<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, 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
Incorporation or Organization)                              Identification No.)


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

State the number of shares outstanding of each of the issuer's classes of common
stock as of the latest practicable date: 38,639,028 shares of Common Stock,
$.001 par value, as of November 8, 2001.



<PAGE>


                  LUMENON INNOVATIVE LIGHTWAVE TECHNOLOGY, INC.

                                TABLE OF CONTENTS

                                                                        Page No.
                                                                        --------

PART I.  FINANCIAL INFORMATION

  Item 1.  Financial Statements

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

           Consolidated Statements of Operations (unaudited)
           for the three months ended September 30, 2001
           and 2000 and from inception to September 30, 2001               2

           Consolidated Statements of Cash Flows (unaudited)
           for the three months ended September 30, 2001
           and 2000 and from inception to September 30, 2001               3

           Notes to Consolidated Financial Statements (unaudited)          4

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

  Item 3.  Quantitative and Qualitative Disclosures About
           Market Risk                                                    18

PART II.   OTHER INFORMATION

  Item 1.  Legal Proceedings                                              19

Signatures                                                                20



<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,
                                                                  2001            2001            2001
------------------------------------------------------------------------------------------------------
                                                                 (US$)          (CAN$)          (CAN$)
                                                              (note 5)
<S>                                                          <C>             <C>             <C>
ASSETS

Current assets:
     Cash                                                    $     276       $     436       $   2,382
     Commercial papers and term deposits                        11,545          18,237          19,913
     Interest and sales tax receivable                             347             548             404
     Government contribution and tax credits receivable          1,072           1,692           1,561
     Prepaid expenses                                               96             151              87
------------------------------------------------------------------------------------------------------
                                                                13,336          21,064          24,347

Deposits                                                           400             632             782
Property and equipment (note 2)                                 12,980          20,505          21,257
Other assets                                                        10              16              16
------------------------------------------------------------------------------------------------------
                                                             $  26,726       $  42,217       $  46,402
======================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Accounts payable                                        $     680       $   1,072       $   1,134
     Accrued liabilities                                           218             344             438
     Accrued compensation costs                                  1,022           1,614           2,178
     Obligations under capital leases                              723           1,142             940
------------------------------------------------------------------------------------------------------
                                                                 2,643           4,172           4,690

Obligations under capital leases                                   974           1,538           1,368
Convertible notes (note 3)                                       8,198          12,951          11,267

Stockholders' equity:
     Share capital (note 4)                                         36              57              57
     Additional paid-in capital                                197,750         312,387         312,035
     Accumulated deficit during the development stage         (182,875)       (288,888)       (283,015)
------------------------------------------------------------------------------------------------------
                                                                14,911          23,556          29,077
Commitments (note 6)
Contingencies (note 8)
Subsequent events (note 9)
------------------------------------------------------------------------------------------------------
                                                             $  26,726       $  42,217       $  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             From
                                              ended              ended             ended     inception to
                                       September 30,      September 30,     September 30,    September 30,
                                               2001               2001              2000             2001
---------------------------------------------------------------------------------------------------------
                                               (US$)            (CAN$)            (CAN$)            (CAN$)
                                            (note 5)
<S>                                     <C>               <C>               <C>                  <C>
Expenses:
     Research and
       development                      $       768       $     1,214       $     1,457          $229,071
     Research tax credits                       (68)             (108)             (113)             (547)
---------------------------------------------------------------------------------------------------------
                                                700             1,106             1,344           228,524

     General and administrative               1,176             1,857             3,639            24,449
     Depreciation and amortization              869             1,371               548             7,132
     Write-down of property and
       equipment                                205               323                --             2,836
---------------------------------------------------------------------------------------------------------
                                              2,250             3,551             4,187            34,417
Other expenses (income):
     Loss (gain) on foreign
       exchange                                 366               578              (711)              229
     Interest expense                           289               456               729             2,821
     Interest income                           (248)             (392)             (793)           (2,779)
     Financing charges                          363               574            22,763            25,676
---------------------------------------------------------------------------------------------------------
                                                770             1,216            21,988            25,947
---------------------------------------------------------------------------------------------------------
Net loss                                $     3,720       $     5,873       $    27,519          $288,888
=========================================================================================================
Net loss per share:
     Basic and diluted                  $      0.10       $      0.15       $      0.80
=======================================================================================
Weighted average number
   of shares outstanding                 38,478,905        38,478,905        34,511,352
=======================================================================================
</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            From
                                                              ended           ended           ended    inception to
                                                       September 30,   September 30,   September 30,   September 30,

                                                               2001            2001            2000            2001
-------------------------------------------------------------------------------------------------------------------
                                                               (US$)          (CAN$)          (CAN$)          (CAN$)
                                                            (note 5)
<S>                                                         <C>             <C>            <C>            <C>
Cash flows from operating activities:
     Net loss                                               $(3,720)        $(5,873)       $(27,519)      $(288,888)
     Adjustment for:
       Compensation costs                                       222             352             707           5,580
       Interest on convertible notes                            231             365             725           2,491
       Common shares issued for services                         --              --              --         217,359
       Depreciation and amortization                            869           1,371             548           7,132
       Write-down of property and equipment                     205             323              --           2,836
       Financing charges                                        364             574          22,764          25,676
       Unrealized loss on foreign exchange                      471             745             650           2,648
     Net change in operating assets
       and liabilities (note 7)                                (748)         (1,181)         (1,211)            824
-------------------------------------------------------------------------------------------------------------------
                                                             (2,106)         (3,324)         (3,336)        (24,342)
Cash flows from financing activities:
     Proceeds from issuance of common shares                     --              --           5,893          23,137
     Principal repayments of capital lease obligations         (198)           (312)            (81)         (1,189)
     Proceeds from issuance of
       convertible notes, net of issue costs                     --              --          48,382          48,681
     Share issue expenses                                        --              --             (27)         (1,138)
     Deposit on subscription of shares                           --              --              --             147
     Cash from the acquisition of a subsidiary                   --              --              --             814
-------------------------------------------------------------------------------------------------------------------
                                                               (198)           (312)         54,167          70,452
Cash flows from investing activities:
     Purchase of commercial papers and term deposits             --              --         (58,162)       (233,337)
     Disposal of commercial papers and term deposits          1,062           1,676          15,947         215,100
     Additions to property and equipment                       (104)           (164)         (8,953)        (26,820)
     Disposal of property and equipment                          18              28              --              28
     Deposits                                                    95             150            (327)           (632)
     Additions to other assets                                   --              --              (3)            (13)
-------------------------------------------------------------------------------------------------------------------
                                                              1,071           1,690         (51,498)        (45,674)
-------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents         (1,233)         (1,946)           (667)            436

Cash and cash equivalents, beginning of period                1,509           2,382           1,125              --
-------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period                    $   276         $   436        $    458       $     436
===================================================================================================================
</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 periods ended September 30, 2001 and 2000 and period from inception
(March 2, 1998) to September 30, 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 September 30, 2001, June 30, 2001, its results of operations and cash
     flows for the three months ended September 30, 2001 and 2000 and from
     inception to September 30, 2001.

     While management believes that the disclosures presented are adequate to
     make the information not misleading, 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 in Canada through its
     wholly owned subsidiary LILT Canada Inc.

     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 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 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. In addition, achievement of its business plan is dependent on
     the ability of Lumenon to raise additional capital.




                                       4
<PAGE>

2.   PROPERTY AND EQUIPMENT:

<TABLE>
<CAPTION>
======================================================================================
                                                                    September 30, 2001
--------------------------------------------------------------------------------------
                                                            Accumulated       Net book
                                                 Cost      depreciation          value
--------------------------------------------------------------------------------------
<S>                                           <C>                <C>           <C>
Plant equipment and laboratory
  installation                                $23,093            $5,885        $17,208
Leasehold improvements                          1,764               385          1,379
Office equipment and fixtures                   1,320               315          1,005
Computer equipment and software                 1,233               446            787
Vehicle equipment                                 183                57            126
--------------------------------------------------------------------------------------
                                              $27,593            $7,088        $20,505
======================================================================================
</TABLE>

     During fiscal 2001, Lumenon acquired certain equipment anticipated to be
     used in production. Subsequently, the Corporation concluded it needed to
     pursue further 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 and an additional write-down
     of $323 has been recorded during the three-month period ended September 30,
     2001.

     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 held under capital leases amount to $3,626 and $2,561, respectively
     as at September 30, 2001.


3.   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 is payable upon
     the earlier of the repayment or conversion of a note. The notes are
     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 $11.06 (US$7) and a ceiling of
     $39.49 (US$25).

     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. The warrants are exercisable on or after January 25, 2002 and
     expire on July 25, 2005. The exercise price of the warrants may vary from
     $15.80 (US$10) to $47.39 (US$30) based upon a formula set forth in the
     warrants. In addition, the exercise price will be lower than the fair
     market value of the common stock unless the fair market value of the common
     stock is equal to or lower than $15.80 (US$10).

     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 September 30, 2001, $19,351
     (US$12,250) of the gross principal amount remains outstanding (see note 9).





                                       5
<PAGE>



4.   SHARE CAPITAL:

<TABLE>
<CAPTION>
=============================================================================================
                                                     September 30,      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:
    38,478,905 common shares                                $  57          $ 57
=============================================================================================
</TABLE>

(a)  Stock option plan:

     Changes in outstanding options for the three-month period ended September
     30, 2001 were as follows:

<TABLE>
<CAPTION>
     ========================================================================================
                                                                             Weighted average
                                                          Number     exercise price per share
     ----------------------------------------------------------------------------------------
     <S>                                               <C>                  <C>
     Options outstanding, June 30, 2001                4,935,650
     Granted                                              56,250            $ 0.70  (US$0.44)
     Cancelled                                          (656,900)           $18.91 (US$11.97)
     ----------------------------------------------------------------------------------------
     Options outstanding, September 30, 2001           4,335,000
     ========================================================================================
</TABLE>


     At September 30, 2001, 926,671 outstanding options are exercisable and
     3,408,329 outstanding options vest over a period of one to five years.

(b)  Warrants:

     The following warrants are outstanding at September 30, 2001:

<TABLE>
<CAPTION>
     ========================================================================================
      Warrants                                     Expiry date       Exercise price per share
     ----------------------------------------------------------------------------------------
     <S>                                         <C>                        <C>
       700,000                                   December 2001              $ 2.37  (US$1.50)
        14,000                                       July 2003              $39.49 (US$25.00)
     5,000,800                                       July 2005                        *
     ----------------------------------------------------------------------------------------
     5,714,800
     ========================================================================================
</TABLE>

     * See notes 3 and 9.


5.   FUNCTIONAL CURRENCY AND CONVENIENCE TRANSLATION:

     The functional currency of the Corporation is the Canadian dollar.

     US dollar amounts presented on the balance sheets, statements of operations
     and cash flows are provided for convenience of reference only and are based
     on the noon buying rate in New York City for cable transfers in foreign
     currencies as certified for customs purposes by the Federal Reserve Bank of
     New York at September 28, 2001, which was $1.5797 Canadian dollar per US
     dollar.



                                       6
<PAGE>


6.   COMMITMENTS:

     Since July 1, 2001, the Corporation entered into new capital lease
     agreements at interest rates varying from 11.25% to 11.75%. Minimum lease
     payments under these capital lease agreements for the next three years are
     as follows:

<TABLE>
<CAPTION>
================================================================================================
<S>                                                                                         <C>
2002                                                                                        $268
2003                                                                                         268
2004                                                                                         173
------------------------------------------------------------------------------------------------
                                                                                            $709
================================================================================================
</TABLE>

7.   SUPPLEMENTAL CASH FLOW DISCLOSURE:

     (a)  Net change in operating assets and liabilities:

<TABLE>
<CAPTION>
     ===========================================================================================
                               Three months     Three months      Three months              From
                                      ended            ended             ended      inception to
                              September 30,    September 30,     September 30,     September 30,
                                       2001             2001              2000              2001
     -------------------------------------------------------------------------------------------
                                      (US$)           (CAN$)            (CAN$)             (CAN$)

     <S>                             <C>            <C>               <C>                 <C>
     Interest and sales
       tax receivable                $ (91)         $  (144)          $(1,613)            $ (573)
     Government
       contribution and tax
       credits receivable              (83)            (131)             (113)              (417)
     Prepaid expenses                  (41)             (64)              (39)              (151)
     Accounts payable and
       accrued liabilities            (533)            (842)              554              1,965
     -------------------------------------------------------------------------------------------
                                     $(748)         $(1,181)          $(1,211)            $  824
     ===========================================================================================
</TABLE>

     (b)  Non-cash investing and financing activities:

          Acquisition of property and equipment through capital leases amounts
          to $684 for the three-month period ended September 30, 2001.

          Capital expenditures of $122 are included in accounts payable at
          September 30, 2001.

8.   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.



                                       7
<PAGE>

9.   SUBSEQUENT EVENTS:

     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 per share 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 investors were granted a security interest in all of
     the present and future moveable property, rights and assets of the
     Corporation. 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.


                                       8
<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
revenues from operations to date.

     Research and Development Expenses. Research and development expenses for
the three-month period ended September 30, 2001, net of tax credits, were
CDN$1.1 million (US$700,000) compared to CDN$1.3 million during the same period
in 2000, a decrease of CDN$200,000 or 15.4%. This overall decrease was primarily
due to decreased spending on materials and supplies for research and development
activities during the three-month period ended September 30, 2001 as compared to
the same period in 2000. The consolidation of the research and development
facility in Dorval with our headquarters and manufacturing center in St-Laurent
(both located in the province of Quebec, Canada), which was completed in
September 2001, also contributed to the reduction of our research and
development expenses. This decrease was partially offset by the increase in
expenses associated with hiring of 10 additional research and development
personnel during the three-month period ended September 30, 2001 to assist in
finalizing the development of our optical components and devices.

     General and Administrative Expenses. The general and administrative
expenses (including depreciation, amortization and write-down of property, plant
and equipment) were CDN$3.6 million (US$2.3 million) during the three-month
period ended September 30, 2001 compared to CDN$4.2 million for the same period
in 2000, an overall decrease of CDN$600,000 or 14.3%. The decrease was mainly
attributable to a decrease in the cost of infrastructure in the three-month
period ended September 30, 2001 as compared to the same period in 2000 and to a
decreased head count in the three-month period ended September 30, 2001 as
compared to the same period in 2000 resulting from the implementation of our
restructuring plan at the end of fiscal year 2001. Part of the decrease resulted
from a decrease in non-cash compensation cost and amounts expensed for the
license of patents during the three-month period ended September 30, 2001 as
compared to the same period in 2000. These elements were partially offset by a
write-down of CDN$300,000 (US$200,000) during the three-month period ended
September 30, 2001 for certain equipment acquired during fiscal year 2001, which
we anticipated would be used in production. We subsequently concluded that we
needed additional time and efforts 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 . Finally,
the increase of CDN$800,000 in depreciation charges also partially offsets the
overall decrease, as a result of the significant investment made in fiscal year
2001 for plant equipment and laboratory installation.


                                       9
<PAGE>

     Other Expenses. Other expenses were CDN$1.2 million (US$770,000) during the
three-month period ended September 30, 2001 compared to CDN$22 million during
the same period in 2000, a decrease of CDN$20.8 million. The decrease was
primarily due to financing charges in the three-month period ended September 30,
2001 relating to the beneficial conversion feature of the convertible notes
issued on July 25, 2000 and the amortization of the debt discount, a non-cash
expense totaling CDN$22.8 million. In addition, the interest expense on the
convertible notes for the three-month period ended September 30, 2001 was
reduced by CDN$360,000 as compared to the same period in 2000 due to the fact
that CDN$31.9 million (US$22.8 million) of the gross principal amount of the
convertible notes were converted into common stock during the year ended June
30, 2001. Interest income also decreased by CDN$400,000 during the three-month
period ended September 30, 2001 compared to the same period in 2000 because of
the decrease in cash and short-term investments. The loss on foreign exchange of
CDN$578,000 (US$366,000) for the three-month period ended September 30, 2001
mainly results from the valuation of the balance due on the convertible notes,
which were subject to the unfavorable fluctuation in the exchange rate between
the Canadian and the US dollar.

LIQUIDITY AND CAPITAL RESOURCES

     During the three-month period ended September 30, 2001, the cash flows
generated from investing activities were CDN$1.7 million (US$1.1 million)
resulting primarily from the liquidation of commercial paper to finance
operating activities and repayment of capital lease obligations.

     On October 9, 2001, we agreed with certain of our investors 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 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 subordinated 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$19.3
million (US$12.2 million) plus accrued interest.

     We terminated a number of employees during fiscal 2001. To date, two
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.

     As of September 30, 2001, we had cash on hand of CDN$436,000 (US$276,000),
as compared to CDN$2.4 million as of June 30, 2001 and CDN$458,000 as of
September 30, 2000. In addition, as of September 30, 2001, we also had CDN$18.2
million (US$11.6 million) in commercial papers and term deposits without
restriction as to their use with various maturity dates up to December 31, 2001,
as compared to CDN$19.9 million as of June 30, 2001 and CDN$46.5 million as of
September 30, 2000. As of September 30, 2001, the market value of the commercial
papers and term deposits approximated the carrying value.



                                       10
<PAGE>

     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. The above balances in cash, commercial
papers and term deposits should, in management's estimation, be sufficient to
meet our financial needs for at least the next 14 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
September 30, 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.

                 CERTAIN FACTORS WHICH MAY AFFECT FUTURE RESULTS

     The following important factors, among others, could cause actual results
to differ materially from those indicated by forward-looking statements made in
this Quarterly Report on Form 10-Q and presented elsewhere by or on behalf of us
from time to time. Any or all of our forward-looking statements in this
Quarterly Report on Form 10-Q, and in any other public statements we make, may
turn out to be wrong. They can be affected by inaccurate assumptions we might
make or by known or unknown risks and uncertainties. Many factors mentioned in
the discussion below will be important in determining future results.
Consequently, no forward-looking statement can be guaranteed. Actual future
results may vary materially. We undertake no obligation to publicly update any
forward-looking statements, whether as a result of new information, future
events or otherwise. You are advised, however, to consult any further
disclosures we make in our reports filed with the Securities and Exchange
Commission.

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 technology 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. We expect that
our first product will be transferred to production in the third quarter of
fiscal 2002 and we expect to make only limited shipments of these products in
the second half of fiscal 2002. Potential customers may not accept our products
and these products may be difficult to




                                       11
<PAGE>

produce in large volumes, fail to perform as expected, cost too much to produce
or be barred from production by the proprietary rights of others.

     We expect to spend considerable sums to develop and market our new
products. We expect our operating expenses to increase as we develop our
technology and products, increase our sales and marketing activities and expand
our assembly operations. We expect to continue incurring considerable operating
losses and negative cash flows as we incur significant operating expenses and
make capital expenditures in our business. The amount we will lose and when, if
ever, we will have profits is highly uncertain. If we are unsuccessful at
developing, manufacturing and marketing our products, we will not generate
sufficient revenues 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 September
30, 2001, had an accumulated deficit of approximately CDN$289 million (US$183
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.

     We did not have material revenues from product sales during fiscal 2001.
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 (US$46 million) from
third parties through various debt and equity financings. If we borrow
additional funds, we may become subject to restrictive financial covenants and
our interest obligations will increase. In addition, we may need to


                                       12
<PAGE>

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 PRODUCT.

     We have never assembled large amounts of our products. The manufacture of
our chips is a complex, sophisticated process, requiring a clean room and
precision assembly equipment. Very small amounts of contaminants in 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 much time and may prove to be costly.

     We must effectively transfer production information from our research and
product 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. Additional capital
expenditures could be required to remedy these problems.

     Changes in our manufacturing processes or the inadvertent use of defective
materials could significantly reduce our manufacturing yields and product
reliability. Because most of our manufacturing costs are relatively fixed,
manufacturing yields are critical to the results of our operations. Lower than
expected production 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 engineering, manufacturing,
marketing, sales, administrative and management personnel and buy 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. If we overestimate demand, we may incur fixed
production expenses that are excessive in relation to revenues generated. This
would increase our net loss and 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



                                       13
<PAGE>

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; 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. 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:

     -    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 anticipated features and functions into our
          products;

     -    meet specific and exacting design requirements;

     -    price our products competitively; and

     -    introduce our products at a receptive time to meet market demand.

     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:

     -    proper product definition;

     -    the timely completion and introduction of new designs;



                                       14
<PAGE>

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

     -    the quality and performance of our products;

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

     -    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 maintain our current selling prices. 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 MORE EFFECTIVELY DEVELOP AND MARKET THEIR
PRODUCTS, MAKING OUR PRODUCTS OBSOLETE.

     Our competitors include much larger companies that have substantially
greater financial experience, 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 purchasing our
products.

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 Vice President 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, sales, marketing and
support personnel. In addition, as we grow, we will


                                       15
<PAGE>


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 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 BECOME INVOLVED IN EXPENSIVE PATENT LITIGATION OR OTHER PROCEEDINGS TO
ENFORCE OUR PATENT RIGHTS, OR IF ANYONE BRINGS A CLAIM OF INFRINGEMENT AGAINST
US, WE COULD INCUR SUBSTANTIAL COSTS OR SUBSTANTIAL LIABILITY FOR DAMAGES OR BE
REQUIRED TO STOP OUR PRODUCT DEVELOPMENT AND COMMERCIALIZATION EFFORTS.

     Problems associated with the protection of our intellectual property or
potential infringement of the intellectual property of others could have a
significant negative impact on our business and our financial condition.

     In order to protect or enforce our patent rights, we may have to initiate
legal proceedings against third parties, such as infringement suits or
interference proceedings. By initiating legal proceedings to enforce our
intellectual property rights, we may also provoke these third parties to assert
claims against us. Intellectual property litigation is costly, and, even if we
prevail, could divert management attention and resources away from our business.

     If we do not prevail in such litigation, 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 obtain a license
to use certain technologies. Any required license may not be available to us on
acceptable terms, or at all. In addition, some licenses may be nonexclusive, and
therefore, our competitors may have access to the same technology which we have
licensed from others. If we fail to obtain a required license 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 may independently develop similar technologies.

     Many participants in the photonics and related communications industries
have a significant number of patents and have frequently demonstrated a
readiness to commence litigation based on allegations of patent and other
intellectual property infringement. Although we are not aware of any material
claim of infringement or misappropriation against us, there can be no assurance
that third parties will not assert claims in the future with respect to our
products. Responding to claims, regardless of merit, could cause product
shipment delays or require us to enter into royalty or licensing arrangements.
Claims could also lead to costly litigation that would require significant
expenditures of


                                       16
<PAGE>

time, capital and other resources by us. Moreover, no assurance can be given
that any necessary royalty or licensing agreement can be obtained on
commercially reasonable terms.

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:

     -    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.

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 regulations requires us to establish compliance procedures and safety
programs. If environmental laws or regulations were to change, our manufacturing
costs or product sales could be adversely affected if we were forced to modify
production processes or use more costly materials. 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.




                                       17
<PAGE>


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 the replacement of incumbent directors. Additionally, preferred stock
may have preference over and harm the rights of the holders of 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>


                                OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

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




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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.



                                    LUMENON INNOVATIVE LIGHTWAVE
                                    TECHNOLOGY, INC.



Dated: November 13, 2001            By: /s/ Gary Moskovitz
                                        ---------------------------------------
                                        Gary Moskovitz
                                        President and Chief Executive Officer
                                        (Acting Principal Financial Officer)





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