As filed with the Securities and Exchange Commission on November 6, 1997.
Registration No. _______
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------
LIGHTPATH TECHNOLOGIES, INC.
(Name of small business issuer in its charter)
<TABLE>
<S> <C> <C>
Delaware 3225 86-0708398
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(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
6820 Academy Parkway East, N.E., Albuquerque, New Mexico 87109 (505) 342-1100
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(Address and telephone number of principal executive offices)
Leslie A. Danziger, Chairman of the Board and President
6820 Academy Parkway East, N.E., Albuquerque, New Mexico 87109
Telephone: (505) 342-1100; Facsimile: (505) 342-1111
----------------------------------------------------
(Name, address and telephone number of agent for service)
Copies to:
James L. Adler, Jr., Esq.
Squire, Sanders & Dempsey L.L.P.
Two Renaissance Square
40 North Central Avenue, Suite 2700
Phoenix, Arizona 85004
Telephone: (602) 528-4000
FAX: (602) 253-8129
Approximate date of commencement of proposed sale to the public: As soon as
practicable from time to time after the Registration Statement becomes
effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: /x/
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering./ /
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering./ /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box./ /
<PAGE>
Calculation of Registration Fee
<TABLE>
<CAPTION>
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Title of each class of securities to be registered Amount to be Maximum aggregate Amount of
registered offering price(1) registration fee
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<S> <C> <C> <C>
Class A Common Stock, $.01 par value(2) 1,500,000 $10,856,250 $3,289.77
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Total 1,500,000 $10,856,250 $3,289.77
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</TABLE>
(1) Estimated solely for purposes of calculating the registration fee.
(2) Issuable upon conversion of Series B Preferred Stock and exercise of
Class E Warrants and Class F Warrants by the Selling Securityholders.
________________________
Pursuant to Rule 416 under the Securities Act of 1933, as amended,
there are also being registered such additional shares of Common Stock as may
become issuable pursuant to anti-dilution provision upon exercise of the Class E
and Class F Warrants, and the Series B Preferred Stock.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
I-2
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOME
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED NOVEMBER 6, 1997.
Prospectus
1,500,000 Shares of Class A Common Stock issuable upon the conversion of
Series B Preferred Stock and exercise of Redeemable Class E Warrants and
Redeemable Class F Warrants
Lightpath Technologies, Inc., a Delaware corporation (the "Company"),
hereby offers: an aggregate of up to 1,500,000 shares of Class A Common Stock
$.01 par value (the "Selling Securityholders' Securities"), issuable upon
conversion of 230 shares of Series B Preferred Stock and exercise of 317,788
redeemable Class E Warrants and 47,668 redeemable Class F Warrants which were
issued to investors in a private placement completed by the Company in October
1997 (the "Selling Securityholders").
The securities offered by this Prospectus may be resold from time to
time by the Selling Securityholders. 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 "Securities 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 resale of
securities by the Selling Securityholders.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND
SUBSTANTIAL IMMEDIATE DILUTION. SEE "RISK FACTORS" BEGINNING AT PAGE 8.
_________________________
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 November _____ 1997.
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AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), a Registration Statement on Form S-3, of which this Prospectus
forms a part, ("Registration Statement") under the Securities 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, (the "Exchange Act") and in
accordance therewith files reports, proxy statements and other information with
the Commission. For further information with respect to the Company, its
reports, proxy statements and other information and the securities offered
hereby, reference is made to such reports, proxy statements and other
information, the Registration Statement and the exhibits filed as part thereof.
The Registration Statement and the reports and other information filed by the
Company in accordance with the Exchange Act can be inspected and copied at the
public reference facility of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following regional
offices of the Commission: 7 World Trade Center, New York, New York, 10048 and
Citicorp Center 500 West Madison Street, Suite 1400, Chicago, IL 60661. Copies
of such material may be obtained from the Public Reference Section of the
Commission at its principal office 450 Fifth Street, N.W., Washington, D.C.
20549, upon payment of the fees prescribed by the Commission. In addition the
Commission maintains a website (http://www.sec.gov) that contains reports, proxy
and information statements regarding registrants, such as the Company, that file
electronically with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission by the
Company and are hereby incorporated by reference into this Prospectus:
i. The Company's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1997. The report of KPMG Peat Marwick LLP on the
aforementioned financial statements contains an explanatory paragraph
that states that the Company's recurring losses from operations and
resulting continued dependence on external sources of capital raise
substantial doubt about the entity's ability to continue as a going
concern. The financial statements do not include any adjustments that
might result from the outcome of that uncertainty
ii. The description of the Company's Class A Common Stock, Class A Warrants
and Class B Warrants contained in the Company's Registration Statement
on Form 8-A filed with the Commission pursuant to Section 15(d) of the
Exchange Act dated January 13, 1996.
iii. The Company's Proxy Statement relating to its 1997 Annual Meeting, as
filed with the Commission pursuant to Section 14 of the Exchange Act on
September 11, 1997.
All other documents and reports filed pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act from the date of this Prospectus and prior to the
termination of the offering shall be deemed to be incorporated by reference
herein and shall be deemed to be a part hereof from the date of the filing of
such reports and documents.
Any statement contained in a document incorporated or deemed
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document that is also deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person
to whom a Prospectus is delivered upon written or oral request of each person, a
copy of any document incorporated herein by
2
<PAGE>
reference, (not including exhibits to the document that have been incorporated
herein by reference unless such exhibits are specifically incorporated by
reference in the document which this Prospectus incorporated). Requests should
be directed to Investor Relations, LightPath Technologies, Inc., 6820 Academy
Parkway East NE, Albuquerque, New Mexico, 87109, telephone (505)342-1100.
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Underwriting discounts Proceeds to
Price to the Public and commissions the Company
- --------------------------------------------------------------------------------
Per Share $7.24(1) $.00 $7.24(1)
Total (2) $ 2,645,891 - $ 2,645,891
================================================================================
(1) Exercise price payable to the Company upon exercise of the Class E and
Class F Warrants
(2) Assumes the exercise of all Class E Warrants and Class F Warrants.
There can be no assurance that any of the Warrants will be exercised.
3
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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) incorporated by reference. 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. ("LightPath" or the "Company") produces
GRADIUM(R) glass and performs research and development on future GRADIUM glass
applications. GRADIUM glass 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 traditionally
performed by multi-element conventional lens systems. The Company believes that
GRADIUM glass lenses provide advantages over conventional lenses for certain
applications. By reducing optical aberrations, the Company believes that GRADIUM
glass 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 glass 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 glass, 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
thirteen patents and has pending filed patent applications related to its
materials composition, product design and fabrication processes for the
production of GRADIUM glass products. The Company continues to develop new
GRADIUM glass materials with various refractive index and dispersion profiles,
whole value added lens systems for a variety of optical applications, and
multiplexers and interconnects for the telecommunications field.
The Company believes that GRADIUM glass can potentially be marketed for
use in most optics and optoelectronics products. In an attempt to more rapidly
establish initial sales volume, to date the Company has emphasized laser
products that it believes may have the greatest immediate commercial impact with
the least initial investment. Generally, optical designers can substitute
GRADIUM glass components from the Company's standard line of products in lieu of
existing conventional laser lens elements. Lasers are presently used extensively
in a broad range of consumer and commercial products, including fiber optics,
robotics, wafer chip inspection, bar code reading, document reproduction and
audio and video compact disc machines. Because GRADIUM glass can concentrate
light transmission into a much smaller focal spot than conventional lenses, the
Company believes and customers' test results confirm that GRADIUM glass has the
ability to improve laser performance. The Company's growth strategy is 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. During fiscal
year 1997, the Company established relationships with six foreign distributors
and a Silicon Valley manufacturer representative which relationships the Company
believes will enable it to rapidly establish a presence in certain foreign and
domestic markets. In addition to laser applications, the Company, through its
printed and Internet on-line catalog, provides a standard line of GRADIUM glass
lenses for broad-based sales to optical designers developing particular systems
for original equipment manufacturers ("OEMs") or in-house products.
Because complex optical systems contain many optical components, and
GRADIUM glass lenses can be utilized to reduce the number of lens elements in
such systems, the Company believes that GRADIUM glass 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 glass,
reconfigure the product housing, re-engineer the assembly process and commence
commercial quantity orders for GRADIUM glass components.
4
<PAGE>
The Company can not predict how long is required for manufacturers of
existing optical systems to incorporate GRADIUM glass into such systems , if
ever. Accordingly, the Company intends to focus its long-term marketing efforts
on emerging niche 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's growth strategy is also to develop strategic
relationships with original equipment manufacturers, ("OEM"'s) that incorporate
or produce optical components. The Company believes OEM relationships may expand
and develop the Company's technology base by evolving into more sophisticated
development efforts and complex products, although there can be no assurances in
this regard. The Company's existing OEM relationships have resulted in the
development of prototype lenses for Karl Storz GMBH & Co., a leading
manufacturer of endoscopes, camera television lenses and the optimization of a
high performance riflescope for a gunsight manufacturer.
Optoelectronics technologies represent an overlap of photonics and
electronics and are key enablers of "Information Age" technologies, such as
fiberoptic communications, optical data storage, laser printers, digital
imaging, and sensors for machine vision and environmental monitoring. As part of
its growth strategy, the Company has targeted various optoelectronic industry
market niches and is currently developing additional GRADIUM glass products and
key strategic alliances with technology and marketing partners to design, build
and sell next generation integrated components and devices. The Company believes
that GRADIUM glass can provide industry wide solutions to optoelectronic
problems associated with light gathering, packaging and alignment.
Since its inception in 1985 until June 1996, the Company was a
development stage enterprise that engaged in basic research and development.
During fiscal year 1997, the Company's operational focus began to shift to
product development and commercial sales. The Company believes that most of its
product sales prior to fiscal year 1997 have been to persons evaluating the
commercial application of GRADIUM glass or using the products for research and
development. During 1997, numerous prototypes for production orders were
completed. In addition, catalog sales of standard profiles were received. The
Company currently offers standard, computer-based profiles of GRADIUM glass that
engineers can use for product design. The current focus of the Company's
technology department development efforts is the expansion of GRADIUM product's
applications to the areas of multiplexers and interconnects for the
telecommunications field, the addition of the crown glass product line to
supplement its existing flint products, development of acrylic axial gradient
material to extend the range of existing product applications, and the upgrade
of proprietary material design software and optical design tools to facilitate
product design. 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.
The Private Securities Litigation Reform Act of 1995 provides a safe
harbor for forward looking statements made by or on behalf of the Company. All
statements, other than statements of historical facts, which address activities,
events or developments that the Company expects or anticipates will or may occur
in the future, including such things as future capital expenditures, growth,
product development, sales, business strategy and other such matters are
forward-looking statements. 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 the forward-looking statements as a result
of a number of factors, including, but not limited to, the Company's early state
of development, the need for additional financing, and intense competition in
various aspects of its business. In light of these risks and uncertainties, all
of the forward-looking statements made are qualified by these cautionary
statements and there can be no assurance that the actual results or developments
anticipated by the Company will be realized.
5
<PAGE>
The Offering
Securities Offered by Selling Securityholders: 1,500,000 shares of Class A
Common Stock issuable upon
conversion of Series B Preferred
Stock and exercise of
outstanding Class E Warrants and
Class F Warrants. Each Class E
Warrant is exercisable at any
time on or before September 2000
to purchase for $7.24 one share
of Class A Common Stock subject
to adjustment. Each Class F
Warrant is exercisable at any
time on or before September 2002
to purchase for $7.24 one share
of Class A Common Stock subject
to adjustment.
Each share of Series B Preferred
Stock has a stated value and
liquidation preference of
$10,000, plus an 8% per annum
premium. Each share of Series B
Preferred Stock is convertible
into Class A Common Stock at the
option of holder, with volume
limitations, during the first 9
months, based on its stated
value at the conversion date
divided by a conversion price.
The conversion price is defined
as the lesser of (i) $7.2375 or
(ii) 85% of the average closing
bid price of the Company's Class
A Common Stock for the five days
preceding the conversion date.
6
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Company's Capitalization
Common Stock Outstanding June 30,
1997(1)(3):
Class A Common Stock 2,766,185 shares(1)(3)
Class E-1 Common Stock 1,449,942 shares(2)
Class E-2 Common Stock 1,449,942 shares(2)
Class E-3 Common Stock 966,621 shares(2)
Use of Proceeds The Company intends to use the net
proceeds received upon the
conversion of the Series B Preferred
Stock and 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." All proceeds
received upon resale of any of the
shares of Class A Common Stock will
be received by the Selling
Securityholders.
Risk Factors The securities offered hereby
involve a high degree of risk and
immediate substantial dilution to
public investors. An investment in
the Class A Common Stock 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) Does not include outstanding options at June 30, 1997 to purchase 304,669
shares of Class A Common Stock and 149,504 shares of Class E-1, 149,504
shares of Class E-2 and 99,669 shares of Class E-3 Common Stock which are
exercisable at option exercise prices ranging from $5.00 to $51.56 per
share and 145,025 shares of Class A Common Stock reserved for issuance upon
future grants of options issuable under the Company's stock option plans.
(2) Each share of outstanding 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 basis, automatically convert 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.
(3) Does not include an aggregate of 10,338,000 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 IPO
Units, (iii) the 839,000 Class A Warrants issued at the IPO; (iv) the
839,000 additional Class B Warrants issuable upon exercise of the Class A
Warrants referred to in (iii) above, and (v) the additional 2,500,000
shares of Class A Common Stock issuable upon conversion of Series A and
Series B Preferred Stock and exercise of Class C, Class D, Class E and
Class F Warrants.
7
<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 the Disclosure Documents, as defined in the
Subscription Agreement, to the following risk factors.
Previously Development Stage Company; Accumulated Deficit, Working
Capital and Capital Deficiency; Limited Operating History. The Company's
predecessor commenced operations in 1985, and the Company was a development
stage company through June 30, 1996. Prior to fiscal year 1997, the Company's
primary activities have been basic research and development. The Company's
current focus is on product development and sales. At June 30, 1997, the Company
had an accumulated deficit of ($17,212,516). For the year ended June 30, 1997,
the Company recognized revenues of $673,677 and a net loss of ($2,998,290). 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 most of its product sales prior to
fiscal year 1997 have been to parties evaluating the commercial application of
GRADIUM glass or using the products for research and development. During 1997
numerous prototypes for production orders were completed, but no commercial
orders have been received to date. 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 1998 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.
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
auditors as raising substantial doubt as to the Company's ability to continue as
a going concern are that the Company's recurring losses from operations and
resulting continued dependence on external sources of capital raise substantial
doubt about the entity's ability to continue as a going concern. 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.
Anticipation of Operating Losses; Need for Additional Financing. The
Company anticipates continuing to incur substantial operating losses for fiscal
year 1998 and until such time, if ever, as the Company's operations generate
sufficient revenues to offset 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 efforts to expand its
product line, capital expenditures for scale-up of manufacturing operations 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 product sales and the net proceeds from the Company's private
placements completed July and October 1997 will be sufficient to finance the
Company's working capital requirements for at least fiscal year 1998, although
the Company's capital requirements are subject to numerous contingencies
associated with a company in its early stages of operations. The Company's
capital requirements after such period will depend on the extent that GRADIUM
glass becomes
8
<PAGE>
commercially accepted, if at all, 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 the proceeds from its July 1997 private placement of Series A Preferred
Stock and October 1997 Series B Preferred Stock are insufficient to offset costs
associated with unanticipated delays, cost overruns, unanticipated expenses
including those associated with a company in an early stage of development or in
the event the Company does not realize anticipated revenues. The Company has no
commitments from others to provide such additional financing and there can be no
assurance that any such 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.
Early Stage of Development of Proposed Products; Need for Market
Acceptance. Through June 1996, the Company's primary activities were basic
research and development of glass material properties. The Company's current
line of GRADIUM products has not been widely sold ( approximately 90 customers
as of June 30, 1997) 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 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. 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 of
its products.
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, product
revenues received by the Company have been from purchasers engaged in prototype
development, evaluation of the commercial application of the Company's products,
or other research and development activities, and purchases have not reached
commercial quantities. 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, if any, or that any existing or products
developed in the future 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 quantities of GRADIUM products, since the Company will be the
sole supplier and licensor. The Company does not have an established track
record as a manufacturer and, even after the Company's February 1996 IPO, does
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 of
its products. Prospective customers will need to make substantial expenditures
to redesign products to incorporate GRADIUM lenses. There can be no assurances
that potential customers will view GRADIUM's benefits as sufficient to warrant
such design expenditures.
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 CEO, 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
9
<PAGE>
depends upon the contributions of Donald E. Lawson, the Company's President,
whose responsibilities for the Company's 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. 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 on the life of
Mr. Lawson. The Company had twenty-eight employees on June 30, 1997. The Company
intends to hire at least eight additional employees in the next twelve months.
Additional personnel will need to be hired if the Company is able to
successfully expand its operations. There can be no assurance that the Company
will be able to identify, attract and retain employees with skills and
experience necessary and relevant to the future operations of the Company's
business.
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 of which the Company is not yet aware 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.
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 will need to hire additional sales and marketing personnel and
develop a sales and marketing program and sales distribution channels in order
to achieve and sustain commercial sales of its products. The Company has hired a
sales staff and used a portion of the proceeds of the IPO to develop its sales
and marketing program and recruit personnel. 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 market segments in which it believes it may have the most
success. It may be very difficult for the Company to penetrate any particular
market segment, and any attempt will require a substantial, but unknown, amount
of effort and resources. The fragmented nature of the optical products 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.
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
10
<PAGE>
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. An inability by the Company to develop and
adequately protect its proprietary technology and other assets could have a
material adverse effect on the Company's business, financial condition and
results of operations.
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 generate product sales,
license, royalties and other funds adequate 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. In 1996, the Company 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. In 1997, the
Company formalized relationships with six foreign distributors to create markets
for GRADIUM in their respective countries. 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. Prior to the IPO, the Company had
minimal experience in manufacturing optical components. In addition, the Company
had limited resources to manufacture its products. Proceeds from the Company's
February 1996 IPO were used to expand its manufacturing facilities and hire
personnel to scale-up production activities. In March 1996, the Company entered
into a 5 year lease for a new corporate headquarters and larger manufacturing
facility in Albuquerque, New Mexico. Within the 13,300 square foot facility, the
Company established its present manufacturing processes. The Company believes
that the present manufacturing facilities are sufficient for its planned
operations over the next several years. However, the Company does not have any
experience manufacturing products in quantities sufficient to meet commercial
demand. If the Company is unable to manufacture its products in sufficient
quantities and a timely manner to meet customer demand, the Company's business,
financial condition and results of operations will be materially adversely
affected.
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 certain of the
securities offered hereby will incur immediate substantial dilution in the per
share net tangible book value of their Class A 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 the Company's Class E Common Stock held by stockholders
who are officers, directors, employees or consultants of the Company are
converted into shares of Class A Common Stock, the Company will record
compensation expense for financial reporting purposes during the period in which
such conversion occurs. 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
11
<PAGE>
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 reportable earnings, if any, at such time. Such charge will 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 will negatively affect the
Company's earnings per share.
Control by Present Holders of Common Stock; Voting Trust. The Company's
principal stockholders beneficially owned 250,210 shares of Class A Common
Stock, 1,106,809 shares of the combined Class E Common Stock, representing 9% of
the outstanding Class A Common Stock, 28% of the combined outstanding Class E
Common Stock, and 20% of the total combined voting power of all of the Common
Stock outstanding at September 12, 1997. In addition, certain stockholders of
the Company holding approximately 18% 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 all 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. The Series B Preferred Stock has no voting rights. Consequently, the
holders thereof will have no such rights until and unless such shares are
converted into Class A Common Stock.
Future Sales of Common Stock. As of the September 15, 1997
approximately 69,000 shares of outstanding Common Stock 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. Although
no significant sales have occurred, 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.
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.
Arbitrary Determination of Warrant Exercise Price. The exercise price
of the warrants and other terms of such securities have been arbitrarily
established by negotiation between the Company and one Underwriter with respect
to the Class A and Class B Warrants and with the placement agent with respect to
the Series B Preferred Stock and Class E and Class F Warrants, 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. The Company has outstanding
(i) 2,679,000 Class A Warrants to purchase an aggregate of 2,679,000 shares of
Class A Common Stock and 2,679,000 Class B Warrants; (ii) 1,840,000 Class B
Warrants to purchase 1,840,000 shares of Class A Common Stock; (iii) the Unit
Purchase Option to purchase an aggregate of 240,000 Units; (iv) 1,000,000 shares
of Class A Common Stock reserved for the conversion of Series A Preferred Stock
and exercise of Class C and Class D Warrants, (v) 1,500,000 shares of Class A
Common Stock reserved for the conversion and exercise of the Selling
Securityholders Securities; and (vii) outstanding options at June 30, 1997 to
purchase an aggregate of 304,669 shares of Class A Common Stock, 149,504 shares
of Class E-1, 149,504 shares of Class E-2 and 99,669 shares of Class E-3 Common
Stock. As of October 13, 1997, the Company also has an additional 1,645,025
shares of Class A Common Stock reserved for issuance under its Omnibus Incentive
Plan and Directors Stock Incentive Plan. For the respective terms of such
Warrants, options and the Unit Purchase Option, the holders thereof are given an
opportunity to
12
<PAGE>
profit from a rise in 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 Company's outstanding 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.
Potential Adverse Effect of Redemption of Warrants. Commencing February
22, 1997, the Class A and Class B 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.
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 additional 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. The Company has authorized 250 shares of Series A
Preferred Stock and 300 shares of Series B Preferred Stock, of which 180 and 230
shares, respectively, are currently issued and outstanding. Although the Company
has no present intention to issue any additional 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.
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.
Possible Adverse Effect on the Liquidity of the Company's Securities
Due to Securities and Exchange Commission Investigation of the IPO Underwriter
and Blair & Co. and Recent Settlement by Blair & Co. with NASD. The Securities
and Exchange Commission (the "Commission") is conducting an investigation
concerning various business activities of the Underwriter in the Company's IPO
(the "IPO Underwriter") and D.H. Blair & Co., Inc., ("Blair & Co.") a selling
group member which distributed a substantial portion of the IPO Units. The
Company has been advised by the IPO Underwriter that the investigation has been
ongoing since at least 1989 and that it is cooperating with the investigation.
The IPO Underwriter cannot predict whether this investigation will ever result
in any type of formal enforcement action against the IPO Underwriter or Blair &
Co.
In July 1997, Blair & Co., its Chief Executive Officer and its head
trader consented, without admitting or denying any violations, to a settlement
with the NASD Regulation, Inc. ("NASDR"), the regulatory oversight subsidiary of
the National Association of Securities Dealers, Inc. ("NASD") District Business
Conduct Committee for District No. 10 to resolve allegation of NASD rule and
securities law violations in connection with mark-up and pricing practices and
adequacy of disclosures to customers
13
<PAGE>
regarding market-making activities of Blair & Co. in connection with certain
securities issues during the period from June 1993 through May 1995 where Blair
& Co. was the primary selling group member. NASDR alleged the firm failed to
accurately calculate the contemporaneous cost of securities in instances where
the firm dominated and controlled after-market trading, thereby causing the firm
to charge its customers excessive mark-ups. NASDR also alleged the firm did not
make adequate disclosure to customers about its market-making activities in two
issues. As part of the settlement, Blair & Co. has consented to censure and has
agreed to pay a $2 million fine, make $2.4 million in restitution to retail
customers, employ an independent consultant for two years to review and make
recommendations to strengthen the firm's compliance procedures, and has
undertaken for twelve months not to sell to its retail customers (excluding
banks and other institutional investors) more than 60% of the total securities
sold in any securities offering in which it participates as an underwriter or
selling group member. The Chief Executive Officer of Blair & Co. has agreed to
settle failure to supervise charges by consenting to a censure, the imposition
of a $300,000 fine and a 90-day suspension from associating with any member firm
and has undertaken to take certain requalification examinations. The settlement
with NASDR does not involve or relate to the IPO Underwriter, its chief
executive officer or any of its other officers or directors.
Blair & Co. currently makes a market in the Company's securities. The
Company is unable to predict whether Blair & Co.'s settlement with the NASDR or
any unfavorable resolution of the Commission's investigation will have any
effect on such firm's ability to make a market in the Company's securities and,
if so, whether the liquidity or price of the Company's securities would be
adversely affected.
Possible Restrictions on Market-Making Activities in Company's
Securities. Blair & Co. makes a market in the Company's securities. Regulation
M, which was recently adopted to replace 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 of up to five business days (or such other applicable
period as Regulation M may provide) prior to any solicitation by the IPO
Underwriter of the exercise of Class A and Class B Warrants until the later of
the termination of such solicitation activity or the termination (by waiver or
otherwise) of any right that such IPO 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 Class A Warrants issued to the Bridge Securityholders and offered for
sale may not simultaneously engage in market-making activities with respect to
any securities of the Company for the applicable restricted period prior to the
commencement of such distribution. Accordingly, in the event the IPO Underwriter
or Blair & Co. engages in a distribution of any 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 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 has 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
14
<PAGE>
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 and Preferred Stock; Need for Current Prospectus. Although none of the
securities offered hereby will knowingly be sold to purchasers in jurisdictions
in which such securities are not registered or otherwise qualified for sale,
purchasers may buy such securities or the components thereof in the aftermarket
in, or may move to, jurisdictions in which the securities underlying the
Warrants and Preferred Stock are not so registered or qualified during the
period that the Warrants are exercisable or the Preferred Stock is convertible.
In this event, the Company would be unable to issue shares and/or Warrants to
those persons desiring to exercise their Warrants or convert their Preferred
Stock 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 will not be
able to exercise their Warrants or convert their Preferred Stock, unless at the
time of exercise the Company has a current prospectus covering the shares of
Class A Common Stock and Class B Warrants underlying the Warrants or Preferred
Stock, as the case may be. No assurances can be given that the Company will be
able to effect any required registration or qualification or maintain a current
prospectus.
Nasdaq Listing and Maintenance Requirements, Risk of Delisting. The
Units, Class A Common Stock and Class A and Class B Warrants are currently
traded on Nasdaq SmallCap Market. Under the rules for continued listing on
Nasdaq SmallCap Market, a company is required to maintain at least $2,000,000 in
"net tangible assets" ("net tangible assets" equals total assets less total
liabilities and goodwill) or at least $35,000,000 in total market value or at
least $500,000 in net income in two out of its last three fiscal years, as well
as at least 500,000 shares in public float, at least $1,000,000 in market value
of the public float and a price of not less than $1.00 per share, and meet
certain corporate governance standards. 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 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.
15
<PAGE>
Risk of Insufficient Funds Available to Effect Redemptions. In the
events of conversion of the Series A or Series B Preferred Stock or exercise of
their accompanying Class C and Class E Warrants, respectively, in a manner that
would cause an undue dilution of its Common Stock, the Company has the right to
redeem such preferred stock and warrants for cash. In addition, a Liquidation
Event (as defined in the Company's Certificate of Designation) may require
redemption of the Series A or Series B Preferred Stock for cash. There can be no
assurance that in either of the foregoing events that the Company will have
adequate cash to effect such cash redemptions.
USE OF PROCEEDS
Holders of Warrants are not obligated to exercise their Warrants. There
can be no assurance that the Warrantholders will choose to exercise all or any
of their Warrants. In the event that all of the 317,788 outstanding Class E
Warrants, and all of the 47,668 outstanding Class F Warrants are exercised, the
Company would receive net proceeds of approximately $2,645,000.
The Company intends to use the net proceeds received upon the exercise
of the Warrants, if any, for general corporate purposes, expansion of the
manufacturing facility and working capital to support anticipated growth
including research and development programs and continuing product development.
All proceeds from the resale of any securities offered hereby will be received
by the respective Selling Securityholders.
DETERMINATION OF OFFERING PRICE
The Selling Securityholders' Securities are issuable upon the exercise
of the Class E and Class F Warrants and the conversion of the Series B Preferred
Stock. The exercise prices of the Warrants and the terms of conversion with
respect to the Series B Preferred Stock were determined by negotiation between
the Company and the placement agent for the private sale of such warrants and
preferred stock. This prospectus may be used from time to time by the Selling
Securityholders to resell such shares of Class A Common Stock. The offering
price of such Class A Common Stock will be determined by the Selling
Securityholders and such sales may be made in the Nasdaq SmallCap Market or
otherwise, at prices and at terms then prevailing or at prices related to the
then current market price, or in negotiated transactions.
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<PAGE>
SELLING SECURITYHOLDERS
An aggregate of 1,500,000 shares of Class A Common Stock may be offered
for resale by the Selling Securityholders from time to time. The shares of Class
A Common Stock are issuable upon exercise of 317,788 Class E Warrants, and
47,668 Class F Warrants and upon conversion of 230 shares of Series B Preferred
Stock, all of which are currently outstanding. Each Class E and Class F Warrant
is exercisable for one share of Class A Common Stock. Each share of Series B
Preferred Stock is convertible into a number of shares of Class A Common Stock
determined by dividing its stated value on the date of conversion by a
conversion price. The conversion price is defined as the lesser of (i) $7.2375
or (ii) 85% of the average closing bid price of the Company's Class A Common
Stock for the five days preceding the conversion date. All of the Class E
Warrants, Class F Warrants and Series B Preferred Stock were acquired by the
Selling Securityholders in connection with a private placement completed by the
Company in October 1997.
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock as of November 1, 1997, and as adjusted to
reflect the sale of the Class A Common stock being offered hereby, by the
Selling Securityholders. Except as described below, there are no material
relationships between any of the Selling Securityholders and the Company, nor
have any such material relationships existed within the past three years.
<TABLE>
<CAPTION>
Shares Beneficially owned
After Offering (1)
------------------
Shares Number of Number Percent Class Percent All
Beneficially Shares Being A Common Classes of
owned Prior to Offered (3) Stock Common
the Offering Stock
(1)(2)(3)
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cranshire Capital LLP 123,224(4) 69,317(5) 53,907 2% *
EP Opportunity Fund, LLC 306,007(6) 180,225(7) 125,782 4% *
Lakeshore International, LTD 159,161(8) 69,317(9) 89,844 3% *
The Matthew Fund 113,466(10) 41,590(11) 71,876 2% *
Keyway Investments, LTD 438,989(12) 277,269(13) 161,720 5% *
Swartz Family Partnership, LP 27,639(14) 11,889 15,750(14) * *
Kendrick Family Partnership, LLP 18,240 11,889 6,351 * *
Brad Hathorn 2,925 2,000 928 * *
Jerry Harris 6,198 4,000 2,198 * *
Carl Johnson 4,000(15) 2,000 2,000(15) * *
Davis Holden 5,000(16) 2,000 3,000(16) * *
Frank Mauro 27,640(17) 11,890 15,750(17) * *
Chuck Whiteman 2,765 1,500 1,265 * *
Dwight Bronnum 750(18) 250 500(18) * *
Robert Hopkins 750(18) 250 500(18) * *
* Represents beneficial ownership of less than 1%
</TABLE>
(1) Except as other wise noted, and subject to community property laws, where
applicable, each person named in the table has sole voting power and
investment power with respect to all shares shown as beneficially owned.
(2) Each share of Series A Preferred Stock is convertible into a number of
shares of Class A Common Stock determined by dividing its stated value on
the date of conversion by a conversion price. The conversion price is
defined as the lesser of (i) $5.625 or (ii) 85% of the average closing bid
price of the Company's Class A Common Stock for the five days preceding the
conversion date. For purposes of the information set forth in this table,
it is assumed that each share of Series A Preferred Stock was converted as
of November 1, 19967 into approximately
17
<PAGE>
1,816 shares of Class A Common Stock.
(3) Each share of Series A Preferred Stock is convertible into a number of
shares of Class A Common Stock determined by dividing its stated value on
the date of conversion by a conversion price. The conversion price is
defined as the lesser of (i) $7.2375 or (ii) 85% of the average closing bid
price of the Company's Class A Common Stock for the five days preceding the
conversion date. For purposes of the information set forth in this table,
it is assumed that each share of Series A Preferred Stock was converted as
of November 1, 1997 into approximately 1,391 shares of Class A Common
Stock.
(4) Includes 123,224 shares issuable upon (A) conversion of (i) 15 shares of
Series A Preferred Stock and (ii) 25 share of Series B Preferred Stock and
upon (B) the exercise of 9I) Class C Warrants to purchase 26,667 shares of
Class A Common Stock and (ii) 34,542 Class E Warrants to purchase shares of
Class A Common Stock.
(5) Includes 34,775 shares issuable upon conversion of 25 shares of Series B
Preferred Stock and assumes the exercise of Class E Warrants to purchase
34,542 shares of Class A Common Stock.
(6) Includes 306,007 shares issuable upon (A) conversion of (i) 35 shares of
Series A Preferred Stock and (ii) 65 share of Series B Preferred Stock and
upon (B) the exercise of (i) Class C Warrants to purchase 62,222 shares and
(ii) 89,810 Class E Warrants to purchase shares of Class A Common Stock.
(7) Includes 90,415 shares issuable upon conversion of 65 shares of Series B
Preferred Stock and assumes the exercise of Class E Warrants to purchase
89,810 shares of Class A Common Stock.
(8) Includes 159,161shares issuable upon (A) conversion of (i) 25 shares of
Series A Preferred Stock and (ii) 25 share of Series B Preferred Stock and
upon (B) the exercise of (i) Class C Warrants to purchase 44,444 shares and
(ii) 34,542 Class E Warrants to purchase shares of Class A Common Stock.
(9) Includes 34,775 shares issuable upon conversion of 25 shares of Series B
Preferred Stock and assumes the exercise of Class E Warrants to purchase
34,542 shares of Class A Common Stock.
(10) Includes 113,466 shares issuable upon (A) conversion of (i) 20 shares of
Series A Preferred Stock and (ii) 15 share of Series B Preferred Stock and
upon (B) the exercise of (i) Class C Warrants to purchase 35,556 shares and
(ii) 20,725 Class E Warrants to purchase shares of Class A Common Stock.
(11) Includes 20,865 shares issuable upon conversion of 15 shares of Series B
Preferred Stock and assumes the exercise of Class E Warrants to purchase
20,725 shares of Class A Common Stock.
(12) Includes 438,989 shares issuable upon (A) conversion of (i) 45 shares of
Series A Preferred Stock and (ii) 100 share of Series B Preferred Stock and
upon (B) the exercise of (i) Class C Warrants to purchase 80,000 shares and
(ii) 138,169 Class E Warrants to purchase shares of Class A Common Stock.
(13) Includes 139,100 shares issuable upon conversion of 100 shares of Series B
Preferred Stock and assumes the exercise of Class E Warrants to purchase
138,169 shares of Class A Common Stock.
(14) Includes 15,750 shares issuable upon the exercise of Class D Warrants.
(15) Includes 2,000 shares issuable upon the exercise of Class D Warrants.
(16) Includes 3,000 shares issuable upon the exercise of Class D Warrants.
(17) Includes 15,750 shares issuable upon the exercise of Class D Warrants.
(18) Includes 500 shares issuable upon the exercise of Class D Warrants.
Class F Warrants were issued to the placement agent along with a cash placement
fee equal to 9% of the gross proceeds from the sale of Series B Preferred Stock
for their compensation in connection with the October 1997 private placement of
Series B Preferred Stock.
18
<PAGE>
PLAN OF DISTRIBUTION
The Selling Securityholders' Securities may be sold from time to time
by the Selling Securityholders, or by pledgees, donees, transferees or other
successors in interest. Such sales may be made in the over-the-counter market or
otherwise, at prices and at terms then prevailing or at prices related to the
then current market price, or in negotiated transactions. The Selling
Securityholders' Securities may be sold in one or more of the following types of
transactions: (a) a block trade in which the broker-dealer so engaged will
attempt to sell the Selling Securityholders' Securities as agent but may
position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker-dealer as principal and resale by such
broker-dealer for its account pursuant to this Prospectus; (c) an exchange
distribution in accordance with the rules of such exchange; and (d) ordinary
brokerage transactions and transactions in which the broker solicits purchasers.
In effecting sales, broker-dealers engaged by the Selling Securityholders may
arrange for other broker-dealers to participate in the resales.
In connection with distributions of the Selling Securityholders'
Securities or otherwise, the Selling Securityholders may enter into hedging
transactions with broker-dealers. In connection with such transactions,
broker-dealers may engage in short sales of the Selling Securityholders'
Securities in the course of hedging the positions they assume with Selling
Securityholders. The Selling Securityholders may also sell Selling
Securityholders' Securities short and redeliver the Selling Securityholders'
Securities to close out such short positions. The Selling Securityholders may
also enter into option or other transactions with broker-dealers which require
the delivery to the broker-dealer of the Selling Securityholders' Securities,
which the broker-dealer may resell or otherwise transfer pursuant to this
Prospectus. The Selling Securityholders may also loan or pledge Selling
Securityholders' Securities to a broker-dealer and the broker-dealer may sell
the Selling Securityholders' Securities so loaned or, upon a default, the
broker-dealer may effect sales of the pledged Selling Securityholders'
Securities pursuant to this Prospectus.
Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from the Selling Securityholders in
amounts to be negotiated in connection with the sale. Such broker-dealers and
any other participating broker-dealers may be deemed to be "underwriters" within
the meaning of the Securities Act in connection with such sales and any such
commission, discount or concession may be deemed to be underwriting discounts or
commissions under the Securities Act. In addition, any securities covered by
this Prospectus which qualify for sale pursuant to Rule 144 under the Securities
Act may be sold under Rule 144 rather than pursuant to this Prospectus.
All costs, expenses and fees in connection with the registration of the
securities offered hereby will be borne by the Company. Commission and
discounts, if any, attributable to the sales of the Selling Securityholders'
Securities will be borne by the Selling Securityholders. The Selling
Securityholders may agree to indemnify any broker-dealer or agent that
participates in transactions involving sales of the Selling Securityholders'
Securities against certain liabilities, including liabilities arising under the
Securities Act. The Company and the Selling Securityholders have agreed to
indemnify certain persons including broker-dealers or agents against certain
liabilities in connection with the offering of the Selling Securityholders'
Securities, including liabilities arising under the Securities Act. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling the Company, the Company
has been informed that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
19
<PAGE>
DESCRIPTION OF SECURITIES
For a description of the Company's Class A Common Stock see the
Company's Registration Statement on Form SB-2 filed with the Commission on
December 7, 1995 and incorporated by reference into this Prospectus.
Each Class E Warrant entitles the holder to purchase one Class A Common
Stock at $7.24 per share at any time through September 2000. Each Class F
Warrant entitles the holder to purchase one Class A Common Stock at $7.24 per
share at any time through September 2002. For a description of the Class E
Warrant and Class F Warrants see Exhibit 4.7 and Exhibit 4.8 to the Registration
Statement.
Each share of Series B Preferred Stock is convertible into Class A
Common Stock at the option of the holder at any time commencing in February,
1998, subject to certain volume limitation applicable until July, 1998. The
number of shares of Class A Common Stock issuable upon conversion of the
Preferred Stock is determined by dividing the stated value of the Series B
Preferred Stock on the date of conversion by a conversion price. The conversion
price is defined as the lesser of (i) $7.2375 or (ii) 85% of the average closing
bid price of the Company's Class A Common Stock for the five days preceding the
conversion date. Each share of Series B Preferred Stock has a stated value of
$10,000 plus an 8% per annum premium.
LEGAL MATTERS
Certain legal matters with respect to the Company and the validity of
the securities offered hereby will be passed upon for the Company by Squire,
Sanders & Dempsey L.L.P., Phoenix, Arizona.
INTERESTS OF NAMED EXPERTS AND COUNSEL
On October 13, 1997, James L. Adler, Jr. was appointed to serve as a
Director of the Company for a two year term. Mr. Adler is a partner of the law
firm of Squire, Sanders & Dempsey, L.L.P.
EXPERTS
The financial statements of the Company as of June 30, 1997, and for
the year then ended, have been incorporated by reference in this Prospectus in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
The report of KPMG Peat Marwick LLP covering the June 30, 1997,
financial statements contains an explanatory paragraph that states that the
Company's recurring losses from operations and resulting continued dependence on
external sources of capital raise substantial doubt about the entity's ability
to continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of that uncertainty.
The statements of operations, stockholders' equity (deficiency in net
assets), and cash flows of the Company, for the year ended June 30, 1996,
incorporated by reference in this Prospectus, have been audited by Ernst & Young
LLP, independent auditors, to the extent indicated in their report thereon also
incorporated by reference (which contains an explanatory paragraph with respect
to going concern mentioned in the Notes to the financial statements). Such
financial statements have been incorporated herein by reference in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
20
<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 Class A 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 Class A 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 delivery 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
----
Available Information 2
Prospectus Summary 4
Risk Factors 16
Use of Proceeds 16
Determination of Offering Price 16
Selling Securityholders 17
Plan of Distribution 19
Description of Securities 20
Legal Matters 20
Experts 20
____________________
LIGHTPATH TECHNOLOGIES, INC.
1,500,000 Shares of Class A Common Stock issuable upon the conversion of Series
B Preferred Stock and exercise of Redeemable Class E Warrants
and Redeemable Class F Warrants
____________________
PROSPECTUS
____________________
November____, 1997
21
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
It is estimated that the following expenses, in addition to Blair's Solicitation
Fee of 5% of the IPO Warrants exercise price under certain circumstances, will
be incurred in connection with the proposed offering hereunder.
All of such expenses will be borne by the Company:
Amount(1)
Legal fees and expenses............................. $ 5,000.00
Accounting fees and expenses........................ 4,000.00
Printing expenses................................... 2,000.00
-----------
Total............................................... $ 11,000.00
===========
(1) Estimated
Item 15. Indemnification of Directors and Officers
Article TENTH of the Company's Certificate of Incorporation, as
amended, provides as follows:
TENTH: No director of the corporation shall be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that the foregoing clause shall not apply
to any liability of a director (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for any transaction from which the director derived an improper
personal benefit, or (iv) under Section 174 of the DGCL. This Article shall not
eliminate or limit the liability of a director for any act or omission occurring
prior to the time this Article became effective.
Article VII of the Company's Bylaws provides, in summary, that the
Company is required to indemnify to the fullest extent permitted by applicable
law, any person made or threatened to be made a party or involved in a lawsuit,
action or proceeding by reason that such person is or was an officer, director,
employee or agent of the Company. Indemnification is against all liability and
loss suffered and expenses reasonably incurred. Unless required by law, no such
indemnification is required by the Company of any person initiating such suit,
action or proceeding without board authorization. Expenses are payable in
advance if the indemnified party agrees to repay the amount if he is ultimately
found to not be entitled to indemnification. For a full text of Article VI of
the Bylaws, see Exhibit 3.3 to this Registration Statement.
II-1
<PAGE>
ITEM 16. Exhibits and Financial Statement Schedules.
<TABLE>
<CAPTION>
Page Number or
Exhibit Method of
Number Description Filing
------ ----------- ------
<S> <C> <C>
4.1 Form of Warrant Agreement (1)
4.2 Form of Unit Purchase Option (2)
4.3 Form of Voting Trust Agreement dated among certain (1)
stockholders of the Registrant
4.4 Specimen Certificate for the Class A Common Stock (2)
4.5 Specimen Certificate for the Class A. Warrants (2)
4.6 Specimen Certificate for the Class B Warrants (2)
4.7 Form of Class E Warrants *
4.8 Form of Class F Warrants *
5.1 Opinion and Consent of Squire, Sanders & Dempsey LLP *
23.1 Consent of KPMG Peat Marwick LLP, Independent Auditors *
23.2 Consent of Ernst & Young LLP, Independent Auditors *
23.3 Consent of Squire, Sanders & Dempsey LLP Included in
Exhibit 5.1
24 Powers of Attorney See signature page
</TABLE>
* Filed herewith.
1. Previously filed as Exhibit 4.1 to registrant's registration statement on
Form SB-2 filed on December 7, 1995 (File No. 33-80119)(the "SB-2").
2. Previously filed as Exhibit to the SB-2.
II-2
<PAGE>
Item 17. Undertakings
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) It will file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) Reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof), which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement; and
(iii) Include any additional or changed material information
on the plan of distribution not previously disclosed in the Registration
Statement.
(4) It will file a post-effective amendment to remove from registration
any of the securities that remain unsold at the termination of the offering.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 14 hereof, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person thereof in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
In accordance with the requirement of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 Registration Statement and duly
authorized this Amendment to the Registrant Statement to be signed on its behalf
by the undersigned, in the City of Albuquerque and State of New Mexico on
November 3, 1997.
LIGHTPATH TECHNOLOGIES, INC.,
a Delaware corporation
By: /s/ LESLIE A. DANZIGER
------------------------------------
Leslie A. Danziger
Chairman of the Board
Chief Executive Officer
Special Power of Attorney
KNOW ALL MEN BY THESE PRESENT, that each of the undersigned,
constitutes and appoints each of Leslie A. Danziger and Donald E. Lawson, his
true and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all pre and post-effective amendments (including all
amendments filed pursuant to Rule 462(b)) to this Form S-3 Registration
Statement, and to file the same with all exhibits thereto, and all documents in
connection therewith, with the Securites and Exchange Commission, granting such
attorney-in-fact and agents, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in person, hereby
ratifying and confirming all that such attorney-in-fact and agents may lawfully
do or cause to be done by virtue hereof. In accordance with the requirement of
the Securities Act of 1933, this Amendment to the Registration Statement was
signed below by the following persons in the capacities and on the dates stated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ LESLIE A. DANZIGER Chairman of the Board (Principal November 3, 1997
- --------------------------------- Executive Officer)
Leslie A. Danziger
/s/ DONALD E. LAWSON President and Treasurer (Principal November 3, 1997
- --------------------------------- Financial and Accounting Officer)
Donald E. Lawson
/s/ James A. Adler, Jr. Director November 3, 1997
- ---------------------------------
James A. Adler, Jr.
/s/ Louis Leeburg Director November 3, 1997
- ---------------------------------
Louis Leeburg
/s/ Milton Klein, M.D. Director November 3, 1997
- ---------------------------------
Milton Klein, M.D.
November 3, 1997
/s/ Haydock H. Miller, Jr. Director
- ---------------------------------
Haydock H. Miller, Jr.
</TABLE>
II-4
Exhibit 4.7
Form of Class E Warrant
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS (i) A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL
HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. SUBSCRIBERS
MUST RELY ON THEIR OWN ANALYSIS OF THE INVESTMENT AND ASSESSMENT OF THE RISKS
INVOLVED. SEE THE RISK FACTORS SET FORTH IN THE ATTACHED DISCLOSURE DOCUMENTS AS
EXHIBIT F.
Warrant to Purchase
_______ shares
Class E Warrant to Purchase Common Stock
of
LIGHTPATH TECHNOLOGIES, INC.
THIS CERTIFIES that ________________ or any subsequent holder hereof
("Holder"), has the right to purchase from LIGHTPATH TECHNOLOGIES, INC., a
Delaware corporation (the "Company"), up to _______________ fully paid and
nonassessable shares of the Company's Class A common stock, $.01 par value per
share ("Common Stock"), subject to adjustment as provided herein, at a price
equal to the Exercise Price as defined in Section 3 below, at any time beginning
on the Date of Issuance (defined below) and ending at 5:00 p.m., New York, New
York time, on September ___, 2000 (the "Exercise Period").
Holder agrees with the Company that this Warrant to Purchase Common
Stock of LightPath Technologies, Inc. (this "Warrant") is issued and all rights
hereunder shall be held subject to all of the conditions, limitations and
provisions set forth herein.
1. Date of Issuance.
-----------------
This Warrant shall be deemed to be issued on October 2, 1997 ("Date of
Issuance").
2. Exercise.
---------
(a) Manner of Exercise. During the Exercise Period, this Warrant may be
exercised as to all or any lesser number of full shares of Common Stock covered
hereby upon surrender of this Warrant, with the Exercise Form attached hereto as
Exhibit A (the "Exercise Form") duly completed and executed, together with the
full Exercise Price (as defined below) for each share of Common Stock as to
which this Warrant is exercised, at the office of the Company, 6820 Academy
Parkway East NE, Albuquerque, New Mexico 87109; Attention: President, Telephone
No. (505) 342-1100, Telecopy No. (505) 342-1111, or at such other office or
agency as the Company may designate in writing, by overnight mail, with an
advance copy of the Exercise Form sent to the Company and
1
<PAGE>
its Transfer Agent by facsimile (such surrender and payment of the Exercise
Price hereinafter called the "Exercise of this Warrant").
(b) Date of Exercise. The "Date of Exercise" of the Warrant shall be
defined as the date that the advance copy of the completed and executed Exercise
Form is sent by facsimile to the Company, provided that the original Warrant and
Exercise Form are received by the Company as soon as practicable thereafter.
Alternatively, the Date of Exercise shall be defined as the date the original
Exercise Form is received by the Company, if Holder has not sent advance notice
by facsimile.
(c) Cancellation of Warrant. This Warrant shall be canceled upon the
Exercise of this Warrant, and, as soon as practical after the Date of Exercise,
Holder shall be entitled to receive Common Stock for the number of shares
purchased upon such Exercise of this Warrant, and if this Warrant is not
exercised in full, Holder shall be entitled to receive a new Warrant (containing
terms identical to this Warrant) representing any unexercised portion of this
Warrant in addition to such Common Stock.
(d) Holder of Record. Each person in whose name any Warrant for shares
of Common Stock is issued shall, for all purposes, be deemed to be the Holder of
record of such shares on the Date of Exercise of this Warrant, irrespective of
the date of delivery of the Common Stock purchased upon the Exercise of this
Warrant. Nothing in this Warrant shall be construed as conferring upon Holder
any rights as a stockholder of the Company.
3. Payment of Warrant Exercise Price.
----------------------------------
The Exercise Price shall equal $7.2375 per share ("Exercise Price").
Payment of the Exercise Price may be made by either of the following,
or a combination thereof, at the election of Holder:
(i) Cash Exercise: cash, bank or cashiers check or wire transfer; or
(ii) Cashless Exercise: subject to the last sentence of this Section 3,
surrender of this Warrant at the principal office of the Company together with
notice of cashless election, in which event the Company shall issue Holder a
number of shares of Common Stock computed using the following formula:
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be issued to Holder.
Y = the number of shares of Common Stock for which this Warrant
is being exercised.
A = the Market Price of one (1) share of Common Stock (for
purposes of this Section 3(ii), the "Market Price" shall be
defined as the average closing bid price of the Common Stock
for the five (5) trading days prior to the Date of Exercise of
this Warrant (the "Average Closing Price"), as reported by the
National Association of Securities Dealers Automated Quotation
System ("Nasdaq") Small Cap Market, or if the Common Stock is
not traded on the Nasdaq Small Cap Market, the Average Closing
Price in any other over-the-counter market; provided, however,
that if the Common Stock is listed on a stock exchange, the
Market Price shall be the Average Closing Price on such
exchange for the five (5)
2
<PAGE>
trading days prior to the date of exercise of the Warrants. If
the Common Stock is/was not traded during the five (5) trading
days prior to the Date of Exercise, then the closing price for
the last publicly traded day shall be deemed to be the closing
price for any and all (if applicable) days during such five
(5) trading day period.
B = the Exercise Price.
For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is intended,
understood and acknowledged that the Common Stock issuable upon exercise of this
Warrant in a cashless exercise transaction shall be deemed to have been acquired
at the time this Warrant was issued. Moreover, it is intended, understood and
acknowledged that the holding period for the Common Stock issuable upon exercise
of this Warrant in a cashless exercise transaction shall be deemed to have
commenced on the date this Warrant was issued.
Notwithstanding anything to the contrary contained herein, this Warrant may not
be exercised in a cashless exercise transaction if, on the Date of Exercise, the
shares of Common Stock to be issued upon exercise of this Warrant would upon
such issuance (x) be immediately transferable in the United States free of any
restrictive legend, including without limitation under Rule 144; (y) be then
registered pursuant to an effective registration statement filed pursuant to
that certain Registration Rights Agreement dated on or about September __, 1997
by and among the Company and certain investors; or (z) otherwise be registered
under the Securities Act of 1933, as amended.
4. Transfer and Registration.
--------------------------
(a) Transfer Rights. Subject to the provisions of Section 8 of this
Warrant, this Warrant may be transferred on the books of the Company, in whole
or in part, in person or by attorney, upon surrender of this Warrant properly
completed and endorsed. This Warrant shall be canceled upon such surrender and,
as soon as practicable thereafter, the person to whom such transfer is made
shall be entitled to receive a new Warrant or Warrants as to the portion of this
Warrant transferred, and Holder shall be entitled to receive a new Warrant as to
the portion hereof retained.
(b) Registrable Securities. The Common Stock issuable upon the exercise
of this Warrant constitutes "Registrable Securities" under that certain
Registration Rights Agreement dated on or about September ____, 1997 between the
Company and certain investors and, accordingly, has the benefit of the
registration rights pursuant to that agreement.
5. Anti-Dilution Adjustments.
--------------------------
(a) Stock Dividend. If the Company shall at any time declare a dividend
payable in shares of Common Stock, then Holder, upon Exercise of this Warrant
after the record date for the determination of holders of Common Stock entitled
to receive such dividend, shall be entitled to receive upon Exercise of this
Warrant, in addition to the number of shares of Common Stock as to which this
Warrant is exercised, such additional shares of Common Stock as such Holder
would have received had this Warrant been exercised immediately prior to such
record date and the Exercise Price will be proportionately adjusted.
(b) Recapitalization or Reclassification. If the Company shall at any
time effect a recapitalization, reclassification or other similar transaction of
such character that the shares of Common Stock shall be changed into or become
exchangeable for a larger or smaller number of shares, then upon the effective
date thereof, the number of shares of Common Stock which Holder shall be
entitled to purchase upon Exercise of this Warrant shall be increased or
decreased, as the case may be, in direct proportion to the increase or decrease
in the number of shares of Common Stock by reason of such recapitalization,
reclassification or similar transaction, and the Exercise Price shall be, in the
case of an increase in the number of shares, proportionally decreased and, in
3
<PAGE>
the case of decrease in the number of shares, proportionally increased. The
Company shall give Holder the same notice it provides to holders of Common Stock
of any transaction described in this Section 5(b).
(c) Distributions. If the Company shall at any time distribute for no
consideration to holders of Common Stock cash, evidences of indebtedness or
other securities or assets (other than cash dividends or distributions payable
out of earned surplus or net profits for the current or preceding year) then, in
any such case, Holder shall be entitled to receive, upon Exercise of this
Warrant, with respect to each share of Common Stock issuable upon such exercise,
the amount of cash or evidences of indebtedness or other securities or assets
which Holder would have been entitled to receive with respect to each such share
of Common Stock as a result of the happening of such event had this Warrant been
exercised immediately prior to the record date or other date fixing shareholders
to be affected by such event (the "Determination Date") or, in lieu thereof, if
the Board of Directors of the Company should so determine at the time of such
distribution, a reduced Exercise Price determined by multiplying the Exercise
Price on the Determination Date by a fraction, the numerator of which is the
result of such Exercise Price reduced by the value of such distribution
applicable to one share of Common Stock (such value to be determined by the
Board of Directors of the Company in its discretion) and the denominator of
which is such Exercise Price.
(d) Notice of Consolidation or Merger. In the event of a merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock shall be changed into
the same or a different number of shares of the same or another class or classes
of stock or securities or other assets of the Company or another entity or there
is a sale of all or substantially all the Company's assets (a "Corporate
Change"), then this Warrant shall be exerciseable into such class and type of
securities or other assets as Holder would have received had Holder exercised
this Warrant immediately prior to such Corporate Change; provided, however, that
Company may not affect any Corporate Change unless it first shall have given
thirty (30) days notice to Holder hereof of any Corporate Change.
(e) Exercise Price Adjusted. As used in this Warrant, the term
"Exercise Price" shall mean the purchase price per share specified in Section 3
of this Warrant, until the occurrence of an event stated in subsection (a), (b)
or (c) of this Section 5, and thereafter shall mean said price as adjusted from
time to time in accordance with the provisions of said subsection. No such
adjustment under this Section 5 shall be made unless such adjustment would
change the Exercise Price at the time by $.01 or more; provided, however, that
all adjustments not so made shall be deferred and made when the aggregate
thereof would change the Exercise Price at the time by $.01 or more. No
adjustment made pursuant to any provision of this Section 5 shall have the net
effect of increasing the Exercise Price. The number of shares of Common Stock
subject hereto shall increase proportionately with each decrease in the Exercise
Price.
(f) Adjustments: Additional Shares, Securities or Assets. In the event
that at any time, as a result of an adjustment made pursuant to this Section 5,
Holder shall, upon Exercise of this Warrant, become entitled to receive shares
and/or other securities or assets (other than Common Stock) then, wherever
appropriate, all references herein to shares of Common Stock shall be deemed to
refer to and include such shares and/or other securities or assets; and
thereafter the number of such shares and/or other securities or assets shall be
subject to adjustment from time to time in a manner and upon terms as nearly
equivalent as practicable to the provisions of this Section 5.
6. Fractional Interests.
---------------------
No fractional shares or scrip representing fractional shares
shall be issuable upon the Exercise of this Warrant, but on Exercise of this
Warrant, Holder may purchase only a whole number of shares of Common Stock. If,
on Exercise of this Warrant, Holder would be entitled to a fractional share of
Common Stock or a
4
<PAGE>
right to acquire a fractional share of Common Stock, such fractional share shall
be disregarded and the number of shares of Common Stock issuable upon exercise
shall be the next higher number of shares.
7. Reservation of Shares.
----------------------
The Company shall at all times reserve for issuance such
number of authorized and unissued shares of Common Stock (or other securities
substituted therefor as herein above provided) as shall be sufficient for the
Exercise of this Warrant and payment of the Exercise Price. The Company
covenants and agrees that upon the Exercise of this Warrant, all shares of
Common Stock issuable upon such exercise shall be duly and validly issued, fully
paid, nonassessable and not subject to preemptive rights, rights of first
refusal or similar rights of any person or entity.
8. Restrictions on Transfer.
-------------------------
(a) Registration or Exemption Required. This Warrant has been
issued in a transaction exempt from the registration requirements of the Act by
virtue of Regulation D and exempt from state registration under applicable state
laws. The Warrant and the Common Stock issuable upon the Exercise of this
Warrant may not be pledged, transferred, sold or assigned except pursuant to an
effective registration statement or an exemption to the registration
requirements of the Act and applicable state laws.
(b) Assignment. If Holder can provide the Company with
reasonably satisfactory evidence that the conditions of (a) above regarding
registration or exemption have been satisfied, Holder may sell, transfer,
assign, pledge or otherwise dispose of this Warrant, in whole or in part. Holder
shall deliver a written notice to Company, substantially in the form of the
Assignment attached hereto as Exhibit B, indicating the person or persons to
whom the Warrant shall be assigned and the respective number of warrants to be
assigned to each assignee. The Company shall effect the assignment within ten
(10) days, and shall deliver to the assignee(s) designated by Holder a Warrant
or Warrants of like tenor and terms for the appropriate number of shares.
9. Benefits of this Warrant.
-------------------------
Nothing in this Warrant shall be construed to confer upon any
person other than the Company and Holder any legal or equitable right, remedy or
claim under this Warrant and this Warrant shall be for the sole and exclusive
benefit of the Company and Holder.
10. Applicable Law.
---------------
This Warrant is issued under and shall for all purposes be
governed by and construed in accordance with the laws of the state of Delaware,
without giving effect to conflict of law provisions thereof.
11. Loss of Warrant.
----------------
Upon receipt by the Company of evidence of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of indemnity or security reasonably satisfactory to the Company,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
shall execute and deliver a new Warrant of like tenor and date.
12. Notice or Demands.
------------------
Notices or demands pursuant to this Warrant to be given or made by Holder to or
on the Company shall be sufficiently given or made if sent by certified or
registered mail, return receipt requested, postage prepaid,
5
<PAGE>
and addressed, until another address is designated in writing by the Company, to
Attention: President, 6820 Academy Parkway East NE, Albuquerque, New Mexico
87109, Telephone No. (505) 342-1100, Telecopy No. (505) 342-1111. Notices or
demands pursuant to this Warrant to be given or made by the Company to or on
Holder shall be sufficiently given or made if sent by certified or registered
mail, return receipt requested, postage prepaid, and addressed, to the address
of Holder set forth in the Company's records, until another address is
designated in writing by Holder.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the
______ day of September, 1997.
LIGHTPATH TECHNOLOGIES, INC.
By: ______________________________
Donald E. Lawson, Exec. Vice President
6
<PAGE>
EXHIBIT A
EXERCISE FORM
TO: LIGHTPATH TECHNOLOGIES, INC.
The undersigned hereby irrevocably exercises the right to purchase
____________ of the shares of Class A Common Stock (the "Common Stock") of
LIGHTPATH TECHNOLOGIES, INC., a Delaware corporation (the "Company"), evidenced
by the attached warrant (the "Warrant"), and herewith makes payment of the
exercise price with respect to such shares in full, all in accordance with the
conditions and provisions of said Warrant.
1. The undersigned agrees not to offer, sell, transfer or otherwise dispose of
any of the Common Stock obtained on exercise of the Warrant, except in
accordance with the provisions of Section 8(a) of the Warrant.
2. The undersigned requests that stock certificates for such shares be issued
free of any restrictive legend, if appropriate, and a warrant representing any
unexercised portion hereof be issued, pursuant to the Warrant in the name of the
undersigned and delivered to the undersigned at the address set forth below:
Dated:
- ------------------------------------------------------------------------
Signature
- -----------------------------------------------------------------------
Print Name
- ------------------------------------------------------------------------
Address
- -----------------------------------------------------------------------
NOTICE
The signature to the foregoing Exercise Form must correspond to the name as
written upon the face of the attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.
- ------------------------------------------------------------------------
7
<PAGE>
EXHIBIT B
ASSIGNMENT
(To be executed by the registered holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned holder of the attached warrant (the
"Warrant") hereby sells, assigns and transfers unto the person or persons below
named the right to purchase _______ shares of the Class A Common Stock of
LIGHTPATH TECHNOLOGIES, INC., evidenced by the attached Warrant and does hereby
irrevocably constitute and appoint _______________________ attorney to transfer
the said Warrant on the books of the Company, with full power of substitution in
the premises.
Dated: ______________________________
Signature
Fill in for new registration of Warrant:
-----------------------------------
Name
- -----------------------------------
Address
- -----------------------------------
Please print name and address of assignee
(including zip code number)
- -----------------------------------------------------------------------
NOTICE
The signature to the foregoing Assignment must correspond to the name as written
upon the face of the attached Warrant in every particular, without alteration or
enlargement or any change whatsoever.
- ------------------------------------------------------------------------
8
Exhibit 4.8
Form of Class F Warrant
THIS WARRANT AND THE SECURITIES RECEIVABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS (i) A REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME
EFFECTIVE WITH REGARD THERETO, OR (ii) AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS AVAILABLE IN CONNECTION
WITH SUCH OFFER, SALE OR TRANSFER.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. SUBSCRIBERS
MUST RELY ON THEIR OWN ANALYSIS OF THE INVESTMENT AND ASSESSMENT OF THE RISKS
INVOLVED. SEE THE RISK FACTORS SET FORTH IN THE ATTACHED DISCLOSURE DOCUMENTS AS
EXHIBIT F.
Warrant to Purchase
__________ shares
Class F Warrant to Purchase Common Stock
of
LIGHTPATH TECHNOLOGIES, INC.
THIS CERTIFIES that ________________ or any subsequent ("Holder")
hereof, has the right to purchase from LIGHTPATH TECHNOLOGIES, INC., a Delaware
corporation (the "Company"), not more than fully paid and nonassessable shares
of the Company's Class A Common Stock, $.01 par value ("Common Stock"), at a
price equal to the Exercise Price as defined in Section 3 below, subject to
adjustment as provided herein, at any time on or before 5:00 p.m., Atlanta,
Georgia time, on September ___, 2002.
The Holder of this Warrant agrees with the Company that this Warrant is
issued and all rights hereunder shall be held subject to all of the conditions,
limitations and provisions set forth herein.
1. Date of Issuance.
-----------------
This Warrant shall be deemed to be issued on September ___, 1997 ("Date
of Issuance").
2. Exercise.
---------
(a) Manner of Exercise. This Warrant may be exercised as to all or any
lesser number of full shares of Common Stock covered hereby upon surrender of
this Warrant, with the Exercise Form attached hereto duly completed and
executed, together with the full Exercise Price (as defined in Section 3) for
each share of Common Stock as to which this Warrant is exercised, at the office
of the Company, LightPath Technologies, Inc., 6820 Academy Parkway East NE,
Albuquerque, New Mexico 87109, Attention: President, Telephone No. (505)
342-1100, Telecopy No. (505) 342-1111, or at such other office or agency as the
Company may designate in writing, by overnight mail, with an advance copy of the
Exercise Form attached as Exhibit A ("Exercise
1
<PAGE>
Form") sent by facsimile to the Company and its Transfer Agent (such surrender
and payment of the Exercise Price hereinafter called the "Exercise of this
Warrant").
(b) Date of Exercise. The "Date of Exercise" of the Warrant shall be
defined as the date that the advance copy of the completed and executed Exercise
Form is sent by facsimile to the Company and its Transfer Agent, provided that
the original Warrant and Exercise Form are received by the Company within five
(5) business days thereafter. The original Warrant and Exercise Form must be
received within five (5) business days of the Date of Exercise, or the exercise
may, at the Company's option, be considered void. Alternatively, the Date of
Exercise shall be defined as the date the original Exercise Form is received by
the Company, if Holder has not sent advance notice by facsimile.
(c) Cancellation of Warrant. This Warrant shall be canceled upon its
Exercise, and, as soon as practical after the Date of Exercise, the Holder
hereof shall be entitled to receive Common Stock for the number of shares
purchased upon such Exercise, and if this Warrant is not exercised in full, the
Holder shall be entitled to receive a new Warrant or Warrants (containing terms
identical to this Warrant) representing any unexercised portion of this Warrant
in addition to such Common Stock.
(d) Holder of Record. Each person in whose name any Warrant for shares
of Common Stock is issued shall, for all purposes, be deemed to have become the
Holder of record of such shares on the Date of Exercise of this Warrant,
irrespective of the date of delivery of such shares of Common Stock. Nothing in
this Warrant shall be construed as conferring upon the Holder hereof any rights
as a shareholder of the Company.
3. Payment of Warrant Exercise Price.
----------------------------------
The Exercise Price ("Exercise Price") shall equal $7.2375 ("Initial
Exercise Price") or, if the Date of Exercise is more than one (1) year after the
Date of Issuance, the lesser of (i) the Initial Exercise Price or (ii) the
"Lowest Reset Price", as that term is defined below. The Company shall calculate
a "Reset Price" on each anniversary date of the Date of Issuance which shall
equal one hundred percent (100%) of the average Closing Price of the Company's
Common Stock for the five (5) trading days ending on such anniversary date of
the Date of Issuance. The "Lowest Reset Price" shall equal the lowest Reset
Price determined on an anniversary date of the Date of Issuance preceding the
Date of Exercise, taking into account, as appropriate, any adjustments made
pursuant to Section 5 hereof.
For purposes hereof, the term "Closing Price" shall mean the closing
bid price on the National Association of Securities Dealers Automated Quotation
System ("Nasdaq") Small Cap Market or OTC Bulletin Board, or if no longer traded
on the Nasdaq Small Cap Market or OTC Bulletin Board, the closing price on the
principal national securities exchange or the over-the-counter system on which
the Common Stock is so traded and, if not available, the mean of the high and
low prices on the principal national securities exchange or the National
Securities Exchange on which the Common Stock is so traded.
Payment of the Exercise Price may be made by either of the following,
or a combination thereof, at the election of Holder:
(i) Cash Exercise: cash, bank or cashiers check or wire transfer; or
(ii) Cashless Exercise: surrender of this Warrant at the principal
office of the Company together with notice of cashless election, in which event
the Company shall issue Holder a number of shares of Common Stock computed using
the following formula:
2
<PAGE>
X = Y (A-B)/A
where:
X = the number of shares of Common Stock to be issued to
Holder. Y = the number of shares of Common Stock for which
this Warrant is being exercised.
A = the Market Price of one (1) share of Common Stock (for
purposes of this Section 3(ii), the "Market Price" shall be
defined as the average closing price of the Common Stock for
the five (5) trading days prior to the Date of Exercise of
this Warrant (the "Average Closing Price"), as reported by
Nasdaq or if the Common Stock is not traded on Nasdaq, the
Average Closing Price in the over-the-counter market;
provided, however, that if the Common Stock is listed on a
stock exchange, the Market Price shall be the Average Closing
Price on such exchange. If the Common Stock is/was not traded
during the five (5) trading days prior to the Date of
Exercise, then the closing price for the last publicly traded
day shall be deemed to be the closing price for any and all
(if applicable) days during such five (5) trading day period.
B = the Exercise Price.
For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is intended,
understood and acknowledged that the Common Stock issuable upon exercise of this
Warrant in a cashless exercise transaction shall be deemed to have been acquired
at the time this Warrant was issued. Moreover, it is intended, understood and
acknowledged that the holding period for the Common Stock issuable upon exercise
of this Warrant in a cashless exercise transaction shall be deemed to have
commenced on the date this Warrant was issued.
4. Transfer and Registration.
--------------------------
(a) Transfer Rights. Subject to the provisions of Section 8 of this
Warrant, this Warrant may be transferred on the books of the Company, in whole
or in part, in person or by attorney, upon surrender of this Warrant properly
completed and endorsed. This Warrant shall be canceled upon such surrender and,
as soon as practicable thereafter, the person to whom such transfer is made
shall be entitled to receive a new Warrant or Warrants as to the portion of this
Warrant transferred, and the Holder of this Warrant shall be entitled to receive
a new Warrant or Warrants as to the portion hereof retained.
(b) Registrable Securities. The Common Stock issuable upon the exercise
of this Warrant constitute "Registrable Securities" under that certain
Registration Rights Agreement dated on or about July 3, 1997 by and between the
Company and Swartz Investments, LLC and, accordingly, has the benefit of the
registration rights pursuant to that agreement.
5. Anti-Dilution Adjustments.
--------------------------
(a) Stock Dividend. If the Company shall at any time declare a dividend
payable in shares of Common Stock, then the Holder hereof, upon Exercise of this
Warrant after the record date for the determination of Holders of Common Stock
entitled to receive such dividend, shall be entitled to receive upon Exercise of
this Warrant, in addition to the number of shares of Common Stock as to which
this Warrant is Exercised, such additional shares of Common Stock as such Holder
would have received had this Warrant been Exercised immediately prior to such
record date and the Exercise Price will be proportionately adjusted.
3
<PAGE>
(b) Recapitalization or Reclassification. If the Company shall at any
time effect a recapitalization, reclassification or other similar transaction of
such character that the shares of Common Stock shall be changed into or become
exchangeable for a larger or smaller number of shares, then upon the effective
date thereof, the number of shares of Common Stock which the Holder hereof shall
be entitled to purchase upon Exercise of this Warrant shall be increased or
decreased, as the case may be, in direct proportion to the increase or decrease
in the number of shares of Common Stock by reason of such recapitalization,
reclassification or similar transaction, and the Exercise Price shall be, in the
case of an increase in the number of shares, proportionally decreased and, in
the case of decrease in the number of shares, proportionally increased. The
Company shall give the Warrant Holder the same notice it provides to holders of
Common Stock of any transaction described in this Section 5(b).
(c) Distributions. If the Company shall at any time distribute to
Holders of Common Stock cash, evidences of indebtedness or other securities or
assets (other than cash dividends or distributions payable out of earned surplus
or net profits for the current or preceding year) then, in any such case, the
Holder of this Warrant shall be entitled to receive, upon exercise of this
Warrant, with respect to each share of Common Stock issuable upon such Exercise,
the amount of cash or evidences of indebtedness or other securities or assets
which such Holder would have been entitled to receive with respect to each such
share of Common Stock as a result of the happening of such event had this
Warrant been Exercised immediately prior to the record date or other date fixing
shareholders to be affected by such event (the "Determination Date") or, in lieu
thereof, if the Board of Directors of the Company should so determine at the
time of such distribution, a reduced Exercise Price determined by multiplying
the Exercise Price on the Determination Date by a fraction, the numerator of
which is the result of such Exercise Price reduced by the value of such
distribution applicable to one share of Common Stock (such value to be
determined by the Board in its discretion) and the denominator of which is such
Exercise Price.
(d) Notice of Consolidation or Merger. In the event of a merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock of the Company shall
be changed into the same or a different number of shares of the same or another
class or classes of stock or securities or other assets of the Company or
another entity or there is a sale of all or substantially all the Company's
assets (a "Corporate Change"), then this Warrant shall be assumed by the
acquiring entity or any affiliate thereof and thereafter this Warrant shall be
exerciseable into such class and type of securities or other assets as the
Holder would have received had the Holder exercised this Warrant immediately
prior to such Corporate Change; provided, however, that Company may not affect
any Corporate Change unless it first shall have given thirty (30) days notice to
the Holder hereof of any Corporate Change.
(e) Exercise Price Adjusted. As used in this Warrant, the term
"Exercise Price" shall mean the purchase price per share specified in Section 3
of this Warrant, as it may be reset from time to time, until the occurrence of
an event stated in subsection (a), (b) or (c) of this Section 5 and thereafter
shall mean said price as adjusted from time to time in accordance with the
provisions of said subsection. No such adjustment under this Section 5 shall be
made unless such adjustment would change the Exercise Price at the time by $.01
or more; provided, however, that all adjustments not so made shall be deferred
and made when the aggregate thereof would change the Exercise Price at the time
by $.01 or more. No adjustment made pursuant to any provision of this Section 5
shall have the effect of increasing the total consideration payable upon
Exercise of this Warrant in respect of all the Common Stock as to which this
Warrant may be exercised. Notwithstanding anything to the contrary contained
herein, the Exercise Price shall not be reduced to an amount below the par value
of the Common Stock.
(f) Adjustments: Additional Shares, Securities or Assets. In the event
that at any time, as a result of an adjustment made pursuant to this Section 5,
the Holder of this Warrant shall, upon Exercise of this Warrant,
4
<PAGE>
become entitled to receive shares and/or other securities or assets (other than
Common Stock) then, wherever appropriate, all references herein to shares of
Common Stock shall be deemed to refer to and include such shares and/or other
securities or assets; and thereafter the number of such shares and/or other
securities or assets shall be subject to adjustment from time to time in a
manner and upon terms as nearly equivalent as practicable to the provisions of
this Section 5.
6. Fractional Interests.
---------------------
No fractional shares or scrip representing fractional shares
shall be issuable upon the Exercise of this Warrant, but on Exercise of this
Warrant, the Holder hereof may purchase only a whole number of shares of Common
Stock. If, on Exercise of this Warrant, the Holder hereof would be entitled to a
fractional share of Common Stock or a right to acquire a fractional share of
Common Stock, such fractional share shall be disregarded and the number of
shares of Common Stock issuable upon conversion shall be the next higher number
of shares.
7. Reservation of Shares.
----------------------
The Company shall at all times reserve for issuance such
number of authorized and unissued shares of Common Stock (or other securities
substituted therefor as herein above provided) as shall be sufficient for
Exercise and payment of the Exercise Price of this Warrant. The Company
covenants and agrees that upon Exercise of this Warrant, all shares of Common
Stock issuable upon such Exercise shall be duly and validly issued, fully paid,
nonassessable and not subject to preemptive rights, rights of first refusal or
similar rights of any person or entity.
8. Restrictions on Transfer.
-------------------------
(a) Registration or Exemption Required. This Warrant and the
Common Stock issuable on Exercise hereof have not been registered under the
Securities Act of 1933, as amended, and may not be sold, assigned, transferred,
pledged, hypothecated or otherwise disposed of in the absence of registration or
the availability of an exemption from registration under said Act. All shares of
Common Stock issued upon Exercise of this Warrant shall bear an appropriate
legend to such effect, if applicable.
(b) Assignment. Assuming the conditions of (a) above regarding
registration or exemption have been satisfied, the Holder may sell, transfer,
assign, pledge or otherwise dispose of this Warrant, in whole or in part. Holder
shall deliver a written notice to Company, substantially in the form of the
Assignment attached hereto as Exhibit B, indicating the person or persons to
whom the Warrant shall be assigned and the respective number of warrants to be
assigned to each assignee. The Company shall effect the assignment within ten
days, and shall deliver to the assignee(s) designated by Holder a Warrant or
Warrants of like tenor and terms for the appropriate number of shares.
(c) Investment Intent. The Warrant and Common Stock issuable
upon conversion are intended to be held for investment purposes and not with an
intent to distribution, as defined in the Act.
9. Benefits of this Warrant.
-------------------------
Nothing in this Warrant shall be construed to confer upon any
person other than the Company and the Holder of this Warrant any legal or
equitable right, remedy or claim under this Warrant and this Warrant shall be
for the sole and exclusive benefit of the Company and the Holder of this
Warrant.
5
<PAGE>
10. Applicable Law.
---------------
This Warrant is issued under and shall for all purposes be
governed by and construed in accordance with the laws of the state of Georgia,
without giving effect to conflict of law provisions thereof.
11. Loss of Warrant.
----------------
Upon receipt by the Company of evidence of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of indemnity or security reasonably satisfactory to the Company,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
shall execute and deliver a new Warrant of like tenor and date.
12. Notice or Demands.
------------------
Notices or demands pursuant to this Warrant to be given or made by the Holder of
this Warrant to or on the Company shall be sufficiently given or made if sent by
certified or registered mail, return receipt requested, postage prepaid, and
addressed, until another address is designated in writing by the Company,
LightPath Technologies, Inc., 6820 Academy Parkway East NE, Albuquerque, New
Mexico 87109, Attention: President, Telephone No. (505) 342-1100, Telecopy No.
(505) 342-1111. Notices or demands pursuant to this Warrant to be given or made
by the Company to or on the Holder of this Warrant shall be sufficiently given
or made if sent by certified or registered mail, return receipt requested,
postage prepaid, and addressed, Attn: Holder, address: c/o Swartz Investments,
LLC, 200 Roswell Summit, Suite 285, 1080 Holcomb Bridge Road, Roswell, Georgia
30076, until another address is designated in writing by Holder.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the
____ day of September, 1997.
LIGHTPATH TECHNOLOGIES, INC.
By: ____________________________
Print Name: ____________________________
Title: ____________________________
6
<PAGE>
EXHIBIT A
EXERCISE FORM
TO: ___________________.
The undersigned hereby irrevocably exercises the right to purchase
____________ of the shares of Common Stock of LIGHTPATH TECHNOLOGIES, INC., a
Delaware corporation, evidenced by the attached Class F Warrant, and herewith
makes payment of the Exercise Price with respect to such shares in full, all in
accordance with the conditions and provisions of said Warrant.
The undersigned agrees not to offer, sell, transfer or otherwise
dispose of any of such Common Stock, except in accordance with the provisions of
Section 8 of the Warrant, and consents that the following legend may be affixed
to the stock certificates for the Common Stock hereby subscribed for, if such
legend is applicable:
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or any
provincial or state securities law, and may not be sold, transferred,
pledged, hypothecated or otherwise disposed of until either (i) a
registration statement under the Securities Act and applicable
provincial or state securities laws shall have become effective with
regard thereto, or (ii) an exemption from registration under the
Securities Act or applicable provincial or state securities laws is
available in connection with such offer, sale or transfer."
The undersigned requests that stock certificates for such shares be
issued, and a warrant representing any unexercised portion hereof be issued,
pursuant to the Warrant in the name of the Registered Holder and delivered to
the undersigned at the address set forth below:
Dated:
- ------------------------------------------------------------------------
Signature of Registered Holder
- ------------------------------------------------------------------------
Name of Registered Holder (Print)
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Address
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7
<PAGE>
EXHIBIT B
ASSIGNMENT
(To be executed by the registered Holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned Holder of the attached Warrant hereby sells,
assigns and transfers unto the person or persons below named the right to
purchase _______ shares of the Common Stock of LIGHTPATH TECHNOLOGIES, INC.
evidenced by the attached Class F Warrant and does hereby irrevocably constitute
and appoint _______________________ attorney to transfer the said Warrant on the
books of the Company, with full power of substitution in the premises.
Dated: ______________________________
Signature
Fill in for new Registration of Warrant:
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Name
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Address
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Please print name and address of assignee
(including zip code number)
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NOTICE
The signature to the foregoing Exercise Form or Assignment must correspond to
the name as written upon the face of the attached Warrant in every particular,
without alteration or enlargement or any change whatsoever.
8
Exhibit 5.1
Opinion and Consent of Squire, Sanders, & Dempsy LLP
November 3, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: LightPath Technologies, Inc.
Dear Ladies and Gentlemen:
This firm is counsel for LightPath Technologies, Inc., a Delaware
corporation (the "Company"). As such, we are familiar with the Certificate of
Incorporation, as amended, and Bylaws of the Company, as well as resolutions
adopted by its Board of Directors authorizing the issuance and sale of 1,500,000
shares of the Company's $.01 par value Common Stock (the "Common Stock"),
issuable upon conversion of outstanding shares of Series B Preferred Stock and
upon exercise of outstanding Class E Warrants and Class F Warrants (collectively
referred to as the "Securities"), which are the subject of a Registration
Statement on Form S-3 (the "Registration Statement") under the Securities Act of
1933, as amended. We have acted as counsel for the Company with respect to
certain matters in connection with the sale of the Securities and in preparation
of the required filings with the Securities and Exchange Commission. In
addition, we have examined such documents and undertaken such further inquiry as
we consider necessary for rendering the opinions hereinafter set forth below:
Based upon the foregoing, it is our opinion that :
1. The Company is a corporation duly organized and validly existing
under the laws of the state of Delaware.
2. The Securities, when issued will be validly issued, fully paid and
nonassessable.
We acknowledge that we are referred to under the heading "Legal
Matters" in the Prospectus which is part of the Registration Statement and we
hereby consent to the use of our name in such Registration Statement. We further
consent to the filing of this opinion as Exhibit 5.1 to the Registration
Statement and with the state regulatory agencies in such states as may require
such filing in connection with the registration of the Securities for offer and
sale in such states.
Respectfully yours,
SQUIRE, SANDERS & DEMPSEY L.L.P.
Exhibit 23.1
Consent of KPMG Peat Marwick LLP, Independent Auditors
The Board of Directors
LightPath Technologies, Inc.
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the headings "Incorporation of Certain Documents by
Reference" and "Experts" in the prospectus.
Our report dated August 1, 1997, contains an explanatory paragraph that states
that the Company has suffered recurring losses from operations and is dependent
on external sources of capital, which raise substantial doubt about its ability
to continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of that uncertainty.
KPMG Peat Marwick LLP
Albuquerque, New Mexico
November 3, 1997
Exhibit 23.2
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in Form S-3 of our report dated
August 2, 1996, with respect to the statements of operations, stockholders'
equity (deficiency in net assets), and cash flows of LightPath Technologies,
Inc. for the year ended June 30, 1996, included in the Annual Report (Form
10KSB) for the year ended June 30, 1997.
Ernst & Young LLP
Tucson, Arizona
November 3, 1997
