Lightpath Technologies Inc – ‘424B2’ on 11/14/97

As of:  Friday, 11/14/97   ·   Accession #:  950147-97-795   ·   File #:  333-39641

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Prospectus   —   Rule 424(b)(2)
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 424B2       Prospectus                                            21    126K 

Document Table of Contents

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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 13, 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                                    
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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.       

--------------------------------------------------------------------------------
                                  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.
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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.                        
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         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.                                    
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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.
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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.                                                     
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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                                                                   
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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                                                                         
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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
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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                                      
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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                                                                 
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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                                            
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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                                                                      
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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.                                                
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         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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 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.       

                                                        [Enlarge/Download Table]

                                                                      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)                                                                  
                                 -------------------------------------------------------------------------------
                                                                                                                
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%                                                      

(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                            
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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.                                                       
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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.                                                                  
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 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.                                                                       
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         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 13, 1997

21

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘424B2’ Filing		Date		First		Last			Other Filings
		11/19/97
Filed on:		11/14/97							10QSB
		11/13/97		1		21
		11/1/97		17		18
		10/13/97		12		20			DEF 14A,  PRE 14A
		9/15/97		12
		9/12/97		12
		9/11/97		2					10KSB40,  DEF 14A
		6/30/97		2		20			10KSB40
		2/22/97		13
		6/30/96		8		20			10KSB
		1/13/96		2
		12/7/95		20
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