  |                 | (8  | )
|        |  |         |  |                                                                                                                                                                                                                                                                                                                                  |  |                 |     |  
|        |  | 10.2.7  |  | Assignment and Acceptance Agreement by and among Advanced Lighting
Technologies, Inc., PNC Bank, National Association and National
City Commercial Finance, Inc. dated as of November 2, 1999 (Form
10-Q Exhibit 10.1)                                                                                                           |  |                 | (9  | )
|        |  |         |  |                                                                                                                                                                                                                                                                                                                                  |  |                 |     |  
|        |  | 10.2.8  |  | Assignment and Acceptance Agreement by and among Advanced Lighting
Technologies, Inc., PNC Bank, National Association and Sovereign
Bank dated as of November 2, 1999 (Form 10-Q Exhibit 10.2)                                                                                                                                   |  |                 | (9  | )
|        |  |         |  |                                                                                                                                                                                                                                                                                                                                  |  |                 |     |  
|        |  | 10.2.9  |  | Third Amendment Agreement by and among Advanced Lighting
Technologies, Inc. and certain of its subsidiaries and PNC Bank,
National Association, as agent for certain other banks dated as of
November 2, 1999, amending the Credit Agreement by and among the
same parties dated as of May 21, 1999 (Form 10-Q Exhibit 10.3)     |  |                 | (9  | )
|        |  |         |  |                                                                                                                                                                                                                                                                                                                                  |  |                 |     |  
|        |  | 10.2.10 |  | Fourth Amendment Agreement by and among Advanced Lighting
Technologies, Inc. and certain of its subsidiaries and PNC Bank,
National Association, as agent for certain other banks dated as of
February 28, 2000, amending the Credit Agreement by and among the
same parties dated as of May 21, 1999 (Form 10-Q/A Exhibit 10.1) |  |                 | (10 | )
|        |  |         |  |                                                                                                                                                                                                                                                                                                                                  |  |                 |     |  
|        |  | 10.2.11 |  | Fifth Amendment Agreement by and among Advanced Lighting
Technologies, Inc. and certain of its subsidiaries and PNC Bank,
National Association, as agent for certain other banks dated as of
May 8, 2000, amending the Credit Agreement by and among the same
parties dated as of May 21, 1999 (Form 10-K Exhibit 10.19)         |  |                 | (11 | )
|        |  |         |  |                                                                                                                                                                                                                                                                                                                                  |  |                 |     |  
|        |  | 10.2.12 |  | Sixth Amendment Agreement by and among Advanced Lighting
Technologies, Inc. and certain of its subsidiaries and PNC Bank,
National Association, as agent for certain other banks dated as of
July 1, 2000, amending the Credit Agreement by and among the same
parties dated as of May 21, 1999 (Form 10-Q Exhibit 10.1)         |  |                 | (13 | )

75



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|        |  |                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                              |     |                 |     |  
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --- | --------------- | --- | -
|        |  |                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                              |     | Previous Filing
|        |  |                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                              |     | If             
|Exhibit |  |                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                              |     | Incorporated   
|Number  |  |                                                                                                                                                                                |  | Description                                                                                                                                                                                                                                                                                                                  |     | by Reference   
|        |  |                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                              |     |                
|        |  | 10.2.13                                                                                                                                                                        |  | Seventh Amendment Agreement by and among Advanced Lighting
Technologies, Inc. and certain of its subsidiaries and PNC Bank,
National Association, as agent for certain other banks dated as of
March 27, 2001, amending the Credit Agreement by and among the
same parties dated as of May 21, 1999 (Form 10-Q Exhibit 10.2) |     |                 | (15 | )
|        |  |                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                              |     |                 |     |  
|        |  | 10.2.14                                                                                                                                                                        |  | Eighth Amendment Agreement by and among Advanced Lighting
Technologies, Inc. and certain of its subsidiaries and PNC Bank,
National Association, as agent for certain other banks dated as of
June 12, 2001, amending the Credit Agreement by and among the same
parties dated as of May 21, 1999 (Form 10-K Exhibit 10.15)  |     |                 | (16 | )
|        |  |                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                              |     |                 |     |  
|        |  | 10.2.15                                                                                                                                                                        |  | Ninth Amendment Agreement by and among Advanced Lighting
Technologies, Inc. and certain of its subsidiaries and PNC Bank,
National Association, as agent for certain other banks dated as of
September 28, 2001, amending the Credit Agreement                                                                               |     |                 | (17 | )
|        |  |                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                              |     |                 |     |  
|        |  | 10.2.16                                                                                                                                                                        |  | Tenth Amendment Agreement by and among Advanced Lighting
Technologies, Inc. and certain of its subsidiaries and PNC Bank,
National Association, as agent for certain other banks dated as of
December 12, 2001, amending the Credit Agreement                                                                                |     |                 | (19 | )
|        |  |                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                              |     |                 |     |  
|        |  | 10.2.17                                                                                                                                                                        |  | Eleventh Amendment Agreement by and among Advanced Lighting
Technologies, Inc. and certain of its subsidiaries and PNC Bank,
National Association, as agent for certain other banks dated as of
April 23, 2002, amending the Credit Agreement                                                                                |     |                 | (20 | )
|        |  |                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                              |     |                 |     |  
|        |  | 10.2.18                                                                                                                                                                        |  | Twelfth Amendment Agreement by and among Advanced Lighting
Technologies, Inc. and certain of its subsidiaries and PNC Bank,
National Association, as agent for certain other banks dated as of
May 13, 2002, amending the Credit Agreement                                                                                   |     |                 | (20 | )
|        |  |                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                              |     |                 |     |  
|10.3    |  | Lease Agreement by and between Macken Associates and Deposition Sciences,
Incorporated dated March 2, 2001                                                                     |  |                                                                                                                                                                                                                                                                                                                              | (16 | )              
|        |  |                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                              |     |                 |     |  
|10.4    |  | Agreement dated April 16, 2001 by and between Macken Associates and
Deposition Sciences, Inc. amending the Lease Agreement by and between the
same parties dated March 2, 2001 |  |                                                                                                                                                                                                                                                                                                                              | (16 | )              

76



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|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              |     |                 |  | 
|------- | ----- | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --- | --------------- |  | 
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              |     | Previous Filing
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              |     | If             
|Exhibit |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | Incorporated
|Number  |       | Description |  | by Reference                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 10.5  |             |  | Second Amendment to Lease dated June 20, 2001 by and between Macken
Associates and Deposition Sciences, Inc. amending the Lease Agreement by
and between the same parties dated March 2,
2001                                                                                                                                                                                                                                                            |  |              | (16 | )              
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              |     |                 |  | 
|        | 10.6  |             |  | Option Agreement to Purchase Real Property dated March 2, 2001 by and
between Macken Associates and Deposition Sciences, Incorporated with
respect to the premises leased by the second party from the first party
pursuant to the Lease Agreement by and between them dated March 2,
2001                                                                                                                                                               |  |              | (16 | )              
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              |     |                 |  | 
|        | 10.7  |             |  | Agreement dated May 29, 2001 by and between Macken Associates and
Deposition Sciences, Inc. amending the Option Agreement to Purchase Real
Property by and between the same parties dated March 2,
2001                                                                                                                                                                                                                                                  |  |              | (16 | )              
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              |     |                 |  | 
|        | 10.8  |             |  | Stock Purchase Agreement by and between Advanced Lighting Technologies,
Inc. and General Electric Company dated as of September 28, 1999 (Form
10-Q/A Exhibit 10.5)                                                                                                                                                                                                                                                                                      |  |              | (8  | )              
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              |     |                 |  | 
|        | 10.9  |             |  | Contingent Warrant Agreement dated as of September 30, 1999 by and among
Advanced Lighting Technologies, Inc., General Electric Company, Wayne R.
Hellman, individually and as voting trustee under Voting Trust Agreement
dated October 10, 1995, Hellman Ltd. and Alan J. Ruud, individually and as
voting trustee under Voting Trust Agreement dated January 2, 1998, as
subsequently amended and restated October 1, 2000 (Form 10-Q/A Exhibit
10.6) |  |              | (8  | )              
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              |     |                 |  | 
|        | 10.10 |             |  | Amendment to Contingent Warrant Agreement dated as of August 31, 2000 by
and among Advanced Lighting Technologies, Inc., General Electric Company,
Wayne R. Hellman, individually and as voting trustee under Voting Trust
Agreement dated October 10, 1995, Hellman Ltd. and Alan J. Ruud,
individually and as voting trustee under Voting Trust Agreement dated
January 2, 1998 (Form 10-Q/A Exhibit 10.6)                                             |  |              | (13 | )              
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              |     |                 |  | 
|        | 10.11 |             |  | Second Amendment to Contingent Warrant Agreement dated as of June 29, 2001
by and among Advanced Lighting Technologies, Inc., General Electric
Company, Wayne R. Hellman, individually and as voting trustee under Voting
Trust Agreement dated October 10, 1995, Hellman Ltd. and Alan J. Ruud,
individually and as voting trustee under Voting Trust Agreement dated
January 2, 1998 (Form 10-K Exhibit 10.24)                                         |  |              | (16 | )              

77



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|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                     |  |              |     |                 |  | 
|------- | ----- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --- | --------------- |  | 
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                     |  |              |     | Previous Filing
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                     |  |              |     | If             
|Exhibit |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                     |  | Incorporated
|Number  |       | Description |  | by Reference                                                                                                                                                                                                                                                                                                                                                                                                       
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 10.12 |             |  | Third Amendment to Contingent Warrant Agreement dated as of September 28,
2001 by and among Advanced Lighting Technologies, Inc., General Electric
Company, Wayne R. Hellman, individually and as voting trustee under Voting
Trust Agreement dated October 10, 1995, Hellman Ltd. and Alan J. Ruud,
individually and as voting trustee under Voting Trust Agreement dated
January 2, 1998 (Form 10-Q Exhibit 10.1) |  |              | (17 | )              
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                     |  |              |     |                 |  | 
|        | 10.13 |             |  | Fourth Amendment to Contingent Warrant Agreement dated as of December 31,
2001 by and among Advanced Lighting Technologies, Inc., General Electric
Company, Wayne R. Hellman, individually and as voting trustee under Voting
Trust Agreement dated October 10, 1995, Hellman Ltd. and Alan J. Ruud,
individually and as voting trustee under Voting Trust Agreement dated
January 2, 1998 (Form 10-Q Exhibit 10.2) |  |              | (19 | )              
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                     |  |              |     |                 |  | 
|        | 10.14 |             |  | Fifth Amendment to Contingent Warrant Agreement dated as of March 31, 2002
by and among Advanced Lighting Technologies, Inc., General Electric
Company, Wayne R. Hellman, individually and as voting trustee under Voting
Trust Agreement dated October 10, 1995, Hellman Ltd. and Alan J. Ruud,
individually and as voting trustee under Voting Trust Agreement dated
January 2, 1998 (Form 10-Q Exhibit 10.3)     |  |              | (20 | )              
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                     |  |              |     |                 |  | 
|        | 10.15 |             |  | Sixth Amendment to Contingent Warrant Agreement dated as of June 30, 2002
by and among Advanced Lighting Technologies, Inc., General Electric
Company, Wayne R. Hellman, individually and as voting trustee under Voting
Trust Agreement dated October 10, 1995, Hellman Ltd. and Alan J. Ruud,
individually and as voting trustee under Voting Trust Agreement dated
January 2, 1998 (Form 10-Q/A Exhibit 10.6)    |  |              |     |                
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                     |  |              |     |                 |  | 
|        | 10.16 |             |  | Lamp Materials Purchase Agreement by and among Advanced Lighting
Technologies, Inc., General Electric Company, acting through its GE
Lighting business and APL Engineered Materials, Inc. dated as of September
30, 1999 (Form 10-Q/A Exhibit 10.8)                                                                                                                                                                 |  |              | (8  | )              
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                     |  |              |     |                 |  | 
|        | 10.17 |             |  | Patent and Technical Assistance Agreement by and among Advanced Lighting
Technologies, Inc., APL Engineered Materials, Inc. and General Electric
Company, acting through its GE Lighting business, dated as of September 30,
1999 (Form 10-Q/A Exhibit 10.9)                                                                                                                                                        |  |              | (8  | )              
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                     |  |              |     |                 |  | 
|        | 10.18 |             |  | Series A1 Warrant to Purchase Common Shares of Advanced Lighting
Technologies, Inc. issued to General Electric Company dated as of October
6, 1999 (Form 10-Q/A Exhibit 10.7)                                                                                                                                                                                                                                       |  |              | (8  | )              

78



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|        |       |             |  |                                                                                                                                                                           |  |              |     |                 |  | 
|------- | ----- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --- | --------------- |  | 
|        |       |             |  |                                                                                                                                                                           |  |              |     | Previous Filing
|        |       |             |  |                                                                                                                                                                           |  |              |     | If             
|Exhibit |       |             |  |                                                                                                                                                                           |  | Incorporated
|Number  |       | Description |  | by Reference                                                                                                                                                             
|        |       |             |  |                                                                                                                                                                          
|        | 10.19 |             |  | Agency Agreement dated August 31, 2000 among Advanced Lighting
Technologies, Inc., Raymond James & Associates, Inc. and Sanders Morris
Harris Inc. (Form 8-K Exhibit 1.1) |  |              | (12 | )              
|        |       |             |  |                                                                                                                                                                           |  |              |     |                 |  | 
|        | 12    |             |  | Statement regarding Computation of Ratios                                                                                                                                 |  |              |     |                
|        |       |             |  |                                                                                                                                                                           |  |              |     |                 |  | 
|        | 21    |             |  | Subsidiaries of the Registrant as of June 30, 2002                                                                                                                        |  |              |     |                
|        |       |             |  |                                                                                                                                                                           |  |              |     |                 |  | 
|        | 23    |             |  | Consent of Grant Thornton LLP                                                                                                                                             |  |              |     |                
|        |       |             |  |                                                                                                                                                                           |  |              |     |                 |  | 
|        | 99.1  |             |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002                                                    |  |              |     |                
|        |       |             |  |                                                                                                                                                                           |  |              |     |                 |  | 
|        | 99.2  |             |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002                                                    |  |              |     |                



---

|(1)  |  | Incorporated by reference to referenced Exhibit in Companys Registration
Statement on Form S-1, Registration No. 33-97902, effective December 11,
1995.                  
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  |                                                                                                                                                                           
|(2)  |  | Incorporated by reference to referenced Exhibit in Companys Registration
Statement on Form S-4 Registration No. 333-58609 filed July 7, 1998.                            
|     |  |                                                                                                                                                                           
|(3)  |  | Incorporated by reference to referenced Exhibit in Companys Quarterly
Report on Form 10-Q/A for the Quarterly Period ended March 31, 1998 filed
on March 15, 1999.       
|     |  |                                                                                                                                                                           
|(4)  |  | Incorporated by reference to referenced Exhibit in Companys Annual Report
on Form 10-K/A No. 2 for the Annual Period ended June 30, 1998 filed March
16, 1999.           
|     |  |                                                                                                                                                                           
|(5)  |  | Incorporated by reference to referenced Exhibit in Companys Quarterly
Report on Form 10-Q/A No. 2 for the Quarterly Period ended September 30,
1998 filed March 15, 1999.
|     |  |                                                                                                                                                                           
|(6)  |  | Incorporated by reference to referenced Exhibit in Companys Quarterly
Report on Form 10-Q/A for the Quarterly Period ended December 31, 1998
filed March 15, 1999.       
|     |  |                                                                                                                                                                           
|(7)  |  | Incorporated by reference to referenced Exhibit in Companys Annual Report
on Form 10-K/A No. 2 for the Annual Period ended June 30, 1999 filed April
25, 2000.           
|     |  |                                                                                                                                                                           
|(8)  |  | Incorporated by reference to referenced Exhibit in Companys Quarterly
Report on Form 10-Q/A for the Quarterly Period ended September 30, 1999
filed January 14, 2000.    
|     |  |                                                                                                                                                                           
|(9)  |  | Incorporated by reference to referenced Exhibit in Companys Quarterly
Report on Form 10-Q for the Quarterly Period ended December 31, 1999 filed
February 14, 2000.      
|     |  |                                                                                                                                                                           
|(10) |  | Incorporated by reference to referenced Exhibit in Companys Quarterly
Report on Form 10-Q/A for the Quarterly Period ended March 31, 2000 filed
July 11, 2000.           

79



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##### Table of Contents



|(11) |  | Incorporated by reference to referenced Exhibit in Companys Annual Report
on Form 10-K for the Annual Period ended June 30, 2000 filed September 27,
2000.          
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  |                                                                                                                                                                      
|(12) |  | Incorporated by reference to referenced Exhibit in Companys Current Report
on Form 8-K dated August 31, 2000 filed September 1, 2000.                               
|     |  |                                                                                                                                                                      
|(13) |  | Incorporated by reference to referenced Exhibit in Companys Quarterly
Report on Form 10-Q for the Quarterly Period ended September 30, 2000 filed
November 14, 2000.
|     |  |                                                                                                                                                                      
|(14) |  | Incorporated by reference to referenced Exhibit in Companys Quarterly
Report on Form 10-Q for the Quarterly Period ended December 31, 2000 filed
February 14, 2001. 
|     |  |                                                                                                                                                                      
|(15) |  | Incorporated by reference to referenced Exhibit in Companys Quarterly
Report on Form 10-Q for the Quarterly Period ended March 31, 2001 filed May
15, 2001.         
|     |  |                                                                                                                                                                      
|(16) |  | Incorporated by reference to referenced Exhibit in Companys Annual Report
on Form 10-K for the Annual Period ended June 30, 2001 filed September 28,
2001.          
|     |  |                                                                                                                                                                      
|(17) |  | Incorporated by reference to referenced Exhibit in Companys Quarterly
Report on Form 10-Q for the Quarterly Period ended September 30, 2001 filed
November 14, 2001.
|     |  |                                                                                                                                                                      
|(18) |  | Incorporated by reference to referenced Exhibit in Companys Current Report
on Form 8-K dated December 12, 2001, filed December 27, 2001.                            
|     |  |                                                                                                                                                                      
|(19) |  | Incorporated by reference to referenced Exhibit in Companys Quarterly
Report on Form 10-Q for the Quarterly Period ended December 31, 2001 filed
February 14, 2002. 
|     |  |                                                                                                                                                                      
|(20) |  | Incorporated by reference to referenced Exhibit in Companys Quarterly
Report on Form 10-Q for the Quarterly Period ended March 31, 2002 filed May
15, 2002.         
|     |  |                                                                                                                                                                      
|(21) |  | Incorporated by reference to referenced Exhibit to Schedule 13D filed by
Alan Ruud, et. al., March 15, 2000.                                                         

(b)     Reports on Form 8-K

The Company did not file any Current Reports on Form 8-K during the quarter
ended June 30, 2002.

(c)     Exhibits.

The exhibits to this Form 10-K are submitted as a separate section of this
Report. See Exhibit Index.

(d)     Financial Statement Schedules.

None.

80



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##### Table of Contents






SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

|                       |  |                                      |  |     |  |                                                             
|---------------------- |  | ------------------------------------ |  | --- |  | ------------------------------------------------------------
|                       |  | ADVANCED LIGHTING TECHNOLOGIES, INC.
|                      
|Date: October 15, 2002 |  |                                      |  | By: |  | /s/ Wayne R. HellmanWayne R. Hellman
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

|                                         |  |                                                                  |  |                 
|---------------------------------------- |  | ---------------------------------------------------------------- |  | ----------------
|SIGNATURE                                |  | TITLE                                                            |  | DATE            
|                                        
|                                        
|/s/ Wayne R. HellmanWayne R. Hellman     |  | Chief Executive Officer
and Director                             |  | October 15, 2002
|                                        
|/s/ Steven C. PottsSteven C. Potts       |  | Chief Financial Officer and Treasurer
(Chief Accounting Officer) |  | October 15, 2002
|                                        
|/s/ Francis H. BeamFrancis H. Beam       |  | Director                                                         |  | October 15, 2002
|                                        
|/s/ John E. BreenJohn E. Breen           |  | Director                                                         |  | October 15, 2002
|                                        
|/s/ Theodore A. FilsonTheodore A. Filson |  | Director                                                         |  | October 15, 2002
|                                        
|/s/ Louis S. FisiLouis S. Fisi           |  | Director                                                         |  | October 15, 2002
|                                        
|/s/ John GonzalezJohn Gonzalez           |  | Director                                                         |  | October 15, 2002
|                                        
|/s/ James E. MohnJames E. Mohn           |  | Director                                                         |  | October 15, 2002
|                                        
|/s/ A Gordon TunstallA Gordon Tunstall   |  | Director                                                         |  | October 15, 2002

81



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CERTIFICATIONS

I, Wayne R. Hellman, certify that:



|(1) |  | I have reviewed this annual report on Form 10-K of Advanced Lighting
Technologies, Inc.;                                                                                                                                                                                                                                    
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report; and
|   
|(3) |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report.                       

Date: October 15, 2002

|                                                            
|------------------------------------------------------------
|/s/ Wayne R. HellmanWayne R. Hellman
Chief Executive Officer

82



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CERTIFICATIONS

I, Steven C. Potts, certify that:



|(1) |  | I have reviewed this annual report on Form 10-K of Advanced Lighting
Technologies, Inc.;                                                                                                                                                                                                                                    
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report; and
|   
|(3) |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report.                       

Date: October 15, 2002

|                                                          
|----------------------------------------------------------
|/s/ Steven C. PottsSteven C. Potts
Chief Financial Officer

83



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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

EXHIBITS TO

FORM 10-K

FOR THE ANNUAL PERIOD ENDED JUNE 30, 2002

ADVANCED LIGHTING TECHNOLOGIES, INC.

84



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EXHIBIT INDEX

|        |     |  |  |                                                                                                                                                                                                                               |  |             |     |              |  |                    |  | 
|------- | --- |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | --- | ------------ |  | ------------------ |  | 
|        |     |  |  |                                                                                                                                                                                                                               |  |             |     |              |  | Previous Filing If
|Exhibit |     |  |  |                                                                                                                                                                                                                               |  |             |     | Incorporated
|Number  |     |  |  |                                                                                                                                                                                                                               |  | Description |     | by Reference
|        |     |  |  |                                                                                                                                                                                                                               |  |             |     |             
|        | 2.1 |  |  | Stock Redemption and Purchase Agreement Among Advanced
Lighting Technologies, Inc., Ruud Lighting, Inc., and
Alan J. Ruud, Susan Ruud, Theodore O. Sokoly,
Christopher A. Ruud and Cynthia A. Johnson dated
November 14, 2001 |  |             | (18 | )           
|       
|        | 2.2 |  |  | First Amendment to Stock Redemption and Purchase
Agreement dated December 12, 2001                                                                                                                                            |  |             | (18 | )           
|       
|       
|       
|       
|       
|        | 3.1 |  |  | Second Amended and Restated Articles of Incorporation
filed September 26, 1995                                                                                                                                                |  |             |     |             
|       
|        | 3.2 |  |  | Certificate of Adoption of Amended Articles of
Incorporation filed February 12,
1997                                                                                                                                          |  |             |     |             
|       
|        | 3.3 |  |  | Certificate of Adoption of Third Amendment to Second
Amended and Restated Articles of Incorporation filed
October 6, 1999 (Form 10-Q/A Exhibit 3.2)                                                                           |  |             | (8  | )           
|       
|        | 3.4 |  |  | Certificate of Adoption of Fourth Amendment to Second
Amended and Restated Articles of Incorporation filed
March 16, 2000                                                                                                     |  |             | (11 | )           
|       
|        | 3.5 |  |  | Code of Regulations                                                                                                                                                                                                           |  |             | (1  | )           
|       
|       
|       
|       
|       
|        | 4.1 |  |  | Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4 and 3.5                                                                                                                                                                      |  |             |     |             
|       
|       
|       
|       
|       
|        | 4.2 |  |  | Form of Stock Certificate for Common Stock of Advanced
Lighting Technologies, Inc (Form 10-K Exhibit 4.2)                                                                                                                     |  |             | (11 | )           
|       
|       
|       
|       
|       
|        | 4.3 |  |  | Indenture between Advanced Lighting Technologies, Inc.
and The Bank of New York, as Trustee, dated as of March
18, 1998 (Form 10-Q/A Exhibit 4.3)                                                                             |  |             | (3  | )           
|       
|       
|       
|       
|       
|        | 4.4 |  |  | Registration Rights Agreement between Advanced Lighting
Technologies, Inc. and Morgan Stanley & Co.,
Incorporated dated as of March 18, 1998 (Form S-4
Exhibit 4.2)                                                           |  |             | (2  | )           
|       
|       
|       
|       
|       
|        | 4.5 |  |  | Form of Security for 8% Senior Notes due 2008 originally
issued by Advanced Lighting Technologies, Inc. on March
18, 1998 (Form S-4 Exhibit 4.3)                                                                              |  |             | (2  | )           
|       
|       
|       
|       
|       
|        | 4.6 |  |  | Form of Security for 8% Senior Notes due 2008 issued by
Advanced Lighting Technologies, Inc. and registered
under the Securities Act of 1933 (Form S-4 Exhibit 4.4)                                                           |  |             | (2  | )           
|       
|       
|       
|       
|       
|        | 4.7 |  |  | First Supplemental Indenture dated September 25, 1998
between Advanced Lighting Technologies, Inc. and The
Bank of New York amending the Indenture dated March 18,
1998 (Form 10-Q/A No. 2 Exhibit 4.1)                       |  |             | (5  | )           

85



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|        |      |  |  |                                                                                                                                                                                                                             |        |             |     |                                                                                                                                                                                                            |  |                    |     |  
|------- | ---- |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------ | ----------- | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | --- | -
|        |      |  |  |                                                                                                                                                                                                                             |        |             |     |                                                                                                                                                                                                            |  | Previous Filing If
|Exhibit |      |  |  |                                                                                                                                                                                                                             |        |             |     | Incorporated                                                                                                                                                                                              
|Number  |      |  |  |                                                                                                                                                                                                                             |        | Description |     | by Reference                                                                                                                                                                                              
|        |      |  |  |                                                                                                                                                                                                                             |        |             |     |                                                                                                                                                                                                           
|        | 4.8  |  |  | Registration Rights Agreement dated as of September 30,
1999 by and between Advanced Lighting Technologies, Inc.
and General Electric Company (Form 10-Q/A Exhibit 4.2)                                                     |        |             | (5  | )                                                                                                                                                                                                         
|       
|       
|       
|       
|       
|        | 9.1  |  |  | Amended and Restated Voting Trust Agreement dated as of
October 1, 1999 by and among Wayne R. Hellman, as voting
trustee, and the Shareholders listed on Exhibit A
thereto (Hellman Voting Trust) (Form 10-K Exhibit 9.3) |        |             | (11 | )                                                                                                                                                                                                         
|       
|       
|       
|       
|       
|        | 9.2  |  |  | Amended and Restated Voting Trust Agreement dated as of
October 1, 1999 among Alan J. Ruud, as voting trustee,
and the Shareholders listed on Exhibit A thereto
(Schedule 13D Exhibit 1)                                    |        |             | (21 | )                                                                                                                                                                                                         
|       
|       
|       
|       
|       
|        | 10.1 |  |  | Management Contracts, Compensatory Plans and Arrangements                                                                                                                                                                   |        |             |     |                                                                                                                                                                                                           
|       
|       
|       
|       
|       
|        |      |  |  |                                                                                                                                                                                                                             | 10.1.1 |             |     | Employment Agreement dated as of January 2, 1998
among Ruud Lighting, Inc., Advanced Lighting
Technologies, Inc. and Alan J. Ruud (Form
10-K/A No.2
Exhibit 10.1)                                          |  |                    | (4  | )
|       
|       
|       
|       
|       
|        |      |  |  |                                                                                                                                                                                                                             | 10.1.2 |             |     | Employment Agreement dated as of February 12, 1998
between Advanced Lighting Technologies, Inc. and
Nicholas R. Sucic (Form 10-Q/A Exhibit 10.5)                                                           |  |                    | (4  | )
|       
|       
|       
|       
|       
|        |      |  |  |                                                                                                                                                                                                                             | 10.1.3 |             |     | Loan Agreement dated as of October 8, 1998 between
Advanced Lighting Technologies, Inc. and Wayne R
Hellman (Form 10-Q/A Exhibit 10.1)                                                                     |  |                    | (6  | )
|       
|       
|       
|       
|       
|        |      |  |  |                                                                                                                                                                                                                             | 10.1.4 |             |     | 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. (Form 10-Q/A Exhibit 10.2)                                     |  |                    | (6  | )
|       
|       
|       
|       
|       
|        |      |  |  |                                                                                                                                                                                                                             | 10.1.5 |             |     | First Amendment to Loan Agreement, Secured Promissory
Note and Security Agreement between Wayne R. Hellman and
Advanced Lighting Technologies, Inc. dated as of
November 22, 2000 (Form 10-Q Exhibit 10.1) |  |                    | (6  | )
|       
|       
|       
|       
|       
|        |      |  |  |                                                                                                                                                                                                                             | 10.1.6 |             |     | Second Amendment to Loan Agreement, Secured Promissory
Note and Security Agreement between Wayne R. Hellman and
Advanced Lighting Technologies, Inc. dated as of March
15, 2001 (Form 10-Q Exhibit 10.1)   |  |                    | (15 | )
|       
|       
|       
|       
|       
|        |      |  |  |                                                                                                                                                                                                                             | 10.1.7 |             |     | Third Amendment to Loan Agreement, Secured Promissory
Note and Security Agreement between Wayne R. Hellman and
Advanced Lighting Technologies, Inc. dated as of April
25, 2002                             |  |                    |     |  
|       
|       
|       
|       
|       
|        |      |  |  |                                                                                                                                                                                                                             | 10.1.8 |             |     | Amended and Restated Employment Agreement between Wayne
R. Hellman and Advanced Lighting Technologies, Inc.
dated as of October 8, 1998 (Form 10-Q/A Exhibit 10.4)                                         |  |                    | (6  | )

86



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|        |      |  |  |                            |         |             |  |                                                                                                                                                                                                                                                                                                                                          |  |                    |     |  
|------- | ---- |  |  | -------------------------- | ------- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | --- | -
|        |      |  |  |                            |         |             |  |                                                                                                                                                                                                                                                                                                                                          |  | Previous Filing If
|Exhibit |      |  |  |                            |         |             |  | Incorporated                                                                                                                                                                                                                                                                                                                            
|Number  |      |  |  |                            |         | Description |  | by Reference                                                                                                                                                                                                                                                                                                                            
|        |      |  |  |                            |         |             |  |                                                                                                                                                                                                                                                                                                                                         
|        |      |  |  |                            | 10.1.9  |             |  | Advanced Lighting Technologies, Inc. Amended and
Restated 1995 Incentive Award Plan (Form S-1 Exhibit
10.1 and 10.1/A)                                                                                                                                                                                                                   |  |                    | (1  | )
|       
|       
|       
|       
|       
|        |      |  |  |                            | 10.1.10 |             |  | Advanced Lighting Technologies, Inc. 1997 Billion Dollar
Market Capitalization Incentive Award Plan (Form 10-K/A
No. 2 Exhibit 10.11)                                                                                                                                                                                                    |  |                    | (7  | )
|       
|       
|       
|       
|       
|        |      |  |  |                            | 10.1.11 |             |  | Advanced Lighting Technologies, Inc. Amended and
Restated 1998 Incentive Award Plan (Form 10-K/A No. 2
Exhibit 10.12)                                                                                                                                                                                                                    |  |                    | (7  | )
|       
|       
|       
|       
|       
|        |      |  |  |                            | 10.1.12 |             |  | Deposition Sciences, Inc. 2001 Equity Incentive Plan
(Form 10-Q Exhibit 10.3)                                                                                                                                                                                                                                                            |  |                    | (15 | )
|       
|       
|       
|       
|       
|        |      |  |  |                            | 10.1.13 |             |  | Mutual Release and Indemnification Agreement by and
between Advanced Lighting Technologies, Inc. and Louis
S. Fisi dated as of December 31, 1999 (Form10-Q Exhibit
10.9)                                                                                                                                                                 |  |                    | (9  | )
|       
|       
|       
|       
|       
|        |      |  |  |                            | 10.1.14 |             |  | Consulting Agreement by and between Advanced Lighting
Technologies, Inc. and Louis S. Fisi dated as of
December 31, 1999 (Form 10-Q Exhibit 10.10)                                                                                                                                                                                       |  |                    | (9  | )
|       
|       
|       
|       
|       
|        |      |  |  |                            | 10.1.15 |             |  | Release and Settlement Agreement by and between Advanced
Lighting Technologies, Inc. and Steven C. Potts dated as
of May 29, 2002                                                                                                                                                                                                        |  |                    |     |  
|       
|       
|       
|       
|       
|        |      |  |  |                            | 10.1.16 |             |  | Addendum to Release and Settlement Agreement by and
between Advanced Lighting Technologies, Inc. and Steven
C. Potts dated as of September 6, 2002                                                                                                                                                                                       |  |                    |     |  
|       
|       
|       
|       
|       
|        | 10.2 |  |  | Credit Facility Agreements |         |             |  |                                                                                                                                                                                                                                                                                                                                         
|       
|       
|       
|       
|       
|        |      |  |  |                            | 10.2.1  |             |  | Credit Agreement by and among Advanced Lighting Technologies,
Inc. and certain of its subsidiaries and PNC Bank, National
Association, as agent for certain other banks dated as of May
21, 1999 (Form 10-K/A No. 2 Exhibit 10.13)                                                                                                       |  |                    | (7  | )
|       
|       
|       
|       
|       
|        |      |  |  |                            | 10.2.2  |             |  | Market Clearance Side Letter dated May 21, 1999 by and among PNC
Bank, National Association, PNC Capital Markets, Inc., Advanced
Lighting Technologies, Inc., Ballastronix, Incorporated,
Canadian Lighting Systems Holding Incorporated, Parry Power
Systems Limited and Venture Lighting Europe Ltd. (Form 10-K/A
No. 2 Exhibit 10.18) |  |                    | (7  | )

87



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|        |  |  |  |  |        |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                    |    |  
|------- |  |  |  |  | ------ | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | -- | -
|        |  |  |  |  |        |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                         |  | Previous Filing If
|Exhibit |  |  |  |  |        |             |  | Incorporated                                                                                                                                                                                                                                                                                                                                                                                                           
|Number  |  |  |  |  |        | Description |  | by Reference                                                                                                                                                                                                                                                                                                                                                                                                           
|        |  |  |  |  |        |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                        
|        |  |  |  |  | 10.2.3 |             |  | Side Letter Agreement dated August 5, 1999 by and
among Advanced Lighting Technologies, Inc. and
certain of its subsidiaries, PNC Bank, National
Association and BankBoston, N.A. relating to the
Credit Agreement by and among Advanced Lighting
Technologies, Inc. and certain of its subsidiaries
and PNC Bank, National Association, as agent for
certain other banks dated May 21, 1999 (Form 10-Q/A
Exhibit 10.1) |  |                    | (8 | )
|       
|       
|       
|       
|       
|        |  |  |  |  | 10.2.4 |             |  | Assignment of Acceptance Agreement by and among
Advanced Lighting Technologies, Inc., PNC Bank,
National Association and BankBoston, N.A. dated as
of August 5, 1999 (Form 10-Q/A Exhibit 10.2)                                                                                                                                                                                                                         |  |                    | (8 | )
|       
|       
|       
|       
|       
|        |  |  |  |  | 10.2.5 |             |  | First Amendment Agreement by and among Advanced
Lighting Technologies, Inc. and certain of its
subsidiaries and PNC Bank, National Association, as
agent for certain other banks dated as of August 17,
1999, amending the Credit Agreement by and among the
same parties dated as of May 21, 1999 (Form 10-Q/A
Exhibit 10.3)                                                                                           |  |                    | (8 | )
|       
|       
|       
|       
|       
|        |  |  |  |  | 10.2.6 |             |  | Second Amendment Agreement by and among Advanced
Lighting Technologies, Inc. and certain of its
subsidiaries and PNC Bank, National Association, as
agent for certain other banks dated as of August 18,
1999, amending the Credit Agreement by and among the
same parties dated as of May 21, 1999 (Form 10-Q/A
Exhibit 10.4)                                                                                          |  |                    | (8 | )
|       
|       
|       
|       
|       
|        |  |  |  |  | 10.2.7 |             |  | Assignment and Acceptance Agreement by and among
Advanced Lighting Technologies, Inc., PNC Bank,
National Association and National City Commercial
Finance, Inc. dated as of November 2, 1999 (Form
10-Q Exhibit 10.1)                                                                                                                                                                                                  |  |                    | (9 | )
|       
|       
|       
|       
|       
|        |  |  |  |  | 10.2.8 |             |  | Assignment and Acceptance Agreement by and among
Advanced Lighting Technologies, Inc., PNC Bank,
National Association and Sovereign Bank dated as of
November 2, 1999 (Form 10-Q Exhibit 10.2)                                                                                                                                                                                                                          |  |                    | (9 | )
|       
|       
|       
|       
|       
|        |  |  |  |  | 10.2.9 |             |  | Third Amendment Agreement by and among Advanced
Lighting Technologies, Inc. and certain of its
subsidiaries and PNC Bank, National Association, as
agent for certain other banks dated as of November
2, 1999, amending the Credit Agreement by and among
the same parties dated as of May 21, 1999 (Form 10-Q
Exhibit 10.3)                                                                                            |  |                    | (9 | )

88



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|        |  |  |  |  |         |             |  |                                                                                                                                                                                                                                                                                                                                  |  |                    |     |  
|------- |  |  |  |  | ------- | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | --- | -
|        |  |  |  |  |         |             |  |                                                                                                                                                                                                                                                                                                                                  |  | Previous Filing If
|Exhibit |  |  |  |  |         |             |  | Incorporated                                                                                                                                                                                                                                                                                                                    
|Number  |  |  |  |  |         | Description |  | by Reference                                                                                                                                                                                                                                                                                                                    
|        |  |  |  |  |         |             |  |                                                                                                                                                                                                                                                                                                                                 
|        |  |  |  |  | 10.2.10 |             |  | Fourth Amendment Agreement by and among Advanced
Lighting Technologies, Inc. and certain of its
subsidiaries and PNC Bank, National Association, as
agent for certain other banks dated as of February
28, 2000, amending the Credit Agreement by and among
the same parties dated as of May 21, 1999 (Form
10-Q/A Exhibit 10.1) |  |                    | (10 | )
|       
|       
|       
|       
|       
|        |  |  |  |  | 10.2.11 |             |  | Fifth Amendment Agreement by and among Advanced
Lighting Technologies, Inc. and certain of its
subsidiaries and PNC Bank, National Association, as
agent for certain other banks dated as of May 8,
2000, amending the Credit Agreement by and among the
same parties dated as of May 21, 1999 (Form 10-K
Exhibit 10.19)         |  |                    | (11 | )
|       
|       
|       
|       
|       
|        |  |  |  |  | 10.2.12 |             |  | Sixth Amendment Agreement by and among Advanced
Lighting Technologies, Inc. and certain of its
subsidiaries and PNC Bank, National Association, as
agent for certain other banks dated as of July 1,
2000, amending the Credit Agreement by and among the
same parties dated as of May 21, 1999 (Form 10-Q
Exhibit 10.1)         |  |                    | (13 | )
|       
|       
|       
|       
|       
|        |  |  |  |  | 10.2.13 |             |  | Seventh Amendment Agreement by and among Advanced
Lighting Technologies, Inc. and certain of its
subsidiaries and PNC Bank, National Association, as
agent for certain other banks dated as of March 27,
2001, amending the Credit Agreement by and among the
same parties dated as of May 21, 1999 (Form 10-Q
Exhibit 10.2)     |  |                    | (15 | )
|       
|       
|       
|       
|       
|        |  |  |  |  | 10.2.14 |             |  | Eighth Amendment Agreement by and among Advanced
Lighting Technologies, Inc. and certain of its
subsidiaries and PNC Bank, National Association, as
agent for certain other banks dated as of June 12,
2001, amending the Credit Agreement by and among the
same parties dated as of May 21, 1999 (Form 10-K
Exhibit 10.15)      |  |                    | (16 | )
|       
|       
|       
|       
|       
|        |  |  |  |  | 10.2.15 |             |  | Ninth Amendment Agreement by and among Advanced
Lighting Technologies, Inc. and certain of its
subsidiaries and PNC Bank, National Association, as
agent for certain other banks dated as of September
28, 2001, amending the Credit Agreement                                                                                   |  |                    | (17 | )
|       
|       
|       
|       
|       
|        |  |  |  |  | 10.2.16 |             |  | Tenth Amendment Agreement by and among Advanced
Lighting Technologies, Inc. and certain of its
subsidiaries and PNC Bank, National Association, as
agent for certain other banks dated as of December
12, 2001, amending the Credit Agreement                                                                                    |  |                    | (19 | )

89



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|        |      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |         |             |     |                                                                                                                                                                                                                                               |  |                    |     |  
|------- | ---- |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------- | ----------- | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | --- | -
|        |      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |         |             |     |                                                                                                                                                                                                                                               |  | Previous Filing If
|Exhibit |      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |         |             |     | Incorporated                                                                                                                                                                                                                                 
|Number  |      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |         | Description |     | by Reference                                                                                                                                                                                                                                 
|        |      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |         |             |     |                                                                                                                                                                                                                                              
|       
|        |      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 10.2.17 |             |     | Eleventh Amendment Agreement by and among Advanced
Lighting Technologies, Inc. and certain of its
subsidiaries and PNC Bank, National Association, as
agent for certain other banks dated as of April 23,
2002, amending the Credit Agreement |  |                    | (20 | )
|       
|       
|       
|       
|       
|        |      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 10.2.18 |             |     | Twelfth Amendment Agreement by and among Advanced
Lighting Technologies, Inc. and certain of its
subsidiaries and PNC Bank, National Association, as
agent for certain other banks dated as of May 13,
2002, amending the Credit Agreement    |  |                    | (20 | )
|       
|       
|       
|       
|       
|        | 10.3 |  |  | Lease Agreement by and between Macken Associates and
Deposition Sciences, Incorporated dated March 2,
2001                                                                                                                                                                                                                                                                                                                                               |         |             | (16 | )                                                                                                                                                                                                                                            
|       
|       
|       
|       
|       
|        | 10.4 |  |  | Agreement dated April 16, 2001 by and between Macken
Associates and Deposition Sciences, Inc. amending the
Lease Agreement by and between the same parties dated
March 2, 2001                                                                                                                                                                                                                                                                           |         |             | (16 | )                                                                                                                                                                                                                                            
|       
|       
|       
|       
|       
|        | 10.5 |  |  | Second Amendment to Lease dated June 20, 2001 by and
between Macken Associates and Deposition Sciences, Inc.
amending the Lease Agreement by and between the same
parties dated March 2, 2001                                                                                                                                                                                                                                                            |         |             | (16 | )                                                                                                                                                                                                                                            
|       
|       
|       
|       
|       
|        | 10.6 |  |  | Option Agreement to Purchase Real Property dated March
2, 2001 by and between Macken Associates and Deposition
Sciences, Incorporated with respect to the premises
leased by the second party from the first party pursuant
to the Lease Agreement by and between them dated March 2,
2001                                                                                                                                                               |         |             | (16 | )                                                                                                                                                                                                                                            
|       
|       
|       
|       
|       
|        | 10.7 |  |  | Agreement dated May 29, 2001 by and between Macken
Associates and Deposition Sciences, Inc. amending the
Option Agreement to Purchase Real Property by and
between the same parties dated March 2, 2001                                                                                                                                                                                                                                                  |         |             | (16 | )                                                                                                                                                                                                                                            
|       
|       
|       
|       
|       
|        | 10.8 |  |  | Stock Purchase Agreement by and between Advanced
Lighting Technologies, Inc. and General Electric Company
dated as of September 28, 1999 (Form 10-Q/A Exhibit
10.5)                                                                                                                                                                                                                                                                                      |         |             | (8  | )                                                                                                                                                                                                                                            
|       
|       
|       
|       
|       
|        | 10.9 |  |  | Contingent Warrant Agreement dated as of September 30,
1999 by and among Advanced Lighting Technologies, Inc.,
General Electric Company, Wayne R. Hellman, individually
and as voting trustee under Voting Trust Agreement dated
October 10, 1995, Hellman Ltd. and Alan J. Ruud,
individually and as voting trustee under Voting Trust
Agreement dated January 2, 1998, as subsequently amended
and restated October 1, 2000 (Form 10-Q/A Exhibit 10.6) |         |             | (8  | )                                                                                                                                                                                                                                            

90



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|        |       |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                     |  |             |     |              |  |                    |  | 
|------- | ----- |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | --- | ------------ |  | ------------------ |  | 
|        |       |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                     |  |             |     |              |  | Previous Filing If
|Exhibit |       |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                     |  |             |     | Incorporated
|Number  |       |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                     |  | Description |     | by Reference
|        |       |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                     |  |             |     |             
|        | 10.10 |  |  | Amendment to Contingent Warrant Agreement dated as of
August 31, 2000 by and among Advanced Lighting
Technologies, Inc., General Electric Company, Wayne R.
Hellman, individually and as voting trustee under Voting
Trust Agreement dated October 10, 1995, Hellman Ltd. and
Alan J. Ruud, individually and as voting trustee under
Voting Trust Agreement dated January 2, 1998 (Form
10-Q/A Exhibit 10.6)        |  |             | (13 | )           
|       
|       
|       
|       
|       
|        | 10.11 |  |  | Second Amendment to Contingent Warrant Agreement dated
as of June 29, 2001 by and among Advanced Lighting
Technologies, Inc., General Electric Company, Wayne R.
Hellman, individually and as voting trustee under Voting
Trust Agreement dated October 10, 1995, Hellman Ltd. and
Alan J. Ruud, individually and as voting trustee under
Voting Trust Agreement dated January 2, 1998 (Form
10-K Exhibit 10.24)    |  |             | (16 | )           
|       
|       
|       
|       
|       
|        | 10.12 |  |  | Third Amendment to Contingent Warrant Agreement dated as
of September 28, 2001 by and among Advanced Lighting
Technologies, Inc., General Electric Company, Wayne R.
Hellman, individually and as voting trustee under Voting
Trust Agreement dated October 10, 1995, Hellman Ltd. and
Alan J. Ruud, individually and as voting trustee under
Voting Trust Agreement dated January 2, 1998 (Form
10-Q Exhibit 10.1) |  |             | (17 | )           
|       
|       
|       
|       
|       
|        | 10.13 |  |  | Fourth Amendment to Contingent Warrant Agreement dated
as of December 31, 2001 by and among Advanced Lighting
Technologies, Inc., General Electric Company, Wayne R.
Hellman, individually and as voting trustee under Voting
Trust Agreement dated October 10, 1995, Hellman Ltd. and
Alan J. Ruud, individually and as voting trustee under
Voting Trust Agreement dated January 2, 1998 (Form
10-Q Exhibit 10.2) |  |             | (19 | )           
|       
|       
|       
|       
|       
|        | 10.14 |  |  | Fifth Amendment to Contingent Warrant Agreement dated as
of March 31, 2002 by and among Advanced Lighting
Technologies, Inc., General Electric Company, Wayne R.
Hellman, individually and as voting trustee under Voting
Trust Agreement dated October 10, 1995, Hellman Ltd. and
Alan J. Ruud, individually and as voting trustee under
Voting Trust Agreement dated January 2, 1998 (Form
10-Q Exhibit 10.3)     |  |             | (20 | )           

91



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|        |       |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                  |  |             |     |              |  |                    |  | 
|------- | ----- |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | --- | ------------ |  | ------------------ |  | 
|        |       |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                  |  |             |     |              |  | Previous Filing If
|Exhibit |       |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                  |  |             |     | Incorporated
|Number  |       |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                  |  | Description |     | by Reference
|        |       |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                  |  |             |     |             
|       
|        | 10.15 |  |  | Sixth Amendment to Contingent Warrant Agreement dated as
of June 30, 2002 by and among Advanced Lighting
Technologies, Inc., General Electric Company, Wayne R.
Hellman, individually and as voting trustee under Voting
Trust Agreement dated October 10, 1995, Hellman Ltd. and
Alan J. Ruud, individually and as voting trustee under
Voting Trust Agreement dated January 2, 1998 (Form
10-Q/A Exhibit 10.6) |  |             |     |             
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|        | 10.16 |  |  | Lamp Materials Purchase Agreement by and among Advanced
Lighting Technologies, Inc., General Electric Company,
acting through its GE Lighting business and APL
Engineered Materials, Inc. dated as of September 30,
1999 (Form 10-Q/A Exhibit 10.8)                                                                                                                                                              |  |             | (8  | )           
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|        | 10.17 |  |  | Patent and Technical Assistance Agreement by and among
Advanced Lighting Technologies, Inc., APL Engineered
Materials, Inc. and General Electric Company, acting
through its GE Lighting business, dated as of September
30, 1999 (Form 10-Q/A Exhibit 10.9)                                                                                                                                                     |  |             | (8  | )           
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|        | 10.18 |  |  | Series A1 Warrant to Purchase Common Shares of Advanced
Lighting Technologies, Inc. issued to General Electric
Company dated as of October 6, 1999 (Form 10-Q/A Exhibit
10.7)                                                                                                                                                                                                                                    |  |             | (8  | )           
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|        | 10.19 |  |  | Agency Agreement dated August 31, 2000 among Advanced
Lighting Technologies, Inc., Raymond James & Associates,
Inc. and Sanders Morris Harris Inc. (Form 8-K Exhibit
1.1)                                                                                                                                                                                                                                        |  |             | (12 | )           
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|        | 12    |  |  | Statement regarding Computation of Ratios                                                                                                                                                                                                                                                                                                                                                                        |  |             |     |             
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|        | 21    |  |  | Subsidiaries of the Registrant as of June 30, 2002                                                                                                                                                                                                                                                                                                                                                               |  |             |     |             
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|        | 23    |  |  | Consent of Grant Thornton LLP                                                                                                                                                                                                                                                                                                                                                                                    |  |             |     |             
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|        | 99.1  |  |  | Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002                                                                                                                                                                                                                                                                                           |  |             |     |             
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|        | 99.2  |  |  | Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002                                                                                                                                                                                                                                                                                           |  |             |     |             



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|(1) |  | Incorporated by reference to referenced Exhibit in Companys
Registration Statement on Form S-1, Registration No. 33-97902, effective
December 11, 1995.           
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
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|(2) |  | Incorporated by reference to referenced Exhibit in Companys
Registration Statement on Form S-4 Registration No. 333-58609 filed July
7, 1998.                     
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|   
|   
|(3) |  | Incorporated by reference to referenced Exhibit in Companys
Quarterly Report on Form 10-Q/A for the Quarterly Period ended March 31,
1998 filed on March 15, 1999.
|   
|   
|   
|   
|(4) |  | Incorporated by reference to referenced Exhibit in Companys Annual
Report on Form 10-K/A No. 2 for the Annual Period ended June 30, 1998
filed March 16, 1999.    

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##### Table of Contents



|(5)  |  | Incorporated by reference to referenced Exhibit in Companys
Quarterly Report on Form 10-Q/A No. 2 for the Quarterly Period ended
September 30, 1998 filed March 15, 1999.
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
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|(6)  |  | Incorporated by reference to referenced Exhibit in Companys
Quarterly Report on Form 10-Q/A for the Quarterly Period ended December
31, 1998 filed March 15, 1999.       
|    
|    
|    
|    
|(7)  |  | Incorporated by reference to referenced Exhibit in Companys Annual
Report on Form 10-K/A No. 2 for the Annual Period ended June 30, 1999
filed April 25, 2000.           
|    
|    
|    
|    
|(8)  |  | Incorporated by reference to referenced Exhibit in Companys
Quarterly Report on Form 10-Q/A for the Quarterly Period ended September
30, 1999 filed January 14, 2000.    
|    
|    
|    
|    
|(9)  |  | Incorporated by reference to referenced Exhibit in Companys
Quarterly Report on Form 10-Q for the Quarterly Period ended December
31, 1999 filed February 14, 2000.      
|    
|    
|    
|    
|(10) |  | Incorporated by reference to referenced Exhibit in Companys
Quarterly Report on Form 10-Q/A for the Quarterly Period ended March 31,
2000 filed July 11, 2000.           
|    
|    
|    
|    
|(11) |  | Incorporated by reference to referenced Exhibit in Companys Annual
Report on Form 10-K for the Annual Period ended June 30, 2000 filed
September 27, 2000.               
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|    
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|    
|(12) |  | Incorporated by reference to referenced Exhibit in Companys Current
Report on Form 8-K dated August 31, 2000 filed September 1, 2000.                                    
|    
|    
|    
|    
|(13) |  | Incorporated by reference to referenced Exhibit in Companys
Quarterly Report on Form 10-Q for the Quarterly Period ended September
30, 2000 filed November 14, 2000.     
|    
|    
|    
|    
|(14) |  | Incorporated by reference to referenced Exhibit in Companys
Quarterly Report on Form 10-Q for the Quarterly Period ended December
31, 2000 filed February 14, 2001.      
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|    
|    
|    
|(15) |  | Incorporated by reference to referenced Exhibit in Companys
Quarterly Report on Form 10-Q for the Quarterly Period ended March 31,
2001 filed May 15, 2001.              
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|    
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|    
|(16) |  | Incorporated by reference to referenced Exhibit in Companys Annual
Report on Form 10-K for the Annual Period ended June 30, 2001 filed
September 28, 2001.               
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|    
|    
|    
|(17) |  | Incorporated by reference to referenced Exhibit in Companys
Quarterly Report on Form 10-Q for the Quarterly Period ended September
30, 2001 filed November 14, 2001.     
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|    
|    
|    
|(18) |  | Incorporated by reference to referenced Exhibit in Companys Current
Report on Form 8-K dated December 12, 2001, filed December 27, 2001.                                 
|    
|    
|    
|    
|(19) |  | Incorporated by reference to referenced Exhibit in Companys
Quarterly Report on Form 10-Q for the Quarterly Period ended December
31, 2001 filed February 14, 2002.      
|    
|    
|    
|    
|(20) |  | Incorporated by reference to referenced Exhibit in Companys
Quarterly Report on Form 10-Q for the Quarterly Period ended March 31,
2002 filed May 15, 2002.              
|    
|    
|    
|    
|(21) |  | Incorporated by reference to referenced Exhibit to Schedule 13D filed by
Alan Ruud, et. al., March 15, 2000.                                                              

93