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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
Amendment No. 1
----------
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)
For the fiscal year ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE REPORT OF 1934
For the transition period from ___________ to ____________
COMMISSION FILE NUMBER 000-27548
LIGHTPATH TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 86-0708398
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) (Identification No)
6820 ACADEMY PARKWAY EAST, NE http://www.light.net 87109
ALBUQUERQUE, NEW MEXICO (ZIP CODE)
(Address of principal executive offices)
Registrant's telephone number, including area code:
(505)342-1100
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
CLASS A COMMON STOCK, $.01 PAR VALUE, UNITS,
CLASS A WARRANTS AND CLASS B WARRANTS
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
The registrant's operating revenue for its most recent fiscal year.
$1,086,126
The aggregate market value of the registrant's voting stock held by
non-affiliates (based on the closing sale price of the registrant's Common Stock
on the Nasdaq SmallCap Market, and for the purpose of this computation only, on
the assumption that all of the registrant's directors and officers are
affiliates) was approximately $8,395,994 on August 13, 1999.
The number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practical date:
Common Stock, Class A, $.01 par value 5,088,431 shares
Common Stock, Class E-1, $.01 par value 1,492,480 shares
Common Stock, Class E-2, $.01 par value 1,492,480 shares
Common Stock, Class E-3, $.01 par value 994,979 shares
- --------------------------------------- ------------------------------
CLASS OUTSTANDING AT AUGUST 13, 1999
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the 1999 Annual Meeting of
Stockholders are incorporated by reference into Part III of this report.
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<PAGE>
LIGHTPATH TECHNOLOGIES, INC.
FORM 10-KSB
INDEX
Item Page
---- ----
PART II
Item 7. Financial Statements F-1
PART III
Item 13. Exhibits and Reports On Form 8-K 3
SIGNATURES 4
2
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits
Exhibit
Number Description
------ -----------
3.1 Certificate of Incorporation of Registrant, as amended 1
3.2 Certificate of Designations filed November 10, 1995 with
the Secretary of State of the State of Delaware 1
3.3 Bylaws of Registrant 1
3.4 Certificate of Designation filed February 6, 1998 with
the Secretary of State of the State of Delaware 2
9.0 Form of Voting Trust Agreement dated January 10, 1996,
among certain stockholders of the Registrant 1
9.1 Rights Agreement dated May 1, 1998 3
10.1 Employment Agreement between Registrant and Leslie A. Danziger 1
10.3 Employment Agreement between Registrant and Donald E. Lawson 5
10.4 Product Development and License Agreement between Registrant
and Karl Storz GMBH & Co. dated December 22, 1994 1
10.6 Omnibus Incentive Plan 4
10.7 Directors Stock Option Plan 6
10.8 Amended Omnibus Incentive Plan 6
11 Computation of Net Loss Per Share 6
23.1 Consent of KPMG LLP *
27 Financial Data Schedule 6
- ----------
1. This exhibit was filed as an exhibit to the Company's Registration
Statement on Form SB-2 (File No: 33-80119) and is incorporated herein by
reference thereto.
2. This exhibit was filed as an exhibit to the Company's Registration
Statement on Form S-3 (File No: 333-47905) dated March 13, 1998 and is
incorporated herein by reference thereto.
3. This exhibit was filed as an exhibit to the Company's Registration
Statement on Form 8-A (File No: 000-27548, respectively) dated April 28,
1998 and is incorporated herein by reference thereto.
4. This exhibit was filed as an exhibit to the Company's Registration
Statement on Form S-8 (File No: 333-23515 and 333-23511, respectively)
dated March 18, 1997 and is incorporated herein by reference thereto.
5. This exhibit was filed as an exhibit to the Company's Form 10-KSB for the
fiscal year ended June 30, 1998 filed on September 17, 1998 and is
incorporated herein by reference thereto.
6. This exhibit was filed as an exhibit to the Company's Form 10-KSB for the
fiscal year ended June 30, 1999 filed on August 27, 1999 and is
incorporated herein by reference thereto.
* Filed herewith.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarterly period ended
June 30, 1999.
3
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
LIGHTPATH TECHNOLOGIES, INC.
INDEX TO FINANCIAL STATEMENTS
Report of KPMG LLP, Independent Auditors.....................................F-2
Audited Financial Statements
Balance Sheets...............................................................F-3
Statements of Operations.....................................................F-4
Statements of Stockholders' Equity...........................................F-5
Statements of Cash Flows.....................................................F-6
Notes to Financial Statements................................................F-7
F-1
<PAGE>
REPORT OF KPMG LLP, INDEPENDENT AUDITORS
The Board of Directors
LightPath Technologies, Inc.:
We have audited the accompanying balance sheets of LightPath Technologies, Inc.,
as of June 30, 1999 and 1998, and the related statements of operations,
stockholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the finanical statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the finanical statements referred to above present fairly, in
all material respects, the financial position of LightPath Technologies, Inc.,
as of June 30, 1999 and 1998, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As more fully described in the notes
to the financial statements, the Company's recurring losses from operations and
resulting continued dependence on external sources of capital raise substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in the notes. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
KPMG LLP
Albuquerque, New Mexico
August 10, 1999
F-2
<PAGE>
LIGHTPATH TECHNOLOGIES, INC.
BALANCE SHEETS
June 30, June 30,
1999 1998
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 413,388 $ 4,237,400
Trade accounts receivable - less allowance
of $15,000 and $0 335,706 256,491
Inventories (NOTE 2) 514,669 407,061
Advances to employees and related parties 17,329 38,560
Prepaid expenses and other 19,124 43,629
------------ ------------
Total current assets 1,300,216 4,983,141
Property and equipment - net (NOTE 3) 893,537 805,487
Intangible assets - net (NOTE 4) 572,877 519,839
Investment in LightChip, Inc. (NOTE 5) 369,696 --
------------ ------------
Total assets $ 3,136,326 $ 6,308,467
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 167,160 $ 190,530
Accrued payroll and benefits (NOTE 7) 131,755 232,051
------------ ------------
Total current liabilities 298,915 422,581
Accrued loss of LightChip, Inc. -- 921,662
Note payable to stockholder (NOTE 6) 30,000 30,000
Commitments and contingencies (NOTE 13)
Redeemable common stock (NOTE 10)
Class E-1 - performance based and redeemable
common stock 1,492,480 and 1,481,584 shares
issued and outstanding 14,925 14,816
Class E-2 - performance based and redeemable
common stock 1,492,480 and 1,481,584 shares
issued and outstanding 14,925 14,816
Class E-3 - performance based and redeemable
common stock 994,979 and 987,715 issued
and outstanding 9,950 9,877
Stockholders' equity (NOTES 9 AND 10)
Preferred stock, $.01 par value; 5,000,000 shares
authorized; Series A convertible shares, 37 and
49 issued and outstanding, Series B convertible
shares, 1 and 126 issued and outstanding, Series
C convertible shares, 84 and 361 issued and
outstanding, $1,220,000 liquidation preference
at June 30, 1999 1 5
Common stock:
Class A, $.01 par value, voting; 34,500,000
shares authorized; 4,960,703 and 3,330,607
shares issued and outstanding 49,607 33,306
Additional paid-in capital 29,776,918 28,103,439
Accumulated deficit (27,058,915) (23,242,035)
------------ ------------
Total stockholders' equity 2,767,611 4,894,715
------------ ------------
Total liabilities and stockholders' equity $ 3,136,326 $ 6,308,467
============ ============
See accompanying notes.
F-3
<PAGE>
LIGHTPATH TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
Year Ended June 30
-------------------------
1999 1998
----------- -----------
REVENUES
Lenses and other $ 712,317 $ 529,318
Product development fees 373,809 228,914
----------- -----------
Total revenues 1,086,126 758,232
COSTS AND EXPENSES
Cost of goods sold 409,417 289,918
Selling, general and administrative 2,918,184 3,456,567
Research and development 615,371 564,779
----------- -----------
Total costs and expenses 3,942,972 4,311,264
----------- -----------
Operating loss (2,856,846) (3,553,032)
OTHER INCOME(EXPENSE)
Investment income 95,362 172,341
Interest and other expense (10,863) (5,217)
Equity in loss of LightChip, Inc. (NOTE 5) (819,882) (945,382)
----------- -----------
Net loss $(3,592,229) $(4,331,290)
=========== ===========
Net loss applicable to common shareholders (NOTE 11) $(3,816,880) $(6,029,519)
=========== ===========
Basic and diluted net loss per share (NOTE 11) $ (.89) $ (2.00)
=========== ===========
Number of shares used in per share calculation 4,271,313 3,010,861
=========== ===========
See accompanying notes.
F-4
<PAGE>
LIGHTPATH TECHNOLOGIES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Class A
Common Stock
Preferred ------------------ Additional
Stock Number of Paid-in Accumulated
Amount Shares Amount Capital Deficit Total
------ ------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Balances at June 30, 1997 $ 1 2,766,185 $27,662 $19,244,055 $(17,212,516) $ 2,059,202
Issuance of 135 shares Series A,
230 shares Series B and 375
shares Series C convertible
preferred stock, net 7 -- -- 6,798,598 -- 6,798,605
Issuance of common stock -- 3,588 36 26,289 -- 26,325
Exercise of stock options -- 46,994 470 251,397 -- 251,867
Exercise of warrants -- 46,890 469 78,287 -- 78,756
Issuance of common stock upon
conversion of 131 shares Series
A, 104 shares Series B and 14
shares Series C convertible
preferred stock to common stock (3) 456,853 4,568 (4,565) -- --
Common stock issued for services -- 10,097 101 11,149 -- 11,250
Imputed dividend on Series A,
Series B and Series C
convertible preferred stock -- -- -- 1,386,700 (1,386,700) --
8% premium on Series A,
Series B and Series C
convertible preferred stock -- -- -- 311,529 (311,529) --
Net loss -- -- -- -- (4,331,290) (4,331,290)
----- --------- ------- ----------- ------------ -----------
Balances at June 30, 1998 $ 5 3,330,607 $33,306 $28,103,439 $(23,242,035) $ 4,894,715
Issuance of common stock -- 8,344 83 27,476 -- 27,559
Exercise of stock options -- 7,264 73 39,586 -- 39,659
Issuance of common stock upon
conversion of 12 shares Series
A, 103 shares Series B and 277
shares Series C convertible
preferred stock to common stock (4) 1,614,488 16,145 (16,141) -- --
8% premium on Series A, Series B
and Series C convertible
preferred stock -- -- -- 224,651 (224,651) --
Sale of securities by LightChip, Inc. -- -- -- 1,397,907 -- 1,397,907
Net loss -- -- -- -- (3,592,229) (3,592,229)
----- --------- ------- ----------- ------------ -----------
Balances at June 30, 1999 $ 1 4,960,703 $49,607 $29,776,918 $(27,058,915) $ 2,767,611
===== ========= ======= =========== ============ ===========
</TABLE>
See accompanying notes.
F-5
<PAGE>
LIGHTPATH TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
Year Ended June 30
-------------------------
1999 1998
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(3,592,229) $(4,331,290)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 375,358 302,507
Provision for uncollectible receivables 15,000 --
Services provided for common stock -- 11,250
Equity in loss of LightChip 819,882 945,382
Changes in operating assets and liabilities:
Receivables, advances to employees,
related parties (72,984) (124,928)
Inventories (107,608) (231,302)
Prepaid expenses and other 24,505 (5,025)
Accounts payable and accrued expenses (123,666) (158,868)
----------- -----------
Net cash used in operating activities (2,661,742) (3,592,274)
CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment additions, net (437,223) (250,857)
Costs incurred in acquiring patents
and license agreements (79,223) (45,652)
Investment in LightChip (713,333) (23,720)
----------- -----------
Net cash used in investing activities (1,229,779) (320,229)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sales of Convertible Series
A, Series B and Series C preferred stock, net -- 6,798,605
Proceeds from exercise of common stock
options and warrants 39,950 331,468
Proceeds from issuance of common stock 27,559 26,325
----------- -----------
Net cash provided by financing activities 67,509 7,156,398
----------- -----------
Net (decrease) increase in cash
and cash equivalents (3,824,012) 3,243,895
Cash and cash equivalents at beginning of period 4,237,400 993,505
----------- -----------
Cash and cash equivalents at end of period $ 413,388 $ 4,237,400
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Class A common stock issued for services $ -- $ 11,250
Class E common stock issued $ 291 $ 845
Class A common stock issued upon conversion
of preferred stock $ 16,145 $ 4,568
Sale of securities by LightChip, Inc. $ 1,397,907 $ --
See accompanying notes.
F-6
<PAGE>
LIGHTPATH TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30,1999
ORGANIZATION
LightPath Technologies, Inc. (the Company) was incorporated in Delaware on June
15, 1992 as the successor to LightPath Technologies Limited Partnership formed
in 1989, and its predecessor, Integrated Solar Technologies Corporation formed
on August 23, 1985. The Company is engaged in the production of GRADIUM(R) glass
lenses, collimator products and other optical materials. The Company also
performs research and development for optical solutions for the fiber
telecommunications and traditional optics market. 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, or fewer lenses, tasks performed by multi-element conventional lens
systems and enabling technology for emerging markets such as optoelectronics and
telecommunications.
BASIS OF PRESENTATION
The Company has incurred substantial losses since inception. During fiscal year
1996 the Company completed an initial public offering ("IPO") and in fiscal year
1997 and 1998 the Company completed three private placements of convertible
preferred stock to raise additional capital to further fund research,
development and commercialization of GRADIUM glass with the objective of
developing products that will achieve market acceptance. Management intends to
utilize the net proceeds from a private placement of convertible debentures
completed in July 1999 (see Note 16) and cash flows from projected product sales
to finance the Company's working capital and other requirements for fiscal year
2000. However, without additional sources of capital or increased sales of
GRADIUM glass and optoelectronic products, there is substantial doubt about the
Company's ability to continue as a going concern. These financial statements do
not include any adjustments to reflect the recoverability and classification of
assets or the amounts and classifications of liabilities that may result from
the outcome of this uncertainty.
1. SUMMARY OF SIGNIFICANT ACCOUNTING MATTERS
CASH AND CASH EQUIVALENTS consist of cash in the bank and temporary investments
with maturities of ninety days or less when purchased.
INVENTORIES which consists principally of raw materials, lenses, collimators and
components are stated at the lower of cost or market, on a first-in, first-out
basis. Inventory costs include material, labor and manufacturing overhead.
PROPERTY AND EQUIPMENT are stated at cost and depreciated using the
straight-line method over the estimated useful lives of the related assets
ranging from three to seven years.
INTANGIBLE ASSETS consisting of licenses, patents and trademarks, are recorded
at cost. Upon issuance of the license, patent or trademark, these assets are
being amortized on the straight-line basis over the estimated useful lives of
the related assets ranging from ten to seventeen years. The recoverability of
the carrying values of these assets are evaluated on a recurring basis.
INVESTMENTS consists of the Company's ownership interest in LightChip Inc.
(LightChip) which is accounted for under the equity method. The Company's voting
interest decreased to 26% in September 1998 due to the sale of voting
convertible preferred stock by LightChip as well as the conversion and exercise
of outstanding debentures and warrants.
F-7
<PAGE>
LIGHTPATH TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
INCOME TAXES are accounted for under the provisions of Statement of Financial
Accounting Standards No. 109, ACCOUNTING FOR INCOME TAXES, which requires an
asset and liability approach to financial accounting and reporting for income
taxes.
Deferred income tax assets and liabilities are computed for differences between
the financial statement and tax bases of assets and liabilities that will result
in taxable or deductible amounts in the future based upon enacted tax laws and
rates applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized.
REVENUE RECOGNITION occurs from sales of products upon shipment or as earned
under product development agreements.
RESEARCH AND DEVELOPMENT costs are expensed as incurred.
STOCK BASED COMPENSATION is accounted for using the intrinsic value method as
prescribed by APB Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES,
under which no compensation expense is recognized when the exercise price of the
employees stock option equals or exceeds the market price of the underlying
stock on the date of grant.
Pro forma information required by Statement of Financial Accounting Standards
No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, has been presented under the
fair value method using a Black-Scholes option pricing model.
PER SHARE DATA is accounted for under the provisions of the Statement of
Financial Accounting Standards No. 128 (FAS 128), EARNINGS PER SHARE. See Note
11.
MANAGEMENT MAKES ESTIMATES and assumptions during the preparation of the
Company's financial statements that affect amounts reported in the financial
statements and accompanying notes. Such estimates and assumptions could change
in the future as more information becomes known, which in turn could impact the
amounts reported and disclosed herein.
FAIR VALUES OF FINANCIAL INSTRUMENTS of the Company are disclosed as required by
Statement of Financial Accounting Standards No. 107, DISCLOSURES ABOUT FAIR
VALUES OF FINANCIAL INSTRUMENTS. The carrying amounts of cash and cash
equivalents, trade accounts receivable, accounts payable and notes payable to
stockholder approximate fair value.
IMPAIRMENT OF LONG-LIVED ASSETS is accounted for under the provisions of
Statement of Financial Accounting Standards No. 121, IMPAIRMENT OF LONG-LIVED
ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. In the event that facts and
circumstances indicate that the cost of intangible or other assets may be
impaired, an evaluation of recoverability would be performed. If an evaluation
is required, the estimated future undiscounted cash flows associated with the
asset would be compared to the asset's carrying amount to determine if a
write-down to fair value is required.
RECLASSIFICATION of certain amounts in the 1998 financial statements has been
made to conform to the 1999 financial statement presentation.
F-8
<PAGE>
LIGHTPATH TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
2. INVENTORIES
The components of inventories include the following at June 30:
1999 1998
---------- ----------
Raw materials $ 50,736 $ 44,885
Boules and blanks in process 97,321 83,530
Finished goods 366,612 278,646
---------- ----------
Total inventories $ 514,669 $ 407,061
========== ==========
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at June 30:
1999 1998
---------- ----------
Manufacturing equipment $1,536,525 $1,132,167
Computer equipment and software 299,085 294,361
Furniture and fixtures 117,885 123,176
Leasehold improvements 99,134 117,227
---------- ----------
2,052,629 1,666,931
Less accumulated depreciation 1,159,092 861,444
---------- ----------
$ 893,537 $ 805,487
========== ==========
4. INTANGIBLE ASSETS
Intangible assets consist of the following at June 30:
1999 1998
---------- ----------
Patents and trademarks granted $ 397,652 $ 309,385
License agreements 40,000 --
Patent applications in process 216,959 266,003
---------- ----------
654,611 575,388
Less accumulated amortization 81,734 55,549
---------- ----------
$ 572,877 $ 519,839
========== ==========
5. INVESTMENT IN LIGHTCHIP, INC.
During fiscal 1998, the Company applied the equity method of accounting to its
$23,720 cash investment in LightChip, a development stage company, until its
share of net losses were reduced to zero at which time the Company discontinued
applying the equity method of accounting. In June 1998, the Company committed to
purchase $1.25 million of LightChip convertible preferred stock thereby
requiring the Company to recognize an additional loss of $921,662 for
substantially all of LightChip's losses during fiscal 1998.
On September 9, 1998, LightPath purchased 2,266,667 shares of voting Series A
convertible preferred stock of LightChip in a private placement participating
with AT&T Ventures who acquired 9,400,000 shares of voting Series A convertible
preferred stock (Preferred Stock) for an aggregate purchase price of
approximately $3.5 million. LightPath and AT&T Ventures have committed to
purchase an additional $570,000 and $2.5 million, respectively, of voting Series
A1 convertible preferred stock upon completion of certain product design
requirements. Each share of Preferred Stock was issued at $.30 per share, 8% per
F-9
<PAGE>
LIGHTPATH TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
annum dividend if declared, noncumulative and a liquidation preference equal to
the purchase price plus any declared but unpaid dividends. In conjunction with
the private placement all the convertible bridge loans outstanding at LightChip,
totaling $890,000, converted to Preferred Stock at $.30 per share as permitted
in the debt agreement. In addition, substantially all of the warrant holders of
LightChip exercised their warrants, including 111,111 shares of Preferred Stock
received upon the exercise of warrants by LightPath. In total, LightChip issued
approximately 16,460,000 shares of Preferred Stock. Each share of Preferred
Stock is convertible into one share of Common Stock at (i) the option of the
holder, (ii) the consent of the majority of the holders of the outstanding
Preferred Stock or (iii) an initial public offering if gross proceeds from the
offering exceed 5 times that paid by holders of the Preferred Stock.
Accordingly, the Company recognized all of LightChip's losses from July 1, 1998
through the closing of the private placement on September 9, 1998, which upon
completion, reduced the Company's voting interest to approximately 26%. From the
closing date through June 30, 1999, the Company recognized its pro-rata share of
LightChip's losses (approximately 26%). Upon completion of the sale of the
Preferred Stock by LightChip, the Company recorded an increase to additional
paid-in capital of $1,397,907 which represents an amount necessary to increase
LightPath's Investment in LightChip to its pro rata share of total LightChip
equity at this date. Due to the Company's tax position, no deferred tax effects
were recognized related to this increase to stockholders' equity.
Summarized financial information of LightChip as of and for the periods ended
June 30, 1999 and 1998 follows:
LightChip Inc.
Summarized financial information June 30, June 30,
1999 1998
---------- ----------
Assets
Current assets $ 1,604,994 $ 18,011
Property and equipment - net 512,110 134,144
----------- -----------
Total assets $ 2,117,104 $ 152,155
=========== ===========
Liabilities and Equity
Current liabilities $ 304,936 $ 183,817
Debt 429,659 890,000
----------- -----------
Total liabilities 734,595 1,073,817
Shareholders' Capital 4,910,502 46,045
Accumulated deficit (3,527,993) (967,707)
----------- -----------
Total shareholders' equity 1,382,509 (921,662)
----------- -----------
Total liabilities and shareholders' equity $ 2,117,104 $ 152,155
=========== ===========
For fiscal years ended June 30, 1999 and 1998
Net loss during development stage $(2,560,286) $ (967,707)
=========== ===========
6. NOTE PAYABLE TO STOCKHOLDER
At June 30, 1999 and 1998, the Company has a note payable to a stockholder of
$30,000, which bears interest at 10.28%, payable monthly. The stockholder has
agreed to accept repayment of the remaining balance contingent upon the Company
meeting the conditions for conversion of the Class E-1 common stock into Class A
common stock. Interest of $2,930 and $5,217 was paid in 1999 and 1998,
respectively.
F-10
<PAGE>
LIGHTPATH TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. DEFERRED EMPLOYEE SALARIES
In November 1993, the Company implemented a plan for the deferral of a portion
of all employees' salaries. The salaries not paid were accrued as a continuing
obligation of the Company. As of June 30, 1999 and 1998, the total deferred
amounts were $72,524 and $153,435, respectively. Certain key officers of the
Company have agreed to make repayment of such deferred amounts contingent upon
the Company meeting the conditions for conversion of the Class E-1 common stock
into Class A common stock.
8. INCOME TAXES
Temporary differences between the net operating losses for financial reporting
and income tax purposes primarily relate to the use of the cash method of
accounting and deferral of research and development and start-up expenses for
tax purposes. Research and development and start-up expenses previously
capitalized for tax purposes are being amortized over a five year period
commencing July 1, 1996.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts reported for income tax purposes.
Significant components of the Company's deferred tax assets are as follows at
June 30:
Deferred tax assets: 1999 1998
----------- -----------
Start-up expenses, net $ 1,197,000 $ 1,792,000
Research and development expenses 719,000 685,000
Net operating loss carryforwards 6,001,000 3,894,000
Research and development
credit carryforwards 224,000 193,000
Other (35,000) (233,000)
----------- -----------
Total deferred tax assets 8,106,000 6,331,000
Valuation allowance for deferred tax assets (8,106,000) (6,331,000)
----------- -----------
$ -- $ --
=========== ===========
The valuation allowance has increased by $1,775,000 and $1,350,000 during the
years ended June 30, 1999 and 1998, respectively, as a result of increased
deferred tax assets created principally by the operating losses and the deferral
of research and development expenses for tax purposes.
The reconciliation of income tax attributable to operations computed at the U.S.
federal statutory tax rates and the actual tax provision of zero results from
the increased valuation allowance. At June 30, 1999, the Company has net
operating loss carryforwards for federal income tax purposes of approximately
$15 million which will begin to expire in 2009 if not previously utilized. The
Company also has research and development credit carryforwards of approximately
$224,000 which will begin to expire in 2009, if not previously utilized.
Approximately $1 million of the net operating loss carryforward and the majority
of the research and development credit carryforwards are subject to certain
limitations of the Internal Revenue Code which restrict their annual
utilization.
9. EMPLOYEE AND DIRECTOR STOCK OPTION PLANS
At June 30, 1999 the Company has three stock based compensation plans which are
described below. The Company applies APB Opinion No. 25 and related
Interpretations in accounting for its plans. No compensation costs have been
recognized for its fixed stock options plans where fair market value of the
underlying stock equaled the option price at the date of grant.
F-11
<PAGE>
LIGHTPATH TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
In June 1992, the Company implemented the Omnibus Incentive Plan (the "Incentive
Plan"), and the Directors Stock Option Plan (the "Directors Plan"). The
Company's has reserved 1,825,000 shares of common stock for awards under the
Incentive Plan. The number of shares reserved for award by the Directors Plan
was increased from 125,000 to 350,000 shares of common stock in 1999.
The Incentive Plan authorizes the Company to grant various awards using common
stock, and cash to officers, key employees and consultants of the Company. To
date only incentive stock options have been issued under the plan with an
average vesting period of four years. The term of the options granted under the
Incentive Plan cannot exceed ten years and grants to stockholders with 10% or
more of the Company's stock cannot exceed five years from the date of grant.
Options issued prior to the IPO are bundled into an option for the purchase of
one share of Class A common stock, 1.5 shares each of Class E-1 and E-2 common
stock and one share of Class E-3 common stock. Options under the Incentive Plan
available for grant at June 30, 1999 were 826,126 shares of Class A common
stock.
The Directors Plan authorizes the Company to grant awards to certain eligible
nonemployee directors of the Company using common stock. Under the plan formula
each nonemployee director receives options to purchase shares of the Company's
common stock. The director's option vest ratably over their three year term.
Each option granted under the Directors Plan will be granted at a price equal to
the fair market value of the underlying stock on the date the options are
granted with a term of ten years. Options issued prior to the IPO are bundled
into an option for the purchase of one share of Class A common stock, 1.5 shares
each of Class E-1 and E-2 common stock and one share of Class E-3 common stock.
Options under the Director Plan available for grant at June 30, 1999 were
143,951 shares of Class A common stock.
In addition, the Company has issued nonqualified options to certain directors
and consultants to the Company not covered by the Incentive or Directors Plans.
The Company did not issue any nonqualified options in 1999 or 1998. Options
issued prior to the IPO are bundled into an option for the purchase of one share
of Class A common stock, 1.5 shares each of Class E-1 and E-2 common stock and
one share of Class E-3 common stock.
A summary of the status of the stock option plans as of June 30, 1999 and 1998
and changes during the years ended is presented below:
Weighted-Avg.
Shares under option: Incentive Directors Exercise
Plan Plan Nonqualified Price
-------- -------- -------- --------
Outstanding at June 30, 1997 229,475 25,500 49,694 $ 7.52
Granted 698,000 49,000 -- $ 7.62
Exercised (41,701) (3,000) (2,293) $ 5.44
Lapsed or canceled (20,800) -- -- $ 5.68
-------- -------- -------- --------
Outstanding at June 30, 1998 864,974 71,500 47,401 $ 7.61
Granted 266,600 167,880 -- $ 3.52
Exercised -- -- (7,264) $ 5.50
Lapsed or canceled (132,700) (33,331) (209) $ 6.49
-------- -------- -------- --------
Outstanding at June 30, 1999 998,874 206,049 39,928 $ 6.29
======== ======== ======== ========
Options exercisable:
June 30, 1999 502,891 115,464 39,928 $ 7.16
======== ======== ======== ========
F-12
<PAGE>
LIGHTPATH TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
The following table summarizes information about fixed stock options outstanding
at June 30, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------ ------------------------------
Number Weighted-Avg. Number
Range of Outstanding at Remaining Weighted-Avg. Exercisable at Weighted-Avg.
Exercise Prices June 30,1999 Contractual Life Exercise Price June 30, 1999 Exercise Price
- --------------- ------------ ---------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
$ 3 to 6 572,414 8.7 Years $ 4.05 218,829 $ 4.42
$ 6 to 11 657,034 6.9 $ 7.51 424,051 $ 7.47
$27 to 52 15,403 4.2 $ 37.60 15,403 $ 37.60
--------- ---------
$ 3 to 52 1,244,851 7.7 $ 6.29 658,283 $ 7.16
========= =========
</TABLE>
Had compensation costs for the Company's stock based compensation plans been
determined consistent with FASB Statement No. 123, the Company's net loss would
have been increased to the pro forma amounts indicated below:
1999 1998
----------- -----------
Net loss applicable to common shareholders,
as reported $(3,816,880) $(6,029,519)
=========== ===========
Net loss applicable to common shareholders,
pro forma $(4,833,880) $(6,707,519)
=========== ===========
Basic and diluted net loss per share,
as reported $ (.89) $ (2.00)
----------- -----------
Basic and diluted net loss per share,
pro forma $ (1.13) $ (2.23)
----------- -----------
The weighted-average fair value of options granted during the years ended June
30, 1999 and 1998 was $2.27 and $4.05, respectively. The fair value of each
incentive option grant is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions used for
grants in fiscal 1999: dividend yield of 0%; expected volatility of 100% (75%
for fiscal 1998); risk free interest rate of 7%; and expected lives of 3 years.
10. STOCKHOLDERS' EQUITY
The Company completed an IPO on February 22, 1996 for the sale of 1,840,000
units at an initial public offering price of $5.00. Each unit consisted of one
share of Class A common stock, one Class A warrant and one Class B warrant.
Common Stock - the Company's common stock consists of the following:
* Authorized 34,500,000 shares of Class A common stock, $.01 par value. The
stockholders of Class A common stock are entitled to one vote for each
share held.
* Authorized 2,000,000 shares of Class E-1 common stock, $.01 par value. The
stockholders of Class E-1 common stock are entitled to one vote for each
share held. Each Class E-1 share will automatically convert into one share
of Class A common stock in the event that the Company's income before
provision of income taxes and extraordinary items or any charges which
result from the conversion of the Class E common stock is equal to or
exceeds approximately $13.5 million in fiscal 2000. Conversion provisions
related to the Company's bid price per share and acquisition or merger
expired on February 22, 1999 without being met.
F-13
<PAGE>
LIGHTPATH TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
* Authorized 2,000,000 shares of Class E-2 common stock, $.01 par value. The
stockholders of Class E-2 common stock are entitled to one vote for each
share held. Each Class E-2 share will automatically convert into one share
of Class A common stock in the event that the Company's income before
provision of income taxes and extraordinary items or any charges which
result from the conversion of the Class E common stock is at least $18
million in fiscal 2000. Conversion provision related to the Company's
acquisition or merger expired on February 22, 1999 without being met.
* Authorized 1,500,000 shares of Class E-3 common stock, $.01 par value. The
stockholders of Class E-3 common stock are entitled to one vote for each
share held. Each Class E-3 share will automatically convert into one share
of Class A common stock in the event that the Company's income before the
provision of income taxes and extraordinary items or any charges which
result from the conversion of the Class E common stock is equal to or
exceeds $37 million in fiscal 2000. Conversion provision related to the
Company's acquisition or merger expired February 22, 1999 without being
met.
The shares of Class E common stock will be redeemed on September 30, 2000
by the Company for $.0001 per share and will be canceled by the Company
without further obligation to the stockholders if such earnings levels are
not achieved. The pretax minimum performance milestones are increased
proportionately with the issuance of additional shares of common stock or
convertible securities after the IPO. The above milestones have been
adjusted to reflect stock issuances during the year ended June 30, 1999.
The Class E common stock performance shares have the characteristics of
escrowed shares; therefore, such shares owned by key officers, employees,
directors or consultants of the Company are subject to variable plan
compensation accounting. In the event the Company attains any of the
remaining earnings thresholds required for the conversion of Class E common
stock by such stockholders, the Company will be required to recognize
compensation expense in the periods in which the stated criteria for
conversion are probable of being met.
Preferred Stock - the Company's preferred stock consists of the following:
Authorized 5,000,000 shares of preferred stock. In June 1997, the Board of
Directors designated 250 shares as Series A Convertible Preferred Stock; $.01
par value. The Company entered into a private placement transaction which
provided proceeds on the sale of 180 shares of Series A Preferred Stock totaling
$1,800,000, less issuance costs of approximately $204,000, resulting in net
proceeds of approximately $1,596,000 by the final closing date, July 25, 1997.
In September 1997, the Board of Directors designated 300 shares as Series B
Convertible Preferred Stock; $.01 par value. The Company entered into a private
placement transaction which provided proceeds on the sale of 230 shares of
Series B Preferred Stock totaling $2,300,000, less issuance costs of
approximately $232,000 resulting in net proceeds of approximately $2,064,000 by
the final closing date, October 2, 1997. In January 1998, the Board of Directors
designated 500 shares as Series C Convertible Preferred Stock; $.01 par value.
The Company entered into a private placement transaction which provided proceeds
on the sale of 375 shares of Series C Preferred Stock totaling $3,750,000, less
issuance costs of approximately $215,000 resulting in net proceeds of
approximately $3,530,000 by the final closing date, February 9, 1998.
F-14
<PAGE>
LIGHTPATH TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
The Series A, Series B and the Series C Convertible Preferred Stock has a stated
value and liquidation preference of $10,000 per share, plus an 8% per annum
premium. The holders of the Series A, Series B and Series C Convertible
Preferred Stock are not entitled to vote or to receive dividends. Each share of
Series A, Series B and Series C Convertible Preferred Stock is convertible into
Class A common stock at the option of the holder, with volume limitations during
the first 9 months after the respective final closing date, based on its stated
value at the conversion date divided by a conversion price. Approximately
1,614,000 shares of Class A common stock were issued upon the conversion of 12
shares of Series A Preferred Stock, 125 shares of Series B Preferred Stock and
277 shares of Series C Preferred Stock during fiscal 1999. The conversion price
is defined as the lesser of $5.625, $7.2375 and $6.675 for the Series A, Series
B and Series C Convertible Preferred Stock, respectively, or 85% of the average
closing bid price of the Company's Class A common stock for the five days
preceding the conversion date. The discount provision in each of the Series A,
Series B and Series C Preferred Stock was recognized as an imputed dividend in
the amount of $318,200, $406,700, and $661,800, respectively, increasing net
loss applicable to common shareholders on a pro rata basis from the date of
issuance to the first date that conversion can occur. All of these imputed
dividends were recognized prior to June 30, 1998.
Designations, rights, and preferences related to the remaining preferred shares
may be determined by the Board of Directors. The terms of any series of
preferred stock may include priority claims to assets and dividends and voting
or other rights.
WARRANTS
Each Class A warrant entitles the holder to purchase one share of Class A common
stock and one Class B warrant at an exercise price of $6.50 until February 2001.
Each Class B warrant entitles the holder to purchase one share of Class A common
stock at an exercise price of $8.75 until February 2001. The warrants are
redeemable by the Company on 30 day's written notice at a redemption price of
$.05 per warrant if the closing price of the Class A common stock for any 30
consecutive trading days ending within 15 days of the notice averages in excess
of $9.10 per share for Class A warrants and $12.25 per share for Class B
warrants. All Class B warrants must be redeemed if any are redeemed. All of the
Class A common stock underlying the Class A and Class B warrants is registered
and contractual restrictions on trading have expired.
Class C, Class E and Class G warrants were issued in connection with the private
placements of Series A, Series B and Series C Convertible Preferred Stock which
were completed during fiscal 1998. A total of 320,000 Class C, 317,788 Class E
and 365,169 Class G warrants were granted to the preferred stockholders which
entitle the holder to purchase one share of Class A common stock at an exercise
price of $5.63, $7.24 and $6.68, respectively, expiring from July 2000 to
February 2001. A total of 64,000 Class D, 47,668 Class F and 58,427 Class H
warrants were granted to the placement agent for each private placement which
entitles the holder to purchase one share of Class A common stock at an exercise
price of $5.63, $7.24 and $6.68 respectively, expiring from July 2002 until
February 2003. The Company registered the resale of the Class A common stock
underlying the Series A, Series B, and Series C Preferred Stock and the
associated warrants on individual Form S-3's which became effective during
fiscal 1998.
In connection with the IPO, the underwriter received a Unit Purchase Option to
acquire up to 160,000 IPO Units at an exercise price of $6.75 per unit. Each IPO
unit consists of one Class A common share, one Class A warrant to acquire a
share of Class A common stock and a Class B warrant, and one Class B warrant.
The Unit Purchase Option is exercisable until February 2001 and as of June 30,
1999, none of the units have been exercised.
F-15
<PAGE>
LIGHTPATH TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
The following table provides information on preferred stock and warrants
activity during fiscal 1999 and 1998.
Warrants
Preferred -------------------------------------
Stock - Series Class Class Class
Shares Outstanding A, B & C A & B C, E & G D, F & H
---------- ---------- ---------- ----------
June 30, 1997 45 4,519,000 -- --
Issuance of securities 740 11,251 1,002,957 170,095
Conversions and exercises (249) (11,251) (88,889) (46,750)
---------- ---------- ---------- ----------
June 30, 1998 536 4,519,000 914,068 123,345
Conversions (414) -- -- --
---------- ---------- ---------- ----------
June 30, 1999 122 4,519,000 914,068 123,345
========== ========== ========== ==========
11. NET LOSS PER SHARE
Basic net loss per common share is computed based upon the weighted average
number of common shares outstanding during each period presented. The
computation of Diluted net loss per common share does not differ from the basic
computation because potentially issuable securities would be anti-dilutive. The
following outstanding securities were not included in the computation of diluted
earnings per share at June 30, 1999: Class A common stock options 1,244,851,
private placement warrants 1,037,413, IPO warrants 7,186,749, (includes
2,667,749 of Class B warrants available upon exercise of the Class A warrants),
IPO Unit Purchase Option to acquire (i) 160,000 shares of Class A common stock
(ii) 160,000 Class A warrants, and (iii) 320,000 Class B warrants (includes
160,000 available upon exercise of the Class A warrants), 937,399 Class A shares
issuable upon the conversion of convertible preferred stock (minimum of 220,000
shares based on the fixed conversion price at closing) and 3,979,939 shares
issuable from the Class E redeemable common stock that is automatically
converted into Class A common stock upon attainment of certain performance
criteria (see Note 10). An eight percent premium earned by the preferred
shareholders of $224,651 and $311,529 increased the net loss applicable to
common shareholders for the years ended June 30, 1999 and 1998, respectively. In
addition, net loss applicable to common shareholders was increased by an imputed
dividend in the amount of $1,386,700 during the year ended June 30, 1998. The
imputed dividend resulted from a discount provision included in the Series A,
Series B and Series C Preferred Stock issued in fiscal 1998.
Loss Shares Per Share
Year Ended June 30, (Numerator) (Denominator) Amount
----------- ------------- -----------
1999
Net loss $(3,592,229)
Less: Preferred Stock Premium (224,651)
-----------
BASIC AND DILUTED EPS
Net loss applicable to common
shareholders $(3,816,880) 4,271,313 $ (.89)
=========== =========== ===========
1998
Net loss $(4,331,290)
Less: Preferred Stock Premium (311,529)
Imputed dividend on Series A,
Series B and Series C
Preferred Stock (1,386,700)
-----------
BASIC AND DILUTED EPS
Net loss applicable to common
shareholders $(6,029,519) 3,010,861 $ (2.00)
=========== =========== ===========
F-16
<PAGE>
LIGHTPATH TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
12. PENSION PLAN
The Company implemented a defined contribution plan on January 1, 1997 covering
substantially all employees. Annual discretionary contributions, if any, are
made by the Company to match a portion of the funds employees contribute,
however, there were no Company contributions during the fiscal years ended June
30, 1999 and 1998.
13. COMMITMENTS AND CONTINGENCIES
The Company has operating leases for office equipment and office space.
Effective April 1, 1996, the Company entered into a 5 year lease (with a three
year renewal option) agreement for a 13,300 square foot manufacturing and office
facility in Albuquerque, New Mexico. Rent expense recognized for the years ended
June 30, 1999 and 1998 was $108,317 and $113,407, respectively. Commitments
under noncancelable operating leases are $98,500 for 2000; and $76,500 for 2001.
The Company has employment agreements, which expire in April 2001 and March
2002, with two officers which provide for a combined payment of salaries of
$275,000 annually. The Company has outstanding purchase commitments for
approximately $100,000 at June 30, 1999 for manufacturing collimators, lens
finishing and advertising.
The Company is involved in various legal actions arising in the normal course of
business. After taking into consideration legal counsel's evaluation of such
actions, management is of the opinion that their outcome will not have a
significant effect on the Company's financial statements.
14. RELATED PARTY TRANSACTIONS
During the fiscal years ended June 30, 1999 and 1998, current directors (or
their firms) of the Company, provided legal and consulting services to the
Company for which they billed the Company approximately $127,000 and $145,000,
respectively. In addition, the Company retained the legal services of a
stockholder for licensing work performed during fiscal 1998 valued at $11,250,
which was paid for in Class A common stock.
In June 1997 the Company entered into a one year Strategic Alliance Agreement
with Invention Machine Corporation to create LightChip to develop and
manufacture wavelength division multiplexing systems for use by
telecommunication carriers, and network system integrators. Under the terms of
the agreement, LightChip utilized office equipment, office space and some
personnel at no charge from LightPath in fiscal year 1998, estimated value of
these contributed services was approximately $137,000. In addition, LightChip
reimbursed LightPath for personnel, services and working capital provided during
fiscal year 1998 totaling approximately $161,000, the balance $10,446 was paid
during the year ended June 30, 1999.
15. SEGMENT INFORMATION
Optoelectronics and Fiber Telecommunications (optoelectronics), which represents
5% of total revenues of the Company, and Traditional Optics, which represents
95% of total revenues, are the Company's reportable segments under SFAS No. 131,
Disclosure about Segments of an Enterprise and Related Information (SFAS 131).
The optoelectronics segment is based primarily on the development and sale of
fiber collimators, fiber-optic switches and other related passive component
products for the optoelectronics segment of the telecommunications industry
while the traditional optics segment provides for the development and sale of
GRADIUM glass in the form of lenses, blanks and development fees for the general
optics markets. During fiscal 1999 approximately $78,000 in sales were derived
from one wafer chip inspection customer and approximately $72,000 of lens sales
were derived from one YAG laser customer. During fiscal 1998, approximately
$135,000 of lens sales were derived from one YAG laser customer.
F-17
<PAGE>
LIGHTPATH TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Summarized financial information concerning the Company's reportable segments
for the respective years ended June 30, is shown in the following table. During
fiscal 1999, the Company changed its primary marketing objectives from primarily
traditional optics products to the development and marketing of passive
components for the optoelectronics segment of the telecommunications industry
and laser based products in the general optics product arena. Prior period
information has been conformed to the segments described above, where
applicable, which are based on the structure and internal organization of the
Company at June 30, 1999.
Opto- Traditional Corporate
Segment Information Electronics Optics And other (1) Total
- ------------------- ----------- ----------- ------------- -----
Revenues (2)
1999 $ 57,029 1,029,097 -- $ 1,086,126
1998 4,500 753,732 -- 758,232
Segment operating
loss (3)
1999 $(1,172,653) (211,218) (1,472,975) $(2,856,846)
1998 (498,755) (1,216,687) (1,837,590) (3,553,032)
Depreciation and
amortization
1999 $ 72,337 224,445 78,576 $ 375,358
1998 -- 217,363 85,144 302,507
Capital Expenditures
for segment assets
1999 $ 389,709 47,514 -- $ 437,223
1998 -- 250,857 -- 250,857
Total Assets
1999 $ 410,473 1,755,326 970,527 $ 3,136,326
1998 4,500 1,762,464 4,541,503 6,308,467
United Other foreign
Geographic Information States Germany Countries Total
- ---------------------- ------ ------- --------- -----
Revenues(4)
1999 $ 678,746 168,205 239,175 $ 1,086,126
1998 438,258 139,636 180,338 758,232
(1) Corporate functions include certain members of executive management, the
corporate accounting and finance function and other typical administrative
functions which are not allocated to segments. Corporate assets include
cash and cash equivalents, advances, prepaid expenses, unallocated property
and equipment and the Company's Investment in LightChip.
(2) There were no inter-segment sales during the years ended June 30, 1999 or
1998.
(3) In addition to unallocated corporate functions, management does not
allocate interest expense, interest income, other non-operating income and
expense amounts in the determination of the operating performance of the
reportable segments.
(4) Revenues attributed to foreign countries are export sales, and are based on
the destination of the shipment. The Company has no long lived assets in a
foreign country.
F-18
<PAGE>
LIGHTPATH TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
16. SUBSEQUENT EVENT
On July 28, 1999, LightPath completed a private placement for $1,000,000 of 6%
Convertible Debentures (the "Debentures"). The Debentures are immediately
convertible into approximately 570,000 shares of Class A common stock, at a
conversion price which is equal to the lower of 80% of the five day average
closing bid price of the Company's Class A common stock at (i) the date of
closing ($1.76) or (ii) the conversion date, until maturity July 2002. The
Debentures may be redeemed by the Company at 115% of the balance of the
outstanding principal plus accrued interest with 10 days notice to the holders.
Debenture holders also received warrants to acquire 427,350 shares of Class A
common stock. The warrant agreement provides for a conversion price of $2.20 per
share. The warrants are immediately exercisable and have a five year life.
Additionally, LightPath issued 150,000 warrants to the placement agent, with
terms identical to those issued to the Debenture holders. The value of the
warrants, aggregating approximately $835,000, will be recognized as an increase
to additional paid-in capital and as interest expense over the life of the
Debentures. Finally, LightPath will recognize an additional interest charge of
approximately $382,000 in the first quarter of fiscal year 2000 for the
"beneficial conversion feature" associated with the Debentures.
F-19
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has
duly caused this Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized.
LIGHTPATH TECHNOLOGIES, INC.
By: /s/ Donald E. Lawson September 7, 1999
--------------------- -----------------
Donald E. Lawson Date
Chief Executive Officer, President
In accordance with the Exchange Act, this amendment has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
/s/ Donald E. Lawson Chief Executive Officer, September 7, 1999
- --------------------------- President and Treasurer,
Donald E. Lawson Director (Principal Executive
Officer and Principal
Financial Officer)
/s/ Leslie A. Danziger Chairwoman of the Board September 7, 1999
- ---------------------------
Leslie A. Danziger
/s/ Katherine Dietze Director September 7, 1999
- ---------------------------
Katherine Dietze
/s/ Haydock H. Miller Jr. Director September 7, 1999
- ---------------------------
Haydock H. Miller Jr.
/s/ James L. Adler Jr. Director September 7, 1999
- ---------------------------
James L. Adler Jr.
/s/ Louis Leeburg Director September 7, 1999
- ---------------------------
Louis Leeburg
/s/ James A. Wimbush Director September 7, 1999
- ---------------------------
James A. Wimbush
4
EXHIBIT 23.1
CONSENT OF KPMG LLP, INDEPENDENT AUDITORS
The Board of Directors
LightPath Technologies, Inc.
We consent to incorporation by reference in the registration statements (No.'s
333-23511 and 333-23515) on Form S-8 and (No.'s 333-80119, 333-39641 and
333-47905) on Form S-3 of LightPath Technologies, Inc. of our report dated
August 10, 1999, relating to the balance sheets of LightPath Technologies, Inc.
as of June 30, 1999 and 1998, and the related statements of operations,
stockholders' equity and cash flows for the years then ended, which report
appears in the June 30, 1999, annual report on Form 10-KSB/A of LightPath
Technologies, Inc..
Our report dated August 10, 1999 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.
/s/ KPMG LLP
Albuquerque, New Mexico
September 7, 1999
