================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
QUARTERLY REPORT FOR SMALL BUSINESS ISSUERS SUBJECT
TO THE 1934 ACT REPORTING REQUIREMENTS
FORM 10-QSB
___________________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE REPORT OF 1934
For the transition period from ___________ to ____________
Commission file number 000-27548
___________________
LIGHTPATH TECHNOLOGIES, INC.
___________________
(Exact name of registrant as specified in its charter)
DELAWARE 86-0708398
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6820 Academy Parkway East, NE 87109
Albuquerque, New Mexico (ZIP Code)
(Address of principal executive offices)
Registrant's telephone number, including area code:
(505)342-1100
-----------------
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 and 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 X NO
----- ----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date:
Common Stock, Class A, $.01 par value 2,741,291 shares
Common Stock, Class E-1, $.01 par value 1,449,942 shares
Common Stock, Class E-2, $.01 par value 1,449,942 shares
Common Stock, Class E-3, $.01 par value 966,621 shares
- --------------------------------------- --------------
Class Outstanding at October 31, 1996
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<PAGE>
LigthPath Technologies, Inc.
( A Development Stage Company)
Form 10-Q
Index
Item Page
- ---- ----
Part I Financial information
Balance Sheet 2
Statements of Operations 3
Statements of Cash Flows 4
Notes to Financial Statements 5
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Part II Other information
Legal Proceedings 9
Changes in Securities 9
Defaults Upon Senior Securities 9
Submission of Matters to Vote of Security Holders 9
Other Items 9
Exhibits and Reports on Form 8-K 9
Signatures 10
<PAGE>
LightPath Technologies, Inc.
(A Development Stage Company)
Balance Sheet
<TABLE>
<CAPTION>
September 30, June 30,
1996 1996
-------------------------------------
Unaudited
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 3,244,016 $ 4,335,133
Trade accounts receivable 128,473 23,500
Inventories 131,093 66,186
Advances to employees 14,203 14,445
Prepaid expenses and other 40,420 82,608
-------------------------------------
Total current assets 3,558,205 4,521,872
Property and equipment - net 599,924 438,726
Intangible assets - net 263,338 250,206
-------------------------------------
Total assets $ 4,421,467 $ 5,210,804
=====================================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 329,727 $ 362,206
Accrued payroll and benefits 264,089 274,237
-------------------------------------
Total current liabilities 593,816 636,443
Note payable to related parties 30,000 30,000
Redeemable common stock
Class E-1 - performance based and redeemable common stock
1,449,942 and 1,454,547, shares issued and outstanding at
September 30, 1996 and June 30, 1996, respectively 14,499 14,545
Class E-2 - performance based and redeemable common stock
1,449,942 and 1,454,547 shares issued and outstanding at
September 30, 1996 and June 30, 1996, respectively 14,499 14,545
Class E-3 - performance based and redeemable common stock
966,621 and 969,691, issued and outstanding at September 30,
1996 and June 30, 1996, respectively 9,666 9,697
Stockholders' equity
Preferred stock, $.01 par value; 5,000,000 shares authorized; none
issued and outstanding at September 30, 1996 or June 30, 1996 - -
Common stock:
Class A, $.01 par value; 34,500,000 shares authorized, voting
2,741,291 and 2,722,191, shares issued and outstanding at
September 30, 1996 and June 30, 1996, respectively 27,414 27,222
Additional paid-in capital 18,702,928 18,692,578
Deficit accumulated during the development stage (14,971,355) (14,214,226)
-------------------------------------
Total stockholders' equity 3,758,987 4,505,574
-------------------------------------
Total liabilities and stockholders' equity $ 4,421,467 $ 5,210,804
=====================================
</TABLE>
See accompanying notes.
2
<PAGE>
LightPath Technologies, Inc.
(A Development Stage Company)
Statements of Operations
<TABLE>
<CAPTION>
Inception
August 23,
1985
Unaudited through
Three Months Ended September
September 30 30
------------------------------------------------------
1996 1995 1996
------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Product development fees $ 111,347 $ 30,000 $ 380,347
Lenses and other 12,123 128 132,511
------------------------------------------------------
Total revenues 123,470 30,128 512,858
Costs and expenses:
Cost of goods sold 12,687 - 219,542
Selling, general and administrative 662,750 293,874 11,809,186
Research and development 246,943 12,570 6,921,397
Amortization of unearned
compensation - 867,642 2,076,217
------------------------------------------------------
Total costs and expenses 922,380 1,174,086 21,026,342
------------------------------------------------------
Operating loss (798,910) (1,143,958) (20,513,484)
Other income(expense)
Investment income 42,558 - 136,009
Interest expense (777) (90,880) (1,851,144)
------------------------------------------------------
Net loss $ (757,129) $(1,234,838) $(22,228,619)
======================================================
Net loss per share $(.28) $(1.65) -
======================================================
Number of shares used in per share 2,735,287 748,898 -
calculation
======================================================
</TABLE>
See accompanying notes.
3
<PAGE>
LightPath Technologies, Inc.
(A Development Stage Company)
Statements of Cash Flows
<TABLE>
<CAPTION>
Inception
August 23,
1985
Three Months Ended through
Unaudited September 30 September 30
-------------------------------------------
1996 1995 1996
-------------------------------------------
<S> <C> <C> <C>
Operating activities
Net loss $ (757,129) $(1,234,838) $(22,228,619)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 35,511 20,216 491,566
Accretion of bridge notes - 38,623 244,808
Services provided for common stock 110,419 5,000 1,251,232
Write-off abandoned patent applications - - 111,059
Amortization of unearned compensation - 867,642 2,076,217
Changes in operating assets and liabilities:
Receivable, advances to employees (104,731) 41,374 (142,676)
Inventories (64,907) - (131,093)
Prepaid expenses and other 42,188 (240,274) (40,420)
Accounts payable and accrued expenses (42,627) 445,502 1,879,480
-------------------------------------------
Net cash used in operating activities (781,276) (56,755) (16,488,446)
Cash flows from investing activities
Property and equipment additions (193,919) - (1,060,405)
Costs incurred in acquiring patents (15,922) (2,392) (405,480)
-------------------------------------------
Net cash used in investing activities (209,841) (2,392) (1,465,885)
Cash flows from financing activities
Proceeds from notes payable - 14,489 4,398,606
Payments on notes payable - - (1,097,350)
Proceeds from convertible notes payable - - 1,465,529
Repayments of convertible notes payable - - (212,500)
Proceeds from bridge loans - 35,433 1,765,748
Repayments of bridge loans - - (1,250,000)
Proceeds from sales of common stock - 9,567 9,189,443
Repurchase of common stock (100,000) - (669,512)
Proceeds from sales of treasury stock - - 351,119
Proceeds from sales of limited partnership units - - 7,257,264
-------------------------------------------
Net cash provided by financing activities (100,000) 59,489 21,198,347
-------------------------------------------
Net increase (decrease) in cash and cash equivalents (1,091,117) 342 3,244,016
Cash and cash equivalents at beginning period 4,335,133 11,177 -
===========================================
Cash and cash equivalents at end of period $3,244,016 $ 11,519 $ 3,244,016
===========================================
Supplemental disclosure of cash flow information:
Class A common stock issued for services $ 110,419 $ 4,904 $ 1,222,036
Debt and accrued interest converted into Class A
common stock - 16,877 6,281,164
Stock options granted for services - - 98,500
Class E common stock issued - 96 38,801
</TABLE>
See accompanying notes.
4
<PAGE>
LightPath Technologies, Inc.
(A Development Stage Company)
Notes to Financial Statements - Unaudited
Organization and Purpose
LightPath Technologies, Inc. (the Company) was incorporated in Delaware on June
15, 1992 as the successor to LightPath Technologies Limited Partnership formed
in 1989, and its predecessor, Integrated Solar Technologies Corporation formed
on August 23, 1985. The Company is a development stage enterprise engaged in the
research, development and production of GRADIUM(TM) lenses. GRADIUM is an
optical quality glass material with varying refractive indices, capable of
reducing optical aberrations inherent in conventional lenses and performing with
a single lens, or fewer lenses, tasks performed by multi-element conventional
lens systems. Since its inception in 1985, the Company has been engaged in basic
research and development. With the proceeds from the initial public offering
(IPO) on February 22, 1996, the Company began to focus on product development
and sales.
1. Summary of Significant Accounting Matters
The accompanying unaudited financial statements have been prepared in accordance
with the instructions to Article 10 of Regulation S-X and, therefore, do not
include all information and footnotes necessary for a fair presentation of
financial position, results of operations, and cash flows in conformity with
generally accepted accounting principles. These financial statements should be
read in conjunction with the Company's financial statements and related notes
included in the Form 10-KSB as filed with the Securities and Exchange Commission
on August 28, 1996.
The information furnished, in the opinion of management, reflects all
adjustments, which include normal recurring adjustments, necessary to present
fairly the results of operations of the Company for the three month periods
ended September 30, 1996 and 1995. Results of operations for interim periods are
not necessarily indicative of results which may be expected for the year as a
whole.
Cash and cash equivalents consist of cash in the bank and temporary investments
with maturities of ninety days or less when purchased.
Inventories which consists principally of raw materials, lenses and components
are stated at the lower of cost, on a first-in, first-out basis, or market.
Inventory costs include material, labor and manufacturing overhead.
Property and equipment are stated at cost and depreciated using the
straight-line method over the estimated useful lives of the related assets from
three to seven years.
Intangible assets consisting of patents and trademarks, are recorded at cost.
These assets are being amortized on the straight-line basis over the estimated
useful lives of the related assets from ten to seventeen years.
Income taxes are accounted for under the provisions of Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes, which requires an
asset and liability approach to financial accounting and reporting for income
taxes.
Deferred income tax assets and liabilities are computed for differences between
the financial statement and tax bases of assets and liabilities that will result
in taxable or deductible amounts in the future based upon enacted tax laws and
rates applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax expense is
the tax payable or refundable for the period plus or minus the change in
deferred tax assets and liabilities during the period.
Revenue recognition occurs from sales of product upon shipment.
5
<PAGE>
Research and development costs are expensed as incurred.
Stock based employee compensation is accounted for under the provision of APB
Opinion No. 25, Accounting for Stock Issued to Employees, which requires no
recognition of compensation expense when the exercise price of the employees
stock option equals the market price of the underlying stock on the date of
grant.
Per share data is computed using the weighted average number of common shares
and common equivalent shares outstanding during each period after giving
retroactive effect to the recapitalization. Restricted Class E common shares and
stock options for the purchase of Class E common shares are considered
contingently issuable and, accordingly, are excluded from the weighted average
number of common and common equivalent shares outstanding.
Net loss per share for the period from inception through September 30, 1996 is
not presented as the Company's predecessor was a limited partnership and no
common shares were outstanding.
Management uses estimates and makes assumptions during the preparation of the
Company's financial statements that affect amounts reported in the financial
statements and accompanying notes. Such estimates and assumptions could change
in the future as more information becomes known, which in turn could impact the
amounts reported and disclosed herein.
Financial instruments of the Company are valued as required by Statement of
Financial Accounting Standards No. 107, Disclosures about Fair Values of
Financial Instruments. The carrying amounts of cash and cash equivalents
approximate fair value.
2. Inventories
The components of inventories include the following at September 30, 1996:
Finished goods and work in process $ 72,987
Raw materials 58,106
----------------
Total inventories $131,093
=================
6
<PAGE>
LightPath Technologies, Inc.
(A Development Stage Company)
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
- ---------------------
Three months ended September 30, 1996 compared with three months ended September
30, 1995
Revenue totaled $123,470 for the three months ended March 31, 1996, an
increase of $93,342, over the comparable period last year. The increase was
attributable to an additional $81,000 in product development fees and an
additional $12,000 in lens sales. The new sales were derived from government
funded subcontracts in the area of solar energy to allow satellites to produce
their own power and the next generation of multiplexing devices used in
conjunction with optical fiber. The total award of the subcontracts was
$285,000. The Company did not enter into any new OEM projects during the
quarter. Cost of sales approximated product sales due to shipment of samples,
outside finishing expenses, and the low volume of inventory production. It is
anticipated that with increased volume the cost of production will decrease.
Administrative costs increased $368,876 or 126% primarily due to the addition of
personnel in all areas, sales and marketing, administration and operations along
with increased overhead in these areas as a result of an expected scale-up of
operations. Research and development costs increased from $12,570 to $246,943.
The research department staff has increased to 4.5 full time equivalents, which
were hired to continue the Company's research and development efforts in the
area of new glass families. There were no costs related to unearned compensation
from incentive stock options during the current quarter representing a decrease
of $867,642 for the period.
Investment income increased $42,588 due to the interest earned on
temporary investments. Interest expense decreased approximately $90,000 due
primarily to the conversion of debt to equity in conjunction with the completion
of the Company's IPO.
Net loss of $757,129 was a decrease of $477,709 from the comparable
period last year due to the increased gross margin $80,655, decrease of $867,642
in unearned compensation and the increase in other income of $132,661. These
gains were offset by the increase in selling, general and administrative costs
$368,876 and research and development $234,373. Net loss per share of $.28 was
an improvement of $1.37 due to increased gross margin $.03, the decrease
unearned compensation $.32 and the increase in other income $.05, offset by the
increase in selling, general and administrative costs $.13 and research and
development other expenses $.09. The remaining $1.19 gain was due to the
increase in weighted common stock due to the IPO.
Financial Resources and Liquidity
- ---------------------------------
LightPath has financed its operations through private placements of
equity, borrowings or debt until February 1996 when an initial public offering
generated net proceeds of approximately, $7.452 million. The Company expects to
continue to incur losses until such time, if ever, as it obtains market
acceptance for its product at selling prices and volumes which provide adequate
gross profit to cover operating costs. Company has budgeted its cash
requirements for fiscal 1997 at $3,700,000 a substantial increase from fiscal
1996 due to the implementation of a sales program, additional personnel and
overhead costs. During the first quarter the Company's actual cash requirements
were approximately $280,000 under this budget. In addition, the Company budgeted
$700,000 for fiscal 1997 to continue its research and development efforts.
During the first quarter the Company's actual cash requirements for research and
development equaled this budget. The Company also budgeted $800,000 primarily to
be used for equipment to expand its manufacturing facilities during fiscal year
1997. During first quarter the Company incurred approximately $210,000 in
capital equipment and patent costs. The Company anticipates purchasing
approximately $170,000 in capital equipment and patent costs by December 31,
1996.
7
<PAGE>
LightPath Technologies, Inc.
(A Development Stage Company)
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Since the Company has principally been engaged in basic research and
development of its products, it has not been significantly impacted by
inflation. The Company does not believe that seasonality will have a significant
impact on its business.
8
<PAGE>
LightPath Technologies, Inc.
(A Development Stage Company)
PART II
-------
Item 1. Legal Proceedings
In October 1996 the Company was informed that a lawsuit filed in the
U.S. District Court, Tucson, by a former employee had been terminated by the
employee following the discovery phase.
There have been no material developments in any other legal actions
since the Company's Form 10-KSB for the year ended June 30, 1996. LightPath is
subject to various claims and lawsuits in the ordinary course of business, none
of which is material to the Company's financial condition and results of
operations.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
LightPath Technologies, Inc. conducted its regular 1996 Annual Meeting
of Stockholders on September 30, 1996. Actions concluded at the meeting through
submission of matters to a vote by stockholders was conducted by proxy and
included the following:
1. Election of one Class III Director to hold office until
the Annual Meeting of Stockholders in 1999 and his
successor is elected and qualified. The election of Mr.
Louis Leeburg as Class III Director of the Company was
approved by the stockholders by a vote of 5,399,518 FOR
and 32,500 ABSTENTIONS.
2. Ratification of the selection of KPMG Peat Marwick LLP as
independent accounts for the Company for the fiscal year
ending June 30, 1997 was approved by the stockholders by a
vote of 5,368,532 FOR, 24,506 AGAINST and 38,980
ABSTENTIONS.
3. Ratification of the proposal to increase the number of
shares of Common Stock which may be issued upon exercise
of options granted under the Company's 1992 Omnibus
Incentive Plan from 104,545 to 325,000 was approved by the
stockholders by a vote of 3,706,918 FOR, 228,833 AGAINST
and 972,034 ABSTENTIONS.
Item 5. Other Items
None
Item 6. Exhibits and Reports on Form 8-K
The following reports were filed under the Securities and Exchange Act
of 1934 during the quarter ended September 30, 1996:
Current Report on Form 8-K dated August 15, 1996 to announce the
termination of Ernst & Young LLP as principal accountants effective with the
conclusion of the June 30, 1996 reporting period.
Current Report on Form 8-K/A No. 1 dated September 3, 1996 to announce
that KPMG Peat Marwick LLP was engaged as principal accountants for the Company.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed in its behalf by the
undersigned, thereunto duly authorized.
LIGHTPATH TECHNOLOGIES, INC.
By: /s/ Donald Lawson October 31, 1996
----------------------------------------
Donald Lawson Date
Executive Vice President and Treasurer
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial
information extracted from the Form 10-QSB for the
three month period ended September 30, 1996 and is
qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 3,244,016
<SECURITIES> 0
<RECEIVABLES> 128,473
<ALLOWANCES> 0
<INVENTORY> 131,093
<CURRENT-ASSETS> 3,558,205
<PP&E> 1,038,637
<DEPRECIATION> 438,713
<TOTAL-ASSETS> 4,421,467
<CURRENT-LIABILITIES> 593,816
<BONDS> 0
0
0
<COMMON> 27,414
<OTHER-SE> 18,702,928
<TOTAL-LIABILITY-AND-EQUITY> 4,421,467
<SALES> 12,123
<TOTAL-REVENUES> 123,470
<CGS> 12,687
<TOTAL-COSTS> 12,687
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 777
<INCOME-PRETAX> (757,129)
<INCOME-TAX> 0
<INCOME-CONTINUING> (757,129)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (757,129)
<EPS-PRIMARY> (.28)
<EPS-DILUTED> 0
</TABLE>
