<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:             September 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:    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: 41,145,197 shares of
common stock, $.001 par value, as of November 8, 2002



<PAGE>


                  LUMENON INNOVATIVE LIGHTWAVE TECHNOLOGY, INC.

                                TABLE OF CONTENTS

                                                                        Page No.
                                                                        --------

PART I.  FINANCIAL INFORMATION............................................  1
         Item 1.  Financial Statements....................................  1
         Item 2.  Management's Discussion and Analysis of Financial
                  Condition and Results of Operations..................... 10
         Item 3.  Quantitative and Qualitative Disclosures About
                  Market Risk............................................. 23
         Item 4.  Controls and Procedures................................. 24
PART II. OTHER INFORMATION................................................ 25
         Item 1.  Legal Proceedings....................................... 25
         Item 4.  Submission of Matters to a Vote of Security Holders..... 25
         Item 6.  Exhibits and Reports on Form 8-K........................ 25
SIGNATURES................................................................ 27
CERTIFICATIONS............................................................ 27


                                       i

<PAGE>



                           FORWARD-LOOKING STATEMENTS

         This quarterly report contains 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, as amended, otherwise known as the Exchange
Act. All statements in this quarterly report, other than statements of
historical fact, regarding our strategy, future operations, financial position,
estimated revenues, projected costs, prospects, plans and objectives of
management are forward-looking statements. When used in this quarterly report,
the words "believe", "anticipate," "estimate", "expect" and similar expressions
are intended to identify forward-looking statements, although not all
forward-looking statements contain these words. 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 in "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, otherwise known as the SEC.


                                       ii

<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>

---------------------------------------------------------------------------------------------------------------
                                                         September 30,     September 30,          June 30,
                                                                 2002               2002              2002
---------------------------------------------------------------------------------------------------------------
                                                                (US$)             (CAN$)            (CAN$)
                                                             (note 6)
<S>                                                          <C>               <C>               <C>
ASSETS

Current assets:
     Cash and cash equivalents                               $   1,923         $   3,050         $     686
     Commercial papers and term deposits                            --                --             6,358
     Loan receivable from an officer                                --                --               200
     Interest, sales tax and other receivables                     101               160               336
     Tax credits receivable                                        560               888               450
     Prepaid expenses                                              245               389               247
---------------------------------------------------------------------------------------------------------------
                                                                 2,829             4,487             8,227

Deposits                                                           447               709               784
Property and equipment (note 3)                                  9,557            15,161            16,395
---------------------------------------------------------------------------------------------------------------
                                                             $  12,833         $  20,357         $  25,456
===============================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Accounts payable                                        $     468         $     743         $   1,199
     Accrued liabilities                                           181               287               289
     Compensation and related liabilities                          504               800             1,274
     Obligations under capital leases                              717             1,137             1,163
---------------------------------------------------------------------------------------------------------------
                                                                 1,870             2,967             3,925

Obligations under capital leases                                   255               405               666
Convertible notes (note 4)                                       7,354            11,666            10,594

Stockholders' equity:
     Share capital (note 5)                                         39                61                61
     Additional paid-in capital                                200,182           317,549           317,114
     Accumulated deficit during the development stage         (196,867)         (312,291)         (306,904)
---------------------------------------------------------------------------------------------------------------
                                                                 3,354             5,319            10,271

Contingencies (note 8)
Subsequent event (note 9)

---------------------------------------------------------------------------------------------------------------
                                                             $  12,833         $  20,357         $  25,456
===============================================================================================================
</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               From
                                                                 ended                ended               ended       inception to
                                                         September 30,        September 30,       September 30,          September
                                                                  2002                 2002                2001           30, 2002
------------------------------------------------------------------------------------------------------------------------------------
                                                                 (US$)               (CAN$)              (CAN$)              (CAN$)
                                                              (note 6)
<S>                                                      <C>                  <C>                  <C>                  <C>
Expenses:
     Research and development                            $        816         $      1,295         $      1,214         $ 234,183
     Research tax credits                                        (275)                (437)                (108)           (1,830)
------------------------------------------------------------------------------------------------------------------------------------
                                                                  541                  858                1,106           232,353

     General and administrative                                 1,152                1,828                1,857            34,015
     Depreciation and amortization                                845                1,340                1,371            12,764
     Write-down of property and equipment                          --                   --                  323             3,994
------------------------------------------------------------------------------------------------------------------------------------
                                                                1,997                3,168                3,551            50,773

Other expenses:
     Interest expense                                             215                  341                  456             4,303
     Interest income                                              (38)                 (60)                (392)           (3,083)
     Financing charges                                            265                  420                  574            27,554
     Loss on foreign exchange                                     416                  660                  578               391
------------------------------------------------------------------------------------------------------------------------------------
                                                                  858                1,361                1,216            29,165
------------------------------------------------------------------------------------------------------------------------------------
Net loss                                                 $      3,396         $      5,387         $      5,873         $ 312,291
====================================================================================================================================

Net loss per share:
     Basic and diluted                                   $       0.08         $       0.13         $       0.15
===============================================================================================================

Weighted average number of shares used to compute
loss per share - basic and diluted                         41,052,547           41,052,547           38,478,905
===============================================================================================================
</TABLE>


See accompanying notes to unaudited consolidated financial statements


                                       2

<PAGE>


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

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                                                                   Three          Three             Three              From
                                                                  months         months            months      inception to
                                                                   ended          ended             ended         September
                                                               September      September         September          30, 2002
                                                                30, 2002       30, 2002          30, 2001
------------------------------------------------------------------------------------------------------------------------------
                                                                   (US$)         (CAN$)            (CAN$)            (CAN$)
                                                                (note 6)
<S>                                                             <C>             <C>             <C>              <C>
Cash flows from operating activities:
   Net loss                                                     $(3,396)        $(5,387)        $ (5,873)        $(312,291)
   Adjustment for:
     Compensation costs                                             115             183              352             6,198
     Interest on convertible notes                                  168             267              365             3,685
     Common shares issued for services                               --              --               --           217,359
     Depreciation and amortization                                  845           1,340            1,371            12,764
     Write-down of property and equipment                            --              --              323             3,994
     Loss (gain) on disposal of property and equipment              (15)            (24)              --                68
     Financing charges                                              265             420              574            27,554
     Unrealized loss on foreign exchange                            402             637              745             2,823
   Net change in operating assets and liabilities                  (642)         (1,018)          (1,181)              (21)
------------------------------------------------------------------------------------------------------------------------------
                                                                 (2,258)         (3,582)          (3,324)          (37,867)

Cash flows from financing activities:
     Proceeds from issuance of common shares                         --              --               --            23,153
     Principal repayments of obligations under capital             (241)           (383)            (312)           (2,424)
       leases
     Proceeds from issuance of convertible notes, net of
       issue cost                                                    --              --               --            48,681
     Share issue expenses                                            --              --               --            (1,138)
     Deposit on subscription of shares                               --              --               --               147
     Cash from the acquisition of a subsidiary                       --              --               --               814
------------------------------------------------------------------------------------------------------------------------------
                                                                   (241)           (383)            (312)           69,233

Cash flows from investing activities:
     Purchase of commercial papers and term deposits                 --              --               --          (302,934)
     Disposal of commercial papers and term deposits              4,008           6,358            1,676           302,934
     Additions to property and equipment                            (33)            (53)            (164)          (27,584)
     Disposal of property and equipment                              15              24               28                52
     Deposits                                                        --              --              150              (784)
------------------------------------------------------------------------------------------------------------------------------
                                                                  3,990           6,329            1,690           (28,316)
------------------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents              1,491           2,364           (1,946)            3,050
Cash and cash equivalents, beginning of period                      432             686            2,382                --
------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period                        $ 1,923         $ 3,050         $    436         $   3,050
------------------------------------------------------------------------------------------------------------------------------
</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 period ended September 30, 2002 and 2001
and period from inception (March 2, 1998) to September 30, 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 financial position of Lumenon Innovative
Lightwave Technology, Inc. ("Lumenon" or the "Corporation") as of September 30,
2002 and June 30, 2002, its results of operations and cash flows for the
three-month period ended September 30, 2002 and 2001 and from inception to
September 30, 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, 2002,
included in the Corporation's Annual Report on Form 10-K for the fiscal year
ended June 30, 2002, as filed with the SEC on September 30, 2002, and amended by
Amendment No. 1 filed with the SEC on October 28, 2002.

1.   ORGANIZATION AND BUSINESS ACTIVITIES:

     Lumenon was incorporated in the State of Delaware in February 1996 under
the name of WWV Development Inc. ("WWV"). In July 1998, under an acquisition
plan, WWV acquired all of the issued and outstanding shares of LILT Canada Inc.
("LILT"), a Canadian corporation. As consideration for the acquisition, WWV
issued 12,200,000 shares of common stock to the shareholders of LILT, resulting
in a change in control. Under applicable accounting rules, LILT was deemed the
acquiring corporation and, as a result, these consolidated financial statements
present the results of operations and cash flows of LILT since its inception,
March 2, 1998. Upon consummation of the acquisition, WWV changed its name to
Lumenon.

     Under the acquisition plan mentioned above, Lumenon issued 4,000,000 shares
of common stock to acquire Dequet Capital, Inc., a Nevada corporation. Dequet
Capital, Inc.'s only asset was cash in the amount of $814 (US$540). This
corporation was subsequently dissolved.

     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 current activities are performed only through LILT, 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



                                       4

<PAGE>

LUMENON INNOVATIVE LIGHTWAVE
TECHNOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

Notes to Consolidated Financial Statements (Unaudited)

Three-month period ended September 30, 2002 and 2001
and period from inception (March 2, 1998) to September 30, 2002.
(in thousands of Canadian dollars, except per share amounts)

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

opened a 53,000-square-foot facility. This facility serves as the Corporation's
headquarters and, when operative, will be capable of high-volume manufacturing.
In March 2001, in response to a perceived market downturn for optical
components, the Corporation re-focused its strategy 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 solutions.

     The Corporation is subject to a number of risks, including the overall
economic environment in its field of activities, the successful development and
marketing of its technology and the attraction and retention of key personnel.

     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 the
realization of additional capital, it would be unlikely for the Corporation to
continue as a going concern. It is management's plan to seek additional capital
in order to finalize the development of its products and to enter into the
commercialization phase of such products. In connection therewith and as part of
management's plan, the Corporation entered into a common stock purchase
agreement in August 2002 (see note 5(c)). However, limitations and conditions
contained in the common stock purchase agreement will restrict the Corporation's
ability to obtain substantial funds under the agreement and accordingly, the
Corporation will need to secure additional funding to continue as a going
concern.

2.   ACCOUNTING CHANGES:

     (a)  Impairment or disposal of long-lived assets

     In August 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
("SFAS 144"), which addresses financial accounting and reporting for the
impairment or disposal of long-lived assets. SFAS 144 applies to certain
long-lived assets, including discontinued operations, and provides a single
accounting model for long-lived assets to be disposed of. Although retaining
many of the fundamental recognition and measurement provisions of SFAS No. 121,
SFAS 144 significantly changes the criteria that would have to be met to
classify an asset as held-for-sale.

     SFAS 144 requires that long-lived assets to be disposed of by sale be
measured at the lower of carrying amount or fair value less cost to sell,
whether reported in continuing operations


                                       5

<PAGE>

LUMENON INNOVATIVE LIGHTWAVE
TECHNOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

Notes to Consolidated Financial Statements (Unaudited)

Three-month period ended September 30, 2002 and 2001
and period from inception (March 2, 1998) to September 30, 2002.
(in thousands of Canadian dollars, except per share amounts)

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


or in discontinued operations. Discontinued operations will no longer be
measured at net realizable value or include amounts for operating losses that
have not yet been incurred. SFAS 144 also broadens the reporting of discontinued
operations to include the disposal of a component of an entity provided that the
operations and cash flows of the component will be eliminated from the ongoing
operations of the entity and the entity will not have any significant continuing
involvement in the operations of the component.

     Lumenon adopted the provisions of SFAS 144 effective July 1, 2002. The
adoption of SFAS 144 did not have a material effect on the business, results of
operations, and financial conditions of Lumenon.

     (b)  Costs associated with exit or disposal activities

     In June 2002, the FASB issued SFAS No.146, "Accounting for Costs Associated
with Exit or Disposal Activities" ("SFAS 146"). SFAS 146 requires that a
liability for the costs associated with an exit or disposal activity be
recognized when the liability is incurred. SFAS 146 also established that fair
value is the objective for initial measurement of the liability. The provisions
of SFAS 146 are effective for exit or disposal activities that are initiated
after December 31, 2002.

3.   PROPERTY AND EQUIPMENT:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
                                                          September 30, 2002
-------------------------------------------------------------------------------
                                                        Accumulated    Net book
                                               Cost    depreciation     value
------------------------------------------------------------------------------
<S>                                           <C>        <C>           <C>
Plant equipment and laboratory installation   $23,216    $ 10,572      $12,644
Leasehold improvements                          1,801         527        1,274
Office equipment and fixtures                   1,329         614          715
Computer equipment and software                 1,348         885          463
Vehicle equipment                                 183         118           65
------------------------------------------------------------------------------
                                              $27,877    $ 12,716      $15,161
------------------------------------------------------------------------------
</TABLE>

                                       6

<PAGE>


LUMENON INNOVATIVE LIGHTWAVE
TECHNOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

Notes to Consolidated Financial Statements (Unaudited)

Three-month period ended September 30, 2002 and 2001
and period from inception (March 2, 1998) to September 30, 2002.
(in thousands of Canadian dollars, except per share amounts)

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

     Cost and net book value of plant equipment, laboratory installation and
vehicle equipment held under capital leases amount to $3,912 and $1,631,
respectively, as of September 30, 2002.

4.   CONVERTIBLE NOTES:

     The Corporation completed 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 and the
conversion price of the notes was fixed at US$1.44 per share. 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 of September 30,
2002, $14,039 (US$8,850) of the gross principal amount remains outstanding.

5.   SHARE CAPITAL:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                                         September 30,  June 30,
                                                              2002        2002
--------------------------------------------------------------------------------
<S>                                                      <C>            <C>
Authorized:
5,000,000 shares of undesignated preferred stock, par
      value of US$0.001 per share
100,000,000 shares of common stock, par value of
      US$0.001 per share
Issued and outstanding:
41,145,197 shares of common stock
      (June 30, 2002: 40,984,375)                            $61           $61

--------------------------------------------------------------------------------
</TABLE>

     (a)  Issuance of stock:

     During the three-month period ended September 30, 2002, the Corporation
issued 160,822 shares of common stock as a result of the conversion of CDN$252
(US$159) of principal and interest accrued on convertible notes.


                                       7

<PAGE>

LUMENON INNOVATIVE LIGHTWAVE
TECHNOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

Notes to Consolidated Financial Statements (Unaudited)

Three-month period ended September 30, 2002 and 2001
and period from inception (March 2, 1998) to September 30, 2002.
(in thousands of Canadian dollars, except per share amounts)

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

     (b)  Stock option plan:

     Changes in outstanding options for the three-month period ended September
30, 2002 were as follows:

<TABLE>
<CAPTION>
 -------------------------------------------------------------------------------
                                                          Weighted average
                                             Number  exercise price per share
 -------------------------------------------------------------------------------
<S>                                        <C>            <C>
 Options outstanding, June 30, 2002        5,284,250
 Granted                                     558,750      $0.77 (US$0.48)
 Cancelled                                 (203,667)      $4.98 (US$3.14)
 Exercised                                        --            --
 -------------------------------------------------------------------------------
 Options outstanding, September 30, 2002   5,639,333
 -------------------------------------------------------------------------------
</TABLE>

     As of September 30, 2002, options to purchase 5,639,333 shares of common
stock were outstanding, of which 2,593,375 were exercisable.

     (c)  Under the terms of a common stock purchase agreement entered into as
of August 14, 2002, Lumenon has the option to receive a maximum of US$14,000,000
by issuing shares of its common stock in a series of periodic draw downs of
funds. The draw downs are subject to certain limitations and the fulfillment of
certain conditions, including a provision which limits the investor's holdings
to 9.999% of the outstanding shares of Lumenon common stock at any given time,
provisions which limit the amount Lumenon may draw down at any one time based on
Lumeon's stock price and trading volume and the receipt of stockholder approval,
which was obtained on October 9, 2002, for draw downs which would result in the
issuance of common stock in excess of 19.9% of the common stock issued and
outstanding as of the date of the agreement. These limitations and conditions
limit the amount that Lumenon may draw down from time to time.

     The price of the shares of common stock to be issued to the investor will
be based on a discount from 8% to 13% of the volume weighted average price of
the common stock during the draw down period as defined in the agreement.
Lumenon has no obligation to draw down the full US$14,000,000 amount of the
commitment.

6.   FUNCTIONAL CURRENCY AND CONVENIENCE TRANSLATION:

     The functional currency of the Corporation is the Canadian dollar.


                                       8

<PAGE>

LUMENON INNOVATIVE LIGHTWAVE
TECHNOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

Notes to Consolidated Financial Statements (Unaudited)

Three-month period ended September 30, 2002 and 2001
and period from inception (March 2, 1998) to September 30, 2002.
(in thousands of Canadian dollars, except per share amounts)

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

     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
September 30, 2002, which was 1.5863 Canadian dollars per US dollar.

7.   SUPPLEMENTAL CASH FLOW DISCLOSURE:

     Non-cash investing and financing activities:

     Acquisition of property and equipment through capital leases amounted to
$96 for the three-month period ended September 30, 2002.

     Capital expenditures of $7 are included in accounts payable at September
30, 2002.

8.   CONTINGENCIES:

     (a)  In connection with employee terminations that occurred during fiscal
2001, two employees filed lawsuits claiming various amounts totaling
approximately $402. The outcome of the lawsuits is unpredictable at this time.
The Corporation believes that the legal actions are without merit and intends to
vigorously defend such lawsuits.

     (b)  On August 30, 2002, the Corporation announced the temporary layoff of
37 employees. Severance accruals may be required if the layoff becomes
permanent. Subsequent to September 30, 2002, an employee filed a claim for
approximately $142 against the Corporation in connection with the layoff. The
outcome of the lawsuit is unpredictable at this time. The Corporation believes
that the legal action is without merit and intends to vigorously defend the
lawsuit.

9.   SUBSEQUENT EVENT:

     On October 9, 2002 at a special meeting of stockholders, the Corporation's
stockholders approved (a) a private equity financing facility with Crossover
Ventures, Inc. pursuant to which the Corporation could issue up to US$14,000,000
worth of the Corporation's common stock and has issued warrants convertible
into shares of the Corporation's common stock; and (b) an amendment to the
Corporation's Amended and Restated Certificate of Incorporation to increase the
number of authorized shares of common stock from 100,000,000 to 250,000,000.

                                       9

<PAGE>


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

     This quarterly report contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Exchange Act. All statements in this quarterly report, other than statements of
historical fact, regarding our strategy, future operations, financial position,
estimated revenues, projected costs, prospects, plans and objectives of
management are forward-looking statements. When used in this quarterly report,
the words "believe", "anticipate," "estimate", "expect" and similar expressions
are intended to identify forward-looking statements, although not all
forward-looking statements contain these words. 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 SEC.

RESULTS OF OPERATIONS

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

     On August 14, 2002, we received formal notification from The Nasdaq Stock
Market, Inc. that we had been granted a 180 day grace period, until February 10,
2003, to gain compliance with Nasdaq's $1.00 minimum bid requirement. If we do
not gain compliance with the minimum bid price requirement by that date, we may
be delisted from The Nasdaq SmallCap Market.

     On August 30, 2002, we announced the reduction of our workforce, through
temporary layoffs, by 37 employees.

     Research and Development Expenses. Research and development expenses for
the three-month period ended September 30, 2002, net of tax credits and grants,
were CDN$858,000 (US$541,000), compared to CDN$1.1 million during the same
period in 2001, a net decrease of CDN$248,000 or 23%. This decrease was due to
the recognition during the three-month period ended September 30, 2002 of tax
credits and grants from prior years of CDN$437,000 as a result of the Canadian
federal government audit assessment of research and development grants for 2000
and 2001.

     General and Administrative Expenses. General and administrative expenses
were CDN$1.9 million (US$1.2 million) during the three-month period ended
September 30, 2002, compared to CDN$1.9 million for the same period in 2001.
During the three-month period ended September 30, 2002, professional fees
increased by CDN$588,000, mainly attributable to the increased effort spent on
obtaining financing and related activities. This increase was offset by a
decrease of CDN$562,000 in salaries and fringe benefits due to a reduction in
the number of general and administration employees compared to the same period
in 2001.

                                       10

<PAGE>


     Depreciation and amortization of property and equipment was CDN$1.3 million
(US$845,000) during the three-month period ended September 30, 2002, compared to
CDN$1.4 million for the same period in 2001, a decrease of approximately
CDN$31,000 or 2%. This decrease was due to the fact that during the quarter
ended September 30, 2002, no write-down on equipment was recorded compared to a
write-down of CDN$323,000 for the same period in 2001.

     Other Expenses. Other expenses, net of interest income, amounted to CDN$1.4
million (US$858,000) during the three-month period ended September 30, 2002,
compared to CDN$1.2 million during the same period in 2001, an increase of
CDN$145,000 or 12%. This increase was mainly due to a decrease in interest
income recorded during the three-month period ended September 30, 2002, which
amounted to CDN$60,000 (US$38,000), compared to interest income of CDN$392,000
for the same period in 2001, as a result of a decrease in cash and cash
equivalents, commercial papers and term deposits. Interest expense was
CDN$341,000 (US$215,000) during the three-month period ended September 30, 2002,
compared to CDN$456,000 for the same period in 2001, a decrease of CDN$115,000
or 25%. This decrease was due to a decrease in the outstanding principal amount
of the convertible notes, which decreased by CDN$200,000 (US$126,000) during the
quarter ended September 30, 2002. Financing charges amounted to CDN$420,000
(US$265,000) for the three-month period ended September 30, 2002, compared to
CDN$574,000 for the same period in 2001, a decrease of CDN$154,000 or 27%, also
due to a decrease in the outstanding principal amount of the convertible notes.

     As a result of the above expenses, our net loss for the three-month period
ended September 30, 2002 was CDN$5.4 million (US$3.4 million) or CDN$0.13
(US$.08) per share, compared to CDN$5.9 million or CDN$0.15 per share for the
same period in 2001.

LIQUIDITY AND CAPITAL RESOURCES

     As of September 30, 2002, we had cash and cash equivalents of CDN$3.0
million (US$1.9 million) as compared to CDN$7.0 million as of June 30, 2002
(including commercial papers and terms deposits).

     If the 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$19.3 million (US$12.3 million). During the three-month period ended
September 30, 2002, we issued 160,822 shares of common stock as a result of the
conversion of principal and interest accrued under the convertible notes of
CDN$252,000 (US$159,000).

     We terminated a total of 28 employees during fiscal 2001 and 2002 and
temporarily laid off 37 employees during the three-month period ended September
30, 2002. To date, three employees have filed lawsuits claiming damages and
other losses related to their severance. The outcome of these lawsuits is
unpredictable at this time. We believe that the legal actions are without merit
and we intend to vigorously defend each lawsuit.

                                       11

<PAGE>


     In order to become profitable, we will have to devote substantial resources
to our research and development efforts and the marketing and manufacturing
programs associated with the commercialization of our products. Our ability to
succeed will depend on numerous factors, including the receipt of funding to
support these efforts, 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 at September 30, 2002
was CDN$3.0 million, which should, in management's estimation, be sufficient to
meet our financial needs for at least the next four months, excluding unforeseen
significant capital expenditures. We have no current source of revenue and as a
result, in order to remain a going concern, we must raise substantial funding by
selling additional equity or debt securities, selling some or all of our assets,
or licensing potentially valuable technologies to third parties. The sale of
additional equity will result in further 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
funding, we will be required to reduce the scope of our planned research,
development and commercialization activities, which could harm our financial
condition and operating results, sell some or all of our assets, license
potentially valuable technologies to third parties, or cease operations. We have
no other significant financial obligations at September 30, 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. In our
business and condensed consolidated financial statements, significant judgments
are made in the area of Impairment of Long-Lived Assets. Actual results could
differ materially from these estimates.

ACCOUNTING CHANGES

 (a) Impairment or disposal of long-lived assets

     In August 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
("SFAS 144"), which addresses financial accounting and reporting for the
impairment or disposal of long-lived assets. SFAS 144 applies to certain
long-lived assets, including discontinued operations, and provides a single
accounting model for long-lived assets to be disposed of. Although retaining
many of the fundamental recognition and measurement provisions of SFAS No. 121,
SFAS 144 significantly changes the criteria that would have to be met to
classify an asset as held-for-sale.

     SFAS 144 requires that long-lived assets to be disposed of by sale be
measured at the lower of carrying amount or fair value less cost to sell,
whether reported in continuing operations or in discontinued operations.
Discontinued operations will no longer be measured at net realizable value or
include amounts for operating losses that have not yet been incurred. SFAS


                                       12

<PAGE>

144 also broadens the reporting of discontinued operations to include the
disposal of a component of an entity provided that the operations and cash flows
of the component will be eliminated from the ongoing operations of the entity
and the entity will not have any significant continuing involvement in the
operations of the component.

     We adopted the provisions of SFAS 144 effective July 1, 2002. The adoption
of SFAS 144 did not have a material effect on our business, results of
operations, and financial conditions.

 (b) Costs associated with exit or disposal activities

     In June 2002, the FASB issued SFAS No.146, "Accounting for Costs Associated
with Exit or Disposal Activities" ("SFAS 146"). SFAS 146 requires that liability
for the costs associated with an exit or disposal activity be recognized when
the liability is incurred. SFAS 146 also established that fair value is the
objective for initial measurement of the liability. The provisions of SFAS 146
are effective for exit or disposal activities that are initiated after December
31, 2002.

RECENT DEVELOPMENTS

     At a special meeting of stockholders held on October 9th, 2002, our
stockholders approved a private equity financing with Crossover Ventures, Inc.
pursuant to which we could issue up to US$14,000,000 worth of our common stock
and warrants convertible into shares of our common stock. Under the terms of the
private equity financing facility with Crossover, we have the option to obtain a
maximum of US$14,000,000 by issuing shares of our common stock in a series of
periodic draw downs of funds. The draw downs are subject to certain limitations
and the fulfillment of certain conditions, including a provision which limits
Crossover's holdings to 9.999% of the outstanding shares of Lumenon common stock
at any given time and provisions which limit the amount we may draw down at any
time based on our stock price and trading volume. These limits and conditions
limit the amount that we may draw down from time to time. We are not obligated
to draw down the full US$14,000,000 amount of the commitment.

CERTAIN 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.


                                       13

<PAGE>


IN ORDER TO REMAIN IN BUSINESS, WE MUST OBTAIN ADDITIONAL FUNDING TO MEET OUR
FUTURE CAPITAL NEEDS. IF WE ARE UNABLE TO OBTAIN SUCH FINANCING, WE WILL BE
REQUIRED TO DELAY OR ABANDON SOME OR ALL OF OUR ANTICIPATED RESEARCH AND
DEVELOPMENT PROJECTS, SIGNIFICANTLY CUT BACK OUR OPERATIONS, SELL ASSETS OR
LICENSE POTENTIALLY VALUABLE TECHNOLOGIES TO THIRD PARTIES OR CEASE OPERATIONS.

        The auditors report covering our audited financial statements which are
included in our Annual Report on Form 10-K for the year ended June 30, 2002, as
amended, contained going concern modifications. Our auditors noted in the notes
to our financial statements that we have no current source of revenue and
without the realization of additional capital, we will not be able to continue
our business as a going concern. As of September 30, 2002, we had CDN$3.0
million of cash and cash equivalents, which should be sufficient to meet our
financial needs for approximately the next four months. In order to remain in
business, we will require substantial additional funding over the next several
years to develop our technology, to broaden and commercialize our products and
to expand our manufacturing capacity. Despite the fact that we have recently
entered into an equity line financing agreement with Crossover, there are
certain restrictions on the amounts available under the equity line. As a
result, the equity line financing agreement will not, for the foreseeable
future, be sufficient to meet our cash needs in the future. In addition, the
terms of the equity line financing agreement and business and economic
conditions may make it unfeasible or undesirable to draw down under the
agreement when we would like. In addition, only one draw down may occur at a
time. Additional funding may be unavailable on favorable terms, or not be
available at all. If we are unable to obtain sufficient additional funding, we
will have to delay or abandon some or all of our current and anticipated
research and development projects, significantly cut back our operations, sell
some or all of our assets, license potentially valuable technologies to third
parties that we currently plan to commercialize ourselves or cease operations.

     To date, we have received approximately CDN$71.6 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, if we raise additional capital by issuing additional
equity securities, our existing stockholders would suffer substantial dilution.

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 revenues from sales of
our products. Our operating history provides no basis for evaluating us or our
prospects. Our future success will depend on our ability to develop, manufacture
and commercialize products based upon our licensed proprietary technologies. We
must successfully develop and manufacture our products, address our competition,
attract, retain and motivate qualified employees, expand our operations and
market and sell products in large volumes to have significant revenues and to
become profitable. We have operated as a development stage company for an
extended period of time and there is no assurance that we will be successful in
creating products or processes that provide the stability, reproducibility,
reliability and performance required for commercialization or that potential
customers will accept our products. In addition, these products may be difficult
to produce in large volumes, fail to perform as expected, cost too much to
produce or be barred

                                       14

<PAGE>


from production by the proprietary rights of others, which would delay or
prevent us from having significant revenues or from becoming 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 September
30, 2002, had an accumulated deficit of approximately CDN$312 million (US$197
million). We expect to spend substantial funds to continue research and product
development, to establish sales, marketing, customer service and manufacturing
operations departments and for other general corporate purposes. Over at least
the next several years, 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 to 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.

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

     To date, we have not completed the development of our products. We will
have to spend significant resources to complete the development of our products.
Once development has been completed, 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, the shipments of products to our customers
could be delayed which could damage our reputation and cause us to lose
customers.

     In addition, 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 could cause a significant number of our
products to be nonfunctional or to have unacceptable defects. 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. Addressing any of these
problems could require a significant amount of time and resources to correct,
which could delay the shipment of products to our customers, which could damage
our reputation, cause us to lose customers or hinder our ability to attract new
customers or achieve market acceptance.

IF THE PRICE OR THE TRADING VOLUME OF OUR COMMON STOCK DOES NOT INCREASE
SUBSTANTIALLY, WE WILL BE UNABLE TO DRAW DOWN A SIGNIFICANT AMOUNT OF THE US$14
MILLION AVAILABLE TO US UNDER OUR EQUITY LINE.

     The maximum amount of a draw down under our equity line facility will be
equal to 10% of the weighted average price for our common stock for the 60
trading day period immediately prior to the first day of the pricing period
specified in the notice to Crossover of our intention to exercise a draw down
multiplied by the total trading volume with respect to our common stock

                                       15

<PAGE>


for such period. If our stock price and trading volume falls below certain
levels, then either the maximum draw down amount formula or the mandatory
threshold price will probably prevent us from being able to draw down a
significant portion of the US$14 million available to us under the equity line
facility with Crossover. For example, during the 60 trading day period ended
September 20, 2002, our weighted average stock price was US$0.212 per share and
our total daily trading volume was 8,803,500 shares. Based on this stock price
and trading volume, the maximum draw down amount available to us during such
period would have been US$186,106. Accordingly, our stock price and the trading
volume of our stock will have to increase substantially in the future in order
for us to have access to the full US$14 million under the equity line.

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

     On June 7, 2002, the listing of our common stock was transferred from The
Nasdaq National Market to The Nasdaq SmallCap Market. This transfer provided us
with a grace period until February 10, 2003 to comply with the $1.00 minimum bid
price required by the Nasdaq Stock Market, Inc. If we are 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 SmallCap Market, it could materially adversely affect
the market price and liquidity of our common stock and our ability to raise
necessary additional capital.

     The issuance by us of shares of common stock to Crossover pursuant to the
terms of the equity line financing with Crossover, or the subsequent resale by
Crossover of those shares, may further reduce the trading price of our common
stock. If our common stock were delisted from The Nasdaq SmallCap Market, we
would not be able to draw down any additional funds on the equity line with
Crossover.

     In addition, if after December 31, 2002 we are not listed on The Nasdaq
National Market for an aggregate of ten trading days, we will be in default of
our outstanding convertible notes and the holders of these notes would be
entitled to redeem these notes. As of September 30, 2002, the aggregate
principal and interest accrued under the notes was US$10.3 million.

THE TELECOMMUNICATIONS INDUSTRY IS CURRENTLY EXPERIENCING A CHALLENGING PERIOD
AND WILL FOR THE FORESEEABLE FUTURE CONTINUE TO EXPERIENCE THE EFFECTS OF THE
MARKET DOWNTURN. FLUCTUATIONS IN INDUSTRY DEMAND FOR OPTICAL COMPONENTS CREATE
SIGNIFICANT UNCERTAINTIES IN OUR BUSINESS, WHICH COULD HAVE A MATERIAL ADVERSE
IMPACT ON OUR RESULTS OF OPERATIONS.

     The success of our business is dependent upon product sales to
telecommunications network system providers. These providers, in turn, are
dependent for their business upon orders for fiber optic systems from
telecommunications carriers. Business fluctuations affecting service providers
and their telecommunication carrier customers have affected and will continue to
affect our business. We are currently in a period of industry-wide overcapacity
and declining demand for our products, with systems providers continuing to
scale back on deployment and equipment manufacturers relying on component
inventories to meet reduced demand. This downturn in the industry is
characterized by inventory overcapacity and reduced revenues, which at times
may, if the downturn is sufficiently prolonged or severe, force system providers
and telecommunications carriers to reduce expenditures on our technology and
products. In addition, due to the lead


                                       16

<PAGE>


times associated with the production of telecommunications equipment, a rise or
fall in the level of sales of telecommunications equipment typically lags any
downturn or recovery in the telecommunications market by approximately six to
twelve months. Our success depends upon increasing demand for products that
incorporate our technology and the continued downturn in the industry has and
will continue to negatively impact our business and results of operations.

IF OUR RECENT TEMPORARY LAYOFF OF EMPLOYEES BECOMES PERMANENT, WE MAY BE
OBLIGATED TO MAKE SUBSTANTIAL SEVERANCE PAYMENTS TO THESE EMPLOYEES.

     In August 2002, we announced the temporary layoff of 37 employees. Of the
remaining 50 people employed with us as of August 30, 2002, 16 were employed in
engineering, test and manufacturing, 19 were employed in research and
development and the remainder were employed in sales, marketing and
administration. We expect to incur an accounting charge in connection with this
layoff. However, the magnitude and timing of the accounting charge will depend
upon the duration of the layoff. For example, if the layoff exceeds six months,
under Quebec law we would be obligated to make aggregated severance payments of
up to CDN$955,000.

IN ORDER TO REACH PROFITABILITY, WE MUST EXPAND OUR BUSINESS OPERATIONS 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
engineers, manufacturing, marketing, sales and 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 may 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 and as a
result, are not able to respond to the needs of our customers, we may lose
customers, which would decrease our revenues.

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 or were not supplied to us, we would, at a minimum, experience
delays in the shipment of our products and we could be required to find another
equipment supplier.


                                       17

<PAGE>


     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:

     -    reduced control over equipment delivery schedules;

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

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

     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.

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.

     Currently, we have a limited international presence on which to base our
expectations for international sales, however, we believe that 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:

     -    changes in foreign currency exchange rates;

     -    challenges inherent in managing geographically dispersed operations;

     -    multiple, conflicting and changing governmental laws and regulations;

     -    political and economic instability or conflicts;

     -    changes in tariffs, taxes and other trade barriers;

     -    lack of experience in a particular geographic market;

     -    significant presence of our competitors in international markets;

     -    inability to recruit personnel in a specific country or region; and

     -    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. As a result, our core
technology faces competition from new and revised technologies that may render
our existing technology less competitive or obsolete. We may be unable to adapt
to the rapid technological change exhibited in this market place.

In order to be successful, we must:


                                       18

<PAGE>

     -    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;

     -    incorporate those features and functions into our products;

     -    meet specific and exacting design requirements; and

     -    price our products competitively.

     If we fail to anticipate or respond adequately to technical developments or
customer requirements, our business and operating results will be negatively
impacted. In addition, due to the constant change in the technology environment,
the life cycle of the products we make may be short. We must introduce new
products on a timely basis. Due to the complexity of our products, we could
experience delays in introducing new products. If we experience significant
delays in product development or introduction, our business operating results
will be negatively impacted.

     In addition, to the extent we determine that new technologies are required
to remain competitive, the development and implementation of such technologies
may require us to make significant capital investments. We may not be able to
obtain capital for these purposes and investments in such technologies may not
result in commercially viable technological products. The loss of revenue and
increased costs to us from such changing technologies would adversely affect our
business.

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.

     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 competitors could also include our own customers, which may
decide to manufacture products competitive with ours, rather than purchase our
products. As a result, the market for optical circuit technology has become and
continues to be intensely competitive. Some competitors have become more
aggressive with their pricing, payment terms and/or issuance of contractual
implementation terms or guarantees. We may not be able to compete successfully
with new and existing competitors without lowering prices or affecting other
favorable terms. We expect competition to persist and intensify, which could
affect our ability to commercialize our products, which would negatively impact
our future operating results.


                                       19

<PAGE>


WE ARE DEPENDENT ON KEY PERSONNEL TO OPERATE OUR BUSINESS. 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, 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. As a result, we may have to grant large numbers of
options or other stock-based awards to attract and retain personnel, which could
be highly dilutive to our stockholders. In addition, 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 and the failure to
attract, train and retain such personnel could negatively impact our development
and manufacturing goals and the effectiveness of our sales and marketing
efforts.

IF WE FAIL TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS OR FACE A
CLAIM OF INTELLECTUAL PROPERTY INFRINGEMENT BY A THIRD PARTY, 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 standards
relating to the scope and validity of patent claims are evolving. Any patents
we have obtained, such as our co-owned 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


                                       20

<PAGE>


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.

SEVERAL OF OUR AGREEMENTS CONTAIN TERMS WHICH 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 revenues from product sales. However, 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 margin and
ultimately, our net income.

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.

TERRORIST ATTACKS AND THREATS OR ACTUAL WAR MAY NEGATIVELY IMPACT ALL ASPECTS OF
OUR OPERATIONS, REVENUES, COSTS AND STOCK PRICE.

     Recent terrorist attacks in the United States, as well as any future events
occurring in response to or in connection with them, including, without
limitation, future terrorist attacks against United States targets, rumors or
threats of war, actual conflicts involving the United States or its allies or
military or trade disruptions impacting our domestic or foreign suppliers, may
substantially negatively impact our operations. Any of these events could cause
consumer confidence and spending to decrease or result in increased volatility
in the United States and worldwide financial markets and economy. They also
could result in economic recession in the


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<PAGE>


United States or abroad. Any of these occurrences could have a significant
negative impact on our operating results, revenues and costs.

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 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 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 the replacement
of 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 convertible 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 conversions of notes could depress the price of our
common stock. This may adversely affect our ability to sell common stock.

OUR COMMON STOCK PURCHASE AGREEMENT WITH CROSSOVER AND THE ISSUANCE OF SHARES TO
CROSSOVER UNDER THAT AGREEMENT MAY CAUSE SIGNIFICANT DILUTION TO OUR
STOCKHOLDERS AND MAY HAVE AN ADVERSE IMPACT ON THE MARKET PRICE OF OUR COMMON
STOCK.

     The resale by Crossover of the common stock that it purchases from us will
increase the number of our outstanding shares, which could depress the market
price of our common stock. Moreover, as all the shares we sell to Crossover will
be available for immediate resale, the mere prospect of our sales to Crossover
could depress the market price for our common stock. The shares of our common
stock issuable to Crossover under the equity line facility will be sold to
Crossover at 87%-92% of the volume weighted average price of our common stock
during the draw down period as defined in the agreement. As a result, any draw
down will cause our existing common stockholders to experience substantial
dilution and would likely have an adverse effect on the market price of our
common stock.

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<PAGE>


     The perceived risk of dilution may cause our existing stockholders to sell
their shares, which would contribute to a downward movement in the stock price
of our common stock. Moreover, the perceived risk of dilution and the resulting
downward pressure on our stock price could encourage investors to engage in
short sales of our common stock. By increasing the number of shares offered for
sale, material amounts of short selling could further contribute to progressive
price declines in our common stock.

THE COMMON STOCK PURCHASE AGREEMENT WITH CROSSOVER LIMITS THE NUMBER OF SHARES
OF COMMON STOCK CROSSOVER IS REQUIRED TO HOLD AT ANY ONE TIME TO 9.999%, WHICH
MAY FURTHER LIMIT OUR ABILITY TO DRAW DOWN AMOUNTS THAT WE REQUEST.

     The common stock purchase agreement we have entered into with Crossover in
connection with the equity line facility provides that we may not sell shares of
our common stock pursuant to our draw down right under that agreement if the
sale would cause Crossover to beneficially own more than 9.999% of our issued
and outstanding common stock at any one time. Any resale of our common stock by
Crossover would reduce Crossover's beneficial ownership, thereby allowing us to
draw down additional funds, but would also have a dilutive effect on the price
of our common stock.

WE MAY USE THE PROCEEDS OF OUR EQUITY LINE FINANCING IN WAYS WITH WHICH YOU MAY
NOT AGREE.

     Net proceeds to us from any sales to Crossover will be used principally for
the continued development and implementation of our technology, advertising and
marketing and for general corporate purposes. We have not allocated any specific
amount of these net proceeds for any particular purpose. Consequently, our
management will have broad discretion with respect to the expenditure of the net
proceeds of any sales to Crossover, including discretion to use the proceeds in
ways with which you may not agree.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Market risk is the potential loss arising from adverse changes in market
rates and prices, such as foreign currency exchange rates. To the extent that we
consummate financings outside of Canada, we receive proceeds in currency other
than the Canadian dollar. The exercise price of certain of our outstanding
options and warrants are payable in US dollars. Our outstanding convertible
notes are also payable in US dollars. As a result, ultimate proceeds received by
us upon the exercise of such options and warrants and the amount required to
repay the convertible notes may vary due to fluctuations in the value of the
Canadian dollar relative to the US dollar.

     Other than the convertible notes mentioned above, we have minimal monetary
assets, liabilities and operating expenses that are denominated at currencies
other than the Canadian dollar. We do not enter into derivatives or other
financial instruments for trading or speculative purposes, nor do we enter into
financial instruments to manage and reduce the impact of changes in foreign
currency exchange rates. If our international operations expand and we decide to
enter into hedging transactions to minimize foreign currency exchange rate risk,
the adoption of SFAS, No. 133, as amended by SFAS, Nos. 137 and 138, could have
a material impact on our operating results.


                                       23

<PAGE>


     We do not utilize any derivative security instruments. Investments with
original maturities of three months or less are classified as cash and cash
equivalents. As of September 30, 2002, we consider the reported amounts of these
investments to be reasonable approximations of their values. Therefore, changes
in market interest rates will not have a material impact on our financial
position. Through September 30, 2002, interest expense was not sensitive to the
general levels of United States interest rates because all of our notes payable
bear fixed interest rates.

ITEM 4.  CONTROLS AND PROCEDURES

     (a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. Based on the
evaluation of our disclosure controls and procedures (as defined in Rules
13a-14(c) and 15d-14(c) under the Exchange Act) as of a date within 90 days of
the filing date of this quarterly report on Form 10-Q, our chief executive
officer and acting chief financial officer has concluded that our disclosure
controls and procedures are designed to ensure that information required to be
disclosed by us in the reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms and are operating in an effective manner.

     (b) CHANGES IN INTERNAL CONTROLS. There were no significant changes in our
internal controls or in other factors that could significantly affect these
controls subsequent to the date of the most recent evaluation.


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<PAGE>


                           PART II OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

     We terminated a total of 28 employees during fiscal 2001 and 2002 and we
temporarily laid off 37 employees during the three-month period ended September
30, 2002. To date, three employees have filed lawsuits claiming damages and
other losses related to their termination or lay-off and related severance. The
outcome of these lawsuits is unpredictable at this time. We believe that the
legal actions are without merit and we intend to vigorously defend each lawsuit.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     On October 9, 2002, we held a special meeting of our stockholders. At the
meeting, the votes cast for each matter presented to our stockholders were as
follows:

     1.   Approval for a private equity financing facility with Crossover
          Ventures, Inc. pursuant to which the Corporation could issue up to
          US$14,000,000 worth of the Corporation's common stock and have issued
          warrants convertible into shares of the Corporation's common stock.

          For:              9,898,246
          Against:            343,218
          Withheld:           109,373

     2.   Approval for an amendment to the Corporation's Amended and Restated
          Certificate of Incorporation to increase the authorized number of
          shares of the Corporation's common stock from 100,000,000 to
          250,000,000.

          For:             23,243,173
          Against:            519,851
          Withheld:           114,458

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

     On August 23, 2002, Lumenon filed a Current Report on Form 8-K, dated
August 14, 2002, reporting under Item 5 (Other Events) that, effective as of
August 14, 2002, Lumenon had entered into an equity line arrangement under the
terms of a common stock purchase agreement with Crossover Ventures, Inc.


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<PAGE>


     On August 30, 2002, Lumenon filed a Current Report on Form 8-K, dated
August 30, 2002, reporting under Item 5 (Other Events) that it had issued a
press release announcing a reduction in its workforce, through temporary
lay-offs, by approximately 37 employees.


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<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:  November 14, 2002             LUMENON INNOVATIVE LIGHTWAVE
                                      TECHNOLOGY, INC.


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


                                 CERTIFICATIONS

I, Gary S. Moskovitz, certify that:

     1.   I have reviewed this quarterly report on Form 10-Q of Lumenon
          Innovative Lightwave Technology, Inc.;

     2.   Based on my knowledge, this quarterly 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 quarterly report;

     3.   Based on my knowledge, the financial statements, and other financial
          information included in this quarterly 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 quarterly report;

     4.   The registrant's other certifying officers and I are responsible for
          establishing and maintaining disclosure controls and procedures (as
          defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
          and we have:

          a)   designed such disclosure controls and procedures to ensure that
               material information relating to the registrant, including its
               consolidated subsidiaries, is made known to us by others within
               those entities, particularly during the period in which this
               quarterly report is being prepared;

          b)   evaluated the effectiveness of the registrant's disclosure
               controls and procedures as of a date within 90 days prior to the
               filing date of this quarterly report (the "Evaluation Date"); and

          c)   presented in this quarterly report our conclusions about the
               effectiveness of the disclosure controls and procedures based on
               our evaluation as of the Evaluation Date;

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<PAGE>

     5.   The registrant's other certifying officers and I have disclosed, based
          on our most recent evaluation, to the registrant's auditors and the
          audit committee of registrant's board of directors (or persons
          performing the equivalent function):

          a)   all significant deficiencies in the design or operation of
               internal controls which could adversely affect the registrant's
               ability to record, process, summarize and report financial data
               and have identified for the registrant's auditors any material
               weaknesses in internal controls; and

          b)   any fraud, whether or not material, that involves management or
               other employees who have a significant role in the registrant's
               internal controls; and

     6.   The registrant's other certifying officers and I have indicated in
          this quarterly report whether or not there were significant changes in
          internal controls or in other factors that could significantly affect
          internal controls subsequent to the date of our most recent
          evaluation, including any corrective actions with regard to
          significant deficiencies and material weaknesses.


          Dated:  November 14, 2002        /s/ Gary S. Moskovitz
                                           -------------------------------------
                                           Gary S. Moskovitz
                                           President and Chief Executive Officer
                                           and Acting Chief Financial Officer
                                           (principal executive officer and
                                           principal financial officer)


                                       28



<PAGE>


                                INDEX TO EXHIBITS


Exhibit No.    Description
-----------    -----------

99.1           Certification pursuant to 18 U.S.C. Section 1350, as adopted
               pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.