UNITEDTable STATES SECURITIESof AND EXCHANGE COMMISSION Contents

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

~~__________~~Washington, D.C. 20549

FORM 10-Q

(Mark One)


þ		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~March~~September 3130, 2005


o		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ~~_________________~~ to ~~_____________________~~

Commission File Number: 0-27202

ADVANCED LIGHTING TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Ohio		34-1803229
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

32000 Aurora Road, Solon, Ohio		44139
(Address of principal executive offices)		(Zip Code)

440 / 519-0500

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate by check mark whether the registrant ~~has~~is ~~filed~~a ~~all~~shell ~~documents~~company ~~and~~(as ~~reports~~defined ~~required~~in ~~to be filed by Section~~Rule ~~12,~~12b-2 ~~13 or 15(d)~~ of the ~~Securities~~ Exchange Act ~~of 1934 subsequent to the distribution of securities under a plan confirmed by a court~~). Yes þo No oþ

~~There~~Indicate ~~were~~by ~~1,131~~check ~~shares~~mark ofwhether the ~~Registrant’s~~registrant ~~Common~~has ~~Stock,~~filed ~~$.001~~all ~~par~~documents ~~value~~and ~~per~~reports ~~share,~~required ~~outstanding~~to asbe offiled ~~March~~by Section 3112, ~~2005~~13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes þ No o

~~INDEX~~There were 1,184 shares of the Registrant’s Common Stock, $.001 par value per share, outstanding as of September 30, 2005.

~~Advanced Lighting Technologies, Inc.~~INDEX

		Page No.
Part I	Financial Information
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets –
	Reorganized Company as of March 31, 2005 and June 30, 2004		2
	Condensed Consolidated Statements of Operations –
	Reorganized Company for the Three Months Ended March 31, 2005		4
	Reorganized Company for the Nine Months Ended March 31, 2005		4
	Reorganized Company for the Three Months Ended March 31, 2004		4
	Predecessor Company for the Six Months Ended December 31, 2003		4
	Condensed Consolidated Statement of Shareholders’ Equity –
	Reorganized Company for the Nine Months Ended March 31, 2005		5
	Condensed Consolidated Statements of Cash Flows –
	Reorganized Company for the Nine Months Ended March 31, 2005		6
	Reorganized Company for the Three Months Ended March 31, 2004		6
	Predecessor Company for the Six Months Ended December 31, 2003		6
	Notes to Condensed Consolidated Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		11
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		20
Item 4.	Controls and Procedures		21
Part II	Other Information
Item 6.	Exhibits and Reports on Form 8-K		22
Signatures			23

Advanced Lighting Technologies, Inc.


		Page No.
Part I	Financial Information

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets – September 30, 2005 and June 30, 2005		2

	Condensed Consolidated Statements of Operations – Three Months Ended September 30, 2005 and 2004		4

	Condensed Consolidated Statement of Shareholders’ Equity – Three Months Ended September 30, 2005		5

	Condensed Consolidated Statements of Cash Flows – Three Months Ended September 30, 2005 and 2004		6

	Notes to Condensed Consolidated Financial Statements		7

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

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		17

Item 4.	Controls and Procedures		17

Part II	Other Information

Item 6.	Exhibits and Reports on Form 8-K		18

Signatures			19
Exhibit 31.1 Rule 13A-14(A)/15D-14(A) Certification of CEO
Exhibit 31.2 Rule 13A-14(A)/15D-14(A) Certification of CFO
Exhibit 32.1 CEO Certification Pursuant to 18 U.S.C. Sect 1350
Exhibit 32.2 CFO Certification Pursuant to 18 U.S.C. Sect 1350

~~Advanced Lighting Technologies, Inc.~~1 ~~Condensed Consolidated Balance Sheets of Reorganized Company (in thousands, except per share amounts)~~

	(Unaudited)		(Audited)
	March 31,		June 30,
	2005		2004
Assets
Current assets:
Cash and cash equivalents	$	2,483	$	4,701
Trade receivables, less allowances of $851 and $706		29,958		29,787
Inventories:
Finished goods		17,310		16,105
Raw materials and work-in-process		13,539		9,073
		30,849		25,178
Prepaid expenses		1,971		1,552
Total current assets		65,261		61,218
Property, plant and equipment:
Land and buildings		19,936		18,165
Machinery and equipment		30,258		29,100
Furniture and fixtures		2,504		1,880
		52,698		49,145
Less accumulated depreciation		5,481		2,118
		47,217		47,027
Receivables from related parties		3,023		4,282
Investments in affiliates		2,255		2,360
Other assets		3,870		3,849
Intangible assets, net		24,457		24,810
Goodwill		50,411		50,561
	$	196,494	$	194,107

~~See~~Advanced ~~Notes~~Lighting ~~to Condensed Consolidated Financial Statements~~Technologies, ~~including Basis of Presentation describing the Reorganized Company~~Inc.

2 Condensed Consolidated Balance Sheets

~~Advanced Lighting Technologies, Inc. Condensed Consolidated Balance Sheets of Reorganized Company~~ (in thousands, except per share amounts)

	(Unaudited)		(Audited)
	March 31,		June 30,
	September 30,		June 30,
	2005		~~2004~~2005
Liabilities and shareholders’ equity
Assets
Current liabilities:
Current assets:
Short-term debt and current portion of long-term debt	$	8,968	$	4,184
Cash and cash equivalents	$	2,609	$	2,643
Accounts payable		10,496		10,755
Trade receivables, less allowances of $696 and $687		31,557		29,069
Payables to related parties		899		2,973
Inventories:
Employee-related liabilities		5,346		6,197
Finished goods		23,500		20,849
Accrued income and other taxes		1,327		1,414
Raw materials and work-in-process		14,282		13,108
Other accrued expenses		7,301		9,216
		37,782		33,957
Total current liabilities		34,337		34,739
Prepaid expenses		1,749		1,421
Long-term debt		124,715		126,679
Total current assets		73,697		67,090
Deferred tax liabilities		857		700
Property, plant and equipment:
Total liabilities		159,909		162,118
Land and buildings		20,510		20,466
Minority interest		1,953		1,477
Machinery and equipment		31,800		31,260
Preferred stock, $.001 par value, 239 shares authorized; 29 shares issued and outstanding		29,338		29,338
Furniture and fixtures		2,645		2,592
Common shareholders’ equity
		54,955		54,318
Common stock, $.001 par value, 80,000 shares authorized; 1 share issued and outstanding		1		1
Less accumulated depreciation		8,095		6,808
Paid-in-capital		1,130		1,130
		46,860		47,510
Accumulated other comprehensive income (loss)		889		(216	)
Receivables from related parties		3,043		2,983
Retained earnings		3,274		259
Investments		6,163		4,946
Total common shareholders’ equity		5,294		1,174
Other assets		3,020		2,980
	$	196,494	$	194,107
Intangible assets, net		24,146		24,327
Goodwill		49,751		50,001
	$	206,680	$	199,837

See Notes to Condensed Consolidated Financial Statements~~, including~~ ~~Basis of Presentation describing the Reorganized Company.~~

AdvancedTable Lighting Technologies, Inc. Condensed Consolidated Statements of Operations (Unaudited) (In thousands) Contents

										Predecessor
	Reorganized Company									Company
	Quarter			Nine Months			Quarter			Six Months
	Ended			Ended			Ended			Ended
	March 31,			March 31,			March 31,			December 31,
	2005			2005			2004			2003
Net sales	$	40,272		$	119,972		$	36,944		$	70,510
Costs and expenses:
Cost of sales		24,335			71,278			22,475			43,361
Marketing and selling		6,125			17,967			5,729			11,311
Research and development		1,486			4,598			1,507			3,095
General and administrative		3,886			11,360			4,617			6,208
Amortization of intangible assets		246			735			227			177
Income from operations		4,194			14,034			2,389			6,358
Other income (expense):
Interest expense		(3,453	)		(10,345	)		(3,410	)		(7,459	)
Interest income		104			301			110			188
Income from investments		53			542			—			3
Gain on restructuring		—			—			—			1,184
Write-off of deferred loan costs		—			—			—			(2,251	)
Reorganization expenses		—			—			—			(11,258	)
Income (loss) before income taxes and minority interest		898			4,532			(911	)		(13,235	)
Income tax expense		409			1,041			301			360
Income (loss) before minority interest		489			3,491			(1,212	)		(13,595	)
Minority interest in income of consolidated subsidiary		(137	)		(476	)		(141	)		(251	)
Net income (loss)	$	352		$	3,015		$	(1,353	)	$	(13,846	)

Advanced Lighting Technologies, Inc.

~~See Notes to~~ Condensed Consolidated ~~Financial~~Balance ~~Statements, including Basis of Presentation describing the Reorganized Company and Predecessor Company.~~ Sheets

4 (in thousands, except per share amounts)

Advanced Lighting Technologies, Inc. Condensed Consolidated Statement of Shareholders’ Equity (Unaudited) Nine Months Ended March 31, 2005 (in thousands)


	(Unaudited)			(Audited)
	September 30,			June 30,
	2005			2005
Liabilities and shareholders’ equity
Current liabilities:
Short-term debt and current portion of long-term debt	$	16,861		$	11,984
Accounts payable		12,038			11,471
Payables to related parties		952			310
Employee-related liabilities		7,430			7,568
Accrued income and other taxes		1,018			793
Other accrued expenses		4,519			8,085

Total current liabilities		42,818			40,211

Long-term debt		123,326			120,026
Deferred tax liabilities		812			826

Total liabilities		166,956			161,063

Minority interest		2,333			2,155
Preferred stock, $.001 par value, 239 shares authorized; 29 shares issued and outstanding		29,338			29,338

Common shareholders’ equity
Common stock, $.001 par value, 80,000 shares authorized; 1 share issued and outstanding		1			1
Paid-in-capital		1,183			1,130
Accumulated other comprehensive income (loss)		(690	)		51
Retained earnings		7,559			6,099

Total common shareholders’ equity		8,053			7,281

	$	206,680		$	199,837

									Accumulated
									Other					Common
	Preferred		Common Stock				Paid-In		Comprehensive			Retained		Shareholders’
	Stock		Shares		Par Value		Capital		Income (Loss)			Earnings		Equity		Total
Balance at June 30, 2004	$	29,338		1	$	1	$	1,130	$	(216	)	$	259	$	1,174	$	30,512
Net income - reorganized company		—		—		—		—		—			3,015		3,015		3,015
Foreign currency translation adjustment		—		—		—		—		1,105			—		1,105		1,105
Balance at March 31, 2005	$	29,338		1	$	1	$	1,130	$	889		$	3,274	$	5,294	$	34,632

See Notes to Condensed Consolidated Financial Statements

~~See Notes to Condensed Consolidated Financial Statements, including~~3 ~~Basis of Presentation describing the Reorganized Company.~~

5 Table of Contents

Advanced Lighting Technologies, Inc. ~~Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands)~~

	Reorganized			Reorganized			Predecessor
	Company			Company			Company
	Nine Months			Three Months			Six Months
	Ended			Ended			Ended
	March 31,			March 31,			December 31,
	2005			2004			2003
Operating activities
Net income (loss)	$	3,015		$	(1,353	)	$	(13,846	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation		3,419			1,056			3,412
Amortization		735			227			177
Provision for doubtful accounts		173			177			381
Loss (income) from investments		(542	)		—			(3	)
Gain on restructuring		—			—			(1,184	)
Write-off of deferred loan costs		—			—			2,251
Reorganization expenses in excess of (less than) cash payments of reorganization expenses		(1,842	)		(4,743	)		2,968
Old Senior Note interest accrued but not paid		—			—			4,000
Payment of pre-petition payables		(371	)		(4,214	)		—
Changes in current assets and liabilities and other		(5,940	)		3,147			6,017
Net cash provided by (used in) operating activities		(1,353	)		(5,703	)		4,173
Investing activities
Capital expenditures		(4,135	)		(608	)		(1,799	)
Purchase of business		—			(827	)		—
Investment in affiliate		—			—			(592	)
Proceeds from sale of investment		450			—			—
Net cash used in investing activities		(3,685	)		(1,435	)		(2,391	)
Financing activities
Net borrowings under revolving credit loan		6,372			2,045			—
Net borrowings under debtor in possession facility		—			—			(25,126	)
Proceeds from long-term debt		—			—			11,000
Payments of long-term debt and capital leases		(3,552	)		(1,153	)		(1,522	)
Investment by Saratoga Lighting Holdings, LLC		—			—			18,000
Officer loan repayment		—			—			1,334
Stock purchases by executive management		—			61			—
Net cash provided by financing activities		2,820			953			3,686
Increase (decrease) in cash and cash equivalents		(2,218	)		(6,185	)		5,468
Cash and cash equivalents, beginning of period		4,701			9,635			4,167
Cash and cash equivalents, end of period	$	2,483		$	3,450		$	9,635
Supplemental cash flow information
Interest paid	$	13,601		$	3,418		$	1,200
Income taxes paid (refunds received), net		740			159			159
Capitalized interest		19			42			37

Condensed Consolidated Statements of Operations (Unaudited)

~~See~~(In ~~Notes to Condensed Consolidated Financial Statements, including Basis of Presentation describing the Reorganized Company and Predecessor Company.~~ thousands)


	Quarter Ended September 30,
	2005			2004
Net sales	$	37,310		$	38,578

Costs and expenses:
Cost of sales		22,288			22,604
Marketing and selling		6,422			6,229
Research and development		1,308			1,542
General and administrative		3,456			3,537
Amortization of intangible assets		261			241

Income from operations		3,575			4,425

Other income (expense):
Interest expense		(3,534	)		(3,423	)
Interest income		92			93
Income from investments		1,953			486

Income before income taxes and minority interest		2,086			1,581
Income tax expense		448			373

Income before minority interest		1,638			1,208
Minority interest in income of consolidated subsidiary		(178	)		(151	)

Net income	$	1,460		$	1,057

~~Advanced~~See ~~Lighting Technologies, Inc.~~ Notes to Condensed Consolidated Financial Statements ~~(Unaudited)~~ ~~March 31, 2005 (Dollars in thousands)~~

~~A. Organization~~4

AdvancedTable Lightingof Technologies, Inc. (the “Company” or “ADLT”) is an innovation-driven designer, manufacturer and marketer focused on metal halide lighting products, including materials, system components, systems and equipment. Contents

B.Advanced ~~Basis~~Lighting ofTechnologies, ~~Presentation~~Inc.

~~The~~Condensed ~~accompanying~~Consolidated ~~unaudited~~Statement ~~condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States~~ of America for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of management, the financial statements include all material adjustments necessary for a fair presentation, including adjustments of a normal and recurring nature as well as adjustments related to the CompanyShareholders’~~s emergence~~ ~~from~~Equity ~~bankruptcy. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2004.~~ (Unaudited)

~~The~~Three ~~preparation~~Months ofEnded ~~financial~~September 30, statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from those estimates. 2005

On December 10, 2003, Advanced Lighting Technologies, Inc. and six of its United States subsidiaries, completed their previously announced financial restructuring when their Fourth Amended Chapter 11 Plan of Reorganization (~~the~~dollars “Final Plan”) under the U.S. Bankruptcy Code became effective and was substantially consummated. ADLT’s non-U.S. operating subsidiaries and Deposition Sciences, Inc., a U.S. subsidiary, were not a part of the proceedings under the Bankruptcy Code. The Company’s emergence from Chapter 11 bankruptcy proceedings resulted in a new reporting entity and the adoption of fresh start accounting in accordance with Statement of Position No. 90-7, Financial Reporting by Entities in Reorganization under the Bankruptcy Code. Also, as encouraged under SEC Staff Accounting Bulletin No. 54, Push Down Basis of Accounting Required in Certain Limited Circumstances, the Company has reflected an additional adjustment to establish a new basis for its assets and liabilities based on the amount paid by Saratoga Lighting Holdings, LLC (“Saratoga”thousands) for its ownership. For financial reporting purposes, the Company used an effective date of December 31, 2003. References in these financial statements to “Predecessor Company” refer to the Company prior to December 31, 2003. References to “Reorganized Company” refer to the Company on and after December 31, 2003, after giving effect to the issuance of new securities in exchange for the previously outstanding securities in accordance with the Final Plan, the additional investment in the Company by Saratoga, and the implementation of fresh start and push down accounting.


									Accumulated
									Other					Common
	Preferred		Common Stock				Paid-In		Comprehensive			Retained		Shareholders’
	Stock		Shares		Par Value		Capital		Income (Loss)			Earnings		Equity			Total
Balance at June 30, 2005	$	29,338		1,131	$	1	$	1,130	$	51		$	6,099	$	7,281		$	36,619

Net income		—		—		—		—		—			1,460		1,460			1,460

Unrealized loss on securities held as available for sale		—		—		—		—		(737	)		—		(737	)		(737	)

Foreign currency translation adjustment		—		—		—		—		(4	)		—		(4	)		(4	)

Stock purchases by management		—		53		—		53		—			—		53			53


Balance at September 30, 2005	$	29,338		1,184	$	1	$	1,183	$	(690	)	$	7,559	$	8,053		$	37,391

~~Advanced~~See ~~Lighting Technologies, Inc.~~ Notes to Condensed Consolidated Financial Statements ~~(Unaudited)~~ ~~March 31, 2005 (Dollars in thousands)~~

~~B. Basis of Presentation (continued)~~5

ATable black line has been drawn between the Reorganized Company and Predecessor Company results of operations and statements of cash flows. The results of operations and statements of cash flows for the Reorganized Company and Predecessor Company are not considered comparable in all respects. Contents

~~Reporting~~Advanced ~~Periods~~Lighting Technologies, Inc.

~~The~~Condensed ~~Company’s~~Consolidated ~~subsidiaries~~Statements ~~have fiscal years that end on the Sunday closest to June 30 and fiscal quarters that end on the Sunday closest to the respective calendar quarter end. As a result, the first nine months~~ of ~~fiscal~~Cash ~~2005~~Flows ~~consisted of 40 weeks as compared to the first nine months of fiscal 2004 that consisted of 39 weeks. The three month periods ended March 31, 2005 and 2004 consisted of 13 weeks.~~ (Unaudited)

~~Income~~(in ~~Taxes~~ thousands)

Actual income tax expense for the interim periods differ from the amounts computed by applying the U.S. Federal income tax rate of 35% to the income (loss) before income taxes because under FAS No. 109, Accounting for Income Taxes, the tax benefit related to the U.S. loss for these interim periods was required to be reserved in a valuation allowance due to the uncertainty regarding the ultimate realization of the tax benefit of such losses. The income tax expense recognized for the interim periods relates to income taxes on certain foreign subsidiaries’ income. The Company had net operating losses at December 31, 2003 which, in accordance with the principles of fresh-start accounting, were not included in the net deferred tax assets of the Reorganized Company. These net operating losses are available to be utilized, and, to the extent the net operating losses are utilized ($150 in the current quarter), goodwill will be reduced accordingly for the benefit received.


	Quarter Ended September 30,
	2005			2004
Operating activities
Net income	$	1,460		$	1,057
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation		1,456			1,120
Amortization		261			241
Provision for doubtful accounts		56			119
Income from investments		(1,953	)		(486	)
Payment of reorganization expenses		—			(1,842	)
Changes in current assets and liabilities and other		(8,751	)		(4,826	)

Net cash used in operating activities		(7,471	)		(4,617	)

Investing activities
Capital expenditures		(792	)		(1,148	)
Proceeds from sale of investment		—			450

Net cash used in investing activities		(792	)		(698	)

Financing activities
Net borrowings under revolving credit loan		5,024			5,352
Proceeds from long-term debt		3,850			—
Payments of long-term debt and capital leases		(698	)		(706	)
Stock purchases by management		53			—

Net cash provided by financing activities		8,229			4,646


Decrease in cash and cash equivalents		(34	)		(669	)
Cash and cash equivalents, beginning of period		2,643			4,701


Cash and cash equivalents, end of period	$	2,609		$	4,032


Supplemental cash flow information
Interest paid	$	6,629		$	6,544
Income taxes paid (refunds received), net		—			(39	)

C.See ~~Comprehensive~~Notes ~~Income~~to ~~(Loss)~~Condensed Consolidated Financial Statements

~~For the quarters ended March 31, 2005 and 2004, the Company’s comprehensive income (loss) was $218~~6 and $(1,338), respectively. For the nine months ended March 31, 2005, the Company’s comprehensive income was $4,120. For the six months ended December 31, 2003, the Company’s comprehensive income (loss) was $(12,487). These amounts include the period’s net income (loss) and the Company’s other component of comprehensive income, foreign currency translation adjustments.

8 Table of Contents

Advanced Lighting Technologies, Inc. ~~Notes to Condensed Consolidated Financial Statements (Unaudited) March 31, 2005 (Dollars in thousands)~~

D.Notes ~~Financing~~to ~~Facilities~~ Condensed Consolidated Financial Statements (Unaudited)

~~The Company’s Bank Credit Facility is a $~~September 30,~~000~~ ~~facility that consists of a term loan requiring monthly principal payments of $183 ($8,250 outstanding at March 31,~~ 2005) with a revolving credit loan, subject to availability, making up the remainder of the facility. Availability of borrowings under the revolving credit loan is determined by the Company’s eligible account receivables and inventories. The amount outstanding under the revolving credit loan was $6,372 at March 31, 2005. Interest rates on the revolving credit loan are based on Libor plus 2.75% or Prime plus .75% (6.50% at March 31, 2005). Interest rates on the term loan are based on Libor plus 3.50% or Prime plus 1.50% (7.25% at March 31, 2005). The final maturity of the facility is December 10, 2008. The revolving credit loan amount at March 31, 2005 has been classified as a current liability in accordance with the provisions of Emerging Issues Task Force Issue No. 95-22, Balance Sheet Classification of Borrowings Outstanding under Revolving Credit Agreements that include Both a Subjective Acceleration Clause and a Lock-box Arrangement.

~~The~~(Dollars Bank Credit Facility includes affirmative and negative covenants customary for this type of agreement, prohibits cash dividends and includes financial covenants relating to Minimum Adjusted EBITDA and Capital Expenditures. The principal security for the Bank Credit Facility is substantially all of the personal property of the Company and each of its North American and United Kingdom subsidiaries. The term loan is secured by substantially all of the Company’s machinery and equipment in ~~North America and the United Kingdom and the Company’s facility in Urbana, Illinois, and is cross-collateralized and secured with the revolving credit loan.~~ thousands)

~~The Company’s long-term debt includes $114,400 of 11% Senior Notes due March 2009~~A. ~~The Notes are~~Organization redeemable at the Company’s option, in whole or in part, at any time at a redemption price equal to the principal amount of the New Notes plus accrued interest. Interest on the Notes is payable semi-annually on March 31 and September 30. The Indenture for the Notes contains covenants that, among other things, limit the ability of the Company and its Restricted Subsidiaries (as defined therein) to incur indebtedness, pay dividends, prepay subordinated indebtedness, repurchase capital stock, make investments, create liens, engage in transactions with stockholders and affiliates, sell assets and, with respect to the Company, engage in mergers and consolidations. There are no sinking fund requirements.

9Advanced Lighting Technologies, Inc. (the “Company” or “ADLT”) is an innovation-driven designer, manufacturer and marketer focused on metal halide lighting products, including materials, system components, systems and equipment.

~~Advanced Lighting Technologies, Inc~~B. ~~Notes~~ toBasis ~~Condensed~~of ~~Consolidated Financial Statements (Unaudited)~~Presentation ~~March 31, 2005 (Dollars in thousands)~~

EThe accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. ~~Saratoga~~Accordingly, ~~Investment~~they do not include all the information and disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of management, the financial statements include all material adjustments necessary for a fair presentation, including adjustments of a normal and recurring nature as well as adjustments related to the Company’s emergence from bankruptcy. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2005.

~~Saratoga~~The ~~received,~~preparation ~~in exchange for cancellation~~ of ~~its~~financial ~~holdings~~statements ofin ~~the~~conformity ~~Predecessor Company’s Common Stock and Old Preferred Stock, and an $18,000 cash investment, new redeemable preferred stock (the “Series A Preferred”) of the Reorganized Company,~~ with anaccounting ~~initial~~principles ~~liquidation~~generally ~~preference of~~accepted ~~$29,000,~~in ~~and approximately 91% of~~ the ~~common~~United ~~stock~~States of ~~the~~America ~~Reorganized~~requires ~~Company (on a diluted basis, assuming issuance of common stock of the Reorganized Company to its senior~~ management ~~pursuant~~ to ~~the~~ ~~new~~make ~~management~~estimates ~~incentive~~and ~~plan).~~assumptions ~~Under~~that ~~the management incentive plan, shares equal to~~affect ~~approximately~~reported 9%amounts ofand ~~the~~related ~~common~~disclosures. ~~stock~~Actual ofresults ~~the~~could ~~Reorganized~~differ ~~Company~~from ~~have~~those ~~been issued~~estimates.

~~The~~Reporting ~~Series A Preferred has a liquidation preference of $1 per share, plus dividends at the rate of~~Periods 8% per annum, when and if declared. The cumulative undeclared dividends were $3,125 as of March 31, 2005. The initial carrying amount of the Series A Preferred was set at $29,000, the estimated fair value at the date of issuance. The Holder of the Series A Preferred may, by notice, require the Company to redeem the outstanding Series A Preferred within 21 days following the occurrence of certain corporate events. The Company may redeem the Series A Preferred in whole, but not in part, at any time. The redemption price for the Series A Preferred is equal to the liquidation preference amount for such shares. The Series A Preferred shares are each entitled to one vote on each matter presented to shareholders of the Company, as well as one vote on each matter required to be voted upon by the Series A Preferred as a class. As a consequence, the Series A Preferred represents approximately 96.3% of the voting power of the Company at March 31, 2005. As of March 31, 2005, Saratoga held 98.5% of the voting power of the Company.

10The Company’s subsidiaries have fiscal years that end on the Sunday closest to June 30 and fiscal quarters that end on the Sunday closest to the respective calendar quarter end. As a result, the first three months of fiscal 2006 consisted of 13 weeks as compared to the first three months of fiscal 2005 that consisted of 14 weeks.

~~Item~~Income ~~2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Dollars in thousands)~~Taxes

~~This~~Actual ~~report~~income ontax ~~Form~~expense ~~10-Q~~for ~~may contain forward-looking statements that involve risks and uncertainties. The operation of~~ the ~~Company~~interim ~~and~~periods ~~its~~differ ~~subsidiaries~~from ~~involves risks and uncertainties, including~~ the ~~strength~~amounts ofcomputed ~~the~~by ~~recovery~~applying of the U.S. ~~economy,~~Federal ~~trends~~income ~~affecting~~tax ~~the~~rate ~~Company’s financial condition or results~~ of ~~operations,~~35% ~~continued~~to ~~growth of~~ the ~~metal~~income ~~halide~~(loss) before ~~lighting~~income ~~market, the~~taxes ~~Company’s~~because ~~operating~~under ~~and~~FAS ~~growth strategies~~No. 109, ~~potential~~Accounting ~~acquisitions~~for orIncome ~~joint~~Taxes, ~~ventures by~~ the ~~Company,~~ ~~litigation~~tax ~~affecting~~benefit ~~the~~related ~~Company,~~to the ~~timely~~U.S. ~~development~~loss ~~and~~for ~~market~~these ~~acceptance of new~~interim ~~products,~~periods ~~the~~was ~~ability~~required to ~~provide~~be ~~adequate~~reserved ~~incentives~~in toa ~~retain~~valuation ~~and~~allowance ~~attract~~due ~~key~~to ~~employees,~~the uncertainty regarding the ~~impact~~ultimate realization of ~~competitive~~the ~~products~~tax ~~and~~benefit ~~pricing,~~of ~~and~~such ~~other risks~~losses. ~~For~~The ~~this~~income ~~purpose,~~tax ~~any~~expense ~~statement contained~~recognized ~~herein~~for ~~that~~the interim isperiods ~~not~~relates ato ~~statement~~income oftaxes ~~historical~~on ~~fact~~certain ~~may~~foreign besubsidiaries’ ~~deemed~~income. toGoodwill ~~be a forward-looking~~was ~~statement.~~reduced ~~Without~~by ~~limiting~~$250 ~~the~~during ~~foregoing,~~ the ~~words~~quarter ~~“believes,”~~ended ~~“anticipates~~September 30,” ~~“plans,” “expects,”~~2005 ~~and~~related ~~similar expressions are intended~~ to ~~identify~~the ~~forward-looking~~benefit ~~statements.~~received ~~The~~from ~~Company’s~~the ~~actual~~utilization ~~results~~of ~~may differ materially from those indicated by such forward~~pre-~~looking statements~~fresh ~~based~~start onnet ~~the~~operating ~~factors outlined above~~losses.

~~The following is management’s discussion and analysis of certain significant factors which have~~7 ~~affected the results of operations and should be read in conjunction with the accompanying unaudited Condensed Consolidated Financial Statements and notes thereto.~~

General Table of Contents

~~The~~Advanced ~~Company~~Lighting ~~is an innovation-driven designer~~Technologies, ~~manufacturer and marketer focused on metal halide lighting products, including materials, system components, systems and equipment~~Inc. ~~Metal halide~~ ~~lighting~~Notes isto ~~currently~~Condensed ~~used~~Consolidated ~~primarily~~Financial inStatements ~~commercial and industrial applications such as factories~~(Unaudited) ~~and distribution centers~~September 30, ~~outdoor site and landscape lighting, sports facilities and large retail~~2005 ~~spaces~~(Dollars ~~such~~in ~~as superstores. Systems, components and materials revenue is recognized when products~~thousands) ~~are shipped, and equipment revenue is recognized under the percentage of completion method.~~

Consistent with the Company’s strategy for new product introductions, the Company invests substantial resources in research and development to engineer materials and system components to be included in customers’ specialized systemsC. ~~Such~~Investment expenditures have enabled the Company to develop new applications for metal halide lighting, improve the quality of its materials, and introduce new specialized products, such as the Uni-Form® pulse start products. Uni-Form® pulse start products are a new generation of metal halide components and systems which permit (a) increased light output with lower power utilization, (b) faster starting, (c) a quicker restart of lamps which have been recently turned off, and (d) better color uniformity. The Company expects to continue to make substantial expenditures on research and development to enhance its position as the leading innovator in ~~the metal halide lighting industry.~~Fiberstars

11At June 30, 2005, the Company maintained an interest in Fiberstars, Inc. (“Fiberstars”) consisting of beneficial ownership of 175,572 shares of common stock and a warrant with an exercise price of $.01 per share that included the right to acquire, upon meeting certain vesting provisions, 231,250 shares of Fiberstars common stock. The warrant’s final vesting provision of maintaining an average closing stock price for Fiberstars common stock of $12.00 per share for a period of thirty consecutive days was met on July 27, 2005, and the Company purchased the shares.

~~Results~~The warrant was accounted for as a derivative financial instrument pursuant to the requirements of Statement ~~Operations~~of Financial Accounting Standards (“FAS”) No. 133, Accounting for Derivative Instruments and Hedging Activities, and was valued based upon the closing market price of Fiberstars common stock on July 27, 2005, of $13.94 per share, or approximately $3,200. The total gain recognized in the accompanying condensed consolidated statements of operations with regard to recording the Company’s investment at fair value was $1,864.

~~Quarter~~The ~~Ended~~total ~~March~~share investment, which approximates 5% of Fiberstars, is being accounted for prospectively under FAS No. 31115, ~~2005~~Accounting ~~compared~~for Certain Investments in Debt and Equity Securities. Periodic changes in market value are recognized as a component of other comprehensive income or loss. The Company recognized a loss of $(737) for this other comprehensive loss component related to ~~Quarter~~the ~~Ended~~investment ~~March~~for the quarter ended September 3130, ~~2004~~2005. The total value of the investment in Fiberstars stock is $4,225 at September 30, 2005 and is included in the “Investments” classification in the condensed consolidated balance sheet.

~~The~~D. ~~following~~Comprehensive ~~table sets forth, as a percentage of net sales, certain items in the Company’s~~Income ~~Condensed Consolidated Statements of Operations for the three months ended March 31, 2005 and 2004:~~

	Three Months Ended					Three Months Ended
	March 31, 2005					March 31, 2004
Net sales	$	40,272		100.0	%	$	36,944		100.0	%
Costs and expenses:
Cost of sales		24,335		60.4			22,475		60.8
Marketing and selling		6,125		15.2			5,729		15.5
Research and development		1,486		3.7			1,507		4.1
General and administrative		3,886		9.7			4,617		12.5
Amortization of intangible assets		246		0.6			227		0.6
Income from operations		4,194		10.4			2,389		6.5
Other income (expense):
Interest expense		(3,453	)	(8.6	)		(3,410	)	(9.3	)
Interest income		104		0.3			110		0.3
Income from investments		53		0.1			—		—
Income (loss) before income taxes and minority interest		898		2.2			(911	)	(2.5	)
Income tax expense		409		1.0			301		0.8
Income (loss) before minority interest		489		1.2			(1,212	)	(3.3	)
Minority interest in income of consolidated subsidiary		(137	)	(0.3	)		(141	)	(0.4	)
Net income (loss)	$	352		0.9	%	$	(1,353	)	(3.7	%)

For the quarters ended September 30, 2005 and 2004, the Company’s comprehensive income was $719 and $1,392, respectively. These amounts include the period’s net income and the Company’s other components of comprehensive income or loss consisting of an unrealized loss on securities held as available for sale of $(737) for the first quarter of fiscal 2006 and foreign currency translation adjustments of $(4) for the first quarter of fiscal 2006 and $335 for the first quarter of fiscal 2005.

~~Factors that have affected the results of operations for the third quarter of fiscal 2005 as~~8 ~~compared to the third quarter of fiscal 2004 are discussed below.~~

NetTable Sales. Net sales increased 9.0% to $40,272 in the third quarter of fiscal 2005 from $36,944 in the third quarter of fiscal 2004. Third quarter metal halide product sales increased 11% to $32,678 compared with $29,436 in the same period last year. This increase in metal halide product sales is primarily the result of an increase in sales of lamps and power supplies. Non-metal halide lighting product sales decreased 4% over the year ago period due primarily to a decrease in non-metal halide material sales. Contents

~~Total~~Advanced ~~lighting~~Lighting ~~product~~Technologies, ~~sales inside the U~~Inc.~~S. increased 15% in the third quarter of fiscal 2005 as~~ ~~compared~~Notes to ~~the~~Condensed ~~same~~Consolidated ~~period~~Financial aStatements ~~year ago due primarily to an increase in sales of lamps and power~~(Unaudited) ~~supplies.~~September 30, ~~Total lighting product sales outside the U.S. increased 4% as compared to the year ago~~2005 ~~period~~(Dollars ~~due primarily to increases~~ in ~~lamp sales and an increase in foreign currency exchange rates.~~thousands)

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

12On September 26, 2005, the Company and the lender under the Company’s $30,000 Bank Credit Facility entered into an amendment to the terms of the facility. The two principal features of the amendment were to increase the principal amount of the term loan to the original principal amount of $11,000 and to expand the definition of inventory eligible for inclusion in the borrowing base formula to include eligible inventory in transit from the Company’s affiliates in India. These changes had the effect of increasing the amount available to the Company under the revolving loan portion of the facility. The Company estimates that the initial incremental availability under the revolving credit facility was approximately $6,000 on the date of the amendment.

~~Cost~~The ofCompany’s ~~Sales.~~Bank ~~Cost~~Credit ofFacility ~~sales~~consists ~~increased~~of ~~8.3%~~a toterm ~~$24,335~~loan inrequiring ~~the~~monthly ~~third~~principal ~~quarter~~payments of $183 ~~fiscal~~($11,000 ~~2005~~outstanding ~~from $22~~at September 30,~~475~~ in2005) ~~the~~with ~~third~~a ~~quarter~~revolving ofcredit ~~fiscal~~loan, ~~2004.~~subject ~~Cost~~to availability, ofmaking ~~sales~~up inthe remainder of the ~~third~~facility. ~~quarter~~Availability of ~~fiscal~~borrowings ~~2004~~under the ~~included~~revolving ancredit ~~additional~~loan ~~amount~~is ofdetermined ~~$1,500~~by ~~above~~ the Company’s ~~normal~~eligible ~~manufacturing~~account ~~cost.~~receivables Inand inventories. ~~accordance~~Total ~~with~~availability ~~“fresh-start”~~was ~~accounting~~approximately ~~principles~~$20,000 ~~inventory~~and asthe ofamount ~~December 31,~~outstanding ~~2003,~~under ~~was~~the revolving credit ~~recorded~~loan atwas ~~fair~~$10,426 ~~value~~at September 30, ~~which~~2005. ~~amount~~Interest ~~approximated~~rates ~~$1,500~~on ~~above~~the ~~manufacturing~~revolving ~~cost~~credit inloan ~~the~~are ~~Company’s~~based on ~~condensed~~Libor ~~consolidated~~plus ~~balance~~2.75% ~~sheet~~or asPrime ofplus ~~December~~.75% (7.50% at September 3130, ~~2003~~2005). ~~This~~Interest ~~additional~~rates ~~amount~~on ~~reduced reported~~the ~~gross~~term ~~margin~~loan are ~~and~~based ~~net~~on ~~profit~~Libor inplus ~~the~~3.25% ~~third~~or ~~quarter~~Prime ofplus ~~fiscal~~1.25% ~~2004~~(7.35% asat ~~the~~September 30, ~~inventory~~2005). ~~was~~The ~~sold.~~final Asmaturity aof ~~percentage~~the offacility ~~net~~is ~~sales~~December 10, ~~cost~~2008. ofThe ~~sales~~revolving ~~was~~credit ~~60.4%~~loan ~~for~~amount ~~the~~at ~~third~~September 30, 2005 ~~quarter~~has ofbeen ~~fiscal~~classified ~~2005.~~as ~~This compares~~a ~~with~~current ~~cost~~liability ofin ~~sales~~accordance with the provisions of ~~60.8%~~Emerging Issues ~~for~~Task ~~fiscal~~Force ~~2004~~Issue No. 95-22, ~~including~~Balance ~~the~~Sheet ~~$1,500~~Classification ~~described~~of ~~above.~~Borrowings ~~The~~Outstanding under ~~additional~~Revolving ~~$1,500~~Credit ~~represented~~Agreements ~~4.1%~~that ofinclude ~~sales~~Both ina ~~the~~Subjective ~~third~~Acceleration ~~quarter~~Clause ofand ~~fiscal~~a ~~2004~~Lock-box Arrangement.

The ~~relatively~~Bank ~~high~~Credit ~~percentage~~Facility ofincludes ~~cost~~affirmative ofand ~~sales~~negative incovenants ~~the~~customary ~~third~~for ~~quarter~~this oftype ~~fiscal 2005 was due to~~of ~~several~~agreement, ~~factors~~prohibits ~~including~~cash adividends ~~change~~and inincludes ~~the~~financial ~~mix~~covenants ofrelating ~~product~~to ~~sales~~Minimum ~~toward~~Adjusted EBITDA ~~lamps~~ and ~~power~~Capital ~~supplies~~Expenditures. ~~that typically~~The ~~have~~principal asecurity ~~lower~~for ~~margin than material sales. Additionally,~~ the ~~cost~~Bank ofCredit ~~copper~~Facility ~~and steel used~~is insubstantially ~~the~~all ~~production~~ of ~~power supplies has risen significantly from~~ the ~~year~~personal ~~ago~~property ~~comparable~~of ~~period. Finally,~~ the Company ~~incurred~~and ~~some~~each ~~additional~~of ~~costs due to~~ its ~~previously~~North ~~announced~~American ~~transition~~and ofUnited ~~its~~Kingdom ~~North~~subsidiaries. ~~American~~The ~~power~~term ~~supply~~loan ~~manufacturing~~is ~~operation~~secured toby ~~Chennai,~~substantially ~~India.~~all ~~While~~of ~~this~~the ~~transition will~~Company’s ~~result~~machinery and equipment in ~~higher~~North ~~costs~~America ~~during~~and the ~~last~~United ~~half~~Kingdom ofand ~~fiscal 2005,~~ the Company’s ~~believes~~facility ~~that~~in ~~the~~Urbana, Illinois, ~~lower~~and ~~cost~~is ofcross-collateralized ~~production~~and insecured ~~India~~with ~~will benefit~~ the ~~Company~~revolving incredit ~~fiscal 2006 and beyond~~loan.

~~Marketing~~The ~~and~~Company’s ~~Selling~~long-term ~~Expenses.~~debt ~~Marketing~~includes ~~and~~$114,400 ~~selling~~of ~~expenses increased 6.9~~11% toSenior ~~$6,125~~Notes indue ~~the third~~March 2009. ~~quarter~~The ofNotes ~~fiscal~~are redeemable ~~2005~~at ~~from~~the $5Company’s option,~~729~~ in ~~the~~whole ~~third~~or ~~quarter~~in ofpart, ~~fiscal~~at ~~2004.~~any Astime at a ~~percentage~~price ofequal to the ~~net~~principal ~~sales,~~amount ~~marketing~~of ~~and~~the ~~selling~~New ~~expenses~~Notes ~~decreased~~plus toaccrued 15interest.2% inInterest on the ~~third~~Notes ~~quarter~~is ofpayable semi-annually ~~fiscal~~on ~~2005 from~~March 31 15and September 30.5% inThe Indenture for the ~~third~~Notes ~~quarter~~contains ofcovenants ~~fiscal~~that, among ~~2004.~~other ~~This~~things, ~~decrease~~limit inthe ~~marketing~~ability of the Company and ~~selling~~its ~~expenses~~Restricted Subsidiaries (as defined atherein) ~~percentage~~to ofincur ~~sales~~indebtedness, ~~was~~pay adividends, ~~result~~prepay ofsubordinated aindebtedness, ~~more~~repurchase ~~rapid~~capital stock, ~~increase~~make investments, create liens, engage in ~~sales~~transactions ~~than~~with stockholders and affiliates, sell assets and, with respect to the ~~increase~~Company, engage in ~~marketing~~ mergers and ~~selling~~consolidations. ~~expenses~~There are no sinking fund requirements.

~~Research and Development Expenses. Research and development expenses remained relatively constant~~9 at $1,486 in the third quarter of fiscal 2005 as compared to $1,507 in the third quarter of fiscal 2004. Research and development expenses relate to: (i) expansion of the product line and continued improvement in lamp technology including the line of Uni-Form® pulse start lamps (with improved energy efficiency, quicker starting and restarting and a more compact arc source, which improves the light and reduces material costs); (ii) continual development of new materials for the world’s major lighting manufacturers; (iii) development and testing of electronic and electromagnetic power supply systems; and, (iv) improvement of coating processes of optical thin-films to broaden the applications and development of new thin-film materials, and using coatings to develop improvements to lighting technologies. The Company expects to continue to make substantial expenditures on research and development to enhance its position as the leading innovator in the metal halide lighting industry.

GeneralTable and Administrative Expenses. General and administrative expenses decreased 15.8% to $3,886 in the third quarter of fiscal 2005 as compared to $4,617 in the third quarter of fiscal 2004. The decrease in general and administrative expenses was primarily due to a decrease in the CEO retention bonus expense of $507 (A total of $2,027 is being accrued ratably over the twelve months ended fiscal 2005, while $2,027 was accrued over the last six months of fiscal 2004). The after-tax amount of the CEO retention bonus, approximately $1,147, is scheduled to be applied against the Company’s receivable from the CEO in July 2005. Contents

~~Amortization~~Item 2. ofManagement’s ~~Intangible~~Discussion ~~Assets.~~and ~~Amortization~~Analysis ~~expense~~ of ~~$246~~Financial inCondition ~~the~~and ~~third~~Results ~~quarter~~ of ~~fiscal~~Operations ~~2005~~(Dollars ~~was comparable to amortization expense of $227~~ in ~~the third quarter of fiscal 2004.~~thousands)

13This report on Form 10-Q may contain forward-looking statements that involve risks and uncertainties. The operation of the Company and its subsidiaries involves risks and uncertainties, including the strength of the recovery of the U.S. economy, trends affecting the Company’s financial condition or results of operations, continued growth of the metal halide lighting market, the Company’s operating and growth strategies, litigation affecting the Company, the timely development and market acceptance of new products, the ability to provide adequate incentives to retain and attract key employees, the impact of competitive products and pricing, and other risks. For this purpose, any statement contained herein that is not a statement of historical fact may be deemed to be a forward-looking statement. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” and similar expressions are intended to identify forward-looking statements. The Company’s actual results may differ materially from those indicated by such forward-looking statements based on the factors outlined above.

~~Income~~The ~~from~~following ~~Operations.~~is Asmanagement’s adiscussion ~~result~~and analysis of ~~the~~certain ~~items~~significant ~~noted~~factors ~~above,~~which ~~the Company realized income from~~have ~~operations~~affected in the ~~third~~results ~~quarter~~ of ~~fiscal~~operations ~~2005~~and ofshould ~~$4,194~~be asread ~~compared~~in toconjunction ~~income~~with ~~from~~the ~~operations of~~accompanying ~~$2,389~~unaudited inCondensed ~~the~~Consolidated ~~year~~Financial ~~ago~~Statements ~~period~~and notes thereto.

~~Interest Expense. Interest expense in the third quarter of fiscal 2005 of $3,453 was comparable to~~General ~~the interest expense of $3,410 in the third quarter of fiscal 2004. The interest expense in both periods includes interest on the Company’s 11% Senior Notes.~~

~~Income~~The ~~(Loss)~~Company ~~from~~is ~~Investments~~an innovation-driven designer, manufacturer and marketer focused on metal halide lighting products, including materials, system components, systems and equipment. ~~The~~Metal ~~income~~halide lighting ~~from~~is ~~investments~~currently used primarily in ~~the~~commercial ~~third~~and ~~quarter~~industrial ofapplications ~~fiscal~~such ~~2005~~as offactories ~~$53~~and ~~represents~~distribution ~~the~~centers, ~~equity~~outdoor ~~income~~site ~~from~~and ~~the~~landscape ~~Company’s~~lighting, ~~40%~~sports ~~ownership~~facilities ofand ~~Aldrich-APL~~large ~~LLC~~retail spaces such as superstores. Systems, ~~a manufacturer~~components and ~~distributor~~materials ofrevenue ~~ultra-pure~~is ~~inorganics~~recognized when products are shipped, and ~~metals~~equipment ~~for~~revenue ~~high-technology~~is ~~applications~~recognized under the percentage of completion method.

~~Income~~Consistent ~~(Loss)~~with ~~before~~the ~~Income~~Company’s ~~Taxes~~strategy ~~and~~for ~~Minority~~new ~~Interest.~~product ~~The~~introductions, the Company ~~had~~invests substantial ~~income~~resources ~~before~~in ~~income taxes~~research and ~~minority~~development ~~interest~~to ofengineer ~~$898~~materials and system components to be included in customers’ specialized systems. Such expenditures have enabled the ~~third~~Company ~~quarter~~to develop new applications for metal halide lighting, improve the quality of ~~fiscal~~its ~~2005~~materials, and introduce new specialized products, such as ~~compared~~the toUni-Form® apulse ~~loss~~start metal halide products. Uni-Form® pulse ~~before~~start ~~income~~products ~~taxes~~permit ~~and~~(a) increased ~~minority~~light ~~interest~~output with lower power utilization, (b) faster starting, (c) a quicker restart of $lamps which have been recently turned off, and (~~911~~d) better incolor uniformity. The Company expects to continue to make substantial expenditures on research and development to enhance its position as the ~~third~~leading ~~quarter~~innovator ofin ~~fiscal~~the ~~2004~~metal halide lighting industry.

~~Income~~Results ~~Tax Expense. Income tax expense was $409 for the third quarter~~ of ~~fiscal 2005 as compared~~Operations ~~to $301 in the third quarter of fiscal 2004. The income tax expense in both quarters related to certain of the Company’s foreign operations.~~

AtQuarter ~~June~~Ended September 30, ~~2004,~~2005 ~~the~~Compared ~~Company had net operating loss carryforwards of $130,833 available~~ to ~~reduce future~~Quarter ~~United~~Ended ~~States federal taxable income, which expire 2008 through 2024. On August~~September 15, 2003, Saratoga purchased the preferred and common shares owned by GE. This transaction caused an ownership change greater than 50% which will limit the annual net operating loss the Company can use to offset any future taxable income pursuant to Section 382 of the Internal Revenue Code. This limitation is effective with the fiscal year ended June 30, 2004~~. The Company also has a capital~~ ~~loss carryforward of $40,117 available to reduce future capital gains. The usage of this carryforward will also be limited as a result of the ownership change. This carryforward expires in 2007.~~

The Company’s ~~also~~subsidiaries ~~had~~have ~~research~~fiscal ~~and~~years ~~development~~that ~~credit~~end ~~carryforwards~~on ofthe ~~approximately~~Sunday ~~$3,818 available~~closest atto June 30, ~~2004,~~and ~~which~~fiscal quarters ~~expire~~that ~~2008~~end ~~through~~on ~~2020.~~the ~~Additionally,~~Sunday inclosest ~~conjunction~~to ~~with~~ the respective calendar quarter end. The first quarter ~~Alternative~~of ~~Minimum~~fiscal ~~Tax~~2006 ~~(“AMT”)~~consisted ~~rules,~~of 13 weeks as compared to the ~~Company~~first ~~had~~quarter ~~available~~of ~~AMT~~fiscal ~~credit~~2005 ~~carryforwards~~that ~~for~~consisted of ~~tax~~14 weeks. As ~~purposes~~a result, a decrease of approximately ~~$98,~~7% ~~which~~in ~~may~~sales beand ~~used~~costs ~~indefinitely~~and toexpenses ~~reduce~~resulted ~~regular~~from ~~federal~~the ~~income~~one ~~taxes.~~fewer ~~The~~week ~~usage~~in ofthe ~~these~~first ~~credits~~quarter ~~will~~of ~~also~~fiscal be2006 ~~limited~~compared asto athe ~~result~~first quarter of ~~the~~fiscal ~~ownership change~~2005.

~~Also, at June 30, 2004, the Company had foreign net operating loss carryforwards for tax purposes~~10 ~~totaling $1,163 that expire 2006 to 2007 and $9,395 that have no expiration dates.~~

NineTable Monthsof Ended March 31, 2005 compared to Nine Months Ended March 31, 2004 Contents

The ~~Company’s~~following ~~emergence~~table ~~from~~sets ~~Chapter 11~~forth, ~~bankruptcy~~as ~~proceedings in December 2003 resulted in~~ a ~~new reporting~~percentage ~~entity and the adoption~~ of ~~fresh~~net ~~start~~sales, ~~reporting.~~certain ~~Generally~~items ~~accepted~~in ~~accounting principles do not permit combining~~ the ~~results of the Reorganized~~ Company ~~with those of the~~’s ~~Predecessor~~Condensed ~~Company in the condensed consolidated financial statements. Accordingly, the~~ Consolidated ~~Statement~~Statements of Operations ~~does not present results~~ for the ~~nine~~three months ended ~~March~~September 3130, ~~2004.~~ ~~However,~~2005 ~~in order to provide useful information~~ and ~~to facilitate understanding of the~~ ~~operating results for the nine months ended March 31, 2005 relative to the corresponding fiscal~~ 2004 ~~period, the following discussion combines the reported~~:


	Quarter Ended					Quarter Ended
	September 30, 2005					September 30, 2004
Net sales	$	37,310		100.0	%	$	38,578		100.0	%

Costs and expenses:
Cost of sales		22,288		59.7			22,604		58.6
Marketing and selling		6,422		17.2			6,229		16.1
Research and development		1,308		3.5			1,542		4.0
General and administrative		3,456		9.3			3,537		9.2
Amortization of intangible assets		261		0.7			241		0.6

Income from operations		3,575		9.6			4,425		11.5

Other income (expense):
Interest expense		(3,534	)	(9.5	)		(3,423	)	(8.9	)
Interest income		92		0.3			93		0.2
Income from investments		1,953		5.2			486		1.3

Income before income taxes and minority interest		2,086		5.6			1,581		4.1
Income tax expense		448		1.2			373		1.0

Income before minority interest		1,638		4.4			1,208		3.1
Minority interest in income of consolidated subsidiary		(178	)	(0.5	)		(151	)	(0.4	)

Net income	$	1,460		3.9	%	$	1,057		2.7	%

Factors ~~operating~~that ~~income~~have ofaffected the ~~Predecessor Company~~results ~~for the six months ended December 31, 2003 and~~ of ~~the~~operations ~~Reorganized Company~~ for the ~~three months~~first ~~ended~~quarter ~~March 31,~~of ~~2004.~~fiscal ~~These~~2006 ~~amounts~~as compared ~~are~~to ~~presented~~the byfirst ~~caption~~quarter inof ~~the~~fiscal ~~table~~2005 ~~below and~~ are ~~captioned~~ ~~“Pro~~discussed ~~Forma Results~~below.”

~~The~~Net ~~primary~~Sales. ~~impacts~~Net ofsales ~~fresh~~decreased ~~start~~3.3% ~~reporting~~to on$37,310 ~~operating~~in ~~income~~the ~~was~~first ~~that~~quarter itof ~~caused~~fiscal a2006 ~~decline in~~from ~~depreciation~~$38,578 ~~expense due to~~ in the ~~asset~~first ~~write-downs~~quarter ~~recorded~~of infiscal ~~conjunction~~2005, ~~with~~as ~~fresh~~a ~~start reporting~~result ~~and~~of anthe ~~increase~~one infewer ~~amortization~~week ~~expense~~of ~~due~~sales toin ~~the~~fiscal ~~fresh~~2006. ~~start~~The average ~~adjustment~~weekly ofsales ~~identifiable intangible~~actually ~~assets~~increased 4.2% ~~Depreciation~~to ~~expense totaled~~ $32,~~419~~870 per week for the ~~nine~~first ~~months~~quarter ~~ended~~of ~~March 31, 2005~~fiscal ~~and~~2006 as compared with $42,~~468~~755 per week for the ~~nine~~first ~~months~~quarter ~~ended~~of ~~March 31,~~fiscal ~~2004~~2005. ~~Amortization~~Average ~~expense~~weekly ~~was~~sales of ~~$735~~metal ~~for~~halide ~~the~~products ~~nine months~~increased ~~ended~~7% ~~March 31,~~to ~~2005 and~~ $~~404~~2,301 ~~for~~in the ~~nine~~first ~~months~~quarter ~~ended~~of ~~March 31,~~fiscal ~~2004.~~2006 ~~Also,~~as ~~cost~~compared with of$2,151 ~~sales~~ in the ~~third~~first quarter of fiscal ~~2004~~2005. ~~included~~This anincrease ~~additional~~in ~~amount~~metal ofhalide ~~$1,500~~product ~~above~~sales ~~the Company’s~~is ~~normal~~primarily ~~manufacturing~~the ~~cost.~~result Inof ~~accordance~~an ~~with~~increase ~~“fresh-start”~~in ~~accounting~~sales ~~principles, inventory as~~ of ~~December 31,~~ ~~2003,~~lamps. ~~was~~Non-metal ~~recorded~~halide atlighting ~~fair~~product ~~value,~~sales increased ~~which~~5% ~~amount~~over ~~approximated~~the ~~$1,500~~year ~~above~~ago ~~manufacturing cost~~period indue ~~the~~primarily ~~Company’s~~to ~~condensed~~an ~~consolidated~~increase ~~balance~~in ~~sheet~~non-metal ashalide ofpower ~~December 31, 2003~~supply sales.

~~The~~Total ~~Company’s~~lighting ~~subsidiaries~~product ~~have~~sales ~~fiscal~~inside ~~years~~the ~~that~~U.S. ~~end~~increased on11% in the ~~Sunday~~first ~~closest~~quarter toof ~~June 30 and~~ fiscal ~~quarters~~2006, ~~that~~in spite ~~end~~of on the ~~Sunday~~one ~~closest~~fewer toweek ~~the~~in ~~respective~~this ~~calendar~~ quarter, ~~end.~~as ~~The~~compared ~~first nine~~to ~~months~~the ofsame ~~fiscal~~quarter ~~2005~~a ~~consisted~~year ofago ~~40 weeks~~due ~~as compared~~ to increases ~~the~~in ~~first~~sales ~~nine months~~ of ~~fiscal 2004~~lamps, ~~that~~power ~~consisted~~supplies ofand ~~39 weeks~~materials. AsTotal alighting ~~result,~~product ansales ~~increase~~outside the ofU.S. ~~approximately~~declined ~~2.5~~12% inas ~~sales~~compared ~~and~~to ~~costs and~~the ~~expenses~~year ~~resulted~~ago ~~from~~period ~~the~~primarily ~~additional~~due ~~week~~ in ~~the~~part ~~first~~to ~~nine~~the ~~months~~one offewer week ~~fiscal~~and ~~2005~~due ~~compared~~ to ~~the~~ ~~first~~decreases ~~nine~~in ~~months~~sales of ~~fiscal~~power ~~2004~~supplies and materials.

~~The~~Pricing ~~following~~in ~~table~~the ~~sets~~metal ~~forth,~~halide aslighting abusiness ~~percentage~~is ~~of net sales~~competitive, ~~certain~~and ~~items~~prices infor the Company’s products ~~Condensed~~have ~~Consolidated~~remained ~~Statements~~flat ofor ~~Operations~~declined ~~for~~slightly. ~~the~~The ~~nine~~introduction ~~months~~of ~~ended~~new ~~March 31,~~products ~~2005~~has ~~and~~helped ~~2004:~~to stabilize the Company’s product pricing.

	Reorganized Company				Pro Forma Results
	Nine Months Ended				Nine Months Ended
	March 31, 2005				March 31, 2004
Net sales	$	119,972	100.0	%	$	107,454	100.0	%
Costs and expenses:
Cost of sales		71,278	59.4			65,836	61.3
Marketing and selling		17,967	15.0			17,040	15.8
Research and development		4,598	3.8			4,602	4.3
General and administrative		11,360	9.5			10,825	10.1
Amortization of intangible assets		735	0.6			404	0.4
Income from operations		14,034	11.7			8,747	8.1

Cost of Sales. Cost of sales decreased 1.4% to $22,288 in the first quarter of fiscal 2006 from $22,604 in the first quarter of fiscal 2005. As a percentage of net sales, cost of sales was 59.7% for the first quarter of fiscal 2006 compared with 58.6% for the first quarter of fiscal 2005. Cost of sales expense was

~~Net Sales. Net sales increased~~ 11~~.6% to $119,972 in the first nine months of fiscal 2005 from~~ $107,454 in the first nine months of fiscal 2004, due in part to the additional week during the first nine months of fiscal 2005. Metal halide product sales for the first nine months of fiscal 2005 increased 16% to $94,646 compared with $81,872 in the same period last year. This increase in metal halide product sales was primarily the result of an increase in lamp and material sales. Non-metal halide lighting product sales decreased 17% over the year ago period due primarily to a decrease in power supply sales.

TotalTable lighting product sales inside the U.S. increased 12% in the first nine months of fiscal 2005 as compared to the same period a year ago primarily due to an increase in lamp and power supply sales. Total lighting product sales outside the U.S. increased 9% as compared to the year ago period due primarily to increases in lamp and material sales and an increase in foreign currency exchange rates. Contents

15positively impacted by the transfer of lamp and power supply production to India and improvements in cost management. Cost of sales expense was negatively impacted by the high cost of copper and steel used in the production of power supplies and additional costs related to the completion of the previously announced transition of the Company’s North American power supply manufacturing operation to Chennai, India. While this transition resulted in higher costs during the last half of fiscal 2005 and first quarter of fiscal 2006, the Company believes that the lower cost of production in India will benefit the Company in fiscal 2006 and beyond.

~~Cost~~Marketing ofand ~~Sales~~Selling Expenses. ~~Cost~~Marketing ofand ~~sales~~selling expenses increased 8.3.1% to $716,~~278~~422 in the first ~~nine~~quarter ~~months~~ of fiscal ~~2005~~ 2006 from $656,~~836~~229 in the first ~~nine~~quarter ~~months~~ of fiscal ~~2004, due in part to the additional week during the first nine months of fiscal~~ 2005. As ~~noted~~a ~~above,~~percentage ~~in accordance with “fresh-start” accounting principles, inventory as~~ of ~~December 31, 2003, was recorded at fair value, which amount~~ ~~approximated~~net $1sales,~~500~~ ~~above~~marketing ~~manufacturing~~and ~~cost~~selling inexpenses ~~the~~increased ~~Company’s~~to ~~condensed consolidated balance sheet as of December 31, 2003~~17.2% ~~This additional amount reduced reported gross margin and net profit~~ in the ~~third~~first quarter of fiscal ~~2004 as the inventory was sold. As a percentage of net sales, cost of~~2006 ~~sales~~from ~~was 59~~16.41% ~~for~~in the first ~~nine~~quarter ~~months~~ of fiscal 2005. This ~~compares~~increase ~~with~~in ~~cost~~marketing ofand ~~sales~~selling ofexpenses as ~~61.3%~~a ~~for~~percentage ~~the first nine months~~ of ~~fiscal~~sales ~~2004,~~was ~~including~~primarily ~~the~~due ~~$1,500~~to ~~described~~increases ~~above.~~in ~~The additional~~compensation ~~$1,500~~and ~~represented~~other ~~1.4%~~costs ofrelated ~~sales~~to in the Company’s ~~first~~marketing ~~nine months of fiscal 2004~~efforts.

~~Cost~~Research ofand ~~sales~~Development ~~expense~~Expenses. ~~was~~Research ~~positively~~and ~~impacted~~development byexpenses ~~the~~declined ~~continuing~~to ~~transfer~~$1,308 ofin ~~lamp~~the first ~~and~~quarter ~~power~~of ~~supply production~~fiscal to2006 ~~India,~~as ~~improvements~~compared into ~~cost management~~$1,542 ~~an improvement~~ in the ~~product~~first ~~mix~~quarter ~~(stronger growth~~of infiscal ~~lamp~~2005. Research and ~~material~~development ~~sales~~expenses ~~than~~relate into: ~~power~~(i) expansion ~~supply~~of ~~sales),~~the product line and acontinued ~~reduction~~improvement in ~~depreciation~~ ~~expense~~lamp oftechnology ~~$637~~including ~~related primarily to~~ the ~~effects~~line of ~~the~~Uni-Form® ~~application~~pulse ~~of fresh-~~start ~~accounting principles~~lamps at(with ~~December 31~~improved energy efficiency, quicker ~~2003.~~starting ~~Cost~~and ofrestarting ~~sales~~and ~~expense~~a ~~was~~more ~~negatively~~compact ~~impacted~~arc bysource, ~~increases~~which inimproves the light and reduces ~~cost~~material ofcosts); ~~copper~~(ii) continual ~~and~~development ~~steel~~of ~~used~~new inmaterials for the ~~production~~world’s ofmajor ~~power~~lighting manufacturers; ~~supplies~~(iii) development asand ~~compared~~testing toof ~~the~~electronic ~~year~~and ~~ago~~electromagnetic power supply ~~period~~systems; and ~~additional~~(iv) improvement ~~costs~~of ~~due~~coating toprocesses ~~its~~of ~~previously~~optical ~~announced~~thin-films ~~transition~~to ofbroaden the ~~Company’s North~~ ~~American~~applications ~~power~~and ~~supply~~development ~~manufacturing~~of ~~operation~~new tothin-film ~~Chennai~~materials, ~~India.~~and ~~While~~using ~~this~~coatings ~~transition~~to ~~will~~develop ~~result~~improvements into ~~higher~~lighting ~~costs~~technologies. ~~during~~The ~~the~~Company ~~last~~expects ~~half~~to ofcontinue ~~fiscal~~to ~~2005,~~make ~~the~~substantial ~~Company~~expenditures ~~believes~~on research ~~that~~and ~~the~~development ~~lower~~to ~~cost~~enhance ~~of production~~its inposition ~~India~~as ~~will benefit~~ the ~~Company~~leading innovator in ~~fiscal~~the ~~2006~~metal ~~and~~halide lighting ~~beyond~~industry.

~~Marketing~~General and ~~Selling~~Administrative Expenses. ~~Marketing~~General and ~~selling~~administrative expenses ~~increased~~remained ~~5.4%~~relatively constant toat $173,~~967~~456 in the first ~~nine~~quarter ~~months~~ of fiscal ~~2005~~2006 ~~from~~as compared to $173,~~040~~537 in the first ~~nine months~~ quarter of fiscal ~~2004~~2005. As a percentage of net sales, ~~marketing~~general and ~~selling~~administrative expenses ~~decreased~~increased to 15 9.03% in the first ~~nine~~quarter ~~months~~ of fiscal ~~2005~~2006 from 159.82% in the first ~~nine~~quarter ~~months~~ of fiscal ~~2004~~2005. ~~The decrease as a percentage of~~ ~~sales resulted from the significant increase in sales that occurred while marketing and selling expenses grew at a slower rate.~~

~~Research~~Amortization ~~and~~of ~~Development~~Intangible ~~Expenses~~Assets. ~~Research~~Amortization ~~and~~expense ~~development expenses remained consistent at $4,598 in the first nine months~~ of ~~fiscal 2005 as compared to~~ $~~4,602~~261 in the first ~~nine~~quarter ~~months~~ of fiscal ~~2004.~~2006 ~~Research~~was ~~and~~comparable ~~development expenses incurred related~~ to: ~~(i) expansion~~amortization expense of ~~the~~$241 ~~product line and continued improvement~~ in ~~lamp technology including~~ the ~~line~~first ofquarter Uni-Form® pulse start lamps (with improved energy efficiency, quicker starting and restarting and a more compact arc source, which improves the light and reduces material costs) (ii) continual development of ~~new~~fiscal materials for the world’s major lighting manufacturers; (iii) development and testing of electronic and electromagnetic power supply systems; and, (iv) improvement of coating processes of optical thin-films to broaden the applications and development of new thin-film materials, and using coatings to develop improvements to lighting technologies2005. ~~The Company expects to continue to make~~ ~~substantial expenditures on research and development to enhance its position as the leading innovator in the metal halide lighting industry.~~

~~General~~Income ~~and~~from ~~Administrative Expenses~~Operations. ~~General~~As ~~and~~a ~~administrative~~result ~~expenses~~of ~~increased~~the ~~4.9%~~items tonoted ~~$11~~above,~~360 in~~ the ~~first~~Company ~~nine~~realized ~~months~~income offrom operations ~~fiscal 2005 as compared to $10,825~~ in the first ~~nine~~quarter ~~months~~ of fiscal ~~2004.~~ ~~The~~2006 ~~increase in general and administrative expenses was primarily due to an increase in the CEO retention bonus expense~~ of $~~507 (A total of $2~~3,~~027~~575 isas ~~being~~compared ~~accrued~~to ~~ratably~~income ~~over~~from ~~the~~operations ~~twelve months ended fiscal 2005, while $2,027 was accrued over the last six months~~ of ~~fiscal 2004). The~~ ~~after-tax amount of the fiscal 2005 CEO retention bonus, approximately~~ $14,~~147,~~425 isin ~~scheduled to be applied against~~ the ~~Company’s~~year ~~receivable~~ago ~~from the CEO in July 2005~~period.

16Interest Expense. Interest expense in the first quarter of fiscal 2006 of $3,534 was slightly higher than interest expense of $3,423 in the first quarter of fiscal 2005. Approximately half of this increase was due to a slightly higher average debt outstanding during the first quarter of fiscal 2006 as compared with the first quarter of fiscal 2005, while the other half was due to higher interest rates on the Company’s Bank Credit Facility resulting from the changes in market rates over the past year.

~~Amortization~~Income offrom ~~Intangible Assets~~Investments. ~~Amortization~~At ~~expense~~June 30, ~~increased~~2005, tothe ~~$735~~Company inmaintained ~~the~~an ~~first~~interest ~~nine~~in ~~months~~Fiberstars, Inc. (“Fiberstars”) consisting of ~~fiscal~~beneficial ~~2005~~ownership ~~from~~of 175,572 shares of common stock and a warrant with an exercise price of $~~404~~.01 inper share that included the ~~first~~right ~~nine~~to ~~months~~acquire, upon meeting certain vesting provisions, 231,250 shares of ~~fiscal~~Fiberstars ~~2004~~common stock. The ~~increase~~warrant’s ~~was~~final ~~due~~vesting provision toof ~~the~~maintaining an average closing stock price for Fiberstars common stock of $12.00 per ~~amortization~~share for a period of ~~identifiable~~thirty ~~intangibles~~consecutive ~~established~~days atwas ~~December~~met on July 3127, ~~2003~~2005, inand ~~accordance~~the ~~with~~Company ~~the~~purchased ~~provisions~~the ~~of fresh-start accounting~~shares.

~~Income from Operations. As a result of the items noted above, the Company realized income from~~12 ~~operations in the first nine months of fiscal 2005 of $14,034 as compared to pro forma income from operations of $8,747 in the year ago period.~~

LiquidityTable andof Capital Resources Contents

The ~~Company’s~~warrant ~~sources~~was ofaccounted ~~liquidity~~for ~~include~~as ~~cash~~a ~~and~~derivative ~~cash~~financial ~~equivalents,~~instrument ~~cash~~pursuant ~~flow~~to ~~from~~the ~~operations~~requirements ~~and~~of ~~amounts~~Statement ~~available~~of ~~under~~Financial ~~its~~Accounting ~~Bank~~Standards ~~Credit~~(“FAS”) ~~Facility~~No. 133, ~~The~~Accounting ~~Company~~for ~~believes~~Derivative ~~these~~Instruments and ~~sources~~Hedging ofActivities, ~~liquidity are~~and ~~sufficient~~was ~~for~~valued atbased ~~least~~upon the ~~next~~closing ~~several~~market ~~years.~~price ~~As a result~~ of ~~the~~Fiberstars ~~exchange of the $100,000 8%~~common ~~Senior~~stock ~~Notes~~on ~~due March~~July ~~2008 for $114~~27,~~400~~ ~~11% Senior Notes due March 2009~~2005, ~~the Company has extended the maturity~~ of ~~most~~$13.94 ofper ~~its~~share, ~~debt~~or ~~until~~approximately ~~2009~~$3,200. The ~~Company~~total ~~believes~~gain ~~that~~recognized ~~its~~in the ~~cash~~accompanying ~~flow~~condensed ~~from operations~~consolidated ~~will~~statements beof ~~more~~operations ~~than~~with ~~adequate~~regard to ~~service~~recording the Company’s ~~debt,~~investment ~~prior~~at tofair ~~the~~value ~~maturity~~was ~~of the 11% Senior Notes~~$1,864.

The ~~Bank~~first ~~Credit~~quarter ~~Facility is a $30,000 facility that consists~~ of afiscal ~~term loan that requires monthly principal payments of $183 ($8,250 outstanding at March 31,~~ 2005) ~~with~~includes a ~~revolving~~gain ~~credit~~on ~~loan, subject~~the tosale ~~availability,~~of ~~making~~an upinvestment ~~the remainder~~ of ~~the facility~~$320. The ~~amount outstanding under the~~ ~~revolving~~remaining ~~credit~~income ~~loan~~from ~~was~~investments of $~~6,372~~89 atin ~~March 31, 2005. Interest rates on~~ the ~~revolving~~first ~~credit~~quarter ~~loan are~~of ~~based~~fiscal on2006 ~~Libor~~and ~~plus~~$166 ~~2.75%~~in orthe ~~Prime~~first quarter ~~plus~~of ~~.75%~~fiscal ~~(6.50% at March 31,~~ 2005). ~~Interest~~represents ~~rates on~~ the ~~term~~ ~~loan~~equity ~~are~~income ~~based~~from onthe ~~Libor~~Company’s ~~plus 3.50~~40% orownership ~~Prime~~of ~~plus 1.50% (7.25% at March 31~~Aldrich-APL LLC, ~~2005).~~a ~~The~~manufacturer ~~final maturity~~and distributor of ~~the~~ultra-pure ~~revolving~~inorganics ~~credit facility~~ and ~~the~~metals ~~term~~for ~~loan is December 10, 2008~~high-technology applications.

~~The~~Income ~~Bank~~Tax Credit Facility contains certain affirmative and negative covenants customary for this type of agreement, prohibits cash dividends, and includes financial covenants related to Minimum Adjusted EBITDA and Capital ExpendituresExpense. AtIncome ~~March 31,~~tax ~~2005,~~expense ~~the Company~~ was in$448 ~~compliance~~for ~~with~~ the ~~terms~~first quarter of ~~the~~fiscal ~~Bank~~2006 ~~Credit~~as ~~Facility. The principal security for the Bank Credit Facility is~~compared ~~substantially~~to ~~all~~$373 ofin the ~~personal~~first ~~property~~quarter of ~~the~~fiscal ~~Company and each of its North American and United Kingdom subsidiaries~~2005. The ~~term~~income ~~loan~~tax isexpense ~~secured~~in byboth ~~substantially~~quarters ~~all~~related ~~of the Company’s machinery and~~to ~~equipment~~certain inof ~~North America and~~ the ~~United Kingdom as well as the~~ Company’s ~~facility~~foreign ~~in Urbana, Illinois, and is cross-collateralized and secured with the revolving credit loan~~operations.

~~Cash~~At ~~decreased~~June 30, 2005, the Company had net operating loss carryforwards of $2136,~~218~~835 ~~during~~available ~~the~~to ~~nine~~reduce future ~~months~~United ~~ended~~States ~~March~~federal taxable income, which expire 2008 through 2024. On August 3115, ~~2005~~2003, Saratoga purchased the preferred and common shares owned by GE. ~~Cash~~This ~~used~~transaction incaused an ownership change greater than 50% which will limit the annual net operating loss the Company can ~~activities~~use to offset any future taxable income pursuant to Section 382 of the Internal Revenue Code. The net operating losses subject to this limitation totaled $1110,~~353~~116 at June 30, ~~cash~~2005. ~~used~~The inCompany also ~~investing~~has ~~activities~~a ~~totaled~~capital loss carryforward of $340,~~685,~~118 that is subject to the limitation and ~~cash~~expires ~~provided~~in 2007. byThe annual limitation on these net operating losses and capital loss carryforwards that ~~financing~~arose ~~activities~~prior ~~totaled~~to the ownership change is $21,~~820~~395. Finally, the Company also had $26,719 of net operating losses at June 30, 2005, that are not subject to the annual limitation.

~~Net~~The ~~Cash~~Company ~~Provided~~also byhad ~~(Used~~research ~~in)~~and ~~Operating~~development ~~Activities.~~credit ~~Net~~carryforwards ~~cash~~of ~~used~~approximately ~~in operating activities totaled~~ $13,~~353~~818 available ~~for~~at ~~the nine months ended March~~June 3130, 2005~~. This reflects the $12~~,~~584~~ ~~payment~~which ofexpire ~~both semi-annual~~2008 ~~interest~~through ~~payments related to the Company’s Senior Notes due March 31 and September 30~~2020. It ~~also reflects the impact of one-time payments of reorganization expenses totaling $1~~Additionally,~~842~~ ~~and pre-petition~~in ~~liabilities~~conjunction ofwith ~~$371 related to~~ the ~~Company’s emergence from Chapter 11 Bankruptcy,~~ ~~which~~Alternative ~~have~~Minimum ~~now~~Tax ~~been~~(“AMT”) ~~fully paid. Finally~~rules, ~~net~~the ~~cash~~Company ~~used~~had inavailable ~~operating~~AMT ~~activities~~credit ~~reflects~~carryforwards anfor tax ~~increase~~purposes ~~in inventory~~ of approximately $598,~~671.~~ Awhich ~~portion~~may ~~of the increase in inventory is expected to~~ be ~~a permanent~~used ~~increase~~indefinitely ~~due~~ to ~~the~~reduce ~~longer~~regular ~~supply~~federal ~~chain~~income taxes. ~~which~~The ~~results~~usage ~~from the continuing shift~~ of ~~production~~ tothese ~~India,~~credits ~~but~~will ~~a portion~~ also ~~resulted~~be ~~from~~limited as a ~~temporary increase~~result ~~in safety stocks to minimize the risk~~ of ~~supply disruptions during~~ the ~~repositioning~~ownership ofchange.

17Also, at June 30, 2005, the Company had foreign net operating loss carryforwards for tax purposes totaling $1,271 that expire 2006 to 2007 and $7,514 that have no expiration dates.

~~manufacturing~~Liquidity toand ~~India.~~Capital ~~The Company expects that the safety stock inventory levels will be reduced~~Resources when the transfer of power supply production from North America to India is completed. The Company does not believe any further increase in inventory levels will be required as reductions in safety stock requirements offset any future growth in inventories associated with expanding revenues.

~~Net~~The ~~Cash~~Company’s ~~Used~~sources inof ~~Investing~~liquidity ~~Activities.~~include Incash ~~the~~and ~~nine~~cash ~~months ended March 31~~equivalents, ~~2005, net~~ cash ~~used~~flow ~~in investing~~from ~~activities~~operations ~~totaled $3,685, including $4,135 related to capital expenditures for plant~~ and ~~equipment,~~amounts ~~the~~available ~~majority~~under ofits ~~which~~Bank ~~relates~~Credit ~~to machinery and equipment~~Facility. The ~~capital~~Company ~~expenditures~~believes ~~in fiscal~~these ~~2005~~sources ~~also include a building purchase~~ of ~~$1,232~~liquidity are insufficient ~~Chennai,~~for ~~India,~~at ~~that~~least ~~will house~~ the ~~Company’s~~ ~~power~~next ~~supply~~several ~~manufacturing operation~~years. The Company ~~will~~has ~~move~~extended ~~these~~the ~~operations~~maturity ~~from~~of ~~its~~most ~~existing~~of ~~lamp~~its ~~manufacturing~~debt ~~facility~~until ~~resulting in additional capacity for the Company’s lamp manufacturing operations~~March 2009. The Company’s ~~capital~~believes ~~expenditure~~that ~~program~~its iscash ~~expected~~flow tofrom ~~approximate between~~operations ~~$5,000 and $6,000 in fiscal 2005. Future capital expenditures beyond this level~~ will be more ~~discretionary,~~than asadequate ~~the~~to ~~Company~~service ~~presently~~the ~~has~~debt, ~~sufficient~~prior ~~operating capacities~~ to ~~support~~the ~~several years~~maturity of ~~sales~~the ~~growth~~$114,400 atof ~~its~~11% ~~historical~~Senior ~~rates~~Notes.

~~Net~~On ~~Cash~~September 26, ~~Provided~~2005, bythe ~~Financing~~Company ~~Activities.~~and In the ~~nine~~lender ~~months~~under ~~ended~~the ~~March 31,~~Company’s ~~2005~~$30,000 ~~net~~Bank ~~cash~~Credit Facility ~~provided~~entered byinto ~~financing~~an ~~activities~~amendment ~~was~~to ~~$2,820~~the ~~resulting~~terms ~~from~~of anthe ~~increase~~facility. inThe ~~borrowings~~two onprincipal ~~the Company’s~~features ~~revolving credit loan~~ of ~~$6,372,~~the amendment ~~net~~were ofto ~~$3,552~~increase ofthe ~~scheduled~~principal ~~payments~~amount of ~~long-~~the term ~~debt that~~loan ~~included~~to the ~~one-time~~original ~~payment~~principal amount of $111,~~402~~000 and to ~~Rohm~~expand ~~and~~the ~~Haas~~definition ~~Company~~of ~~related~~inventory toeligible afor ~~promissory~~inclusion ~~note~~in the borrowing base ~~obligation.~~formula to include eligible

~~The interest-bearing obligations of the Company totaled $133,683 as of March 31, 2005, and~~13 ~~consisted of: $14,622 outstanding under the Bank Credit Facility; $114,400 of 11% Senior Notes; mortgages of $4,371; and obligations of foreign subsidiaries and other debt of $290.~~

CriticalTable Accountingof Policies Contents

~~The~~inventory ~~discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared~~ in ~~accordance~~transit ~~with~~from ~~accounting principles~~the ~~generally~~Company’s ~~accepted~~affiliates in ~~the United States of America~~India. ~~The preparation of these financial~~These ~~statements~~changes ~~requires~~had usthe ~~to make estimates and judgments that~~ effect ~~the reported amounts~~ of ~~our assets,~~increasing ~~liabilities,~~the ~~revenues~~amount ~~and~~available ~~costs and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related~~ to~~: valuation~~ ofthe ~~accounts~~Company ~~and~~under ~~notes~~the ~~receivable~~revolving ~~and~~ loan ~~receivable from officer, valuation of~~ ~~investments,~~portion ~~valuation~~ of ~~long-lived~~the ~~assets, valuation of inventory valuation reserves, revenue recognition, and deferred tax assets~~facility. WeThe ~~base~~Company ~~our~~ estimates ~~on historical experience and on various other assumptions~~ that ~~we believe reasonable under~~ the ~~circumstances,~~initial ~~the~~incremental ~~results~~availability ofunder ~~which~~the ~~form~~revolving ~~the~~credit ~~basis~~facility ~~for~~was ~~making~~approximately ~~judgments~~$6,000 ~~about~~on the ~~carrying~~date ~~value~~ of ~~assets~~the ~~and liabilities that are not readily apparent from other sources~~amendment. ~~Actual results may differ from these estimates under~~ ~~different assumptions or conditions.~~

WeThe ~~have~~Bank ~~identified~~Credit ~~the~~Facility ~~following~~consists ~~policies~~of asa ~~critical~~term toloan ~~our~~that ~~business~~requires ~~operations~~monthly ~~and~~principal ~~the understanding~~payments of ~~our~~$183 ($11,000 ~~results~~outstanding ofat ~~operations.~~September 30, ~~For~~2005) with a ~~detailed~~revolving ~~discussion~~credit onloan, subject to availability, making up the ~~application~~remainder of ~~these and~~the ~~other~~facility. ~~accounting~~Total ~~policies~~availability was approximately $20,000 ~~see~~and ~~Note~~the amount Coutstanding ofunder the ~~“Notes~~revolving tocredit ~~Consolidated~~loan ~~Financial~~was ~~Statements”~~$10,426 inat September 30, 2005. Interest rates on the ~~Annual~~revolving ~~Report~~credit loan are based on ~~Form~~Libor ~~10-K~~plus ~~for~~2.75% or Prime plus .75% (7.50% at September 30, 2005). Interest rates on the ~~Period~~term ~~Ended~~loan ~~June~~are based on Libor plus 3.25% or Prime plus 1.25% (7.35% at September 30, ~~2004~~2005). The final maturity of the revolving credit facility and the term loan is December 10, 2008.

~~Valuation~~The Bank Credit Facility contains certain affirmative and negative covenants customary for this type of ~~Accounts~~agreement, prohibits cash dividends, and ~~Notes~~includes ~~Receivable~~financial covenants related to Minimum Adjusted EBITDA and ~~Loan~~Capital ~~Receivable~~Expenditures. ~~from~~At ~~Officer~~September 30, 2005, the Company was in compliance with the terms of the Bank Credit Facility. The principal security for the Bank Credit Facility is substantially all of the personal property of the Company and each of its North American and United Kingdom subsidiaries. The term loan is secured by substantially all of the Company’s machinery and equipment in North America and the United Kingdom as well as the Company’s facility in Urbana, Illinois, and is cross-collateralized and secured with the revolving credit loan.

~~Management~~Cash ~~evaluates~~decreased ~~and~~$34 ~~makes~~during ~~estimates~~the ofthree ~~the~~months ~~collectibility~~ended ofSeptember 30, ~~the~~2005. ~~Company’s~~Cash ~~accounts~~used ~~and~~in ~~notes~~operating ~~receivable,~~activities ~~including~~totaled ~~unbilled~~$7,471, ~~accounts~~cash ~~receivable~~used ~~related~~in toinvesting ~~long-term~~activities ~~equipment~~totaled ~~contracts~~$792, ~~based~~and cash provided by onfinancing aactivities totaled $8,229.

18Net Cash Used in Operating Activities. Net cash used in operating activities totaled $7,471 for the three months ended September 30, 2005. This includes the $6,292 payment of semi-annual interest related to the Company’s Senior Notes due September 30. Additionally, net cash used in operating activities included an increase in inventory of $3,825 due to the longer supply chain which results from the continuing shift of production to India.

~~combination~~Net ofCash ~~factors.~~Used ~~Management~~in ~~analyzes~~Investing ~~historical~~Activities. ~~bad~~In ~~debts, customer credit-worthiness, and current economic trends in evaluating~~ the ~~adequacy~~three ofmonths ~~the~~ended ~~allowance~~September 30, ~~for~~2005, ~~doubtful~~net ~~accounts~~cash ~~and~~used ~~whether~~in ~~there~~investing isactivities ~~any~~totaled ~~impairment~~$792, inwhich ~~its~~related ~~notes~~to ~~receivable.~~capital Inexpenditures ~~circumstances~~for ~~where~~plant and equipment, the ~~Company~~majority ~~is aware~~ of awhich ~~certain~~relates ~~customer’s inability~~ to ~~meet~~machinery ~~its~~and ~~financial~~equipment. ~~obligation,~~The aCompany’s ~~specific~~capital expenditure ~~reserve~~program is ~~recorded~~ toexpected ~~reduce the receivable~~ to ~~the~~approximate ~~amount~~between ~~the~~$5,000 ~~Company~~and ~~believes~~$6,000 ~~will~~in befiscal ~~collected~~2006. ~~Material~~Future ~~changes~~capital inexpenditures ~~the~~beyond ~~allowance~~this ~~for~~level ~~doubtful~~will be ~~accounts~~discretionary, ~~may~~as ~~occur if~~ the ~~results~~Company ofpresently ~~management’s~~has ~~evaluation change~~sufficient oroperating ifcapacities ~~a different method is used~~ to ~~estimate~~support ~~possible losses. The accounts receivable~~several ~~balance~~years ~~was $29,958, net~~ of ansales ~~allowance~~growth ofat ~~$851~~its ashistorical ~~of March 31, 2005~~rates.

~~The~~Net ~~Company~~Cash ~~also~~Provided ~~has~~by aFinancing ~~loan and interest receivable of $2,914 from the Chief Executive Officer~~Activities. ~~The~~ ~~loan~~In ~~documents require that~~ the ~~after-tax~~three ~~proceeds~~months ofended ~~bonuses~~September 30, ~~payable~~2005, tonet ~~the CEO be applied~~cash ~~against~~provided ~~the~~by ~~loan~~financing ~~and~~activities ~~interest.~~was In$8,229 ~~the~~resulting ~~second~~from ~~quarter~~an ofincrease ~~fiscal~~in ~~2005,~~borrowings ~~the~~on ~~Company applied~~ the ~~after-tax~~Company’s ~~proceeds~~revolving ofcredit ~~the~~loan ~~CEO retention and performance bonuses~~ of $15,~~314~~024, to the ~~balance outstanding.~~increase ~~Management~~of ~~periodically evaluates~~ the ~~adequacy~~principal amount of the ~~underlying~~term ~~assets~~loan ~~to repay this~~by ~~loan.~~$3,850 ~~The~~resulting ~~Company~~from ~~believes~~ the ~~loan~~amendment, ~~receivable~~net ~~amount~~of ~~will~~$698 beof ~~realized~~scheduled inpayments ~~accordance with the terms~~ of ~~loan~~long-term ~~documents~~debt.

~~Inventory~~The ~~Valuation~~interest-bearing ~~Reserves~~obligations of the Company totaled $140,187 as of September 30, 2005, and consisted of: $21,426 outstanding under the Bank Credit Facility; $114,400 of 11% Senior Notes; mortgages of $4,312; and obligations of foreign subsidiaries and other debt of $49.

~~The Company values its inventory for accounting purposes at the lower of cost (first-in, first-out~~14 method) or market. In circumstances where the Company is aware of a problem in the valuation of a certain item, a specific reserve is recorded to reduce the item to its net realizable value. For all other inventory, the Company records a reserve based on a combination of factors, including actual usage in recent history and projected usage in the future. If expected circumstances should change due to general economic or product obsolescence issues resulting in lower-than-expected usage, management’s estimate of the net realizable value could be reduced by a material amount.

ValuationTable of Long-Lived Assets Contents

~~The~~Critical ~~Company’s~~Accounting ~~emergence from Chapter 11 bankruptcy proceedings resulted in a new reporting entity~~Policies and adoption of fresh start reporting in accordance with SOP No. 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code. The Company’s tangible assets were adjusted in accordance with SOP 90-7 which resulted in a decrease in the Company’s real estate of $11,644 and a decrease in personal property (machinery and equipment and furniture and fixtures) of $28,790. The Company’s identifiable intangible assets were adjusted to $24,675 representing customer contracts and relationships of $10,000, trademarks and tradenames of $8,635, and technology of $6,040.

InThe ~~addition~~discussion toand ~~the~~analysis ~~above,~~of ~~the~~our ~~application~~financial ofcondition ~~SOP~~and ~~90-7~~results ~~and~~of ~~SEC~~operations ~~Staff~~is ~~Accounting~~based ~~Bulletin~~upon ~~No. 54,~~our ~~Push~~consolidated ~~Down~~financial ~~Basis~~statements, ofwhich ~~Accounting~~have ~~Required~~been prepared in ~~Certain~~accordance ~~Limited~~with ~~Circumstances,~~accounting principles ~~resulted~~generally accepted in the ~~elimination~~ United States of ~~the~~America. ~~existing~~The ~~goodwill~~preparation ~~and~~of ~~the~~these ~~establishment~~financial statements ofrequires aus ~~new~~to ~~amount~~make ofestimates ~~goodwill~~and ofjudgments ~~$50,561,~~ that ~~represents~~affect the ~~“reorganization~~reported ~~value~~amounts inof ~~excess~~our assets, ofliabilities, ~~amounts~~revenues ~~allocable~~and tocosts ~~identifiable~~and expenses, and related disclosure of contingent assets.” Inand ~~accordance~~liabilities. ~~with~~On ~~the~~an ~~provisions~~on-going ofbasis, ~~Statement~~we ofevaluate ~~Financial~~our ~~Accounting~~estimates, ~~Standards~~including ~~(“FAS”)~~those ~~No. 142,~~related to: ~~Goodwill~~valuation of accounts and ~~Other~~notes ~~Intangible~~receivable ~~Assets~~and loan receivable from officer, novaluation ~~amortization~~of investments, valuation of ~~goodwill~~long-lived ~~was~~assets, ~~recorded~~valuation inof ~~fiscal~~inventory ~~2003~~valuation orreserves, revenue ~~fiscal~~recognition, ~~2004~~and deferred tax assets. ~~Additionally,~~We ~~the~~base ~~newly-established~~our ~~goodwill~~estimates ~~will~~on ~~not~~historical beexperience ~~amortized.~~and ~~Rather~~on various other assumptions that we believe reasonable under the circumstances, the ~~Company~~ ~~will~~results ~~evaluate~~of ~~this~~which form ~~asset~~the basis for ~~impairment~~making atjudgments ~~least~~about ~~annually~~the carrying value of assets and ~~whenever~~liabilities ~~there~~that isare annot ~~impairment~~readily ~~indicator~~apparent ~~using~~from ~~the~~other ~~fair~~sources. ~~value~~Actual ~~guidelines~~results ofmay ~~FAS~~differ Nofrom these estimates under different assumptions or conditions. ~~142.~~

~~The~~We ~~Company~~have ~~evaluates~~identified the ~~carrying~~following ~~value~~policies as critical to our business operations and the understanding of ~~its~~our ~~investment~~results inof ~~other~~operations. ~~long-lived~~For ~~assets~~a ~~for~~detailed discussion on the application of these ~~impairment~~and ~~such~~other asaccounting ~~property~~policies, ~~plant~~see ~~and~~Note ~~equipment~~C ~~whenever~~of ~~there~~the is“Notes anto ~~impairment~~Consolidated ~~indicator,~~Financial Statements” in ~~generally~~the ~~using~~Annual anReport ~~undiscounted~~on ~~cash~~Form ~~flow~~10-K ~~methodology~~for the Period Ended June 30, 2005.

19Valuation of Accounts and Notes Receivable

~~Revenue~~Management ~~Recognition~~evaluates and makes estimates of the collectibility of the Company’s accounts and notes receivable, including unbilled accounts receivable related to long-term equipment contracts, based on a combination of factors. Management analyzes historical bad debts, customer credit-worthiness, and current economic trends in evaluating the adequacy of the allowance for doubtful accounts and whether there is any impairment in its notes receivable. In circumstances where the Company is aware of a certain customer’s inability to meet its financial obligation, a specific reserve is recorded to reduce the receivable to the amount the Company believes will be collected. Material changes in the allowance for doubtful accounts may occur if the results of management’s evaluation change or if a different method is used to estimate possible losses. The accounts receivable balance was $31,557, net of an allowance of $696 as of September 30, 2005.

The Company has ~~entered~~notes ~~into~~receivable ~~certain~~plus ~~contracts~~accrued ~~with~~interest ~~customers~~from ~~for~~ the ~~construction~~Ruud ofLighting, ~~lighting and thin-film coating equipment~~Inc. ~~The~~shareholders ~~Company also has certain contracts related to~~ in the ~~further development~~aggregate ~~and~~amount ~~application~~ of ~~lighting and coating technologies for the U~~$2,102.S. ~~government.~~These ~~Revenue is~~notes ~~recognized~~are ondue ~~these~~December 1, ~~contracts~~2006, asbut ~~work~~rebates onearned ~~the contract progresses using the percentage of~~on ~~completion~~purchases ~~method~~by ofRuud ~~accounting~~Lighting, ~~which relies on estimates of total expected contract revenues and costs~~Inc. ~~Under~~pursuant ~~this method reasonable estimates of the costs applicable~~ to ~~the~~its ~~various~~current ~~stages~~agreement ofwith ~~a contract are made, thus, impacting~~ the ~~level~~Company ofwill ~~recognized revenue. Since the financial reporting~~be ofcredited ~~these~~toward ~~contracts~~prepayment ~~depends on estimates, which are assessed continually during the term~~ of the ~~contract,~~ ~~recognized~~principal ~~revenues~~ and ~~profit~~interest ~~are~~on ~~subject to revisions as~~ the ~~contract progresses toward completion~~notes. ~~Revisions~~The inCompany ~~profit~~believes ~~estimates are reflected in~~ the ~~period in which the facts that give~~ ~~rise~~total toreceivable ~~the~~amount ~~revision~~will ~~become known. Should estimates indicate a loss is expected to~~ be ~~incurred under~~realized ain ~~contract,~~accordance ~~cost of sales is charged~~ with athe ~~provision~~terms ~~for~~of ~~such~~the ~~loss~~notes.

~~Deferred~~Inventory ~~Tax Assets and~~ Valuation ~~Allowance~~Reserves

The Company ~~had~~values ~~approximately~~its ~~$10,379~~inventory offor ~~net~~accounting ~~deferred~~purposes ~~tax~~at ~~assets~~the ~~related~~lower ~~principally to certain unused tax credits and loss carryforwards as~~ of ~~June 30~~cost (first-in, ~~2004. The realization of these assets is~~first-out ~~based~~method) ~~upon~~or ~~the Company generating future taxable income~~market. ~~Due~~In tocircumstances where the Company’s ~~historical results it~~ is ~~uncertain~~aware asof toa ~~when~~problem itin ~~will~~the ~~realize~~valuation ~~taxable~~of ~~income that will allow it to utilize its tax~~a ~~credits~~certain ~~and loss carryforwards and~~item, ~~accordingly, has recorded~~ a ~~valuation~~specific ~~allowance~~reserve ~~of approximately~~is ~~$10,379.~~recorded ~~Additionally,~~to onreduce ~~August 15, 2003, Saratoga purchased~~ the ~~preferred~~item ~~and common~~to ~~shares~~its ~~owned by GE. This transaction caused an ownership change greater than 50% which will limit the annual~~ net ~~operating~~realizable ~~loss and tax credit carryforwards the Company can use to offset any future taxable income pursuant to Section 382 of the Internal Revenue Code~~value. ~~This limitation is~~For ~~effective~~all ~~with~~other ~~the fiscal year ended June 30~~inventory, ~~2004.~~the ~~The~~ Company ~~has~~records ~~net~~a ~~operating~~reserve ~~losses~~based ~~which,~~on ~~in accordance~~a ~~with~~combination ~~the principles~~ of ~~fresh start accounting~~factors, ~~were not recorded. These net operating~~including ~~losses~~actual ~~are~~usage ~~available~~in torecent behistory ~~utilized,~~ and, toprojected ~~the~~usage ~~extent~~in the ~~net~~future. ~~operating~~If ~~losses~~expected ~~are~~circumstances ~~utilized,~~should ~~goodwill~~change ~~will~~due beto ~~reduced~~general ~~accordingly~~economic ~~for~~or ~~the~~product ~~benefit~~obsolescence ~~received.~~issues ~~Management~~resulting ~~will~~in ~~continue to~~lower-than-expected ~~evaluate~~usage, ~~the~~management’s ~~realization~~estimate of ~~these deferred tax assets that are subject to~~ the ~~Company’s~~net ~~future operations.~~realizable ~~The~~value ~~Company’s~~could ~~future operations will~~ be ~~influenced~~reduced by ~~the~~a ~~general~~material ~~business environment, which is difficult to predict and beyond the control of the Company~~amount.

~~Foreign Currency~~15

ApproximatelyTable 31% of the Company’s net sales in fiscal 2004 were denominated in currencies other than U.S. dollars, principally pounds sterling, Australian dollars, Canadian dollars, Euros and Japanese yen. A significant weakening of such currencies versus the U.S. dollar could have a material adverse effect on the Company. Contents

~~Item~~Valuation 3.of ~~Quantitative~~Long-Lived ~~and Qualitative Disclosures about Market Risk~~Assets

~~During~~The Company evaluates the ~~nine~~carrying ~~months~~value ~~ended~~of ~~March 31,~~its ~~2005~~investment in long-lived assets (e.g. property, plant ~~there~~and ~~have~~equipment ~~been~~and noamortizable ~~material~~intangibles) ~~changes~~for inimpairment ~~the~~whenever ~~reported~~there is an impairment ~~market~~indicator, ~~risks~~generally ~~presented~~using inan undiscounted cash flow methodology. Additionally, the Company’s evaluates ~~Annual~~the ~~Report~~indefinite-lived onintangibles, ~~Form~~goodwill, ~~10-K~~trade names and trademarks, for impairment at least annually and whenever there is an impairment indicator using the ~~year~~fair ~~ended~~value ~~June 30,~~guidelines of FAS ~~2004~~No. 142.

20Revenue Recognition

~~Item~~The 4Company has entered into certain contracts with customers for the construction of lighting and thin-film coating equipment. ~~Controls~~The Company also has certain contracts related to the further development and ~~Procedures~~application of lighting and coating technologies for the U.S. government. Revenue is recognized on these contracts as work on the contract progresses using the percentage of completion method of accounting, which relies on estimates of total expected contract revenues and costs. Under this method reasonable estimates of the costs applicable to the various stages of a contract are made, thus, impacting the level of recognized revenue. Since the financial reporting of these contracts depends on estimates, which are assessed continually during the term of the contract, recognized revenues and profit are subject to revisions as the contract progresses toward completion. Revisions in profit estimates are reflected in the period in which the facts that give rise to the revision become known. Should estimates indicate a loss is expected to be incurred under a contract, cost of sales is charged with a provision for such loss.

~~The~~Deferred ~~Company~~Tax ~~evaluated~~Assets ~~the design~~ and ~~operation~~Valuation ~~of its disclosure controls and procedures as of~~Allowance March 31, 2005, to determine whether they are effective in ensuring that the disclosure of required information is timely made in accordance with the Exchange Act and the rules and forms of the Securities and Exchange Commission. This evaluation was made under the supervision and with the participation of management, including the Company’s principal executive officer and chief accounting officer. The principal executive officer and chief accounting officer have concluded, based on their review, that the Company’s disclosure controls and procedures, as defined at Exchange Act Rules 13a-14(c) and 15d-14(c), are effective to ensure that information required to be disclosed by the Company in reports that it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. No significant changes were made to the Company’s internal controls or other factors that could significantly affect these controls subsequent to the date of their evaluation.

21The Company had approximately $11,328 of net deferred tax assets related principally to certain unused tax credits and loss carryforwards as of June 30, 2005. The realization of these assets is dependent upon the Company generating future taxable income. Due to the Company’s historical results it is uncertain as to when it will realize taxable income that will allow it to utilize its tax credits and loss carryforwards and, accordingly, has recorded a valuation allowance of $12,154. Additionally, on August 15, 2003, Saratoga purchased the preferred and common shares owned by GE. This transaction caused an ownership change greater than 50% which will limit the annual net operating loss and tax credit carryforwards the Company can use to offset any future taxable income pursuant to Section 382 of the Internal Revenue Code that arose prior to the emergence from bankruptcy. This limitation is effective beginning with the fiscal year ended June 30, 2004. The Company has net operating losses which, in accordance with the principles of fresh start accounting, were not recorded. These net operating losses are available to be utilized, and, to the extent the net operating losses are utilized, goodwill will be reduced accordingly for the benefit received ($250 in the quarter ended September 30, 2005). Management will continue to evaluate the realization of these deferred tax assets that are subject to the Company’s future operations. The Company’s future operations will be influenced by the general business environment, which is difficult to predict and beyond the control of the Company.

~~Part~~Foreign ~~II. Other Information~~Currency

~~Except~~Approximately as35% ~~noted~~of ~~below,~~ the ~~items~~Company’s net sales in ~~Part II~~fiscal ~~are~~2005 ~~inapplicable~~were ordenominated in currencies other than U.S. dollars, ifprincipally ~~applicable~~pounds sterling, ~~would~~Australian bedollars, ~~answered in~~Canadian ~~the~~dollars, ~~negative~~Euros and Japanese yen. ~~These~~A ~~items~~significant ~~have~~weakening ~~been~~of ~~omitted~~such ~~and~~currencies noversus ~~other~~the ~~reference~~U.S. isdollar ~~made~~could ~~thereto~~have a material adverse effect on the Company.

~~Item 6. Exhibits and Reports on Form 8-K~~16

(a) Exhibits Table of Contents

Exhibit			Incorporated
Number		Title	by Reference
2.1	Venture Lighting International, Inc. et al. Fourth Amended Chapter 11 Plan of Reorganization confirmed December 8, 2003 effective December 10, 2003		(1	)
3.1	Third Amended and Restated Articles of Incorporation filed November 12, 2004		(2	)
3.2	Amended and Restated Code of Regulations		(2	)
4.1	Reference is made to Exhibit 2.1
12	Statement Re: Computation of Ratio of Earnings to Fixed Charges
31.1	Rule 13a-14(a)/15d-14(a) Certification
31.2	Rule 13a-14(a)/15d-14(a) Certification
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Item 3. Quantitative and Qualitative Disclosures about Market Risk

~~(1)~~During ~~Incorporated~~the bythree ~~reference~~months toended ~~Exhibit~~September 30, of2005, ~~same~~there ~~number~~have been no material changes in the reported market risks presented in the Company’s ~~Current~~Annual Report on Form 810-K ~~dated~~for ~~December~~the 8,year ~~2003,~~ended ~~filed December 23~~June 30, ~~2003~~2005.

~~(2)~~Item 4. ~~Incorporated~~Controls byand ~~reference to Exhibit of same number in Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2004, filed November 12, 2004.~~Procedures

~~(b)~~The Company evaluated the design and operation of its disclosure controls and procedures as of September ~~Reports~~30, 2005, to determine whether they are effective in ensuring that the disclosure of required information is timely made in accordance with the Exchange Act and the rules and forms of the Securities and Exchange Commission. This evaluation was made under the supervision and with the participation of management, including the Company’s principal executive officer and chief accounting officer. The principal executive officer and chief accounting officer have concluded, based on ~~Form~~their review, that the Company’s disclosure controls and procedures, as defined at Exchange Act Rules 813a-K14(c) and 15d-14(c), are effective to ensure that information required to be disclosed by the Company in reports that it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. No significant changes were made to the Company’s internal controls or other factors that could significantly affect these controls subsequent to the date of their evaluation.

~~No reports on Form 8-K were filed during the quarter ended March 31, 2005.~~17

22 Table of Contents

~~SIGNATURES~~Part II. Other Information

~~Pursuant~~Except toas ~~the~~noted ~~requirements~~below, of the ~~Securities~~items ~~Exchange~~in ~~Act~~Part II ofare ~~1934~~inapplicable or, ~~the~~if ~~registrant~~applicable, ~~has~~would ~~duly~~be ~~caused~~answered ~~this~~in ~~report~~the tonegative. beThese ~~signed~~items onhave ~~its~~been ~~behalf~~omitted byand ~~the~~no ~~undersigned~~other ~~hereunto~~reference ~~duly~~is ~~authorized~~made thereto.

	ADVANCED LIGHTING TECHNOLOGIES, INC.
Date: May 16, 2005	By:	/s/ Wayne R. Hellman
		Wayne R. Hellman
		Chief Executive Officer
Date: May 16, 2005	By:	/s/ Christopher F. Zerull
		Christopher F. Zerull
		Vice President and Chief Accounting Officer

Item 6. Exhibits and Reports on Form 8-K

23 (a) Exhibits

EXHIBIT INDEX


Exhibit		Incorporated
Number	Title	by Reference

2.1	Venture Lighting International, Inc. et al. Fourth Amended Chapter 11 Plan of Reorganization confirmed December 8, 2003 effective December 10, 2003		(1	)

3.1	Third Amended and Restated Articles of Incorporation filed November 12, 2004		(2	)

3.2	Amended and Restated Code of Regulations		(2	)

4.1	Reference is made to Exhibit 2.1

31.1	Rule 13a-14(a)/15d-14(a) Certification

31.2	Rule 13a-14(a)/15d-14(a) Certification

32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit			Incorporated
(1)	Incorporated by reference to Exhibit of same number in Company’s Current Report on Form 8-K dated December 8, 2003, filed December 23, 2003.
Number		Title	by Reference
(2)	Incorporated by reference to Exhibit of same number in Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2004, filed November 12, 2004.
2.1	Venture Lighting International, Inc. et al. Fourth Amended Chapter 11 Plan of Reorganization confirmed December 8, 2003 effective December 10, 2003		(1	)
3.1	Third Amended and Restated Articles of Incorporation filed November 12, 2004		(2	)
3.2	Amended and Restated Code of Regulations		(2	)
4.1	Reference is made to Exhibit 2.1
12	Statement Re: Computation of Ratio of Earnings to Fixed Charges
31.1	Rule 13a-14(a)/15d-14(a) Certification
31.2	Rule 13a-14(a)/15d-14(a) Certification
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(1b) ~~Incorporated~~Reports on Form 8-K The Company filed two reports on Form 8-K during the quarter ended September 30, 2005. First, the Company filed a Report on Form 8-K on August 2, 2005, under Item 1.01, Entry into a Material Definitive Agreement, in which it reported the adoption of the Company’s 2005 Equity Incentive Plan by ~~reference~~the toBoard ~~Exhibit~~of Directors, the granting of ~~same~~awards ~~number~~under inthis Plan, the entry into an Amended and Restated Employment Agreement with the Company’s ~~Current~~Chief Executive Officer, and the entry into Severance and Noncompetition Agreements with two other executives of the Company. The Company also reported, under Item 5.05, the approval by the Board of Directors of a “Code of Ethical Conduct for Chief Executive Officer and Executive Officers Including Senior Financial Officers” and the amendment of a portion of the existing Code of Conduct specifying that disciplinary action, to and including dismissal, could result from violation of the Code of Conduct. Exhibits pertaining to these items were filed with the Report on Form 8-K. ~~dated~~Second, ~~December~~the Company filed a Report on Form 8-K on September 12, ~~2003~~2005, ~~filed~~announcing ~~December~~the ~~23,~~resignation ~~2003~~of a director.

~~(2) Incorporated by reference to Exhibit of same number in Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2004, filed November 12, 2004.~~18

SIGNATURES

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


	ADVANCED LIGHTING TECHNOLOGIES, INC.
Date: October 28, 2005	By:	/s/ Wayne R. Hellman
		Wayne R. Hellman
		Chief Executive Officer



Date: October 28, 2005	By:	/s/ Christopher F. Zerull
		Christopher F. Zerull
		Vice President and Chief Accounting Officer

EXHIBIT INDEX


Exhibit		Incorporated
Number	Title	by Reference

2.1	Venture Lighting International, Inc. et al. Fourth Amended Chapter 11 Plan of Reorganization confirmed December 8, 2003 effective December 10, 2003		(1	)

3.1	Third Amended and Restated Articles of Incorporation filed November 12, 2004		(2	)

3.2	Amended and Restated Code of Regulations		(2	)

4.1	Reference is made to Exhibit 2.1

31.1	Rule 13a-14(a)/15d-14(a) Certification

31.2	Rule 13a-14(a)/15d-14(a) Certification

32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


(1)		Incorporated by reference to Exhibit of same number in Company’s Current Report on Form 8-K dated December 8, 2003, filed December 23, 2003.

(2)		Incorporated by reference to Exhibit of same number in Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2004, filed November 12, 2004.

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