<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:         December 31, 2001
                                  ----------------------------


(  ) 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: 39,253,697 shares of Common
Stock, $.001 par value, as of February 8, 2002.


<PAGE>


                  LUMENON INNOVATIVE LIGHTWAVE TECHNOLOGY, INC.

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                                   Page No.
                                                                                   --------

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

     Item 1.      Financial Statements                                                   1

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

                  Consolidated Statements of Operations (unaudited)
                  for the three and six months ended December 31, 2001
                  and 2000 and from inception to December 31, 2001                       2

                  Consolidated Statements of Cash Flows (unaudited)
                  for the three and six months ended December 31, 2001
                  and 2000 and from inception to December 31, 2001                       3

                  Notes to Consolidated Financial Statements (unaudited)                 4

     Item 2.      Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                                   10

     Item 3.      Quantitative and Qualitative Disclosures About
                  Market Risk                                                           18

PART II.          OTHER INFORMATION                                                     19

     Item 1.      Legal Proceedings                                                     19

     Item 4.      Submission of Matters to a Vote of Security Holders                   19

     Item 6.      Exhibits and Reports on Form 8-K                                      19

Signatures                                                                              20
</TABLE>


<PAGE>

                          PART I. FINANCIAL INFORMATION

ITEM 1.          FINANCIAL STATEMENTS

LUMENON INNOVATIVE LIGHTWAVE
TECHNOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
Consolidated Balance Sheets
(Unaudited, in thousands of Canadian dollars)

<TABLE>
<CAPTION>

                                                         December 31,        December 31,             June 30,
                                                                 2001                2001                 2001
                                                         ------------        ------------            ---------
                                                                (US$)              (CAN$)               (CAN$)
                                                             (note 6)
<S>                                                          <C>                <C>                  <C>
Assets
Current assets:

     Cash and cash equivalents                               $  9,159           $  14,585            $   2,382
     Commercial papers and term deposits                            -                   -               19,913
     Loan receivable from an officer                              125                 200
     Interest and sales tax receivable                            120                 191                  404
     Government contribution and tax credits receivable           309                 492                1,561
     Prepaid expenses                                              89                 142                   87
                                                             --------           ---------            ---------
                                                                9,802              15,610               24,347

Deposits                                                          512                 815                  782
Property and equipment (note 2)                                12,523              19,943               21,257
Other assets                                                        -                   -                   16
                                                             --------           ---------            ---------
                                                             $ 22,837           $  36,368            $  46,402
                                                             ========           =========            =========
Liabilities and Stockholders' Equity

Current liabilities:
     Accounts payable                                        $    664           $   1,057            $   1,134
     Accrued liabilities                                          169                 268                  438
     Compensation and related liabilities                       1,668               2,656                2,178
     Obligations under capital leases (note 3)                    723               1,153                  940
                                                             --------           ---------            ---------
                                                                3,224               5,134                4,690

Obligations under capital leases  (note 3)                        787               1,253                1,368
Convertible notes (note 4)                                      7,852              12,504               11,267

Stockholders' equity:
     Share capital (note 5)                                        37                  58                   57
     Additional paid-in capital                               196,922             313,600              312,035
     Accumulated deficit during the development
       stage                                                 (185,985)           (296,181)            (283,015)
                                                             --------           ---------            ---------
                                                               10,974              17,477               29,077
Commitments (note 7)
Contingencies (note 9)

                                                             --------           ---------            ---------
                                                             $ 22,837           $  36,368            $  46,402
                                                             ========           =========            =========
</TABLE>


See accompanying notes to unaudited consolidated financial statements.

                                      -1-
<PAGE>

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

<TABLE>
<CAPTION>

                                    Three months     Three months    Three months     Six months       Six months            From
                                           ended            ended           ended          ended            ended    Inception to
                                    December 31,     December 31,    December 31,    December 31,    December 31,     December 31,
                                            2001            2001             2000            2001            2000             2001
                                    ------------     ------------    ------------    ------------    ------------     ------------
                                           (US$)          (CAN$)           (CAN$)          (CAN$)          (CAN$)           (CAN$)
                                        (note 6)
<S>                                   <C>              <C>             <C>             <C>             <C>                <C>
Expenses:
     Research and development         $      993       $    1,581      $    1,856      $    2,795      $    3,312         $230,652
     Research tax credits                   (250)            (398)              -            (506)           (113)            (946)
                                      ----------       ----------      ----------      ----------      ----------         --------
                                             743            1,183           1,856           2,289           3,199          229,706

     General and administrative            1,996            3,177           3,643           5,034           7,282           27,627
     Depreciation and amortization           949            1,511             587           2,883           1,135            8,643
     Write-down of property and
       equipment                             241              384               -             707               -            3,220
                                      ----------       ----------      ----------      ----------      ----------         --------
                                           3,186            5,072           4,230           8,624           8,417           39,490
Other expenses (income):
     Loss (gain) on foreign
       exchange                              129              206            (341)            784         (1,051)              435
     Interest expense                        266              423             770             879           1,499            3,245
     Interest income                         (79)            (125)           (640)           (517)        (1,433)          (2,904)
     Financing charges                       335              534           1,161           1,107          23,924           26,209
                                      ----------       ----------      ----------      ----------      ----------         --------
                                             651            1,038             950           2,253          22,939           26,985
                                      ----------       ----------      ----------      ----------      ----------         --------
Net loss                              $    4,580       $    7,293      $    7,036      $   13,166      $   34,555         $296,181
                                      ==========       ==========      ==========      ==========      ==========         ========
Net loss per share:
     Basic and diluted                $     0.12       $     0.19      $     0.19      $     0.34      $     0.97         $
                                      ==========       ==========      ==========      ==========      ==========         ========

Weighted average number
   of shares outstanding              38,763,784       38,763,784      36,471,090      38,621,336      35,491,468
                                      ==========       ==========      ==========      ==========      ==========         ========
</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)

<TABLE>
<CAPTION>


                                          Three months         Three months       Three months          Six months
                                                 ended                ended              ended               ended
                                          December 31,         December 31,       December 31,         December 31,
                                                  2001                2001                2000                 2001
                                          ------------         -----------        ------------         ------------
                                                 (US$)              (CAN$)              (CAN$)               (CAN$)
                                              (note 6)
<S>                                         <C>                  <C>                 <C>                  <C>
Cash flows from operating activities:
  Net loss                                  $ (4,580)            $ (7,293)           $ (7,036)            $(13,166)
  Adjustment for:
    Compensation costs                           228                  364                 818                  715
    Interest on convertible notes                215                  343               1,909                  708
    Common shares issued for services              -                    -                   -                    -
    Depreciation and amortization                949                1,511                 587                2,883
    Write-down of property and equipment         241                  384                   -                  707
    Financing charges                            335                  533                   -                1,107
    Unrealized loss on foreign exchange          135                  215                  86                  960
  Net change in operating assets
    and liabilities                              390                  618              (6,054)                (561)
                                            --------             --------            --------             --------
                                              (2,087)              (3,325)             (9,690)              (6,647)
Cash flows from financing activities:

  Proceeds from issuance of  common shares         5                    9                   -                    9
  Principal repayments of capital
    lease obligations                           (171)                (274)               (160)                (588)
  Proceeds from issuance of
    convertible notes, net of issue costs          -                    -                   -                    -
  Share issue expenses                             -                    -                  (9)                   -
  Deposit on subscription of shares                -                    -                   -                    -
  Cash from the acquisition of a subsidiary        -                    -                   -                    -
                                            --------             --------            --------             --------
                                                (166)                (265)               (169)                (579)
Cash flows from investing activities:
 Purchase of commercial papers and
   term deposits                                   -                    -              (9,273)                   -
 Disposal of commercial papers and
   term deposits                              11,211               17,854              29,631               19,530
 Additions to property and equipment             (77)                (123)             (2,596)                (287)
 Disposal of property and equipment                5                    8                   -                   36
 Deposits                                          -                    -                 650                  150
 Other assets                                      -                    -                   -                    -
                                            --------             --------            --------             --------
                                              11,139               17,739              18,412               19,429
                                            --------             --------            --------             --------
 Net (decrease) increase in cash and
   cash equivalents                            8,886               14,149                8553               12,203
 Cash and cash equivalents,
   beginning of period                           273                  436                 458                2,382
                                            --------             --------            --------             --------
 Cash and cash equivalents,
   end of period                            $  9,159             $ 14,585            $  9,011             $ 14,585
                                            ========             ========            =========            ========
</TABLE>

<TABLE>
<CAPTION>


                                              Six months                  From
                                                   ended          inception to
                                            December 31,           December 31,
                                                    2000                  2001
                                            ------------           -----------
                                                  (CAN$)                 (CAN$)
<S>                                            <C>                   <C>
Cash flows from operating activities:
  Net loss                                     $(34,555)             $(296,181)
  Adjustment for:
    Compensation costs                            1,525                  5,943
    Interest on convertible notes                   296                  2,834
    Common shares issued for services                 -                217,359
    Depreciation and amortization                 1,135                  8,643
    Write-down of property and equipment              -                  3,220
    Financing charges                            25,102                 26,210
    Unrealized loss on foreign exchange             736                  2,863
  Net change in operating assets
    and liabilities                              (7,265)                 1,444
                                               --------              ---------
                                                (13,026)               (27,665)
Cash flows from financing activities:

  Proceeds from issuance of  common shares        5,893                 23,146
  Principal repayments of capital
    lease obligations                              (241)                (1,465)
  Proceeds from issuance of
    convertible notes, net of issue costs        48,382                 48,681
  Share issue expenses                              (36)                (1,138)
  Deposit on subscription of shares                   -                    147
  Cash from the acquisition of a subsidiary           -                    814
                                               --------              ---------
                                                 53,998                 70,185
Cash flows from investing activities:
 Purchase of commercial papers and
   term deposits                                (67,435)              (233,336)
 Disposal of commercial papers and
   term deposits                                 45,578                232,953
 Additions to property and equipment            (11,552)               (26,943)
 Disposal of property and equipment                   -                     36
 Deposits                                           323                   (632)
 Other assets                                         -                    (13)
                                               --------              ---------
                                                (33,086)               (27,935)
                                               --------              ---------
 Net (decrease) increase in cash and
   cash equivalents                               7,886                 14,585
 Cash and cash equivalents,
   beginning of period                            1,125                      -
                                               --------              ---------
 Cash and cash equivalents,
   end of period                               $  9,011              $  14,585
                                               ========              =========
</TABLE>

     See accompanying notes to unaudited consolidated financial statements.

                                      -3-
<PAGE>


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

Three-month and six-month periods ended December 31, 2001 and 2000 and period
from inception (March 2, 1998) to December 31, 2001
(in thousands of Canadian dollars, except per share amounts)
-----------------------------------------------------------------------------

     In the opinion of management, the accompanying unaudited interim financial
     statements, prepared in accordance with US generally accepted accounting
     principles, contain all adjustments (consisting of normal recurring
     accruals) necessary to present fairly the Corporation's financial position
     as at December 31, 2001 and June 30, 2001, its results of operations and
     cash flows for the three-month and six-month periods ended December 31,
     2001 and 2000 and from inception to December 31, 2001.

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

1.   ORGANIZATION AND BUSINESS ACTIVITIES:

     The Corporation's principal business activity is to design, develop and
     build integrated optic devices in the form of compact hybrid glass circuits
     on silicon chips. Lumenon activities are performed 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 inaugurated its
     53,000-square-foot facility. This facility serves as the Corporation's
     headquarters and, when operative, will be a high-volume manufacturing
     plant. In March 2001, in response to a perceived market downturn for
     optical circuits, the Corporation re-focused its process from one of
     providing only simple passive components to one of offering a mix of
     products and services ranging from optical chips to integrated photonic
     devices.

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

                                      -4-
<PAGE>


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

Three-month and six-month periods ended December 31, 2001 and 2000 and period
from inception (March 2, 1998) to December 31, 2001
(in thousands of Canadian dollars, except per share amounts)
-------------------------------------------------------------------------------

2.   PROPERTY AND EQUIPMENT:
<TABLE>
<CAPTION>

                                                                           December 31, 2001
                                               ---------------------------------------------
                                                             Accumulated            Net book
                                                 Cost       depreciation               value
                                               --------     ------------           ---------
<S>                                               <C>                <C>               <C>
Plant equipment and laboratory
  installation                                 $ 23,940          $ 7,168            $ 16,772
Leasehold improvements                            1,788              419               1,369
Office equipment and fixtures                     1,326              389                 937
Computer equipment and software                   1,305              551                 754
Vehicle equipment                                   183               72                 111
                                               --------          -------            --------
                                               $ 28,542          $ 8,599            $ 19,943
                                               ========          =======            ========
</TABLE>


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

     Because Lumenon is a development stage enterprise, the recoverability of
     plant equipment and laboratory installation to be used in commercial
     production has been established on fair value. In connection therewith
     additional write-downs of $384 and $707 have been recorded during the
     three-month period and the six-month period ended December 31, 2001
     respectively.

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

     Cost and net book value of plant equipment, laboratory installation and
     vehicle equipment held under capital leases amount to $3,815 and $2,447,
     respectively, as at December 31, 2001.

                                      -5-
<PAGE>

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

Three-month and six-month periods ended December 31, 2001 and 2000 and period
from inception (March 2, 1998) to December 31, 2001
(in thousands of Canadian dollars, except per share amounts)
-------------------------------------------------------------------------------

3.   OBLIGATIONS UNDER CAPITAL LEASES:

     Future minimum lease payments under capital leases are as follows:

<TABLE>

<S>                                                                          <C>
2002                                                                         $ 1,373
2003                                                                           1,098
2004                                                                             193
                                                                             -------
Total minimum lease payments                                                   2,664

Less amount representing interest (at rates varying from 11.25% to 18.85%)       258
                                                                             -------
Present value of net minimum capital lease payments                            2,406

Current portion of obligations under capital leases                            1,153
                                                                             -------
Long-term portion of obligations under capital leases                        $ 1,253
                                                                             =======

</TABLE>

4.   CONVERTIBLE NOTES:

     On July 25, 2000, the Corporation closed a financing involving the issuance
     of five-year convertible notes in the aggregate principal amount of $51,243
     (US$35,000) bearing interest at 7.5% per annum. Interest was payable upon
     the earlier of the repayment or conversion of a note. Under the terms of
     the original agreement, the notes were convertible at any time by the
     holder into the Corporation's common stock at a conversion price based on
     the closing bid price of the common stock at the time of conversion with a
     floor of $11.05 (US$7) and a ceiling of $39.46 (US$25). In addition, the
     investors also received five-year common stock purchase warrants entitling
     them to acquire a total of 5,000,800 shares of the Corporation's common
     stock.

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

4.   CONVERTIBLE NOTES (CONTINUED):

                                      -6-
<PAGE>

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

Three-month and six-month periods ended December 31, 2001 and 2000 and period
from inception (March 2, 1998) to December 31, 2001
(in thousands of Canadian dollars, except per share amounts)
-------------------------------------------------------------------------------

     The convertible notes were discounted and are presented net of the debt
     discount, which is amortized over the term of the notes. Amortization is
     presented under financing charges in the consolidated statements of
     operations.

     Since the date of issuance, a portion of the convertible notes has been
     converted into shares of common stock and as of December 31, 2001, $18,234
     (US$11,450) of the gross principal amount remains outstanding.

5.   SHARE CAPITAL:

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

Issued and outstanding:
39,098,547 common shares (June 30, 2001: 38,478,905)                 $  58            $  57
                                                                     =====            =====
</TABLE>

(a)  Issue of shares:

     During the six-month period ended December 31, 2001, the Corporation issued
     611,342 common shares as a result of the conversion of convertible notes,
     and 8,300 common shares upon exercise of options for cash consideration of
     $9,039.


                                      -7-
<PAGE>
LUMENON INNOVATIVE LIGHTWAVE
TECHNOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
Notes to Consolidated Financial Statements (Unaudited)

Three-month and six-month periods ended December 31, 2001 and 2000 and period
from inception (March 2, 1998) to December 31, 2001
(in thousands of Canadian dollars, except per share amounts)
-------------------------------------------------------------------------------

5.   SHARE CAPITAL: (CONTINUED)

(b)  Stock option plan:

     Changes in outstanding options for the six-month period ended December 31,
     2001 were as follows:

<TABLE>
<CAPTION>

                                                                                                    Weighted average
                                                                       Number               exercise price per share
                                                                   ----------               ------------------------
<S>                                                                    <C>                      <C>           <C>
Options outstanding, June 30, 2001                                  4,935,650
Granted                                                                56,250                   $  0.70    (US$0.44)
Cancelled                                                            (656,900)                  $ 18.91   (US$11.87)
                                                                   ----------               -----------------------
Options outstanding, September 30, 2001                             4,335,000
Granted                                                             1,132,500                   $  0.82    (US$0.51)
Cancelled                                                             (80,000)                  $  7.82    (US$4.91)
Exercised                                                              (8,300)                  $  1.09    (US$0.68)
                                                                   ----------               -----------------------
Options outstanding, December 31, 2001                              5,379,200
                                                                   ==========               =======================
</TABLE>


     At December 31, 2001, 843,283 outstanding options were exercisable and
     4,535,917 outstanding options vest over a period from one to five years.

6.   FUNCTIONAL CURRENCY AND CONVENIENCE TRANSLATION:

     The functional currency of the Corporation is the Canadian dollar.

     US dollar amounts presented on the balance sheets, statements of operations
     and cash flows are provided for convenience of reference only and are based
     on the noon buying rate in New York City for cable transfers in foreign
     currencies as certified for customs purposes by the Federal Reserve Bank of
     New York at December 31, 2001, which was $1.5925 Canadian dollar per US
     dollar.

7.   COMMITMENTS:

     The Corporation leases premises under operating lease agreements that
     expire in January 2004 and July 2012. The first lease contains a renewal
     option for a period of five years at the end of the initial term. Those
     leases require the Corporation to pay all executory costs such as
     maintenance and insurance. Rental payments under the terms of these leases
     are secured by a deposit of $750 (US$507), of which $75 (US$50) is
     refundable per year, beginning in fiscal 2002.

     In addition, the Corporation leases certain equipment under operating
     leases. Minimum lease payments under operating lease agreements for
     premises and equipment for the next five years and thereafter are as
     follows:

                                      -8-
<PAGE>

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

Three-month and six-month periods ended December 31, 2001 and 2000 and period
from inception (March 2, 1998) to December 31, 2001
(in thousands of Canadian dollars, except per share amounts)
-------------------------------------------------------------------------------

7.   COMMITMENTS: (CONTINUED)

<TABLE>

<S>                                                      <C>
2002                                                     $   988
2003                                                         981
2004                                                         896
2005                                                         887
2006                                                         880
Thereafter                                                 5,251
                                                         -------
                                                         $ 9,883
                                                         =======
</TABLE>


8.   SUPPLEMENTAL CASH FLOW DISCLOSURE:

     Non-cash investing and financing activities:

     Acquisition of property and equipment through capital leases is nil for the
     three-month period ended December 31, 2001 and amounts to $684 for the
     six-month period ended December 31, 2001.

     Capital expenditures of $90 are included in accounts payable at December
     31, 2001.

9.   CONTINGENCIES:

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

                                      -9-
<PAGE>



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

     Certain statements contained in this Quarterly Report on Form 10-Q,
including, without limitation, statements containing the words "believe,
""anticipate," "estimate" "expect" and words of similar import, constitute
"forward-looking statements." 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 and elsewhere in this
Quarterly Report, and in other documents we have filed with the Securities and
Exchange Commission.

RESULTS OF OPERATIONS

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

     Research and Development Expenses. Research and development expenses for
the three-month period ended December 31, 2001, net of tax credits , were
CDN$1.2 million (US$743,000), compared to CDN$1.9 million during the same period
in 2000, a decrease of approximately CDN$700,000 or 37%. For the six-month
period ended December 31, 2001, these amounted to CDN$2.3 million, compared to
CDN$3.2 million during the same period in 2000.

         The decrease of CDN$700,000 in research and development expenses during
the three-month period ended December 31, 2001 was primarily due to the
reduction of CDN$536,000 in spending on materials and supplies. The
consolidation of the research and development facility in Dorval with our
headquarters and manufacturing center in St-Laurent, Canada contributed to the
reduction. In addition, research and development expenses for the three-month
period ended December 31, 2000 included non-recurring expenses related to the
opening of our headquarters and manufacturing center. However, salaries and
compensation costs increased by CDN$308,000, due to the hiring of additional
personnel in our research and development group and related operating expenses
in 2001, as we focused on new designs, the completion of our initial product,
product development, and refinements of our microfabrication processes. Finally,
related research tax credits of CDN$398,000 were recorded during the three-month
period ended December 31, 2001 and, accordingly, contributed to the decrease in
research and development expenses. Initial product samples were delivered to
Poly-Scientific, a business unit of Northrop Grumman's Component Technologies
Sector, and a global, "tier one" network equipment supplier. The samples
provided were Lumenon's 16 channel 100 GHz Mux/Demux units used for systems
design verification, as well as technological assessment.

     General and Administrative Expenses. The general and administrative
expenses were CDN$3.2 million (US$2 million) during the three-month period ended
December 31, 2001, compared to CDN$3.6 million for the same period in 2000, a
decrease of approximately CDN$400,000 million or 13%. General and administrative
expenses were CDN$5 million during the six-month period ended December 31, 2001,
compared to CDN$7.3 million for the same period in 2000, a decrease of
approximately CDN$2.3 million. The decrease during these periods was mainly
attributable to the implementation of our restructuring plan at the end of
fiscal year 2001. The depreciation and amortization and write-down of property
and equipment were CDN$1.9 million (US$1.2 million) during the three-month
period ended December 31, 2001, compared to CDN$587,000 for the same period in
2000, an increase of approximately CDN$1.3 million or 221%. The depreciation and
amortization and write-down of property and equipment were CDN$3.6 million
during the six-month period ended December 31, 2001, compared to CDN$1.1 million
for the same period in 2000, an increase of CDN$2.5 million. The increase in
depreciation and amortization is the result of the significant investment made
in fiscal year 2001 for plant equipment and laboratory installation. However,
during the three-month period ended December 31, 2001, a write-down on property
and equipment was recorded in the amount of CDN$384,000 (US$241,000) and is
related to manufacturing equipment acquired during the last fiscal year, which
we anticipated being used in production. We subsequently concluded that we
needed additional time to complete the development of our initial product and,
as a result, the recoverability of plant equipment and laboratory installation
to be used in commercial production has been established at fair value under FAS
121 Accounting for Impairment of Long-Lived Assets.

                                      -10-
<PAGE>

     Other Expenses. Other expenses, net of interest income and gain on foreign
exchange, amounted to CDN$1 million (US$651,000) during the three-month period
ended December 31, 2001, compared to CDN$950,000 during the same period in 2000,
a decrease of approximately CDN$88,000. During the six-month period ended
December 31, 2001, other expenses, net of interest income and gain on foreign
exchange, amounted to CDN$2.3 million, compared to CDN$23 million for the same
period in 2000, a decrease of CDN$20.7 million. The decrease was mainly due to
the CDN$51,243,000 (US$35,000,000) worth of convertible notes we issued on July
25, 2000. The interest expense portion of other expenses is mainly attributable
to the fact that these convertible notes bear interest at 7.5% per annum.
Moreover, in the quarter ended September 30, 2000, the convertible notes
financing agreement created a non-cash financing charge of CDN$22,763,000.
Interest income during the three-month and six-month periods ended December 31,
2001, amounted to CDN$125,000 (US$78,500) and CDN$517,000, compared to
CDN$640,000 and CDN$1.4 million in the same periods in 2000, a decrease of
CDN$515,000 and CDN$916,000 respectively. These decreases in interest income
were due to the decrease in cash and cash equivalents and commercial papers and
term deposits. As a result of the above expenses, our net loss for the
three-month period ended December 31, 2001 was CDN$7.3 million (US$4.6 million)
or CDN$0.19 (US$0.12) per share, compared to CDN$7 million or CDN$0.19 per share
for the same period in 2000. For the six-month period ended December 31, 2001
our net loss was CDN$13.2 million or CDN$0.34 per share, compared to CDN$34.5
million or CDN$0.97 per share for the same period in 2000.

LIQUIDITY AND CAPITAL RESOURCES

     During the three-month period ended December 31, 2001, the cash flows
generated from investing activities were CDN$17.7 million (US$11 million)
resulting primarily from the liquidation of commercial papers to finance
operating activities, additions to property and equipment and the repayment of
capital lease obligations.

     On October 9, 2001, we agreed with certain of our investors to amend the
terms of the July 25, 2000 convertible note financing documents. The convertible
notes were amended and restated to provide for a conversion price of US$1.44 per
share, to eliminate certain restrictive covenants and to eliminate certain
events of default. As security for the repayment of the amended and restated
convertible notes, we granted the investors a security interest in all of our
present and future moveable property, rights and assets. This security interest
is subordinate to any equipment lease financing or purchase money security
interest into which we may enter. In addition, the common stock purchase
warrants issued in the financing were cancelled and the securities purchase
agreement and the registration rights agreement were amended to eliminate
certain restrictive covenants. If the 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$18.2 million (US$11.4 million) plus
accrued interest.

     On February 7, 2002, convertible notes in the aggregate principal amount of
CDN$356,000 (US$223,000), together with accrued interest, were converted into
155,150 shares of common stock at a price equal to US$1.44 per share.

     We have applied APB-14 ("Accounting for Convertible Debt and Debt Issued
with Stock Purchase Warrants") and EITF 98-5 ("Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently Adjustable
Conversion Ratios") in determining the accounting treatment of the convertible
notes. These bulletins require that we allocate the proceeds from the notes
among the notes. As a result, the notes have been discounted and the beneficial
conversion feature of notes has been recorded as financing charges.

     As of December 31, 2001, we had cash and cash equivalents of CDN$14.6
million (US$9.2 million) as compared to CDN$436,000 as of September 30, 2001 and
CDN$9 million as of December 30, 2000.

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

                                      -11-
<PAGE>


         Government grants receivable for a total of CDN$1.2 million recorded
during the year ended June 30, 2001 relating to the acquisition of certain
production equipment have been written off during the three-month period ended
December 31, 2001. We are in default of the terms of these grants because we
have not completed the development of our initial product and the grants are
only available for the commercial production of photonic devices. The government
has temporarily suspended the grant and we have until December 31, 2003 to
comply as a full production facility. As conditions for the payments of the
grants became remote, a write-off of this receivable was deemed necessary.
Property and equipment has been adjusted by such amount, accordingly.

         We expect to devote substantial resources to our research and
development efforts and the marketing and manufacturing programs associated with
the commercialization of our products. Our funding requirements will depend on
numerous factors, including the progress, level and timing of our research and
development activities, the status of competitive products and our ability to
defend our intellectual property rights. Our cash balance should, in
management's estimation, be sufficient to meet our financial needs for at least
the next 11 months, excluding unforeseen significant capital expenditures. If
our existing resources are insufficient to satisfy our liquidity requirements,
we may need to sell additional equity or debt securities. The sale of additional
equity and debt securities may result in additional dilution to our
stockholders, and we cannot be certain that additional financing will be
available in amounts or on terms acceptable to us, if at all. If we are unable
to obtain this additional financing, we may be required to reduce the scope of
our planned research, development and commercialization activities, which could
harm our financial condition and operating results. We have no other significant
financial obligations at December 31, 2001, 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.

                CERTAINS FACTORS WHICH MAY AFFECT FUTURE RESULTS

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

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

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

         Our future will depend on our ability to develop, manufacture and
commercialize products based upon our licensed proprietary technologies. We did
not have material revenues from product sales during fiscal 2001. Our first
product was transferred to production in the second quarter of fiscal 2002 and
we expect to make only limited shipments of these products in fiscal 2002.
Potential customers may not accept our products and these products may be
difficult to produce in large volumes, fail to perform as expected, cost too
much to produce or be barred from production by the proprietary rights of
others.

         We expect to spend considerable sums to develop and market our new
products. We expect our operating expenses to increase as we develop our
technology and products, increase our sales and marketing activities and expand
our assembly operations. We expect to continue incurring considerable operating
losses and negative cash flows as we incur significant operating expenses and
make capital expenditures in our business. The amount we will lose and when, if
ever, we will have profits is highly uncertain. If we are


                                      -12-
<PAGE>


unsuccessful at developing, manufacturing and marketing our products, we will
not generate sufficient revenues to become profitable.

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

         We have incurred operating losses since our inception and, as of
December 31, 2001 had an accumulated deficit of approximately CDN$296 million
(US$186 million). We expect to spend substantial funds to continue research and
product development, to establish sales, marketing and quality control
departments and for other general corporate purposes. As a result, we expect to
incur increasing losses over the next several years.

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

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

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

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

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

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

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

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

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

         Changes in our manufacturing processes could significantly reduce our
manufacturing yields. Because


                                      -13-
<PAGE>

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

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

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

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

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

          o   changes in foreign currency exchange rates;

          o   challenges inherent in managing geographically dispersed
              operations;

          o   multiple, conflicting and changing governmental laws and
              regulations;

          o   political and economic instability or conflicts;

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

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

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

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

         We must:

          o   anticipate what features and functions our customers and their
              end-users will need and demand in

                                      -14-
<PAGE>


              our products, for both general industry and specific custom-made
              use;

          o   incorporate those features and functions into our products;

          o   meet specific and exacting design requirements; and

          o   price our products competitively.

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

          o   proper product definition;

          o   the timely completion and introduction of new designs;

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

          o   the quality and performance of our products;

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

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

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

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

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

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

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

         Developments by others may render our products or technologies obsolete
or non-competitive. Our competitors include much larger companies that have
substantially greater financial, technical, marketing, distribution and other
resources, broader product lines, greater name recognition and longer standing
relationships with leading original equipment manufacturers than we do. Our
competitors include companies already manufacturing large volumes of products
based on established technologies, as well as companies selling emerging
technological solutions, which could replace the technologies we are currently
using. Potential competitors could also include our own customers, which may
decide to manufacture products competitive with ours, rather than purchase our
products. As a result, any products and/or technologies that we develop may
become obsolete or non-competitive before we can recover the expenses incurred
in connection with their



                                      -15-
<PAGE>


development.

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

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

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

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

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

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

         We have filed patent applications covering the on-substrate cleaving of
sol-gel waveguide, which describes a unique method of revealing a facet of an
optical chip for connection to an optical fiber. 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, or obtain in the
future, may be challenged, invalidated or circumvented. Moreover, the United
States Patent and Trademark Office may commence interference proceedings
involving our patents or patent applications. Any challenge to, or invalidation
or circumvention of, our patents or patent applications could have a material
adverse effect on our business.

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

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


                                      -16-

<PAGE>


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

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

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

          o   reduced control over equipment delivery schedules;

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

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

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

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

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

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

         Provisions of our certificate of incorporation and by-laws and of
applicable law could make it more difficult for another party to acquire us or
discourage another party from attempting to acquire us. This may reduce the
value of our common stock. For example, we could issue preferred stock with
rights senior to the common stock without any further vote or action by
stockholders. The issuance of preferred stock as part of a future financing
could have the effect of preventing a change of control and could make it more
difficult for holders of our common stock to take certain corporate actions,
including replacing incumbent directors. Additionally, the preferred stock may
have preference over, and harm the rights of the holders of, our common stock.

WE HAVE A SIGNIFICANT NUMBER OF OUTSTANDING CONVERTIBLE NOTES, WARRANTS AND
OPTIONS, THE EXERCISE OR CONVERSION OF WHICH COULD DECREASE THE PRICE OF OUR
COMMON STOCK, WHICH WOULD LEAD TO ADDITIONAL SHARES BECOMING ISSUABLE UPON THE
CONVERSION OF ANY REMAINING OUTSTANDING NOTES.

                                     -17-
<PAGE>


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

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

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

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         We are exposed to immaterial levels of market risk with respect to
changes in foreign currency exchange rates. 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. Most of
our operating expenses are incurred in Canadian dollars. Thus, our operations
will tend to be adversely affected if there is a strong Canadian dollar. We
neither 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.

                                      -18-
<PAGE>


                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         Lumenon is subject to several lawsuits brought by former employees. We
believe these lawsuits are without merit and intend to defend these matters
vigorously.

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

         We held our 2001 Annual Meeting of Stockholders on November 14, 2001.
The following matters were voted upon at the Annual Meeting:

          1.  Election of Guy Brunet as Class II director to serve for ensuing
              three years and until his respective successor is elected and
              qualified.

              For:         24,722,871
              Withheld:    4,154,424

          2.  Approval of our 2001 stock incentive plan and the authorization of
              4,000,000 shares of our common stock for issuance under that plan.

              For:         18,688,289
              Against:     4,864,504
              Abstain:     18,101

          3.  Approval of our 2001 director stock option plan and the
              authorization of 600,000 shares of our common stock for issuance
              under that plan.

              For:         18,661,165
              Against:     4,866,098
              Abstain:     13,631

          4.  Ratification of the appointment of KPMG LLP as our independent
              auditors fro the current year.

              For:         28,847,245
              Against:     17,388
              Abstain:     12,662

         In addition to the director above who was elected at the meeting, the
terms of the following directors continued after the meeting: Pierre-Paul
Allard, Mark P. Andrews, Gilles Marcotte, Gary Moskovitz and Pierre-Andre Roy.

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. Documents listed on such Index
to Exhibits and identified by asterisks are being filed as exhibits herewith.
Documents otherwise identified are not being filed herewith and, pursuant to
Rule 12b-32 under the Securities Exchange Act of 1934, reference is made to such
documents as previously filed as exhibits filed with the Securities and Exchange
Commission. Lumenon's file number under the Securities and Exchange Act of 1934
is 000-27977.

(b) Reports on Form 8-K.

                                      -19-
<PAGE>



         On October 11, 2001 we filed a Current Report on Form 8-K dated October
9, 2001 reporting under Item 5 (Other Events) the amendment of the terms of the
July 25, 2000 convertible note financing documents among Lumenon, Castle Creek
Technology Partners LLC and Capital Ventures International.

                                      -20-
<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: February 14, 2002         LUMENON INNOVATIVE LIGHTWAVE
                                 TECHNOLOGY, INC.


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

                                      -21-
<PAGE>


                                INDEX TO EXHIBITS
<TABLE>
<CAPTION>

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

<S>                 <C>
10.1*               Amended and Restated 2001 Director Stock Option Plan

10.2*               Amended and Restated 2001 Non-Officer, Non-Director Employee Stock Incentive Plan

10.3*               Amended and Restated 2001 Stock Incentive Plan

10.4*               Security Agreement, dated as of October 31, 2001, between Lumenon Innovative Lightwave Technology, Inc.,
                    Capital Venture International and Castle Creek Technology Partners LLC.

10.5*               Deed of Hypothec, dated October 30, 2001, between Lumenon Innovative Lightwave Technology, Inc. and CIBC
                    Mellon Trust Company.

10.6*               Deed of Hypothec, dated October 30, 2001, between LILT Canada Inc. and CIBC Mellon Trust Company.

10.7 (1)            Form of Amended and Restated Convertible Note.

10.8 (1)            Agreement dated as of October 9, 2001 between Lumenon Innovative Lightwave Technology, Inc. and
                    Capital Venture International.

10.9 (1)            Agreement dated as of October 9, 2001 between Lumenon Innovative Lightwave Technology, Inc. and
                    Castle Creek Technology Partners LLC.

10.10 (1)           Amendment No. 1 to the Securities Purchase Agreement dated as of October 9, 2001 among Lumenon
                    Innovative Lightwave Technology, Inc. and the Investors ( as defined therein ).

10.11 (1)           Amendment No. 1 to the Registration Rights Agreement dated as of October 9, 2001 among Lumenon Innovative
                    Lightwave Technology, Inc. and the Investors (as defined therein).
</TABLE>
----------------------------------
*    Filed herewith.
(1)  Incorporated by reference to Lumenon's Current Report on Form 8-K dated
     October 9, 2001 (File No. 000-27977).

                                      -22-