<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                              ---------------------

                                    FORM 10-Q

(Mark One)

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

For the quarterly period ended:            March 31, 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: 000-27977
                                                ---------


                  Lumenon Innovative Lightwave Technology, Inc.
                  ---------------------------------------------
              Exact Name of Registrant as Specified in Its Charter

              Delaware                                98-0213257
----------------------------------        --------------------------------
 (State or Other Jurisdiction of          (I.R.S. Employer Identification No.)
  Incorporation or Organization)

8851 Trans-Canada Highway, St-Laurent, Quebec, Canada          H4S 1Z6
----------------------------------------------------------------------------
(Address of Principal Executive Offices)                      (Zip Code)

Registrant's Telephone Number, Including Area Code: (514) 331-3738
                                                    ---------------

Indicate by check whether the registrant: (1) has filed all reports 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. (X) Yes ( ) No

Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date: 40,984,375 shares of Common
Stock, $.001 par value, as of May 1, 2002.



<PAGE>


                  LUMENON INNOVATIVE LIGHTWAVE TECHNOLOGY, INC.

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                     Page No.
                                                                                     --------

<S>                                                                                    <C>
PART I.           FINANCIAL INFORMATION                                                  1

     Item 1.      Financial Statements                                                   1

                  Consolidated Balance Sheets as of March 31, 2002
                  (unaudited) and June 30, 2001                                          1

                  Consolidated Statements of Operations (unaudited) for the
                  three and nine months ended March 31, 2002 and 2001 and from
                  inception to March 31, 2002                                            2

                  Consolidated Statements of Cash Flows (unaudited) for the
                  three and nine months ended March 31, 2002 and 2001 and from
                  inception to March 31, 2002                                            3

                  Notes to Consolidated Financial Statements (unaudited)                 4

     Item 2.      Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                                    9


PART II.          OTHER INFORMATION                                                     22

     Item 5.      Other information                                                     22

     Item 6.      Exhibits and Reports on Form 8-K                                      22


SIGNATURES                                                                              23


INDEX TO EXHIBITS                                                                       24
</TABLE>



<PAGE>


                         PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

LUMENON INNOVATIVE LIGHTWAVE
TECHNOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
Consolidated Balance Sheets
(Unaudited, in thousands of Canadian dollars)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
                                                             March 31,           March 31,            June 30,
                                                                 2002                2002                2001
--------------------------------------------------------------------------------------------------------------
                                                                (US$)               (CAN$)              (CAN$)
                                                             (note 5)
<S>                                                         <C>                 <C>                   <C>
Assets
Current assets:
     Cash and cash equivalents                              $   6,901           $  11,013             $  2,382
     Commercial papers and term deposits                            -                   -               19,913
     Loan receivable from an officer                              125                 200                    -
     Interest and sales tax receivable                            169                 269                  404
     Government contribution and tax credits receivable           274                 437                1,561
     Prepaid expenses                                              94                 150                   87
--------------------------------------------------------------------------------------------------------------
                                                                7,563              12,069               24,347

Deposits                                                          491                 783                  782
Property and equipment (note 2)                                11,168              17,822               21,257
Other assets                                                        -                   -                   16
--------------------------------------------------------------------------------------------------------------
                                                            $  19,222           $  30,674             $ 46,402
==============================================================================================================
Liabilities and Stockholders' Equity

Current liabilities:
     Accounts payable                                       $     553           $     882             $  1,134
     Accrued liabilities                                          213                 340                  438
     Compensation and related liabilities                       1,713               2,733                2,178
     Obligations under capital leases                             726               1,159                  940
--------------------------------------------------------------------------------------------------------------
                                                                3,205               5,114                4,690

Obligations under capital leases                                  602                 960                1,368
Convertible notes (note 3)                                      6,592              10,520               11,267

Stockholders' equity:
     Share capital (note 4)                                        38                  61                   57
     Additional paid-in capital                               198,432             316,657              312,035
     Accumulated deficit during the development
       stage                                                 (189,647)           (302,638)            (283,015)
--------------------------------------------------------------------------------------------------------------
                                                                8,823              14,080               29,077
Contingencies (note 7)
--------------------------------------------------------------------------------------------------------------
                                                            $  19,222           $  30,674             $ 46,402
==============================================================================================================
</TABLE>

See accompanying notes to unaudited consolidated financial statements.

                                      -1-
<PAGE>

LUMENON INNOVATIVE LIGHTWAVE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
Consolidated Statements of Operations
(Unaudited, in thousands of Canadian dollars, except per share amounts)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
                                    Three months         Three months        Three months          Nine months
                                           ended                ended               ended                ended
                                       March 31,            March 31,           March 31,            March 31,
                                            2002                 2002                2001                 2002
---------------------------------------------------------------------------------------------------------------
                                           (US$)               (CAN$)              (CAN$)               (CAN$)
                                        (note 5)
<S>                                 <C>                  <C>                  <C>                  <C>
Expenses:
     Research and development       $        834         $      1,330         $     3,061          $     4,126
     Research tax credits                   (268)                (427)                  -                 (934)
--------------------------------------------------------------------------------------------------------------
                                             566                 903                3,061                3,192

     General and administrative            1,639               2,616                4,837                7,650
     Depreciation and amortization           901               1,438                  654                4,320
     Write-down of property and
       equipment                             452                 722                    -                1,429
--------------------------------------------------------------------------------------------------------------
                                           2,992               4,776                5,491               13,399

Other expenses (income):
     Loss (gain) on foreign exchange         (25)                (39)                (221)                 745
     Interest expense                        241                 383                  394                1,263
     Interest income                         (36)                (57)                (430)                (574)
     Financing charges                       308                 491                  375                1,598
--------------------------------------------------------------------------------------------------------------
                                             488                 778                  118                3,032
--------------------------------------------------------------------------------------------------------------
Net loss                            $      4,046         $     6,457          $     8,670          $    19,623
==============================================================================================================
Net loss per share:
     Basic and diluted              $       0.10         $      0.16          $      0.23          $      0.50
==============================================================================================================
Weighted average number
   of shares outstanding              39,441,465          39,441,465           38,361,512           38,890,695
==============================================================================================================
</TABLE>

<TABLE>
<CAPTION>
----------------------------------------------------------------------------
                                           Nine months                  From
                                                 ended          Inception to
                                             March 31,             March 31,
                                                  2001                  2002
----------------------------------------------------------------------------
                                                (CAN$)                (CAN$)

<S>                                        <C>                  <C>
Expenses:
     Research and development              $     6,373          $    231,982
     Research tax credits                         (113)               (1,372)
----------------------------------------------------------------------------
                                                 6,260               230,610

     General and administrative                 12,119                30,242
     Depreciation and amortization               1,789                10,081
     Write-down of property and
       equipment                                     -                 3,942
----------------------------------------------------------------------------
                                                13,908                44,265

Other expenses (income):
     Loss (gain) on foreign exchange            (1,272)                  396
     Interest expense                            1,893                 3,627
     Interest income                            (1,863)               (2,961)
     Financing charges                          24,299                26,701
----------------------------------------------------------------------------
                                                23,057                27,763
----------------------------------------------------------------------------
Net loss                                  $     43,225          $    302,638
============================================================================
Net loss per share:
     Basic and diluted                    $       1.19          $
============================================================================
Weighted average number
   of shares outstanding                    36,452,585
============================================================================
</TABLE>


See accompanying notes to unaudited consolidated financial statements.



                                      -2-
<PAGE>

LUMENON INNOVATIVE LIGHTWAVE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
Consolidated Statements of Operations
(Unaudited, in thousands of Canadian dollars, except per share amounts)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
                                            Three months         Three months        Three months          Nine months
                                                   ended                ended               ended                ended
                                               March 31,            March 31,           March 31,            March 31,
                                                    2002                2002                 2001                 2002
-----------------------------------------------------------------------------------------------------------------------
                                                   (US$)              (CAN$)               (CAN$)               (CAN$)
                                                (note 5)
<S>                                            <C>                 <C>                 <C>                  <C>
Cash flows from operating activities:
     Net loss                                  $  (4,046)          $   (6,457)         $   (8,670)          $  (19,623)
     Adjustment for:
       Compensation costs                            196                  312               2,339                1,028
       Interest on convertible notes                 196                  315                 333                1,024
       Common shares issued for services               -                    -                   -                    -
       Depreciation and amortization                 901                1,438                 654                4,320
       Write-down of property and equipment          452                  722                   -                1,429
       Financing charges                             308                  491                 375                1,598
       Unrealized loss on foreign exchange           (30)                 (49)                399                  911
     Net change in operating assets
       and liabilities                                 4                    6              (2,218)                (557)
-----------------------------------------------------------------------------------------------------------------------
                                                  (2,019)              (3,222)             (6,788)              (9,870)
Cash flows from financing activities:
     Proceeds from issuance of common shares           4                    7                 145                   16
     Principal repayments of capital
          lease obligations                         (179)                (287)               (188)                (874)
     Proceeds from issuance of
       convertible notes, net of issue costs           -                    -                   -                    -
     Share issue expenses                              -                    -                  (4)                   -
     Deposit on subscription of shares                 -                    -                   -                    -
     Cash from the acquisition of a subsidiary         -                    -                   -                    -
-----------------------------------------------------------------------------------------------------------------------
                                                    (175)                (280)                (47)                (858)
Cash flows from investing activities:
     Purchase of commercial papers and
       term deposits                                   -                    -                   -                    -
     Disposal of commercial papers and
       term deposits                                   -                    -              25,931               19,530
     Additions to property and equipment             (64)                (102)             (1,541)                (389)
     Disposal of property and equipment                -                    -                   -                   36
     Deposits                                         20                   32                 419                  182
     Other assets                                      -                    -                   -                    -
-----------------------------------------------------------------------------------------------------------------------
                                                     (44)                 (70)             24,809               19,359
-----------------------------------------------------------------------------------------------------------------------
     Net (decrease) increase in cash and
       cash equivalents                           (2,238)              (3,572)             17,974                8,631
     Cash and cash equivalents,
       beginning of period                         9,139               14,585               9,011                2,382
-----------------------------------------------------------------------------------------------------------------------
     Cash and cash equivalents,
       end of period                            $  6,901           $   11,013          $   26,985           $   11,013
-----------------------------------------------------------------------------------------------------------------------
</TABLE>


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
                                                   Nine months                  From
                                                         ended          Inception to
                                                     March 31,             March 31,
                                                          2001                  2002
------------------------------------------------------------------------------------
                                                        (CAN$)                 (CAN$)

<S>                                                  <C>                  <C>
Cash flows from operating activities:
     Net loss                                        $ (43,225)           $  (302,638)
     Adjustment for:
       Compensation costs                                3,864                  6,256
       Interest on convertible notes                     1,807                  3,149
       Common shares issued for services                     -                217,359
       Depreciation and amortization                     1,789                 10,081
       Write-down of property and equipment                  -                  3,942
       Financing charges                                24,299                 26,701
       Unrealized loss on foreign exchange               1,135                  2,814
     Net change in operating assets
       and liabilities                                  (9,483)                 1,448
-------------------------------------------------------------------------------------
                                                       (19,814)               (30,888)
Cash flows from financing activities:
     Proceeds from issuance of common shares             6,038                 23,153
     Principal repayments of capital
          lease obligations                               (429)                (1,751)
     Proceeds from issuance of
       convertible notes, net of issue costs            48,382                 48,681
     Share issue expenses                                  (40)                (1,138)
     Deposit on subscription of shares                       -                    147
     Cash from the acquisition of a subsidiary               -                    814
-------------------------------------------------------------------------------------
                                                        53,951                 69,906
Cash flows from investing activities:
     Purchase of commercial papers and
       term deposits                                   (67,435)              (233,337)
     Disposal of commercial papers and
       term deposits                                    71,509                232,954
     Additions to property and equipment               (13,093)               (27,045)
     Disposal of property and equipment                      -                     36
     Deposits                                              742                   (600)
     Other assets                                            -                    (13)
-------------------------------------------------------------------------------------
                                                        (8,277)               (28,005)
-------------------------------------------------------------------------------------
     Net (decrease) increase in cash and
       cash equivalents                                 25,860                 11,013
     Cash and cash equivalents,
       beginning of period                               1,125                      -
-------------------------------------------------------------------------------------
     Cash and cash equivalents,
       end of period                                  $ 26,985            $    11,013
-------------------------------------------------------------------------------------
</TABLE>


See accompanying notes to unaudited consolidated financial statements.
                                      -3-
<PAGE>


LUMENON INNOVATIVE LIGHTWAVE
TECHNOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
Notes to Consolidated Financial Statements (Unaudited)

Three-month and nine-month periods ended March 31, 2002 and 2001 and period from
inception (March 2, 1998) to March 31, 2002 (in thousands of Canadian dollars,
except per share amounts)
--------------------------------------------------------------------------------

     In the opinion of management, the accompanying unaudited interim financial
     statements, prepared in accordance with US generally accepted accounting
     principles, contain all adjustments (consisting of normal recurring
     accruals) necessary to present fairly the Corporation's financial position
     as at March 31, 2002 and June 30, 2001, its results of operations and cash
     flows for the three-month and nine-month periods ended March 31, 2002 and
     2001 and from inception to March 31, 2002.

     While management believes that the disclosures presented are adequate,
     these consolidated financial statements and notes should be read in
     conjunction with the Corporation's Consolidated Financial Statements at
     June 30, 2001.


1.   ORGANIZATION AND BUSINESS ACTIVITIES:

     The Corporation's principal business activity is to design, develop and
     build integrated optic devices in the form of compact hybrid glass circuits
     on silicon chips. Lumenon's activities are performed through LILT Canada
     Inc., a wholly-owned subsidiary of the Corporation, in Canada.

     Lumenon was established to capitalize on innovations in compact optical
     circuit design and hybrid glass materials for integrated optics. In July
     1999, Lumenon opened its pilot plant to support its ongoing research and
     development initiatives. In October 2000, the Corporation opened its
     53,000-square-foot facility. This facility serves as the Corporation's
     headquarters and, when operative, will be a high-volume manufacturing
     plant. In March 2001, in response to a perceived market downturn for
     optical circuits, the Corporation re-focused its process from one of
     providing only simple passive components to one of offering a mix of
     products and services ranging from optical chips to integrated photonic
     devices.

     The Corporation's financial statements are prepared using the generally
     accepted accounting principles applicable to a going concern, which
     contemplates the realization of assets and liquidation of liabilities in
     the normal course of business. However, the Corporation has no current
     source of revenue. Without raising additional capital, it is unlikely that
     the Corporation will continue as a going concern. The Corporation plans to
     seek additional capital through private financing.

                                       4-

<PAGE>

LUMENON INNOVATIVE LIGHTWAVE
TECHNOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
Notes to Consolidated Financial Statements (Unaudited)

Three-month and nine-month periods ended March 31, 2002 and 2001 and period from
inception (March 2, 1998) to March 31, 2002 (in thousands of Canadian dollars,
except per share amounts)
--------------------------------------------------------------------------------


2.   PROPERTY AND EQUIPMENT:

<TABLE>
<CAPTION>
     ---------------------------------------------------------------------------------------------------------
                                                                                                March 31, 2002
     ---------------------------------------------------------------------------------------------------------
                                                                             Accumulated              Net book
                                                             Cost           depreciation                 value
     ---------------------------------------------------------------------------------------------------------
     <S>                                                 <C>                   <C>                   <C>
     Plant equipment and laboratory installation         $ 23,219              $   8,366             $  14,853
     Leasehold improvements                                 1,787                    454                 1,333
     Office equipment and fixtures                          1,329                    464                   865
     Computer equipment and software                        1,338                    662                   676
     Vehicle equipment                                        183                     88                    95
     ---------------------------------------------------------------------------------------------------------
                                                         $ 27,856              $  10,034             $  17,822
     =========================================================================================================
</TABLE>


     During fiscal 2001, Lumenon acquired certain equipment anticipated to be
     used in production. Subsequently, management concluded that the Corporation
     required additional time and effort to complete the development of its
     products and, as a result, commencement of related production activity was
     delayed.

     Because Lumenon is a development stage enterprise, the recoverability of
     plant equipment and laboratory installation to be used in commercial
     production has been established at fair value. In connection therewith,
     write-offs of $722 and $1,429 on the equipment for which management
     believes there will be no future use due to technological changes have been
     recorded during the three-month period and the nine-month period ended
     March 31, 2002 respectively.

     Fair value is based on information obtained from suppliers and other
     companies operating in the same field of activity.

     Cost and net book value of plant equipment, laboratory installation and
     vehicle equipment held under capital leases amount to $3,815 and $2,145,
     respectively, as at March 31, 2002.



                                      -5-
<PAGE>

LUMENON INNOVATIVE LIGHTWAVE
TECHNOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
Notes to Consolidated Financial Statements (Unaudited)

Three-month and nine-month periods ended March 31, 2002 and 2001 and period from
inception (March 2, 1998) to March 31, 2002 (in thousands of Canadian dollars,
except per share amounts)
--------------------------------------------------------------------------------

3.   CONVERTIBLE NOTES:

     As mentioned in the annual consolidated financial statements and previous
     quarterly consolidated financial statements, the Corporation closed a
     financing in July 2000 involving the issuance of convertible notes in the
     aggregate principal amount of $51,243 (US$35,000). Due to the terms and
     conditions of the financing, the convertible notes were discounted and are
     presented net of the debt discount. Amortization is presented under
     financing charges in the consolidated statements of operations.

     On October 9, 2001, the convertible notes were amended and restated to,
     among other things, modify the conversion price to US$1.44. The convertible
     notes with related accrued interest are payable on or before July 25, 2005.
     Since the date of issuance, a portion of the convertible notes including
     related interest has been converted into shares of common stock and as at
     March 31, 2002, $14,442 (US$9,050) of the gross principal amount remains
     outstanding.

     The convertible notes are secured by present and future movable properties,
     rights and assets of the Corporation.


4.   SHARE CAPITAL:

<TABLE>
<CAPTION>
     -----------------------------------------------------------------------------------------
                                                                       March 31,      June 30,
                                                                            2002          2001
     -----------------------------------------------------------------------------------------
     <S>                                                                <C>            <C>
     Authorized:
     5,000,000 preferred stock, par value
     of US$0.001 per share
     100,000,000 common stock, par value
     of US$0.001 per share

     Issued and outstanding:
     40,984,375 common shares (June 30, 2001: 38,478,905)               $    61        $    57
----------------------------------------------------------------------------------------------
</TABLE>

     (a) Issue of shares:

         During the three-month period ended March 31, 2002, the Corporation
         issued 1,874,161 shares of common stock as a result of the conversion
         of convertible notes amounting to CDN$3,514 (US$2,699), and 11,667
         shares of common stock upon exercise of options for cash
         consideration of $7. As a result, the Corporation issued during the
         nine-month period ended March 31, 2002, 2,485,503 shares of common
         stock in connection with conversion of convertible notes amounting to
         CDN$4,685, and 19,967 shares of common stock upon exercise of options
         for cash consideration of $16.

                                      -6-
<PAGE>

LUMENON INNOVATIVE LIGHTWAVE
TECHNOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
Notes to Consolidated Financial Statements (Unaudited)

Three-month and nine-month periods ended March 31, 2002 and 2001 and period from
inception (March 2, 1998) to March 31, 2002 (in thousands of Canadian dollars,
except per share amounts)
--------------------------------------------------------------------------------

4.   SHARE CAPITAL (CONTINUED):

     (b) Stock option plan:

         Changes in outstanding options for the nine-month period ended March
         31, 2002 were as follows:
<TABLE>
<CAPTION>

         ---------------------------------------------------------------------------------------------
                                                                                     Weighted average
                                                                Number       exercise price per share
         ---------------------------------------------------------------------------------------------
         <S>                                                <C>                  <C>        <C>
         Options outstanding, June 30, 2001                  4,935,650
         Granted                                                56,250            $  0.70    (US$0.44)
         Cancelled                                            (656,900)           $ 18.91   (US$11.87)
         ---------------------------------------------------------------------------------------------
         Options outstanding, September 30, 2001             4,335,000
         Granted                                             1,132,500            $  0.82    (US$0.51)
         Cancelled                                             (80,000)           $  7.82    (US$4.91)
         Exercised                                              (8,300)           $  1.09    (US$0.68)
         ---------------------------------------------------------------------------------------------
         Options outstanding, December 31, 2001              5,379,200
         Granted                                               190,000            $  0.64    (US$0.40)
         Cancelled                                            (315,000)           $  6.65    (US$4.17)
         Exercised                                             (11,667)           $  0.62    (US$0.39)
         ---------------------------------------------------------------------------------------------
         Options outstanding, March 31, 2002                 5,242,533
         ---------------------------------------------------------------------------------------------
</TABLE>

         At March 31, 2002, 1,191,075 outstanding options were exercisable and
         4,051,458 outstanding options vest over a period from one to five
         years.

5.   FUNCTIONAL CURRENCY AND CONVENIENCE TRANSLATION:

     The functional currency of the Corporation is the Canadian dollar.

     US dollar amounts presented on the balance sheets, statements of operations
     and cash flows are provided for convenience of reference only and are based
     on the noon buying rate in New York City for cable transfers in foreign
     currencies as certified for customs purposes by the Federal Reserve Bank of
     New York at March 31, 2002, which was $1.5958 Canadian dollar per US
     dollar.

6.   SUPPLEMENTAL CASH FLOW DISCLOSURE:

     Non-cash investing and financing activities:

     Acquisition of property and equipment through capital leases is nil for the
     three-month period ended March 31, 2002 and amounts to $684 for the
     nine-month period ended March 31, 2002.

     Capital expenditures of $32 are included in accounts payable at March 31,
     2002.


                                      -7-
<PAGE>

LUMENON INNOVATIVE LIGHTWAVE
TECHNOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
Notes to Consolidated Financial Statements (Unaudited)

Three-month and nine-month periods ended March 31, 2002 and 2001 and period from
inception (March 2, 1998) to March 31, 2002 (in thousands of Canadian dollars,
except per share amounts)
--------------------------------------------------------------------------------

7.   CONTINGENCIES:

     In connection with employee terminations that occurred during the past
     fiscal year, certain employees filed lawsuits claiming various amounts with
     respect to damage and loss related to their forfeitures. The outcome, if
     any, is unpredictable at this time. The Corporation believes that the legal
     actions are without merit and intends to vigorously defend such lawsuits.

                                      -8-
<PAGE>


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

         This quarterly report contains forward-looking statements that involve
risks and uncertainties. The statements contained in this report that are not
purely historical are 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. Without limiting the foregoing, statements containing the words
"believe", "anticipate," "estimate", "expect" and words of similar import, are
intended to identify forward-looking statements. All forward-looking statements
included in this quarterly report are based on information available to us up to
and including the date of this document, and we assume no obligation to update
any such forward-looking statements, even if our estimates change. You should
not place undue reliance on these forward-looking statements. Our actual results
could differ materially from those anticipated in these forward-looking
statements for many reasons, including the risks faced by us as described below
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "Certain Factors Which May Affect Future Results" and
elsewhere in this quarterly report, and in other documents we have filed with
the Securities and Exchange Commission.

RESULTS OF OPERATIONS

         Lumenon is a development stage enterprise that has not realized any
material revenues from operations to date.

         During the three-month period ended March 31, 2002, we entered into an
agreement with Poly-Scientific, a business unit of Northrop Grumman's Component
Technologies sector, to develop and market a Reconfigurable Optical Add/Drop
Multiplexer (ROADM) Module. To date, we have not derived any revenues from our
relationship with Northrop Grumman.

         Research and Development Expenses. Research and development expenses
for the three-month period ended March 31, 2002, net of tax credits and grants,
were CDN$903,000 (US$566,000), compared to CDN$3.1 million during the same
period in 2001. For the nine-month period ended March 31, 2002, these amounted
to CDN$3.2 million, compared to CDN$6.3 million during the same period in 2001.

         The net decrease of CDN$2.2 million or 71% in research and development
expenses during the three-month period ended March 31, 2002 compared to the same
period in 2001, was primarily due to the decrease of CDN$1.1 million or 81% in
spending on materials and supplies, the concentration of our efforts on specific
activities, as well as our conservative cash management objective. The decrease
of CDN$623,000 or 90% in non-cash compensation cost in research and development
also contributed to the decrease. The decrease in non-



                                      -9-
<PAGE>

cash compensation cost is due to the fact that during the quarter ended March
31, 2001, the exercise period of certain options issued to employees under our
stock incentive plans was changed from two to five years. Finally, related
research tax credits of CDN$427,000 were recorded during the three-month period
ended March 31, 2002 and, accordingly, contributed to the decrease in research
and development expenses.

         General and Administrative Expenses. The general and administrative
expenses were CDN$2.6 million (US$1.6 million) during the three-month period
ended March 31, 2002, compared to CDN$4.8 million for the same period in 2001, a
decrease of approximately CDN$2.2 million or 46%. General and administrative
expenses were CDN$7.7 million (US$4.8 million) during the nine-month period
ended March 31, 2002, compared to CDN$12.1 million for the same period in 2001,
a decrease of CDN$4.4 million. The decreases during these periods were mainly
attributable to a decrease in expenses relating to salaries and consulting fees
as a result of the implementation of our restructuring plan at the end of fiscal
year 2001. In addition, during the quarter ended March 31, 2001, the exercise
period of certain options issued to employees under our stock incentive plans
was changed from two to five years.

         The depreciation and amortization and write-down of property and
equipment were CDN$2.2 million (US$1.4 million) during the three-month period
ended March 31, 2002, compared to CDN$654,000 for the same period in 2001, an
increase of approximately CDN$1.5 million or 231%. The depreciation and
amortization and write-down of property and equipment were CDN$5.8 million
during the nine-month period ended March 31, 2002, compared to CDN$1.8 million
for the same period in 2001, an increase of CDN$4.0 million. The increase in
depreciation and amortization is the result of the significant investment made
in fiscal year 2001 for plant equipment and laboratory installation. In
addition, during the three-month period ended March 31, 2002, a write-down on
property and equipment was recorded in the amount of CDN$722,000 (US$452,000).
In connection therewith, write-offs of $722,000 and $1,429,000 on the equipment
for which management believes there will be no future use due to technological
changes have been recorded during the three-month period and the nine-month
period ended March 31, 2002, and is related to manufacturing equipment acquired
during the last fiscal year, which we anticipated being used in production. We
subsequently concluded that we needed additional time to complete the
development of our initial product and, as a result, the recoverability of plant
equipment and laboratory installation to be used in commercial production has
been established at fair value under FAS 121 Accounting for Impairment of
Long-Lived Assets.

         Other Expenses. Other expenses, net of interest income and gain on
foreign exchange, amounted to CDN$778,000 (US$488,000) during the three-month
period ended March 31, 2002, compared to CDN$118,000 during the same period in
2001, an increase of CDN$660,000 or 559%. During the nine-month period ended
March 31, 2002, other expenses, net of interest income and gain on foreign
exchange, amounted to CDN$3 million, compared to CDN$23 million for the same
period in 2001, a decrease of CDN$20 million.


                                      -10-
<PAGE>


         The increase of CDN$660,000 is mainly due to a decrease of interest
income recorded during the three-month period ended March 31, 2002 which
amounted to CDN$57,000 (US$36,000), compared to CDN$430,000 for the same period
in 2001, as a result of a decrease in cash and cash equivalents, commercial
papers and term deposits and the decrease of the principal of the convertible
notes. Also contributing to the decrease were financing charges and the gain on
foreign exchange which amounted to CDN$491,000 (US$308,000) and CDN$39,000
(US$26,000), respectively, for the three-month period ended March 31, 2002,
compared to CDN$375,000 and CDN$221,000 for the same period in 2001. The
decrease of CDN$20 million was mainly due to the CDN$55,209,000 (US$35,000,000)
worth of convertible notes we issued on July 25, 2000. The interest expense
portion of other expenses is mainly attributable to the fact that these
convertible notes bear interest at 7.5% per annum and the principal decreased by
CDN$3.5 million (US $2.4 million) during the last quarter. Moreover, in the
quarter ended September 30, 2000, the convertible notes financing agreement
created a non-cash financing charge of CDN$21 million. In connection therewith,
we have applied APB-14 ("Accounting for Convertible Debt and Debt Issued with
Stock Purchase Warrants") and EITF 98-5 ("Accounting for Convertible Securities
with Beneficial Conversion Features or Contingently Adjustable Conversion
Ratios") in determining the accounting treatment of the convertible notes. These
accounting pronouncements require that we allocate the proceeds from the notes
among the notes and the warrants issued pursuant to the convertible notes
financing agreement. As a result, the notes have been discounted and the
beneficial conversion feature of notes has been recorded as financing charges.
As a result of the above expenses, our net loss for the three-month period ended
March 31, 2002 was CDN$6.5 million (US$4 million) or CDN$0.16 (US$0.10) per
share, compared to CDN$8.7 million or CDN$0.23 per share for the same period in
2001. For the nine-month period ended March 31, 2002 our net loss was CDN$20
million or CDN$0.50 per share, compared to CDN$43 million or CDN$1.19 per share
for the same period in 2001.

LIQUIDITY AND CAPITAL RESOURCES

         As of March 31, 2002, we had cash and cash equivalents and term
deposits of CDN$11 million (US$6.9 million) as compared to CDN$22.3 million as
of June 30, 2001.

         On October 9, 2001, we agreed with certain of our investors to amend
the terms of the July 25, 2000 convertible note financing documents. The
convertible notes were amended and restated to provide for a conversion price of
US$1.44 per share, to eliminate certain restrictive covenants and to eliminate
certain events of default. As security for the repayment of the amended and
restated convertible notes, we granted the investors a security interest in all
of our present and future moveable property, rights and assets. This security
interest is subordinate to any equipment lease financing or purchase money
security interest into which we may enter. In addition, the common stock
purchase warrants issued in the financing were cancelled and the securities
purchase agreement and the registration rights agreement were amended to
eliminate certain restrictive covenants. If the


                                      -11-
<PAGE>


convertible notes and related unpaid interest calculated at the rate of 7.5% per
year are not converted into additional common stock upon maturity, on July 25,
2005 we will be required to pay to the investors an aggregate of CDN$14.4
million (US$9 million) plus accrued interest. During the three-month period
ended March 31, 2002, the Corporation issued 1,874,161 common shares as a result
of the conversion of convertible notes for CDN$3.5 million (US$2.7 million).

         We terminated a number of employees during fiscal 2001. To date, three
employees have filed lawsuits claiming damages and other losses related to their
severance. The outcome, if any, is unpredictable at this time. We believe that
the legal actions are without merit and we intend to vigorously defend each
lawsuit.

         We expect to devote substantial resources to our research and
development efforts and the marketing and manufacturing programs associated with
the commercialization of our products. Our funding requirements will depend on
numerous factors, including the progress, level and timing of our research and
development activities, the status of competitive products and our ability to
defend our intellectual property rights. Our cash balance should, in
management's estimation, be sufficient to meet our financial needs for at least
the next 9 months, excluding unforeseen significant capital expenditures. If our
existing resources are insufficient to satisfy our liquidity requirements, we
may need to sell additional equity or debt securities. The sale of additional
equity and debt securities may result in additional dilution to our
stockholders, and we cannot be certain that additional financing will be
available in amounts or on terms acceptable to us, if at all. If we are unable
to obtain this additional financing, we may be required to reduce the scope of
our planned research, development and commercialization activities, which could
harm our financial condition and operating results, or we may be forced to cease
operations. We have no other significant financial obligations at March 31,
2002, other than operating lease commitments for our premises and equipment and
employment agreements.

         We do not believe that inflation has had a significant impact on our
results of operations.

CRITICAL ACCOUNTING POLICIES

         Our discussion and analysis of our financial condition and results of
operations are based upon our condensed consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the date of the financial statements
and the reported amounts of revenues and expenses during the reporting periods.
Areas where significant judgments are made include, but are not limited to,
Impairment of Long-Lived Assets. Actual results could differ materially from
these estimates.

         Impairment of Long-Lived Assets. In fiscal 2001, Lumenon concluded it
required additional time and effort to complete the development of its products,
and as a result, commencement of production was delayed. In addition, in
response to a perceive market downturn for optical circuits, Lumenon re-focused
its process of providing only simple passive components to one of offering a mix
of products and services ranging from optical chips to integrated photonic
devices. As a result, management must use judgment in order to segregate the
assets to be used in production from those that will not be used in the future.
In establishing recoverable value of property, plant and equipment, management
must make estimates about future cash flows to be generated from the sale of



                                      -12-
<PAGE>


the assets. Fair value has been established under FAS121, Accounting for
Impairment of Long-Lived Assets and because the Corporation is a development
stage enterprise, recoverability is based on information obtained from suppliers
and other companies operating in the same field of activities. As a result, a
decrease in value of certain equipment will be reflected by a write-down and
the equipment for which management believes there will be no future use due to
technological changes are written-off.


CERTAINS FACTORS WHICH MAY AFFECT FUTURE RESULTS

         Investing in our common stock involves a high degree of risk. You
should carefully consider the risks and uncertainties described below before
purchasing our common stock. The risks and uncertainties described below are not
the only ones facing our company. Additional risks and uncertainties may also
impair our business operations. If any of the following risks actually occur,
our business, financial condition or results of operations would likely suffer.
In that case, the trading price of our common stock could fall, and you may lose
all or part of the money you paid to buy our common stock.

WE ARE A DEVELOPMENT STAGE COMPANY WITH NO EXPERIENCE IN MANUFACTURING AND
MARKETING OUR PRODUCTS, MAKING IT DIFFICULT TO EVALUATE OUR BUSINESS AND YOUR
INVESTMENT.

         We have no history in manufacturing and marketing our products. We are
a development stage company and, to date, have not had any significant revenues
from sales of our products. Our operating history provides no basis for
evaluating us or our prospects. We must successfully develop and commercialize
our products, address our competition, attract, retain and motivate qualified
employees, expand our operations and market and sell products using our licensed
proprietary technologies in large volumes to have significant revenues and to be
profitable.

         Our future will depend on our ability to develop, manufacture and
commercialize products based upon our licensed proprietary technologies. We did
not have material revenues from product sales during fiscal 2001. Potential
customers may not accept our products and these products may be difficult to
produce in large volumes, fail to perform as expected, cost too much to produce
or be barred from production by the proprietary rights of others.

         We expect to spend considerable sums to develop and market our new
products. We expect our operating expenses to increase as we develop our
technology and products, increase our sales and marketing activities and expand
our assembly operations. We expect to continue incurring considerable operating
losses and negative cash flows as we incur significant operating expenses and
make capital expenditures in our business. The amount we will lose and when, if
ever, we will have profits is highly uncertain. If we are unsuccessful at
developing, manufacturing and marketing our products, we will not generate
sufficient revenues



                                      -13-
<PAGE>


to become profitable.

WE HAVE A HISTORY OF LOSSES, WE EXPECT FUTURE LOSSES AND OUR FUTURE
PROFITABILITY IS UNCERTAIN.

         We have incurred operating losses since our inception and, as of March
31, 2002, had an accumulated deficit of approximately CDN$303 million (US$190
million). We expect to spend substantial funds to continue research and product
development, to establish sales, marketing and quality control departments and
for other general corporate purposes. As a result, we expect to incur increasing
losses over the next several years.

         In addition, we may never become profitable. Even if we do become
profitable, we may not be able to sustain or increase profitability on a
quarterly or annual basis. If we fail to become and remain profitable, the
market price of our common stock will decline.

         Our financial statements have been prepared using the generally
accepted accounting principles applicable to a going concern. We cannot be
certain that we will be able to continue as a going concern.

WE MAY BE UNABLE TO OBTAIN FUNDING TO MEET OUR FUTURE CAPITAL NEEDS, WHICH COULD
CAUSE US TO DELAY OR ABANDON SOME OR ALL OF OUR ANTICIPATED SPENDING, CUT BACK
OUR OPERATIONS, SELL ASSETS OR LICENSE OUR TECHNOLOGIES TO THIRD PARTIES OR
FORCE US TO CEASE OPERATIONS.

         We will require substantial additional funding over the next several
years to develop our technology, to broaden and commercialize our products and
to expand manufacturing capacity. Additional funding could be unavailable on
favorable terms, or not be available at all. If we are unable to obtain
sufficient additional funding, we may have to delay or abandon some or all of
our anticipated spending, cut back our operations significantly, sell some or
all of our assets, license potentially valuable technologies to third parties
that we currently plan to commercialize ourselves or be forced to cease
operations

         To date, we have received approximately CDN$73 million from third
parties through various debt and equity financings. If we borrow more funds, we
may become subject to restrictive financial covenants and our interest
obligations will increase. In addition, we may need to raise additional capital
by issuing additional securities, which could result in additional dilution to
our existing stockholders.

SEVERAL OF OUR AGREEMENTS WILL REDUCE THE AMOUNT OF REVENUES THAT WE WILL
RECEIVE UPON THE SALE OF OUR PRODUCTS AND THIS MAY DECREASE OUR PROFITABILITY.

         To date, we have not had any significant revenues from product sales.
Our agreements with Polaroid Corporation, Polyvalor and McGill University
require that we pay a royalty based upon our gross sales. In the event that we
do generate revenues, those agreements require us to allocate a percentage of
our revenues to third parties, which may ultimately lower our gross profit
margin.


                                      -14-
<PAGE>


THERE ARE SIGNIFICANT RISKS ASSOCIATED WITH THE MANUFACTURE OF OUR PRODUCTS.

         We have never assembled large amounts of our products. The manufacture
of our chips and packaged components is a complex, sophisticated process,
requiring a clean room and precision assembly equipment. Very small amounts of
contaminants during assembly, defects in components, difficulties in the
assembly process or other factors can cause a significant number of products to
be nonfunctional or to have unacceptable defects. This could significantly
reduce yields and increase the cost of our products. The difficulty in
uncovering these problems and resolving these issues may require a significant
amount of time and may prove to be costly.

         We must effectively transfer production information from our research
and product development departments to our manufacturing facility and rapidly
achieve volume production. If we fail to manage this process effectively or if
we experience delays, disruptions or quality control problems in our
manufacturing operations, the shipments of products to our customers could be
delayed and additional capital expenditures could be required to remedy these
problems.

         Changes in our manufacturing processes could significantly reduce our
manufacturing yields. Because most of our manufacturing costs are relatively
fixed, manufacturing yields are critical to the results of our operations. Lower
than expected manufacturing yields could delay product shipments and reduce our
gross margins.

OUR BUSINESS MAY EXPAND RAPIDLY AND THE FAILURE TO MANAGE THIS EXPANSION
EFFECTIVELY, AS WELL AS THE STRAIN ON OUR RESOURCES WHICH EXPANSION MAY CREATE,
COULD IMPAIR OUR ABILITY TO OPERATE PROFITABLY.

         Our success will depend on the expansion of our operations and the
effective management of our growth, which will place a significant strain on our
management, operations and financial resources. In particular, once we begin
volume assembly of our products, our operations are anticipated to expand
substantially. We must hire and train additional scientists, chemists and
engineering, manufacturing, marketing, sales, administrative and management
personnel and acquire additional equipment, facilities, information technology
and other infrastructure. We must also continue to develop our management,
operational and financial systems, procedures and controls. Because we have no
history with the assembly, marketing or sale of our products in large
quantities, we do not know if we will be able to expand our business rapidly or
adequately enough to manage this growth. If we do not accurately predict demand
for our products, we may have too much or too little production capacity. In
addition, if we overestimate demand, we will incur fixed production expenses
that could be excessive in relation to revenues generated. This would reduce our
gross margins and increase our net loss. If we underestimate demand, we may lose
customers, which would decrease our revenues.

CREATING INTERNATIONAL SALES AND MANAGING INTERNATIONAL OPERATIONS WILL BE
DIFFICULT AND OUR FAILURE TO DO SO SUCCESSFULLY COULD AFFECT OUR ABILITY TO
BECOME PROFITABLE OVER THE LONG TERM.


                                      -15-
<PAGE>


         In order to achieve our long-term business goals, we will have to
generate sales in international markets. This will require us to establish
international operations and hire additional personnel. Our failure to do so in
a timely and effective manner could have a material adverse effect on our
business, prospects, financial condition and operating results. Our plans to
expand internationally may be affected by a number of risks including:

     o changes in foreign currency exchange rates;

     o challenges inherent in managing geographically dispersed operations;

     o multiple, conflicting and changing governmental laws and regulations;

     o political and economic instability or conflicts;

     o changes in tariffs, taxes and other trade barriers; and

     o the need to develop local distribution channels through third parties.

THE MARKETS IN WHICH WE COMPETE ARE HIGHLY COMPETITIVE AND SUBJECT TO RAPID
TECHNOLOGICAL CHANGE; WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY IF WE ARE
UNABLE TO ADAPT TO NEW TECHNOLOGIES AND SUCCESSFULLY DEVELOP NEW AND EVOLVING
PRODUCTS, WHICH MAY LEAD TO REDUCED SALES OF OUR PRODUCTS, REDUCED REVENUES AND
REDUCED MARKET SHARE.

         We must become a key supplier of components to the photonics industry
to be successful. The photonics market is highly competitive and subject to
continuous, rapid technological change, including changing industry standards,
frequent introduction of new products, anticipated and unanticipated decreases
in average selling prices and fierce price competition. We may be unable to
adapt to rapid technological change or to continue new product development. This
may lead to reduced sales of our products, reduced revenues and reduced market
share.

         We must:

     o  anticipate what features and functions our customers and their end-users
        will need and demand in our products, for both general industry and
        specific custom-made use;

     o  incorporate those features and functions into our products;

     o  meet specific and exacting design requirements; and

     o  price our products competitively.

                                      -16-
<PAGE>


         The life cycle of the products we make may be short. We must introduce
new products on a timely basis and we must spend large amounts of capital to
develop new products. Due to the complexity of our products, we could experience
delays in introducing new products. The success of our new products will depend
on many factors, including:

     o proper product definition;

     o the timely completion and introduction of new designs;

     o the ability of our customers to incorporate our products into their
       product offerings;

     o the quality and performance of our products;

     o the differentiation of our products from those of our competitors; and

     o market acceptance of our products and those of our customers.

         If we are unable to introduce new products on a timely and
cost-efficient basis, we could lose sales and customers, resulting in reduced
revenues.

         In addition, competing technologies may force us to sell our products
at lower prices than we expect. Thus, we will need to introduce new products in
order to remain competitive and to reach and maintain profitability. This need
for additional product introduction may require us to expend greater resources
on product research and development than we presently anticipate, which could
result in an increase in our future expenses.

THE SMALL NUMBER OF POTENTIAL CUSTOMERS FOR OUR PRODUCTS WILL GIVE THESE
CUSTOMERS CONSIDERABLE LEVERAGE OVER US, WHICH COULD LEAD TO LOWER SALES PRICES.

         For the foreseeable future, we expect to market our products to a
relatively limited number of leading original equipment manufacturers. We will
rely on these customers to develop their own systems, thereby creating demand
for our products. As a result of the limited number of customers and the intense
competition in the market, our customers will exert considerable leverage in
negotiating purchases from us, which could lead to lower sales prices.

OUR COMPETITORS MAY BE ABLE TO DEVELOP AND MARKET THEIR PRODUCTS MORE
EFFECTIVELY THAN WE CAN, MAKING OUR PRODUCTS OBSOLETE.

         Developments by others may render our products or technologies obsolete
or non-competitive. Our competitors include much larger companies that have
substantially greater financial, technical, marketing, distribution and other
resources, broader product lines, greater name recognition and longer standing
relationships with leading original equipment manufacturers than we do. Our
competitors include companies already manufacturing large volumes of products
based on established technologies, as well as companies selling emerging
technological solutions, which could replace the technologies we are currently
using. Potential



                                      -17-
<PAGE>


competitors could also include our own customers, which may decide to
manufacture products competitive with ours, rather than purchase our products.
As a result, any products and/or technologies that we develop may become
obsolete or non-competitive before we can recover the expenses incurred in
connection with their development.

WE ARE DEPENDENT ON KEY PERSONNEL; WE MAY NOT BE ABLE TO ATTRACT, TRAIN AND
RETAIN SUFFICIENTLY QUALIFIED PERSONNEL, WHICH COULD LIMIT OUR ABILITY TO GROW
OUR BUSINESS.

         Our success will depend to a significant degree upon the continued
services of key management, technical, and scientific personnel, including Gary
Moskovitz, our President and Chief Executive Officer, and Dr. Mark P. Andrews,
our Co-founder, Vice President of Technology and Chief Technology Officer. We do
not currently maintain key-man life insurance for any of our personnel.

         Our success will also depend on our ability to attract, train and
retain additional management and other highly skilled technical, marketing and
support personnel. In addition, as we grow, we will need to hire skilled
operators for our assembly process. Our competitors for qualified personnel are
often long-established, highly profitable companies and the process of hiring
qualified personnel is often lengthy. Our management and other employees may
voluntarily leave us at any time. We may not be able to meet our revenue goals
if we cannot attract, train and retain sufficient qualified personnel.

         Our future profitability will also depend on our ability to develop an
effective marketing staff and field sales force. Competition for employees with
sales and marketing experience in the photonics industry is intense. We require
sales people with a good technical understanding of our products and of the
industry. We may be unable to attract and retain qualified salespeople or build
an effective sales and marketing organization.

IF WE FAIL TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS OR FACE A
CLAIM OF INTELLECTUAL PROPERTY INFRINGEMENT BY A THIRD PARTY, THEN WE COULD LOSE
VALUABLE INTELLECTUAL PROPERTY RIGHTS, BE LIABLE FOR SIGNIFICANT DAMAGES OR BE
PREVENTED FROM COMMERCIALIZING OUR PRODUCTS.

         Our success depends in part on our ability to obtain and maintain
patents, protect trade secrets and operate without infringing upon the
proprietary rights of others. In the absence of patent and trade secret
protection, competitors may adversely affect our business by independently
developing and marketing substantially equivalent products and technology and
preventing us from marketing our products. It is also possible that we could
incur substantial costs in litigation if we are required to defend ourselves in
patent suits brought by third parties, or if we are required to initiate
litigation against others to protect our intellectual property rights

         We may not be issued patents based on the applications already filed or
that we file in the future, and if patents are issued, they may be insufficient
in scope to cover the products we hope to market. Moreover, legal


                                      -18-
<PAGE>


standards relating to the scope and validity of patent claims are evolving. Any
patents we have obtained, such as our patent for the method of "on-substrate
cleaving of sol-gel waveguide", or that we may obtain in the future, may be
challenged, invalidated or circumvented. Moreover, the United States Patent and
Trademark Office may commence interference proceedings involving our patents or
patent applications. Any challenge to, or invalidation or circumvention of, our
patents or patent applications could have a material adverse effect on our
business.

         If we are required to defend ourselves against patent suits brought by
third parties and we do not prevail, in addition to any damages we might have to
pay, any patents we may obtain could be narrowed, invalidated or rendered
unenforceable by a court. We could also be required to design around any patents
we are deemed to infringe or obtain a license to use certain technologies. If we
fail to obtain a required license on a cost-efficient or on an exclusive basis
or are unable to design around a patent, we may be unable to sell some of our
products, which would make it more difficult for us to achieve profitability.

         We also rely on trade secret and copyright law and employee and
third-party nondisclosure agreements to protect our intellectual property
rights. We may be unable to secure meaningful protection of our trade secrets,
copyrights, know-how or other proprietary information in the event of
infringement by others or if others independently develop similar technologies.

WE ARE DEPENDENT ON EQUIPMENT SUPPLIERS AND CONTRACT MANUFACTURERS WHO COULD
DISRUPT OUR BUSINESS IF THEY STOPPED, DECREASED OR DELAYED SHIPMENTS TO US.

         We rely on outside suppliers to provide some of the equipment we use in
our manufacturing process. We do not maintain long-term agreements with any of
these suppliers and, therefore, they could stop supplying equipment to us at any
time. If the equipment, which any particular supplier provides to us, were to
malfunction, we would, at a minimum, experience delays in the shipment of our
products and we could be required to find another equipment manufacturer. Delays
in shipments could result in the loss of customers and decreases in our
revenues.

         In addition, we may rely on third party manufacturers to produce some
of the components used in our products. Our potential dependence upon third
party manufacturing relationships could lead to:

     o reduced control over equipment delivery schedules;

     o lack of quality assurance over the components produced by third parties;
       and

     o the delivery of poor quality components which could lead to poor
       manufacturing yields of our products and ultimately higher product costs.


                                      -19-
<PAGE>


         Any supply deficiencies relating to the quality or quantity of
equipment or components we use to manufacture our products could affect our
ability to fulfill customer orders and ultimately reduce our revenues and
profitability.

OUR COMMON STOCK MAY BE DELISTED FROM THE NASDAQ NATIONAL MARKET.

         On February 14, 2002, we received a letter from The Nasdaq National
Market indicating that our common stock had not maintained a minimum closing bid
price over the previous thirty consecutive trading days. Under applicable Nasdaq
rules, our common stock could be delisted from The Nasdaq National Market if the
closing bid price is not at or above US$1.00 for ten consecutive trading days
before May 15, 2002. Should our common stock be delisted from The Nasdaq
National Market, we may transfer to The Nasdaq SmallCap Market. If delisted from
The Nasdaq SmallCap Market, our common stock would be likely traded on the "pink
sheets" or the Over-The-Counter Bulletin Board. If our common stock were
delisted from The Nasdaq National Market, it could materially adversely affect
the market price and liquidity of our common stock and our ability to raise
necessary capital.

OUR BUSINESS INVOLVES THE USE OF SOME HAZARDOUS MATERIALS AND ENVIRONMENTAL LAWS
AND REGULATIONS MAY EXPOSE US TO LIABILITY AND THEREFORE INCREASE OUR COSTS.

         We handle small amounts of hazardous materials as part of our
manufacturing activities. As a result, our operations and assembly processes are
subject to certain federal, provincial and local environmental protection laws
and regulations. These relate to our use, handling, storage, discharge and
disposal of certain hazardous materials and wastes, the pre-treatment and
discharge of process waste waters and the control of process air pollutants.
Compliance with these laws and regulations requires us to establish compliance
procedures and safety programs. If environmental laws or regulations were to
change, forcing us to modify production processes or use more costly materials,
our manufacturing costs or product sales could be adversely affected. We may be
required to incur additional costs to comply with current or future
environmental laws. In addition, if we fail to comply with either present or
future environmental regulations, we may be subject to fines and production
halts. As with other companies engaged in manufacturing activities that involve
hazardous materials, the risk of environmental liability is inherent in our
manufacturing activities. The costs associated with environmental compliance or
remediation efforts or other environmental liabilities could adversely affect
our business.

PROVISIONS OF OUR CORPORATE DOCUMENTS AND APPLICABLE LAW MAY PREVENT OR HINDER A
CHANGE OF CONTROL.

         Provisions of our certificate of incorporation and by-laws and of
applicable law could make it more difficult for another party to acquire us or
discourage another party from attempting to acquire us. This may reduce the
value of our common stock. For example, we could issue preferred stock with
rights senior to the common stock without any further vote or action by
stockholders. The issuance of preferred stock as part of a future financing



                                      -20-
<PAGE>

could have the effect of preventing a change of control and could make it more
difficult for holders of our common stock to take certain corporate actions,
including replacing incumbent directors. Additionally, the preferred stock may
have preference over, and harm the rights of the holders of, our common stock.

WE HAVE A SIGNIFICANT NUMBER OF OUTSTANDING CONVERTIBLE NOTES, WARRANTS AND
OPTIONS, THE EXERCISE OR CONVERSION OF WHICH COULD DECREASE THE PRICE OF OUR
COMMON STOCK.

         To date, we have issued numerous warrants, options and notes, which are
exercisable or convertible into shares of our common stock. Holders of our
common stock could experience substantial dilution upon the conversion or
exercise of outstanding convertible notes, warrants or options.

         No holder may convert any portion of our outstanding convertible notes
to the extent that the conversion would result in that holder or any of its
affiliates beneficially owning more than 4.99% of our outstanding common stock.
Therefore, a holder may have to sell shares of common stock in order to be able
to convert those notes.

         The exercise of outstanding options and warrants and the conversion of
outstanding notes will dilute the then current stockholders' ownership of common
stock. Sales in the public market of common stock acquired upon exercise of
options and warrants and conversion of notes could depress the price of our
common stock. This may adversely affect our ability to sell common stock.


                                      -21-
<PAGE>


                           PART II. OTHER INFORMATION

ITEM 5.  OTHER INFORMATION

         On February 14, 2002, we received a letter from The Nasdaq National
Market indicating that our common stock had not maintained a minimum closing bid
price over the previous thirty consecutive trading days. Under applicable Nasdaq
rules, our common stock could be delisted from The Nasdaq National Market if the
closing bid price is not at or above $1.00 for ten consecutive trading days
before May 15, 2002. Should our common stock be delisted from The Nasdaq
National Market, we may transfer to The Nasdaq SmallCap Market. If delisted from
The Nasdaq SmallCap Market, our common stock would be likely traded on the "pink
sheets" or the Over-The-Counter Bulletin Board. If our common stock were
delisted from The Nasdaq National Market, it could materially adversely affect
the market price and liquidity of our common stock and our ability to raise
necessary capital.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

a)       EXHIBITS

         The Exhibits filed as part of this Quarterly Report on Form 10-Q are
listed on the Index to Exhibits immediately preceding such Exhibits, which Index
to Exhibits is incorporated herein by reference.

b)       REPORTS ON FORM 8-K

         None.



                                      -22-

<PAGE>


                                   SIGNATURES



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

Dated:  May 15, 2002                   LUMENON INNOVATIVE LIGHTWAVE
                                       TECHNOLOGY, INC.


                                       By: /s/ Gary Moskovitz
                                           ----------------------------------
                                       Gary Moskovitz
                                       President and Chief Executive Officer
                                       (Acting Principal Financial Officer)




                                      -23-

<PAGE>


                                INDEX TO EXHIBITS


Exhibit No:      Description
-----------      -----------

10.1             Employment agreement between LILT Canada, Inc. and
                 Dr. Mark P. Andrews, dated February 27, 2002


                                      -24-