LIGHTPATH TECHNOLOGIES INC
424B1, 1997-01-21
GLASS PRODUCTS, MADE OF PURCHASED GLASS
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Prospectus
                          LIGHTPATH TECHNOLOGIES, INC.
                1,840,000 UNITS, EACH CONSISTING OF ONE SHARE OF
               CLASS A COMMON STOCK AND ONE REDEEMABLE B WARRANT,
            ISSUABLE UPON THE EXERCISE OF REDEEMABLE CLASS A WARRANTS
                                       AND
                    3,680,000 SHARES OF CLASS A COMMON STOCK
            ISSUABLE UPON THE EXERCISE OF REDEEMABLE CLASS B WARRANTS

         Lightpath  Technologies,  Inc., a Delaware corporation (the "Company"),
hereby  offers:  (i)  1,840,000  Units  ("Units")  issuable upon the exercise of
1,840,000 Class A Warrants (the "Class A Warrants"), each unit consisting of one
share of Class A Common Stock, $.01 par value,  ("Class A Common Stock") and one
redeemable Class B Warrant (the "Class B Warrants"); and (ii) 3,680,000 share of
Class A Common Stock  issuable  upon the exercise of Class B Warrants  which are
presently  outstanding.  The  shares  of Class A Common  Stock  and the  Class B
Warrants included in the Units will be immediately  separately  transferable and
the Units will not trade as a separate  security.  1,600,000 of the  outstanding
Class A Warrants and Class B Warrants (collectively, the "Warrants") were issued
in connection  with the Company's  initial public  offering  ("IPO") in February
1996 of 1,840,000  Units ("IPO  Units"),  with each IPO Unit  consisting  of one
share of Class A Common Stock,  one Class A Warrant and one Class B Warrant.  In
March 1996, D.H. Blair Investment Banking Corp. ("Blair"), as the underwriter of
the IPO,  exercised its  over-allotment  to purchase an  additional  240,000 IPO
Units.  The Company also  registered  in the IPO 839,000  Class A Warrants  (the
"Selling   Securityholders'    Warrants")   on   behalf   of   certain   selling
securityholders (the "Selling Securityholders"), none of which have been sold to
date by the  Selling  Securityholders.  There  are  1,840,000  Class A  Warrants
outstanding  and 1,840,000  Class B Warrants  outstanding as of the date of this
Prospectus  (excluding the 839,000 Warrants that continue to be held the Selling
Securityholders (the "Remaining Selling  Securityholders")and an option to Blair
to  purchase  160,000  Units  for an  exercise  price of $6.75 , "Unit  Purchase
Option"),assuming the exercise of all Class A Warrants,  there will be 1,840,000
additional Class B Warrants issuable, for a total of 3,680,000 Class B Warrants.
Each Class A Warrant  entitles  the holder to  purchase  one Unit at an exercise
price of $6.50, subject to adjustment.  Each Class B Warrant entitles the holder
to purchase, at an exercise price of $8.75, subject to adjustment,  one share of
Class A  Common  Stock.  The  Class A  Warrants  and the  Class B  Warrants  are
exercisable  until  February 22, 2001. The Warrants are subject to redemption by
the Company for $.05 per Warrant,  upon 30 days' written notice,  if the average
closing  bid  price of the Class A Common  Stock  exceeds  $9.10 per share  with
respect to the Class A Warrants and $12.25 per share with respect to the Class B
Warrants  (subject to adjustment in each case) for 30 consecutive  business days
ending within 15 days of the date the Warrants are called for redemption.

         The Class A Common stock is one of four classes of the Company's Common
Stock:  Class A,  Class  E-1,  Class E-2 and Class E-3 ( which are  collectively
referred to herein as the "Common Stock"). See "Description of Securities."

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

         THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND
               SUBSTANTIAL IMMEDIATE DILUTION. SEE "RISK FACTORS".
                             ---------------------
    THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
           AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
           NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
                SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
                 ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
                     TO THE CONTRARY IS A CRIMINAL OFFENSE.

                The date of this Prospectus is January 10, 1997.
<PAGE>
The Company  has agreed to pay to Blair a  solicitation  fee (the  "Solicitation
Fee") equal to 5% of the  exercise  prices in  connection  with the  exercise of
Warrants  under certain  conditions.  See "Plan of  Distribution."  The exercise
prices of the Warrants were  determined by  negotiation  between the Company and
Blair,  and are not necessarily  related to the Company's asset value, net worth
or other criteria of value.

The  Company's  IPO Units,  Class A Common  Stock,  Class A Warrants and Class B
Warrants  are traded on the Nasdaq  SmallCap  Market  under the  symbols  LPTHU,
LPTHA,  LPTHW, LPTHZ,  respectively.  On November 15, 1996 closing prices of the
IPO Units,  Class A Common  Stock,  Class A Warrants  and Class B Warrants  were
$7.50, $5.88, $2.00 and $.75, respectively.

<TABLE>
<CAPTION>
=======================================================================================================
                                      Warrant                  Warrant               Proceeds to
                                  Exercise Price         Solicitation Fee(1)         the Company
- -------------------------------------------------------------------------------------------------------
<S>                           <C>                      <C>                      <C>
Per Class A Warrant                    $6.50                    $.33                    $6.17
Total (2)                     $11,960,000              $   598,000              $11,362,000
Per Class B Warrant                    $8.75                    $.44                    $8.31
Total (2)                     $32,200,000              $1,610,000               $30,590,000
=======================================================================================================
</TABLE>
     (1)  Represents  Solicitation Fees payable to Blair pursuant to the Warrant
          Agreement between the Company and Blair in certain circumstances.  See
          "Plan of Distribution."

     (2)  Assumes  the  exercise  of all Class A Warrants  and Class B Warrants.
          There can be no assurance that any of the Warrants will be exercised.
                                       2
<PAGE>
                               PROSPECTUS SUMMARY

- --------------------------------------------------------------------------------
         The  following  summary  should  be read in  conjunction  with,  and is
qualified  in its  entirety  by the  more  detailed  information  and  financial
statements (including the notes thereto) appearing elsewhere in this Prospectus.
Unless  otherwise  indicated,  the  information  in this  Prospectus  assumes no
exercise of any other outstanding warrants or options.  This Prospectus contains
forward-looking  statements that involve risks and uncertainties.  The Company's
actual  results  may differ  significantly  from the  results  discussed  in the
forward-looking  statements.  Factors that might cause such differences include,
but are not limited to, those discussed in the "Risk Factors."

                                   The Company
         LightPath  Technologies,  Inc. (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.  The Company  believes  that GRADIUM
lenses provide advantages over conventional lenses for certain applications.  By
reducing  optical  aberrations,  the Company  believes  that GRADIUM  lenses can
provide sharper images, higher resolution, less image distortion, a wider usable
field of view and a smaller focal spot size. By reducing the number of lenses in
an optical system,  the Company believes that GRADIUM can provide more efficient
light  transmission  and  greater  brightness,  lower  production  costs,  and a
simpler, smaller product. While other researchers have sought to produce optical
quality lens material with the  properties of GRADIUM,  the Company is not aware
of any other  person  or firm  that has  developed  a  repeatable  manufacturing
process for producing  such material on a  prescribable  basis.  The Company has
been issued patents and has pending patent applications related to its materials
composition,  product  design and  fabrication  processes for the  production of
GRADIUM products.

         The Company's  initial products are a line of loose optical  components
for "simple"  optical  products  (products  with one to three lens  elements and
simple  mounts,  as opposed to  products  with many lens  elements  and  complex
housing or  alignment  requirements).  The Company  believes  that  designers of
simple optical  products will be able to  incorporate  GRADIUM lenses into their
products without  substantial  redesign or retooling.  The Company believes that
laser  applications  present a market  for its  loose  optical  components,  and
intends to concentrate its initial product  development and marketing efforts on
that market segment.  Lasers are presently used  extensively in a broad range of
consumer and commercial  products,  including  fiber-optics,  robotics,  barcode
reading, document reproduction and audio and video compact disc machines.

         In addition to broad-based  marketing of laser components,  the Company
also will seek  contracts  with  original  equipment  manufacturers  ("OEMs") to
design and produce complex,  proprietary optical products incorporating GRADIUM.
The Company  expects  initially to target OEMs in emerging  industries,  such as
multimedia  and  telecommunications,  which  the  Company  believes  may be more
inclined  to   incorporate   GRADIUM   lenses  in  the   development   of  their
next-generation  products,  and  perform-oriented  industries,  such as  medical
instruments, which are seeking to optimize performance of existing
                                       3
<PAGE>
optical  products.  The Company has produced  prototype lenses for several OEMs,
but these  relationships  have not yet yielded commercial sales and there can be
no assurance that any of them will mature to the commercial  production phase or
produce  significant  revenues for the Company.  Further  development of GRADIUM
will be necessary for certain of these uses.

     Since its inception in 1985, the Company has been engaged in basic research
and  development  and only recently began to focus on product  development.  The
Company  received  its first  revenues  from product  sales in 1994,  which were
generated by catalog sales to researchers. The Company believes that most of its
product sales to date have been to persons evaluating the commercial application
of GRADIIJM or using the  products  for  research  and  development  The Company
intends to offer standard, computer-based profiles of GRADIUM that engineers can
use for product design. Further development is necessary to expand the Company's
available  standard  profiles  and  to add  additional  GRADIUM  glass  families
required for certain optics  applications.  The Company  conduces to develop new
GRADIUM  materials  with  various  refractive  index  profiles.   The  Company's
marketing  efforts  are  still in the  early  stage,  and it will need to devote
substantial  effort and  resources  to develop its  marketing  organization,  to
educate optical  designers in the various  markets of GRADIUM's  advantages over
alternative lens materials, and to obtain OEM product development contracts. The
Company's  insufficient  capital has limited its  production  and  marketing  of
GRADIUM products.  The Company intends to expand its production and marketing of
GRADIUM products upon completion of the IPO.

     The  Company  was   incorporated   in  Delaware  in  1992.   Its  corporate
headquarters  are located at 6820 Academy  Parkway East N.E.,  Albuquerque,  New
Mexico, 87109 and its telephone number is (505) 342-1100.


Securities Offered by the Company:           1,840,000  Units  consisting of one
                                             share  of Class A  Warrant  and one
                                             Class  B  Warrant  of the  Company.
                                             Each Class A Warrant is exercisable
                                             at any time on or  before  February
                                             22 , 2001 to purchase for $6.50 one
                                             share of Class A Common  Stock  and
                                             one  Class B  Warrant,  subject  to
                                             adjustment. Each Class B Warrant is
                                             exercisable  any time on or  before
                                             February 22 , 2001 to purchase  one
                                             share of Class A Common  Stock  for
                                             $8.75,  subject to adjustment.  The
                                             Warrants are subject to  redemption
                                             in certain circumstances. The Class
                                             A  Common  Stock  and  Class  A and
                                             Class B Warrants will be separately
                                             tradable immediately upon issuance.
                                             Unit  Purchase  Option to Blair for
                                             160,000  Units  for  $6.75 per unit
                                             during   the  three   year   period
                                             commencing  February 22, 1998. Each
                                             Unit consists of one share of Class
                                             A Common Stock,  one share of Class
                                             A  Warrant  and one Class B Warrant
                                             of the Company. See "Description of
                                             Securities."

Securities Offered Concurrently by Selling   839,000  Units consisting  of Class
Securityholders:                             A  Common  Stock;  839,000  Class B
                                             Warrants  issuable upon exercise of
                                             the Class A Warrants and  1,678,000
                                             shares  of  Common  Stock  issuable
                                             upon  exercise  of the  Class A and
                                             Class B Warrants.  See  "Concurrent
                                             Offering".
                                       4
<PAGE>
Common Stock Outstanding June 30,
1996(1)(3):

   Class A Common Stock                     2,722,191 shares(2)(4)

   Class E-1 Common Stock                   1,454,547 shares(3)

   Class E-2 Common Stock                   1,454,547 shares(3)

   Class E-3 Common Stock                      969,691shares(3)

Use of Proceeds                              The Company  intends to use the net
                                             proceeds received upon the exercise
                                             of  the   Warrants,   if  any,  for
                                             general   corporate   purposes  and
                                             working    capital    to    support
                                             anticipated     growth    including
                                             research and  development  programs
                                             and continuing product development.
                                             See "Use of Proceeds."

Risk Factors                                 The   securities   offered   hereby
                                             involve  a high  degree of risk and
                                             immediate  substantial  dilution to
                                             public investors.  An investment in
                                             the Units offered  hereby should be
                                             made    only    after   a   careful
                                             consideration  of the various risks
                                             which may  affect the  Company  and
                                             its operations. See "Risk Factors"

Nasdaq Symbols                               Units - LPTHU 
                                             Class A Common Stock - LPTHA  
                                             Class A Warrants - LPTHW 
                                             Class B Warrants - LPTHZ

- --------
(1)  For a description  of the voting and other rights of the Common Stock,  see
     "Description of Securities--Common Stock."
(2)  Does not include  outstanding  options at June 30, 1996 to purchase 155,578
     shares of Class A Common  Stock and  176,233  shares of Class E-1,  176,233
     shares of Class E-2 and 117,487  shares of Class E-3 Common Stock which are
     exercisable  at option  exercise  prices  ranging  from $5.50 to $51.56 per
     share and 12,297 shares of Class A Common Stock  reserved for issuance upon
     future  grants of options to be issued  under the  Company's  stock  option
     plans. See "Management--Stock Option Plans."
(3)  The Class E-1 Common  Stock,  Class E-2  Common  Stock and Class E-3 Common
     Stock (collectively, the "Class E Shares") will, on a class-by-class basis,
     automatically  convert on a share-for-share basis into Class A Common Stock
     if and as the Company attains  certain  earnings levels or the market price
     of the Company's Class A Common Stock achieves certain targets with respect
     to each of the three separate classes.  The Class E Shares will be redeemed
     by the Company for a nominal amount if such earnings levels or market price
     targets are not achieved. See "Description of Securities."
(4)  Does not include an aggregate  of 7,838,000  shares of Class A Common Stock
     issuable upon exercise of (i) the Unit Purchase  Option and the Class A and
     Class B Common Stock Purchase Warrants underlying the Unit Purchase Option;
     (ii) the Class A Warrants  and Class B Warrants  forming  part of the Units
     offered  hereby,  (iii) the 214,000 Class A Warrants  issued to persons who
     converted  debt into Common Stock of the Company prior to the IPO; (iv) the
     625,000 Class A Warrants issued to holders of the Bridge Warrants;  and (v)
     the 839,000 additional Class B Warrants issuable upon exercise of the Class
     A Warrants  referred to in (iii) and (iv)  above.See  "Capitalization"  and
     "Concurrent Offering".
                                       5
<PAGE>
                          Summary Financial Information
Statement of Operations Data:


<TABLE>
<CAPTION>
                                                                                       Inception     
                                                                                        (August      
                                                                                   23, 1985) Through 
                                   June 30,                    September 30,          September 30,   
                            1996            1995           1996            1995           1996       
                            ----            ----           ----            ----        -----------
<S>                    <C>             <C>             <C>             <C>             <C>
Revenues ...........   $    200,444    $    166,465    $    123,470    $     30,128    $    512,858
Costs and expense ..      2,787,894       2,523,705         922,380       1,174,086      21,021,342
Net (loss) .........     (2,914,905)     (2,789,580)       (757,129)     (1,234,838)    (22,228,619)
Net (loss) per share   
(1).................   $      (1.98)   $      (3.95)   $      (0.28)   $      (1.65)           --
Weighted average
number of common
shares and common
share equivalents       
outstanding(1)......      1,471,006         705,580       2,735,287         748,898            --
                       ------------    ------------    ------------    ------------    ------------
</TABLE>


<TABLE>
<CAPTION>
                                                 September 30, 
                                                 ------------- 
Balance Sheet Data:              June 30, 1996       1996       
                                 -------------       ----      
<S>                               <C>            <C>
Total assets .............        $ 5,210,804    $ 4,421,467

Total liabilities.........            666,443        623,816

Stockholders' equity......          4,505,574      3,758,987
</TABLE>
- ----------
(1) The shares of Class E Common Stock are excluded from the  computation of net
loss per share.

See notes to the Financial Statements.
                                       6
<PAGE>
                                  RISK FACTORS

         An investment in the Securities  offered hereby  involves a high degree
of risk and should  only be made by  investors  who can afford the loss of their
entire  investment.   Prospective  investors,  prior  to  making  an  investment
decision,   should  give  careful  consideration,   in  addition  to  the  other
information contained in this Prospectus, to the following risk factors.

         Development  Stage Company;  Accumulated  Deficit,  Working Capital and
Capital  Deficiency;   Limited  Operating  History.  The  Company's  predecessor
commenced  operations  in 1985,  and the  Company has been a  development  stage
company throughout its existence. To date, the Company's primary activities have
been basic research and  development.  From  inception  until June 30, 1996, the
Company  recognized  revenues  of  $389,388  and had an  accumulated  deficit of
($14,214,226). For the year ended June 30, 1996, the Company recognized revenues
of $200,444 and had a net loss of ($2,914,905). The Company's products are at an
early stage of  development  and the Company  believes that its product sales to
date are to parties  evaluating the  commercial  application of GRADIUM or using
the products for research and development,  but not for commercial usage.  While
the Company has been engaged in some  marketing  efforts over the past few years
that have resulted in some  collaborative  arrangements  or purchases by parties
considering  incorporating GRADIUM in their product designs,  these efforts have
not resulted in material sales revenues. The Company has continued to operate at
a deficit  and  expects to continue to operate at a deficit for fiscal year 1997
and until such time, if ever, as the Company's  operations  generate  sufficient
revenues to cover its costs.  The  likelihood of the success of the Company must
be  considered  in light of the delays,  uncertainties,  difficulties  and risks
inherent in a new business,  many of which may be beyond the Company's  control.
These  include,  but are not  limited  to,  unanticipated  problems  relating to
product  development,  testing,  manufacturing,  marketing and competition,  and
additional costs and expenses that may exceed current estimates. There can be no
assurance  that revenues will increase  significantly  in the future or that the
Company will ever achieve profitable  operations.  See "Management's  Discussion
and Analysis of Financial  Condition  and Results of  Operations--Liquidity  and
Capital Resources."

         Independent  Auditor's Report as to Company's  Ability to Continue as a
Going Concern.  The Company has received a report from its independent  auditors
that includes an explanatory  paragraph regarding  uncertainty as to the ability
of the Company to continue as a going  concern.  Among the factors  cited by the
accountants as raising substantial doubt as to the Company's ability to continue
as a going concern are that the Company is in  development  stage,  has incurred
operating losses,  is in default on certain debt obligations,  and has a working
capital deficiency and capital deficiency.  The Company may incur losses for the
foreseeable future due to the significant costs associated with the development,
manufacturing  and  marketing of its GRADIUM  products and due to the  continued
research and development activities that will be necessary to further refine the
Company's  technology  and  products  and to develop  products  with  additional
applications.  The Company expects that the proceeds from the IPO will enable it
to fund its operations for fiscal year 1997.  See  "--Anticipation  of Operating
Losses; Need for Additional Financing," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Financial Statements--Report of
Independent Auditors" and "Business--Research and Development."

         Anticipation of Operating Losses;  Need for Additional  Financing.  The
Company anticipates  continuing to incur substantial operating losses for fiscal
year 1997 and until such time,  if ever, as the  Company's  operations  generate
sufficient revenues to cover its costs. The Company expects to incur substantial
expenses  principally  as the result of the various  costs  associated  with the
Company's  continuing  research  and  development  to expand its  product  line,
capital expenditures for scale-up of manufacturing and implementation of a sales
and marketing  program and  distribution  channels,  recruitment and training of
personnel and other operating  activities.  The Company's  potential  receipt of
revenues from product sales are subject to substantial contingencies,  and there
can be no assurances  concerning  the timing and amount of future  revenues from
product sales,  if any. The Company  anticipates  that the net proceeds from the
IPO will be sufficient to finance the Company's working capital requirements for
at least  fiscal year 1997,  although the  Company's  capital  requirements  are
subject to numerous  contingencies  associated with development stage companies.
The Company's capital  requirements  after such period will depend on the extent
that GRADIUM becomes  commercially  accepted and the Company's marketing program
is successful in generating  sales  sufficient to sustain its operations.  There
can be no assurance that the Company will generate  sufficient  revenues to fund
its operations.  The Company may be required to seek additional financing in the
event  of  delays,  cost  overruns,   unanticipated   expenses  including  those
associated with a company in an early stage of development and damages which may
be payable from lawsuits (see  "Business--Legal  Proceedings"),  or in the event
the  Company  does  not  realize  anticipated  revenues.   The  Company  has  no
commitments  from others to provide  additional  financing,  and there can be no
assurance  that any  additional  financing  will be  available  if needed or, if
available,  will be on  terms  acceptable  to the  Company.  In the  event  such
necessary financing is not obtained, the Company's operations will be materially
adversely  affected and the Company will have to cease or  substantially  reduce
operations. Any additional equity financing may be dilutive to stockholders, and
debt financings,  if available,  may involve restrictive covenants.  See "Use of
Proceeds" and "Management's  Discussion and Analysis of Financial  Condition and
Results of Operations."

         Early  Stage of  Development  of  Proposed  Products;  Need for  Market
Acceptance.  To date, the Company's primary activity has been basic research and
development of glass material properties.  The Company's current line of GRADIUM
products  has not been widely sold or marketed.  While the Company  believes its
existing  products  are  commercially  viable,  market  feedback may require the
Company to further  refine these  products.  Development  of additional  product
lines will  require  significant  further  
                                       7
<PAGE>
research,  development,  testing and marketing  prior to  commercialization.  In
particular,  the Company's  lens  technology  will require  substantial  further
refinement  to  develop  products  capable  of  correcting   chromatic   optical
applications,  which is required  for many  optical  product  applications.  See
"Business--Research  and  Development."  There  can  be no  assurance  that  any
proposed products will be successfully developed,  demonstrate desirable optical
performance, be capable of being produced in commercial quantities at reasonable
costs  or be  successfully  marketed.  In  order  for its  products  to  achieve
commercial  acceptance,  the Company must educate the optical components markets
to create product awareness and demand,  and, in large part,  persuade potential
customers to redesign existing  products and retool existing assembly  processes
in order to substitute GRADIUM for existing materials. There can be no assurance
that the Company can accomplish the foregoing to the extent necessary to develop
market acceptance. See "Business."

         Uncertainty of Commercialization of the Company's  Technology;  Limited
Number of Potential  Customers Testing the Company's  Technology.  The Company's
existing products have not yet achieved commercial acceptance. To date, the only
product  revenues  received  by the  Company  are from  parties  evaluating  the
commercial  application  of the  Company's  products or using the  products  for
research and development  activities,  and purchases have not reached commercial
quantities. Most of the Company's sales have been to a catalog distributor that,
until such  arrangement  was recently  terminated,  had the  exclusive  right to
distribute the Company's  products.  While the Company has no agreement with the
catalog company with respect thereto, it anticipates continuing its relationship
with  the  distributor  on  a  non-exclusive   basis.   See   "Business--Product
Applications."  Although the Company is engaged in negotiations  and discussions
with  other  potential  customers,  there  can be no  assurance  that  any  such
discussions  will  lead  to  development  of  commercially  viable  products  or
significant revenues for the Company, or that any existing or developed products
will attain sufficient market acceptance to generate  significant  revenues.  In
order to persuade potential customers to purchase GRADIUM products,  the Company
will need to overcome  industry  resistance to, and suspicion of,  gradient lens
technology   that  has  resulted  from  previous   failed  attempts  by  various
researchers and  manufacturers to develop a repeatable,  consistent  process for
producing lenses with variable refractive indices. The Company must also satisfy
prospective  customers  that it will be able to meet their  demand  for  GRADIUM
products,  since the Company will be the sole supplier and licenser. The Company
does not have a proven track record as a  manufacturer  and, even after the IPO,
will not have a  substantial  net  worth.  There  can be no  assurance  that the
Company can accomplish  the foregoing to the extent  necessary to develop market
acceptance.  Prospective customers will need to make substantial expenditures to
redesign products to incorporate GRADIUM lenses. There can be no assurances that
companies  will view  GRADIUM's  benefits as  sufficient  to warrant such design
expenditures. Additionally, GRADIUM may be cost effective for only high-end uses
which  require  multiple  lenses or the increased  performance  that the Company
believes GRADIUM provides. See "Business."

         Dependence  on  Key  Personnel,  Need  for  Additional  Personnel.  The
operations  of the Company  depend to a  significant  extent upon the efforts of
Leslie A.  Danziger,  the  Company's  Chairman of the Board and  President,  who
conceived the Company's  technology and strategic plan and who is  substantially
responsible for planning and guiding the Company's direction.  In addition,  the
Company's  success depends upon the  contributions of Louis P. Wagman and Donald
E.  Lawson,   the  Company's   Executive  Vice   Presidents,   whose  respective
responsibilities  for the Company's  strategic  planning and operations are very
substantial. Each of the foregoing officers has an employment agreement with the
Company that provides, among other things, for severance compensation in certain
events. See "Management-- Executive  Compensation." The loss of any of these key
employees  would  adversely  affect the  Company's  business.  The  Company  has
obtained key employee life insurance policies in the amount of $3,000,000 on the
life of Ms.  Danziger  and  $1,000,000  each on the lives of Messrs.  Wagman and
Lawson. See "Management." The Company had twenty-one employees by June 30, 1996.
See "Business--Sales and Marketing."

         Competition.  The optical  lens and  components  markets are  intensely
competitive  and  numerous  companies,  substantially  all of which have greater
financial and other  resources than the Company,  provide  products and services
that  compete  with those  offered by the  Company.  The Company  competes  with
manufacturers  of  conventional  spherical  lens  products and  aspherical  lens
products,  producers of optical  quality glass and other  developers of gradient
lens  technology  and  products.  In the markets for  conventional  and aspheric
lenses,  the  Company  will be  competing  against,  among  others,  established
international  industry  giants.  Many  of  these  companies  also  are  primary
customers for optical  components,  and therefore have significant  control over
certain  markets  for the  Company's  products.  The  Company  is aware of other
companies that are attempting to develop radial gradient lens technology, and it
is possible that other  companies are  attempting to develop axial gradient lens
technology similar to the Company's  technology.  There can be no assurance that
existing or new competitors will not develop  technologies  that are superior to
or more commercially  acceptable than the Company's technology and products. See
"Business--Competition."

         Limited  Marketing  and  Sales  Capabilities;  Fragmented  Market.  The
Company's  operating  results  will  depend to a large  extent on its ability to
educate the various  industries  utilizing optical glass about the advantages of
GRADIUM  and to  market  GRADIUM  products  to  the  participants  within  those
industries.  The Company currently has very limited  marketing  capabilities and
experience  and needs to hire  additional  sales  and  marketing  personnel  and
develop a sales and  marketing  program  and sales  distribution  channels.  The
Company has only recently hired a sales manager.  The Company will use a portion
of the  proceeds  of the IPO to  develop  its sales and  marketing  program  and
recruit  personnel.  See "Use of Proceeds."  In addition,  while the Company has
developed a preliminary  marketing plan, there can be no assurance that the plan
will be  implemented  or, if  implemented,  will succeed in creating  sufficient
levels of customer  demand for the Company's  products.  The markets for optical
lenses and components are highly fragmented. Consequently, the Company will need
to target particular segments in which it believes it may have the most 
                                       8
<PAGE>
success.  It may be very  difficult for the Company to penetrate any  particular
market segments, and any attempt will require a substantial, but unknown, amount
of effort  and  resources.  The  fragmented  nature of the market may impede the
Company's  ability  to  achieve  commercial  acceptance  for its  products.  The
Company's  success  will  depend in great part on its  ability  to  develop  and
implement a successful  marketing and sales  program.  There can be no assurance
that  any  marketing  and  sales  efforts  undertaken  by the  Company  will  be
successful or will result in any significant sales of the Company's products. If
the sales and  marketing  efforts  implemented  by the  Company do not  generate
expected revenues,  the Company may be required to seek additional  financing or
alter its business plan. See "Business--Sales and Marketing."

         Dependence on Patents and Proprietary Technology. The Company's success
will depend,  in part, on its ability to obtain  protection for its products and
technologies  under United States and foreign patent laws, to preserve its trade
secrets,  and to operate  without  infringing  the  proprietary  rights of third
parties.  There can be no  assurance  that patent  applications  relating to the
Company's  products or potential  products  will result in patents being issued,
that any issued patents will afford adequate protection to the Company or not be
challenged,  invalidated,  infringed or circumvented, or that any rights granted
thereunder will afford competitive advantages to the Company. Furthermore, there
can be no assurance that others have not  independently  developed,  or will not
independently  develop,  similar products and/or technologies,  duplicate any of
the Company's product or technologies, or, if patents are issued to, or licensed
by, the Company,  design  around such  patents.  There can be no assurance  that
patents  owned or licensed by the  Company and issued in one  jurisdiction  will
also issue in any other  jurisdiction.  Furthermore,  there can be no  assurance
that the Company can adequately  preserve  proprietary  technology and processes
that it maintains as trade secrets. See "Business--Patents and Other Proprietary
Intellectual Property."

         Dependence  on  Others.   The  Company's  strategy  for  the  research,
development and  commercialization  of certain of its products  entails entering
into  various   arrangements  with  corporate   partners,   original   equipment
manufacturers (OEMs), licensees and others in order to receive product sales and
royalties  and funds for product  development.  The Company may also rely on its
collaborative  partners  to conduct  research  efforts,  product  testing and to
manufacture and market certain of the Company's  products.  Although the Company
believes that parties to any such arrangements would have an economic motivation
to succeed in  performing  their  contractual  responsibilities,  the amount and
timing of  resources  to be  devoted to these  activities  may not be within the
control of the Company.  There can also be no assurance that the Company will be
successful  in  establishing  any such  collaborative  arrangements  or that, if
established,  the  parties  to such  arrangements  will  assist  the  Company in
commercializing  products.  Presently the Company has entered into a development
agreement  with an  endoscope  manufacturer  pursuant to which it has  developed
prototype lenses. There can be no assurance that the endoscope manufacturer will
progress to a production  phase or, if  production  commences,  that the Company
will receive significant  revenues from this relationship.  The Company recently
terminated  its agreement  with a catalog  company to distribute  certain of its
products on an  exclusive  basis.  While the Company has no  agreement  with the
catalog   company  with  respect   thereto,   it  anticipates   continuing  such
relationship  on a  non-exclusive  basis.  There can be no assurance  that these
parties,  or any future partners,  will perform their obligations as expected or
that any revenue will be derived from such arrangements.

         Limited Manufacturing Capability. The Company had minimal experience in
manufacturing   optical  components.   The  Company  had  limited  resources  to
manufacture  products.  The-Company has not manufactured on a commercial  scale,
and will  need to  expand  its  manufacturing  facilities  and  personnel  using
proceeds  from the IPO to  scale-up  production.  In that  regard,  the  Company
negotiated  with respect to several  locations for a new corporate  headquarters
and  larger   manufacturing   facility   in   Albuquerque,   New   Mexico.   See
"Business--Property."  Within the  present  13,300  square  foot  facility,  the
Company believes that it can scale-up its manufacturing processes,  there can be
no such assurance and the Company may  experience  unanticipated  delays,  costs
and/or logistical problems. See "Business--Manufacturing."

         Product Liability Exposure.  The sale of the Company's optical products
will involve the inherent risk of product  liability claims against the Company.
The Company  currently does not maintain product liability  insurance  coverage,
but intends to procure such insurance in the future. Product liability insurance
is expensive,  subject to various coverage  exclusions and may not be obtainable
by the Company in the future on terms acceptable to the Company.  Moreover,  the
amount and scope of any coverage may be inadequate to protect the Company in the
event  that a product  liability  claim is  successfully  asserted  against  the
Company.

         Immediate  and  Substantial  Dilution.  Purchasers  of  the  securities
offered hereby will incur  immediate  substantial  dilution in the per share net
tangible  book  value  of  their  Common  Stock.  Therefore,  purchasers  of the
securities offered hereby will bear a proportionately  greater risk of loss than
the Company's current stockholders.

         Charge to Income in the Event of  Conversion of Class E Common Stock In
the event any  shares of Class E Common  Stock held by the  stockholders  of the
Company who are officers, directors, employees or consultants of the Company are
converted  into shares of Class A Common  Stock,  compensation  expense  will be
recorded for financial reporting purposes. Therefore, if the Company attains any
of the earnings  thresholds or the Company's  Class A Common Stock meets certain
minimum bid prices  required for the  conversion of the shares of Class E Common
Stock,  such conversion will be deemed  additional  compensation  expense of the
Company.  Accordingly,  the Company will, in the event of the  conversion of the
Class E Common  Stock,  recognize  during  the  period in which  the  reportable
earnings thresholds are met or such minimum bid prices obtained, what could be a
substantial  charge that would have the effect of  significantly  increasing the
Company's reportable loss or reducing or eliminating
                                       9
<PAGE>
reportable earnings, if any, at such time. Such charge win equal the fair market
value of such shares on the date of release,  which may be substantial  Although
the amount of compensation expense recognized by the Company will not affect the
Company's  total  stockholders'  equity,  it may have a  negative  effect on the
market price of the Company's  securities.  Since Class E shares are not treated
as outstanding for purposes of earnings per share calculations,  the increase in
the number of shares of Class A Common  Stock upon  conversion  of any series of
Class E Common Stock win negatively affect the Company's earnings per share. See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations--Liquidity and Capital Resources" and "Description of Securities."

         Control by Present  Stockholders;  Voting Trust. Upon completion of the
IPO, the Company's present  stockholders will beneficially own 882,191 shares of
Class A Common  Stock,  1,454,547  shares of Class E-1 Common  Stock,  1,454,547
shares of Class E-2 Common Stock and 969,691  shares of Class E-3 Common  Stock,
representing 32% of the outstanding  Class A Common Stock,  100% of the combined
outstanding  Class E Common Stock, and 72.13% of the total combined voting power
of all of the Common Stock to be outstanding after the IPO. As a result,  acting
in concert,  the Company's present  stockholders win be able to elect a majority
of the Company's  directors and otherwise control the Company's  operations.  In
addition,  certain stockholders of the Company holding  approximately 27% of the
total  voting  power have  entered  into a voting  trust  agreement.  Additional
stockholders  may  subsequently  join the voting  trust.  Pursuant to the voting
trust, Leslie A. Danziger, the Company's Chairman and President,  is granted the
authority  to vote an of the shares  subject to the voting  trust on all matters
that the Company's stockholders are entitled to vote. Accordingly,  Ms. Danziger
will likely be able to influence  the election of the  Company's  directors  and
thereby  direct the policies of the Company.  See "Principal  Stockholders"  and
"Description of Securities."

         Investigation  of  the  Underwriter  by  the  Securities  and  Exchange
Commission.  The  Securities  and  Exchange  Commission  (the  "Commission")  is
conducting  an  investigation  concerning  various  business  activities  of the
Underwriter and D. H. Blair & Co., Inc.  ("Blair & Co."), a selling group member
which  will  distribute  substantially  all of the  Units  offered  hereby.  The
investigation  appears to be broad in scope,  involving  numerous aspects of the
Underwriter's and Blair & Co.'s compliance with the Federal  securities laws and
compliance  with the Federal  securities  laws by issuers whose  securities were
underwritten  by the  Underwriter or Blair & Co., or in which the Underwriter or
Blair  &  Co.  made  over-the-counter   markets,  persons  associated  with  the
Underwriter or Blair & Co., such issuers and other persons. The Company has been
advised by the  Underwriter  that the  investigation  has been ongoing  since at
least 1989 and that it is cooperating  with the  investigation.  The Underwriter
cannot predict whether this investigation will ever result in any type of formal
enforcement  action  against the  Underwriter or Blair & Co., or, if so, whether
any  such  action  might  have  an  adverse  effect  on the  Underwriter  or the
securities offered hereby. The Company has been advised that Blair & Co. intends
to make a market in the securities following the IPO. An unfavorable  resolution
of the Commission's  investigation could have the effect of limiting such firm's
ability to make a market in the  Company's  securities,  which could  affect the
liquidity or price of such securities.

         Future  Sales of  Common  Stock.  All of the  shares  of  Common  Stock
currently outstanding are "restricted  securities" as that term is defined under
Rule  144  promulgated  under  the  Securities  Act of  1933,  as  amended  (the
"Securities  Act"),  and  under  certain   circumstances  may  be  sold  without
registration  pursuant to such rule.  The  Company's  officers and directors and
holders of  substantially  all of the shares of Class A Common Stock and options
to  purchase  Common  Stock  outstanding  prior to the IPO have  agreed with the
Underwriter  not to offer,  sell or otherwise  dispose of any of their shares of
Class A Common Stock or other  securities  issued by the Company for a period of
13 months  after  February  22,1996  without  the prior  written  consent of the
Underwriter.  Upon expiration of such 13-month period,  substantially all of the
shares of Class A Common  Stock will be eligible  for resale under Rule 144. The
Company is unable to  predict  the  effect  that  sales made under Rule 144,  or
otherwise,  may  have on the then  prevailing,  market  price  of the  Company's
securities  although  any future  sales of  substantial  amounts  of  securities
pursuant  to Rule 144 could  adversely  affect  prevailing  market  prices.  See
"Principal  Stockholders,"  "Description  of Securities,"  "Shares  Eligible For
Future Sale," and "Management --Stock Option Plans."

         Dividends Unlikely.  The Company has not paid any cash dividends on its
Common  Stock  and does not  intend  to  declare  or pay cash  dividends  in the
foreseeable  future.  The  Company  expects  that it will  retain all  available
earnings, if any, to finance and expand its business. See "Dividend Policy."

         Arbitrary  Determination of Warrant Exercise Price. The exercise prices
and other terms of the Warrants have been arbitrarily established by negotiation
between the Company and Blair,  the underwriter in the Company's IPO, and do not
necessarily  bear any  relationship to the Company's  asset value,  net worth or
financial condition of the Company or any generally recognized criteria of value
and should not be regarded as an  indication  of any future  market price of the
Company's securities.

         Effect of Outstanding Options and Warrants. Upon completion of the IPO,
the Company will have  outstanding (i) 1,840,000 Class A Warrants to purchase an
aggregate  of  1,840,000  share of Class A Common  Stock and  1,840,000  Class B
Warrants;  (ii) 1,840,000 Class B Warrants to purchase 1,840,000 shares of Class
A Common  Stock;  (iii) the  Selling  Securityholders  Warrants  to  purchase an
aggregate  of  839,000  shares  of  Class A Common  Stock  and  839,000  Class B
Warrants;  (iv) the Unit  Purchase  Option to purchase an  aggregate  of 240,000
Units; and (v) outstanding  options at June 30, 1996 to purchase an aggregate of
155,578  shares of Class A Common Stock,  176,233  shares of Class E-1,  176,233
shares of Class E-2 and 117,487  shares of Class E-3 Common  Stock.  The Company
also has an  additional  12,297  shares  of Class A Common  Stock  reserved  for
issuance  under its Omnibus  Incentive  
                                       10
<PAGE>
Plan and Amended and Restated  Directors  Stock Incentive Plan. In order for the
Company to attract  additional  members of its Board of Directors,  officers and
employees,  it may be necessary to obtain shareholder approval to add additional
shares  to its  existing  option  plans  or to  promulgate  new  plans.  For the
respective  terms of such Warrants,  options and the Unit Purchase  Option,  the
holders  thereof  are given an  opportunity  to profit  from a rise n the market
price of the  Company's  Class A Common  Stock with a resulting  dilution in the
interests of the other stockholders. Further, the terms on which the Company may
obtain additional  financing during that period may be adversely affected by the
existence of such options and Warrants. The holders of the Warrants may exercise
them at a time  when the  Company  might be able to  obtain  additional  capital
through a new offering of securities on terms more favorable than those provided
therein.  In addition,  holders of the Unit  Purchase  Option have  registration
rights with respect to such option and the  underlying  securities.  Exercise of
the  registration  rights may involve  substantial  expense to the Company.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations," "Management--Stock Option Plans," and "Description of Securities."

         Potential Adverse Effect of Redemption of Warrants. Commencing February
22, 1997,  the Warrants may be redeemed by the Company at a redemption  price of
$.05 per Warrant upon 30 days' notice provided the average closing bid price (as
defined herein) of the Class A Common Stock for any 30 consecutive  trading days
ending within 15 days of the notice of redemption  exceeds $9.10, in the case of
the Class A Warrants, or $12.25, in the case of the Class B Warrants (subject to
adjustment in each case).  Redemption of the Warrants could force the holders to
exercise  the  Warrants  and pay the  exercise  price  at a time  when it may be
disadvantageous  for the  holders  to do so,  to sell the  Warrants  at the then
current market price when they might otherwise wish to hold the Warrants,  or to
accept the redemption price,  which is likely to be substantially  less than the
market  value of the Warrants at the time of  redemption.  See  "Description  of
Securities--Redeemable Warrants."

         Possible   Adverse  Effects  of   Authorization   of  Preferred  Stock,
Anti-Takeover Provisions.  The Company's Certificate of Incorporation authorizes
the  issuance of 5,000,000  shares of "blank  check"  Preferred  Stock with such
designations,  rights and  preferences as may be determined from time to time by
the Board of  Directors.  Accordingly,  the  Board of  Directors  is  empowered,
without   stockholder   approval,   to  issue  Preferred  Stock  with  dividend,
liquidation, conversion, voting or other rights which could adversely affect the
voting power or other rights of the holders of the Company's  Common  Stock.  In
the  event of  issuance,  Preferred  Stock  could  be  utilized,  under  certain
circumstances,  as a method of discouraging,  delaying or preventing a change in
control of the Company.  Although the Company has no present  intention to issue
any shares of Preferred  Stock,  there can be no assurance that the Company will
not do so in the future. In addition, the Company's Certificate of Incorporation
requires a super majority vote of stockholders to approve certain  transactions,
a classified  Board of Directors and certain other  provisions that may have the
effect of discouraging a change of control of the Company.  Further, the Company
is subject to the provisions of Section 203 of the Delaware General  Corporation
Law  which  may  have  the  effect  of  discouraging  persons  from  pursuing  a
non-negotiated  takeover  of the  Company and  delaying  or  preventing  certain
changes of control. See "Management,"  "Principal Stockholders" and "Description
of Securities."

         Limitation of Liability of  Directors.  The  Company's  Certificate  of
Incorporation  provides  that  directors of the Company  shall not be personally
liable for monetary  damages to the Company or its  stockholders for a breach of
fiduciary  duty as a  director,  subject to limited  exceptions.  Although  such
limitation of liability does not affect the  availability of equitable  remedies
such as injunctive relief or rescission, the presence of these provisions in the
Certificate  of  Incorporation  could  prevent the recovery of monetary  damages
against directors of the Company. See  "Management--Limitation  of Liability and
Indemnification."

         Possible   Restrictions  on   Market-Making   Activities  in  Company's
Securities.  The Underwriter has advised the Company that Blair & Co. intends to
make a market in the  Company's  securities.  Rule  10b-6  under the  Securities
Exchange Act of 1934, as amended (the  "Exchange  Act") may prohibit Blair & Co.
from  engaging in any  market-making  activities  with  regard to the  Company's
securities  for the period  from nine  business  days (or such other  applicable
period as Rule 10b-6 may provide) prior to any  solicitation  by the Underwriter
of the  exercise  of  Warrants  until  the  later  of the  termination  of  such
solicitation  activity or the  termination (by waiver or otherwise) of any right
that the  Underwriter  may have to receive a fee for the  exercise  of  Warrants
following such solicitation. As a result, Blair & Co. may be unable to provide a
market for the Company's  securities  during certain  periods while the Warrants
are exercisable.  In addition,  under applicable rules and regulations under the
Exchange  Act,  any  person   engaged  in  the   distribution   of  the  Selling
Securityholders   Warrants  may  not  simultaneously   engage  in  market-making
activities  with  respect to any  securities  of the Company for the  applicable
"cooling off" period (at least two and possibly nine business days) prior to the
commencement of such distribution.  Accordingly, in the event the Underwriter or
Blair  & Co.  is  engaged  in a  distribution  of  the  Selling  Securityholders
Warrants,  neither of such firms will be able to make a market in the  Company's
securities during the applicable  restrictive period. Any temporary cessation of
such  market-making  activities could have an adverse effect on the market price
of the Company's securities.

         Risk of Low-Priced  Stock.  If the Company's  securities  were delisted
from Nasdaq (See "Risk Factors--Nasdaq  Listing and Maintenance  Requirements"),
they could become  subject to Rule 15g-9 under the Exchange  Act,  which imposes
additional  sales  practice  requirements  on  broker-dealers  which  sell  such
securities  to  persons  other  than   established   customers  and  "accredited
investors"  (generally,  individuals  with net worth in excess of  $1,000,000 or
annual incomes exceeding $200,000, or $300,000 together with their spouses). For
transactions  covered  by  this  rule,  a  broker-dealer  must  make  a  special
suitability determination for
                                       11
<PAGE>
the  purchaser  and  have  received  the  purchaser's  written  consent  to  the
transaction  prior to sale.  Consequently,  such rule may  adversely  affect the
ability of  broker-dealers  to sell the Company's  securities  and may adversely
affect  the  ability  of  purchasers  in the IPO to sell  any of the  securities
acquired hereby in the secondary market.

         The Commission  adopted  regulations  which  generally  define a "penny
stock" to be any non-Nasdaq  equity security that has a market price (as therein
defined)  of less than  $5.00 per share or with an  exercise  price of less than
$5.00 per share, subject to certain exceptions.  For any transaction involving a
penny stock, unless exempt, the rules require delivery, prior to any transaction
in a penny stock, of a disclosure  schedule prepared by the Commission  relating
to the  penny  stock  market.  Disclosure  is also  required  to be  made  about
commissions payable to both the broker-dealer and the registered  representative
and current  quotations  for the  securities.  Finally,  monthly  statements are
required to be sent disclosing recent price information for the penny stock held
in the account and information on the limited market in penny stocks.

         The foregoing  required penny stock  restrictions will not apply to the
Company's  securities if such  securities  are listed on Nasdaq and have certain
price and volume information  provided on a current and continuing basis or meet
certain minimum net tangible assets or average revenue criteria. There can be no
assurance  that the Company's  securities  will qualify for exemption from these
restrictions.  In any event,  even if the Company's  securities were exempt from
such  restrictions,  it would remain subject to Section 15(b)(6) of the Exchange
Act,  which gives the  Commission  the  authority to prohibit any person that is
engaged in unlawful  conduct while  participating  in a distribution  of a penny
stock from  associating  with a broker-dealer or participating in a distribution
of a penny stock,  if the Commission  finds that such a restriction  would be in
the public interest.

         If the  Company's  securities  were subject to the existing or proposed
rules on penny stocks,  the market liquidity for the Company's  securities could
be severely adversely affected.

         Non-Registration  in Certain  Jurisdictions  of Shares  Underlying  the
Warrants; Need for Current Prospectus. The Class A Warrants and Class B Warrants
constituting  part of the Units offered hereby are detachable  immediately  from
the Units and may be traded separately. Although the Units will not knowingly be
sold to purchasers  in  jurisdictions  in which the Units are not  registered or
otherwise qualified for sale, purchasers may buy Units or the components thereof
in the  aftermarket  in,  or may move to,  jurisdictions  in  which  the  shares
underlying  the Class A Warrants or the Class B Warrants  issuable upon exercise
of the Warrants are not so  registered  or qualified  during the period that the
Warrants are  exercisable.  In this event,  the Company would be unable to issue
shares  and/or  Class B Warrants to those  persons  desiring  to exercise  their
Warrants unless and until the underlying  securities could be qualified for sale
in  jurisdictions  in which such  purchasers  reside,  or an  exemption  to such
qualification  exists in such  jurisdiction.  In addition,  investors in the IPO
will not be able to exercise their Warrants,  unless at the time of exercise the
Company has a current  prospectus  covering  the shares of Class A Common  Stock
underlying  the Warrants.  No  assurances  can be given that the Company will be
able to effect any required  registration or qualification or maintain a current
prospectus. See "Description of Securities--Redeemable Warrants."

         Nasdaq Listing and Maintenance Requirements.  The Units, Class A Common
Stock and Warrants are listed on Nasdaq.  Under the rules for continued  listing
on Nasdaq,  a company is  required  to  maintain  at least  $2,000,000  in total
assets, two market makers, a public float of at least $200,000 and a minimum bid
price of $1.00  per  share  or,  if the  share  price  criterion  cannot be met,
$2,000,000 in capital and surplus and a public float of $1,000,000.  Upon notice
of a  deficiency  in one or more of the  maintenance  requirements,  the Company
would be given 90 days (30 days in the case of the  number of market  makers) to
comply  with the  maintenance  standards.  Failure  of the  Company  to meet the
maintenance  requirements  of Nasdaq  could result in the  Company's  securities
being delisted from Nasdaq, with the result that the Company's  securities would
trade  on the OTC  Bulletin  Board or in the  "pink  sheets"  maintained  by the
National Quotation Bureau Incorporated.  As a consequence of such delisting,  an
investor  could  find it more  difficult  to  dispose  of or to obtain  accurate
quotations  as to the market  value of the  Company's  securities.  Among  other
consequences,  delisting from Nasdaq may cause a decline in the stock price, the
loss of news  coverage  about the Company and  difficulty  in  obtaining  future
financing.

         Stock Market Volatility.  There have been periods of extreme volatility
in the  stock  market,  which in many  cases  were  unrelated  to the  operating
performance of, or announcements concerning,  the issuers of the affected stock.
General market price declines or market volatility in the future could adversely
affect  the  price of the  Common  Stock and the  Warrants.  In  certain  cases,
volatility  in the price of a given  security  can  result  from the  short-term
trading  strategies of certain  market  segments.  Such  volatility  can distort
market   value  and  can  be   particularly   severe  in  the  case  of  smaller
capitalization  stocks and  immediately  before or after an important  corporate
event such as a public offering.

         Forward-Looking   Statements  and  Associated  Risks.  This  Prospectus
contains  "forward-looking  statements,"  including statements regarding,  among
other  matters,  the Company's  growth  strategy,  product  development,  future
products,  sales,  working  capital  needs,  ability to  develop  manufacturing,
marketing  and sales  capabilities,  and  anticipated  trends  in the  Company's
business.  These  forward-looking  statements are based largely on the Company's
expectations  and  assumptions  and  are  subject  to  a  number  of  risks  and
uncertainties,  many of which are beyond the Company's  control.  Actual results
could differ materially from these  forward-looking  statements as a result of a
number of factors,  including,  but not limited to, the Company's early stage of
development,  the need for additional financing,  intense competition in various
aspects of its business and other  factors  described  under "Risk  Factors" and
elsewhere  herein.  In light of these risks and  uncertainties,  there can be no
assurance that the forward-looking  statements contained in this Prospectus will
in fact  transpire  or prove to be  accurate.  All  subsequent  written and oral
forward-looking  statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by this section.

                                 USE OF PROCEEDS

         Holders of Warrants are not  obligated to exercise  their  Warrants and
there can be no assurance that the Warrantholders will choose to exercise all of
any of their Warrants.  In the event that all of the 1,840,000 outstanding Class
A Warrants  (excluding the Remaining  Security Holders and Unit Purchase Option)
are  exercised,  the net  proceeds to the Company  would be  $11,362,000,  after
deducting the  Solicitation  Fee. In the event that all of the 3,680,000 Class B
Warrants  outstanding and issuable upon the exercise of 
                                       12
<PAGE>
the  outstanding  Class A  Warrants  are  exercised,  (excluding  the  Remaining
Security Holders and Unit Purchase Option), the Company would receive additional
net proceeds of $30,590,000, after deducting the Solicitation Fee.

         The Company intends to use the net proceeds  received upon the exercise
of the Warrants,  if any, for general corporate  purposes and working capital to
support  anticipated  growth  including  research and  development  programs and
continuing product development.


                                 DIVIDEND POLICY

         The  Company  does not intend to declare or pay cash  dividends  on its
Class A Common Stock (or any other  securities) in the foreseeable  future.  The
Company  intends  to retain all  available  earnings  to finance  and expand its
business.  Declaration  of dividends in the future will be at the  discretion of
the  Company's  Board of Directors,  which will review its dividend  policy from
time to time.


                       PRICE RANGE OF CLASS A COMMON STOCK

         The Company's Common Stock has been quoted on the National  Association
of Securities  Dealers  Automated  Quotation  ("NASDAQ") system under the symbol
LPTHA since February 22, 1996.

         The Company  estimates there were  approximately  300 holders of record
and  approximately  1200 beneficial  holders on August 15, 1996. The Company has
not paid  dividends in the past and does not intend to pay cash dividends in the
foreseeable  future.  Declaration  of dividends will be at the discretion of the
Board of Directors.

         The following table sets forth the range of high and low bid prices for
the Class A common stock for the periods  indicated,  as reported by NASDAQ, the
principal system or exchange on which such securities are quoted or traded.


                                                     Class A
                                                     Common Stock
     For periods noted                               High     Low
     ------------------------------------------------------------
     February 22, 1996 to
           March 31, 1996                            $ 5      $ 4

         Quarter ended June 30, 1996                 $ 6.5    $ 4.63

         Quarter ended September 30, 1996            $ 6.5    $ 4.75
                                       13
<PAGE>
                                 CAPITALIZATION
         The following table sets forth the actual capitalization of the Company
as of September  30, 1996 and to reflect the  conversion  of Class A and Class B
Warrants. This table should be read in conjunction with the Financial Statements
and the Notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
                                                                             September 30, 1996
                                                          ----------------------------------------------------------
                                                                                                  Further Adjusted
                                                               Actual          Adjusted for A       for A and B
                                                                                Warrants (1)        Warrants (2)
                                                          ----------------------------------------------------------
<S>                                                         <C>                <C>                 <C>          
Class E-1 Common Stock, $.01 par value, 2,000,000              $14,499            $14,499             $14,499
shares authorized, 1,449,942 shares issued and
outstanding (4)

Class E-2 Common Stock, $.01 par value, 2,000,000              $14,499            $14,499             $14,499
shares authorized, 1,4449,942 shares issued and
outstanding (5)

Class E-3 Common Stock, $.01 par value, 1,500,000              $ 9,666            $ 9,666             $ 9,666
shares authorized, 966,621 shares issued and
outstanding (6)

Preferred Stock, $.01 par value, 5,000,000 shares                 0                  0                   0
authorized, none issued

Class A Common Stock, $.01 par value, 34,500,000               $27,414            $45,814             $ 82,614
shares authorized; 2,741,291 shares issued and               
outstanding; 4,581,291and  8,261,291 shares issued 
and outstanding as adjusted for A Warrants and A 
and B Warrants (3)

Additional paid in capital                                   $18,702,928        $30,046,528         $60,599,728
(Deficit) accumulated during the development stage          $(14,971,355)      $(14,971,355)       $(14,971,355)
                                                            -------------      -------------       -------------


Total Stockholders' Equity (Capital Deficiency)              $ 3,758,987        $15,120,987         $45,710,987
                                                            -------------      -------------       -------------
Total Capitalization                                         $3,797,651         $15,159,651         $45,749,651
                                                            =============      =============       =============
</TABLE>

(1)  Gives effect to the exercise of 1,840,000  Class A Warrants  (excludes  the
     Remaining  Selling  Securityholders)  at $6.50 per Class A Warrant,  net of
     solicitation fee.
(2)  Gives effect to the exercise of 3,680,000 Class B Warrants  outstanding and
     issuable upon the exercise of the  outstanding  Class A Warrants  (excludes
     the Remaining  Selling  Securityholders  and Unit Purchase Option) at $8.75
     per Class B Warrant, net of solicitation fee.
(3)  Unless  otherwise  indicated,  the  number  of  outstanding  shares  of the
     Company's  Class A Common  Stock  referenced  in this  Prospectus  does not
     include  (i)5,520,00  shares of Class A Common Stock issuable upon exercise
     of the  Company's  outstanding  publicly-held  Class A Warrants and Class B
     Warrants  (ii)640,000 shares of Class A Common Stock issuable upon exercise
     of the Unit Purchase Option (and the underlying  Class A Warrants and Class
     B Warrants);  (iii) 1,678,000  shares of Class A Common Stock issuable upon
     exercise  of Class A Warrants  and Class B Warrants  issued to persons  who
     purchased  Bridge  Warrants  or  previously  loaned  the  Company  money in
     anticipation  of a public  offering,  and (iv)  155,578  shares  of Class A
     Common Stock and 176,233  shares of Class E-1,  176,233 shares of Class E-2
     and 117,487  shares of Class E-3 Common  Stock  issuable  upon  exercise of
     outstanding stock options.  See "Principal  Stockholders," and "Description
     of Securities."
(4)  Does not include  176,233  shares  issuable  upon  exercise of  outstanding
     options.
(5)  Does not include  176,233  shares  issuable  upon  exercise of  outstanding
     options.
(6)  Does not include  117,487  shares  issuable  upon  exercise of  outstanding
     options.
                                       14
<PAGE>
                             SELECTED FINANCIAL DATA

         The  selected  financial  data set forth below for the years ended June
30,  1996 and 1995  have  been  derived  from the  financial  statements  of the
Company, which together with the notes thereto and the related report of Ernst &
Young LLP, are included  elsewhere in this  Prospectus.  The selected  financial
data as of and for  the  three  -month  period  ended  September  30,  1996  and
September  30,  1995  are  derived  from  the  Company's   unaudited   financial
statements.   The  Company's   unaudited   financial   statements   include  all
adjustments,  consisting of only normal  recurring  accruals,  which the Company
considers  necessary for a fair  presentation of the financial  position and the
results of operations for these periods.  Operating results for the three months
ended September 30, 1996 are not necessarily  indicative of the results that may
be expected  for future  periods.  The selected  financial  data set forth below
should be read in conjunction  with the financial  statements of the Company and
related notes  thereto and  "Management's  Discussion  and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Prospectus.

Statement of Operations Data
<TABLE>
<CAPTION>
                                                                                                       Inception
                                                                             Three Months           August 23, 1985
                                                  Year Ended                    Ended                  through
                                                     June 30,                September 30            September 30,
                                              1996          1995         1996            1995            1996
                                              ----          ----         ----            ----        -----------
<S>                                        <C>          <C>             <C>             <C>            <C>     
Revenues                                   $  200,444   $   166,465     $123,470        $30,128        $512,858

Costs and Expenses                          2,787,894     2,523,705      922,380      1,174,086      21,026,342

Net (loss)                                 (2,914,905)   (2,789,580)    (757,129)    (1,234,838)    (22,228,619)

Net (loss) per share (1)                        (1.98)        (3.95)       (0.28)         (1.65)             -

Weighted average number of common                                      
shares and common share equivalents         1,471,006       705,580    2,735,287        748,898              -
outstanding (1)
</TABLE>

Balance Sheet Data:


                                      
                                       September 30,      
                                       -------------      
                       June 30, 1996       1996
                       -------------       ----

Total assets          $ 5,210,804       $ 4,421,467

Total liabilities         666,443           623,816

Stockholders' equity    4,505,574         3,758,987




(1)  The Class E shares  are  excluded  from the  computation  of net (loss) per
     share.
                                       15
<PAGE>
           Management's Discussion and Analysis of Financial Condition
                            and Results of Operation

General

         The Company is a development stage company that has only recently begun
to generate limited revenues from the sale of its GRADIUM products.  Since 1985,
the  Company  has been  engaged in  research  and  development  relating  to the
discovery  and patenting of GRADIUM and processes to  manufacture  GRADIUM.  The
Company began to recognize revenues from product sales in the fiscal year ending
June 30, 1995. The Company  believes that most of its product sales to date have
been to persons  evaluating the  commercial  application of GRADIUM or using the
products  for research  and  development,  but not for  commercial  usage.  From
inception through June 30, 1996, the Company has sustained  cumulative losses of
($21,471,490).  These losses have  resulted  from  substantial  expenditures  in
connection  with  research  and  development  and  general  and   administrative
expenses, including legal and professional fees. During the ten year period from
1985 to 1996, the Company and its predecessors raised  approximately $16 million
of private  investment  capital for basic  research  and  development  and other
operating expenses.

Plan of Operation

         During fiscal year 1997, the Company plans to utilize proceeds from the
IPO to  incur  substantial  research  and  development  costs  of  approximately
$700,000  due to  continuing  research  of  materials  composition,  design  and
production process optimization, development of new GRADIUM profiles and product
development.  The Company also budgeted for the 1997 fiscal year,  $3,700,000 in
general and  administrative  costs associated with the scale-up of manufacturing
operations,  creation  of a  marketing  and  sales  organization,  programs  and
distribution channels, recruitment and training of personnel and other operating
activities.  The Company incurred capital expenditures of approximately $280,000
from  the  date of the  IPO  through  June  30,  1996,  and  additional  capital
expenditures of approximately $800,000 are planned for administrative,  research
and development  and  manufacturing  equipment  during the 1997 fiscal year. The
Company  believes  that the IPO proceeds  will be sufficient to cover the fiscal
year  operating and capital  budget.  At this time,  the Company has no plans to
raise additional funds in fiscal year 1997.


Results of Operations

Year ended June 30, 1996 compared with the year ended June 30, 1995

         Revenue totaled  $200,444 for the year ended June 30, 1996, an increase
of  $33,979  or 20% over the  comparable  period  last year.  The  increase  was
attributable  to greater product  development  fees from an OEM. The development
phase  of the OEM  project  is  nearing  completion  and the  Company  does  not
anticipate  additional revenue from this phase of the project. Cost of sales was
$18,563,  56% of product  sales,  a decline of  approximately  $123,000 over the
comparable   period  in  which   cost  of  sales   exceeded   product   revenue.
Administrative  costs increased  $473,147 or 35% primarily due to fourth quarter
staff  additions  which  increased  salaries  approximately  $245,000 during the
quarter, and accretion costs for the bridge financing obtained in November 1995.
Research and  development  costs  decreased  $29,091 for the year but during the
fourth quarter approximately $50,000 was expended. Use of research personnel and
consultants  were reduced during the year due to limited  resources prior to the
IPO. It is  anticipated  that  research  costs will  increase  to  approximately
$150,000  a quarter  in  fiscal  year 1997 as  personnel  are hired to  continue
research and development  efforts.  Costs related to unearned  compensation from
incentive  stock  options  decreased  $56,825  for the year.  The Company has no
additional  unearned  compensation  from incentive  stock options to amortize in
future  periods.  The net variances  resulted in an increase in total  operating
costs of $264,189.

         Investment  income increased  $71,003 due to the interest earned on the
IPO  proceeds.  Interest  expense  decreased  $33,882  for the year,  due to the
repayment or  conversion of bridge loans and other  interest  bearing notes with
IPO proceeds.

         Net loss  totaled  $2,914,905,  an  increase of $125,325 or 4% from the
comparable  period last year.  The increase in net loss was  attributable  to an
increase in administrative costs of $387,231, offset by improved gross margin of
$157,021 and other  income/expense of $104,885.  Net loss per share of $1.98 was
an  improvement  of $1.97 from the prior year due to  increased  gross margin of
$.11 and other  income/expense of $.07, offset by the increase in administrative
costs of $.26.  The  remaining  $2.05 gain was due to the  increase  in weighted
common stock resulting from the IPO.
                                       16
<PAGE>
Three months ended September 30, 1996 compared with three months ended September
30,1995

         Revenue totaled $123,470 for the three months ended September 30, 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 and 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 had financed its  operations  through  private  placements of
equity,  borrowings  or debt  until  February  1996 when the IPO  generated  net
proceeds of approximately  $7,200,000.  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. The Company has budgeted its cash  requirements for fiscal 1997
at  $3,700,000  a  substantial  increase  due to the  implementation  of a sales
program,  additional  personnel  and overhead  costs as detailed in the "Plan of
Operations".  Cash required for operating and research activities in fiscal 1996
were approximately $2,300,000. In addition, the Company plans to expend $700,000
to continue  its research and  development  efforts and to purchase  $800,000 in
capital  equipment to expand its  manufacturing  facilities  during  fiscal year
1997. During fiscal 1996 the Company incurred  approximately $280,000 in capital
equipment.

         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.

         The Company  believes that IPO proceeds will be sufficient to cover the
fiscal 1997 operating and capital  budget.  The Company's  capital  requirements
after such period will depend on the extent that  GRADIUM  becomes  commercially
accepted and the Company's  sales  program is  successful  in  generating  sales
sufficient to sustain its operations. There can be no assurance that the Company
will  generate  sufficient  revenues to fund its  operations or that the Company
will successfully  commercialize its GRADIUM products. In addition,  the Company
may be required to seek  additional  financing or alter its business plan in the
event of delays,  cost  overruns or  unanticipated  expenses  associated  with a
company in the development  stage. The Company  currently has no credit facility
with a bank or other financial institution.  There also can be no assurance that
any additional financing will be available if 
                                       17
<PAGE>
needed,  or, if available,  will be on terms  acceptable to the Company.  In the
event  necessary  financing  is not  obtained,  the Company  will be  materially
adversely affected and have to cease or substantially reduce operations.

         The shares of Class E common stock have the characteristics of escrowed
shares;  therefore,  shares  owned  by key  officers,  employees,  directors  or
consultants of the Company are subject to variable plan compensation accounting.
In the event the Company attains any of the earnings thresholds of the Company's
Class A common stock meets certain minimum market prices required for conversion
of Class E common stock into Class A common stock,  the Company will be required
to recognize  compensation  expense in the periods in which the stated  criteria
for conversion are probable of being met.

         Effective  April 1, 1996,  the Company  entered  into a five year lease
agreement  for a  13,300  square  foot  manufacturing  and  office  facility  in
Albuquerque,  New Mexico at a monthly  cost of $6,500 for the first three years,
increasing  to $6,900  monthly in the last two years.  The Company has relocated
its staff and manufacturing equipment as of this date. No significant costs were
incurred in the move. The Company incurred capital expenditures of approximately
$280,000 from the date of the IPO through June 30, 1996, and additional  capital
expenditures  of  approximately  $800,000  are  planned for  administrative  and
manufacturing facilities during the 1997 fiscal year.

         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.


                                    Business

General

         LightPath  Technologies,  Inc. (the  "Company") is a development  stage
enterprise  engaged in the research,  development  and production of GRADIUM(TM)
glass.  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 tasks performed by multi-element  conventional
lens systems.  The Company believes that GRADIUM lenses provide  advantages over
conventional lenses for certain  applications.  By reducing optical aberrations,
the Company  believes that GRADIUM  lenses can provide  sharper  images,  higher
resolution,  less image  distortion,  a wider usable field of view and a smaller
focal spot size.  By  reducing  the number of lenses in an optical  system,  the
Company believes that GRADIUM can provide more efficient light  transmission and
greater  brightness,  lower production  costs,  and a simpler,  smaller product.
While the Company believes that other researchers have sought to produce optical
quality lens material with the  properties of GRADIUM,  the Company is not aware
of any other  person  or firm  that has  developed  a  repeatable  manufacturing
process for producing such material on a prescribable basis.  LightPath has been
issued ten  patents and has filed  pending  patent  applications  related to its
materials  composition,   product  design  and  fabrication  processes  for  the
production  of GRADIUM  products.  The Company  continues to develop new GRADIUM
materials with various refractive index and dispersion profiles.

         LightPath  was  incorporated  under  Delaware  law in June  1992 as the
successor to LightPath  Technologies Limited  Partnership,  a New Mexico limited
partnership (the "Partnership") formed in 1989, and its predecessor,  Integrated
Solar Technologies Corporation, a New Mexico corporation ("ISOTEC") organized in
1985.  The  Company's  initial  objective  in 1985 was to improve  solar  energy
technology by creating optical  material that could  efficiently bend light from
varying  angles in order to track the path of the sun across  the sky.  In 1987,
the Company  realized that its early  discoveries had much broader  application,
and expanded its focus to imaging optics applications.  On February 22, 1996 the
company  completed  an initial  public  offering  ("IPO") for sale of  1,840,000
units,  each unit  consisting of one share of Class A common stock,  one Class A
warrant and one Class B warrant at a price of $5.00 per unit.

         Since its  inception  in 1985,  the Company  has been  engaged in basic
research  and   development   and  only  recently  began  to  focus  on  product
development.  The Company  believes  that most of its product sales to date have
been to persons  evaluating the  commercial  application of GRADIUM or using the
products  for  research  and  development.  The  Company is  offering  standard,
computer-based  profiles of GRADIUM that  engineers can use for product  design.
Further  development  is necessary to expand the  Company's  available  standard
profiles  and to add  additional  GRADIUM  glass  families  required for certain
optics applications.
                                       18
<PAGE>
         LightPath  has  developed a patented  process for  producing an optical
quality material,  GRADIUM, with an "axial" gradient refractive index (i.e., the
index gradient runs parallel to the optical lens axis, rather than perpendicular
or "radial").  GRADIUM is produced by inter-diffusing the atomic constituents of
different glass compounds into one material with the prescribed  optical profile
throughout. GRADIUM profiles with large or small changes in refractive index can
be prescribed  and achieved with  precision,  and GRADIUM lenses can be produced
across a large diameter range (currently  4mm-50mm).  Unlike  aspheres,  GRADIUM
lenses  can be  finished  using  conventional  spherical  surface  grinding  and
polishing  techniques.  Each piece of GRADIUM can contain  the  properties  of a
number of conventional optical glasses combined into one, thus allowing a simple
spherical  lens to correct  spherical  aberrations  or perform more  complicated
"multi-element lens system" functions with a single lens.

         By reducing  optical  aberrations,  GRADIUM lenses can provide  sharper
images, higher resolution,  less image distortion,  a wider usable field of view
and a smaller  focal spot size.  By reducing  the number of lenses in an optical
system,  GRADIUM should provide more efficient  light  transmission  and greater
brightness,  lower production costs, and a simpler, smaller and lighter product.
Although the Company's  present GRADIUM products are designed for  monochromatic
applications (e.g.,  lasers), the Company believes that GRADIUM may be developed
for  high  performance  white  light  applications  such as  endoscopes  or high
precision  microscopes.  GRADIUM's  unique  properties will allow the Company to
develop products for markets that emphasize performance, as well as markets that
emphasize efficiency (by reducing conventional lens count or as a substitute for
more expensive aspheres).


Business Strategy

         In an attempt  to  achieve  more rapid  sales,  the  Company  initially
intends to  emphasize  laser  products  that it believes  may have the  greatest
immediate  commercial  impact  with the least  initial  investment.  Lasers  are
presently used extensively in a broad range of consumer and commercial products,
including fiber-optics,  robotics,  bar-code reading,  document reproduction and
audio  and  video  compact  disc  machines.  Generally,  optical  designers  can
substitute  GRADIUM  components  included  in the  Company's  standard  line for
existing laser lens elements. Because GRADIUM can concentrate light transmission
into a much smaller focal spot than  conventional  lenses,  the Company believes
that  GRADIUM  has the  ability  to improve  laser  performance.  The  Company's
strategy  will be to target key laser market  niches and establish the necessary
products and  partnership  alliances to sell into Europe and Asia as well as the
U.S. market.  In addition to laser  applications,  loose optical  components can
easily be substituted into many simple products.  The Company intends to provide
a standard line of GRADIUM profiles for broad-based  sales to optical  designers
developing particular systems for original equipment  manufacturers  ("OEMs") or
in-house products.

         Because complex systems  contain many optical  components,  and GRADIUM
lenses can be  utilized to reduce the number of lens  elements in such  systems,
the Company believes that GRADIUM lenses can simplify the design and improve the
performance of complex  optical  systems.  However,  design and production of an
optical product is a lengthy  process,  and it could take years for producers to
redesign complex optical systems using GRADIUM, reconfigure the product housing,
re-engineer  the assembly  process and commence  commercial  quantity orders for
GRADIUM  components.  Accordingly,  the Company  intends to focus its  marketing
efforts on niche emerging industries, such as multimedia and telecommunications,
that are designing for next-generation  optical systems,  and performance driven
industries,   such  as  medical  instruments,   that  are  seeking  to  optimize
performance of existing optical products. The Company believes OEM relationships
may improve the Company's  technology  base by evolving into more  sophisticated
research and products,  although there can be no assurances in this regard.  The
Company's existing OEM relationships include the development of prototype lenses
for a  leading  manufacturer  of  endoscopes  and  the  optimization  of a  high
performance rifle scope for a gunsight manufacturer.

         The Company has targeted various optoelectronic  industry market niches
and is  currently  developing  additional  GRADIUM  products  and key  strategic
relationships  that potentially could impact this large growth area. The Company
believes  that GRADIUM can provide  industry  wide  solutions to  optoelectronic
problems of light gathering, packaging and alignment.

         The Company intends to engage in promotional and educational activities
concerning GRADIUM so that optical engineers from the numerous, high performance
optics  markets  become  familiar with GRADIUM and its  properties.  The Company
presently  has five  standard  profiles of GRADIUM  that  engineers  can use for
product design, and is continuing to develop more profiles.  In addition,  using
customers'  designs,  the  Company  intends to provide the lenses or lens blanks
with the  profiles  necessary  to perform the desired  function.  The  Company's
GRADIUM  profiles are  compatible  with  established  software  design  programs
utilized by optical  designers,  enabling  designers to  integrate  GRADIUM into
their designs.  While this enables  designers to incorporate  GRADIUM into their
product design,  the Company must create  
                                       19
<PAGE>
awareness of GRADIUM so that designers will utilize GRADIUM in their designs. If
a standard  GRADIUM profile is not suited for a specific  design,  LightPath may
create a custom  GRADIUM  profile for the customer.  The Company's  objective is
that optical designers will learn from information furnished by the Company that
GRADIUM can  provide  them with  additional  flexibility  and design  freedom to
create optical products more efficiently and with enhanced performance.

Sales and Marketing

         The Company's primary  marketing  objectives are to target specific OEM
customers,  to promote  direct sales to the laser market and to promote  product
awareness  by educating  the various  optics  markets  about the  advantages  of
GRADIUM.  The Company's limited revenues and financing prior to the IPO had been
applied  primarily  to research and  development,  consequently,  LightPath  and
GRADIUM are largely unknown.

         The optics industry is characterized by extensive product diversity and
varying levels of product maturity. Products range from consumer (e.g., cameras,
copiers) to industrial  (e.g.,  lasers),  from products where the lenses are the
central feature (e.g.,  telescopes,  microscopes) to products incorporating lens
components (e.g., robotics,  semiconductor  production equipment).  As a result,
the  market  for the  Company's  products  is  highly  segmented  and no  single
marketing  approach  will  allow the  Company  to access  all  available  market
segments.  Accordingly, the Company will selectively focus in specific laser and
optoelectronic  niches that provide the best opportunity for market penetration.
However,  all optical products are restricted by the same design constraints and
technological shortcomings of conventional optical technology and materials.

         Because  the optics  industry  is so  segmented  the  Company  plans to
utilize the Internet as a vehicle for  promotion of GRADIUM.  "Light.Net"  is an
Internet sight where interested  persons may presently obtain information on the
Company and  GRADIUM,  and order  products  from our  catalog.  In addition  the
Company will develop a computer-based instructional program to answer frequently
asked questions about GRADIUM and provide  technical  information  about product
applications for customers,  suppliers and interested  individuals.  The Company
has placed,  and will continue to place,  print media  advertisements in various
trade magazines and will be participating in appropriate trade shows.

         The  Company  continues  to develop a network of  selected  independent
optical engineering firms which it has named  LightPath-Design!(TM)  Centers, to
promote the sale of GRADIUM  products.  There  presently  exists an  unorganized
worldwide  group of  optical  engineering  firms  that  provide  optical  design
services and support.  The Company's  objective is to refer potential  customers
that inquire  about GRADIUM (on the Light.Net or otherwise) to such firms in the
customers' geographic location in an effort to promote the use of GRADIUM in the
design of the customers'  optical systems.  LightPath-Design!(TM)  Centers are a
strategic  alliance between the Company and optical  engineering firms owned and
operated by third parties.

         The Company plans to market GRADIUM through relationships with OEMs for
the  production  of  particular  prototype  lenses to be  incorporated  into the
manufacturer's  proprietary  products.  LightPath  has entered into an agreement
with Karl Storz GMBH & Co. ("Storz"),  a major endoscope  manufacturer,  for the
development of lenses for endoscopy instruments.  Endoscopes are used to observe
diagnostic  or surgical  procedures  in vivo  (within  the body),  substantially
reducing surgical costs. Pursuant to the terms of the agreement, the Company has
designed and delivered GRADIUM  materials with profiles  specified by Storz, and
Storz is in the process of producing  prototype  instruments  incorporating  the
GRADIUM  materials.  Storz is not  obligated to order  commercial  quantities of
GRADIUM  products,  and may  terminate  the  agreement  without  entering into a
production  phase.  Although the  agreement  provides for the Company to receive
payments upon achievement of certain  development  milestones,  the relationship
will yield significant revenues only if Storz sells commercial quantities of the
GRADIUM endoscopes.  The Company granted Storz an exclusive worldwide license to
use GRADIUM  materials in the production of endoscopes,  as well as the right to
use the Company's tradenames in connection with the sale of such endoscopes. The
exclusive  license  provides  for  royalties  based on  actual  sales as well as
certain minimum royalties once Storz commences commercial production, if ever.

         Pursuant  to a purchase  order from a  military  contractor,  LightPath
designed a prototype for a more rugged,  high performance  gunsight lens system.
The  Company  believes  that the  GRADIUM  prototype  has  demonstrated  greater
ruggedness  and  an  imperviousness  to  harsh  environmental  conditions.   The
LightPath lens design  eliminates air spaces between lens elements,  eliminating
condensation  caused by rapid  changes  between  warm,  humid indoor and cold or
humid outdoor environments. The contractor is seeking next-stage U.S. government
funding,  of which there can be no  assurance,  before  continuing  the project.
LightPath  has  also  developed  a  prototype  lens  for a  commercial  gunsight
manufacturer that is considering  incorporating a GRADIUM lens in its gunsights,
and is  developing  prototype  lenses  for  other  military/aerospace  OEMs  and
government research labs.
                                       20
<PAGE>
Competition

         The market for  optical  components  is highly  competitive  and highly
fragmented.  The Company competes with  manufacturers of conventional  spherical
lens products and optical components, providers of aspherical lenses and optical
components  and producers of optical  quality  glass.  To a lesser  extent,  the
Company   competes  with  developers  of  radial  gradient  lenses  and  optical
components.  Many of these  competitors have greater  financial,  manufacturing,
marketing and other resources than the Company.

         Manufacturers  of conventional  lenses and optical  components  include
industry  giants  such as Eastman  Kodak  Corporation,  Nikon,  Olympus  Optical
Company,  Carl Zeiss and Leica AG. In addition to being substantial producers of
optical  components,  these entities are also some of the primary  customers for
such  components,   incorporating  them  into  finished  products  for  sale  to
end-users. Consequently, these competitors have significant control over certain
markets for the Company's products. In addition, although these companies do not
manufacture  axial  gradient  lenses,  and the  Company  believes  that it has a
substantial  technological  lead in this  field,  in light of their  substantial
resources,  these companies could pursue development of axial gradient products.
In addition,  the Company's  products  compete with  products  produced by these
manufacturers.

         Because the Company also sells GRADIUM blanks for final  fabrication to
customers,  it competes  directly with producers of homogenous  optical  quality
glass such as Schott Glaswerke and Hoya  Corporation.  These  manufacturers  are
continually  seeking to improve the  materials  available for lenses and optical
components.  Due to their substantial resources,  they also might be expected to
try to develop  products more directly  competitive  with GRADIUM  and/or impede
market opportunities for the Company's sale of GRADIUM materials.

         Manufacturers  of  aspherical  lenses and  optical  components  provide
significant  competition for the Company in providing  products that improve the
shortcomings  of  conventional  lenses.  Aspherical  lens  system  manufacturers
include Eastman Kodak Corporation, Olympus Optical Company, Gel-Tech, Inc., Hoya
Corporation and U.S. Precision Lens. The use of aspherical surfaces provides the
optical  designer with a powerful tool in correcting  spherical  aberrations and
enhancing performance in state-of-the-art optical products. But the nonspherical
surfaces of glass "aspheres" are difficult to fabricate and test, are limited in
diameter range and induce light scatter.  Plastic molded aspheres,  on the other
hand,  allow for high volume  production,  but primarily are limited to low-tech
consumer  products  that do not  place a high  demand  on  performance  (such as
plastic  lenses  in  disposable  cameras).  Molded  plastic  aspheres  appear in
products that stress weight,  size and cost as their measure of success.  Molded
glass aspheric  technology  requires high volume production to be cost-effective
because  hand  polishing  is  too  time  consuming.   Despite  these  drawbacks,
aspherical lenses presently have significant commercial acceptance.

         To a lesser extent,  the Company  competes with  manufacturers of other
gradient index lens materials.  Currently,  processes to produce  gradient index
materials include ion-exchange, chemical vapor deposition (CVD) and Sol-Gel, all
of which produce  small radial  gradient  index rods with limited  applications.
Manufacturers using these processes include Nippon Sheet Glass,  Olympus Optical
Company and Gradient Lens Corporation. The Company believes that these processes
are limited by the small refractive  index change  achievable  (typically,  less
than 0.05),  the small skin depth of the gradient region  (typically less than 3
mm), the lack of control of the shape of the resultant gradient profile, limited
glass compositions, and high per unit manufacturing costs.

         Another  potentially  competitive  technology  being pursued by certain
researchers is diffractive optics, a process that etches microscopic patterns on
the  surface of a  homogenous  lens to correct  spherical  aberrations.  Because
diffraction  alters  the lens  surface,  optical  coatings  cannot be applied to
minimize light scatter and maximize light  transmission.  However,  this process
has the  potential  to  compete  with  both  aspheres  and  GRADIUM  in  certain
applications.
                                       21
<PAGE>
Manufacturing

         LightPath had limited  manufacturing  capabilities prior to the move to
Albuquerque.  In the larger  facility,  the Company has begun to  implement  its
plans  for a  high-volume  blank  and  lens  production  manufacturing  plant by
purchasing appropriate equipment, expanding and training a production work force
and implementing  process  controls.  Although the Company has not produced high
volumes of GRADIUM lenses,  it believes that a scale-up of manufacturing  can be
achieved in the larger  facility by adding  appropriate  equipment and personnel
without  requiring  any  significant  engineering  advances.  The  Company  also
believes  that  proper  scale-up  of  the   manufacturing   process  will  yield
efficiencies  and reduce unit  production  costs.  By  purchasing  larger,  more
sophisticated  furnaces,  milling machines and metrology equipment,  the Company
believes that greater production efficiencies should be realized.  Automation of
certain assembly processes, including core drilling and metrology, may result in
further cost savings and quality  improvements.  The Company  believes  that low
manufacturing costs will be a key to its long-term success.

         The Company  presently  uses  subcontractors  for finishing  lenses and
intends to continue to do so. The Company has purchased a limited amount of lens
finishing  equipment for finishing  prototype lenses and for rapid turnaround of
small volume orders.

         The Company  believes that the  production  process is repeatable  with
consistent high quality,  and has accurately  completed a production scale up of
its  catalog  product  lines.  The  Company's   process  does  not  require  any
extraordinary  controls.  Since present GRADIUM lenses have spherical  surfaces,
lens finishing costs will continue to be  considerably  less expensive than most
aspheric lenses. Although GRADIUM lenses may be more expensive than conventional
homogenous  lenses,  the lens price may be offset by GRADIUM's ability to reduce
the number of lens elements and/or to increase the performance and functionality
of the  complete  optical  system.  The  Company  is now  able to use  standard,
off-the-shelf  base glass to produce  its  GRADIUM  lenses..  Base  glasses  are
manufactured by a number of major glass manufacturers,  and the Company believes
that a satisfactory supply of glass can be assured at a reasonable price.

Patents and Other Proprietary Intellectual Property

         The  Company's  policy is to protect  its  technology  by,  among other
things, patents, trade secrets,  trademarks and copyrights. As of June 1996, the
Company  had ten  issued  U.S.  patents,  four  foreign  patents  and had  filed
applications for four additional U.S.  patents.  Patents have been issued and/or
patent applications have been filed in the areas of glass composition,  gradient
geometries, production processes and product design. One of the Company's issued
patents  expires in 2006, two in 2007,  one in 2008,  three in 2010, two in 2012
and  one  in  2013.  Patent  applications   corresponding  to  LightPath's  U.S.
applications  have been filed in the patent offices in Europe and Japan pursuant
to the Patent Cooperation  Treaty ("PCT).  Under the PCT, a patent applicant may
file one patent application and have it acknowledged as an accepted filing in as
many member nations to the PCT as the applicant elects.

         In  addition  to patent  protection,  certain  process  inventions  and
innovations  are  retained as trade  secrets.  A key feature of GRADIUM is that,
once  fabricated,  it does not reveal its formula upon  inspection and cannot be
reverse-engineered.  LightPath(R)  is now  registered  as a service  mark in the
United States; registrations for LightPath(TM), GRADIUM and other trademarks are
pending.  The  Company  intends to  register  these  trademarks  in key  foreign
jurisdictions.

         There can be no assurance  that any issued patents owned by the Company
will  afford   adequate   protection  to  the  Company  or  not  be  challenged,
invalidated,  infringed or circumvented, or that patent applications relating to
the Company's products or technologies that it may license in the future or file
itself  will  result  in  patents  being  issued,  or that  any  rights  granted
thereunder will provide competitive  advantages to the Company.  There can be no
assurance  that  patents  owned or  licensed  by the  Company  and issued in one
jurisdiction will also issue in any other jurisdiction.  Furthermore,  there can
be no  assurance  that the  validity  of any of the  patents  would be upheld if
challenged by others in litigation  or that the Company's  activities  would not
infringe patents owned by others. No such challenges have been made to date.

         Further,  there can be no assurance that others have not  independently
developed  or will not  independently  develop  and patent  similar or  superior
products  and/or  technologies,  duplicate  any of  the  Company's  products  or
technologies or design around the Company's  patents.  There can be no assurance
that  patents  issued to others will not  adversely  affect the  development  or
commercialization  of the Company's  products or technologies.  The Company does
not have a policy of patent infringement liability coverage for costs or damages
relating to claims of infringement. The Company could incur substantial costs in
defending  itself in suits  brought  against it or any of its  licensees,  or in
suits in 
                                       22
<PAGE>
which the  Company  may assert its patent or patents in which it may have rights
against  others  or in suits  contesting  the  validity  of a  patent.  Any such
proceedings would be protracted. In addition, there can be no assurance that the
Company  could be  successful  in  defending  its  patent  rights in any  future
infringement  action.  If the outcome of any such  litigation  is adverse to the
Company's  interests,   the  Company's  business  may  be  materially  adversely
affected.

         The Company is not aware of its products  and/or  processes  infringing
any U.S. or foreign patent rights of any other party. There can be no assurance,
however,  that all United States and any foreign patents or patent  applications
that may pose a risk of infringement have been identified.  Patent  applications
in the United States are maintained in secrecy until patents issue.  The Company
could incur  substantial  costs in defending  itself in infringement  litigation
brought by others, or in prosecuting  infringement claims against third parties.
An adverse party claiming patent or copyright  infringement  might assert claims
for  substantial  damages  or seek to obtain an  injunction  or other  equitable
relief,  which could  effectively  block the ability of the Company to make, use
distribute and sell products.

         The Company relies on trade secrets and proprietary know-how,  which it
seeks to protect,  in part, by  confidentiality  agreements  with its employees,
consultants and customers. However, there can be no assurance that the Company's
confidentiality  agreements,  when in place,  will not be  breached  or that the
Company would have adequate remedies for any breach. Some of the confidentiality
agreements that the Company relies upon will expire in the next few years. There
can be no assurance  that others will not  independently  develop  technology or
processes substantially equivalent to or better than the Company's technology or
processes,  or that  the  Company's  trade  secrets  will not  otherwise  become
disclosed  to or  independently  discovered  by  its  competitors.  It  is  very
difficult to protect unpatented know-how and trade secrets.

Environmental and Government Regulation

         Emissions and waste from the Company's  present  manufacturing  process
are at such low levels that no special  environmental  permits or  licenses  are
required.  In the future,  the Company  may need to obtain  special  permits for
disposal of increased waste  by-products.  The glass  materials  utilized by the
Company  contain lead and other toxic elements in a stabilized  molecular  form.
However, the high temperature diffusion process results in low-level emission of
such  elements in gaseous  form.  If  production  reaches a certain  level,  the
Company believes that it will be able to efficiently  recycle certain of its raw
material waste,  thereby reducing disposal levels.  The Company believes that it
presently is in compliance with all material  federal,  state and local laws and
regulations  governing its operations and has obtained all material licenses and
permits necessary for the operation of its business.

         There are no federal,  state or local  regulations  that  restrict  the
manufacturing   and   distribution  of  GRADIUM   materials.   Certain  end-user
applications  will require that the complete optical systems receive  government
approval,  such as Federal Drug Administration approval for use in endoscopy. In
these cases, the Company will generally be involved on a secondary level and the
license and approval process will be up to the OEM customer.

Research and Development

         Since  inception,  the Company has been  engaged in basic  research and
development  that has resulted in the  discovery of GRADIUM and the  proprietary
processes for fabricating  GRADIUM lenses.  This research  included  theoretical
development  of the  mathematical  formulas  for  accurately  defining  GRADIUM,
development and refinement of the prescribable,  repeatable fabrication process,
and  development  of the  software  modeling  tools and  metrology.  The Company
shipped its first GRADIUM  products in May 1994. The Company intends to continue
fundamental  materials research,  process and production  optimization,  and the
development  of new  glass  compositions  to  create  different  "families"  and
geometries of GRADIUM materials to be offered to customers.  "Families" of glass
are various base glass compounds comprised of different  elements.  Variation of
refractive  index can be  accomplished  by using  different  elements  in glass.
Further   development  is  necessary  to  produce  GRADIUM  materials  for  high
performance,  white light applications (such as high performance microscopes and
other products where sensitive color  discrimination  is critical).  The Company
will  continue  to refine its  design  modeling  software  in an attempt to gain
greater design accuracy and more efficient production processes.

         The Company's initial product line is lead-based. The Company currently
is  developing  a  barium-based  product  line,  and may in the  future  conduct
development regarding lanthanum-based products. Optical elements of lanthanum or
barium may be used with lead-based glass to correct or reduce certain  chromatic
aberrations.  From within these families, a specific range of refractive indices
and dispersive  properties is selected for each specific  profile,  providing an
inventory of GRADIUM profiles for a diverse range of applications.
                                       23
<PAGE>
         The  Company has  expended in excess of  $6,900,000  for  research  and
development since inception.  The Company expended or incurred  expenditures for
research  and  development  for the two years  ended June 30 as  follows:  1996,
$83,074; 1995, $112,165.  The decrease in research and development  expenditures
in recent  years is due to  personnel  reductions  and  declining  activity as a
result of the Company's lack of operating  capital.  The Company plans to expend
approximately $700,000 on research and development during fiscal 1997.


Employees

         The Company  currently had twenty-one  full-time  employees at June 30,
1996 and expects to hire four  additional  employees in the next twelve  months,
including manufacturing,  technical design and engineering, marketing and sales.
Seven  of  the  Company's   present   employees   are  engaged  in   management,
administrative and clerical functions, four in research and development, five in
production  and five in sales and  marketing.  In order to maintain low overhead
expenses,  the Company  intends to continue  its current  practice of  utilizing
outside  consultants,  where  appropriate,  in  addition  to  hiring  additional
full-time  personnel.  None of the Company's  employees are represented by labor
unions.


Description of Property

         The Company  leases its principal  offices in  Albuquerque,  New Mexico
which  are used to house  all of its  operations,  including  research,  product
design and development, production and all administrative operations. The 13,300
square foot facility is located in a business and research  park. The Company is
obligated to make monthly  rental  payments of $6,500  (increasing  to $6,900 in
year four) on a five year lease which expires April 2001.


Legal Proceedings

         On July 31,  1995 a former  employee  commenced  a lawsuit  against the
Company for deferred  compensation,  reimbursable  expenses and damages totaling
$114,672 in the Superior Court of Arizona, County of Pima. On September 22, 1995
an  additional  suit was  filed in the same  court,  by the  employee,  alleging
wrongful  discharge and damages in an unspecified  amount.  The Company  settled
both of the lawsuits in May 1996,  for  approximately  $75,000,  the majority of
which was deferred wages the Company had accrued in the prior year.

         On April 24, 1995,  another former employee  commenced a lawsuit in the
U.S. District Court, Tucson, against the Company alleging that he was unlawfully
terminated in retaliation for his efforts to secure unpaid wages for himself and
co-workers.  He also filed a complaint with the National Labor  Relations  Board
(the  "NLRB").  The NLRB found in favor of LightPath on the merits of the claim.
The discovery  phase has begun and the Company is preparing a motion for summary
judgment. The former employee seeks an unspecified amount of damages. In October
1996,  the Company was  informed  that the  lawsuit had been  terminated  by the
employee following the discovery phase.

         On January 9, 1996,  a former  consultant  filed a lawsuit  against the
Company in Arizona  Superior  Court,  County of Pima,  alleging that the Company
owes him additional  fees in the amount of $25,600 plus interest.  Discovery has
been initiated and the Company intends to answer and defend against the claim.

         The Company is involved in other various  legal actions  arising in the
normal  course of business.  After  taking into  consideration  legal  counsel's
evaluation of such actions, management is of the opinion that their outcome will
not have a significant effect on the Company's financial statements. The Company
is also aware of the existence of certain unasserted  claims.  Certain potential
claims exist due to nonpayment  of payables  during the periods when the Company
had  inadequate  cash flow.  Third  parties have not recently  manifested  their
intent to pursue such  matters.  Management  is of the opinion that such matters
are not likely to be  asserted  or if they are will not  result in any  material
liability to the Company.
                                       24
<PAGE>
                                   MANAGEMENT

Directors and Executive Officers

         The  Directors  and  Executive  Officers  of  the  Company,  and  their
respective ages and positions with the Company, are as follows:

<TABLE>
<CAPTION>
             Name                  Age               Position
             ----                  ---               --------
<S>                                <C>               <C>
Leslie A. Danziger                 43                Chairman and President

Louis P. Wagman                    54                Executive Vice President and Secretary

Donald E. Lawson                   45                Executive Vice President, Chief Operating Officer and Treasurer

David W. Collins                   56                Director

Milton Klein, M.D. (1)             48                Director

Louis Leeburg (2)                  42                Director

Haydock H. Miller, Jr. (1)         71                Director
</TABLE>
- ---------------------

(1)      Member of the Compensation Committee.
(2)      Member of the Audit Committee.

         Leslie  A.  Danziger  has  been  Chairman  of the  Company,  since  its
incorporation  in June 1992,  and has also held the position of President  since
August 1995.  Ms.  Danziger was a partner or executive  officer of the Company's
predecessors  from 1985 until  incorporation  of the Company.  Ms. Danziger is a
founder of the Company and a co-inventor of the first two LightPath patents. She
has  developed  and guided the  execution of the  Company's  long-term  business
strategies  and  the   development  and   commercialization   of  the  Company's
technologies.  From 1974 to 1979 she served as an  Executive  Vice  President of
COS,  Inc.,  and from 1979 to 1982 she served as  Executive  Vice  President  of
Arctic Communications Corporation.  Both of these communication consulting firms
developed  tools designed to assist clients in resolving  conflicts  relating to
economic  development,  land  use and  natural  resource  issues.  Ms.  Danziger
attended the University of Texas.  Ms. Danziger is married to Joel C. Goldblatt,
the Company's Vice President of Strategic  Planning and  Communications,  and is
the sister-in-law of Milton Klein, M.D., a Director of the Company.

         Louis P. Wagman has been the  Executive  Vice  President of the Company
since  May  1992  and as  its  Secretary  since  October  1992.  Mr.  Wagman  is
responsible for the Company's strategic alliances and licensing and new business
development.  From  1991  until  the time he  joined  the  Company,  Mr.  Wagman
performed  management  consulting  services  for various  firms,  including  the
Company. From 1989 to 1991, Mr. Wagman was President and Chief Executive Officer
of Photometrics,  Ltd., a supplier of advanced  electronic imaging equipment for
scientific  and  industrial  applications.  From 1977 to 1989, he served as Vice
President and General Manager of four different  companies engaged in the design
and  manufacture  of  high-tech  diagnostic,   testing  and  service  equipment:
Princeton  Gamma-Tech,  Sun  Electric  Corporation,   Sensors/Dynatech  and  KLT
Industries.  During the previous eleven years,  Mr. Wagman was an executive with
Bendix Corporation. Mr. Wagman received a B.S. degree in Electronics Engineering
from  George  Washington  University  and an M.B.A.  with  distinction  from the
University of Michigan.

         Donald E. Lawson has been Executive Vice President of the Company since
May 5, 1995 and Treasurer  since  September  1995. Mr. Lawson has also served as
the Company's Chief Operating Officer since June 1995 and is responsible for the
Company's financial activities,  manufacturing, sales, research and development,
and intellectual  property  management.  From 1991 to 1995, Mr. Lawson served as
Vice  President,  Operations  for Lukens Medical  Corporation,  a medical device
manufacturer.  From  1980 to 1990,  Mr.  Lawson  served in  various  capacities,
including Production Superintendent,  for Ethicon, Inc., a division of Johnson &
Johnson and a manufacturer  of medical  products.  Mr. Lawson  received a B.B.A.
degree in Finance from Texas A & M University.

         David W.  Collins has served as a Director  of the Company  since 1992.
Dr. Collins served as an in-house patent counsel for Bell Laboratories from 1970
to 1974, for Allied Chemical  Corporation  from 1974 to 1978, for Exxon Research
and  Development  from 1978 to 1979, and for Hughes  Aircraft from 1979 to 1985.
Dr.  Collins has been a patent  attorney in private  practice in since 1985 with
his office in Tucson,  Arizona,  since  1992,  and has served as special  patent
counsel to the  Company  since  1987.  Dr.  Collins  received  a B.S.  degree in
chemistry from the University of Massachusetts, an 
                                       25
<PAGE>
M.S. degree in chemistry from Williams  College,  a Ph.D. in solid state science
from Penn State University and a J.D. from Seton Hall University. Dr. Collins is
a member of the New Jersey and California Bar Associations.

         Milton  Klein,  M.D. has served as a Director of the Company  since its
inception.  Dr.  Klein is  principally  involved in  medically  related uses for
LightPath  GRADIUM  materials.  In March 1992 Dr. Klein  organized the Company's
group of scientific  advisors to explore the use of the Company's  technology in
endoscopic equipment,  microscopy and related medical optical systems. Dr. Klein
specializes  in  cardiology  and from 1982 to the  present  has been a  Clinical
Associate  Professor  of Medicine at The Baylor  College of  Medicine,  Houston,
Texas.  He is a Fellow of the American  College of  Cardiology  and the American
College of Physicians.  Dr. Klein received a B.S. degree from McGill  University
and an M.D. from the  University  of  California in San Diego.  Dr. Klein is the
brother-in-law of Leslie A. Danziger.

         Louis  Leeburg has served as a Director of the Company  since May 1996.
Since 1993 Mr. Leeburg has been with the investment  firm, Jay A. Fishman,  Ltd.
From December 1988 until August 1993 he was the Vice  President,  Finance of The
Fetzer  Institute,  Inc.  From 1980 to 1988 he was in financial  positions  with
different  organizations with an emphasis in investment management.  Mr. Leeburg
was an audit manager for Price Waterhouse & Co. until 1980. Mr. Leeburg received
a B.S. in accounting from Arizona State  University.  Mr. Leeburg is a member of
Financial  Foundation  Officers Group and the treasurer and trustee for the John
E. Fetzer Memorial Trust Fund and the John E. Fetzer ILM Trust Fund,  affiliated
with a significant stockholder of the Company.

         Haydock H.  Miller,  Jr. has served as a Director of the Company  since
January  1993.  Since that time he has advised  the  Company on  administrative,
management  and financial  matters.  Mr. Miller served as an executive  with the
Aluminum  Company of America (ALCOA) from 1949 until his retirement in 1983. Mr.
Miller received a B.A. degree from Yale University. His last position with ALCOA
was Manager of Organization Analysis, an internal consulting group for all ALCOA
departments  and  divisions  prior  hereto  he  was  Manager  for  salaried  job
evaluations  for ALCOA and its  subsidiaries  and  immediately  before that, was
Superintendent  of several ALCOA plants,  concentrating  on quality  control and
production  techniques,  and consultant to its operations in the United Kingdom.
Since 1983, Mr. Miller has been an independent management consultant.

Committees of the Board of Directors

         The Board of Directors has a Compensation  Committee  which reviews and
recommends  to the Board of  Directors  the  compensation  and  benefits  of all
officers of the Company and also  administers  the Company's  Omnibus  Incentive
Plan, pursuant to which incentive awards,  including stock options,  are granted
to  officers  and key  employees.  The  Board of  Directors  appointed  an Audit
Committee comprised of Louis Leeburg on July 8, 1996. It is anticipated that the
Audit Committee will review,  with the Company's  independent  accountants,  the
annual  financial   statements  of  the  Company,   and  also  will  review  the
effectiveness   of  the  Company's   financial  and  accounting   functions  and
organization and make recommendations to the Board of Directors in that regard.

Directors' Compensation

         During the year end June 30, 1996  directors were not  compensated  for
their  services in that capacity or for serving on  committees.  On July 8, 1996
the Board of  Directors  approved a proposal  to  compensate  each  non-employee
director  $1,000 per meeting  attended.  Non-employee  Directors  serving on the
Company's  Board receive  nonqualified  stock options of Class A Common Stock as
part of the  Directors  Stock Plan.  The plan  provides for an automatic  annual
grant of 182  shares  and an  initial  option  grant of 900 shares at the time a
director  commences  service to the Company.  On August 21,  1996,  the Board of
Directors  approved  a  proposal  to modify  the plan for  fiscal  1997,  for an
automatic  annual  grant of 3,000  shares and an initial  option grant of 10,000
shares at the time a director commences service to the Company.

         All  Directors  are  reimbursed  for  their  reasonable   out-of-pocket
expenses incurred in connection with attendance at Board and Committee meetings.
Directors  who are  employees  of the  Company do not receive  compensation  for
service on the Board or Committees of the Board other than their compensation as
employees.

Limitation of Liability and Indemnification

         The Certificate of Incorporation  limits,  as permitted by the Delaware
General  Corporation Law liability of the Company's  directors to the Company or
its  stockholders  for monetary damages arising from a breach of their fiduciary
duties as directors in certain circumstances.  This provision presently limits a
director's  liability  except  where a director  (i) breaches his or her duty of
loyalty to the Company or its  stockholders,  (ii) for acts or omissions  not in
good faith or
                                       26
<PAGE>
engages in intentional  misconduct or a knowing  violation of law, (iii) for any
transaction from which a director obtains an improper personal benefit,  or (iv)
under  Section  174  of the  Delaware  General  Corporation  Law  which  imposes
liability for willful or negligent payment of unlawful dividends,  distributions
or redemptions.  This provision does not prevent the Company or its stockholders
from seeking equitable  remedies,  such as injunctive  relief or rescission.  If
equitable  remedies  are  found  not  to be  available  to  stockholders  in any
particular case,  stockholders may not have any effective remedy against actions
taken by directors that constitute negligence or gross negligence.

         The  Bylaws of the  Company  authorize  the  Company to  indemnify  its
directors,  officers  or other  persons  serving at the  request of the  Company
against liabilities and losses arising from their services in such capacities to
the fullest  extent  permitted by law,  including  payment in advance of a final
disposition of a director's or officer's  expenses or attorneys' fees reasonably
incurred in defending any action, suit or proceeding,  other than in the case of
an action,  suit or proceeding  brought by the Company on its own behalf against
such person. Presently, the Delaware General Corporation Law provides that to be
entitled to indemnification an individual must have acted in good faith and in a
manner he or she  reasonably  believed to be in or not opposed to the  Company's
best interests.

         The Company has been advised that it is the position of the  Commission
that insofar as the foregoing provision may be invoked to disclaim liability for
damages  arising  under the  Securities  Act, such  provision is against  public
policy as expressed in the Securities Act and is therefore unenforceable.

         The Company believes that these charter  provisions are consistent with
certain provisions of the Delaware General  Corporation Law, which are designed,
among other things, to encourage qualified individuals to serve as directors and
officers of Delaware  corporations.  The Company also believes these  provisions
will assist it in maintaining  and securing the services of qualified  directors
and officers.
                                       27
<PAGE>
Executive Compensation
         The following table sets forth the compensation  paid or accrued by the
Company for the services  rendered  during the fiscal years ended June 30, 1996,
1995 and 1994 to the Company's Chief  Executive  Officer and the other executive
officers of the Company or any employee who earned in excess of $100,000  during
the last fiscal year (collectively, the "Named Officers").

<TABLE>
<CAPTION>
                                             Summary Compensation Table
================================================================================================================
                                                                            Long Term
                                            Annual Compensation             Compensation
                                            -------------------             ------------
================================================================================================================
                                                                            Bundled Stock    Class A
Name and Position              Year         Salary           Bonus          Options (1)      Options (2)
- -----------------              ----         ------           -----          -----------      -----------
<S>                            <C>
 Leslie A. Danziger
   Chairman, President         FY 1996    $150,000(3)
                               FY 1995     150,000(4)                         90,910
                               FY 1994     120,000(5)                         36,077
Louis P. Wagman
  Exec. Vice President         FY 1996     120,000(6)
                               FY 1995     120,000(7)        5,000            58,182
                               FY 1994     120,000(8)                         32,909
                                    
Donald E. Lawson
  Exec. Vice President         FY 1996      90,000(9)                                           25,000
                               FY 1995     10,269(10)
================================================================================================================
</TABLE>

(1)  With  respect to the  Bundled  Stock  Options,  the total  amount of shares
     indicated  consists  of 20% shares of Class A common  stock,  30% shares of
     Class E-1common stock, 30% shares of Class E-2 common stock, and 20% shares
     of Class E-3 common stock.
(2)  Options are for Class A common stock only.
(3)  Of this amount,  $125,591 was paid,  and the  remainder  has been  deferred
     contingent upon the Company meeting the Class E-1 conversion conditions.
(4)  Of this amount, $31,250 was paid, $30,250 has been deferred contingent upon
     the Company  meeting the Class E-1 conversion  conditions and the remainder
     converted into Class E common stock at a $1 per share conversion price.
(5)  Of this amount,  $37,500 was paid and the remainder  converted into Class E
     common stock at a $1 per share conversion price.
(6)  Of this  amount,  $111,410  was paid and the  remainder  has been  deferred
     contingent upon the Company meeting the Class E-1 conversion conditions.
(7)  Of this amount, $87,500 was paid, $32,500 has been deferred contingent upon
     the Company  meeting the Class E-1 conversion  conditions and the remainder
     converted into Class E common stock at a $1 per share conversion price.
(8)  Of this amount, $78,750 was paid, $16,250 has been deferred contingent upon
     the Company  meeting the Class E-1 conversion  conditions and the remainder
     converted into Class E common stock at a $1 per share conversion price.
(9)  Of this amount,  $65,000 was paid, and the remainder converted into Class E
     common stock at a $1 per share conversion price.
(10) Of this  amount,  $2,770  was paid,  and the  remainder  has been  deferred
     contingent  upon the Company  meeting the Class E-1 conversion  conditions.
     Mr. Lawson was hired in May 1995.
                                       28
<PAGE>
         The following table sets forth information regarding Options granted to
the Named Officers during the fiscal year ended June 30, 1996.

                                          Option Grants For The
                                        Year Ended June 30, 1996

<TABLE>
<CAPTION>
=====================================================================================================
                            Options        %  of  Total  
Name                        Granted(1)    Options Granted      Exercise Price         Expiration Date
- -----------------------------------------------------------------------------------------------------
<S>                          <C>           <C>                 <C>                    <C>
Leslie A. Danziger                0        0                   0                      -
Louis P. Wagman                   0        0                   0                      -
Donald E. Lawson             25,000        45%                          $5.00         Feb. 22, 2006
=====================================================================================================
</TABLE>

(1)      Options represented are to purchase shares of Class A Common Stock.

The following table sets forth  information  regarding  options exercised by the
Named  Officers  during the fiscal  year June 30,  1996 and the value of options
held by the Named Officers at the fiscal year end.

                                  Option Exercises And Year End Values
<TABLE>
<CAPTION>
================================================================================================================


                                                                 #    of   Unexercised   Value    of 
                                                                 Options   at  FY  end,  Unexercised
                            Shares                               Exercisable/            In-The-Money
Name                        Acquired     on  Value               Unexercisable           Options at FY End
                            Exercise         Realized                                    -Class A (3)
- ----------------------------------------------------------------------------------------------------------
<S>                                <C>       <C>                 <C>                     <C>     
Leslie A. Danziger(1)              0         $0                     126,987/0            $105,787
Louis P. Wagman   (1)              0         $0                      91,091/0            $ 75,882
Donald E. Lawson  (2)              0         $0                  10,000/15000            $3,750/5,625
==========================================================================================================
</TABLE>

(1)  With  respect to the  Bundled  Stock  Options,  the total  amount of shares
     indicated  consists  of 20% shares of Class A common  stock,  30% shares of
     Class E-1common stock, 30% shares of Class E-2 common stock, and 20% shares
     of Class E-3 common stock.
(2)  Options represented are to purchase shares of Class A common stock.
(3)  Assumes  a fiscal  year end  value of  $5.375  per  share of Class A common
     stock.  To  compute  the  unrealized  value of Class A  common  stock,  the
     underlying E shares were excluded and 20% of the option  exercise price was
     attributed  to the Class A portion  of the  options.  If the E shares  were
     included  neither the shares held by Ms.  Danziger or Mr.  Wagman  would be
     in-the-money at June 30, 1996.



Employment Agreements

         Effective  November  8,  1995,  the  Company  entered  into  three-year
employment  agreements with its senior executive  officers,  Leslie A. Danziger,
Louis P. Wagman and Donald E. Lawson.  The agreements  provide for base salaries
of $150,000,  $120,000 and $90,000 for Ms. Danziger,  Mr. Wagman and Mr. Lawson,
respectively.  In the  event  the  Company  terminates  any  of the  executive's
employment  during the term of the agreement  without cause, or in the event the
executive terminates the agreement for good reason, the executive is entitled to
(i)  continue  to  receive  salary  until the  earlier of  obtaining  comparable
employment with another  company or the lapse of two years,  with respect to Ms.
Danziger,  one year, with respect to Mr. Wagman, and six months, with respect to
Mr.  Lawson,  (ii) continue to receive  benefits  until the earlier of obtaining
comparable  employment with another company or the corresponding  periods stated
in  (i)  above,  (iii)  have  all  unvested  stock  options  become  immediately
exercisable,  and (iv)  receive a lump sum  payment  equal to the average of the
annual bonuses paid to the executive during the previous three fiscal years. The
Agreement defines "cause" to mean termination due to felony conviction,  willful
disclosure  of  confidential  information  or willful  
                                       29
<PAGE>
failure to perform the executive's  duties.  The Agreement defines "good reason"
as  a  material   detrimental   alteration  in  the   executive's   position  or
responsibilities,  a material reduction in compensation,  relocation,  exclusion
from  compensation  plans or fringe benefits enjoyed by other  executives,  or a
material  breach by the  Company.  The  executive  officers  have  agreed not to
terminate for good reason as a result of the Company's move to Albuquerque,  New
Mexico. In addition,  if the termination under the foregoing events occurs after
a change in control of the Company,  the executive shall also receive a lump sum
severance  payment  equal to 2.99  times the  executive's  annual  compensation,
including  bonuses.  The Agreement defines "change in Control" as an acquisition
of 40% of Company's combined voting power by any party, a change in the majority
of the  directors  over a two-year  period  (unless  supported by the  incumbent
directors),  a  reorganization  or other business  combination  resulting in the
present  stockholders  of the  Company  no  longer  owning  more than 50% of the
combined voting power of the Company,  a sale of substantially all of the assets
of the Company or other similar transactions. The employment agreements reaffirm
the  executives'   agreements  pursuant  to  previously  executed   confidential
information  and invention  agreements to, among other things,  not compete with
the Company for a period of two years following termination of employment and to
assign any inventions,  patents and other proprietary rights to the Company. Any
controversies  regarding the employment  agreements are to be settled by binding
arbitration.


Stock Option Plans

      The Omnibus  Incentive Plan In June 1992,  the Board of Directors  adopted
and the  Company's  stockholders  approved,  the  LightPath  Technologies,  Inc.
Omnibus Incentive Plan (the "Incentive Plan") pursuant to which employees and of
ricers of the Company and any  subsidiary  corporations  are eligible to receive
incentive stock options ("incentive  options") within the meaning of Section 422
of the Internal Revenue Code ("Code"), as well as options that do not qualify as
incentive  options   ("nonqualified   options"),   stock  appreciation   rights,
restricted  stock awards and/or  performance  bonuses of cash or stock. To date,
the only  forms of awards  under the  Incentive  Plan  have been  incentive  and
nonqualified  stock options.  The Incentive Plan, is administered by a committee
of the Board of  Directors,  pursuant to Rule 16b-3 ("Rule  16b-3")  promulgated
under the Securities  Exchange Act of 1934 (the "Exchange  Act"),  consisting of
"disinterested"  directors  as  defined  in  Rule  16b-3.  The  purposes  of the
Incentive Plan are to ensure the retention of existing  executive  personnel and
key employees who are expected to contribute to the Company's  future growth and
success and to provide  additional  incentive by permitting such  individuals to
participate  in the  ownership  of the  Company.  The  criteria  utilized by the
committee in granting  awards  pursuant to the Incentive Plan is consistent with
these purposes.

      Awards may be granted only to such  employees  and officers of the Company
as the committee  shall select from time to time in its sole  discretion.  As of
June 30, 1996,  the number of employees and officers of the Company  eligible to
receive grants under the Incentive Plan was twenty-one  persons.  The committee,
in its discretion,  determines  (subject to the terms of the Incentive Plan) who
will be granted awards, the time or times at which awards shall be granted,  and
the number of shares  subject to each award,  whether any options are  incentive
options or  nonqualified  options,  and the manner in which any  options  may be
exercised. In making such determination, consideration may be given to the value
of the  services  rendered  by the  respective  individuals,  their  present and
potential  contributions  to the success of the Company and it subsidiaries  and
such other factors deemed relevant in accomplishing the purpose of the Incentive
Plan.

      As set forth above, options granted under the Incentive Plan may be either
incentive options or nonqualified options. Incentive options are exercisable for
a period of up to 10 years from the date of grant at an exercise  price which is
not less  than  the fair  market  value of the  Common  Stock on the date of the
grant,  except that the term of an incentive  option granted under the Incentive
Plan to a stockholder  owning more than 10% of the outstanding  voting power may
not exceed  five years and its  exercise  price may not be less than 110% of the
fair market  value of the Common  Stock on the date of the grant.  To the extent
that the aggregate fair market value, as of the date of grant, of the shares for
which  incentive  options become  exercisable  for the first time by an optionee
during the calendar year exceeds  $100,000,  the portion of such option which is
in excess of the $100,000  limitation will be treated as a nonqualified  option.
The Company  has agreed not to issue  options  with  exercise  prices  below the
greater of the initial  public  offering  price for the Units or the fair market
value of the Class A Common Stock on the date of grant of the option.

      Awards  granted under the Incentive  Plan may be exercised  only while the
recipient  is employed or retained by the Company or within  three months of the
date of termination of employment.  However,  awards which become exercisable at
the time of  termination  by  reason  of death or  permanent  disability  of the
optionee  may be  exercised  within  one  year  of the  date of  termination  of
employment. Upon the exercise of an award, payment may be made by cash or by any
other means the Board of Directors or the committee determines.
                                       30
<PAGE>
     Under the Incentive  Plan,  an award  recipient has none of the rights of a
stockholder   with  respect  to  the  shares   issuable  upon  the  exercise  or
satisfaction  of  conditions  for the award,  until such shares are  issued.  No
adjustment may be made for dividends or  distributions or other rights for which
the record  date is prior to the date of  exercise,  except as  provided  in the
Incentive  Plan.  During  the  lifetime  of the  recipient,  an  award  shall be
exercisable  only by the recipient.  No option may be sold,  pledged,  assigned,
hypothecated,  transferred or disposed of in any manner other than by will or by
the laws of decent and distribution.

     The Board of Directors  may amend or terminate  the  Incentive  Plan except
that  stockholder  approval is required to effect a change so as to increase the
aggregate  number of shares that may be issued under the Incentive  Plan (unless
adjusted to reflect such changes as a result of a stock  dividend,  stock split,
recapitalization,  merger  or  consolidation  of the  Company),  to  modify  the
requirements as to eligibility to receive  options,  to increase  materially the
benefits  accruing to participants or as otherwise may be required by Rule 16b-3
or Section  422 of the Code.  No action  taken by the Board may  materially  and
adversely  affect  any  outstanding  award  grant  without  the  consent  of the
recipient.

     Under  current tax law,  there are no Federal  income tax  consequences  to
either  the  employee  or the  Company on the grant of  nonqualified  options if
granted  under the terms set forth in the  Incentive  Plan.  Upon  exercise of a
nonqualified  option,  the excess of the fair market value of the shares subject
to the option over the option  price (the  "Spread")  at the date of exercise is
taxable as ordinary  income to the optionee in the year it is  exercised  and is
deductible by the Company as  compensation  for Federal income tax purposes,  if
Federal income tax is withheld on the Spread. However, if the shares are subject
to  vesting  restrictions  conditioned  on future  employment  or the  holder is
subject to the short-swing  profits  liability  restrictions of Section 16(b) of
the Exchange Act (i.e., is an executive of ricer, director or 10% stockholder of
the Company), then taxation and measurement of the Spread is deferred until such
restrictions lapse, unless a special election is made under Section 83(b) of the
Code to report such income currently  without regard to such  restrictions.  The
optionee's  basis in the shares  will be equal to the fair  market  value on the
date taxation is imposed and the holding period commences on such date.

     Incentive  option holders incur no regular  Federal income tax liability at
the time of grant or upon  exercise of such option,  assuming  that the optionee
was an  employee of the  Company  from the date the option was granted  until 90
days before such exercise.  However, upon exercise,  the Spread must be added to
regular  Federal taxable income in computing the option's  "alternative  minimum
tax"  liability.  An optionee's  basis in the shares  received on exercise of an
incentive  stock  option  will be the option  price of such  shares for  regular
income tax purposes. No deduction is allowable to the Company for Federal income
tax purposes in connection with the grant or exercise of incentive options.

     If the holder of shares acquired  through  exercise of an incentive  option
sells such shares within two years of the date of grant of such option or within
one  year  from  the  date  of  exercise   of  such  option  (a   "Disqualifying
Disposition"),  the optionee  will  realize  income  taxable at ordinary  rates.
Ordinary  income  is  reportable  during  the  year of such  sale  equal  to the
difference  between the option  price and the fair market value of the shares at
the date the option is exercised,  but the amount  includable as ordinary income
shall not exceed  the  excess,  if any,  of the  proceeds  of such sale over the
option price. In addition to ordinary  income,  a Disqualifying  Disposition may
result in  taxable  income  subject  to  capital  gains  treatment  if the sales
proceeds exceed the optionee's  basis in the shares (i e., the option price plus
the amount includable as ordinary income).  The amount of the optionee's taxable
ordinary  income  will  be  deductible  by  the  Company  in  the  year  of  the
Disqualifying Disposition.

     At the time of sale of shares  received  upon  exercise of an option (other
than a  Disqualifying  Disposition  of shares  received  upon the exercise of an
incentive  option),  any gain or loss is long-term or short-term capital gain or
loss,  depending  upon the  holding  period.  The holding  period for  long-term
capital gain or loss treatment is more than one year.

      A total of  104,545  shares  of Class A Common  Stock  are  available  for
issuance  under the  Incentive  Plan at June 30,  1996.  The Board of  Directors
resolved to increase  the  available  shares to 325,000  which the  shareholders
approved on  September  30, 1996.  At June 30, 1996 options to purchase  102,384
shares of Class A Common  Stock  71,076  shares of Class E-1,  71,076  shares of
Class E-2 and 47,384 shares of Class E-3 Common Stock at exercise prices ranging
from $5.00 to $6.05 per share are outstanding under the Incentive Plan. No other
form of award has been granted by the  committee.  The Company has agreed not to
issue for a period of one year any awards other than options under the Incentive
Plan.
                                       31
<PAGE>
      Directors Stock  Incentive Plan. In June 1992, the Board adopted,  and the
stockholders of the Company approved,  the Amended and Restated  Directors Stock
Incentive Plan (the "Directors Plan"). The provisions of the Directors Plan were
amended on July 8, 1996 to provide for the automatic grant of nonqualified stock
options to purchase shares of Common Stock ("Director  Options") to directors of
the Company  who are not  employees  or  principal  stockholders  of the Company
("Eligible  Directors").  Eligible  Directors  of the Company  will be granted a
Director  Option to  purchase10,000  shares of Class A Common  Stock on the date
they first  become a director  at a per share  exercise  price equal to the fair
market  value of the Common  Stock on the grant  date.  Further,  each  Eligible
Director is granted a Director Option to purchase 3,000 shares of Class A Common
Stock ("Automatic Grant") on the date of each annual meeting of stockholders, as
long as he or she is a member of the Board of Directors.  The exercise  price of
each  share  subject to a Director  Option is  required  to be equal to the fair
market value of the Common Stock on the date of grant.  Director  Options become
exercisable  in three  equal  annual  installments  and  expire  the  earlier of
termination of service as a Board member or 10 years after the date of grant. To
the extent options are  exercisable on the date of termination of the director's
service on the Board of Directors,  the optionee will continue to be entitled to
exercise such Director  Option in accordance  with its terms.  A total of 75,000
shares  of Class A Common  Stock  are now  authorized  for  issuance  under  the
Directors Plan. As of June 30, 1996, options to purchase 3,500 shares of Class A
Common  Stock,  5,250  shares of Class E-1,  5,250 shares of Class E-2 and 3,500
shares of Class E-3  Common  Stock at per share  exercise  prices  ranging  from
$35.75 to $51.56 were outstanding under the Directors Plan. The tax consequences
with  respect  to  Director   Options  are  the  same  as  discussed  above  for
nonqualified options granted under the Incentive Plan.

      Other Nonqualified  Options.  In addition to options outstanding under the
foregoing  Plans,  the Company  had  outstanding  on June 30, 1996  nonqualified
options to purchase 49,694 shares of Class A Common Stock 74,541 shares of Class
E-1, 74,541 shares of Class E-2 and 49,694 shares of Class E-3 Common Stock that
were not issued pursuant to a written plan. Most of these options were issued in
consideration  for  consulting  services from  independent  consultants or Board
members. Most of these options were immediately  exercisable in full upon grant,
although some vested over a several year schedule. The per share exercise prices
for these options ranges from $5.50 to $42.95. The tax consequences with respect
to these options are the same as discussed above for nonqualified options issued
under the Incentive  Plan.  The Company  anticipates  that,  in the future,  any
options granted will be pursuant to a written plan.
                                       32
<PAGE>
                             PRINCIPAL STOCKHOLDERS

         The following  table sets forth,  as of August 15, 1996, the number and
percentage of  outstanding  shares of the Company's  Class A, and Class E Common
Stock, by (i) each  stockholder  known by the Company to own  beneficially  five
percent  or more of the  outstanding  Class A and  Class E  Common  Stock of the
Company,  (ii)  each  director,   (iii)  each  person  named  in  the  Executive
Compensation  Table and (iv) all executive officers and directors of the Company
as a group.

<TABLE>
<CAPTION>
 ==============================================================================================================
                            (1)   Class  A               (2)   Class   E
                            Common                       Common 
                            Stock                        Stock
 --------------------------------------------------------------------------------------------------------------
                                                                                     % of Vote of all
 Name and Address of       Number of       Percent      Number of        Percent        Classes of
 Beneficial Owner           Shares          Owned        Shares           Owned        Common Stock
 --------------------------------------------------------------------------------------------------------------
<S>                          <C>             <C>        <C>               <C>              <C>
 Leslie A. Danziger          112,946 (3)     4%           751,878(4)      19%              13%
 --------------------------------------------------------------------------------------------------------------
 Louis P. Wagman              18,742 (5)     *             99,965(6)       3%               2%
 --------------------------------------------------------------------------------------------------------------
 Donald E. Lawson             22,000 (7)     1%            25,000          1%               1%
 --------------------------------------------------------------------------------------------------------------
 David W. Collins              4,907 (8)     *             19,627(9)       *                *
 --------------------------------------------------------------------------------------------------------------
 Milton Klein                 29,945(10)     1%           119,786(11)      3%               2%
 --------------------------------------------------------------------------------------------------------------
 Louis Leeburg                  9090(15)     *             36,360(15)      1%               1%
 --------------------------------------------------------------------------------------------------------------
 Haydock H. Miller, Jr.       18,454(12)     *             73,819(13)      2%               1%
 --------------------------------------------------------------------------------------------------------------
 The John E. Fetzer          118,447         4%           473,789         12%               9%
 Institute, Inc. (14)
 --------------------------------------------------------------------------------------------------------------
 All exec. officers and      216,088         8%         1,126,435         29%              20%
 directors as a group  
 (7 persons)
 ==============================================================================================================
</TABLE>
- --------------------
* Less than one percent.

1.   Except as otherwise noted, each of the parties listed above has sole voting
     and  investment  power over the  securities  listed.  The  address  for all
     directors is care of LightPath  Technologies,  Inc.,  6820 Academy  Parkway
     East N.E., Albuquerque, New Mexico, 87109.
2.   Includes Class E-1, E-2 and E-3 Common Stock.
3.   Includes  25,397  Class A shares  represented  by  immediately  exercisable
     options and 9,090 Class A shares  represented  by  immediately  exercisable
     options held by Joel Goldblatt, Ms. Danziger's spouse.
4.   Includes  101,589 Class E shares  represented  by  immediately  exercisable
     options and 36,360 Class E shares  represented by  immediately  exercisable
     options held by Joel Goldblatt, Ms. Danziger's spouse.
5.   Includes  18,218  Class A shares  represented  by  immediately  exercisable
     options.
6.   Includes  72,873  Class E shares  represented  by  immediately  exercisable
     options.
7.   Includes  22,000  Class A shares  represented  by  immediately  exercisable
     options.
8.   Includes  1,091  Class A  shares  represented  by  immediately  exercisable
     options.
9.   Includes  4,364  Class E  shares  represented  by  immediately  exercisable
     options.
10.  Includes  11,720  Class A shares  represented  by  immediately  exercisable
     options.
11.  Includes  46,880  Class E shares  represented  by  immediately  exercisable
     options.
12.  Includes  10,182  Class A shares  represented  by  immediately  exercisable
     options.
13.  Includes  40,727  Class E shares  represented  by  immediately  exercisable
     options.
14.  The  address  of The John E.  Fetzer  Institute,  Inc.  is 9292 KL  Avenue,
     Kalamazoo, Michigan 49009.
15.  Includes 7272 Class A shares and 29088 Class E shares held by Mr. Leeburg's
     brother.  Mr. Leeburg is the treasurer and trustee for two funds associated
     with the John E. Fetzer Institute, Inc. which do not hold any shares in the
     Company.  Shares  held by the  John E.  Fetzer  Institute,  Inc.  are  not,
     however, included in the beneficial ownership amounts for Mr. Leeburg.
                                       33
<PAGE>
Voting Trust Agreement

         Stockholders of the Company owning an aggregate of 1,105,704  shares of
Common Stock, which represents 17% of the total voting power outstanding at June
30, 1996, entered into a Voting Trust Agreement dated January 10,1996.  Pursuant
to that  Agreement,  Leslie A.  Danziger,  the  President  and  Chairman  of the
Company,  is  designated  as the trustee of the trust and  empowered to vote all
shares  subject to the trust with respect to any matter subject to a vote by the
Company's stockholders,  including voting in favor of the election of herself as
a director of the Company and in favor of  ratification  and approval of acts of
herself  as a  director  in the  conduct of  business  affairs  of the  Company.
Consequently,   combined  with  her  individual  holdings,   Ms.  Danziger  will
effectively  control  27%  of  the  total  voting  power  of  the  Company.  The
stockholders'  agreements  to  deposit  their  shares  in the  voting  trust are
irrevocable for 13 months following  February 22, 1996.  Thereafter,  parties to
the agreement may withdraw their shares upon ten days' prior written notice. The
Voting Trust Agreement  terminates upon the earlier of five years or the date on
which Ms.  Danziger  ceases to be  Chairman  of the Board or  resigns as trustee
under the Agreement.

                              CERTAIN TRANSACTIONS

         During the period from November 1993 through  August 1995,  the Company
deferred  payment  of salary to its  executive  officers  due to a  shortage  of
working  capital.  In November  1995,  Leslie A.  Danziger,  Louis P. Wagman and
Donald E. Lawson agreed to convert $300,000, $25,000 and $25,000,  respectively,
of deferred  salary into shares of Class E Common  Stock at an average per share
conversion price of $1.00 per share. Consequently, Ms. Danziger received 112,500
shares of Class E-1 Common Stock,  112,500  shares of Class E-2 Common Stock and
75,000 shares of Class E-3 Common Stock. Messrs. Wagman and Lawson each received
9,375 shares of Class E-1 Common  Stock,  9,375 shares of Class E-2 Common Stock
and 6,250 shares of Class E-3 Common Stock.  Mr. Wagman also  converted a $5,000
bonus into common stock at a conversion  price of $1 per share.  He received 182
shares of Class A Common Stock, 273 shares of Class E-1 Common Stock, 273 shares
of Class E-2 Common Stock and 182 shares of Class E-3 Common Stock. An aggregate
of  $119,500 of deferred  salary is owed to the  executive  officers at June 30,
1996 and was placed into a contingent liability account to be paid only upon the
accomplishment  of the  milestones  for conversion of the Class E-1 common stock
into Class A common stock.

         From  January  to  July  1995,  the  Company   privately  placed  units
consisting of a $50,000  promissory  note (Unit Notes) and 1,818 Class A shares,
2,727 Class E-1 shares,  2,727 Class E-2 shares and 1,818 Class E-3 shares for a
per unit  purchase  price of $50,000.  Family  members of Leslie A. Danziger and
Louis P. Wagman  purchased  units in that private  offering on the same terms as
other  investors.  In September,  October and November  1995, the Company agreed
with  certain  holders of the Unit Notes to  convert  such notes into  shares of
Class A and Class E Common  Stock at an adjusted  per share  conversion  rate of
$5.50 per  share.  As  additional  consideration  for the debt  conversion,  the
Company  issued an aggregate of 214,000 Class A Warrants to all of the Unit Note
holders. In connection with the foregoing,  family members of Leslie A. Danziger
and Louis P. Wagman,  each agreed to convert their  respective  outstanding debt
into  19,220,   and  18,666  shares  of  Class  A  and  Class  E  Common  Stock,
respectively, and received 21,000 and 17,000 Class A Warrants, respectively. The
19,220 represents 3,844 Class A shares,  5,766 Class E-1 shares, 5,766 Class E-2
shares and 3,844 Class E-3. The 18,666  represents  3,733 Class A shares,  5,600
Class E-1 shares, 5,600 Class E-2 shares and 3,733 Class E-3 shares.

         During the fiscal year ended June 30, 1996 and 1995,  David W.  Collins
and  Haydock H.  Miller,  Jr.,  Directors  of the  Company,  provided  legal and
consulting   services   to  the  Company  for  which  they  billed  the  Company
approximately,  $58,000 and $54,000 respectively.  In February 1994, Dr. Collins
converted  $54,000 of  receivables  into a six month  loan.  In June  1995,  Dr.
Collins  agreed to convert  this loan into  shares of Class A and Class E common
stock.  In addition the company was provided  legal and  consulting  services by
several  individuals and companies who are shareholders  (none of which own more
than .05% of common stock) of the Company,  for which they billed $144,000.  The
Company has retained the legal  services of a shareholder  for licensing work to
be performed  during  fiscal year 1997 for $90,000 of which half is paid in cash
and half in Class A common stock.

         Milton Klein, a Director of the Company,  loaned the Company $50,000 in
January 1995 in consideration for a three month promissory note bearing interest
at an annual  rate of 9%.  The note was  subsequently  converted  to a Unit Note
consisting of a $50,000  promissory  note and 1,818 Class A shares,  2,727 Class
E-1  shares,  2,727  Class E-2 shares and 1,818  Class E-3 shares as part of the
private  placement noted above. In September,  1995, Dr. Klein agreed to convert
the $50,000 note,  receiving 1,926 Class A shares, 2,889 Class E-1 shares, 2,889
Class E-2 shares and 1,926  Class E-3 shares and the  Company  issued Dr.  Klein
16,000 Class A Warrants as part of its debt conversion efforts. Additionally, in
                                       34
<PAGE>
November 1995, Dr. Klein converted other indebtedness owed to him by the Company
in the total  amount of  $27,984  into  1,018  Class A shares,  1,527  Class E-1
shares, 1,527 Class E-2 shares and 1,018 Class E-3 shares.

         In connection  with the Company's  IPO, the Company agreed with certain
other debt holders to convert  outstanding debt into shares of Class A and Class
E Common Stock of the Company (in the same  proportion as the  Recapitalization)
at an  adjusted  per share  conversion  price per share of $5.50 per  share.  In
connection with the debt conversion on the same terms as other debt holders, the
John  E.  Fetzer  Institute,  Inc.  (a  principal  stockholder  of the  Company)
converted debt of $2,043,241 into 74,300 shares of Class A Common Stock, 111,450
shares of Class E-1 Common Stock,  111,450  shares of Class E-2 Common Stock and
74,300 shares of Class E-3 Common Stock.

         The Company  believes that all of the transactions set forth above were
made on terms no less  favorable  to the Company  than could have been  obtained
from unaffiliated third parties.  In addition,  ongoing and future  transactions
with  affiliates  will be on terms no less  favorable  than may be obtained from
third parties, and any loans to affiliates will be approved by a majority of the
disinterested directors.

                 CONCURRENT OFFERING BY SELLING SECURITYHOLDERS

         The registration  statement of which this Prospectus forms a part, also
relates to the Remaining  Selling  Securityholders'  Warrants and to the Class A
Common  Stock  and  Class  B  Warrants   underlying   such   Remaining   Selling
Securityholders'  Warrants.  An aggregate of 839,000  warrants  were  originally
issued in connection with the Private  Placement in November 1995 as warrants to
purchase  839,000  shares  of  Class A  Common  Stock,  and  were  automatically
converted  into 839,000  Class A Warrants at the closing of the IPO. None of the
original  Class A Warrants  have been sold by the  respective  holders  thereof.
Exercise of the Remaining Selling Securityholders' Warrants by the persons named
below is further  subject to the  existence  of an exemption  form  registration
applicable  to the issuance of the  underlying  securities by the Company to the
Remaining  Selling  Securityholders.  It is likely  that sales of the  Remaining
Selling Securityholders' Warrants or the underlying Class B Warrants and Class A
Common  Stock,  or even the  potential of such sales at any time,  could have an
adverse effect on the market prices of the Class A Common Stock and Warrants.

         The following table sets forth certain information with respect to each
Remaining Selling  Securityholder for whom the Company is registering securities
for resale to the public.  The Company will not receive any of the proceeds from
the sale of these securities.  Except as described below,  there are no material
relationships  between  any of the  Remaining  Selling  Securityholders  and the
Company, nor have any such material  relationships existed within the past three
years.
                                       35
<PAGE>
                                                       Number of Class A
                                                     Warrants Beneficially
                                                       Owned and Maximum
Selling Securityholders                               Number to be sold(1)
- -----------------------                               --------------------
Magid Abraham                                                         50,000
William Aden                                                          35,000
Bruce Barrus                                                           8,500
Thomas J. & Dorothy M. Biuso                                          12,500
Burns Family Trust                                                      1200
Kenneth & Sherry Cohen                                                12,500
David B. Cornstein                                                    25,000
Benjamin Danziger                                                     21,000
Charles Garcia                                                         7,500
Irving L. Goldman                                                     25,000
Stuart Gruber                                                         12,500
Kenneth Hoffer                                                        15,000
Herman S. Howard                                                      50,000
Michael Jesselson 12/18/80 Trust                                      25,000
Jesselson Grandchildren 12/18/80 Trust                                50,000
Robert & Eileen Jordan                                                12,500
Milton Klein                                                          16,000
Guy Knolle                                                            17,500
Louis Leeburg                                                          7,500
William Leeburg                                                       15,000
William Leeburg Profit Sharing Plan                                   15,000
Lenny Corp                                                            12,500
William J. Lipkin                                                     12,500
Gloria Marra                                                          25,000
Charles Bechert                                                        7,500
James S. Mulholland, Sr.                                              37,500
Ray & Vita Pliskow                                                    17,000
Robin Prever                                                          25,000
Marc Roberts                                                          25,000
Robert Roberts                                                         7,500
F.B. Rooke & Sons                                                     18,000
Alan J. Rubin                                                         25,000
Robert & Daniel Ruscutti                                              12,500
Anand J. Sathe                                                        12,500
Louise Schrier                                                        50,000
E. Donald Shapiro                                                     12,500
Gary J. Strauss                                                       12,500
Morris Talansky                                                       12,500
Leonard R. and Jane G. Wohletz, Jr.                                   12,500
Wolfson Equities                                                      50,000
Martin Zelman                                                         12,500
                                                    =========================
                          Total                                      839,000
                                                    =========================


(1)  Does not  include  shares  of Class A Common  Stock  and  Class B  Warrants
     issuable  upon  exercise of the Class A Warrants  and the shares of Class A
     Common Stock  issuable upon  exercise of the Class B Warrants.  The Selling
     Securityholders  have  agreed not to  exercise  the Class A Warrants  being
     registered hereby for a period of one year from February 22, 1996.

         With the exception of Milton Klein, a director of the Company; Benjamin
Danziger, the father of Leslie A. Danziger,  Ray and Vita Pliskow,  relatives of
Louis A. Wagman;  Louis Leeburg, a principal of the John E. Fetzer  Institute--a
principal  stockholder  of the Company;  and, the Burns  Family  Trust,  another
principal  stockholder  of the  Company,  there  are no  material  relationships
between any of the Remaining Selling  
                                       36
<PAGE>
Securityholders  and the  Company,  nor  have any  such  material  relationships
existed within the past three years. See "Certain  Transactions"  with reference
to ownership by family members or affiliates of certain officers,  directors and
principal  stockholders  of Notes  who  received  Class A  Warrants  and who are
Remaining  Selling  Securityholders.  The  Company  has  been  informed  by  the
Underwriter  that  there  are no  agreements  between  the  Underwriter  and any
Remaining  Selling  Securityholder  regarding  the  distribution  of the Selling
Securityholders Warrants or their underlying securities.

         The sale of the securities by the Remaining Selling Securityholders may
be  effected  from  time  to time  in  transactions  (which  may  include  block
transactions by or for the account of the Remaining Selling  Securityholders) in
the over-the-counter market or in negotiated transactions, a combination of such
methods of sale or  otherwise.  Sales may be made at fixed  prices  which may be
changed,  at market  prices  prevailing  at the time of sale,  or at  negotiated
prices.

         Selling  Securityholders  may effect such transactions by selling their
securities directly to purchasers,  through  broker-dealers acting as agents for
the Remaining  Selling  Securityholders  or to  broker-dealers  who may purchase
securities as principals and thereafter sell the securities from time to time in
the  over-the-counter  market,  in negotiated  transactions  or otherwise.  Such
broker-dealers,  if any,  may  receive  compensation  in the form of  discounts,
concessions or commissions from the Remaining Selling Securityholders and/or the
purchasers for whom such  broker-dealers  act as agents or to whom they may sell
as principals or otherwise (which compensation as to a particular  broker-dealer
may exceed customary commissions).

         Each Selling  Securityholder has agreed (i) not to sell,  transfer,  or
otherwise  dispose of publicly the  Remaining  Selling  Securityholder  Warrants
except through a 270 day maximum lock up period measured from February 22, 1996,
and (ii) not to exercise the  Remaining  Selling  Securityholder  Warrants for a
period of one year from February 22, 1996.  Purchasers of the Remaining  Selling
Securityholder Warrants will not be subject to such restrictions.

         Under  applicable rules and regulations  under the Securities  Exchange
Act of 1934  ("Exchange  Act"),  any person engaged in the  distribution  of the
Remaining  Selling  Securityholders  Warrants may not  simultaneously  engage in
market  making  activities  with respect to any  securities of the Company for a
period  of at  least  two  (and  possibly  nine)  business  days  prior  to  the
commencement of such distribution.  Accordingly, in the event the Underwriter of
the Company's  offering or D.H. Blair & Co. Inc. ("Blair & Co.") is engaged in a
distribution of the Remaining Selling Securityholders Warrants,  neither of such
firms  will be able to make a market  in the  Company's  securities  during  the
applicable restrictive period. However,  neither the Underwriter nor Blair & Co.
have  agreed to nor are either of them  obliged to act as  broker/dealer  in the
sale of the Remaining Selling Securityholders Warrants and the Remaining Selling
Securityholders may be required,  and in the event Blair is a market maker, will
likely be required,  to sell such securities through another  broker/dealer.  In
addition,  each Selling Securityholder desiring to sell Warrants will be subject
to the applicable  provisions of the Exchange Act and the rules and  regulations
thereunder,   including  without  limitation,   Rules  10b-6  and  10b-7,  which
provisions  may limit the  timing  of the  purchases  and sales of shares of the
Company's securities by such Selling Securityholders.

         The  Remaining  Selling  Securityholders  and  broker-dealers,  if any,
acting in connection with such sales might be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act, and any commission  received
by them and any  profit on the  resale of the  securities  might be deemed to be
underwriting discounts and commissions under the Securities Act.
                                       37
<PAGE>
                            DESCRIPTION OF SECURITIES

General

         In September  1995, the Board of Directors and the  stockholders of the
Company approved the  recapitalization of the Company,  which consisted of (i) a
1-for-5.5  reverse stock split of all then  outstanding  shares of Common Stock,
(ii) an increase of the  authorized  Common and Preferred  Stock of the Company,
(iii) a recapitalization  of the shares of the Company's Common Stock into Class
A Common Stock and Class E Common Stock, and similar  adjustments to outstanding
options and the option  plans,  and (iv) a stock  dividend  of one and  one-half
share of Class E-1 Common  Stock,  one and  one-half  shares of Class E-2 Common
Stock and one share of Class E-3 Common Stock,  for each share of Class A Common
Stock  outstanding  following the reverse stock split. The Company's  authorized
capital stock now consists of (i)  40,000,000  shares of Common Stock,  $.01 par
value  per  share,  divided  into  34,500,000  shares  of Class A Common  Stock,
2,000,000 shares of Class E-1 Common Stock, 2,000,000 shares of Class E-2 Common
Stock and 1,500,000  shares of Class E-3 Common Stock, and (ii) 5,000,000 shares
of "blank  check"  Preferred  Stock.  Immediately  prior to the IPO,  there were
outstanding  871,147 shares of Class A Common Stock (held by  approximately  200
holders),  and 1,441,724  shares of Class E-1 Common Stock,  1,441,724 shares of
Class E-2 Common Stock,  and 961,147  shares of Class E-3 Common Stock (all such
classes  of  shares  held  by  the  same  approximately  200  persons),  and  no
outstanding shares of Preferred Stock.

         The following summary  descriptions of capital stock of the Company are
qualified  in their  entirety  by  reference  to the  Company's  Certificate  of
Incorporation,  as amended (the "Certificate of Incorporation"),  Certificate of
Designation,  and Bylaws (the "Bylaws"),  a copy of each of which is filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.


Class A Common Stock

         Holders  of Class A Common  Stock  have the  right to cast one vote for
each share held of record on all matters submitted to a vote of holders of Class
A Common Stock,  including  the election of  directors.  The Class A, Class E-1,
Class E-2 and Class E-3 Common  Stock  vote  together  as a single  class on all
matters on which  stockholders may vote, except when class voting is required by
applicable law.

         Holders of Class A Common  Stock are  entitled  to  receive  dividends,
together  with the holders of Class E-1,  Class E-2 and Class E-3 Common  Stock,
pro rata based on the number of shares  held,  when,  as and if  declared by the
Board of Directors, from funds legally available therefor, subject to the rights
of holders of any outstanding  Preferred Stock. In the case of dividend or other
distributions payable in stock of the Company,  including distributions pursuant
to stock splits or  divisions  of stock of the  Company,  only shares of Class A
Common Stock will be  distributed  with respect to Class A Common Stock.  In the
event of the  liquidation,  dissolution  or  winding  up of the  affairs  of the
Company,  all assets and funds of the Company remaining after the payment of all
debts  and other  liabilities,  subject  to the  rights  of the  holders  of any
outstanding  Preferred  Stock,  shall be  distributed  to the holders of Class A
Common  Stock,  together  with the holders of Class E Common Stock to the extent
such holders are then entitled to participate in such  distribution.  Holders of
Class A Common Stock are not entitled to  preemptive,  subscription,  cumulative
voting or  conversion  rights,  and  there are no  redemption  or  sinking  fund
provisions  applicable to the Class A Common Stock.  All  outstanding  shares of
Class A Common Stock are, and the shares of Class A Common Stock offered  hereby
will be when issued, fully paid and non-assessable.

Class E-1, E-2 and E-3 Common Stock

         Each share of Class E-1,  E-2 and E-3 Common  Stock is  entitled to one
vote on all matters on which  stockholders  may vote,  including the election of
directors.  The Class A,  Class E-1,  Class E-2 and Class E-3 Common  Stock vote
together as a single class on all matters on which stockholders may vote, except
when class voting is required by applicable law. Holders of Class E Common Stock
are not entitled to preemptive,  subscription,  cumulative  voting or conversion
rights and there are no redemption or sinking fund provisions
                                       38
<PAGE>
applicable  to the Class E Common  Stock.  All  shares  of Class E Common  Stock
issued are and will be fully paid and non-assessable.

         Holders  of  Class  E-1,  E-2 and E-3  Common  Stock  are  entitled  to
participate together with the holders of Class A Common Stock, pro rata based on
the number of shares held, in the payment of dividends  and in the  liquidation,
dissolution  and winding up of the Company,  subject to the rights of holders of
any  outstanding  Preferred  Stock.  In the case of cash,  securities  and other
property that is the subject of a distribution or dividend  (except with respect
to an  acquisition  of the  Company or its merger with or into  another  entity)
payable to Class E-1, E-2 or E-3 shareholders  shall be held in escrow until the
applicable  Class E shares are converted into Class A Common Stock.  In the case
of dividends and other distributions payable in stock of the Company,  including
distributions  pursuant to stock  splits or  divisions  of stock of the Company,
only shares of Class A Common  Stock shad be  distributed  with respect to Class
E-1, E-2 and E-3 Common Stock.

Conversion of Class E Common Stock

         A. Each share of Class E-1 Common Stock will be automatically converted
into one share of Class A Common Stock,  if, and only if, any one or more of the
following conditions is/are met:

     (i) the  Company's  net  income  before  provision  for  income  taxes  and
     exclusive of any  extraordinary  earnings (all as audited and determined by
     the Company's independent public accountants) (the "Minimum Pretax Income")
     is at least $8.0  million  during any of the fiscal  years  ending June 30,
     1996, 1997, 1998 or 1999;

     (ii) the Minimum  Pretax  Income is at least  $10.3  million for the fiscal
     year ending June 30, 2000;

     (iii) the Bid Price (as  defined)  of the  Company's  Class A Common  Stock
     averages  in excess of $12.50 per share for 30  consecutive  business  days
     during the 18-month period commencing on the date of this Prospectus;

     (iv) the Bid Price  (as  defined)  of the  Company's  Class A Common  Stock
     averages  in excess of $16.75 per share for 30  consecutive  business  days
     during  the  18-month  period  commencing  18 months  from the date of this
     Prospectus; or

     (v) the Company is acquired by or merged with or into another entity during
     either of the periods  referred to below and as a result thereof holders of
     the Class A Common Stock of the Company (after giving  consideration to the
     conversion of the Class E-1 Common Stock)  receive per share  consideration
     equal to or greater than: (i) $12.50 during the 18-month period  commencing
     on the date of this Prospectus;  or, (ii) $16.75 during the 18-month period
     commencing 18 months from the date of this Prospectus;

         B. Each share of Class E-2 Common Stock will be automatically converted
into one  share of Class A Common  Stock,  if,  and only if,  one or more of the
following conditions is/are met:

     (i) the Minimum  Pretax Income is at least $10.9 million  during any of the
     fiscal years ending June 30, 1996, 1997, 1998 or 1999; or

     (ii) the Minimum  Pretax Income is at least $14.0 million during the fiscal
     year ending June 30,

     (iii) the  Company is acquired  by or merged  with or into  another  entity
     during  either of the  periods  referred  to below and as a result  thereof
     holders  of  Class  A  Common  Stock  of  the  Company  receive  per  share
     consideration  (after  giving  effect  to the  conversion  of the Class E-1
     Common Stock,  and Class E-2 Common  Stock) equal to or greater  than:  (i)
     $18.00  during  the  18-month  period   commencing  on  the  date  of  this
     Prospectus;  or (ii) $23.00 during the 18-month period commencing 18 months
     from the date of this Prospectus.

         C. Each share of Class E-3 Common Stock will automatically be converted
into  one  share of Class A  Common  Stock,  if and only if,  one or more of the
following conditions is/are met:

     (i) the Minimum Pretax Income amounts to at least $28 million during any of
     the fiscal years ending June 30, 1996, 1997, 1998, 1999 or 2000;

     (ii) the  Company is  acquired  by or merged  with or into  another  entity
     during the  periods  referred to below and as a result  thereof  holders of
     Class A Common Stock of the Company receive per share 
                                       39
<PAGE>
     consideration  (after  giving  effect to the  conversion  of the Class E-1,
     Class E-2 and Class E-3 Common Stock) equal to or greater than:  (i) $30.00
     during the 18-month period  commencing on the date of this  Prospectus;  or
     (ii) $40.00 during the 18-month  period  commencing 18 months from the date
     of this Prospectus.

         D. Distributions in the event the Company is acquired or merged with or
into another entity will be made as follows:

     (i) if the merger or acquisition proceeds are sufficient to pay the Class A
     Common Stock outstanding prior to such event up to the applicable Bid Price
     amount per share set forth in A(v), B(iii) or C(ii), the applicable Class E
     Common  Stock  shall  participate  in  the  balance  remaining  up  to  the
     applicable Bid Price per share amount;

     (ii) if the proceeds are  sufficient  to pay the holders of the Class A and
     the  applicable  Class E Common  Stock the full  amount  set forth in A(v),
     B(iii) or C(ii), then the applicable Class E Common Stock will be converted
     into Class A Common  Stock and  distributions  will be made pro rata on all
     such stock outstanding subsequent to such conversion.

         The shares of Class E Common  Stock will be redeemed on  September  30,
2000 by the Company for $.0001 per share if such earnings levels or market price
targets are not achieved.

         The Minimum  Pretax  Income  amounts set forth above shall be increased
proportionately,  with certain  limitations,  in the event additional  shares of
Common Stock or securities  convertible  into,  exchangeable  for or exercisable
into Common Stock are issued after  completion of the IPO. The Bid Price amounts
set forth  above are  subject to  adjustment  in the event of any stock  splits,
stock dividends, recapitalizations or other similar events.

Redeem able Warrants

Class A Warrants

         Each Class A Warrant  entitles  the  registered  holder to purchase one
share of Class A Common  Stock and one Class B Warrant at an  exercise  price of
$6.50 at any time until 5:00 P.M.,  New York City time,  on February  22,  2001.
Commencing one year from the date of this  Prospectus,  the Class A Warrants are
redeemable  by the Company on 30 days' written  notice at a redemption  price of
$.05 per Class A Warrant if the "closing  price" of the Company's Class A Common
Stock for any 30 consecutive trading days ending within 15 days of the notice of
redemption averages in excess of $9.10 per share. "closing price" shall mean the
closing  bid  price if  listed  in the  over-the-counter  market  on  Nasdaq  or
otherwise  or the  closing  sale price if listed on the Nasdaq  National  Market
System or a national securities exchange.  All Class A Warrants must be redeemed
if any are redeemed.

Class B Warrants

         Each Class B Warrant  entitles  the  registered  holder to purchase one
share of Class A Common  Stock at an  exercise  price of $8.75 at any time until
5:00 P.M. New York City time, on February 22, 2001. Commencing one year from the
date of this  Prospectus,  the Class B Warrants are redeemable by the Company on
30 days' written  notice at a redemption  price of $.05 per Class B Warrant,  if
the closing price of the Company's  Class A Common Stock for any 30  consecutive
trading  days  ending  within 15 days of the notice of  redemption  averages  in
excess of $12.25 per share.  All Class B Warrants  must be  redeemed  if any are
redeemed.

General

         The Class A Warrants and Class B Warrants will be issued  pursuant to a
warrant agreement (the "Warrant  Agreement") among the Company,  the Underwriter
and Continental  Stock Transfer  Company,  New York, New York, as Warrant Agent,
and will be evidenced by warrant  certificates in registered  form. The Warrants
provide for  adjustment of the exercise  price and for a change in the number of
shares issuable upon exercise to protect  holders against  dilution in the event
of a stock dividend, stock split, combination or reclassification of the Class A
Common Stock or upon  issuance of shares of Class A Common Stock at prices lower
than the market  price then in effect  other than  issuances  upon  exercise  of
                                       40
<PAGE>
options granted to employees, directors and consultants to the Company under the
Company's  stock option plans,  other  outstanding  warrants on the date of this
Prospectus or with respect to the Unit Purchase Option.

         The exercise  prices of the Warrants  were  determined  by  negotiation
between  the  Company  and the  Underwriter  and should not be  construed  to be
predictive of or to imply that any price  increases in the Company's  securities
will occur.

         A Warrant may be exercised upon surrender of the Warrant certificate on
or prior to its expiration date (or earlier  redemption  date) at the offices of
Continental Stock Transfer  Company,  New York, New York, as Warrant Agent, with
the  form  of  "Election  to  Purchase"  on the  reverse  side  of  the  Warrant
certificate  completed and executed as indicated,  accompanied by payment of the
full  exercise  price (by  certified  or bank check  payable to the order of the
Company)  for the number of shares  with  respect to which the  Warrant is being
exercised.  Shares  issued upon  exercise of Warrants and payment in  accordance
with the terms of the Warrants will be fully paid and nonassessable.

         The Warrants do not confer upon the  Warrantholder  any voting or other
rights of a stockholder of the Company.  Upon notice to the Warrantholders,  the
Company has the right to reduce the exercise price or extend the expiration date
of the Warrants.

Preferred Stock

         The Certificate of Incorporation of the Company  authorize the issuance
of 5,000,000 shares of Preferred Stock, none of which are currently outstanding.
The Board of Directors, within the limitations and restrictions contained in the
Certificate  of  Incorporation  and  without  further  action  by the  Company's
stockholders,  has the authority to issue shares of Preferred Stock from time to
time in one or more  series  and to fix the  number of shares  and the  relative
rights,  conversion rights, voting rights, and terms of redemption,  liquidation
preferences and any other preferences,  special rights and qualifications of any
such series. Any issuance of Preferred Stock could, under certain circumstances,
have the effect of delaying,  deferring or preventing a change in control of the
Company  and may  adversely  affect the rights of holders of Common  Stock.  The
Company has no present plans to issue any shares of Preferred Stock.

IPO Units

         The Company also has outstanding  IPO Units which are currently  listed
on the Nasdaq SmallCap Market.  Each IPO Unit consists of (i) one share of Class
A Common Stock,  (ii) one Class A Warrant and (iii) one Class B Warrant.  The of
Class A Common  Stock,  Class A Warrants  and Class B Warrants  were  separately
transferrable immediately upon issuance.

IPO Unit Purchase Option

         In conjunction with the Company's IPO, the Company granted to Blair IPO
Unit  Purchase  Options to purchase up to 160,000 IPO Units.  The Unit  Purchase
Options are exercisable at any time commencing on February 22, 1998 for a period
of three  years at an  exercise  price of $6.75  per Unit  (135% of the  initial
public  offering  price)  subject to  adjustment  in  certain  events to protect
against  dilution.  These Units will be identical  to the publicly  traded Units
except  that the Class A  Warrants  and Class B  Warrants  included  in the Unit
Purchase  Option will not be subject to redemption by the Company,  except if at
the time the Warrants are called for redemption,  the Unit Purchase Options have
been exercised and the underlying  warrants are  outstanding.  The Unit Purchase
Options cannot be transferred, sold, assigned or hypothecated until February 22,
1998, except in the case of a transfer to any officer of the underwriter for the
IPO or a member of that selling group.
                                       41
<PAGE>
Certain Statutory and Charter Provisions

         Section  203 of the  Delaware  General  Corporation  Law  provides,  in
general,  that a stockholder  acquiring more than 15% of the outstanding  voting
shares of a  publicly-held  Delaware  corporation  subject  to the  statute  (an
"Interested Stockholder") may not engage in certain "Business Combinations" with
the corporation for a period of three years  subsequent to the date on which the
stockholder  became an Interested  Stockholder unless (i) prior to such date the
corporation's board of directors approved either the Business Combination or the
transaction in which the stockholder became an Interested  Stockholder;  or (ii)
upon consummation of the Business Combination, the Interest Stockholder owns 85%
or more of the  outstanding  voting stock of the corporation  (excluding  shares
owned by directors  who are also officers of the  corporation  or shares held by
employee  stock  option  plans that do not provide  employees  with the right to
determine  confidentially  whether  shares  held  subject  to the  plan  will be
tendered in a tender or exchange  offer);  or (iii) the Business  Combination is
approved by the  corporation's  board of directors  and  authorized an annual or
special meeting of stockholders,  and not by written consent, by the affirmative
vote of at least  two-thirds of the outstanding  voting stock of the corporation
not owned by the Interested Stockholder.

         Section 203 of the Delaware  General  Corporation  Law defines the term
"Business  Combination"  to  encompass a wide  variety of  transactions  with or
caused by an Interested Stockholder in which the Interested Stockholder receives
or  could  receive  a  Bennett  on  other  than  a pro  rata  basis  with  other
stockholders,  including  mergers,  certain  asset sales,  certain  issuances of
additional  shares  to  the  Interested  Stockholders,   transactions  with  the
corporation  which  increase  the  proportionate   interest  of  the  Interested
Stockholder or transaction in which the Interested  Stockholder receives certain
other benefits.

     The  Certificate  of  Incorporation  of the  Company,  as amended,  further
provides  that the  following  actions,  among  others,  must be approved by the
affirmative  vote of the  holders  of 85% of the  outstanding  shares of capital
stock entitled to vote thereon:  (a) adopt,  alter,  amend or repeal the Bylaws;
(b) eliminate  indemnification of directors;  (c) grant any pre-emptive  rights;
(d) change the number or manner of election of the Board of  Directors;  and (e)
eliminate the supermajority voting rights contained therein. In addition, unless
approved by a majority of the Board,  the affirmative  vote of the holders of at
least 85% of the  outstanding  shares is  required  to: (a)  change the  capital
structure of the Company, or (b) amend the Certificate of Incorporation to allow
stockholders to act without a meeting.

     These provisions could have the effect of delaying, deferring or preventing
a change of control of the Company. The Company's  stockholders,  by adopting an
amendment to the  Certificate  of  Incorporation  or Bylaws of the Company,  may
elect not to be governed by Section 203 of the Delaware General Corporation Law,
effective twelve months after adoption. Neither the Certificate of Incorporation
nor  the  Bylaws  of  the  Company  currently  excludes  the  Company  from  the
restrictions imposed by Section 203 of the Delaware General Corporation Law.

Transfer Agent and Warrant Agent

     Continental  Stock  Transfer  Company,  New York,  New York  will  serve as
Transfer Agent for the Common Stock and Warrant Agent for the Warrants.


                         SHARES ELIGIBLE FOR FUTURE SALE

         As of June  30,1996,  the  Company  had  outstanding  an  aggregate  of
2,722,191  shares of Class A Common  Stock.  Of all such shares,  the  1,840,000
shares of Class A Common  Stock  included  in the Units  sold in the IPO will be
freely transferable  without restriction under the Securities Act except for any
shares  purchased by any person who is or thereby  becomes an "affiliate" of the
Company,  which  shares will be subject to the resale  limitations  contained in
Rule 144 promulgated  under the Securities Act. All of the other shares of Class
A Common Stock outstanding prior to the IPO are "restricted  securities" as that
term is defined under Rule 144. The Company's shares of Class E Common Stock are
not  transferable.  Accordingly,  holders of Class E Common Stock must hold such
shares until such shares are converted  into shares of Class A Common Stock.  If
converted,  the shares of Class A Common Stock received upon  conversion will be
"restricted securities."
                                       42
<PAGE>
     In general,  under Rule 144, as currently  in effect,  a person (or persons
whose shares are aggregated),  who has beneficially owned restricted  securities
for at least two  years,  may sell  within  any  three-month  period a number of
restricted  shares  which  does  not  exceed  the  greater  of  1% of  the  then
outstanding  shares of such class of  securities or the average  weekly  trading
volume during the four calendar  weeks prior to such sale.  Sales under Rule 144
are also subject to certain  requirements  as to the manner of sale,  notice and
the availability of current public information about the Company.  Rule 144 also
permits, under certain circumstances,  the sale of shares by a person who is not
an affiliate of the Company with respect to restricted securities that satisfy a
three-year  holding  period,  without  regard  to the  volume  or  other  resale
limitations.  For shares issued in  consideration of an unsecured or nonrecourse
promissory  note, the holding period does not commence until the note is paid in
full.  The  above is a brief  summary  of Rule 144 and is not  intended  to be a
complete description of the Rule.

     Substantially  all  of  the  current  stockholders,  including  all  of the
principal  stockholders,  officers and directors of the Company,  holding in the
aggregate  approximately 882,191 shares of Class A Common Stock, have agreed not
to sell, assign or transfer or otherwise dispose publicly of any of their shares
for a period of 13 months  from the date of this  Prospectus  without  the prior
written  consent of the  Underwriter.  Following the  expiration of such period,
approximately  625,000  of such  shares of Class A Common  Stock  will be freely
transferrable  subject to the  requirements of Rule 144. Prior to the IPO, there
has been no market for any  securities  of the Company and the Company is unable
to predict the effect that sales under Rule 144, pursuant to a registered public
offering  or  otherwise,  may have on the then  prevailing  market  price of the
Common  Stock,  but such sales may have a  substantial  negative  effect on such
market price.

     As of June 30, 1996,  options to purchase an aggregate of 155,578 shares of
Class A Common Stock and 150,867  shares of Class E-1,  150,867  shares of Class
E-2 and 100,578 shares of Class E-3 Common Stock were outstanding.  An aggregate
of an additional  12,297 shares of Class A Common Stock are available for future
option grants under the Incentive Plan and the Directors  Plan. See  "Management
- --Stock Option Plans."

                              PLAN OF DISTRIBUTION

         The securities offered hereby are being offered directly by the Company
pursuant  to the terms of the  Warrants.  No  underwriter  is being  utilized in
connection with this offering.

         The  Company  has agreed to pay Blair a  Solicitation  Fee of 5% of the
aggregate  exercise price of each Warrant which is exercised,  if (i) the market
price of the Class A Common  Stock on the date of the  Warrant is  exercises  is
greater than the then  exercise  price of the Warrant;  (ii) the exercise of the
Warrant was solicited by a member of the NASD;  (iii) the Warrant is not held in
a discretionary  account; (iv) disclosure of compensation  arrangements was made
both at the time of the offering and at the time of exercise of the Warrant; and
(v) the  solicitation  of exercise of the  Warrants was not in violation of Rule
10b-6 as promulgated  under the Exchange Act or respective  state blue sky laws.
Any costs  incurred  by the Company in  connection  with the  exercising  of the
Warrants shall be borne by the Company.

         Blair acted as the  underwriter  of the  Company's  IPO in February and
March  1996.  Other than the  securities  underlying  the Unit  Purchase  Option
granted to Blair in  connection  with the IPO,  the  Company is not aware of any
other  securities of the Company owned by Blair. In connection with the IPO, the
Company and Blair agreed to indemnify each other against certain  liabilities in
connection with the IPO and this offering including liabilities under the Act.

         In  connection  with the IPO,  the Company  sold to Blair,  for nominal
consideration,  the Unit Purchase  Option to purchase up to 160,000 IPO Units at
an  exercise  price of $6.75 per IPO Unit.  The Unit  Purchase  Options  and the
underlying  securities  cannot be transferred,  sold, or assigned until February
22, 1998, except to officers of Blair or to any NASD member participating in the
IPO and is exercisable during the period commencing February 22, 1998 and ending
February 22, 2001.

         The Company  entered into an  agreement  with Blair  providing  for the
payment of a fee to Blair,  in the event that Blair is responsible  for a merger
or other  acquisition  transaction  to which the Company is a party.  The fee is
based on a percentage of the consideration paid in the transaction  ranging from
7% of the first  $1,000,000  to 2  (OMEGA)%  of any  consideration  in excess of
$9,000,000.
                                       43
<PAGE>
         Unless  granted an exemption by the Commission  from Rule 10b-6,  Blair
will be prohibited from engaging in any market making  activities with regard to
the Company's  securities  for the period from nine business days (or such other
applicable  period as Rule 10b-6 may provide) prior to any  solicitation  of the
exercise of Warrants  until the later of the  termination  of such  solicitation
activity or the termination (by waiver or otherwise) of any right that Blair may
have to receive a fee for the exercise of Warrants  following such solicitation.
As a result,  Blair may be unable to continue to make a market in the  Company's
securities during certain periods while the Warrants are exercisable.

         The warrant prices and other terms of the Warrants have been determined
by negotiation  between the Company and Blair and are not necessarily related to
the Company's asset value, net worth or other established criteria of value.

         Blair  acted as a  placement  agent  in  connection  with  the  Private
Placement of the Bridge Notes and warrants completed in November 1995.

         Blair  has  informed  the  Company  that The  Securities  and  Exchange
Commission is conducting an investigation concerning various business activities
of Blair. The  investigation  appears to be broad in scope,  involving  numerous
aspects of Blair's  compliance  with the Federal  securities laws and compliance
with the Federal  securities laws by issuers whose securities were  underwritten
by Blair, or in which Blair made  over-the-counter  markets,  persons associated
with Blair,  such  issuers and other  persons.  The Company has been  advised by
Blair that the investigation has been ongoing since at least 1989 and that it is
cooperating   with  the   investigation.   Blair  cannot  predict  whether  this
investigation  will ever result in any type of formal enforcement action against
Blair,  or, if so, whether any such action might have an adverse effect on Blair
or the  securities  offered  hereby.  Blair  intends  to  make a  market  in the
securities  following the IPO. An  unfavorable  resolution  of the  Commission's
investigation  could have the effect of limiting  such firm's  ability to make a
market in the Company's securities, which could affect the liquidity or price of
such securities.

                                     EXPERTS

         The financial  statements of the Company, at June 30, 1996 and for each
of the two years in the  period  then ended  appearing  in this  Prospectus  and
Registration  Statement,  have been  audited by Ernst & Young  LLP,  independent
auditors,  as set forth in their report thereon  (which  contains an explanatory
paragraph  with respect to going  concern  mentioned  in Notes to the  financial
statements)  appearing  elsewhere  herein and are included in reliance upon such
report  given  upon the  authority  of that firm as experts  in  accounting  and
auditing.


                              AVAILABLE INFORMATION

         The Company has filed with the Securities and Exchange  Commission (the
"Commission"),  a Post-Effective Amendment to its Registration Statement on Form
SB-2, File No. 33-80119,("Registration Statement") under the Securities Exchange
Act of  1933,  as  amended  with  respect  to  the  securities  offered  hereby.
Statements  contained in this  Prospectus  as to the contents of any contract or
other  document  referred  to are not  necessarily  complete.  In each  instance
reference  is made to the copy of such  contract or other  document  filed as an
exhibit to the  Registration  Statement,  each such statement being qualified in
all respects by such reference.

         The  Company  is  subject  to  the  informational  requirements  of the
Securities  Exchange Act of 1934, as amended,  and in accordance  herewith files
reports, proxy statements and other information with the Commission. For further
information  with respect to the Company,  reports,  proxy  statements and other
information and the securities offered, reference is made to such reports, proxy
statements and other  information,  the Registration  Statement and the exhibits
filed as part thereof,  which may be examined  without charge and copies of such
material can be obtained at prescribed rates from the Public  Reference  Section
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.

         A copy of the Company's Annual Report on Form 10-KSB, as filed with the
Commission,  is available upon request,  without charge, by writing to LightPath
Technologies,  Inc.,  6820 Academy Parkway East N.E.,  Albuquerque,  New Mexico,
87109, Attention: Investor Relations.
                                       44
<PAGE>
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure


         Ernst & Young LLP was the principal  accountants of LightPath.  In July
1996, the Board of Directors of the Company voted on the  recommendation  of the
Company's  management  to retain  KPMG Peat  Marwick  to serve as the  Company's
principal  accountants  and  to  the  dismissal  of  Ernst  &  Young  LLP at the
conclusion of the June 30, 1996 reporting period.  Ernst & Young was notified of
the dismissal in August 1996. The Company will obtain  shareholder  ratification
for the  selection of KPMG Peat Marwick at the annual  meeting on September  30,
1996.

         In April 1996,  the Company  relocated  its corporate  headquarters  to
Albuquerque,  New Mexico from Tucson,  Arizona.  Since that time the Company has
continued  to work with Ernst & Young's  Tucson  office.  Ernst & Young does not
have an Albuquerque  office.  The Board believes that the change to KPMG,  which
has an  Albuquerque  office,  will  be more  convenient  and  efficient  for the
Company.

         There  were no  disagreements  with  Ernst & Young LLP on any matter of
accounting principles or practices,  financial statement disclosure, or auditing
scope or procedure, and such firm's report on the Company's financial statements
did not contain an adverse opinion or disclaimer of opinion and was not modified
as to audit scope,  or accounting  principles.  For the past two years the audit
report has contained  explanatory language  as to the uncertainty of the Company
as a going concern. Additionally,  Ernst & Young LLP's management letter related
to their  audit of the June 30,  1995  financial  statements  contained  certain
comments regarding material  weaknesses noted. These particular comments related
to the Company's  internal  controls in its accounting  and financial  reporting
systems and  information  systems.  The Company  agreed to the  inclusion of the
explanatory  language and the material weaknesses which management believes have
been properly resolved subsequent to June 30, 1995.
                                       45
<PAGE>
                          LightPath Technologies, Inc.
                          (A Development Stage Company)
                          Index to Financial Statements


Report of Ernst & Young LLP, Independent Auditors..........................F-2

Audited Financial Statements

Balance Sheet..............................................................F-3
Statements of Operations...................................................F-4
Statements of (Deficiency in Net Assets) Stockholders' Equity..............F-5
Statements of Cash Flows...................................................F-6
Notes to Financial Statements..............................................F-7

                                      F-1
<PAGE>
                Report of Ernst & Young LLP, Independent Auditors



Board of Directors
LightPath Technologies, Inc.

         We  have   audited  the   accompanying   balance   sheet  of  LightPath
Technologies,  Inc., (a development  stage company) as of June 30, 1996, and the
related  statements  of  operations,  (deficiency  in net assets)  stockholders'
equity,  and cash flows for each of the two years in the  period  ended June 30,
1996.   These  financial   statements  are  the   responsibility   of  LightPath
Technologies,  Inc.'s management. Our responsibility is to express an opinion on
these financial statements based on our audits.

         We conducted our audits in accordance with generally  accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance about whether the financial statemens are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the finanical statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

         In our opinion,  the  finanical  statements  referred to above  present
fairly,  in  all  material   respects,   the  financial  position  of  LightPath
Technologies,  Inc., as of June 30, 1996,  and the results of its operations and
its cash flows for each of the two years in the period ended June 30,  1996,  in
conformity with generally accepted accounting principles.

         The accompanying  financial statements have been prepared assuming that
LightPath  Technologies,  Inc., will continue as a going concern.  As more fully
described in the notes,  since inception,  the Company has incurred  substantial
losses  related  to its  formation,  research  and  development,  and  operating
activities. These conditions raise substantial doubt about the Company's ability
to continue as a going  concern.  Management's  plans in regard to these matters
are also  described in the notes.  The  financial  statements do not include any
adjustments  to reflect the possible  future effects on the  recoverability  and
classification  of assets or the amounts and  classification of liabilities that
may result from the outcome of this uncertainty.


                                           ERNST & YOUNG LLP

Tucson, Arizona
August 2, 1996
                                      F-2
<PAGE>
                          LightPath Technologies, Inc.
                          (A Development Stage Company)
                                  Balance Sheet
<TABLE>
<CAPTION>
                                                                                    June 30,
                                                                                      1996
                                                                                  ------------
<S>                                                                               <C>         
Assets
Current assets:
  Cash and cash equivalents                                                       $  4,335,133
  Trade accounts receivable                                                             23,500
  Inventories                                                                           66,186
  Advances to employees                                                                 14,445
  Prepaid expenses and other                                                            82,608
                                                                                  ------------
Total current assets                                                                 4,521,872

Property and equipment - net (Note 2)                                                  438,726
Intangible assets - net (Note 3)                                                       250,206
                                                                                  ------------
Total assets                                                                      $  5,210,804
                                                                                  ============

Liabilities and Stockholders' Equity
Current liabilities:
  Accounts payable and accrued liabilities                                        $    362,206
  Accrued payroll and benefits                                                         274,237
                                                                                  ------------
Total current liabilities                                                              636,443

Note payable to related parties (Note 4)                                                30,000

Commitments and contingencies (Note 9)

Redeemable common stock (Note 8)
  Class E-1 - performance based and redeemable common stock 1,454,547 shares
   issued and outstanding                                                               14,545
  Class E-2 - performance based and redeemable common stock 1,454,547 shares
   issued and outstanding                                                               14,545
  Class E-3 - performance based and redeemable common stock 969,691 issued
   and outstanding                                                                       9,697

Stockholders' equity (Notes 5, 7 and 8)
   Preferred stock, $.01 par value; 5,000,000 shares authorized; none
    issued and outstanding                                                                --
   Common stock:
    Class A, $.01 par value, voting; 34,500,000 shares authorized; 2,722,191
     shares issued and outstanding                                                      27,222
   Additional paid-in capital                                                       18,692,578
   Deficit accumulated during the development stage                                (14,214,226)
                                                                                  ------------
Total stockholders' equity                                                           4,505,574
                                                                                  ------------
Total liabilities and stockholders' equity                                        $  5,210,804
                                                                                  ============
</TABLE>
See accompanying notes
                                      F-3
<PAGE>
                          LightPath Technologies, Inc.
                          (A Development Stage Company)
                            Statements of Operations
<TABLE>
<CAPTION>
                                                                                           Inception
                                                                                          August  23,
                                                                                         1985 through
                                                            Year Ended June 30             June 30, 
                                                         1996               1995             1996
                                                    --------------------------------------------------
                                                                                          (Unaudited)
<S>                                                 <C>                <C>                <C>
Revenues
   Product development fees                         $    167,000       $    102,000       $    269,000
   Lenses and other                                       33,444             64,465            120,388
                                                    --------------------------------------------------
Total revenues                                           200,444            166,465            389,388

Costs and expenses
   Cost of goods sold                                     18,563            141,605            206,855
   Selling, general and administrative                 1,818,615          1,345,468         11,146,436
   Research and development                               83,074            112,165          6,674,454
   Amortization of unearned compensation                 867,642            924,467          2,076,217
                                                    --------------------------------------------------
Total costs and expenses                               2,787,894          2,523,705         20,103,962
                                                    --------------------------------------------------
Operating loss                                        (2,587,450)        (2,357,240)       (19,714,574)

Other income(expense)
   Investment income                                      71,003               --               93,451
   Interest expense                                     (398,458)          (432,340)        (1,850,367)
                                                    --------------------------------------------------
Net loss                                            $ (2,914,905)      $ (2,789,580)      ($21,471,490)
                                                    ==================================================


Net loss per share                                  $      (1.98)      $      (3.95)              --
                                                    ==================================================
Number of shares used in per share calculation         1,471,006            705,580               --
                                                    ==================================================
</TABLE>
See accompanying notes.
                                      F-4
<PAGE>
                          LightPath Technologies, Inc.
                          (A Development Stage Company)
          Statements of (Deficiency in Net Assets) Stockholders' Equity
<TABLE>
<CAPTION>
                                                             Class A                                                 
                                                           Common Stock                         Treasury Stock       
                                                    ----------------------      Additional  -----------------------  
                                                     Number of                   Paid-in    Number of                
                                                      Shares        Amount       Capital     Shares       Amount     
                                                    -----------------------------------------------------------------
<S>                                                   <C>        <C>           <C>          <C>         <C>          
Balances at July 1, 1994                              643,491    $  6,435      $4,238,255   (208,484)   $ (224,802)  
   Issuance of common stock                            46,348         464         446,573          -             -   
   Common stock issued for services                     2,028          20          34,450          -             -   
   Common stock from debt conversion                   37,792         378       1,031,755          -             -   
   Sales of treasury stock                                  -           -          22,401     22,401        44,802   
   Issuance of options to purchase common stock
     below market price                                     -           -       1,413,548          -            -    
   Amortization of unearned compensation                    -           -               -          -            -    
   Repurchase of common stock for treasury                  -           -               -     (5,000)      (10,000)  
   Net loss                                                 -           -               -          -             -   
                                                    -----------------------------------------------------------------
Balances at June 30, 1995                             729,659       7,297       7,186,982   (191,083)     (190,000)  
   Issuance of common stock, net of offering costs  1,842,547      18,425       7,198,089          -             -   
   Common stock issued for services                       182           2           4,990          -             -   
   Common stock issued for debt conversion            152,418       1,524       4,294,880          -             -   
   Sales of treasury stock                                  -           -               -    190,628       185,000   
   Amortization of unearned compensation                    -           -               -          -             -   
   Warrants issued with bridge loans                        -           -          62,500          -             -   
   Retirement of  common and treasury stock            (2,615)        (26)        (54,863)       455          5000   
   Net loss                                                 -           -               -          -             -   
                                                    =================================================================
Balances at June 30, 1996                           2,722,191    $ 27,222     $18,692,578          -             -   
                                                    =================================================================
</TABLE>
<TABLE>
<CAPTION>
                                                                           Deficit
                                                                         Accumulated                          
                                                                         During the                           
                                                         Unearned        Development                          
                                                       Compensation         Stage             Total           
                                                       ----------------------------------------------------   
<S>                                                    <C>               <C>               <C>                
Balances at July 1, 1994                                 $ (378,561)     $ (8,509,741)     $ (4,868,414)      
   Issuance of common stock                                       -                 -           447,037       
   Common stock issued for services                               -                 -            34,470       
   Common stock from debt conversion                              -                 -         1,032,133       
   Sales of treasury stock                                        -                 -            67,203       
   Issuance of options to purchase common stock                                                               
     below market price                                  (1,413,548)                -                 -       
   Amortization of unearned compensation                    924,467                 -           924,467       
   Repurchase of common stock for treasury                        -                 -           (10,000)      
   Net loss                                                       -        (2,789,580)       (2,789,580)      
                                                       ----------------------------------------------------   
Balances at June 30, 1995                                  (867,642)      (11,299,321)       (5,162,684)      
   Issuance of common stock, net of offering costs                -                 -         7,216,514       
   Common stock issued for services                               -                 -             4,992       
   Common stock issued for debt conversion                        -                 -         4,296,404       
   Sales of treasury stock                                        -                 -           185,000       
   Amortization of unearned compensation                    867,642                 -           867,642       
   Warrants issued with bridge loans                              -                 -            62,500       
   Retirement of  common and treasury stock                       -                 -           (49,889)      
   Net loss                                                       -        (2,914,905)       (2,914,905)      
                                                       ====================================================   
Balances at June 30, 1996                                         -     $ (14,214,226)     $  4,505,574       
                                                       ====================================================   
</TABLE>
See accompanying notes.
                                      F-5
<PAGE>
                          LightPath Technologies, Inc.
                          (A Development Stage Company)
                            Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                                   Inception
                                                                                                     August
                                                                                                    23, 1985
                                                                       Year Ended                   through
                                                                         June 30                    June 30
                                                           --------------------------------------------------
                                                                1996               1995              1996
                                                           --------------------------------------------------
                                                                                                  (Unaudited)
<S>                                                        <C>                <C>                <C>
Operating activities
Net loss                                                   $ (2,914,905)      $ (2,789,580)      $(21,471,490)
Adjustments to reconcile net loss to net cash used in
 operating activities:
   Depreciation and amortization                                 86,875             86,105            456,055
   Accretion of bridge notes                                    213,568             31,240            244,808
   Services provided for common stock                             5,000             34,552          1,140,813
   Write-off abandoned patent applications                        1,895             23,025            111,059
   Amortization of unearned compensation                        867,642            924,467          2,076,217
Changes in operating assets and liabilities:
  Receivables, advances to employees                             44,399            (10,762)           (37,945)
  Inventories                                                   (66,186)              --              (66,186)
  Prepaid expenses and other                                    (49,688)           (24,756)           (82,608)
  Accounts payable and accrued expenses                        (510,561)           504,497          1,922,107
                                                           --------------------------------------------------
Net cash used in operating activities                        (2,321,961)        (1,221,212)       (15,707,170)
Cash flows from investing activities
Property and equipment additions                               (269,057)            (2,678)          (866,486)
Costs incurred in acquiring patents                             (49,962)           (36,110)          (389,558)
                                                           --------------------------------------------------
Net cash used in investing activities                          (319,019)           (38,788)        (1,256,044)
Cash flows from financing activities
Proceeds from notes payable                                      40,000             76,100          4,398,606
Payments on notes payable                                      (314,511)          (172,535)        (1,097,350)
Proceeds from convertible notes payable                            --              391,000          1,465,529
Repayments of convertible notes payable                        (162,500)           (50,000)          (212,500)
Proceeds from bridge loans                                    1,285,433            480,315          1,765,748
Repayments of bridge loans                                   (1,250,000)              --           (1,250,000)
Proceeds from sales of common stock                           7,216,514            448,891          9,189,443
Repurchase of common stock                                      (40,000)           (10,000)          (569,512)
Proceeds from sales of treasury stock                           190,000             67,203            351,119
Proceeds from sales of limited partnership units                   --                 --            7,257,264
                                                           --------------------------------------------------
Net cash provided by financing activities                     6,964,936          1,230,974         21,298,347
                                                           --------------------------------------------------
Net increase (decrease) in cash and cash equivalents          4,323,956            (29,026)         4,335,133
Cash and cash equivalents at beginning period                    11,177             40,203               --
                                                           --------------------------------------------------
Cash and cash equivalents at end of period                 $  4,335,133       $     11,177       $  4,335,133
                                                           ==================================================
Supplemental disclosure of cash flow information:
Class A common stock issued for services                   $      4,992       $     34,470       $  1,111,617
Debt and interest converted into Class A common stock         4,296,404          1,032,133          6,281,164
Stock options granted for services                                 --               98,500             98,500
Class E common stock issued                                       9,613              3,448             38,801
</TABLE>
See accompanying notes.
                                      F-6
<PAGE>
                          LightPath Technologies, Inc.
                          (A Development Stage Company)
                   Notes to Financial Statements June 30,1996

Organization

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.

Basis of Presentation

The  Company  has  incurred  substantial  losses  since  inception.  The Company
consummated  an IPO to  raise  additional  capital  to  further  fund  research,
development  and  commercialization  of GRADIUM with the objective of developing
products  that will  achieve  market  acceptance.  Management  believes  the net
proceeds from the offering  will be sufficient to finance the Company's  working
capital  requirements for the next year.  Without sales of the GRADIUM products,
there is  substantial  doubt  about the  ability of the Company to continue as a
going  concern.  The  financial  statements  do not include any  adjustments  to
reflect  the  recoverability  and  classification  of assets or the  amounts and
classifications  of  liabilities  that  may  result  from  the  outcome  of this
uncertainty.


1. Summary of Significant Accounting Matters

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.
                                      F-7
<PAGE>
                          LightPath Technologies, Inc.
                          (A Development Stage Company)
                    Notes to Financial Statements - Continued

Revenue recognition occurs from sales of product upon shipment.

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 t;he date of
grant.

Pro forma information  required by Statement of Financial  Accounting  Standards
No. 123, Accounting for Stock-Based  Compensation,  has been presented under the
fair value method using a Black-Scholes option pricing model (see Note 7).

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  (see Note 8).  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  June 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.  Property and Equipment

Property and equipment consist of the following:

                                                     June 30,1996

         Manufacturing equipment                     $  491,614
         Computer equipment and software                203,243
         Furniture and fixtures                          84,656
         Leasehold improvements                          65,207
                                                     ------------
                                                        844,720
         Less depreciation                             (405,994)
                                                     ============
                                                     $  438,726
                                                     ============
                                      F-8
<PAGE>
                          LightPath Technologies, Inc.
                          (A Development Stage Company)
                    Notes to Financial Statements - Continued

3. Intangible Assets

Intangible assets consist of the following:

                                                     June 30,1996

       Patents and trademarks granted                $  162,838
       Patent applications in process                   106,863
       Trademark applications in process                  8,797
                                                     ------------
                                                        278,498
       Less amortization                                (28,292)
                                                     ------------
                                                     $  250,206
                                                     ============

4.   Note Payable

At June 30, 1996,  the Company has a note payable to a  stockholder  of $30,000,
which bears interest at 10.28%,  payable monthly.  The stockholder has agreed to
make repayment of the remaining balance  contingent upon the Company meeting the
conditions  for  conversion  of the Class E-1  common  stock into Class A common
stock (as discussed in Note 8).

Bridge Loans

In November  1995,  the Company  completed a bridge  financing  consisting of an
aggregate of  $1,250,000  principal  amount of Bridge  Notes and 625,000  Bridge
Warrants  from which it received net  proceeds of  $1,070,380,  after  deducting
commissions  and expenses of such  financing.  The Bridge Notes and  accumulated
interest were repaid with proceeds from the initial public offering.  The Bridge
Warrants  entitled  the holders to purchase one share of common stock for $3 per
share, which were automatically exchanged on the closing of the IPO into 625,000
Class A warrants with  exercise  price of $6.50 per share.  The warrants,  which
were initially  valued at $62,500 by management  were recorded as debt discount.
Debt discount and deferred  financing  costs were amortized over the life of the
loan.

Conversion of Debt into Equity

In October and November 1995, the majority of the holders of bridge notes agreed
to convert  $440,000 in principal and related accrued  interest under such notes
into shares of Class A and Class E common  stock at a  conversion  rate of $5.50
per share.  In February  1996, the Company  converted the remaining  $215,000 in
principal and related accrued interest into shares of Class A and Class E common
stock at a conversion rate of $5.50 per share. As additional  consideration  for
the  debt  conversion,  the  Company  issued  214,000  Class A  warrants  to the
noteholders.

In February 1996, in conjunction with the IPO, certain other debtholders  agreed
to convert  approximately $3.3 million in principal,  accrued interest and other
payables  into shares of Class A and Class E common stock at a conversion  price
of $5.50 per share.

Interest of $58,023 and $21,613 was paid in 1996 and 1995 respectively.


5. Deferred Employee Salaries

In November 1993, the Company  implemented a plan for the deferment of a portion
of all employees'  salaries.  The salaries not paid were accrued as a continuing
obligation  of the  Company.  As of June 30, 1996 and 1995,  the total  deferred
amounts were $211,470 and $789,449  respectively.  During 1996 portions of these
deferrals were repaid with proceeds from bridge loans,  while other  obligations
were converted into common stock.  Additionally,  in November 1995, key officers
of the Company agreed to convert $350,000 of their deferred amounts into Class E
common stock at an average  conversion  price 
                                      F-9
<PAGE>
                          LightPath Technologies, Inc.
                          (A Development Stage Company)
                    Notes to Financial Statements - Continued

of $1 per share.  Key officers and  employees of the Company have agreed to make
repayment of the June 30, 1996 balance plus the balance of an accrued  liability
for a  director  (totals  $275,000)  contingent  upon the  Company  meeting  the
conditions  for  conversion  of the Class E-1  common  stock into Class A common
stock (as discussed in Note 8).

6. Income Taxes

Temporary  differences  between the net operating losses for financial reporting
and  income  tax  purposes  primarily  relate  to the use of the cash  method of
accounting and deferral of research and  development  and start-up  expenses for
tax purposes.  Research and development and start-up expenses will be deductible
over a five year period  commencing with the year the Company  advances from the
development stage into its commercialization phase.

For financial  reporting  purposes a valuation  allowance of $3,674,000 has been
recognized to offset the Company's deferred tax assets. The valuation  allowance
has increased by $692,000 and $747,000  during the years ended June 30, 1996 and
1995,  respectively,  as a result  of  increased  deferred  tax  assets  created
principally by the operating losses and the deferral of research and development
and start-up expenses.

Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes  and  the  amounts  reported  for  income  tax  purposes.   Significant
components of the Company's deferred tax assets at June 30, 1996 are as follows:

     Deferred tax assets:
        Capitalized start-up expenses, net                     $    2,474,000
        Capitalized research and development expenses                 533,000
        Net operating loss carryforwards                              434,000
        Research and development credits                              106,000
        Other deferred deductions                                     127,000
                                                               -----------------
     Total deferred tax assets                                      3,674,000
     Valuation allowance for deferred tax assets                   (3,674,000)
                                                               -----------------
                                                               $          --
                                                               =================

The reconciliation of income tax attributable to operations computed at the U.S.
federal  statutory tax rates is a difference equal to the federal statutory rate
given that the annual losses resulted in no tax benefits.

At June 30, 1996, the Company has net operating loss  carryforwards  for federal
income tax purposes of  approximately  $1 million  which will begin to expire in
2009 if not previously  utilized.  The Company also has research and development
credit  carryforwards  of  approximately  $106,000 which will begin to expire in
2009,  if not  previously  utilized.  The  majority  of the net  operating  loss
carryforward  and  research  and  development  credits  are  subject  to certain
limitations   of  the  Internal   Revenue  Code  which   restrict  their  annual
utilization.
                                      F-10
<PAGE>
                          LightPath Technologies, Inc.
                          (A Development Stage Company)
                    Notes to Financial Statements - Continued

7. Employee and Director Stock Option Plans

At June 30, 1996 the Company has three stock based  compensation plans which are
described   below.   The  Company   applies  APB  Opinion  No.  25  and  related
Interpretations in accounting for its plans. Prior to becoming a public company,
the Company's  management  valued options granted based on the cash transactions
price of the Company's  common stock during the period of grant.  Certain of the
grants,  prior to 1995,  were at less than  fair  market  value and the  Company
recorded  total  unearned  compensation  of $1,413,548  and $662,669 in 1995 and
1994,  respectively,  at the date of the grants, and was amortizing the unearned
compensation  expense over the vesting periods. The amortization expense totaled
$867,642 and $924,467 in 1996 and 1995, respectively. The unamortized balance of
unearned compensation was charged to expense in the first quarter of fiscal 1996
when the vesting of all options  outstanding was accelerated due to the approval
by the  stockholders of an underwriting  agreement.  No compensation  costs have
been  recognized  for its fixed stock  options  plans  where fair  market  value
equalled the option price at the date of grant. Had  compensation  costs for the
Company's stock based  compensation  plans been determined  consistent with FASB
Statement  No. 123, the  Company's  net loss and net loss per share for the year
ended June 30, 1996 would have been substantially the same as reported.

In June 1992, the Company implemented the Omnibus Incentive Plan (the "Incentive
Plan"), and the Directors Stock Option Plan (the "Directors Plan"). An aggregate
of 104,545 and 13,636 shares of the Company's common stock has been reserved for
awards under the Incentive Plan and the Directors Plan, respectively.

The Incentive  Plan  authorizes the Company to grant various awards using common
stock,  and cash to officers and other key  employees of the Company,  including
incentive stock options,  nonqualified stock options, "reload" options, deferred
compensation stock options, stock appreciation rights,  restricted stock grants,
restricted  unit grants and  performance  bonus awards.  The term of the options
granted under the Incentive  Plan cannot exceed ten years for all option holders
except  stockholders  with 10% or more of the Company's stock for which the term
is five years after the date of grant.  Each option  issued  prior to the IPO is
now, due to the recapitalization discussed in Note 8, bundled into an option for
the purchase of one share of Class A common stock,  1.5 shares each of Class E-1
and E-2 common stock and one share of Class E-3 common stock.  Options under the
Incentive Plan available for grant at June 30, 1996 were 2,161 shares of Class A
common stock.

The Directors Plan  authorizes  the Company to grant awards to certain  eligible
nonemployee directors of the Company using common stock. Under the plan formula:
i) each of the current  nonemployee  directors will receive  options to purchase
182 shares of the Company's  common stock at the date of each annual  meeting of
stockholders;  and ii) on the date an  individual  first  becomes a  nonemployee
director,  they will  receive  options to purchase  900 shares of the  Company's
common stock which vest ratably  over a three year period.  Each option  granted
under the  Directors  Plan will be granted at a price  equal to the fair  market
value of such  shares on the date the  options  are  granted  with a term of ten
years.  Each option issued prior to the IPO is now, due to the  recapitalization
discussed  in Note 8,  bundled  into an option for the  purchase of one share of
Class A common stock,  1.5 shares each of Class E-1 and E-2 common stock and one
share of Class E-3 common stock.  Options under the Director Plan  available for
grant at June 30, 1996 were 10,136 shares of Class A common stock.

In addition,  the Company has issued  nonqualified  options to certain directors
and  consultants to the Company not covered by the Incentive or Directors  Plan.
The Company issued 26,628 shares in 1995 to consultants  for services  rendered,
recognizing $445,000 in cost related to these options issued. Each option issued
prior  to the  IPO is  now,  due to the  recapitalization  discussed  in Note 8,
bundled  into an option for the  purchase of one share of Class A common  stock,
1.5  shares  each of Class E-1 and E-2  common  stock and one share of Class E-3
common stock.
                                      F-11
<PAGE>
                          LightPath Technologies, Inc.
                          (A Development Stage Company)
                    Notes to Financial Statements - Continued

A summary of the status of the stock  option  plans as of June 30, 1996 and 1995
and changes during the years ended is presented below:

<TABLE>
<CAPTION>
========================================================================================
                                    Incentive         Directors 
Shares under option:                Plan              Plan                  Nonqualified
- ----------------------------------------------------------------------------------------
<S>                                       <C>                  <C>             <C>
Outstanding at June 30, 1994                19,655             4,182           24,675
Granted                                     57,529                 -           26,628
Exercised                                        -                 -                -
Lapsed or canceled                         (12,891)             (682)               -
                                    ----------------------------------------------------
Outstanding at June 30, 1995                64,293             3,500           51,303
Granted at $5.00                            55,000                 -                -
Exercised                                        -                 -                -
Lapsed or canceled                         (16,909)                -           (1,609)
                                    ----------------------------------------------------
Outstanding at June 30, 1996               102,384             3,500           49,694
                                    ====================================================

Options exercisable:
  June 30, 1996                             57,384             3,500           49,694
Weighted-avg fair value of
options granted during year               $   1.03                 -                -
</TABLE>

The following table summarizes information about fixed stock options outstanding
at June 30, 1996:

<TABLE>
<CAPTION>
                                      Options Outstanding                             Options Exercisable
====================================================================================================================
                                           Weighted-Avg.
 Range of                  Number            Remaining                                Number
 Exercise              outstanding at       Contractual         Weighted-Avg.     Exercisable at     Weighted-Avg.
  Prices                June 30,1996           Life             Exercise Price    June 30, 1996      Exercise Price
- --------------------------------------------------------------------------------------------------------------------
<S>                         <C>           <C>                         <C>              <C>                  <C>
$ 5  to 15                  137,673       8.7 Years                   $  5.57          92,673               $  5.85
$ 25 to 40                   12,658       7.3                         $ 35.71          12,658               $ 35.71
$ 41 to 55                    5,247       7.2                         $ 44.44           5,247               $ 44.44
                     ------------------                                        ------------------
$ 5  to 55                  155,578       8.5                         $ 9.33          110,578               $ 11.09
                     ==================                                        ==================
</TABLE>


The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option-pricing   model  with  the   following   weighted-average
assumptions used for grants in 1996:  dividend yield of 0%; expected  volatility
of 25%; risk free interest rate of 7%; and expected lives of 2 years.

8.  Stockholder's Equity

Initial Public Offering

The Company  completed  an IPO on February  22, 1996 for the sale of units which
consisted  of one share of Class A common  stock,  one  Class A warrant  and one
Class B warrant. The initial public offering price per unit was $5.00.

Common Stock

Effective September 29, 1995, the Board of Directors and the stockholders of the
Company approved the recapitalization of the Company as follows:

A 1-for-5.5 reverse stock split of all then outstanding  shares of common stock.
Concurrently,  a stock  dividend  of 1.5 shares of Class E-1 common  stock,  1.5
shares of Class E-2  common  stock  and one
                                      F-12
<PAGE>
                          LightPath Technologies, Inc.
                          (A Development Stage Company)
                    Notes to Financial Statements - Continued

share of Class E-3  stock,  for each share of Class A common  stock  outstanding
following the reverse stock split was declared

The Company's common stock and preferred stock consists of the following:

- -    Authorized  34,500,000  shares of Class A common stock, $.01 par value. The
     stockholders  of Class A common  stock  are  entitled  to one vote for each
     share held.

- -    Authorized  2,000,000 shares of Class E-1 common stock, $.01 par value. The
     stockholders  of Class E-1 common  stock are  entitled to one vote for each
     share held. Each Class E-1 share will automatically  convert into one share
     of Class A common stock in the event that (i) the  Company's  income before
     provision  of income  taxes and  extraordinary  items or any charges  which
     result  from the  conversion  of the  Class E  common  stock is equal to or
     exceeds  $8,000,000  in fiscal  1996,  1997,  1998 or 1999,  or is at least
     $10,300,000  in fiscal 2000;  or (ii) the  Company's bid price per share of
     Class A common stock averages in excess of $5.00 multiplied by 2.5 (subject
     to adjustment for stock splits) for 30 consecutive business days during the
     18-month period commencing on February 22, 1996, or (iii) the bid price per
     share of Class A common  stock  averages in excess of $5.00  multiplied  by
     3.35 (subject to adjustment for stock splits) for 30  consecutive  business
     days during the period from 18 months  through 36 months after February 22,
     1996,  or (iv) the Company is  acquired  by or merged with or into  another
     entity  during  any of the  periods  referred  to in (ii) or (iii) and as a
     result thereof  holders of the Class A common stock of the Company  receive
     per share consideration (after giving effect to the conversion of the Class
     E-1 common stock) equal to or greater than the respective bid price amounts
     set forth in (ii) or (iii) above, respectively, as applicable.

- -    Authorized  2,000,000 shares of Class E-2 common stock, $.01 par value. The
     stockholders  of Class E-2 common  stock are  entitled to one vote for each
     share held. Each Class E-2 share will automatically  convert into one share
     of Class A common stock in the event that (i) the  Company's  income before
     provision  of income  taxes and  extraordinary  items or any charges  which
     result  from the  conversion  of the  Class E  common  stock is equal to or
     exceeds  $10,900,000  in fiscal 1996,  1997,  1998 or 1999,  or is at least
     $14,000,000  in fiscal  2000;  or (ii) the Company is acquired by or merged
     with or into another entity during any of the periods referred to below and
     as a result  thereof  holders  of the Class A common  stock of the  Company
     receive per share  consideration  (after giving effect to the conversion of
     the Class E-1 and Class E-2  common  stock)  equal to or  greater  than 3.6
     times $5.00 during the 18-month period  commencing on February 22, 1996, or
     4.6 times $5.00  during the period from 18 months  through 36 months  after
     February  22,  1996  set  forth in (ii) or (iii)  above,  respectively,  as
     applicable.

- -    Authorized  1,500,000 shares of Class E-3 common stock, $.01 par value. The
     stockholders  of Class E-3 common  stock are  entitled to one vote for each
     share held. Each Class E-3 share will automatically  convert into one share
     of Class A common stock in the event that (i) the  Company's  income before
     the provision of income taxes and extraordinary  items or any charges which
     result  from the  conversion  of the  Class E  common  stock is equal to or
     exceeds  $28,000,000 in fiscal 1996,  1997, 1998, 1999 or 2000; or (ii) the
     Company is  acquired by or merged with or into  another  entity  during the
     periods referred to below and as a result thereof holders of Class A common
     stock of the Company receive per share  consideration  (after giving effect
     to the  conversion  of the Class E-1, E-2 and E-3 common stock) equal to or
     greater than 6 times $5.00 price during the 18-month  period  commencing on
     February  22,  1996,  or 8 times  $5.00  during the  period  from 18 months
     through 36 months after February 22, 1996.

     The shares of Class E common stock will be redeemed on  September  30, 2000
     by the  Company  for $.0001 per share and will be  canceled  by the Company
     without  further  obligation to the  stockholder if such earnings  levels a
     market price targets are not achieved.

     The Class E common stock  performance  shares have the  characteristics  of
     escrowed  shares;  therefore,  shares  owned  by key  officers,  employees,
     directors or consultants of the Company are  
                                      F-13
<PAGE>
                          LightPath Technologies, Inc.
                          (A Development Stage Company)
                    Notes to Financial Statements - Continued

     subject to variable plan compensation accounting.  In the event the Company
     attains any of the  earnings  thresholds  or the  Company's  Class A common
     stock meets certain  minimum  market prices  required for the conversion of
     Class E common stock by such stockholders,  the Company will be required to
     recognize  compensation expense in the periods in which the stated criteria
     for conversion are probable of being met.

- -    Authorized 5,000,000 shares of preferred stock; no par value, none of which
     have been issued.  Designations,  rights, and preferences  related to these
     shares may be determined by the Board of Directors. The terms of any series
     of preferred stock may include  priority claims to assets and dividends and
     voting or other rights.


Warrants

Each Class A warrant entitles the holder to purchase one share of Class A common
stock and one Class B warrant at an exercise  price of $6.50 until  February 22,
2001. Commencing one year from the offering, the Class A warrants are redeemable
by the  Company on 30 day's  written  notice at a  redemption  price of $.05 per
warrant if the closing price of the Class A common stock for any 30  consecutive
trading days ending within 15 days of the notice averages in excess of $9.10 per
share.

Each Class B warrant entitles the holder to purchase one share of Class A common
stock at an exercise price of $8.75 until February 22, 2001. Commencing one year
from the  offering,  the Class B warrants  are  redeemable  by the Company on 30
day's  written  notice at a redemption  price of $.05 per warrant if the closing
price of the Class A common  stock for any 30  consecutive  trading  days ending
within 15 days of the notice averages in excess of $12.25 per share. All Class B
warrants must be redeemed if any are redeemed.

All of the  Class A  warrants,  the Class A common  stock  and Class B  warrants
issuable  upon  exercise of such Class A warrants  and the Class A common  stock
issuable  upon exercise of the Class B warrants  were  registered  and tradeable
subject to a contractual  restriction  that such Class A warrants and underlying
securities  may not be sold for a period of  between  90 and 270 days  after the
effective  date of the IPO.  Original  securityholders  have also  agreed not to
exercise their warrants for a period of one year following the effective date of
the IPO; provided,  however,  that subsequent purchasers of the warrants are not
subject to such restrictions on exercise.


9. Commitments and Contingencies

The  Company  has  operating  leases for  office  equipment  and  office  space.
Effective  April 1, 1996  Company has entered  into a 5 year lease (with a three
year renewal option) agreement for a 13,300 square foot manufacturing and office
facility in Albuquerque, New Mexico. Rent expense recognized for the years ended
June 30, 1996 and 1995 was $55,640 and $66,352  respectively.  Commitments under
noncancelable  operating leases are $93,500 for 1997;  $89,000 for 1998; $91,000
for 1999; $94,000 for 2000; and $73,000 for 2001.

The Company has outstanding purchase  commitments for approximately  $100,000 at
June 30, 1996 for capital expenditures for the manufacturing facility.

In June 1996,  the Company  entered into an  agreement  with  Invention  Machine
Corporation  (IMC) for a benchmarking  and prediction  analysis of  technologies
related to LightPath's proprietary process for the manufacturing of GRADIUM. The
agreement  calls for the  Company to pay IMC a total of  $24,000  from July 1996
through  December  1996 and issue 40,000 shares of  unregistered  Class A common
stock upon completion of the project.

In 1995, a former employee  commenced a lawsuit against the Company for deferred
compensation and reimbursable  expenses.  A second lawsuit was commenced by this
same person  alleging  wrongful  
                                      F-14
<PAGE>
                          LightPath Technologies, Inc.
                          (A Development Stage Company)
                    Notes to Financial Statements - Continued

discharge.  The  Company  settled  both  of  these  lawsuits  in May  1996,  for
approximately  $75,000. The majority of which was deferred  compensation accrued
in 1995.

The Company is involved in other  various  legal  actions  arising in the normal
course of business.  After taking into consideration legal counsel's  evaluation
of such actions, management is of the opinion that their outcome will not have a
significant effect on the Company's  financial  statements.  The Company is also
aware of the existence of certain  unasserted  claims.  Certain potential claims
exist due to  nonpayment  of payables  during the  periods  when the Company had
inadequate cash flow. Third parties have not recently manifested their intent to
pursue such  matters.  Management  is of the opinion  that such  matters are not
likely to be asserted or if they are will not result in any  material  liability
to the Company.


10.  Related Party Transactions

During  the fiscal  year ended June 30,  1996,  two  directors  of the  Company,
provided legal and consulting  services to the Company for which they billed the
Company approximately,  $58,000. In addition, the Company was provided legal and
consulting services by several individuals and companies who are stockholders of
the  Company,  for which they billed  approximately,  $144,000.  The Company has
retained the legal services of a stockholder  for licensing work to be performed
during fiscal 1997 for $90,000 of which half is paid in cash and half in Class A
common stock.

11.   Supplemental Net Loss Per Share Information

On February  22, 1996 the Company  completed  an IPO upon which shares of common
stock was issued due to the  conversion  of certain  accounts  payable,  accrued
liabilities,  payables to related  parties,  notes  payable,  convertible  notes
payable and bridge  loans into Class A common stock and shares of Class E common
stock.  Had the  conversion  occurred  on July 1,  1995 the  earnings  per share
amounts for 1996 would have been as follows:

                                              1996
                                              ----
Actual                                      $(1.98)
Adjustments                                    .07
                                        -----------------
Supplemental                                $(1.91)
                                        =================

                                      F-15
<PAGE>
     No dealer,  salesman or any other  person has been  authorized  to give any
information or to make any  representations  other than those  contained in this
Prospectus in connection with the offer made by this Prospectus and, if given or
made,  such  information and  representations  must not be relied upon as having
been authorized by the Company or the Selling  Securityholders.  This Prospectus
does not constitute an offer to sell or the solicitation of any offer to buy any
security other than the shares of Common Stock offered by this  Prospectus,  nor
does it  constitute an offer to sell or a  solicitation  of any offer to buy the
shares of Common  Stock by anyone in any  jurisdiction  in which  such  offer or
solicitation  is not  authorized,  or in which the person  making  such offer or
solicitation  is not qualified to do so, or to any person to whom it is unlawful
to make such offer or  solicitation.  Neither the deliver of this Prospectus nor
any sale made hereunder shall, under any  circumstances,  create any implication
that  information  contained  herein is correct as of any time subsequent to the
date hereof.

                             ----------------------
                                TABLE OF CONTENTS


                                                                            Page
                                                                            ----

Prospectus Summary                                                            3
Risk Factors                                                                  7
Use of Proceeds                                                              13
Dividend Policy                                                              13
Price Range of Class A Common Stock                                          13
Capitalization                                                               14
Selected Financial Data                                                      15
Management's Discussion and Analysis
  of Financial Condition and Results
  of Operations                                                              16
Business                                                                     18
Management                                                                   25
Principal Stockholders                                                       33
Certain Transactions                                                         34
Concurrent Offering by Selling Securityholders                               35
Description of Securities                                                    38
Shares Eligible For Future Sale                                              42
Plan of Distribution                                                         43
Experts                                                                      44
Available Information                                                        44
Changes and Disagreements with Accountants on
  Accounting and Financial Disclosure                                        45
Financial Statements                                                         F-1
                             ----------------------

                          LIGHTPATH TECHNOLOGIES, INC.

         1,840,000 UNITS, EACH CONSISTING OF ONE SHARE OF CLASS A COMMON
              STOCK AND ONE REDEEMABLE B WARRANT, ISSUABLE UPON THE
                     EXERCISE OF REDEEMABLE CLASS A WARRANTS
              AND 3,680,000 SHARES OF CLASS A COMMON STOCK ISSUABLE
                UPON THE EXERCISE OF REDEEMABLE CLASS B WARRANTS

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

                                   PROSPECTUS

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

                                January 10, 1997
                                       46
<PAGE>
                                                                       ALTERNATE
PROSPECTUS
                          LIGHTPATH TECHNOLOGIES, INC.
                 839,000 Redeemable Class A Warrants to Purchase
                     839,000 Shares of Class A Common Stock
                     and 839,000 Redeemable Class B Warrants
               to Purchase 839,000 Shares of Class A Common Stock

         This  Prospectus  relates to 839,000  redeemable  Class A Warrants (the
"Class A Warrants") of Lightpath Technologies, Inc., a Delaware corporation (the
"Company"),  625,000 of which were issued to investors upon  conversion of other
warrants  issued to such  investors  in a private  placement  by the  Company in
November  1995 (the  "Private  Placement"),  and 214,000 of which were issued to
other  investors  upon  conversion  of certain  Notes issued by the Company in a
private   placement  during  the  first  seven  months  of  1995.  See  "Selling
Securityholders."  This  Prospectus also relates to 839,000  Redeemable  Class B
Warrants ("Class B Warrants") issuable upon exercise of the Class A Warrants and
1,678,000  shares of Class A Common Stock  issuable upon exercise of the Class A
Warrants  and Class B  Warrants.  Each  Class A Warrant  entitles  the holder to
purchase,  at an exercise  price of $6.50,  subject to  adjustment,  one Class B
Warrant and one share of Class A Common Stock. Each Class B Warrant entitles the
holder to purchase,  at an exercise price of $8.75,  subject to adjustment,  one
share of Class A Common  Stock.  The Class A  Warrants  and the Class B Warrants
(collectively,  the  "Warrants")  are  exercisable  at any time  after  issuance
through the fifth  anniversary of the date of this Prospectus.  The Warrants are
subject to redemption by the Company for $.05 per Warrant, upon 30 days' written
notice,  if the average  closing bid price of the Class A Common  Stock  exceeds
$9.10 per share with  respect to the Class A Warrants  and $12.25 per share with
respect  to the Class B Warrants  (subject  to  adjustment  in each case) for 30
consecutive  business  days ending  within 15 days of the date the  Warrants are
called for redemption. See "Description of Securities."

         The securities offered by this Prospectus may be sold from time to time
by the holders thereof ("Selling Securityholders"), or by their transferees. All
of the Class A Warrants are expected to become  freely  traceable  commencing 90
days from the date of this Prospectus,  and the securities underlying such Class
A Warrants are expected to become freely traceable  commencing one year from the
date of this  Prospectus.  See  "Concurrent  Offering." The  distribution of the
securities  offered hereby may be effected in one or more  transactions that may
take  place  on  the  over-the-counter   market,   including  ordinary  brokers'
transactions,  privately negotiated transactions or through sales to one or more
dealers for resale of such securities as principals, at market prices prevailing
at the time of sale, at prices  related to such  prevailing  market prices or at
negotiated paces. Usual and customary or specifically  negotiated brokerage fees
or commissions may be paid by the Selling Securityholders.

         The  Selling  Securityholders  and  intermediaries  through  whom  such
securities  are sold may be deemed  "underwriters"  within  the  meaning  of the
Securities  Act of 1933, as amended (the "Act"),  with respect to the securities
offered,  and  any  profits  realized  or  commissions  received  may be  deemed
underwriting  compensation.  The  Company  has agreed to  indemnify  the Selling
Securityholders  against certain  liabilities,  Including  liabilities under the
Act.

         The  Company  will not  receive  any of the  proceeds  from the sale of
securities by the Selling Securityholders.

         On December 7, 1995, the Company filed a Registration  Statement  under
the Act with  respect  to a public  offering  by the  Company  (the  "Offering")
underwritten  by D.H.  Blair  Investment  Banking  Corp.  ("Blair") of 1,840,000
Units,  each Unit  consisting of one share of Class A Common Stock,  one Class A
Warrant and one Class B Warrant,  with the  Securities  and Exchange  Commission
(the "Commission").  The Company received approximately  $7,200,000 net Proceeds
from the Offering after payment of  underwriting  discounts and  commissions and
estimated expenses of the Offering.  In the event all of the Class A and Class B
Warrants  are fully  exercised,  the  Company  will  receive  gross  proceeds of
approximately $61,835,000.

         The  Company  has  agreed  to  pay  Blair  a   solicitation   fee  (the
"Solicitation  Fee") equal to 5% of the exercise price in  connections  with the
exercise of Warrants under certain conditions.  See "Selling Securityholders and
Plan of  Distribution."  The warrant prices and other terms of the Warrants have
been  determined  by  negotiation  between  the  Company  and  Blair and are not
necessarily related to the Company's asset value, net worth or other established
criteria of value.

                             ----------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
                             ----------------------
THESE  SECURITIES  HAVE NOT BEEN APPROVED OR  DISAPPROVED  BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES  COMMISSION,  NOR HAS THE SECURITIES
AND  EXCHANGE  COMMISSION  OR ANY  STATESECURITIES  COMMISSION  PASSED  UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.  ANY REPRESENTATIONTO THE CONTRARY IS A
CRIMINAL OFFENSE.

                The date of this Prospectus is January 10, 1997.
                                      A-1
<PAGE>
                                                                       ALTERNATE
                               CONCURRENT OFFERING

         On December 7, 1995, the Company Filed a Registration  Statement  under
the Securities Act with respect to an underwritten offering of the 1,840,000 IPO
Units by the  Company  (i.e.,  the  IPO).  The  offering  of the IPO  Units  has
subsequently  been  completed,  but the  Company may be deemed to continue to be
offering securities pursuant to the outstanding Warrants.  Sales of Securites by
the Selling  Securityholders,  or the  potential  of such sales,  chould have an
adverse  effect on the market  price of the  Warrants  and of the Class A Common
Stock purchasable upon exercise of the Warrants.


                                                                       ALTERNATE
                SELLING SECURITYHOLDERS AND PLAN OF DISTRIBUTION
           
         An aggregate of 839,000 Class A Warrants,  consisting of Class A Common
Stock and a Class B Warrant  may be  offered  by certain  security  holders  who
received  their  Class A Warrant in  connection  with the Private  Placement  in
November 1995.

         The following table sets forth certain information with respect to each
Remaining Selling  Securityholder for whom the Company is registering securities
for resale to the public.  The Company will not receive any of the proceeds from
the sale of these securities.  Except as described below,  there are no material
relationships  between  any of the  Remaining  Selling  Securityholders  and the
Company, nor have any such material  relationships existed within the past three
years.


                                                   Number of Class A
                                                 Warrants Beneficially
                                                   Owned and Maximum
Selling Securityholders                           Number to be sold(1)
- -----------------------                           --------------------
Magid Abraham                                                     50,000
William Aden                                                      35,000
Bruce Barrus                                                       8,500
Thomas J. & Dorothy M. Biuso                                      12,500
Burns Family Trust                                                  1200
Kenneth & Sherry Cohen                                            12,500
David B. Cornstein                                                25,000
Benjamin Danziger                                                 21,000
Charles Garcia                                                     7,500
Irving L. Goldman                                                 25,000
Stuart Gruber                                                     12,500
Kenneth Hoffer                                                    15,000
Herman S. Howard                                                  50,000
Michael Jesselson 12/18/80 Trust                                  25,000
Jesselson Grandchildren 12/18/80 Trust                            50,000
Robert & Eileen Jordan                                            12,500
Milton Klein                                                      16,000
Guy Knolle                                                        17,500
Louis Leeburg                                                      7,500
William Leeburg                                                   15,000
William Leeburg Profit Sharing Plan                               15,000
Lenny Corp                                                        12,500
William J. Lipkin                                                 12,500
Gloria Marra                                                      25,000
Charles Bechert                                                    7,500
James S. Mulholland, Sr.                                          37,500
                                      A-2
<PAGE>
Ray & Vita Pliskow                                                17,000
Robin Prever                                                      25,000
Marc Roberts                                                      25,000
Robert Roberts                                                     7,500
F.B. Rooke & Sons                                                 18,000
Alan J. Rubin                                                     25,000
Robert & Daniel Ruscutti                                          12,500
Anand J. Sathe                                                    12,500
Louise Schrier                                                    50,000
E. Donald Shapiro                                                 12,500
Gary J. Strauss                                                   12,500
Morris Talansky                                                   12,500
Leonard R. and Jane G. Wohletz, Jr.                               12,500
Wolfson Equities                                                  50,000
Martin Zelman                                                     12,500
                                                =========================
                          Total                                  839,000
                                                =========================


(1)  Does not  include  shares  of Class A Common  Stock  and  Class B  Warrants
     issuable  upon  exercise of the Class A Warrants  and the shares of Class A
     Common Stock issuable upon exercise of the Class B Warrants.  The Remaining
     Selling  Securityholders  have agreed not to exercise  the Class A Warrants
     being registered hereby for a period of one year from February 22, 1996.

         With the exception of Milton Klein, a director of the Company; Benjamin
Danziger, the father of Leslie A. Danziger,  Ray and Vita Pliskow,  relatives of
Louis A. Wagman;  Louis Leeburg, a principal of the John E. Fetzer  Institute--a
principal  stockholder  of the Company;  and, the Burns  Family  Trust,  another
principal  stockholder  of the  Company,  there  are no  material  relationships
between any of the Remaining Selling  Securityholders and the Company,  nor have
any such  material  relationships  existed  within  the past  three  years.  See
"Certain  Transactions"  with  reference  to  ownership  by  family  members  or
affiliates of certain  officers,  directors and principal  stockholders of Notes
who received Class A Warrants and who are Remaining Selling Securityholders. The
Company  has been  informed  by the  Underwriter  that  there are no  agreements
between the Underwriter and any Remaining Selling  Securityholder  regarding the
distribution  of  the  Remaining  Selling  Securityholders   Warrants  or  their
underlying securities.

         The sale of the securities by the Remaining Selling Securityholders may
be  effected  from  time  to time  in  transactions  (which  may  include  block
transactions by or for the account of the Remaining Selling  Securityholders) in
the over-the-counter market or in negotiated transactions, a combination of such
methods of sale or  otherwise.  Sales may be made at fixed  prices  which may be
changed,  at market  prices  prevailing  at the time of sale,  or at  negotiated
prices.

         Remaining  Selling  Securityholders  may effect  such  transactions  by
selling their securities directly to purchasers,  through  broker-dealers acting
as agents for the Remaining Selling Securityholders or to broker-dealers who may
purchase  securities as principals and thereafter  sell the securities from time
to time in the over-the-counter market, in negotiated transactions or otherwise.
Such broker-dealers,  if any, may receive compensation in the form of discounts,
concessions or commissions from the Remaining Selling Securityholders and/or the
purchasers for whom such  broker-dealers  act as agents or to whom they may sell
as principals or otherwise (which compensation as to a particular  broker-dealer
may exceed customary commissions).

         Each  Remaining  Selling  Securityholder  has  agreed  (i) not to sell,
transfer, or otherwise dispose of publicly the Selling  Securityholder  Warrants
except through a 270 day maximum lock up period measured from February 22, 1996,
and (ii) not to exercise the  Remaining  Selling  Securityholder  Warrants for a
period of one year from February 22, 1996.  Purchasers of the Remaining  Selling
Securityholder Warrants will not be subject to such restrictions.
                                      A-3
<PAGE>
         Under  applicable rules and regulations  under the Securities  Exchange
Act of 1934  ("Exchange  Act"),  any person engaged in the  distribution  of the
Remaining  Selling  Securityholders  Warrants may not  simultaneously  engage in
market  making  activities  with respect to any  securities of the Company for a
period  of at  least  two  (and  possibly  nine)  business  days  prior  to  the
commencement of such distribution.  Accordingly, in the event the Underwriter of
the Company's  offering or D.H. Blair & Co. Inc. ("Blair & Co.") is engaged in a
distribution of the Remaining Selling Securityholders Warrants,  neither of such
firms  will be able to make a market  in the  Company's  securities  during  the
applicable restrictive period. However,  neither the Underwriter nor Blair & Co.
have  agreed to nor are either of them  obliged to act as  broker/dealer  in the
sale of the Remaining Selling Securityholders Warrants and the Remaining Selling
Securityholders may be required,  and in the event Blair is a market maker, will
likely be required,  to sell such securities through another  broker/dealer.  In
addition,  each Remaining Selling Securityholder  desiring to sell Warrants will
be subject to the  applicable  provisions  of the Exchange Act and the rules and
regulations  thereunder,  including without  limitation,  Rules 10b-6 and 10b-7,
which  provisions  may limit the timing of the  purchases and sales of shares of
the Company's securities by such Remaining Selling Securityholders.

         The  Remaining  Selling  Securityholders  and  broker-dealers,  if any,
acting in connection with such sales might be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act, and any commissions received
by them and any  profit on the  resale of the  securities  might be deemed to be
underwriting discounts and commissions under the Securities Act.

         The  Company  has agreed to pay Blair a  Solicitation  Fee of 5% of the
aggregate  exercise price of each Warrant which is exercised,  if (i) the market
price of the Class A Common  Stock on the date of the  Warrant is  exercises  is
greater than the then  exercise  price of the Warrant;  (ii) the exercise of the
Warrant was solicited by a member of the NASD;  (iii) the Warrant is not held in
a discretionary  account; (iv) disclosure of compensation  arrangements was made
both at the time of the offering and at the time of exercise of the Warrant; and
(v) the  solicitation  of exercise of the  Warrants was not in violation of Rule
10b-6 as promulgated  under the Exchange Act or respective  state blue sky laws.
Any costs  incurred  by the Company in  connection  with the  exercising  of the
Warrants shall be borne by the Company.
                                      A-4
<PAGE>
         No dealer, salesman or any other person has been authorized to give any
information or to make any  representations  other than those  contained in this
Prospectus in connection with the offer made by this Prospectus and, if given or
made,  such  information and  representations  must not be relied upon as having
been authorized by the Company or the Selling  Securityholders.  This Prospectus
does not constitute an offer to sell or the solicitation of any offer to buy any
security other than the shares of Common Stock offered by this  Prospectus,  nor
does it  constitute an offer to sell or a  solicitation  of any offer to buy the
shares of Common  Stock by anyone in any  jurisdiction  in which  such  offer or
solicitation  is not  authorized,  or in which the person  making  such offer or
solicitation  is not qualified to do so, or to any person to whom it is unlawful
to make such offer or  solicitation.  Neither the deliver of this Prospectus nor
any sale made hereunder shall, under any  circumstances,  create any implication
that  information  contained  herein is correct as of any time subsequent to the
date hereof.

                             ----------------------
                                TABLE OF CONTENTS
                                                                            Page
                                                                            ----

Prospectus Summary                                                           3
Risk Factors                                                                 7
Use of Proceeds                                                              13
Dividend Policy                                                              13
Price Range of Class A Common Stock                                          13
Capitalization                                                               14
Selected Financial Data                                                      15
Management's Discussion and Analysis
  of Financial Condition and Results
  of Operations                                                              16
Business                                                                     18
Management                                                                   25
Principal Stockholders                                                       33
Certain Transactions                                                         34
Concurrent Offering by Selling Securityholders                               35
Description of Securities                                                    37
Shares Eligible For Future Sale                                              42
Plan of Distribution                                                         43
Experts                                                                      44
Available Information                                                        44
Changes in and Disagreements with Accountants on 
   Accounting and Financial Disclosure                                       45
Financial Statements                                                         F-1

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

                          LIGHTPATH TECHNOLOGIES, INC.

                       839,000 Redeemable Class A Warrants
                       839,000 Redeemable Class B Warrants
                    1,678,000 Shares of Class A Common Stock
                             ----------------------
                                   PROSPECTUS
                             ----------------------

                                January 10, 1997

                                      A-5


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