As filed with the Securities and Exchange Commission on April 12, 2002


                                                      Registration No. 333-73832
================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549


                               Amendment No. 4 To
                                    FORM S-2


                          REGISTRATION STATEMENT UNDER
                           THE SECURITIES ACT OF 1933

                          LIGHTPATH TECHNOLOGIES, INC.
             (Exact name of registrant as specified in its charter)


            DELAWARE                                             86-0708398
  (State or other jurisdiction                                (I.R.S. Employer
of incorporation or organization)                           (Identification No.)


                 3819 Osuna, N.E., Albuquerque, New Mexico 87109
                                 (505) 342-1100
    (Address, including zip code, and telephone number, including area code,
                  of registrant's principal executive offices)



                                                        
                    Donna Bogue                             Copy to: Joseph M. Crabb, Esq.
       Chief Financial Officer and Treasurer               Squire, Sanders & Dempsey L.L.P
           LightPath Technologies, Inc.                         40 North Central Avenue
                  3819 Osuna, NE                                      Suite 2700
           Albuquerque, New Mexico 87109                        Phoenix, Arizona 85004
                  (505) 342-1100                               Telephone: (602) 528-4000
(Name, address, including zip code, and telephone              Facsimile: (602) 253-8129
number, including area code, of agent for service)


APPROXIMATE  DATE OF PROPOSED SALE TO PUBLIC:  As soon as practicable  after the
effective date of this Registration Statement.

     If any of the securities being registered on this form are to be offered on
a delayed or continuous  basis  pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]

     If the  registrant  elects to deliver its latest  annual report to security
holders, or a complete and legible facsimile thereof,  pursuant to Item 11(a)(1)
of this Form, check the following box. [ ]

     If this form is filed to  register  additional  securities  for an offering
pursuant to Rule 462 (b) under the  Securities  Act,  please check the following
box and list the Securities  Act  registration  statement  number of the earlier
effective registration statement for the same offering. [ ]

     If this Form is a  post-effective  amendment filed pursuant to Rule 462 (c)
under the  Securities  Act,  check the following box and list the Securities Act
registration  statement number of the earlier effective  registration  statement
for the same offering. [ ]

     If this Form is a  post-effective  amendment  filed pursuant to Rule 462(d)
under the  Securities  Act,  check the following box and list the Securities Act
registration  statement number of the earlier effective  registration  statement
for the same offering. [ ]

     If delivery of the  prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

                         CALCULATION OF REGISTRATION FEE



===================================================================================================================
                                                     Proposed maximum        Proposed maximum
  Title of each class of          Amount to be        offering price       aggregate offering         Amount of
securities to be registered        registered            per unit*                price*           registration fee
-------------------------------------------------------------------------------------------------------------------
                                                                                          
Options to purchase five
(5) shares of Class A
common stock, $0.01 par value    40,250 Options           $19.325              $777,831.25             $194.46
===================================================================================================================


*    Estimated  solely  for the  purpose of  calculating  the  registration  fee
     pursuant to Rules 457(c) and 457(g) under the  Securities  Act of 1933,  as
     amended,  based on the  average  of the high and low  prices  of a share of
     Class A Common Stock as reported on the Nasdaq  National Market on November
     16, 2001.  This average  price per share of $3.865  multiplied  by five (5)
     shares per Option comprises the proposed maximum offering price per unit.

THE REGISTRANT HEREBY AMENDS THIS  REGISTRATION  STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT  SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY  STATES THAT THIS REGISTRATION  STATEMENT
SHALL  THEREAFTER  BECOME  EFFECTIVE  IN  ACCORDANCE  WITH  SECTION  8(a) OF THE
SECURITIES  ACT OF  1933 OR  UNTIL  THIS  REGISTRATION  STATEMENT  SHALL  BECOME
EFFECTIVE  ON SUCH  DATE  AS THE  SECURITIES  AND  EXCHANGE  COMMISSION,  ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

================================================================================

THE  INFORMATION  IN THIS  PROSPECTUS  IS NOT COMPLETE  AND MAY BE CHANGED.  THE
SELLING SHAREHOLDERS MAY NOT SELL THESE SECURITIES PURSUANT TO THIS REGISTRATION
STATEMENT  UNTIL  THIS  REGISTRATION  STATEMENT  FILED WITH THE  SECURITIES  AND
EXCHANGE  COMMISSION IS DECLARED  EFFECTIVE.  THIS PROSPECTUS IS NOT AN OFFER TO
SELL THESE  SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

                              SUBJECT TO COMPLETION

                                   PROSPECTUS

            40,250 OPTIONS TO PURCHASE SHARES OF CLASS A COMMON STOCK

                          LIGHTPATH TECHNOLOGIES, INC.
                                3819 Osuna, N.E.
                          Albuquerque, New Mexico 87109
                            Telephone: (505) 342-1100

LightPath  Technologies,  Inc.,  a  Delaware  corporation  ("we",  "us"  or  the
"Company"), is issuing up to 40,250 options (the "Options") to acquire shares of
the  Company's  Class A common  stock,  $0.01 par value per share  (the  "Common
Stock") in connection  with the  settlement  (the  "Settlement"  or  "Settlement
Agreement")  of a class  action  lawsuit  involving  the  Company and the former
holders  of shares  of our Class  E-1,  Class  E-2 and Class E-3  common  shares
(collectively,  the "Class E" stock). As part of the Settlement  Agreement,  the
former  holders of our Class E shares who did not elect to be excluded  from the
Settlement  Agreement have been offered, in exchange for their settlement of the
class action lawsuit, the choice of either: (i) $0.40 per Class E share, or (ii)
an Option, for every one hundred (100) Class E shares held, to purchase five (5)
shares of our Class A Common Stock (the "Option  Shares"),  at an exercise price
of $3.73 per share of our  Class A Common  Stock,  subject  to  adjustment.  The
Options  are being  distributed  to those  former  Class E holders  who elect to
receive the Options among these settlement alternatives. See "Description of the
Options."  Under either  settlement  alternative,  former  Class E  shareholders
participating in the Settlement Agreement will also receive the redemption price
of $0.0001  per Class E share  held.  The  offering  period  terminates  15 days
following the delivery of the  prospectus  to the  non-excluded  class  members.
Class members must respond by letter to the Company  indicating  their  election
within the 15-day period. If a non-excluded  class member fails to make a timely
election,  the Company will deem such non-excluded  class member to have elected
to receive the cash alternative.  The Options may be exercised at any time prior
to 5:00 p.m.,  central time, on December 10, 2003, and shall be void thereafter.
Any  proceeds  that we receive from the exercise of the Options will be used for
general  corporate  purposes.  All of the Options  being  distributed  are being
offered  directly by us, and because  certain Class E holders have  indicated an
intention to opt out of the Settlement Agreement, there is no assurance that all
of the  Options  will be  issued.  We have  agreed to bear all the  expenses  of
registration of the Options in this  Prospectus.  No  underwriting  discounts or
commissions will be paid in connection with this offering.

The  Settlement  Agreement  requires that we offer the Options to former Class E
holders who did not elect to be excluded from the  settlement.  The market price
of our  Class A Common  Stock  has  declined  significantly  since  the time the
Settlement  Agreement was negotiated,  and the exercise price of the Options now
exceeds the market price of the  underlying  Class A Common Stock.  Based on the
current  market  price of the  Class A Common  Stock,  it is  economically  more
favorable for former Class E holders to receive $0.40 per Class E share formerly
held rather than to receive the Options. Accordingly, even though the Settlement
Agreement  requires  that we offer the  Options to former  Class E  holders,  we
recommend  that former  Class E holders  elect to receive  the cash  alternative
(i.e., $0.40 per Class E share formerly held) rather than the Options. We do not
intend to list the Options on any securities exchange and do not anticipate that
a trading  market for the Options  will  develop or be  maintained.  Our Class A
Common  Stock is  traded  in the  over-the-counter  market  through  the  Nasdaq
National  Market system under the symbol LPTH.  On November 16, 2001,  and March
13, 2002, the closing prices of the Class A Common Stock on the Nasdaq  National
Market system were $4.40 and $1.86 per share, respectively.  See "Price Range of
the Company's Class A Common Stock."

PROSPECTIVE  INVESTORS  SHOULD  CAREFULLY  CONSIDER  THE MATTERS SET FORTH UNDER
"RISK FACTORS," AT PAGE 9.

NEITHER  THE  SECURITIES  AND  EXCHANGE  COMMISSION  NOR  ANY  STATE  SECURITIES
COMMISSION HAS APPROVED OR  DISAPPROVED  OF THESE  SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

                The date of this prospectus is _______ __, 2002.

                                       1

                              AVAILABLE INFORMATION

     We file annual,  quarterly and current reports and other  information  with
the U.S. Securities and Exchange Commission.  You may read and copy any document
that we have filed at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington,  DC,  20549.  Please  call  the SEC at  1-800-SEC-0330  for  further
information  about the  operation of its public  reference  facilities.  Our SEC
filings  are also  available  to you free of  charge  at the  SEC's  web site at
http://www.sec.gov.

     Copies of publicly available  documents that we have filed with the SEC can
also be  inspected  and copied at the  offices of the  National  Association  of
Securities Dealers, Inc., 1735K Street, N.W., Washington, D.C. 20006.

     We have filed a registration statement on Form S-2 with the SEC that covers
the issuance of the Options  offered by this  prospectus.  This  prospectus is a
part of that registration statement,  but the prospectus does not include all of
the information  included in the  registration  statement.  We have also filed a
registration  statement  on Form S-3 with the SEC that  covers the resale of the
common stock underlying the Options offered by this prospectus. You should refer
to these  registration  statements for additional  information  about us and the
Options  being  offered  in  this  prospectus.  Statements  that we make in this
prospectus  relating to any  documents  filed as an exhibit to the  registration
statement  or any  document  incorporated  by  reference  into the  registration
statement  may not be complete  and you should  review the  referenced  document
itself for a complete understanding of its terms.

     The SEC allows us to  "incorporate by reference" to the information we file
with them, which means that we can disclose important information to you in this
prospectus by referring  you to those  documents.  The documents  that have been
incorporated  by reference  are an  important  part of the  prospectus,  and you
should be sure to review that  information  in order to understand the nature of
any  investment  by you in the common  stock.  We  incorporate  by reference the
documents listed below:

     +    our annual  report on Form  10-KSB for the fiscal  year ended June 30,
          2001;
     +    our  proxy   statement   relating  to  the  2001  Annual   Meeting  of
          Shareholders;
     +    our  quarterly  reports  on Form 10-Q for the  fiscal  quarters  ended
          September 30, 2001, and December 31, 2001;
     +    our current report on Form 8-K/A filed on October 11, 2000;


     +    our current reports on Form 8-K filed on January 4, 2002, February
          4, 2002 and April 3, 2002; and


     +    the   description  of  our  Class  A  Common  Stock  included  in  our
          registration statement on Form 8-A filed on January 13, 1996.

                                       2

     We will  provide you with copies of any of the  documents  incorporated  by
reference,  at no  charge to you,  however,  we will not  deliver  copies of any
exhibits  to  those   documents   unless  the  exhibit  itself  is  specifically
incorporated  by  reference.  If you would like a copy of any  document,  please
write or call us at:

                          LightPath Technologies, Inc.
                                3819 Osuna, N.E.
                          Albuquerque, New Mexico 87109
                            Attn: Investor Relations
                            Telephone: (505) 342-1100

     You should only rely upon the  information  included in or  incorporated by
reference into this prospectus or in any prospectus supplement that is delivered
to you.  We have  not  authorized  anyone  to  provide  you with  additional  or
different information. You should not assume that the information included in or
incorporated by reference into this  prospectus or any prospectus  supplement is
accurate  as of any date later than the date on the front of the  prospectus  or
prospectus supplement.

     This  prospectus  does not  constitute an offer of these  securities in any
state  where the  offer is not  permitted.  The  information  contained  in this
prospectus is accurate only as of the date of this prospectus, regardless of the
time of delivery of this prospectus or any sale of Class A Common Stock.

                           FORWARD-LOOKING STATEMENTS

     Throughout  this  prospectus  and  the  other  documents   incorporated  by
reference  into this  prospectus we make certain  "forward-looking"  statements.
These are statements about future events, results of operations,  business plans
and other  matters.  We use words such as  "expect",  "anticipate",  "intend" or
other similar words to identify forward-looking statements. These statements are
made based on our current knowledge and understanding.  However, there can be no
assurances  as to whether or not actual  results will be  consistent  with these
statements. In fact, actual events or results could vary dramatically from these
statements as a result of among other factors:

     +    Economic conditions, domestically and internationally

     +    Technological developments

     +    Industry trends

     +    Risk factors described in this prospectus.

We have no  obligation  to update the  forward-looking  statements  made in this
prospectus or incorporated by reference herein.

                                       3

                               PROSPECTUS SUMMARY

THE  INFORMATION  IN THIS  PROSPECTUS  IS NOT COMPLETE  AND MAY BE CHANGED.  THE
COMPANY MAY NOT SELL THESE SECURITIES  PURSUANT TO THIS  REGISTRATION  STATEMENT
UNTIL  THIS  REGISTRATION  STATEMENT  FILED  WITH THE  SECURITIES  AND  EXCHANGE
COMMISSION IS DECLARED EFFECTIVE.  THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES  AND IT IS NOT  SOLICITING  AN OFFER TO BUY THESE  SECURITIES  IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

THE  FOLLOWING  SUMMARY  SHOULD BE READ TOGETHER  WITH,  AND IS QUALIFIED IN ITS
ENTIRETY BY, THE MORE DETAILED INFORMATION IN OTHER SECTIONS OF THIS PROSPECTUS.
YOU SHOULD  CAREFULLY  CONSIDER THE FACTORS  DESCRIBED  UNDER THE HEADING  "RISK
FACTORS."

                                   THE COMPANY

     LightPath is a  manufacturer  of families of  high-performance  fiber-optic
collimator  and isolator  products,  GRADIUM(R)  glass lenses and other  optical
materials to produce  products that  manipulate  light.  We operate  through two
operating segments;  optoelectronics and fiber  telecommunications  ("telecom"),
and traditional  optics (e.g. lenses used in lasers,  data storage,  bar coding,
medical equipment, consumer optics, etc.). We manufacture and sell the following
types of telecom  products:  (i)  collimators,  (ii)  isolators and (iii) molded
aspheric lenses. Collimators are assemblies that are used to straighten and make
parallel diverging light as it exits a fiber. An isolator is used to prevent the
back  reflection of optical  signals that can degrade  transmitter and amplifier
performance.  Molded  aspheres are used in telecom  applications to collimate or
couple light as it emerges from a fiber. Collimators, isolators, molded aspheres
and other optical  components  are used  throughout  fiber optic  systems.  Such
systems are used by the  telecommunications  industry  with a goal of  increased
bandwidth,  through  the  development  of all  optical  networks,  by  combining
multiple  light  streams from  individual  transmissions  onto a single  optical
fiber.  We  are  also  planning  to  develop  other  products   related  to  the
optoelectronics   and   telecommunications   industry   through   licenses   and
relationships with other manufacturers.

     We also perform research and development for optical solutions in the fiber
telecommunications  and  traditional  optics  markets.  On April  14,  2000,  we
acquired  Horizon  Photonics,   Inc.  ("Horizon"),   a  California   corporation
originally founded in July 1997. Horizon is engaged in the automated  production
of passive optical components for the telecommunications and data communications
markets.  Horizon  manufactures  isolator  products at their Walnut,  California
facility. On September 20, 2000, the Company acquired Geltech,  Inc., a Delaware
corporation,  ("Geltech"),  a manufacturer of precision molded aspherical optics
used in the active telecom components market to provide a highly efficient means
to couple laser diodes to fibers or waveguides.

     We also  manufacture  traditional  optics products  including:  (i) GRADIUM
glass products, lenses, prisms and (ii) molded aspheric lenses. GRADIUM glass is
an optical  quality  glass  material  with varying  refractive  indices used for
optics such as lenses for YAG lasers.  Molded  aspheres are used in  non-telecom
applications such as optical data storage,  high precision printing,  bar coding
and by manufacturers of medical equipment.  In addition, we manufacture a family
of traditional optics including laser flow tubes,  polished cylinders and flats,
and prisms.

     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

                                       4

conventional  lens  systems.  We  believe  that  GRADIUM  glass  lenses  provide
advantages  over  conventional  lenses for  certain  applications.  By  reducing
optical aberrations and the number of lenses in an optical system, GRADIUM glass
can provide more efficient  light  transmission  and greater  brightness,  lower
production  costs, and a simpler,  smaller product.  While we believe that other
researchers have sought to automate production of passive optical components and
produce  optical  quality lens material with the properties of GRADIUM glass, we
are not  aware of any  other  person or firm  that has  developed  a  repeatable
manufacturing process comparable to ours or the ability to produce such material
on a prescribable basis.

     Our management and marketing  focus is organized to serve two markets:  (1)
optoelectronics and fiber  telecommunications  ("telecom"),  and (2) traditional
optics.  Optoelectronics  technologies  consist of an overlap of  photonics  and
electronics  and are key enablers of  "Information  Age"  technologies,  such as
fiber optic  communications,  optical  data  storage,  laser  printers,  digital
imaging, and sensors for machine vision and environmental monitoring. We believe
that GRADIUM glass and other optical  materials can  potentially be marketed for
use in many  optics  and  optoelectronics  products.  The  current  focus of our
development  efforts has been to develop new  products  based on our optical and
automation  platforms  in  the  areas  of  isolators,  next  generation  optical
subassemblies, diffractive gratings, waveguides, switches, micro-collimators and
lens arrays for use in the telecommunications field as well as new GRADIUM glass
materials to be used in various telecom applications.

                                  THE OFFERING

     The  Options are to be issued  pursuant to the "Order and Final  Judgment,"
entered on November 9, 2001, in "LIGHTPATH  TECHNOLOGIES,  INC., V. LEEBURG,  ET
AL.," C.A.  No.  18021,  commenced  on May 2,  2000,  in the  Delaware  Court of
Chancery,  New Castle  County,  modifying  and  approving  the  "Stipulation  of
Settlement,"  filed on November 17, 2000. The Delaware Action  involved  certain
rights associated with the Company's Class E Stock. In particular,  the terms of
the  Class  E  Stock  provided  that  if the  Company  failed  to  meet  certain
performance  benchmarks by June 30, 2000, all rights associated with the Class E
Stock would expire as of that date, and all such shares would be redeemed by the
Company no later than  September 30, 2000.  Prior to June 30, 2000,  uncertainty
arose with  respect to the rights  that the  holders of the Class E Stock  would
have to vote their  shares of the  expired but  unredeemed  Class E Stock at the
Company's  2000  annual  meeting  of  shareholders.   Accordingly,  the  Company
commenced the Delaware action, in which it sought declaratory  judgment relating
to the rights of the  approximately  250 former Class E shareholders  to vote at
the 2000 annual meeting of shareholders, the Company's right to redeem the Class
E shares,  and for certification of the former holders of the Class E Stock as a
class and the named defendants as its representatives. The named defendants were
Donald E. Lawson,  the Company's then President and Chief Executive  Officer,  a
Director of the Company,  and holder of an aggregate of 25,000 shares of Class E
Stock, Louis G. Leeburg, a Director of the Company who owns or advises owners of
502,877 shares of Class E Stock,  and William  Leeburg,  who owns or controls an
aggregate of 21,816 shares of Class E Stock.  The former  holders of the Class E
Stock were certified as a class and the named  defendants  were certified as the
class  representatives.

                                       5

     The original  settlement  offer was negotiated by Robert Ripp,  Chairman of
the Board,  on behalf of the  Company,  and Louis G.  Leeburg,  on behalf of the
defendant class.  Under the terms of the original  settlement  offer, the former
Class E  shareholders  who did not  elect to be  excluded  from  the  settlement
agreement were entitled to receive either $0.40 per share for each Class E share
held, or an option, for every one hundred (100) Class E shares held, to purchase
one (1) share of the Company's  Class A common stock.  A settlement  hearing was
held on January 8, 2001,  at which class  certification  issues,  including  the
necessity of an opt out  provision,  were  addressed.  Because of the passage of
time since the settlement  hearing and the  determination  to include an opt out
provision,  and the change in market conditions during the interim,  counsel for
the Company proposed,  and counsel for the former Class E shareholders accepted,
an  increase  in the  option  alternative.  Accordingly,  under the terms of the
Settlement Agreement,  the Class E shareholders who did not elect to be excluded
are entitled to receive  either $0.40 per share for each Class E share held,  or
an option, for every one hundred (100) Class E shares formerly held, to purchase
five (5) shares of the  Company's  Class A Common Stock at an exercise  price of
$3.73 per share.

     Due  primarily  to a decline in the market  value of the  Company's  common
stock, the option alternative is no longer  approximately  equal in value to the
cash alternative.  The option  alternative was based on the trading price of the
Company's  Class A  common  stock  at that  time.  At the  time of the  original
settlement  negotiations,  the Company's  Class A Common Stock (par value $0.01)
was trading at approximately $40 per share.

     With the passage of time, the market price of the Company's  Class A common
stock declined to  approximately  $4 per share, or about 10% of the market price
at the time of the original settlement offer,  thereby prompting a renegotiation
of the  terms  of  the  settlement  offer.  The  revised  settlement  offer  was
negotiated by Robert Ripp, Chairman of the Board, on behalf of the Company,  and
Louis G.  Leeburg  and  Robert  D.  Goldberg,  class  counsel,  on behalf of the
defendant class. In exchange for a disproportionately  small increase,  from one
(1) to five (5), in the number of Class A shares  under the option  alternative,
the Company  agreed to leave the cash  alternative at $0.40 per share of Class E
Stock.  Under  either  settlement  alternative,   former  Class  E  shareholders
participating in the Settlement Agreement will also receive the redemption price
of $0.0001 per Class E share held. Accordingly, as a result of the renegotiation
of the terms of the Settlement  Agreement and of the significant  decline in the
price of the  underlying  Class A Common Stock,  the option  alternative  is now
worth less than the cash alternative. This disparity in value represents the key
advantage  of the  cash  alternative  over  the  option  alternative.  With  the
exception of possible  favorable tax treatment (See "CERTAIN  FEDERAL INCOME TAX
CONSEQUENCES"),  the option  alternative is  economically  less favorable to the
former Class E holders than the cash alternative.

     The date by which the former  holders of the Class E Stock were required to
make their decision  about whether to opt out of the proposed  settlement of the
Delaware action was December 24, 2001. The information provided to class members
to assist them in making this decision included:

          a.   the  Stipulation  of  Settlement,  attached  to the  Form  S-2 as
               Exhibit 99.1, which includes a detailed discussion of the history
               of and allegations underlying the litigation; and

                                       6

          b.   the Notice of  Pendency  of Class  Action,  Class  Determination,
               Proposed  Settlement,  Settlement  Hearing  and Right to  Appear,
               attached  to the Form S-2 as  Exhibit B to  Exhibit  99.1,  which
               includes  the  history  of the  litigation,  and  summarizes  the
               evidence adduced at trial.


     The foregoing  documents were provided to class members in accordance  with
procedural  requirements of the Delaware  Chancery Court,  and were on file with
the Court and publicly  available prior to  distribution to class members.  Upon
receipt of these documents,  approximately  63 of the 250 class members,  former
holders of approximately 12.5% of the Class E Stock, attempted to opt out of the
Settlement Agreement. However, the opt out forms for the plaintiffs in the Texas
action,  which comprise  approximately 60 of these 63 purportedly excluded class
members,  are executed by their attorney.  The execution of the opt out forms by
counsel for the Texas plaintiffs  appears to be inconsistent  with the authority
granted  to  such  attorney  under  the  engagement  letter  between  the  Texas
plaintiffs  and their  counsel.  Further,  federal  caselaw  raises the issue of
whether due process concerns regarding adequate notice prohibit an attorney from
executing an opt-out form on behalf of class members.  Accordingly, the question
has arisen regarding whether this  noncompliance  with proper opt out procedures
invalidates the  effectiveness of the Texas  plaintiffs'  attempts to opt out of
the  Settlement  Agreement.  This question is currently  unresolved but has been
submitted to the Delaware court for resolution.


     The Company is also involved in  litigation  relating to the Class E shares
in Harris County,  Texas. In the Texas action,  the  plaintiffs,  certain former
Class E shareholders,  allege that the actions of the Company, and certain named
individuals,  leading up to and  surrounding  the Company's 1995 proxy statement
constitute fraud, negligent misrepresentation,  fraudulent inducement, breach of
fiduciary duty and civil  conspiracy.  In general,  the Texas plaintiffs  allege
misrepresentations  and omissions in connection  with a request from the Company
that its  shareholders  consent to a  recapitalization,  resulting in a 5.5 to 1
reverse  stock  split  and the  issuance  of  certain  Class E Stock.  The Texas
plaintiffs  further allege that, as a result of the  defendants'  actions,  they
were induced to consent to the Company's  recapitalization.  Management believes
that the  allegations  underlying the Texas action are without merit. On October
23, 2001,  the Company  participated  in a mediation  proceeding  related to the
Texas action.  Nonetheless,  the Texas  plaintiffs,  who are comprised of former
holders of approximately 12.2% of the Class E Stock, have purportedly elected to
opt out of the  Settlement  Agreement,  and will  proceed  with the Texas action
pending resolution in the Delaware court of the opt out matter.

     The  Company  will send  copies of the  prospectus  to all  former  Class E
shareholders who did not elect to be excluded from the Settlement Agreement. The
non-excluded  former  Class E  shareholders  will have fifteen (15) days to make
their election between the cash and the Options. Apart from the various required
notices related to the Settlement  Agreement,  no other communications have been
or will be made to the Class E  Shareholders.  Copies of: (1) the Stipulation of
Settlement;   (2)  the  Supplemental  Notice  of  Class  Action,   Class  Action
Determination and Approval of Class Action  Settlement;  and (3) Order and Final
Judgment have been filed as exhibits to the registration statement of which this
prospectus is a part.

                                       7

SUMMARY OF THE OFFERING

Securities Offered....................... A maximum of 40,250 options to acquire
                                          five  (5)  shares  of  Class A  common
                                          stock,   $0.01  par   value,   of  the
                                          Company.

Determination of Offering Price.......... The exercise price of the Options will
                                          be $3.73  per  share of the  Company's
                                          Class A Common Stock.

Class A Common Stock Outstanding
as of December 31, 2001.................. 19,478,667 shares(1)(2).

Use of Proceeds ......................... The Options  are being  issued as part
                                          of  a   settlement  of  class   action
                                          litigation  and  will  not  result  in
                                          any  cash  proceeds  to  the  Company.
                                          Proceeds from exercises of the Options
                                          will  be  used  for  general corporate
                                          purposes.

Risk Factors ............................ Prospective investors should carefully
                                          consider the  matters set  forth under
                                          "Risk Factors."

Nasdaq National Market Symbol............ "LPTH"

Settlement Agreement..................... The Options are being offered pursuant
                                          to the Settlement Agreement.  Due to a
                                          decline  in the  market  price  of the
                                          Class A Common  Stock  since  the time
                                          the    Settlement     Agreement    was
                                          negotiated, the Options have decreased
                                          in value  and are now  (excluding  the
                                          impact of tax treatment)  economically
                                          less    favorable    than   the   cash
                                          alternative  (i.e.,  $0.40 per Class E
                                          share formerly held). Accordingly, the
                                          Company recommends that former Class E
                                          holders  elect  to  receive  the  cash
                                          settlement rather than the Options.

(1) Does not include shares underlying options outstanding to purchase 4,182,241
shares of Class A Common Stock which are  exercisable at option  exercise prices
ranging from $.63 to $51.56 per share and approximately  540,000 shares of Class
A Common  Stock  reserved  for  issuance  upon  future  grants of options  under
LightPath's stock option plans at December 31, 2001.

(2) Does not  include an  aggregate  of 840,392  shares of Class A Common  Stock
consisting of (i) 299,300  shares of Class A Common Stock issuable upon exercise
of private  placement  and other  warrants;  and (ii) 541,092  shares of Class A
Common Stock  issuable upon  conversion of the 127 remaining  shares of Series F
Preferred Stock (minimum of 292,483 shares based on the fixed  conversion  price
at closing) as of December 31, 2001.

                                        8

                                  RISK FACTORS

THE FOLLOWING RISK FACTORS SHOULD BE READ BY YOU TOGETHER WITH THE MORE DETAILED
INFORMATION  INCLUDED AT OTHER SECTIONS OF THIS  PROSPECTUS AND  INCORPORATED BY
REFERENCE IN THIS PROSPECTUS  BEFORE  PURCHASING THE SECURITIES  OFFERED HEREBY.
OUR FISCAL YEAR ENDS ON JUNE 30 AND REFERENCES TO YEARS IN THIS PROSPECTUS REFER
TO OUR FISCAL YEAR ENDED AS OF JUNE 30 OF THE REFERENCED CALENDAR YEAR.

RISKS RELATED TO THE OFFERING

     THE OPTION ALTERNATIVE IS ECONOMICALLY UNFAVORABLE.

     The Settlement Agreement requires that we offer the Options to former Class
E holders who did not elect to be excluded from the settlement. The market price
of the Company's Class A Common Stock has declined  significantly since the time
the Settlement  Agreement was negotiated,  and the exercise price of the Options
now exceeds the market price of the  underlying  Class A Common Stock.  Based on
the current market price of the Class A Common Stock,  it is  economically  more
favorable for former Class E holders to receive $0.40 per Class E share formerly
held rather than to receive the Options. Accordingly, even though the Settlement
Agreement  requires  that we offer the  Options to former  Class E  holders,  we
recommend  that former  Class E holders  elect to receive  the cash  alternative
(i.e., $0.40 per Class E share formerly held) rather than the Options.

OUR STOCK PRICE IS VOLATILE.

Broad market fluctuations or fluctuations in our operations may adversely affect
the market  price of our  Common  Stock.  The  market  for our  Common  Stock is
volatile. The trading price of our Common Stock has been and will continue to be
subject to:

     -    volatility  in the trading  markets  generally  and in our  particular
          market segment;
     -    significant  fluctuations  in  response  to  quarterly  variations  in
          operating results;
     -    announcements  regarding our business or the business of our customers
          or competitors;
     -    changes in prices of our or our competitors' products and services;
     -    changes in product mix;
     -    changes in revenue and revenue  growth  rates;  and - other  events or
          factors.

Statements  or  changes  in  opinions,  ratings or  earnings  estimates  made by
brokerage firms or industry analysts relating to the markets in which we operate
or expect to operate  could have an  adverse  effect on the market  price of our
Common  Stock.  In  addition,  the  stock  market  as a  whole,  as  well as our
particular market segment,  have from time to time experienced extreme price and
volume  fluctuations  which have particularly  affected the market price for the
securities  of many  companies  and  which  often  have  been  unrelated  to the
operating performance of these companies.

                                       9

     HOLDERS MAY NOT REALIZE PROCEEDS FROM THE SALE OF OPTION SHARES.

Holders of Options may not be able to realize  any  proceeds  from the  Options.
Holders will only be able to realize proceeds if they exercise their Options and
then subsequently sell the underlying Option Shares for a price greater than the
Exercise  Price of the Option.  As such,  the  potential  proceeds that could be
realized  from the  exercise  of the Options  and the  subsequent  resale of the
underlying Option Shares will depend upon the trading price of the Common Stock,
which is subject to substantial  risk and volatility.  There can be no assurance
that the trading price of the Common Stock will ever exceed the Option  Exercise
Price.  If a  holder  exercises  Options  but  does  not  immediately  sell  the
underlying Option Shares,  the trading price of the Common Stock could remain at
or decline to a level below the Option Exercise Price. Accordingly,  holders who
exercise Options but are unable to sell the underlying  Option Shares at a price
greater than the Exercise Price could lose money.

     DECLARATION  OF  DIVIDENDS TO  SHAREHOLDERS  IN THE  FORESEEABLE  FUTURE IS
UNLIKELY.

Our  Board  has  never  declared  a  dividend  on our  Common  Stock.  We do not
anticipate paying dividends on the Common Stock in the foreseeable future. It is
anticipated  that  earnings,  if any, will be reinvested in the expansion of our
business.

     A PUBLIC MARKET FOR THE OPTIONS IS UNLIKELY TO DEVELOP.

The Options have no established  trading market and it is unlikely that any such
market will develop or, if one develops, that it will be sustained.  The Company
does not intend to apply to list the Options on any stock  exchange.  Holders of
the Options may be unable to sell or  otherwise  realize any  proceeds  from the
Options for an extended period of time, if at all.

     THE SETTLEMENT AGREEMENT WAS NEGOTIATED BY DIRECTORS OF THE COMPANY.

The named  defendants  in the Delaware  action  include  Donald E.  Lawson,  the
Company's  then  President  and Chief  Executive  Officer  and a Director of the
Company,  and Louis G.  Leeburg,  a  Director  of the  Company.  The  Settlement
Agreement was negotiated by Robert Ripp, Chairman of the Board, on behalf of the
Company, and Mr. Leeburg, on behalf of the defendant class. Although Mr. Leeburg
owns or advises  owners of 502,877  shares of Class E Stock and was certified as
one of the class  representatives  along with the other  named  defendants,  Mr.
Leeburg  was a director  of the  Company at the time of the  negotiation  of the
Settlement Agreement.  Although the Company believes the terms of the Settlement
Agreement are fair,  former Class E holders should be aware of the  relationship
between the Company and the named class  representatives,  including Mr. Leeburg
who negotiated the Settlement Agreement on behalf of the class.

                                       10

RISKS RELATED TO OUR FINANCIAL RESULTS

     WE HAVE A HISTORY OF LOSSES AND MAY CONTINUE TO INCUR LOSSES.

We incurred net losses of $60.8  million and $15.6  million for the fiscal years
ended June 30, 2001 and 2000, respectively.  We had accumulated deficits of $105
million  and  $133   million  as  of  June  30,  2001  and  December  31,  2001,
respectively.  In June 2001,  we  announced  lower net revenue  guidance for our
fiscal year  ending June 30, 2002 from $85 million to $35-55  million due to the
unanticipated    widespread    softening   of   the   U.S.   economy   and   the
telecommunications   industry  in   particular.   We  have   experienced   order
cancellations  and extensions of product shipment dates by our customers who are
adjusting their inventory  levels in response to slower industry  growth.  These
cancellations  and extensions  adversely impact our revenues and could result in
higher  inventory  levels  than  required  to support  our sales  levels.  These
conditions may  significantly  delay, and could prevent,  our ability to achieve
profitability.  We expect to continue to incur significant product  development,
sales and marketing and administrative  expenses, and, as a result, we will need
to  generate  increased  revenues to achieve  profitability.  Even if we achieve
profitability, given the competition in, and the evolving nature of, the optical
networking market, we may not be able to sustain or increase  profitability on a
quarterly or annual basis. As a result,  we will need to generate  significantly
higher  revenues  while  containing  costs and  operating  expenses if we are to
achieve profitability.

     WE FACE ORDER  CANCELLATIONS  AND  EXTENSIONS OF PRODUCT  SHIPMENT DATES BY
SOME OF OUR CUSTOMERS.

Our sales are  generally  made  pursuant to purchase  orders that are subject to
cancellation,  modification or rescheduling without significant penalties to our
customers.  We have recently  experienced order  cancellations and extensions of
product  shipment  dates by some of our  customers.  If  these or other  current
customers stop placing orders,  or further reduce orders,  we may not be able to
replace these orders with orders from new customers. The majority of our current
customers  do not  have  any  minimum  purchase  obligations,  and they may stop
placing  orders with us at any time,  regardless  of any forecast  they may have
previously provided.  The loss of any of our key customers or further reductions
in sales to these  customers  would  reduce  our net  revenues  from the  levels
currently expected.

                                       11

     WE HAVE ONLY  RECENTLY  BEGUN  SELLING  PRODUCTS TO THE  TELECOMMUNICATIONS
INDUSTRY.

We  have  only   generated   revenues   from  the  sale  of   products   to  the
telecommunications  industry  since fiscal 1999.  Through June 1996, our primary
activities  were basic research and  development  of glass material  properties.
Moreover,  our ability to accurately forecast revenues is impacted by weaknesses
and  uncertainties   regarding  overall  demand  within  the  telecommunications
industry,  inventory  levels within the industry,  sudden order  reductions  and
cancellations  by  customers,  lower backlog of customer  orders,  and potential
pricing  pressures  that may arise  from  supply/demand  conditions  within  the
industry. Because we have only recently begun to sell these products, we have in
the past and may in the future be unable to  accurately  forecast  our  revenues
from  sales  of  these  products,  and we  have  limited  meaningful  historical
financial  data  upon  which  to plan  future  operating  expenses.  Many of our
expenses are fixed in the short term,  and we may not be able to quickly  reduce
spending  if  our   revenue  is  lower  than  we  project.   Major  new  product
introductions  will also result in  increased  operating  expenses in advance of
generating revenues,  if any. Therefore,  net losses in a given quarter could be
greater than expected.  We may not be able to address the risks  associated with
our limited  operating  history in an emerging market and our business  strategy
may not be sustainable.  Failure to accurately  forecast our revenues and future
operating  expenses could cause  quarterly  fluctuations in our net revenues and
may result in volatility or a decline in our stock price.

     OUR  PRODUCTS  ARE AT AN EARLY  STAGE OF  DEVELOPMENT  AND MAY NOT  ACHIEVE
MARKET ACCEPTANCE.

Many of our telecommunications products are still in the introductory phase, and
our current line of GRADIUM  products  and other  traditional  optics,  have not
generated  sufficient  revenues  to sustain  operations.  While we  believe  our
existing products are commercially viable, we anticipate the need to educate the
optical components market in order to generate market demand and market feedback
may require us to further  refine  these  products.  Development  of  additional
product lines will require  significant further research,  development,  testing
and marketing  prior to  commercialization.  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.

     OUR PRODUCTS HAVE NOT BEEN DEMONSTRATED TO BE COMMERCIALLY SUCCESSFUL.

Our collimator products have not yet achieved broad commercial  acceptance,  our
isolator sales first entered the commercial  production phase in April 2000 with
one significant  customer and our molded aspheres telecom  applications are new.
Although  we  are  engaged  in  negotiations   and  discussions  with  potential
customers,  there can be no  assurance  that any such  discussions  will lead to
development of commercially viable products or significant  revenues, if any, or
that any  products  currently  existing  or to be  developed  in the future will
attain sufficient market acceptance to generate  significant  revenues.  We must
also satisfy industry-standard  Telcordia testing on telecommunication  products
to meet customer requirements,  as well as satisfy prospective customers that we
will be able to meet their demand for  quantities  of products,  since we may be
the sole  supplier and  licensor.  We do not have  demonstrated  experience as a

                                       12

manufacturer for all our product lines and have limited financial resources.  We
may be unable  to  accomplish  any one or more of the  foregoing  to the  extent
necessary to develop market acceptance of our products.

Although our traditional  optics products have been accepted  commercially,  the
benefits of the GRADIUM  glass line are not widely  known.  In order to persuade
potential  customers  to  purchase  GRADIUM  products,  we 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
unrelated to us to develop a repeatable, consistent process for producing lenses
with  variable  refractive  indices.  Prospective  customers  will  need to make
substantial  expenditures in order to redesign  products to incorporate  GRADIUM
lenses.  There  can be no  assurances  that  potential  customers  will view the
benefits of our products as sufficient to warrant such design expenditures.

     WE DEPEND ON A FEW KEY CUSTOMERS.

In  the  fiscal  year  ended  June  30,  2001,  Agere  Systems,   Inc.,  Corning
Incorporated  and JDS  Uniphase  accounted  for 44%,  7.4%,  and 5.2% of our net
revenues,  respectively.  We anticipate that our operating results will continue
to depend on sales to a relatively  small number of significant  customers.  The
loss of any of these customers,  or a significant reduction in sales to any such
customers, could adversely affect our revenues.

RISKS RELATED TO THE OPTICAL NETWORKING INDUSTRY

     SALES OF OUR  PRODUCTS  DEPENDS  UPON  DEPLOYMENT  OF OPTICAL  NETWORKS  TO
SATISFY INCREASED BANDWIDTH REQUIREMENTS.

Our future  success  depends on the  continuing  increase  in the amount of data
transmitted  over  communications  networks,  or  bandwidth,  and the  growth of
optical  networks to meet the increased  demand for  bandwidth.  If the Internet
does not continue to expand as a widespread communications medium and commercial
marketplace,  the need for significantly increased bandwidth across networks and
the market for optical networking  products may not continue to develop.  Future
demand for our  products is  uncertain  and will depend to a great degree on the
continued growth and upgrading of optical networks.  If the growth and upgrading
of optical networks does not continue,  sales of our products may decline, which
would adversely affect our revenues.

     THE OPTICAL NETWORKING MARKET IS NEW AND UNPREDICTABLE AND CHARACTERIZED BY
RAPID TECHNOLOGICAL CHANGES AND EVOLVING STANDARDS.

The optical  networking  market is relatively new and is  characterized by rapid
technological change,  frequent new product  introductions,  changes in customer
requirements and evolving industry standards.  Because this market is relatively
new,  it is  difficult  to predict its  potential  size or future  growth  rate.
Widespread  adoption of optical  networks  is  critical  to our future  success.
Potential  end-user customers who have invested  substantial  resources in their
existing  copper lines or other  systems may be reluctant or slow to adopt a new

                                       13

approach,  like optical  networks.  Our success in  generating  revenues in this
emerging market will depend on, among other things:

     -    maintaining and enhancing our relationships with our customers;
     -    the  education of potential  end-user  customers  and network  service
          providers about the benefits of optical networks; and
     -    our ability to  accurately  predict  and develop our  products to meet
          industry standards.

If we fail to address changing market conditions,  the sales of our products may
decline, which would adversely impact our revenues.

     WE MUST INCREASE OUR SALES  VOLUMES,  REDUCE OUR COSTS OR INTRODUCE  HIGHER
MARGIN PRODUCTS TO OFFSET  ANTICIPATED  REDUCTIONS IN THE AVERAGE SELLING PRICES
OF OUR PRODUCTS.

We have  experienced  decreases  in the  average  selling  prices of some of our
products,  including most of our passive component products.  We anticipate that
as products in the optical component and module market become more commoditized,
the  average  selling  prices  of our  products  may  decrease  in  response  to
competitive pricing pressures,  new product introductions by us, our competitors
or other  factors.  The  optical  component  and module  market is  experiencing
extreme  volatility  as a result of lower  product  demand,  which  will make it
difficult  for us to increase our sales  volume.  If we are unable to offset the
anticipated  decrease  in our average  selling  prices by  increasing  our sales
volumes or product  mix, our net revenues  and gross  margins will  decline.  In
addition,  to maintain or improve our gross margins,  we must continue to reduce
the  manufacturing  cost of our products,  and we must develop and introduce new
products and product  enhancements with higher margins. If we cannot maintain or
improve our gross  margins,  our financial  position may be harmed and our stock
price may decline.

RISKS RELATED TO OUR BUSINESS

     OUR FUTURE  SUCCESS  DEPENDS ON OUR  ABILITY  TO DEVELOP  AND  SUCCESSFULLY
INTRODUCE NEW AND ENHANCED PRODUCTS THAT MEET THE NEEDS OF OUR CUSTOMERS.

Our future success depends on our ability to anticipate our customers' needs and
develop  products  that address  those needs.  Introduction  of new products and
product  enhancements  will  require  that we  effectively  transfer  production
processes  from research and  development  to  manufacturing  and coordinate our
efforts with the efforts of our suppliers to rapidly  achieve  efficient  volume
production.  If we fail to effectively  transfer production  processes,  develop
product  enhancements  or  introduce  new  products  that  meet the needs of our
customers as scheduled, our net revenues may decline.

     IF WE ARE UNABLE TO SUCCESSFULLY INTEGRATE ACQUIRED COMPANIES, OUR BUSINESS
MAY BE ADVERSELY AFFECTED.

During the calendar  year ended  December 31, 2000, we acquired both Horizon and
Geltech in separate transactions.  The efficient integration of these businesses
into our  organization  will be  important to our  success.  If our  integration

                                       14

efforts prove to be unsuccessful,  our business will suffer.  We have spent, and
expect  to  continue  to  spend,  significant  financial,  management  and other
resources to integrate  these  businesses into our  organization.  Our headcount
increased substantially as a result of the acquisitions, and these new employees
must be integrated  with our existing  employees.  Both Horizon and Geltech were
privately  held and may  require  substantial  investments  in  operational  and
financial  infrastructure to ensure that their systems and processes  adequately
support operating as a publicly held organization.  Each of these  organizations
will also need additional  investments in manufacturing  infrastructure in order
to  develop  new  products  and  ramp up  production  volumes.  There  can be no
assurances  that we will be able to retain  the key  employees  of  Horizon  and
Geltech.  We have limited experience with integrating  acquired  businesses into
our organization.  Our integration  efforts may not be successful and may result
in unanticipated operations problems, expenses and liabilities and the diversion
of management attention.  If we are unable to integrate these companies into our
organization  in a timely and effective  manner,  our business and our operating
results will be adversely affected.

We  anticipate  that in the future,  as part of our  business  strategy,  we may
continue to make strategic acquisitions of complementary companies,  products or
technologies. In the event of any further future acquisitions, we could:

     -    issue  stock that would  dilute our current  stockholders'  percentage
          ownership;
     -    incur debt;
     -    assume liabilities; or
     -    incur  expenses  related  to  in-process   research  and  development,
          amortization of intangible assets.

Any future acquisitions also could involve numerous risks, including:

     -    problems   associated   with   combining   the  acquired   operations,
          technologies or products;
     -    unanticipated costs or liabilities;
     -    diversion of management's attention from our core business;
     -    adverse effects on existing business  relationships with suppliers and
          customers;
     -    risks  associated with entering markets in which we have no or limited
          prior experience; and
     -    potential  loss of key employees,  particularly  those of the acquired
          businesses.

We cannot assure that we will be able to successfully  integrate any businesses,
products,  technologies or personnel that we might acquire in the future,  which
may harm our business.

     COMPETITION  MAY INCREASE,  WHICH COULD REDUCE OUR SALES AND GROSS MARGINS,
OR CAUSE US TO LOSE MARKET SHARE.

Competition  in the optical  component  and module market in which we compete is
intense.  Many of our  competitors  are large public  companies that have longer
operating histories and significantly  greater financial,  technical,  marketing
and other  resources than we have. As a result,  these  competitors  are able to
devote greater  resources than we can to the  development,  promotion,  sale and
support of their  products.  In  addition,  the market  capitalization  and cash
reserves of several of our  competitors  are much  larger  than ours,  and, as a
result,  these  competitors  are much better  positioned  than we are to acquire

                                       15

other companies in order to gain new  technologies or products that may displace
our product  lines.  Such  acquisitions  could give our  competitors a strategic
advantage.  For  example,  if our  competitors  acquire  any of our  significant
customers,  these customers may reduce the amount of products they purchase from
us.  Alternatively,  some of our  competitors  may spin-out new companies in the
optical   component  and  module  market.   These  companies  may  compete  more
aggressively than their former parent companies due to their greater  dependence
on  our  markets.   In  addition,   many  of  our  potential   competitors  have
significantly  more established sales and customer support  organizations,  much
greater  name  recognition,   more  extensive  customer  bases,  more  developed
distribution  channels  and  broader  product  offerings  than  we  have.  These
companies can leverage their customer  bases and broader  product  offerings and
adopt aggressive pricing policies to gain market share.  Additional  competitors
may enter the market,  and we are likely to compete  with new  companies  in the
future.  We  expect to  encounter  potential  customers  that,  due to  existing
relationships  with our  competitors,  are committed to the products  offered by
these  competitors.  As a  result  of the  foregoing  factors,  we  expect  that
competitive  pressures may result in price reductions,  reduced margins and loss
of market share.

We compete  with  manufacturers  of  conventional  spherical  lens  products and
aspherical  lens  products,   producers  of  optical  quality  glass  and  other
developers of gradient lens technology as well as telecom product manufacturers.
In both the  optical  lens and  telecommunications  components  markets,  we are
competing against, among others, established international industry giants. Many
of these companies also are primary customers for optical and  telecommunication
components,  and therefore have significant control over certain markets for our
products.  We are also aware of other  companies  that are attempting to develop
radial  gradient lens  technology.  There may also be others of which we are not
aware that are attempting to develop axial gradient lens  technology  similar to
our technology.  There can be no assurance that existing or new competitors will
not develop  technologies that are superior to or more  commercially  acceptable
than our existing and planned technologies and products.

     OUR PRODUCTS MAY CONTAIN UNKNOWN DEFECTS.

Some of our products  are  designed to be deployed in large and complex  optical
networks. Because of the nature of these products, they can only be fully tested
for  reliability  when deployed in networks for long periods of time.  Our fiber
optic products may contain  undetected  defects when first  introduced or as new
versions are released,  and our  customers may discover  defects in our products
only  after  they have been  fully  deployed  and  operated  under  peak  stress
conditions.  In addition,  our products  often are combined  with  products from
other  vendors.  As a result,  should  problems  occur,  it may be  difficult to
identify  the source of the  problem.  If we are unable to fix  defects or other
problems, we could experience, among other things:

     -    loss of customers;
     -    damage to our brand reputation;
     -    failure to attract new customers or achieve market acceptance;
     -    diversion of development and engineering resources; and
     -    legal actions by our customers or third parties.

                                       16

The  occurrence of any one or more of the foregoing  factors could cause our net
revenues to decline or otherwise have an adverse effect on our business.

     WE FACE PRODUCT LIABILITY RISKS.

The sale of our  optical  products  will  involve the  inherent  risk of product
liability  claims by others.  We do not  currently  maintain  product  liability
insurance  coverage,  although  we do intend to procure  such  insurance  in the
future.  Product liability  insurance is expensive,  subject to various coverage
exclusions and may not be obtainable on terms  acceptable to us.  Moreover,  the
amount and scope of any  coverage may be  inadequate  to protect us in the event
that a product liability claim is successfully asserted.

     OUR PRODUCTS HAVE LONG AND VARIABLE SALES CYCLES.

The timing of our  revenue  is  difficult  to predict  because of the length and
variability of the sales and implementation  cycles for our products.  We do not
recognize  revenue  until  a  product  has  been  shipped  to  a  customer,  all
significant  vendor obligations have been performed and collection is considered
probable. Customers often view the purchase of our products as a significant and
strategic decision.  As a result,  customers typically expend significant effort
in  evaluating,  testing  and  qualifying  our  products  and our  manufacturing
process.  This customer evaluation and qualification  process frequently results
in a lengthy initial sales cycle (often one year or longer). While our customers
are evaluating our products and before they place an order with us, we may incur
substantial  sales and  marketing  and  research  and  development  expenses  to
customize our products to the customer's  needs. We may also expend  significant
management  efforts,  increase  manufacturing  capacity and order long lead-time
components or materials prior to receiving an order.  Even after this evaluation
process,  a potential  customer may not purchase  our  products.  Because of the
evolving  nature of the optical  component and module market,  we cannot predict
the length of these sales and  development  cycles.  The recent  slowdown in the
U.S.  economy has  resulted in order  cancellations  and  extensions  of product
shipment  dates by our  customers.  These long sales  cycles,  coupled  with the
uncertain  affects of the slowdown in the U.S.  economy,  may cause our revenues
and operating  results to vary  significantly  and unexpectedly  from quarter to
quarter, which could continue to cause volatility in our stock price.

     WE DEPEND ON KEY PERSONNEL TO MANAGE OUR BUSINESS EFFECTIVELY.

Our future success depends upon the continued services of our executive officers
and  other  key  engineering,   sales,  marketing,   manufacturing  and  support
personnel.  Our  inability  to retain or  attract  key  employees  could  have a
material  adverse  effect  on  our  business  and  results  of  operations.  Our
operations  depend, to a great extent,  upon the efforts of our senior officers.
We also depend upon our ability to attract  additional members to our management
and operations teams to support our expansion strategy. The loss of any of these
key employees  would adversely  affect our business.  We had  approximately  200
full-time  employees  on  September  30,  2001.  Although  we have  reduced  our
workforce by approximately 190 people during the last three quarters,  we expect
to continue to hire  selectively in the  manufacturing,  engineering,  sales and
marketing  and  administrative  functions  to the  extent  consistent  with  our
business  levels.  Our ability to continue to attract and retain highly  skilled

                                       17

personnel  will  be  a  critical  factor  in  determining  whether  we  will  be
successful.  Competition for highly skilled personnel is intense.  We may not be
successful  in  attracting,  assimilating  or retaining  qualified  personnel to
fulfill our current or future needs, which could adversely impact our ability to
develop and sell our products.

     WE HAVE LIMITED PRODUCT OFFERINGS, SOME OF WHICH ARE CURRENTLY EXPERIENCING
A DECLINE IN DEMAND.

We derive a  substantial  portion of our net revenues  from a limited  number of
products.  Specifically,  in the fiscal  year ended  June 30,  2001,  we derived
approximately  50%, 16%, 14.5% and 19.5% of our net revenues from our isolators,
collimators,  molded aspheric lenses and traditional  optics,  respectively.  We
expect that net  revenues  from a limited  number of products  will  continue to
account for a substantial  portion of our total net  revenues.  Demand for these
and other optical  component and module products has declined as a result of the
recent  slowdown  in  the  economy  and  we  have  recently   experienced  order
cancellations and delays in product shipment dates by our customers.  Aside from
the  current  slowdown  in  the  telecommunications   industry,   continued  and
widespread  market acceptance of our products is critical to our future success.
We  cannot  assure  you that,  once the  telecommunication  industry  conditions
improve,  our current  products  will achieve  market  acceptance at the rate at
which we  expect,  or at all,  which  could  adversely  affect  our  results  of
operations.

     WE MUST ACCURATELY TIME OUR MANUFACTURING  CAPACITY WITH THE DEMAND FOR OUR
PRODUCTS.

We face a challenge in accurately  timing the installation of our  manufacturing
capacity  with the demand for our products.  Throughout  fiscal 2001 we expanded
our manufacturing capacity through the expansion of facilities and the hiring of
employees and through the acquisition of Geltech.  At September 30, 2001, we had
a total of 200 full-time  employees,  up from 125 employees at June 30, 2000 but
down from 300 at June 30,  2001.  As a result of the recent,  and sudden,  order
cancellations and extensions of product shipment dates by our customers,  we are
slowing  the rate of  production  of some of our  products.  We also may curtail
efforts to install new  equipment  in our  facilities  until  market  conditions
improve.  We believe this approach  will allow us to quickly ramp  production if
unit  demand  for our  products  merits.  However,  if demand  for our  products
continues  to  decline,  we may have more  employees  and  facility  space  than
necessary to deliver our products,  which would adversely  impact our ability to
achieve  profitability,  and could require us to further  reduce the size of our
operations.

Despite our recent announcement to slow down expansion of our business, we still
face  challenges  as a result of our rapid  expansion  over the past few  fiscal
years.  The increase in employees as a result of the acquisitions and the growth
in   our    operations,    combined    with   the    challenges    of   managing
geographically-dispersed  operations, have placed, and will continue to place, a
significant  strain on our management  systems and resources.  We expect that we
will  need to  continue  to  improve  our  financial  and  managerial  controls,
reporting  systems and procedures  and continue to expand,  train and manage our
work  force.  The  failure  to  effectively  manage  our  recent  growth  and to
accurately  time any future  growth with market  demand for our  products  could
adversely  impact our ability to manufacture and sell our products,  which could
reduce our revenues.

                                       18

     WE MUST EXPAND OUR SALES ORGANIZATION.

The sale of our products  requires long and involved efforts targeted at several
key departments within our prospective  customers'  organizations.  Sales of our
products  require the prolonged  efforts of executive  personnel and specialized
systems and  applications  engineers  working  together  with a small  number of
dedicated  salespersons.  Currently,  our sales organization is limited. We will
need to grow our sales force in order to increase market  awareness and sales of
our products.  Competition for these individuals is intense, and we might not be
able to hire the kind and number of sales personnel and  applications  engineers
we need. If we are unable to expand our sales operations,  we may not be able to
increase market awareness or sales of our products,  which would prevent us from
increasing our revenues.

     WE MUST MAKE SALES IN A FRAGMENTED MARKET.

The markets  for  optical  lenses and  telecommunication  components  are highly
fragmented.  Consequently,  we will need to  identify  and  successfully  target
particular  market  segments in which we believe we will have the most  success.
These  efforts will  require a  substantial,  but unknown,  amount of effort and
resources.  The fragmented  nature of the optical products market may impede our
ability to achieve  commercial  acceptance  for our products.  In addition,  our
success  will  depend in great part on our  ability to develop  and  implement a
successful  marketing  and sales  program.  There can be no  assurance  that any
marketing and sales  efforts  undertaken by us will be successful or will result
in any significant product sales.

     CURRENT AND PENDING LITIGATION MAY ADVERSELY IMPACT OPERATING RESULTS.

On May 2, 2000,  the Company  commenced a class  action  lawsuit in the Chancery
Court of Delaware,  New Castle County (the "Court"). In this action, the Company
sought a declaratory  judgment with respect to the Company's right to redeem the
Class E Common  Stock on March 31,  2001 for $.0001 per share,  the right of the
holders  of Class E Common  Stock to vote at the  Annual  Meeting  to be held on
October 6, 2000, and for certification of the holders of Class E Common Stock as
a class and the named  defendants as its  representatives.  The Options  offered
hereby  are  being  distributed  as part of the  Settlement  Agreement  that was
approved by the Court on November 9, 2001, in  settlement  of this lawsuit.  The
Settlement   Agreement  permits  the  Class  E  shareholders  to  elect  not  to
participate  in the  settlement  and thus  will not be  binding  on any  Class E
shareholders who so elect.

On or about June 9,  2000,  a small  group of  holders  of Class E Common  Stock
commenced an action in a state court in Texas (the "Texas  Action").  Plaintiffs
in the Texas Action have made various  allegations  regarding the  circumstances
surrounding the issuance of the Class E Common Stock and seek damages based upon
those allegations.  Although management believes the allegations  underlying the
Texas litigation are without merit, we are unable to predict the outcome of this
litigation.

The Company may from time to time become  involved in other  lawsuits  and legal
proceedings.  Litigation  is subject to inherent  uncertainties,  and an adverse
result in any such matters that may arise from time to time may adversely impact

                                       19

our operating results or financial  condition.  Additionally,  any litigation to
which  we are  subject  could  require  significant  involvement  of our  senior
management  and  may  divert  management's   attention  from  our  business  and
operations.

     WE FACE RISKS ASSOCIATED WITH INTERNATIONAL SALES.

For the fiscal year ended June 30,  2001,  14.9% of our net  revenues  were from
sales to international  customers. Our international sales will be limited if we
cannot establish and/or maintain relationships with international  distributors,
establish  foreign   operations,   expand   international   sales,  and  develop
relationships  with   international   service   providers.   Additionally,   our
international sales may be adversely affected if international economies weaken.
We are subject to risks including the following:

     -    greater  difficulty  in  accounts  receivable  collection  and  longer
          collection periods;
     -    the impact of recessions in economies outside the United States;
     -    unexpected changes in regulatory requirements;
     -    sudden and unexpected  reductions in demand in particular countries in
          response to exchange rate fluctuations;
     -    certification requirements;
     -    reduced protection for intellectual property rights in some countries;
     -    potentially adverse tax consequences; and
     -    political and economic instability.

While we expect our  international  revenues to be denominated  predominantly in
U.S. dollars, in the future a portion of our international revenues and expenses
may be denominated in foreign currencies.  Accordingly,  we could experience the
risks of fluctuating currencies and the corresponding exchange rates.

     POTENTIAL INFLUENCE OF EXISTING MANAGEMENT AND PRINCIPAL SHAREHOLDERS.

If our  management  and  shareholders  act in  concert,  disposition  of matters
submitted to  shareholders  or the election of the entire Board of Directors may
be  hindered.  We  estimate  that  management  and  our  principal  shareholders
beneficially owned approximately 26.2% of the aggregate Common Stock outstanding
as of August 1, 2001.

     SOME PROVISIONS IN OUR CHARTER DOCUMENTS AND BYLAWS MAY HAVE  ANTI-TAKEOVER
EFFECTS.

Our Certificate of  Incorporation  and Bylaws contain some provisions that could
have the effect of  discouraging  a  prospective  acquirer  from making a tender
offer, or which may otherwise delay, defer or prevent a change in control.

                                       20

     OUR CONVERTIBLE PREFERRED STOCK, WARRANTS AND OPTIONS MAY AFFECT OUR FUTURE
FINANCING.

The  existence  of our  outstanding  Convertible  Preferred  Stock,  options  or
warrants  may  adversely  affect  the  terms on which we can  obtain  additional
financing. As of December 31, 2001, there were outstanding:

     -    warrants issued in private placement and other  transactions  pursuant
          to which 299,300 shares of Common Stock are issuable;

     -    127 shares of Series F Convertible Preferred Stock, $.01 par value per
          share,  pursuant to which 541,092  shares of Common Stock are reserved
          for  issuance  to the  holders of the  shares of Series F  Convertible
          Preferred  Stock upon  conversion  of such shares  (minimum of 292,483
          shares based on the fixed conversion price at closing); and

     -    outstanding  options to purchase an aggregate  of 4,182,241  shares of
          Common Stock.

In addition,  approximately  540,000  shares of Common Stock were reserved as of
December  31, 2001 for issuance  pursuant to future  grants to be made under the
Omnibus Incentive Plan and Directors Stock Incentive Plan.

For the life of such options,  warrants and  Convertible  Preferred  Stock,  the
holders  will have the  opportunity  to  profit  from a rise in the price of the
underlying  common  stock,  with a resulting  dilution in the  interest of other
holders of common stock upon  exercise or  conversion.  Further,  the option and
warrant holders can be expected to exercise their options and warrants at a time
when we would, in all  likelihood,  be able to obtain  additional  capital by an
offering of our unissued  common stock on terms more  favorable to us than those
provided by such options or warrants.

The  eligibility  of the  foregoing  shares  to be sold to the  public,  whether
pursuant to an effective registration  statement,  Rule 144 or an exemption from
the  registration  requirements may have a material adverse effect on the market
value and trading price of the Common Stock.

     WE HAVE  AGREED TO CERTAIN  LIMITATIONS  UPON  POTENTIAL  LIABILITY  OF OUR
DIRECTORS.

Our Certificate of Incorporation  provides that directors will not be personally
liable for monetary  damages to LightPath  or its  shareholders  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 by
LightPath or its shareholders.

                                       21

     WE MUST  MAINTAIN  COMPLIANCE  WITH  CERTAIN  CRITERIA IN ORDER TO MAINTAIN
LISTING OF OUR SHARES ON THE NASDAQ MARKET.

The Company's  Common Stock is currently  traded on the Nasdaq National  Market.
Failure  to meet the  applicable  quantitative  and/or  qualitative  maintenance
requirements  of Nasdaq could result in our  securities  being delisted from the
Nasdaq  National  Market.  If  delisted  from the Nasdaq  National  Market,  our
securities may be eligible for trading on the Nasdaq  SmallCap  Market,  the OTC
Bulletin Board or on other  over-the-counter  markets,  although there can be no
assurance  that our securities  will be eligible for trading on any  alternative
exchanges or markets. 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 our securities. Among other consequences,  delisting from Nasdaq
may  cause a decline  in the stock  price and  difficulty  in  obtaining  future
financing.

     WE MAY NOT HAVE ENOUGH  FUNDS  AVAILABLE  TO REDEEM  OUTSTANDING  SHARES OF
PREFERRED STOCK.

In the event of  automatic  conversion  of the Series F Preferred  Stock  (three
years after  issuance or November  2002)  LightPath has the right to redeem such
preferred  stock for cash or convert  such  preferred  stock into Class A Common
Stock.  The  redemption  value of the  outstanding  Series F Preferred  Stock at
September 30, 2001 was  $1,440,000,  or 5.8% of the Company's cash. In addition,
in the  event of any  liquidation,  dissolution  or  winding  up of the  Company
("Liquidation  Event"),  either  voluntary or  involuntary,  the then Holders of
shares of Series F  Preferred  Stock  shall be entitled to receive an amount per
share  equal  to the sum of (i) the  Original  Series  F Issue  Price  for  each
outstanding  share of Series F Preferred Stock and (ii) an amount equal to seven
percent (7%) of the Original  Series F Issue Price,  per annum. At each Holder's
option,  a sale,  conveyance or disposition of all or  substantially  all of the
assets of the Company or the  effectuation  by the Company of a  transaction  or
series of related  transactions  in which more than fifty  percent  (50%) of the
voting  power of the Company is disposed of shall be deemed to be a  Liquidation
Event  as  defined  above;  provided  further  that  a  consolidation,   merger,
acquisition, or other business combination of the Company with or into any other
publicly  traded  company or  companies  shall not be  treated as a  Liquidation
Event.  However,  a  consolidation,   merger,  acquisition,  or  other  business
combination of the Company with or into any other non-publicly traded company or
companies in which the surviving  entity is not a publicly  traded company shall
be treated as a Liquidation  Event.  There can be no assurance that we will have
adequate cash to effect such cash redemptions in the future.

     WE WILL  RECOGNIZE A  SUBSTANTIAL  CHARGE TO INCOME UPON  CONVERSION OF OUR
CLASS E COMMON STOCK.

In the event any shares of the Class E Common Stock held by shareholders who are
officers,  directors,  employees or  consultants  of the Company  converted into
shares of Common  Stock,  we will  record  compensation  expense  for  financial
reporting  purposes  during  the  period  conversion  appears  probable.   These
conversion  rights expired on September 30, 2000 based on the operating  results
of the Company for the year ended June 30,  2000.  Our  management  believes the
conversion  rights have not been met and that,  as a result,  the Class E Common
Stock will be subject to redemption for a nominal amount.  However,  we continue
to be involved in litigation  regarding the Class E Common Stock, the outcome of

                                       22

which  cannot be  determined  at this time.  Any adverse  determination  in such
litigation, including any determination resulting in a conversion of the Class E
Common Stock,  could have a material  adverse  effect on the market price of the
Common Stock.

     RISK THAT FORWARD-LOOKING STATEMENTS MAY NOT COME TRUE.

This  report  contains   forward-looking   statements  that  involve  risks  and
uncertainties. We use words such as "believe", "expect," "anticipate," "plan" or
similar words to identify forward-looking statements. Forward-looking statements
are made  based upon our  belief as of the date that such  statements  are made.
These  forward-looking  statements are based largely on our current expectations
and are subject to a number of risks and uncertainties, many of which are beyond
our  control.  You  should not place  undue  reliance  on these  forward-looking
statements,  which speak as of the date of this report. Our actual results could
differ materially from those anticipated in these forward-looking statements for
many reasons,  including the risks faced by us described  above and elsewhere in
this report.

     BUSINESS INTERRUPTIONS COULD ADVERSELY AFFECT OUR BUSINESS.

Our operations are vulnerable to interruption by fire,  earthquake,  power loss,
telecommunications failure and other events beyond our control. We do not have a
detailed  disaster  recovery  plan.  We carry only a limited  amount of business
interruption insurance, which may not sufficiently compensate us for losses that
may  occur.  Our  facilities  in the  State  of  California  may be  subject  to
electrical  blackouts as a  consequence  of a shortage of  available  electrical
power in the state.  We  currently  do not have backup  generators  or alternate
sources of power in the event of a blackout.  If blackouts  interrupt  our power
supply,  we would be temporarily  unable to continue  operations at our affected
facilities.  Any losses or damages  incurred by us as a result of  blackouts  or
other business  interruptions  could impair our reputation,  harm our ability to
retain existing customers and to obtain new customers,  and could result in lost
revenue,  any of which  could  substantially  harm our  business  and results of
operations.

     WE MAY NEED ADDITIONAL FUTURE FINANCING IN ORDER TO FUND OUR OPERATIONS AND
PLANS FOR GROWTH.

There can be no assurance that the Company will generate  sufficient revenues to
fund  its  future  operations  and  growth  strategies.  We may  need to  obtain
additional  financing in the future.  We do not have any commitments from others
to provide additional financing in the future and there can be no assurance that
any such additional financing will be available if needed or, if available, will
be on terms favorable to us. In the event such needed financing is not obtained,
our operations will be materially  adversely  affected and we could be forced to
cease or substantially reduce operations. Any additional equity financing may be
dilutive  to  shareholders,  and debt  financings,  if  available,  may  involve
restrictive covenants.

     OUR BUSINESS DEPENDS UPON THE EFFORTS OF THIRD PARTIES.

Our strategy for the  research,  development  and  commercialization  of certain
products entails  entering into various  arrangements  with corporate  partners,
OEMs,  licensees and others in order to generate  product  sales,  license fees,

                                       23

royalties and other funds adequate for product development.  We may also rely on
our collaborative  partners to conduct research efforts,  product testing and to
manufacture and market certain of our products. Although we believe 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 our control. There
can also be no assurance  that we will be  successful in  establishing  any such
collaborative  arrangements  or  that,  if  established,  the  parties  to  such
arrangements will assist us in commercializing products. We have a non-exclusive
agreement with a catalog company to distribute certain of our products.  We have
formalized  relationships with eight 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.

RISKS RELATED TO MANUFACTURING OUR PRODUCTS

     IF WE DO NOT  ACCURATELY  PROJECT  DEMAND  FOR OUR  PRODUCTS,  WE WILL HAVE
EXCESS MANUFACTURING CAPACITY OR INSUFFICIENT MANUFACTURING CAPACITY.

We currently  manufacture  substantially  all of our products in our  facilities
located in Albuquerque,  New Mexico,  Walnut,  California and Orlando,  Florida.
Based on the recent and sudden change in U.S. economic conditions, we now expect
lower  demand for our  products in fiscal  2002.  We intend to lower  production
output during the first part of fiscal 2002 while retaining  flexibility to meet
demand  if it should  increase  in the near  future.  As  occurred  in the first
quarter of fiscal 2002, we expect that the production  slowdown will  negatively
impact our gross  margins  during the first half of fiscal  2002.  If we fail to
accurately  coordinate  our  production  capacity and output with demand for our
products in the future,  we may have excess capacity or  insufficient  capacity,
either of which may seriously harm our results of operations.

Furthermore,  we may experience delays,  disruptions or quality control problems
in our  manufacturing  operations,  and, as a result,  product  shipments to our
customers could be delayed beyond the revised  shipment  schedules  requested by
our customers, which would negatively impact our revenues,  competitive position
and reputation.  For example, we have, in the past,  experienced a disruption in
the  manufacture  of some of our  products  due to changes in our  manufacturing
processes,  which  resulted  in reduced  manufacturing  yields and delays in the
shipment of our products. If we experience similar disruptions in the future, it
may  result in lower  yields or delays of our  product  shipments,  which  could
adversely affect our revenues, gross margins and results of operations.

                                       24

     OUR FAILURE TO ACCURATELY FORECAST MATERIAL  REQUIREMENTS COULD CAUSE US TO
INCUR ADDITIONAL COSTS, HAVE EXCESS  INVENTORIES OR HAVE INSUFFICIENT  MATERIALS
TO BUILD OUR PRODUCTS.

We use rolling  forecasts  based on anticipated  product orders to determine our
materials requirements. It is very important that we accurately predict both the
demand for our  products  and the lead times  required  to obtain the  necessary
materials.  Lead times for materials that we order vary significantly and depend
on  factors  such as  specific  supplier  requirements,  the size of the  order,
contract  terms and current  market demand for the materials at a given time. If
we overestimate our material requirements,  we may have excess inventory,  which
would increase our costs. If we underestimate our material requirements,  we may
have inadequate  inventory,  which could interrupt our  manufacturing  and delay
delivery  of our  products  to our  customers.  Any of these  occurrences  would
negatively  impact our results of  operations.  Recent order  cancellations  and
extension  of product  delivery  dates by our  customers  have created a risk of
material  obsolescence.   Additionally,   in  order  to  avoid  excess  material
inventories we may incur cancellation charges associated with modifying existing
purchase orders with our vendors.

     IF WE DO NOT ACHIEVE ACCEPTABLE  MANUFACTURING YIELDS OR SUFFICIENT PRODUCT
RELIABILITY, OUR ABILITY TO SHIP PRODUCTS TO OUR CUSTOMERS COULD BE DELAYED.

The  manufacture of our products  involves  complex and precise  processes.  Our
manufacturing  costs for several  products  are  relatively  fixed,  and,  thus,
manufacturing  yields are critical to our results of operations.  Changes in our
manufacturing  processes  or those  of our  suppliers,  or the use of  defective
materials,  could  significantly  reduce our  manufacturing  yields and  product
reliability.  In addition,  we may experience  manufacturing  delays and reduced
manufacturing  yields upon introducing new products to our manufacturing  lines.
We may experience  lower than targeted  product yields in the future which could
adversely affect our operating results.

     IF  OUR  CUSTOMERS  DO NOT  QUALIFY  OUR  MANUFACTURING  LINES  FOR  VOLUME
SHIPMENTS, OUR OPERATING RESULTS COULD SUFFER.

Generally, customers do not purchase our products, other than limited numbers of
evaluation units,  prior to qualification of the  manufacturing  line for volume
production.  Our existing manufacturing lines, as well as each new manufacturing
line,  must pass through  varying  levels of  qualification  with our customers.
Customers  may  require  that  we  be  registered  under  international  quality
standards,  such as ISO 9001.  This customer  qualification  process  determines
whether our  manufacturing  lines meet the customers'  quality,  performance and
reliability standards. If there are delays in qualification of our products, our
customers  may drop the product  from a long-term  supply  program,  which would
result in significant lost revenue opportunity over the term of that program.

     WE  DEPEND  ON  SINGLE  OR  LIMITED  SOURCE  SUPPLIERS  FOR SOME OF THE KEY
MATERIALS IN OUR PRODUCTS,  WHICH MAKES US  SUSCEPTIBLE  TO SUPPLY  SHORTAGES OR
PRICE FLUCTUATIONS.

                                       25

We currently  purchase  several key  materials  used in the  manufacture  of our
products from single or limited source suppliers. We may fail to obtain required
materials in a timely manner in the future,  or could experience  further delays
from  evaluating  and  testing  the  products  of  these  potential  alternative
suppliers.  The recent  softening of demand in the  telecommunications  industry
could adversely  impact the financial  condition of our suppliers,  many of whom
have limited financial resources. We have in the past, and may in the future, be
required  to provide  advance  payments  in order to secure key  materials  from
financially  limited  suppliers.  Financial or other difficulties faced by these
suppliers  could  limit  the   availability  of  key  components  or  materials.
Additionally,  financial  difficulties  could  impair  our  ability  to  recover
advances made to these suppliers. Any interruption or delay in the supply of any
of these  materials,  or the inability to obtain these  materials from alternate
sources  at  acceptable  prices and within a  reasonable  amount of time,  would
impair our ability to meet  scheduled  product  deliveries  to our customers and
could cause customers to cancel orders.

RISKS RELATED TO OUR INTELLECTUAL PROPERTY

     WE MAY NOT BE ABLE TO PROTECT OUR PROPRIETARY TECHNOLOGY.

We rely on a combination of patent,  copyright,  trademark and trade secret laws
and restrictions on disclosure to protect our intellectual  property rights.  We
cannot assure that our patent  applications  will be approved,  that any patents
that may issue will protect our intellectual property or that third parties will
not  challenge  any issued  patents.  Other  parties may  independently  develop
similar or competing  technology or design around any patents that may be issued
to us.

     WE MAY BECOME INVOLVED IN INTELLECTUAL PROPERTY DISPUTES AND LITIGATION.

We anticipate,  based on the size and  sophistication of our competitors and the
history  of  rapid  technological   advances  in  our  industry,   that  several
competitors may have patent  applications in progress in the United States or in
foreign countries that, if issued,  could relate to products similar to ours. If
such  patents  were to be issued,  the patent  holders or  licensees  may assert
infringement claims against us or claim that we have violated other intellectual
property rights. These claims and any resulting lawsuits,  if successful,  could
subject us to significant  liability for damages and invalidate our  proprietary
rights.  The lawsuits,  regardless of their merits,  could be time-consuming and
expensive  to  resolve  and would  divert  management  time and  attention.  Any
potential intellectual property litigation could also force us to do one or more
of the following, any of which could harm our business:

     -    stop  selling,  incorporating  or  using  our  products  that  use the
          disputed intellectual property;
     -    obtain  from  third  parties  a  license  to sell or use the  disputed
          technology, which license may not be available on reasonable terms, or
          at all; or
     -    redesign our products that use the disputed intellectual property.

                                       26

     IF WE ARE UNABLE TO PROTECT AND ENFORCE OUR  INTELLECTUAL  PROPERTY RIGHTS,
WE MAY BE UNABLE TO COMPETE EFFECTIVELY.

We regard  substantial  elements of our technology as proprietary and attempt to
protect them by relying on patent, trademark,  service mark, copyright and trade
secret  laws.  We  also  rely  on  confidentiality  procedures  and  contractual
provisions with our employees,  consultants and corporate partners. The steps we
take to protect our intellectual property may be inadequate,  time consuming and
expensive.  Furthermore,  despite our efforts, we may be unable to prevent third
parties from  infringing upon or  misappropriating  our  intellectual  property,
which could harm our business.

It may be necessary to litigate to enforce our  patents,  copyrights,  and other
intellectual  property  rights,  to protect our trade secrets,  to determine the
validity of and scope of the  proprietary  rights of others or to defend against
claims of  infringement  or invalidity.  Such  litigation can be time consuming,
distracting  to management,  expensive and difficult to predict.  Our failure to
protect or enforce our intellectual property could have an adverse effect on our
business, financial condition, prospects and results of operation.

     NECESSARY LICENSES OF THIRD-PARTY  TECHNOLOGY MAY NOT BE AVAILABLE TO US OR
MAY BE VERY EXPENSIVE.

From time to time we may be required to license technology from third parties to
develop  new  products  or  product  enhancements.  We  cannot  assure  you that
third-party  licenses will be available to us on commercially  reasonable terms,
or at all. The inability to obtain any third-party  license  required to develop
new  products and product  enhancements  could  require us to obtain  substitute
technology of lower quality or performance  standards or at greater cost, either
of which could seriously harm our ability to manufacture and sell our products.

                                 USE OF PROCEEDS

     The Options are being issued as part of the Settlement  Agreement,  and the
Company will not receive any proceeds from such issuance. The net proceeds to be
received by the Company  from the sale of the  approximately  201,250  shares of
Class A Common  Stock upon the  exercise of the Options will be used for general
corporate purposes.

                         DETERMINATION OF OFFERING PRICE

     Because  the  Options  are being  issued as part of a  settlement  of class
action litigation and will not result in any cash proceeds to the Company, there
is no offering price of the Options. The Exercise Price of the Options is $3.73,
which represents the average closing price of the Company's Class A Common Stock
for the ten (10)  trading  days  immediately  prior to December  10,  2001,  the
effective  date of the  Settlement  Agreement  pursuant to which the Options are
issued.

                                       27

                              PLAN OF DISTRIBUTION

     The Options offered hereby are being  distributed as part of the Settlement
Agreement  that was  approved by the  Delaware  Court of Chancery for New Castle
County  (the  "Court")  on  November  9, 2001.  See "RISK  FACTORS - Current and
Pending  Litigation." The Options offered hereby are being  distributed to those
non-excluded  former Class E shareholders  who have chosen to receive the Option
in  settlement  of their claim (the  "Optionholders").  The Company will furnish
each  non-excluded  former Class E shareholder with a prospectus  describing the
Company's business and finances as of the dates set forth.  Non-excluded  former
Class E  shareholders  will  have  fifteen  (15) days from the date on which the
prospectus  was mailed to them within which to elect to receive  either the cash
or the Option as set forth herein, by letter addressed to Ms. Donna Bogue, Chief
Financial Officer, LightPath Technologies,  Inc., 3819 Osuna, N.E., Albuquerque,
NW 87109.  Any such letter shall be deemed  received two (2) days  following the
postmark  date on the letter.  In the event a  non-excluded  Class E shareholder
fails to make a timely  election,  LightPath will deem such  shareholder to have
elected to  receive a cash  payment  of $0.40 per Class E share  formerly  held.
Under either settlement alternative,  former Class E shareholders  participating
in the Settlement  Agreement  will also receive the redemption  price of $0.0001
per Class E share  held.  Because  the  Options  are  being  issued as part of a
settlement  of class  action  litigation,  the  issuance of the Options will not
result in any cash  proceeds to the Company.  The Company has agreed to bear all
the expenses of registering the issuance of the Options in this Prospectus.

                             DESCRIPTION OF OPTIONS

     As  part  of  the  Settlement   Agreement  and  pursuant  to  that  certain
Stipulation of Settlement,  filed on November 17, 2000, as approved by the Court
by the entry of its Order and Final  Judgment on  November 9, 2001,  the Company
has  agreed to issue the  Options to the  Optionholders.  Upon  issuance  of the
Options  pursuant to the Settlement  Agreement,  Continental  Stock Transfer and
Trust Company, the Company's Transfer Agent, will serve as Option Agent.

     The following is a summary of the material features of the Options.  A copy
of the form of Option has been filed as an exhibit to the registration statement
of which this Prospectus is a part.

     Each  Option  entitles  the  Optionholder,  at any time prior to 5:00 p.m.,
central time, on December 10, 2003, to purchase five (5) shares of the Company's
Class A Common Stock, at the Exercise Price of $3.73 per share.  Both the number
of  shares  underlying  the  Options  and the  Exercise  Price  are  subject  to
adjustment under certain circumstances, as set forth below.

     The Settlement Agreement requires that we offer the Options to former Class
E holders who did not elect to be excluded from the settlement. The market price
of the Company's Class A Common Stock has declined  significantly since the time
the Settlement  Agreement was negotiated,  and the exercise price of the Options
now exceeds the market price of the  underlying  Class A Common Stock.  Based on
the current market price of the Class A Common Stock,  it is  economically  more
favorable for former Class E holders to receive $0.40 per Class E share formerly
held rather than to receive the Options. Accordingly, even though the Settlement
Agreement  requires  that we offer the  Options to former  Class E  holders,  we
recommend  that former  Class E holders  elect to receive  the cash  alternative
(i.e., $0.40 per Class E share formerly held) rather than the Options.

                                       28

     Optionholders will not be entitled (i) to vote,  consent, or receive notice
with respect to meetings of shareholders  or the election of directors;  or (ii)
to receive  dividends or subscription  rights as shareholders,  until the Option
has been exercised.

     The Company does not intend to list the Options on any securities  exchange
and does not anticipate that a trading market for the Options will develop or be
maintained.  See "RISK FACTORS -- A Public Market for the Options is Unlikely to
Develop."

     The Options are exercisable by the  Optionholder,  for the entire number of
Option  Shares,  at any time during the term of the Option,  by the surrender of
the Option and the executed Notice of Exercise,  attached to the Form of Option,
at the offices of both the Option  Agent and the  Company,  and upon  payment in
full of the Exercise Price.

     The number of Option  Shares  issuable upon exercise of the Options and the
Exercise  Price are subject to adjustment  in the event of certain  transactions
involving the Company, including: (i) a reorganization, merger, consolidation or
sale of all or  substantially  all of the  Company's  assets (an  "Extraordinary
Transaction");   (ii)  a  reclassification;   (iii)  a  split,   subdivision  or
combination of shares;  and (iv) payment of stock or other  non-cash  dividends.
Upon the effective date of an Extraordinary Transaction, unless such transaction
otherwise  provides,  the Options will terminate after notice and an opportunity
to  exercise  the  Options.  Upon  a  reclassification,  split,  subdivision  or
combination  of shares,  the number of Option  Shares for which the  Options are
exercisable  and the  Exercise  Price  shall  each  be  increased  or  decreased
commensurate  with the  reclassification,  split,  subdivision or combination of
shares.  Upon the Company's payment of a stock or other non-cash dividend to the
holders of its Class A Common Stock,  the Options  shall  represent the right to
receive,  upon exercise, in addition to the Option Shares, and for no additional
consideration,  such stock or non-cash dividend,  adjusted as necessary from the
date of the payment of the stock or non-cash dividend to the date of exercise.

     The Options may not be offered for sale,  sold,  hypothecated,  assigned or
otherwise  transferred,   except  (i)  by  will  or  the  laws  of  descent  and
distribution,  (ii) under a domestic  relations  order in  settlement of marital
property  rights,  or (iii) to a  custodian,  trustee  (including a trustee of a
voting trust),  executor,  or other fiduciary in a custodial  account,  trust or
other  arrangement  by which the  Optionholder  retains  the  entire  beneficial
interest in the Option.

                                       29

                     CERTAIN FEDERAL INCOME TAX CONSEQUENCES


     Based on the foregoing and the advice of its tax counsel, Squire, Sanders &
Dempsey  L.L.P.,  and  subject to the  limitations  stated  herein,  the Company
believes  that  the  material  U.S.  federal  income  tax  consequences  of  the
Settlement  Agreement  to  Class E  Shareholders  will be as  described  in this
Section, Federal Income Tax Consequences.

     This  discussion is based on present federal income tax law. The discussion
is not intended to be, nor should it be relied on as, a  comprehensive  analysis
of the tax issues  arising from or relating to the Proposed  Settlement.  Income
tax  consequences to the stockholders may vary from the federal tax consequences
described generally below.

1. REDEMPTION OF SHARES PURSUANT TO THE OFFER

     As part of this Proposed Settlement,  the Class E Shareholders will receive
the redemption price of $0.0001 per Class E share, and each Class E Shareholder,
at its option  pursuant  to the  Proposed  Settlement,  may  receive  additional
consideration $0.40 per Class E Share.

     While the factual issues are not entirely free from doubt,  for federal tax
purposes it is  reasonable  to conclude  and it has been assumed  that:  (i) the
Delaware  Action is a contingency  that  prevents the  redemption of the Class E
Shares  until  such  time that the  transactions  contemplated  by the  Proposed
Settlement are consummated;  and (ii) the consideration  paid is for the Class E
Shares  redeemed.  Based on the  facts  and the  assumptions  contained  in this
federal income tax consequences  section, the sale of Class E Shares pursuant to
the Offer will be a taxable transaction for federal income tax purposes,  either
as a "sale or exchange," or under certain circumstances, as a "dividend."

     Under Section 302(b) of the Internal  Revenue Code of 1986, as amended (the
"Code"),  a sale of Class E  Shares  pursuant  to the  Offer  generally  will be
treated  as a "sale or  exchange"  if the  receipt  of cash:  (a)  results  in a
"complete  termination"  of the  shareholder's  interest in the Company,  (b) is
"substantially disproportionate" with respect to the shareholder, or (c) is "not
essentially equivalent to a dividend" with respect to the shareholder. If any of
these three tests for "sale or exchange"  treatment is met, a  shareholder  will
recognize  gain or loss  equal to the  difference  between  the  amount  of cash
received  pursuant to the Offer and the tax basis of the Class E Shares sold. If
such  Class E Shares  are held as a  capital  asset,  the gain or loss will be a
capital gain or loss.


     A. COMPLETE TERMINATION

     A  "complete  termination"  of a  shareholder's  interest  occurs  when the
shareholder  disposes of all of its proprietary  interest in a company.  Class E
Shareholders  who redeem all of their Class E Shares but  continue to own shares
of other Company stock,  including but not limited to Class A Common Stock, have
not completely  terminated  their interest.  In addition,  the Internal  Revenue
Service applies the attribution rules under Code ss.318 when determining whether
a shareholder  has completely  terminated its  proprietary  interest.  Thus, for
example, Company stock owned by a family member or any entity referenced in Code
ss.318 may be  attributed  to a related  Class E  Shareholder  and  treated as a
proprietary  interest  that  prevents such  shareholder  from having  completely
terminated its interest in the Company. Finally, if constructive ownership under
the  family  attributions  rule of Code  ss.318  is all that  prevents  complete
termination of a shareholder's  proprietary  interest,  the shareholder may seek
relief  by  waiving  family  attribution  under  Code  ss.302(c)(2)  in  certain
instances prescribed in that Code provision.


                                       30

     B. SUBSTANTIALLY DISPROPORTIONATE SALE

     A  "substantially  disproportionate"  sale or  exchange  results  when  the
following three requirements are satisfied:

          1.   Immediately after redemption,  the shareholder must own less than
               50% of the total combined  voting power of all classes of Company
               stock entitled to vote;

          2.   The  shareholder's  percentage  of the total  outstanding  voting
               stock  immediately  after the redemption must be less than 80% of
               its percentage of ownership of such stock immediately  before the
               redemption; and

          3.   The shareholder's  percentage of outstanding common stock (voting
               or non-voting)  after the redemption must be less than 80% of the
               shareholder's percentage of ownership before the redemption.

Again,   the  attribution   rules  of  Code  ss.318  apply  when  determining  a
shareholder's percentage ownership.

     C. NOT ESSENTIALLY EQUIVALENT TO A DIVIDEND

     According  to the Supreme  Court in UNITED  STATES V. DAVIS,  397 U.S.  301
(1970),  the  determination  of whether a sale or exchange  is "not  essentially
equivalent to a dividend" is a fact-specific determination that looks to whether
the  redemption  has resulted in a  "meaningful  reduction in the  shareholder's
proportionate  interest in the corporation." In making this  determination,  the
attribution rules of Code ss.318,  discussed above,  apply. For this purpose,  a
meaningful   reduction  of  a  shareholder's   proportionate   interest  in  the
corporation  has  been  held  to  refer  to a  significant  reduction  in 1) the
shareholder's  voting interest,  2) the  shareholder's  dividend rights,  3) the
shareholder's  rights to receive the proceeds of a complete  liquidation  of the
corporation,  or 4)  some  combination  of  the  foregoing  shareholder  rights.
However,  a precise  dividing line between those  reductions that are meaningful
and  those  that are not  meaningful  has not been  established  in the cases or
administrative  authorities.  Rather,  the authorities  make that  determination
based on the facts and circumstances  relating to the particular shareholder and
corporation.

     If a Class E  Shareholder  cannot  meet one of the three  tests  under Code
ss.302(b),  the  redemption  of that  shareholder's  stock  will be treated as a
distribution  under ss.301.  Under  ss.301,  the amount of the  distribution  is
treated as ordinary income to the extent of the Company's  earnings and profits,
then as recovery of basis of the  shareholder's  Class E Shares,  and finally as
gain from the sale or  exchange  of  property.  Generally,  if the  Company  has
distributed other dividends in the year of redemption, earnings and profits will
first be attributed to the earlier dividends.  If a Class E shareholder  retains
shares,  the basis of the retained  shares will be increased by the basis of the
redeemed shares. If a Class E Shareholder retains no shares, it may transfer the
basis of its redeemed shares to shares held by a related shareholder.

                                       31


2. EXCHANGE OF CLASS E SHARES FOR OPTION TO PURCHASE CLASS A COMMON SHARES

     Also, as part of the Proposed Settlement, the Class E Shareholders have the
option to  exchange  their  Class E Shares for  $0.0001 per Class E Share and an
Option or Options to purchase Class A Common Shares.

     While the factual issues are not entirely free from doubt,  for federal tax
purposes it is  reasonable  to conclude  and it has been assumed  that:  (i) the
Delaware  Action is a  contingency  that  prevents  the  exchange of the Class E
Shares until such time that the transactions contemplated by Proposed Settlement
are  consummated;  and (ii)  the  consideration  paid is for the  Class E Shares
exchanged.  Based on the facts and the  assumptions  in this federal  income tax
consequences  section,  the Company believes that the exchange of Class E Shares
for   options   to   purchase   Class  A  Common   Stock   will   constitute   a
"recapitalization" under Section 368(a)(1)(E) of the Code.

     (1) The issuance of the Options and cash pursuant to the Option Alternative
in exchange for the Class E Shares should constitute a reorganization within the
meaning  of  Section  368(a)(1)(E);  (2) the  Company  should  be a  party  to a
reorganization  within the meaning of Section 368(b) of the Code; (3) no gain or
loss should be recognized by the Class E Shareholders  of the Company upon their
receipt of an Option,  except that a Class E Shareholder shall recognize gain to
the  extent  the  cash  received  by  a  shareholder   pursuant  to  the  Option
Alternative,  but no greater  than the amount by which the value of the  Options
plus the cash received  pursuant to the Option  Alternative  exceeds the Class E
Shareholder's  aggregate tax basis in the Class E Shares surrendered pursuant to
the Option Alternative; (4) the aggregate tax basis of the Options received by a
Class E Shareholder of the Company should be the same as the aggregate tax basis
of the Class E Shares exchanged pursuant to the Option  Alternative,  reduced by
the amount of cash received pursuant to the Option  Alternative and increased by
the amount of gain  recognized by the Class E Shareholder in connection with the
Option  Alternative;  and (5) the holding period of the Options  received in the
exchange should include the holding period of the Class E Shares  surrendered in
the  exchange,  provided  that  such  shareholder  held the  Class E Shares as a
capital asset on the date of the exchange.


     Further, assuming that an Option is held as a capital asset, it is also our
opinion  that (1) the  taxation  of the  disposition  of an Option  received  in
exchange for Class E shares should be governed by Section 1234 of the Code;  (2)
under Section 1234, a Class E Shareholder  that sells an Option should realize a
capital gain or loss that should be short-term or long-term,  depending upon the
holding period of the Option;  (3) a Class E Shareholder  that allows its Option
to expire should  realize a capital loss that should be short-term or long-term,
depending  upon the holding  period of the Option;  (4) if a Class E Shareholder
exercises  its Option to  purchase  Class A Shares,  the tax basis of the Option
should be added to the aggregate tax basis of the purchased Class A Shares,  and
(5) the holding period of Class A Shares acquired  through exercise of an Option
received in exchange for Class E Shares should not include the holding period of
the Option.

     The Company generally will be required to withhold tax equal to the rate of
30.5% (backup  withholding)  from any payment to a tendering Class E Shareholder
that  is  an  individual  (or  certain  other  non-corporate   persons)  if  the
shareholder   fails  to  provide   the  Company   with  its   correct   taxpayer
identification  number and certify that it is not subject to backup  withholding
on dividends (by  completing and returning the Form W-9 included in theNotice of
Election)  or if the  Internal  Revenue  Service  advises the  Company  that the
shareholder  is  subject  to  backup  withholding  for prior  underreporting  of
reportable interest or dividend payments.  A foreign shareholder  generally will
be able to avoid  backup  withholding  with  respect to  payments by the Company
W-8BEN,  certifying under penalties of perjury, that it (1) is neither a citizen
nor a resident of the United States,  (2) has not been, and reasonably  does not
expect to be, present in the United States for a period  aggregating 183 days or

                                       32

more during the calendar year, and (3) reasonably expects not to be engaged in a
trade or  business  within  the U.S.  to which  the gain on sale of the  Class E
Shares  would  be  effectively  connected,  or a  duly  completed  Form  W-8ECI,
certifying  under  penalties  of  perjury,  that (1) it is neither a citizen nor
resident of the U.S., and (2) this income is  effectively  connected with a U.S.
trade or business.  Backup withholding is not an additional tax, and any amounts
withheld  may be  credited  against a  shareholder's  U.S.  federal  income  tax
liability or refunded by the Internal Revenue Service.

     The  foregoing  discussion  is intended  only as a summary of the  material
federal  income tax  consequences  of the  Proposed  Settlement.  The  foregoing
discussion  does  not  address  the tax  consequences  that may be  relevant  to
particular  Class E Shareholders in light of their personal  circumstances or to
taxpayers subject to special  treatment under the Code (for example,  tax exempt
entities,  life insurance companies,  regulated investment companies and foreign
taxpayers,  corporations,  or related parties).  The foregoing discussion is not
intended as tax advice to any person or entity.

     No information is provided herein with respect to the tax consequences,  if
any, of the Proposed Settlement under applicable state, local,  foreign or other
tax laws. No ruling from the Internal Revenue Service or opinion of counsel will
be obtained regarding the federal income tax consequences to the stockholders as
a result of the Proposed Settlement.

     The  foregoing  discussion  is based upon the  provisions  of the  Internal
Revenue Code,  applicable  Treasury  regulations  thereunder,  Internal  Revenue
Service  rulings,  and  judicial  decisions  as in effect as of the date of this
proxy   statement.   There  can  be  no  assurance   that  future   legislative,
administrative,  or  judicial  changes  or  interpretations  will not affect the
accuracy of the  statements or  conclusions  set forth  herein.  Any such change
could apply retroactively and could affect the accuracy of this discussion.

BECAUSE OF THE INTENSELY FACTUAL NATURE OF THE ABOVE ANALYSIS,  YOU STRONGLY ARE
URGED TO CONSULT YOUR OWN TAX ADVISOR AND SEEK YOUR TAX ADVISOR'S  OPINION AS TO
THE SPECIFIC TAX CONSEQUENCES TO YOU OF THE SETTLEMENT AGREEMENT,  INCLUDING THE
APPLICATION OF FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.

                     INTERESTS OF NAMED EXPERTS AND COUNSEL

     On October 6, 2000,  James L. Adler, Jr. was elected to serve as a director
of  LightPath  until the 2003 annual  meeting of  shareholders.  Mr.  Adler is a
partner of the law firm of Squire, Sanders & Dempsey L.L.P., which has issued an
opinion as to the validity of the Options  offered by this  prospectus  and also
provides legal services to us on a regular basis.  Mr. Adler holds options under
the  Directors  Stock  Option Plan to purchase  59,176  shares of Class A Common
Stock at exercise  prices ranging from $3.25 to $28.03.  As of October 31, 2001,
these shares represented less than 1% of the total outstanding shares of Class A
Common Stock.

                                       33

                   INFORMATION WITH RESPECT TO THE REGISTRANT

                           DESCRIPTION OF THE BUSINESS

     LightPath was incorporated under Delaware law in June 1992 as the successor
to LightPath Technologies Limited Partnership,  a New Mexico limited partnership
(the  "Partnership"),  formed in 1989,  and its  predecessor,  Integrated  Solar
Technologies  Corporation,  a New Mexico  corporation  ("ISOTEC"),  organized in
1985.

     From our  inception  in 1985  until  June  1996,  we were  classified  as a
development stage enterprise that engaged in basic research and development. Our
initial  objective in 1985 was to improve solar energy technology by creating an
optical material that could  efficiently bend light from varying angles in order
to track the path of the sun across the sky.  During this stage, we believe that
most of our product sales were to persons evaluating the commercial  application
of GRADIUM  glass (See - Products:  GRADIUM) or using the  products for research
and  development.  In 1987,  we  realized  that our early  discoveries  had much
broader application, and we expanded our focus to imaging optics applications.

     During fiscal year 1997,  our  operational  focus began to shift to product
development and sales. We completed  numerous  prototypes for production  orders
and received  catalog  sales of standard lens  profiles.  We also began to offer
standard,  computer-based  profiles  of  GRADIUM  glass that  engineers  use for
product design.

     In June 1997, we announced we had joined with Invention Machine Corporation
to form a joint venture company,  LightChip, to develop,  manufacture and market
the next generation of wavelength division  multiplexing ("WDM") systems for use
by telecommunication carriers, CATV companies, local area networks and wide area
networks system  integrators.  WDM systems are needed by the  telecommunications
industry to increase  bandwidth by serving as data  "traffic  cops" by combining
multiple  light  streams from  individual  transmissions  onto a single  optical
fiber. We formed  LightChip in order to serve the metro WDM market.  Since 1998,
LightChip  has  received  approximately  $84 million from the issuance of common
stock and three series of convertible  preferred  stock.  The initial  investors
included  AT&T  Ventures  and  LightPath.   Subsequent  investors  also  include
Morgenthaler  Ventures,  J.P.  Morgan  Capital and Berkeley  International.  Our
current  percentage  ownership  of  LightChip  is  approximately  16.4% of total
preferred  and  common  shares  (13.2%  if  fully  diluted  by the  exercise  of
outstanding stock options).

     LightChip  successfully  demonstrated  a WDM  model and had  prototypes  of
several products  available in fiscal 2000. They began product sales in calendar
2001 in Salem, New Hampshire.  We licensed the use of GRADIUM glass to LightChip
for specific  applications.  We anticipate  minimal,  if any, short-term revenue
from  LightChip.  The value of our investment in LightChip could increase in the
future to the extent, if any, LightChip is able to successfully  market its core
WDM products, although there can be no assurances in this regard.

     In fiscal year 1998,  we began to explore the  development  of products for
emerging markets such as optoelectronics,  photonics and solar due to the number
of  potential  customer  inquiries  into the  ability of GRADIUM  glass to solve
optoelectronic problems,  specifically in the areas of fiber telecommunications.

                                       34

In 1998, the resolution of packaging and alignment  issues,  along with advances
made by LightChip with WDM equipment,  led us to develop a strategy to enter the
telecom  optical  components  market.  This  strategy is built around  automated
production  of the telecom  components  using laser fusion and fiber  attachment
techniques we have  developed.  We have also  maintained our emphasis on optical
materials  where we gained  expertise  during the  development of GRADIUM glass.
During fiscal 1998,  sales of lenses to the traditional  optics market continued
with  increases  in sales of lenses  used in the YAG laser  market,  catalog and
distributor sales and lenses used in the wafer inspection  markets.  During this
time, we  reorganized  internally  and realigned our marketing  efforts with the
purpose  of  expanding  our  focus to  include  the  optoelectronics  and  fiber
telecommunications  markets in addition to the  traditional  optics market.  See
"Sales and Marketing - Optoelectronics and Fiber Telecommunications".

     In designing our  optoelectronic  devices,  we focused on automation of the
manufacturing  process.  Although many other manufacturers in this industry rely
on offshore  production  to control  costs,  we believe that  automation  of the
manufacturing  process can yield  significant  costs savings over the long term.
Our patented laser fusion and fiber attachment  techniques are highly automated,
and we believe these techniques provide improve quality and a better flexibility
to  increase  manufacturing  capacity  in  response  to  growth in  demand.  Our
automation concept was expanded upon with our fiscal 2000 acquisition of Horizon
Photonics,  Inc.  ("Horizon")  where we employ  the use of  robotic  welders  in
manufacturing of isolators.

     On April 14, 2000, we acquired Horizon, a California corporation originally
founded in July 1997. Horizon is engaged in the automated  production of passive
optical components for the telecommunications  and data communications  markets.
We  acquired  all of the  outstanding  shares of Horizon for  approximately  1.4
million  shares of Class A Common  Stock and $1  million  in cash (an  aggregate
purchase price of approximately $40.2 million, based on the trading price of our
common  stock).   Horizon  manufactures   isolator  products  at  their  Walnut,
California facility.

     On September 20, 2000, we acquired Geltech,  Inc.  ("Geltech"),  a Delaware
corporation,  originally  founded  in May 1985.  Geltech  is a  manufacturer  of
precision molded aspheric optics used in the active telecom components market to
provide a highly efficient means to couple laser diodes to fibers or waveguides.
Additionally, Geltech has a unique and proprietary line of all-glass diffraction
gratings  (StableSil(R))  for telecom  applications  such as optical  switching,
mux/demux  and laser  tuning.  Geltech  also  produces  lens  arrays for optical
switches and other applications and is currently  developing a product family of
Sol-Gel based waveguides.  We acquired all of the outstanding  shares of Geltech
for an aggregate  purchase price of  approximately  $28.5 million,  comprised of
822,737  shares of Class A common stock  (valued at $27.5  million  based on the
trading price of our common stock) and  approximately  $1 million in acquisition
costs.  Geltech  manufactures  products at its facility in Orlando,  FL.  During
fiscal 2001 and  continuing  into fiscal 2002,  Geltech has been  expanding  its
manufacturing  facility,  which will include  integrating some of the automation
techniques utilized at our other facilities.

                                       35

OPERATING SEGMENTS AND PRODUCTS

     We  operate  through  two  operating  segments;  optoelectronics  and fiber
telecommunications  ("telecom"),  and  traditional  optics  (e.g.  lasers,  data
storage, bar coding,  medical equipment,  consumer optics, etc.). We manufacture
and sell the  following  types of telecom  products  at  LightPath,  Horizon and
Geltech:  (i)  collimators,  (ii)  isolators and (iii) molded  aspheric  lenses.
Collimators  are  assemblies  that are  used to  straighten  and  make  parallel
diverging  light as it exits a fiber.  An  isolator  is used to prevent the back
reflection  of  optical  signals  that can  degrade  transmitter  and  amplifier
performance.  Molded  aspheres are used in telecom  applications to collimate or
couple light as it emerges from a fiber. Collimators, isolators, molded aspheres
and other optical  components  are used  throughout  fiber optic  systems.  Such
systems are used by the  telecommunications  industry  with a goal of  increased
bandwidth,  through  the  development  of all  optical  networks,  by  combining
multiple  light  streams from  individual  transmissions  onto a single  optical
fiber.  We  are  also  planning  to  develop  other  products   related  to  the
optoelectronics   and   telecommunications   industry   through   licenses   and
relationships with other manufacturers. See "Current Focus on Products" below.

     LightPath and Geltech  manufacture  traditional optics products  including:
(i) GRADIUM glass  products,  lenses,  prisms and (ii) molded  aspheric  lenses.
GRADIUM  glass is an optical  quality  glass  material  with varying  refractive
indices used for optics such as lenses for YAG lasers.  Molded aspheres are used
in  non-telecom  applications  such as  optical  data  storage,  high  precision
printing, bar coding and by manufacturers of medical equipment.  In addition, we
manufacture a family of traditional optics including laser flow tubes,  polished
cylinders and flats, and prisms.

     COLLIMATORS

     We offer three product levels of collimators:

          *    collimating lenses;
          *    single mode fiber Gen3 collimator assemblies; and
          *    large-beam collimator assemblies.

          COLLIMATING LENSES

     We offer two types of lenses for use in telecommunication  applications: TL
and GPX-series. Our TL-series lenses are 1.8 mm diameter collimating, rod lenses
and are available in 0.18, 0.23 and 0.25  pitch-equivalent  lenses. These lenses
have an  optional  angles  facet  to  control  back  reflection  and for ease of
assembly.  Our TL-series  lenses  provide a high degree of  collimation,  design
customization,  have tight  piece-to-piece  control  and are more  compact  than
competing  radial-gradient  lenses.  Customized  TL-series  lenses  with  larger
diameters  can provide beam  diameters  greater than 2 mm. Our GPX series lenses
are available in a wide variety of sizes and focal lengths. These lenses provide
superior aberration control and are easily customized.  They are sold separately
for assembly into customers  components and are also incorporated into our large
beam collimator. These GRADIUM collimating lenses can replace homogeneous lenses
with, in most cases,  immediate  improvements in performance,  repeatability and
cost.

                                       36

          GEN3 COLLIMATOR AND LARGE BEAM COLLIMATOR

     In fiscal 2000 we released  our  advanced  collimator  assembly  called the
Gen3.  Our tests on the Gen3  collimator  indicate it has the lowest  documented
insertion  loss reported to date in these  devices.  We  demonstrated  our first
passive  optoelectronic  product, a single mode fiber collimator  assembly ("SMF
Assembly") in February  1998.  Our SMF Assembly and  subsequent  Gen3 offer high
quality  performance in the areas of back  reflection and insertion  loss. It is
also more compact and we believe it can be manufactured at a significantly lower
cost than the competitive products currently available in commercial quantities.
The  collimator  is a key  element in all fiber  optic  systems,  including  WDM
equipment. Collimators straighten and make parallel, diverging light as it exits
a fiber. Our Gen3 collimator is  approximately  50-60% smaller than the existing
industry  collimator,  provides  superior  performance  in back  reflection  and
insertion  loss and can  withstand 10 watts of optical  power.  This entry level
product  currently used by the  telecommunications  industry prevents light from
diverging and shepherds it into the next piece of equipment or fiber.

     ISOLATORS

     Horizon  has  developed  a family of products  that  utilize a  proprietary
micro-fixture design and robotic platform process. This automated process allows
for micro-optics to be mounted in small transferable fixtures that are processed
in arrays  and  converted  into a variety of optical  components  and  component
subsystems.  Horizon's  platform  is  capable  of  producing  products  such  as
isolators,   gain  flatteners,   attenuators,   filter  assemblies,   and  other
volume-oriented  optic  assemblies  for the WDM  market.  To  date,  Horizon  is
manufacturing a qualified family of free-space,  laminate and  contract-specific
isolators.  In 2001,  Horizon  released a new line of  isolator  assemblies  for
application  in the metro and access  telecom  markets.  This line is based on a
flexible  manufacturing  platform  which can  address a wide  range of  customer
specifications while attracting lower cost applications.

     Horizon's core competency is the optical  isolator.  An isolator is used to
prevent the back reflection of optical signals that can degrade  transmitter and
amplifier performance. Horizon has developed and qualified an automated platform
process that avoids the  traditional  pitfalls of producing  optical  isolators.
Applicable  to a variety  of passive  optical  components,  Horizon's  automated
platform  process  has  proven  to be an  efficient  and  low  cost  method  for
manufacturing  isolators  without  machining  tiny metal  fixtures  and  without
utilizing  a  significant  level of  manual  labor.  Horizon  believes  it has a
competitive  advantage for a certain  segment of OEM business,  especially as it
relates to isolator products,  since its proprietary  platform allows Horizon to
produce unique designs at competitive prices in a flexible, automated process.

     MOLDED ASPHERES, MOLDED LENS ARRAYS AND DIFFRACTION GRATINGS

     The telecom  industry  has a need for molded  aspheres  for  laser-to-fiber
coupling, tunable lasers, DFB lasers and device coupling. Corning Inc. developed
the original process of molding a proprietary low melting temperature glass into
an asphere lens. In 1994,  Geltech  acquired the laboratory  scale process,  key
personnel and equipment,  and also secured a perpetual  license to all Corning's
intellectual  property  associated  with the  development  of  precision  molded
optics.  Since  acquiring the technology  from Corning,  Geltech has refined the
process  and  developed  the  markets  for  these  exceptional  lenses.  As high

                                       37

performance laser diode applications have  proliferated,  Geltech's business and
reputation have grown significantly.

     Geltech's  focus is on providing  custom  optical  solutions to meet unique
customer  needs  in the  rapidly  changing  telecommunications  market.  Geltech
provides optics of size up to 15mm, and is a developer of sub-millimeter optics.

     Geltech  has also  developed  a line of molded  lens  arrays.  Geltech  has
developed a process to mold lens arrays capable of producing optical  components
with very small lens  diameters  and very high lens density (for example  40,000
optical elements in a two-inch diameter array).

     Geltech also has a unique and  proprietary  line of  all-glass  diffraction
gratings  (StableSil(R))  for telecom  applications  and is developing a product
family of Sol-Gel based  waveguides.  Gratings  operate by separating light into
various wavelengths, utilized in DWDM, tunable lasers and optical test equipment
applications.  Geltech gratings are replicated providing a low-cost, high-volume
approach when compared with conventional  methods currently  employed by some of
Geltech's competitors.

GRADIUM

     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.  We  believe  that  GRADIUM  glass  lenses  provide
advantages  over  conventional  lenses for  certain  applications.  By  reducing
optical  aberrations and the number of lenses in an optical  system,  we believe
that GRADIUM glass can provide more  efficient  light  transmission  and greater
brightness,  lower production  costs, and a simpler,  smaller product.  While we
believe that other  researchers  have sought to automate  production  of passive
optical  components  and to  produce  optical  quality  lens  material  with the
properties of GRADIUM  glass,  we are not aware of any other person or firm that
has developed a repeatable  manufacturing process comparable to our abilities or
with the ability to produce such material on a prescribable basis.

     CURRENT FOCUS ON PRODUCTS

     The  current  focus of our  development  efforts  has been to  develop  new
products  based  on  our  optical  and  automation  platforms  in the  areas  of
isolators,   next  generation  optical   subassemblies,   diffractive  gratings,
waveguides,  switches,   micro-collimators  and  lens  arrays  for  use  in  the
telecommunications  field as well as new GRADIUM  glass  materials to be used in
various telecom applications.

     We were  issued a patent in fiscal year 2000 for  development  of a process
utilizing  high-powered  lasers for fusion,  splicing  and  polishing of optical
material to include optical fiber.  Our original process patent is for producing
an optical quality material,  GRADIUM glass, with an "axial" gradient refractive
index (i.e.,  the index gradient runs parallel to the optical lens axis,  rather
than  perpendicular to the lens axis or "radial").  The GRADIUM glass designated
curve is achieved by the  controlled  combination  of  multiple  glass  molecule
densities.  We have developed a set of proprietary software design tools so that
the light upon leaving the glass can be precisely modeled.  GRADIUM glass lenses

                                       38

can be produced across a large diameter range (currently  1mm-100mm).  Growth in
our  manufacturing  capabilities  has  led to  improved  yield  and  automation,
advancing our goal of producing  competitively priced optoelectronic and GRADIUM
glass products.

     We were  issued a patent  in  fiscal  year  2001  relating  to our  robotic
assembly platform used for the manufacturing of isolators and have several other
patents in process. We have approximately 50 US and foreign patents in the areas
of precision molded optics and Sol-Gel technologies.  We also hold the exclusive
right  to  certain  materials  we  believe  are key to the  development  of high
precision molded optics.

     In addition,  we utilize other optical  materials and  specialized  optical
packaging  concepts to manipulate light and perform research and development for
optical  solutions  in  the  fiber  telecommunications  and  traditional  optics
markets.

          MODULES

     During  fiscal 2001,  we  introduced a number of modules which will combine
two or more of our current components, such as the isolator and molded aspheres,
into a  subassembly.  During  fiscal  2002 we plan on  expanding  these  modules
offering and to automate the manufacturing of these modules to take advantage of
low cost  assembly.  Demand for  modules is driven by specific  customer  needs.
Utilizing  automation  techniques,  we are able to provide  active  alignment of
multiple  components and deliver a subsystem  optimized for the customers unique
needs with very low insertion loss.

          SWITCHES AND COLLIMATOR ARRAYS

     During fiscal 2002,  we had planned on shipment of the 1XN  opto-mechanical
switch  based  upon a patent  licensed  from  Herzel  Laor.  Due to the  current
economic  environment we have elected to delay  expenditures  required to launch
this product in fiscal  2002.  We will  concentrate  instead on  development  of
further  enhancements to existing  product lines. We introduced the prototype of
this  product  in August  2000.  The  prototype  is much  smaller  than  current
competitor's  switches while demonstrating  impressive  switching speeds. We are
also  working on  technologies  that can be applied to NxN  switches.  Using the
automated alignment  techniques learned in production of the 1XN opto-mechanical
switch, we plan on developing collimator arrays.

     Optical  cross-connects,   which  perform  high-speed  wavelength  routing,
switching and conversion  functions in an optical network,  are products that we
intend to focus on in the future. We believe our material  processing  expertise
will be key to the development of optical  cross-connect  products that overcome
the cost and performance  challenges of current technology.  Today, switching is
primarily performed  electronically;  however, several non-optical switches have
recently  been  announced.  To our  knowledge,  all of these  devices  remain in
development.

                                       39

          SOL-GEL TECHNOLOGY

     Late in 1994, after the acquisition of the  complementary  Precision Molded
Optics process from Corning,  Geltech redirected the Sol-Gel  technology's focus
towards development and manufacture of advanced optical components.  Examples of
these components include the high volume manufacture (more than 17 million units
to date) of silica  substrates  for optically  active  windows used in toxic gas
detection and the development and production of unique  solid-state  calibration
filters.  Geltech has practiced  Sol-Gel  technology since its inception and has
successfully addressed many different markets over the years. Today, Geltech has
significant  knowledge in this field with protection through extensive know-how,
trade secrets, and 7 issued patents.

     During the past few years,  Geltech also developed a replication process to
manufacture glass diffractive optical components using Sol-Gel technology.  This
process  allows the  fabrication  by  replication  of these complex  optics at a
fraction of the cost of conventional  technologies such as photolithography  and
reactive-ion etching.

     Early in 2000,  Geltech introduced a line of all-glass gratings in response
to  the  anticipated  demand  from  the  telecommunications   industry  for  the
fabrication  of DWDM and other devices  requiring  high  performance  and sturdy
gratings. These all-glass gratings present significant advantages over available
gratings due to outstanding environmental  resistance,  high performance and low
cost.

     Geltech continues to pursue the development of additional products based on
Sol-Gel technology.  Included in our new product plan are inorganic  waveguides,
active   waveguides   and   arrayed   waveguide   gratings   to   be   used   in
telecommunications applications.

BUSINESS STRATEGY

     Our management and marketing  focus is organized with the intended  purpose
of   serving   two   separate   markets:    (1)    optoelectronics   and   fiber
telecommunications  ("telecom"),  and (2) traditional optics (e.g. lasers,  data
storage, bar coding, medical equipment,  consumer optics, etc.). We believe that
GRADIUM glass and other optical materials can potentially be marketed for use in
many optics and optoelectronics products.

     OPTOELECTRONICS AND FIBER TELECOMMUNICATIONS (TELECOM PRODUCTS)

     Optoelectronics  technologies  consist  of  an  overlap  of  photonics  and
electronics  and are key enablers of  "Information  Age"  technologies,  such as
fiber optic  communications,  optical  data  storage,  laser  printers,  digital
imaging,  and sensors  for  machine  vision and  environmental  monitoring.  The
dramatic rise of the Internet, office automation,  videoconferencing,  local and
wide area networking, and remote access telecommunications has fueled the demand
for increased  network capacity in both long-haul  telecommunications  and cable
television networks.

     Given the inherently faster speed of light signals in fiber-optic  networks
and their immunity from  electromagnetic  interference,  fiber-optic systems are
replacing existing copper wire networks for long-haul (more than 600 kilometers)
telecommunications  networks.  Cable  television  networks are also  shifting to

                                       40

fiber-optic solutions for the distribution of signals from the broadcast station
to the local cable  distribution  hubs. Today,  fiber-optic cable is the primary
medium for long-haul  telecommunications  and cable  television  networks and is
making  inroads to replace  copper in the shorter  distance  "metro  loops" that
serve larger metropolitan and other public networks with transmission  distances
of less than 100 kilometers.

          COLLIMATORS

     Prior to 1998, we targeted various optoelectronic industry market niches as
potential  purchasers of our GRADIUM glass  products.  During 1998, we began the
development of products for the emerging optoelectronics  markets,  specifically
in the areas of fiber  telecommunications.  With our resolution of packaging and
alignment issues we demonstrated our first passive  optoelectronic  product, the
SMF Assembly,  in 1998. This product is manufactured  with automated  production
techniques we developed which utilizes laser fusion and fiber attachment. During
1999  and  2000,   we  expanded  this  product   line,   demonstrating   to  the
telecommunication  optical  components  industry  that we can  provide  low cost
products and solutions to meet their telecom-related collimator needs.

          ISOLATORS AND WDM SYSTEMS

     The demand for increased  bandwidth in fiber-optic  networks has led to the
widespread use of a once-theoretical method for transmitting multiple signals at
slightly different  wavelengths  through a single fiber to achieve efficient use
of fiber capacity. This technique, known as wavelength division multiplexing, or
WDM, requires separate source lasers transmitting slightly different wavelengths
for each signal or "channel" and more complex  modulators and optical amplifiers
to control  and  amplify  the signal in the  network.  WDM  systems,  originally
developed for eight separate  channels in 1996, are currently  being designed to
carry  as  many  as  128   separate   channels   with  0.4  of  a  nanometer  in
differentiation between wavelengths.  In theory, a single pair of optical fibers
can carry more than 10 terabits  of  information  per  second,  which is roughly
equivalent to 156 million voice  channels or 500,000  simultaneous  two-way HDTV
channels.  Through  Horizon and our investment in LightChip,  we have positioned
ourselves with products that are used within WDM systems.

     With our acquisition of Horizon, we acquired a manufacturer  engaged in the
automated  production of passive optical  components for the  telecommunications
and data  communications  markets.  Horizon believes its primary strength is the
design  of  optical   subassemblies   for  automation.   Horizon's  team  has  a
comprehensive  background in the field of fiber optics,  taking research efforts
"off the bench" and into  manufacturing.  Drawing  upon years of  experience  in
automation,  optoelectronic  package  design and  testing,  and a  multitude  of
technical disciplines,  Horizon has demonstrated novel solutions for today's WDM
design and processing  challenges.  By targeting  product  families and creating
common  platforms  for each,  Horizon can  rapidly  tailor  variations  within a
family, as the customer  demands,  and without major process or tooling changes.
This  philosophy  is  evident  in their  proprietary  micro-fixture  design  and
automated platform  manufacturing  process. This platform allows robots to mount
micro-optics  in small  transferable  fixtures  that can be processed at various
levels and converted into a variety of finished products. We believe Horizon has
a competitive advantage for a certain segment of OEM business,  especially as it

                                       41

relates to isolator products,  since its proprietary  platform allows Horizon to
produce unique designs at competitive prices in a flexible, automated process.

     In fiscal  2001,  Horizon  released a new line of isolator  assemblies  for
application in the metro and access telecom markets. This new line is based on a
flexible  manufacturing  platform  which can  address a wide  range of  customer
specifications while attracting lower cost applications.

          ASPHERIC LENSES

     Lenses in  telecommunications  applications perform two major tasks. One is
for the collimation of light as it emerges from the fiber. This collimated light
then passes through multiple  components  including  isolators,  filters,  and a
second collimator,  before returning back into a fiber. The second major task is
coupling light at the output of a laser diode to a fiber or waveguide.  Aspheric
lenses and lens arrays are used in both of these configurations.

     Telecom  products  manufactured  using  this  technology  include  aspheric
lenses,  sub-millimeter  lenses and lens arrays.  Several new products targeting
telecommunications applications, and using this technology are under development
at Geltech.  These new products  include low-cost  aspheric  lenses,  anamorphic
lenses,  cross  cylinder  lenses,  multifunctional  optical  components  and new
components  for low cost WDM products.  All of these products have key relevancy
for many different applications in the telecommunications market.

          SWITCHES

     In 1999, we entered into an exclusive  licensing agreement with Herzel Laor
for the commercialization of two fiberoptic opto-mechanical switch technologies.
In August 2000 we introduced the LP1600  opto-mechanical  switch at the National
Fiber  Optics  Engineers  Conference  in Denver,  Colorado.  The LP1600 is a 1xN
optical switch,  which is designed to route one incoming fiber into  one-of-many
output   fibers.   The  current   design  allows   customers  to  select  custom
configurations  of 4 to 24 output  channels,  with future designs allowing up to
100  output  channels.  The  Company  planned to  manufacture  the switch at its
Albuquerque  location  using its  patented  automated  fiber  fusion  and active
alignment  processes.  Due to delays which developed after Kaifa Technology went
through two acquisitions to ultimately become part of JDS Uniphase  Corporation,
we  decided  not to  continue  our  efforts  under  a 1999  joint  assembly  and
distribution  agreement  for  the  fiberoptic  mechanical  switches  with  Kaifa
Technology.  In fiscal 2001,  due to the current  economic  environment  we have
elected to delay expenditures required to launch this product in fiscal 2002. We
intend to concentrate instead on development of further enhancements to existing
product lines.

          WAVEGUIDES

     Waveguides  and Waveguide  Array  Gratings are important  technologies  for
coupling  and  splitting  wavelengths  of  light in DWDM  applications.  Typical
configurations are made of silica on silicon and new developments are being made
using Sol-Gel.  The largest  market segment for waveguide  usage is currently in
the area of multiplexing/demultiplexing.

                                       42

          OTHER PRODUCTS

     We are currently developing  additional  optoelectronics  products based on
our  proprietary  technologies.  Key strategic  alliances  with  technology  and
marketing  partners  to  design,  build  and  sell  next  generation  integrated
components  and devices may be  considered  in the  future.  However,  we do not
currently have any agreements,  other than those discussed  above, to enter into
any strategic alliances for this purpose.

     Traditional Optics

          LASER MARKETS FOR GRADIUM LENSES

     We initially  emphasized  laser products because we believed GRADIUM lenses
could have a substantial  immediate  commercial  impact in laser products with a
relatively  small initial  investment.  The majority of the increase in sales of
our lenses is due to optics used by YAG lasers. Generally, optical designers can
substitute  our  standard  GRADIUM  glass  components  for  existing  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,  we believe,  and customers' test
results  confirm,  that  GRADIUM  glass has the  ability to improve  the current
standard of laser performance. In 1998, our distributor,  Permanova Lasersystems
AB of Sweden, funded and completed a lengthy trial and testing period on GRADIUM
YAG lenses which they  qualified into systems  produced by  Rofin-Sinar  GmbH, a
major OEM  manufacturer of  high-powered  CO2 and YAG lasers,  headquartered  in
Germany.

     Our growth  strategy is to increase our emphasis on 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 1999,  LightPath and
Rodenstock  Prazisionsoptik GmbH (Rodenstock)  executed an agreement to transfer
to Rodenstock the exclusive, application-related utilization and distribution of
GRADIUM lenses  throughout  Europe.  The agreement was for an initial  five-year
period.  Rodenstock sold their precision  optics division to Linos AG, a pioneer
in the  field  of  photonics,  in  June  2000.  We  believe  our  agreement  and
relationships will continue to grow under the Linos AG/Rodenstock  alliance.  We
also have established relationships with eight additional foreign distributors.

          MOLDED ASPHERES

     In 1994, Geltech acquired the Precision Molded Optics process from Corning,
Inc. Geltech's  traditional optics product applications are molded aspheres used
in  optical  data  storage,   high  precision   printing,   bar  coding  and  by
manufacturers of medical equipment. In addition to the molded aspheres,  Geltech
also  manufactures a family of traditional  optics  including  laser flow tubes,
polished  cylinders and flats,  and prisms.  These devices are primarily sold to
manufacturers of medical devices, laser eye surgery, and other traditional optic
applications.

                                       43

     ORIGINAL EQUIPMENT MANUFACTURERS ("OEMS")

     In addition to laser applications, through our printed and Internet on-line
catalog,  we offer a standard line of GRADIUM glass lenses for broad-based sales
to  optical  designers  developing  particular  systems  for  OEMs  or  in-house
products.  Because complex systems contain many optical components,  and GRADIUM
glass  lenses can be  utilized  to reduce the  number of lens  elements  in such
systems,  we believe  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 may 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.  Accordingly,  we intend to focus
our long-term marketing efforts on emerging industries,  such as optoelectronics
and fiber  telecommunications  designed in next-generation  optical systems, and
performance  driven  industries  that are  seeking to  optimize  performance  of
existing optical products.

     We believe  OEM  relationships  may  improve  our  ability to develop  more
sophisticated technology development methods and products, although there can be
no assurances in this regard.  Such OEM relationships  have been utilized in the
development of prototype  lenses for  manufacturers of endoscopes and wafer chip
inspection equipment.  We will evaluate future OEM projects based on a number of
factors, including our assessment of the OEM's ability to fund the design effort
for the project and expected impact upon future sales.

SALES AND MARKETING

     Extensive   product  diversity  and  varying  levels  of  product  maturity
characterize  the optics  industry.  Product  markets range from consumer (e.g.,
cameras,  copiers) to industrial  (e.g.,  lasers,  data storage),  from products
where the lenses are the central  feature  (e.g.,  telescopes,  microscopes)  to
products incorporating lens components (e.g., robotics, semiconductor production
equipment).  Emerging  technology markets require optics for bandwidth expansion
and data transfer improvement in the drive to achieve an all optical network. As
a  result,  the  market  for our  products  is  highly  segmented  and no single
marketing approach will allow us to access all available market segments.

     Since fiscal 1998, our primary marketing objective has been the development
and  marketing  of passive  components  for the  optoelectronics  segment of the
telecommunications  industry  and laser based  products  in the  general  optics
product  arena.  The  narrowing  of our  product  focus was in  response  to the
opportunities  in the emerging  optoelectronics  market where we believe we have
key advantages and our success in sales of laser based products.  We believe our
key advantages are:

     *    we have developed packaging solutions for optoelectronic products;
     *    we have  been  able  to  develop  patentable  processes  with  optical
          materials that provide product solutions; and
     *    through automation, we have developed low cost production techniques.

                                       44

     Combining these elements,  we believe we have the opportunity to enter into
key optical  telecommunications markets with products that are enabling and cost
effective.  Although the same design constraints and technological  shortcomings
of conventional  optical technology and materials restrict all optical products,
we believe that our  proprietary  manufacturing  processes,  as well as the high
quality associated with GRADIUM glass,  results in a competitive  advantage over
other glass  products  currently  available  in our targeted  markets.  With our
acquisition of Horizon,  we have added to our line of passive optical components
while maintaining our emphasis on low cost production from automation.  With our
acquisition  of  Geltech,  we have  added a product  line  sold into the  active
optical component markets as well as products to be sold into DWDM systems.

     OPTOELECTRONICS AND FIBER TELECOMMUNICATIONS

     In order to be more  accessible to potential  customers we have divided our
sales  staff  into  the  following  territorial  areas  because  of  their  high
concentrations of telecom users:

     *    California
     *    New Mexico
     *    Texas
     *    Florida
     *    New Jersey

     In  addition,  we have  formalized  relationships  with  eight  industrial,
optoelectronics and medical component  distributors located in foreign countries
to assist in distribution of telecom products outside the United States. Because
the  optics  industry  is highly  fragmented,  we utilize  distributors  and our
Internet  site  (www.lightpath.com)  as vehicles  for broader  promotion  of our
telecom  products.  We have  placed,  and will  continue  to place,  print media
advertisements  in various trade  magazines and will  participate in appropriate
domestic and foreign trade shows.

     The target market for our current  products is concentrated  within several
industry  experts  such as  Agere  Systems,  Inc.,  Lucent  Technologies,  Inc.,
Corning, Inc., JDS Uniphase Corporation and Alcatel Optronics. The lens and Gen3
collimator  are used in free space  applications  where  coupling  to an optical
fiber is required.  We are  developing  these initial  products into families of
products as variations  are made to meet  specific  customer  requirements.  Our
focus will be on the Gen3 collimator as we believe that the Gen3 collimator will
replace the collimating  lens in many  applications.  Since many of our targeted
customers  currently assemble their own collimators,  our sales approach will be
to highlight  the Gen3  collimator  price/performance  ratio (value) and compare
that to the customer's  internal costs plus their lost opportunity  cost. During
fiscal 2001, our large beam  collimator  was selected as the primary  customized
collimator built specifically for Corning's  PurePath(TM)  Wavelength  Selective
Switch.  This product  utilizes both a GRADIUM lens and a Gen3 collimator  which
takes advantage of the unique properties of both components.

     Telecom   product  sales  for  fiscal  years  2001,   2000  and  1999  were
approximately $21.1 million,  $1.5 million and $57,000  respectively,  primarily
generated by targeting our sales efforts on  collimators  and  isolators,  entry
level products  currently  used by the  telecommunications  industry.  Our major

                                       45

telecom customers in fiscal 2001 and 2000 included Agere Systems,  Inc., Lucent,
Inc., Corning, Inc. and JDS Uniphase Corporation.

     Horizon's current marketing plan for isolators targets niche players in the
telecom/datacom  markets  with  high  volume  potential  for  the  next  decade.
Specifically,  Horizon is focusing on the  following  market  segments:  (i) WDM
long-haul   system   manufacturers,   (ii)  cable   television   carrier  system
manufacturers,   (iii)  "metro  loop"  system  manufacturers,   and  (iv)  Fiber
Channel/Gigabit Ethernet system manufacturers.  Horizon's largest customer, with
sales of  approximately  $11.4  million  and  $900,000  in fiscal 2001 and 2000,
respectively,  was Agere Systems,  Inc. ("Agere") (formerly the Microelectronics
division of Lucent  Technologies  Inc.) Early in fiscal 2001,  this platform was
qualified  to  support  Agere's  premium   isolator   package  for  high  volume
production,  although there can be no assurance that Agere will purchase Horizon
products in these  quantities.  Horizon has also  qualified a low-cost  isolator
platform to be used in the metro access markets.

     Geltech's  current  marketing plan for molded aspheres  targets the asphere
lenses used with the 980/1480  pump lasers,  DFB lasers and tunable  lasers with
their major customers being JDSU, Alcatel and New Focus. Geltech is also focused
on niche  players in the DWDM who utilize  all glass  diffraction  gratings  and
Sol-Gel  waveguides.  Geltech's  micro  lens  array has  application  in optical
switching,  waveguide coupling and fiber array coupling. In addition, Geltech is
focusing on several high volume  opportunities  in optical data storage  working
closely  with the key players  developing  the next  generation  of  audio/video
devices.

     In addition to our telecom products business,  we are planning on providing
modules  where  several of our  components  are  integrated  with  automation to
provide a  subassembly  to the  customer.  We  believe  these  modules  have the
potential to provide higher gross profit margins than the individual components.
We are also addressing our customers DWDM needs by focusing our development team
efforts  on a  "micro-collimator"  assembly  to  target  numerous  requests  for
manufacturing  services  related  to  collimating  packages.   Generally,  these
inquiries are coming from producers of next generation switches,  MEMS and other
optical devices that need assistance with packaging and volume production.

          STRATEGIC ALLIANCES

               *    WDM Model and DWDM Prototypes

     Since fiscal 1997,  we have entered  into  strategic  alliances  with other
companies in an effort to quickly enter into the  optoelectronics  markets.  For
example, we currently own approximately 16.4% of the preferred and common shares
outstanding  of  LightChip  (13.2% if fully  diluted by exercise of  outstanding
stock  options).  LightChip  successfully  demonstrated  a WDM  model  and  DWDM
prototypes  and product  sales began in calendar  2001.  We licensed  the use of
GRADIUM glass,  as well as any newly  developed  intellectual  property,  in the
field of fiber-optic communication systems, components and devices to LightChip.
We have  retained  the  rights  to the  specific  areas  of  fiber  collimators,
isolators,   amplifiers,   circulators,   couplers,  splitters  and  fiber-optic
switches.

               *    Switches

                                       46

     In 1999, we entered into an exclusive  licensing agreement with Herzel Laor
for the commercialization of two fiberoptic opto-mechanical switch technologies.
In August 2000 we introduced the LP1600  opto-mechanical  switch at the National
Fiber  Optics  Engineers  Conference  in Denver,  Colorado.  The LP1600 is a 1xN
optical switch,  which is designed to route one incoming fiber into  one-of-many
output   fibers.   The  current   design  allows   customers  to  select  custom
configurations  of 4 to 24 output  channels,  with future designs allowing up to
100  output  channels.  The  Company  planned to  manufacture  the switch at its
Albuquerque  location  using its  patented  automated  fiber  fusion  and active
alignment  processes.  Due to delays which developed after Kaifa Technology went
through two acquisitions to ultimately become part of JDS Uniphase  Corporation,
we  decided  not to  continue  our  efforts  under  a 1999  joint  assembly  and
distribution  agreement  for  the  fiberoptic  mechanical  switches  with  Kaifa
Technology.  In fiscal 2001,  due to the current  economic  environment  we have
elected to delay expenditures required to launch this product in fiscal 2002. We
will  concentrate  instead on  development of further  enhancements  to existing
product lines. The telecommunications industry is subject to, among other risks,
intense  competition  and  rapidly  changing  technology,  and  there  can be no
assurances  as to our  ability to  anticipate  and  respond to the  demands  and
competitive aspects of this industry.

               *    Federally Funded Research on WDM Prototypes and Concepts

     We began our sales of WDM  prototypes  and  concepts in 1997.  With funding
from a  federal  government  contract,  we worked in  partnership  with  Radiant
Research Inc. and the Microelectronics  Research Center,  University of Texas to
address WDM problems encountered in network  applications.  By employing GRADIUM
microlenses  for a tunable WDM, we were able to develop  possible  solutions for
these  issues.  In fiscal 2000 Phase 2 total funds of $750,000  were  awarded to
Radiant Research Inc. for continuation of the WDM project,  of which we received
approximately $300,000. The project ended in fiscal 2000.

          TRADE SHOWS

     We  displayed  our  collimating  lens,  the  SMF  assembly  and  large-beam
collimator  assembly products at industry trade shows in early calendar 1999. We
displayed the enhanced Gen3  collimator at the January 2000 Photonics West trade
show.  During fiscal 2001, we have  displayed  our  additional  product lines of
isolators,  molded aspheres,  diffraction  gratings and micro lens arrays. These
shows provide an opportunity for us to meet with potential customers, distribute
information  and samples of our products or to discuss test results from samples
previously sent.

     TRADITIONAL OPTICS

     Prior to our IPO in 1996,  our  resources  had been  applied  primarily  to
research and  development;  consequently,  LightPath  and GRADIUM glass were not
introduced  to the  commercial  market.  Promotion of our  products  through the
Internet,  trade  advertising  in  industrial  magazines  and  participation  in
numerous  domestic and foreign trade shows  increased  interest and awareness of
our products,  resulting in additional lens sales. Traditional optics lens sales
for fiscal years 2001 and 2000 were  approximately  $5.1  million and  $768,000,
respectively.  The growth in 2001 was primarily due to the addition of Geltech's

                                       47

traditional optics business in September 2000, which accounted for $4 million of
traditional  optics  sales in fiscal 2001.  Geltech's  products are used in data
storage and by manufacturers of medical equipment.  Lens sales are primarily due
to sales of  lenses  for  laser and wafer  chip  inspection  markets.  Our sales
efforts in targeting laser  applications,  an area where GRADIUM lenses increase
the  quality of YAG laser  beams and reduce  the focal spot size,  has  received
market acceptance.  Our major customers in fiscal 2001 included Coherent, Alpine
Research,  Sunrise  Technologies  and Gerhard  Franck  Optronik  GmBH. Our major
customers in fiscal 2000  included  Gerhard  Franck  Optronik GmBH and Permanova
Laser Systems AB.

          INDUSTRIAL AND OPTOELECTRONIC DISTRIBUTORS IN FOREIGN COUNTRIES

     We have formalized  relationships  with eight industrial and optoelectronic
distributors located in foreign countries. Because the optics industry is highly
fragmented,  we utilize  distributors  and the  Internet as vehicles for broader
promotion of GRADIUM  glass.  Our Internet web site  (www.lightpath.com)  is one
source of  information  on  GRADIUM  glass,  and  potential  customers  can view
products from our catalog.  We have placed,  and will  continue to place,  print
media advertisements in various trade magazines and will participate in selected
domestic  and  foreign  trade  shows.  We have  developed  a network of selected
independent  optical  engineering  firms to promote  the sale of  GRADIUM  glass
products. Presently, eight optical engineering firms provide such optical design
services and support.

          OEMS

     We  intend  to  continue  to  market   GRADIUM   glass   through   existing
relationships  with OEMs for the production of specific  prototype  lenses to be
incorporated  into  the   manufacturer's   proprietary   products.   Future  OEM
relationships will only be entered into based upon the OEM's ability to fund the
product  design and our  assessment of its ability to achieve  certain  economic
criteria.  In fiscal 2000 we recognized  $125,000 in licensing  fees from a 1994
agreement  with Karl  Storz  GMBH & Co.,  a major  endoscope  manufacturer,  who
converted to a non-exclusive arrangement.

          PROMOTIONAL AND EDUCATION ACTIVITIES FOR OPTICAL DESIGNERS

     As  part  of our  marketing  strategy,  we have  provided  promotional  and
educational activities concerning GRADIUM glass and its properties,  intended to
familiarize and educate optical engineers from numerous, high performance optics
markets. We presently have six standard profiles of GRADIUM glass that engineers
can use for  product  design,  and will  continue  to develop  more  profiles as
required.  Our existing  GRADIUM glass profiles are compatible with  established
software design programs utilized by optical  designers,  enabling  designers to
integrate  GRADIUM  glass into their  designs.  While this enables  designers to
incorporate  GRADIUM glass into their existing product design,  we must increase
familiarity  with  GRADIUM  glass  so that  designers  will be  more  likely  to
incorporate GRADIUM glass in their original designs. If a standard GRADIUM glass
profile is not suited for a specific design,  we have the capability to create a
custom  GRADIUM  glass  profile for the  customer.  Our  objective is to educate
optical designers, through the distribution of materials, about the potential of

                                       48

GRADIUM glass to provide them with additional  flexibility and design freedom to
create optical products more efficiently and with enhanced performance.

COMPETITION

     OPTOELECTRONICS AND FIBER TELECOMMUNICATIONS

     The telecommunications  marketplace is renowned for its product quality and
reliability demands. Every item must pass rigorous testing before being designed
into devices and systems.  We must establish a reputation as a quality supplier.
The products  must perform as claimed so that the customer will not need to test
after the initial  qualification,  and we must be open to continuous improvement
of our  products  and  processes.  If we can pass these  tests we believe we can
become a primary  or second  source  supplier  to the  industry.  However,  this
industry  is subject to,  among other  risks,  intense  competition  and rapidly
changing  technology,  and  there  can be no  assurances  as to our  ability  to
anticipate and respond to the demands and competitive aspects of this industry

          COLLIMATORS

     There  are  currently  only  a  handful  of  direct   competitors  for  our
collimating  lenses and Gen3 collimator.  Nippon Sheet Glass currently  supplies
the majority of collimator  lenses.  The collimator lens is a separate  business
from Nippon Sheet Glass's primary product, automotive glass. The Gen3 collimator
will  compete  against  existing  collimator  assemblies,  which are produced by
Casix, DiCon Fiberoptics,  Samsung Electronics, Wave Optics and Oz Optics. There
are also a number of companies  that  assemble  their own  collimators,  such as
Lucent,   and  JDS  Uniphase.   These   competitors   have  greater   financial,
manufacturing,  marketing and other  resources than  LightPath.  We are aware of
current research projects that integrate optical technologies,  such as existing
planar  waveguide  structures,  which have the  potential to replace some of the
current  collimator  applications.  We  believe  that  many  of  these  products
currently have limitations  which have made their wide spread usage  unfeasible,
thereby  reducing  the  likelihood  that they will  replace  current  collimator
applications in the immediate future.

          ISOLATORS

     Horizon competes with a few specific players in the isolator segment of the
WDM components market. These include Namiki, TDK, Tokin,  Kyocera,  Sumitomo and
Kaifa Technology (acquired by E-TEK/JDS  Uniphase).  Horizon's strategy does not
involve  direct  competition  with the "catalog"  offerings of these  companies;
rather, Horizon focuses its efforts on designing and manufacturing specialty and
hybrid  components  according to  particular  OEM  specifications  by delivering
flexible and novel packaging solutions achieved by its automated platform.

          MOLDED ASPHERES

     Geltech competes with Hoya Corporation and Asahi  Corporation in the molded
asphere  lenses.  Diffraction  gratings or a  competitive  solution  are sold by
American  Holigraphics,  Jobin Yvan and Pirelli;  arrayed waveguide gratings are
produced by Lucent and PIRI; and reflective gratings are produced by Instruments

                                       49

SA. In addition, for less performance driven applications, Geltech competes with
manufacturers of plastic aspheres.

          SWITCHES AND OPTICAL CROSS-CONNECTS ("OXC")

     Mechanical  switches  comprise the  majority of switches  used today in the
telecommunications  industry.  Current  competitors  in this  area  include  JDS
Uniphase  and Dicon  Fiberoptics.  These  competitors  have  greater  financial,
manufacturing,  marketing and other resources than  LightPath.  OXC perform high
speed  wavelength  routing,  switching  and  conversion  functions in an optical
network.  We intend to  continue  with the  development  of OXC.  We believe our
material  processing  expertise  will be key to the  development of OXC products
which overcome the cost and performance challenges of current technology.  Today
switching is generally performed  electronically,  however,  several non-optical
switches have recently been  announced.  To our knowledge,  all of these devices
remain in development.

     TRADITIONAL OPTICS

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

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

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

                                       50

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

MANUFACTURING

     LIGHTPATH

     LightPath  has  full  scale  commercial  manufacturing  operations  in  its
Albuquerque,  New Mexico facilities,  totaling 30,300 square feet. In June 2000,
we  completed  the initial  construction  of a 5,000 square foot clean room that
houses seventeen operational manufacturing stations. Each station includes laser
fusion and housing equipment and an automated testing process. We currently have
two laser polishing stations in operation.  With this equipment,  we believe our
facilities can meet the capacity  requirements of our planned  telecom  products
for  several  years.  Our present  telecom  manufacturing  facility  can also be
expanded by approximately 25% if needed.

     Due to manufacturing  techniques we have developed, we believe our costs to
produce  the  Gen3  collimator  will  be  less  than  the  traditional  industry
manufacturing  costs. In April 1996, we built out our lens  manufacturing  plant
for traditional optics. We believe that the present  manufacturing  facility can
produce in excess of 2 million  lens blanks per year  depending  on product size
and mix. However, to date, we have not manufactured products in such quantities,
as our sales have not supported this scale of production.

     Our purchase of five larger, more sophisticated furnaces,  milling machines
and metrology equipment in fiscal 1998 generated further production efficiencies
in the form of  yield  efficiencies  and  reduced  unit  production  costs.  The
furnaces,  which are  equipped  with  monitoring  and  feedback  systems,  allow
production of multiple  boules that are up to four times as large as our initial
boules.  Automation of certain assembly  processes,  including core drilling and
metrology,  are  resulting  in further  cost  savings and quality  improvements.
GRADIUM glass lenses have  spherical  surfaces,  and as a result lens  finishing
costs will continue to be considerably less expensive than most aspheric lenses.
As a result of our  manufacturing  efficiencies  and use of  off-the-shelf  base
glass,   GRADIUM  lenses  are  generally  price  competitive  with  conventional
homogenous lenses.

     Much  of  product  qualification  is  performed  in-house.   Our  test  and
evaluation  capabilities include Damp Heat, High/Low Temp Storage, and a Thermal
Shock Oven, which are  representative of the equipment required to meet BellCore
Testing requirements.  Our engineering  departments have full design and CAD/CAM
technical  support.  The  implementation  of  Statistical  Process  Controls has

                                       51

allowed us to eliminate costly manual testing operations. We believe the ability
to maintain  consistently high quality at the  manufacturing  stage represents a
significant asset and distinctive characteristic of our production capabilities.
Quality  control  will be  critical  to our  ability to bring  telecommunication
products to market as the customers  demand rigorous testing prior to purchasing
a product.

          SUBCONTRACTORS; STRATEGIC ALLIANCES

     We believe that low  manufacturing  costs will be crucial to our  long-term
success.  We presently use  subcontractors  for finishing lenses,  including the
collimator  lens,  and  intend  to  continue  to do so.  We  have  the  internal
capability to finish prototype lenses and small volume orders. We have qualified
and  licensed  numerous  finishers  to  fabricate  lenses,  several of which are
located in Asia.  Qualification of additional  offshore finishers to augment our
strategy of maximizing cost efficiencies will continue to be a top manufacturing
priority  while the assembly  and  alignment  of  collimators  will be done with
automation at our manufacturing facilities.

     We entered into a 1997  strategic  alliance  with Hikari Glass Co., Ltd. of
Japan (a 40% owned  subsidiary of Nikon) to consider  using Hikari as a possible
second source for GRADIUM glass production, as a possible source for high-volume
blank  production,  to  increase  the  presence  of  GRADIUM  glass in  Hikari's
established  Asian  markets  and to  develop  a  continuous  flow  manufacturing
process, currently used by Hikari for high-end optical lenses. In February 2000,
Hikari  announced  that they intended to spend $5 million to purchase  equipment
necessary to build out a second  facility for GRADIUM glass  materials and other
products.  The companies have plans to implement some of our goals during fiscal
year 2002.

     We have taken steps to protect our  proprietary  methods of repeatable high
quality manufacturing by patent disclosures and internal trade secret controls.

          SUPPLIERS

     Base optical materials,  used in both  optoelectronic and traditional optic
products, are manufactured and supplied by a number of major manufacturers, such
as Hikari,  Schott Glaswerke and Hoya Corporation.  Optical fiber and collimator
housings are manufactured and supplied by a number of major manufacturers,  such
as Corning. We believe that a satisfactory  supply of production  materials will
continue  to be  available  at  reasonable  prices,  although  there  can  be no
assurances in this regard.

     HORIZON

     Horizon's manufacturing lines are housed in approximately 5,000 square-feet
of clean room space  (certified  Class 10,000)  within their Walnut,  California
facility.  The  manufacturing  lab contains  dual beam laser  welding  stations,
sub-micron  alignment engines,  robotic assembly stations,  automated dispensing
systems and precision dicing equipment. A tool and die operation,  including EDM
capability,  is located in a separate shop and assembly  area. The shop supports
Horizon's  product  design  and  automation  efforts  including   metrology  and
inspection,  part  prototype  fabrication  for  proof of  concept,  and  machine
building from prototype to production  line.  The primary  benefits of Horizon's
approach to manufacturing are (i) reduced costs as a result of higher yields and

                                       52

throughput,  and (ii)  product  consistency  as a result of  eliminating  manual
labor.  We believe  Horizon is the only  manufacturer  of  free-space  isolators
currently   using   automated   manufacturing.   Horizon  has  similar   product
qualification processes and equipment as LightPath.

          SUPPLIERS

     Horizon  currently  purchases  a few key  materials  from single or limited
sources.  The  polarizing  glass  used  in its  isolator  products  is  supplied
exclusively by Corning and is marketed as Polarcora.  To date,  Horizon has been
able to acquire an ample supply of polarizing glass. The latching garnet used in
some isolators is supplied exclusively by Agere.  Allocations of supply for this
raw  material  can be very  competitive  but  have  not  been an  issue to date.
Non-latching garnet and other crystals used in Horizon's other isolator products
are  provided  by a  number  of  vendors,  including  Casix,  Sumitomo  and TDK.
Available  quantities  and  adequate  pricing  of this  garnet  has  not  proven
problematic.  We believe that a satisfactory supply of production materials will
continue  to be  available  at  reasonable  prices,  although  there  can  be no
assurances in this regard.

     Horizon also relies on local and regional  vendors for component  materials
such as housings,  fixtures and magnets.  In addition,  certain Horizon products
require external  processing such as brazing and metalization.  To date, Horizon
has found a suitable  number of  qualified  vendors in the  Southern  California
market.

     GELTECH

     Geltech's  manufacturing lines are housed in approximately 23,000 sq./ft at
its headquarters in Orlando,  Florida. This facility includes extensive research
and development  labs featuring  state-of-the-art  equipment and metrology.  The
manufacturing  plants  include lens  pressing  equipment,  high  precision  mold
production  equipment,  advanced metrology and inspection  equipment and coating
facilities.  The Orlando plant  features an extensive  tooling and machine shop,
developed for the fabrication of proprietary  press  workstations,  and advanced
mold development.

         In November 2001,  Geltech moved into a new 41,000  sq/ft.,  production
facility to accommodate current and future growth needs in Orlando. At this time
we consolidated our traditional optics work within the new facility and closed a
second site.  The new facility  will feature  extensive  clean room  operations,
expanded  tooling and coating work areas,  and expanded areas for the production
of diffraction  gratings and micro-lens arrays. The new production facility will
also emphasize  automation in all phases of  manufacturing.  The new facility is
expected to provide  Geltech  with the  platform to  significantly  reduce costs
through process improvements and automation, and provide the capacity needed for
the fulfillment of high volume opportunities.

          SUPPLIERS

     Geltech utilizes a number of glass  compositions for the manufacture of its
molded glass aspheres and lens array  products.  One such glass is a proprietary
glass  composition  licensed  from and  manufactured  by  Corning  Incorporated.

                                       53

Corning Incorporated is currently the sole source for this glass composition. We
believe that a satisfactory  supply of production  materials will continue to be
available at  reasonable  prices,  although  there can be no  assurances in this
regard.  Suppliers and second  sources of other glass  compositions  are readily
available.

     Geltech also relies on local and regional  vendors for component  materials
and services such as chemicals and inert gases,  specialty ceramics, UV coatings
and other specialty  coatings.  To date,  Geltech has found a suitable number of
qualified vendors for these materials and services.

PATENTS AND OTHER PROPRIETARY INTELLECTUAL PROPERTY

         Our  policy is to  protect  our  technology  by,  among  other  things,
patents,  trade secret protection,  trademarks and copyrights.  As of June 2001,
LightPath and its subsidiaries had forty-nine issued U.S.  patents,  twenty-nine
foreign patents and had filed numerous  applications for additional U.S. patents
and foreign patents.  Patents have been issued and/or patent  applications  have
been  filed  in  the  areas  of  glass  composition,   glass  molding,  gradient
geometries,  production  processes,  sol-gel processing,  product design,  fiber
attachment,  robotic  assembly  and  micro-fabrication.  The first of our issued
patents  expires in 2006;  the  remainder  expire at various times through 2018.
Patent  applications  corresponding to our U.S.  applications have been filed in
the  patent  offices  in Europe and Japan  pursuant  to the  Patent  Cooperation
Treaty.  Under the Patent  Cooperation  Treaty,  a patent applicant may file one
patent  application  and have it  acknowledged  as an accepted filing in as many
member nations to the Patent Cooperation Treaty as the applicant elects.


     In addition to patent protection,  certain process inventions, lens designs
and innovations are retained as trade secrets. A key feature of GRADIUM glass is
that,  once  fabricated,  it does not reveal our formula upon inspection and, to
our knowledge, cannot be reverse-engineered.

     LightPath(R)  is now  registered as a service mark in the United States and
GRADIUM (R) is a  registered  trademark.  Horizon has filed a federal  trademark
application  for the mark  "Horizon  Photonics".  Geltech's  StableSil  (R) is a
registered trademark.

     There can be no assurance  that any issued  patents owned by us will afford
adequate  protection  to us or  not be  challenged,  invalidated,  infringed  or
circumvented,  or that patent applications  relating to our products will result
in patents being issued. There can be no assurance that any rights granted to us
for  technologies  that we may  license in the future will  provide  competitive
advantages to us. There can be no assurance that patents owned or licensed by us
that  are  issued  in  one  jurisdiction  will  also  be  issued  in  any  other
jurisdiction. Furthermore, there can be no assurance that the validity of any of
the patents  would be upheld if  challenged  by others in litigation or that our
activities would not infringe upon patents owned by others.

     Further,  there can be no  assurance  that  others  have not  independently
developed  or will not  independently  develop  and patent  similar or  superior
products and  technologies,  duplicate  any of our products or  technologies  or
design  around our  patents.  There can be no assurance  that patents  issued to
others will not adversely  affect the  development or  commercialization  of our
products  or  technologies.  We do not  have  an  insurance  policy  for  patent
infringement  liability  coverage  for costs or  damages  relating  to claims of

                                       54

infringement.  We could  incur  substantial  costs in  defending  suits  brought
against us or any of our licensees,  or in suits in which we may assert that our
patent or patents  provide us with rights against others or in suits  contesting
the validity of a patent. Any such proceedings could be protracted. In addition,
there can be no assurance  that we would be  successful  in defending our patent
rights in any future infringement  action. If the outcome of any such litigation
is adverse to our interests, our business may be materially adversely affected.

     We do not believe that any of our products or processes  infringes any U.S.
or foreign patent rights of any other party. There can be no assurance, however,
that our products or  processes  do not  infringe on a United  States or foreign
patent,  or patent  application.  Patent  applications  in the United States are
maintained  in secrecy  until the patent is issued.  We could incur  substantial
costs in defending ourself in infringement  litigation  brought by others, or in
prosecuting infringement claims against third parties. An adverse party claiming
patent or copyright  infringement might assert claims for substantial damages or
seek to obtain an injunction or other equitable relief,  which could effectively
block the ability for us to make, use, distribute and sell products.

     We also rely on trade secrets and proprietary  know-how. We seek to protect
our  trade  secrets  and  proprietary  know-how,  in  part,  by  confidentiality
agreements with our employees,  consultants and customers. However, there can be
no assurance that our confidentiality agreements will not be breached or that we
would  have  adequate  remedies  for any  breach.  Some  of the  confidentiality
agreements that we rely upon will expire in the next few years.  There can be no
assurance  that others will not  independently  develop  technology or processes
substantially  equivalent to or better than our technology or processes, or that
our trade  secrets  will not  otherwise  become  disclosed  to or  independently
discovered by our competitors.

ENVIRONMENTAL AND GOVERNMENT REGULATION

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

     Horizon  uses a  low-emission  spray booth for the  application  of certain
solvents and adhesives in its manufacturing process.  Horizon maintains a permit
for its spray  booth  through  its local air  quality  management  district  and
believes  it is in full  compliance  with all  applicable  regulations.  Geltech
utilizes certain  chemicals and solvents in its manufacturing  process.  Geltech
maintains all necessary  permits and believes it is in full  compliance with all
applicable regulations

                                       55

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

RESEARCH AND DEVELOPMENT

     From August 1985 through June 1996,  we were engaged in basic  research and
development  that resulted in the discovery of GRADIUM glass and the proprietary
processes  for  fabricating   GRADIUM  glass  lenses.   This  research  included
theoretical  development of the  mathematical  formulas for accurately  defining
GRADIUM  glass,  development  and  refinement  of the  prescribable,  repeatable
fabrication  process,  and  development  of  the  software  modeling  tools  and
metrology.  We shipped our first GRADIUM glass products in May 1994. Our initial
flint  product  line is  lead-based.  The flint  GRADIUM  glass  family has been
expanded over the years, to include crown glasses,  titania silicate glasses and
polymer materials. We intend to continue fundamental materials research, process
and production  optimization  and the  development of new glass  compositions to
create  different  "families"  and  geometries of GRADIUM glass  materials to be
offered to  customers.  "Families"  of glass are  various  base glass  compounds
comprised  of  different   elements.   Variation  of  refractive  index  can  be
accomplished by using different elements in glass.

     Further  development  is necessary to produce  GRADIUM glass  materials for
high performance, white light applications (such as high performance microscopes
and other products where sensitive color  discrimination  is critical).  We will
continue to upgrade the material  design  modeling  software and optical  design
tools  to  facilitate   product  design.   Working  with  DR  Technologies,   we
successfully  completed the development of GRADIUM polymer and acrylic materials
in fiscal 1998.  These  materials  may be used for solar  concentrators  used in
space  applications  and for  conformal  optics  (optics  that conform to design
specifications  of aircraft  and  missiles)  where more  aerodynamic  shapes are
required.

     The  majority  of  present  development  efforts  are  focused  on the Gen3
collimator  assembly  and  expanding  the  Company's  products  to the  areas of
switches,  interconnects and cross-connects for the telecommunications industry.
Our acquired businesses continue their efforts in the area of isolators and next
generation optical subassemblies,  diffractive gratings, waveguides, lens arrays
and  sub-assembly  technologies.  We  incurred  expenditures  for  research  and
development  for the years  ended June 30,  2001,  2000 and 1999 of  $7,089,931,
$1,449,347 and $615,371,  respectively.  In addition,  during fiscal 2001,  $9.1
million  and  during  fiscal  2000  $4.2  million  of  in-process  research  and
developments  costs were  expensed  related to the  acquisition  of Geltech  and
Horizon,  respectively.  We currently plan to expend  approximately $6.5 million
for research and development during fiscal 2002, which could vary depending upon
progress of projects in the proof of concept stage.

                                       56

EMPLOYEES

     We currently have approximately 200 full-time employees in California,  New
Mexico, Texas, Florida and New Jersey. Although we have reduced our workforce by
approximately  190 people during the last three quarters,  we expect to continue
to hire selectively in the manufacturing,  engineering,  sales and marketing and
administrative  functions to the extent  consistent with our business levels. We
intend to continue our current practice of utilizing outside consultants,  where
appropriate,  in addition to hiring full-time  personnel.  None of our employees
are represented by labor unions.

               PRICE RANGE OF THE COMPANY'S CLASS A COMMON STOCK.

     The following table sets forth the range of high and low bid prices for the
Class A Common  Stock for the periods  indicated,  as  reported  by Nasdaq,  the
principal system on which such securities are quoted. The quotation  information
below  reflects  inter-dealer  prices,  without  retail  mark-up,  mark-down  or
commission, and may not represent actual transactions.

                                                       Class A
                                                     Common Stock
Fiscal Year Ended     Quarter ended               High           Low
-----------------     -------------               ----           ---

June 30, 2000:        September 30, 1999        $  7.19        $  1.78
                      December 31, 1999         $ 18.69        $  3.13
                      March 31, 2000            $ 65.31        $ 15.88
                      June 30, 2000             $ 41.38        $ 15.63

June 30, 2001:        September 30, 2000        $ 57.94        $ 26.50
                      December 31, 2000         $ 48.00        $ 10.56
                      March 31, 2001            $ 27.44        $ 10.25
                      June 30, 2001             $ 19.00        $  6.65

June 30, 2002:        September 30, 2001        $  8.39        $  1.78
                      December 31, 2001         $  5.00        $  1.81

     We  estimate  that  there  were  approximately  300  holders  of record and
approximately 19,000 beneficial holders of the Company's Class A Common Stock on
August  15,  2001.  We have not paid  cash  dividends  in the past and we do not
intend to pay dividends in the foreseeable future. Declaration of dividends will
be at the discretion of the Board of Directors.

     SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

     LightPath  is providing  the  following  information  to assist you in your
financial  analysis  of  the  Company.   The  table  below  represents  selected
historical  consolidated  statement  of  operations  and  balance  sheet data of
LightPath  Technologies,  Inc. and subsidiaries.  The consolidated  statement of
operations data set forth below for the years ended June 30, 2001, 2000 and 1999
and the consolidated balance sheet data as of June 30, 2001 and 2000 are derived
from,  and are  qualified by reference  to, the audited  consolidated  financial
statements of LightPath  Technologies,  Inc. and subsidiaries included elsewhere
in this  prospectus.  The  consolidated  statement of operations  data set forth

                                       57

below for the years  ended June 30, 1998 and 1997 and the  consolidated  balance
sheet  data as of June  30,  1999,  1998  and  1997  are  derived  from  audited
consolidated   financial   statements  of  LightPath   Technologies,   Inc.  and
subsidiaries  not included in this  prospectus.  The  consolidated  statement of
operations  data set forth below for the six months ended  December 31, 2001 and
2000 and the consolidated balance sheet data as of December 31, 2001 are derived
from,  and are qualified by reference to, the unaudited  condensed  consolidated
financial statements included elsewhere in this prospectus.

     In LightPath's opinion, the unaudited consolidated  information for the six
months ended  December 31, 2001 and 2000  reflects all  adjustments,  consisting
only of normal recurring adjustments, necessary to fairly present the results of
operations and financial  condition.  Results from interim periods should not be
considered  indicative  of results for any other  periods or for the year.  This
information  is  only  a  summary.  You  should  read  it  in  conjunction  with
LightPath's   historical   financial   statements  and  related  notes  and  the
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations," which are included elsewhere in this prospectus.



In 000's except per            Six months ended
share data                        December 31                           Fiscal Year end June 30
                           -----------------------   -------------------------------------------------------------
                              2001         2000         2001         2000         1999         1998         1997
                           ---------    ---------    ---------    ---------    ---------    ---------    ---------
                                                                                    
Total Revenues             $   5,855    $  10,826    $  26,143    $   2,266    $   1,086    $     758    $     674
Cost of Sales                  6,918        6,436       15,284        1,310          409          290          152
Operating Loss               (28,773)     (27,223)     (63,126)     (16,198       (2,857)      (3,553)      (3,104)
Net loss applicable
to common shareholders     $ (28,022)   $ (25,784)   $ (60,853)   $ (17,842)   $  (3,359)   $  (6,030)   $  (2,998)
                           =========    =========    =========    =========    =========    =========    =========

Basic & Diluted Net
Loss per share             $   (1.45)   $   (1.38)   $   (3.19)   $   (1.86)   $   (0.79)   $   (2.00)   $   (1.09)
                           =========    =========    =========    =========    =========    =========    =========

Number of shares
used in per share
calculations                  19,382       18,785       19,064        9,587        4,271        3,011        2,755

Total Assets               $  58,406                 $  84,290    $ 100,713    $   2,767    $   6,308    $   2,709
Working Capital               24,000                    35,375       59,129        1,001        4,561          873

Stockholders' Equity       $  53,406                 $  78,024    $  98,298    $   1,828    $   4,895    $   2,059


                                       58



                          SUPPLEMENTARY QUARTERLY CONSOLIDATED FINANCIAL DATA (UNAUDITED)

                                                                        Net Loss        Basic and     Number of
                                                                     Applicable to     Diluted Net   Shares used
Three Months                                                             Common         Loss per     in per share
    Ended         Revenues      Gross Profit     Operating Loss       Shareholders       Share       Calculation
    -----         --------      ------------     --------------       ------------       -----       -----------
                                                                                    
Fiscal 2000:
------------
09/30/99        $    269,105    $    184,284     $   (589,411)       $ (1,024,536)       $(0.20)       5,222,931
12/31/99             277,795         172,786       (1,001,630)         (2,139,621)       (0.32)        6,786,966
03/31/00             333,175         191,197       (2,419,398)         (3,134,329)       (0.29)       10,674,337
06/30/00        $  1,386,189    $    408,286     $(12,187,483)(1)    $(11,543,524)(1)    $(0.73)      15,741,760

Fiscal 2001:
------------
09/30/00        $  3,064,939    $  1,340,165     $(17,768,798)(2)    $(16,965,646)(2)    $(0.93)      18,327,625
12/31/00           7,760,606       3,049,119       (9,454,104)         (8,863,512)        (0.46)      19,242,857
03/31/01          10,269,074       4,656,152       (9,680,718)         (9,175,835)        (0.48)      19,332,856
06/30/01        $  5,048,537    $  1,814,026     $(26,222,658)(3)    $(25,847,917)(3)    $(1.33)      19,362,307

Fiscal 2002:
------------
09/30/01        $  3,458,046    $    344,279     $(11,065,974)       $(10,381,860)       $(0.54)      19,371,167
12/31/01        $  2,396,871      (1,407,783)     (17,707,142)        (17,639,833)(4)    (0.91)       19,392,308


(1)  Includes  $4.2  million  charge  for  acquired   in-process   research  and
     development from the April 2000 acquisition of Horizon Photonics, Inc.
(2)  Includes  $9.1  million  charge  for  acquired   in-process   research  and
     development from the September 2000 acquisition of Geltech Inc.
(3)  Includes $13.8 million charge for asset impairment,  $13.4 million from the
     June  2001  adjustment  to the  carrying  value of the  intangible  assets,
     goodwill and customer supply  agreement,  related to the Horizon  Photonics
     Inc.  acquisition and $0.4 million for equipment held for disposal due to a
     site closure.
(4)  Includes $7.0 million  charge for asset  impairment,  $1.5 million from the
     December  2001  adjustment  to the carrying  value of the  customer  supply
     agreement, related to the Horizon Photonics Inc. acquisition,  $4.9 million
     adjustment to the carrying value of the intangible  assets,  related to the
     Geltech  Inc.   acquisition  and  $0.6  million  for  excess  manufacturing
     equipment used in the production on collimators.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS

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
IN THIS "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF  OPERATIONS"  AND  ELSEWHERE IN THIS  PROSPECTUS,  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  SIMILAR  MATTERS ARE  FORWARD-LOOKING  STATEMENTS.
THESE  FORWARD-LOOKING  STATEMENTS  ARE BASED LARGELY ON THE  COMPANY'S  CURRENT
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 SET FORTH HEREIN AS
A RESULT OF A NUMBER OF FACTORS,  INCLUDING,  BUT NOT LIMITED TO, THE  COMPANY'S
EARLY  STAGE  OF  DEVELOPMENT,   THE  NEED  FOR  ADDITIONAL  FINANCING,  INTENSE
COMPETITION IN VARIOUS  ASPECTS OF ITS BUSINESS AND OTHER RISKS DESCRIBED IN THE
COMPANY'S REPORTS ON FILE WITH THE SECURITIES AND EXCHANGE COMMISSION.  IN LIGHT
OF THESE RISKS AND  UNCERTAINTIES,  ALL OF THE  FORWARD-LOOKING  STATEMENTS MADE
HEREIN  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.  THE COMPANY  UNDERTAKES NO OBLIGATION TO UPDATE OR REVISE ANY
OF THE FORWARD LOOKING STATEMENTS CONTAINED HEREIN.

                                       59

ACQUISITIONS

GELTECH, INC.

On September  20, 2000,  LightPath  acquired  all of the  outstanding  shares of
Geltech, Inc. (Geltech), a manufacturer of precision molded aspheric optics used
in the active  telecommunication  components markets,  for an aggregate purchase
price of approximately  $28.5 million.  In the first quarter of fiscal 2001, the
Company  recorded an immediate  non-recurring  charge of $9.1 million related to
the acquired in-process research and development of Geltech.  The value assigned
to in-process  research and  development  was determined by the Company based on
estimates  of the  projected  discounted  cash  flows from  certain  development
projects   including   diffraction   gratings,   waveguides,   lens  arrays  and
sub-assembly  technologies.  These programs were in various stages of completion
ranging from 30% to 50% of completion,  with estimated  completion dates through
December 2001 and projected costs to complete of approximately $2.25 million. As
of June 30, 2001,  these programs were not complete and a new completion date of
June  2002 was  established.  Geltech  had no sales in fiscal  2001  from  these
programs, which is consistent with the revenue projections.

Geltech had no sales  during the six months  ended  December 31, 2001 from these
programs,  which is consistent with the revenue  projections.  During the second
quarter of fiscal  2002,  the Company  decided to defer the  development  of the
diffraction  gratings and waveguides,  projects that were in process at the time
of the  acquisition  of Geltech,  due primarily to the continued  decline in the
market for telecommunications  components.  However, the development of the lens
arrays  and  sub-assembly   technologies,   projects  also  in  process  at  the
acquisition date, continue as planned.

For fiscal 2002, the consolidated  research and development  expenditures budget
for LightPath was approximately $7.7 million,  which includes approximately $1.7
million related to the ongoing  development efforts which were in process at the
time of the acquisition of Geltech.  For the six months ended December 31, 2001,
we estimate approximately $630,000 of research and development expenditures were
incurred in connection with these efforts.

HORIZON PHOTONICS, INC.

On April 14, 2000,  LightPath  acquired Horizon  Photonics,  Inc.  (Horizon),  a
company engaged in the automated  production of passive  optical  components for
the  telecommunications  and data communications  markets,  for a total purchase
price of approximately  $40.2 million. In the fourth quarter of fiscal 2000, the
Company recorded an immediate  non-recurring charge of $4.2 million,  related to
the acquired  in-process  research and  development  of Horizon.  The in-process
research and development related to micro-collimator  products as well as active
alignment  and  isolator   injection   molding   technologies  that  were  under
development at the time of acquisition. These programs were in various stages of
completion ranging from 50% to 60%, with estimated completion dates through June
2001 and estimated costs to complete the projects of $1 million.  As of June 30,
2001,  these programs were not completed and a revised  completion  date of June
2002 was  established.  Horizon had no sales in fiscal 2001 from these programs,
which is consistent with the revenue projections.

Horizon had no sales from these  programs  during the six months ended  December
31, 2001, which is consistent with the revenue projections.

For fiscal 2002, the consolidated  research and development  expenditures budget
for LightPath was approximately $7.7 million,  which includes approximately $1.6
million related to the ongoing  development efforts which were in process at the
time of the acquisition of Horizon.  For the six months ended December 31, 2001,
we estimate  approximately  $1 million of research and development  expenditures
were  incurred,   which  included  these  efforts  as  well  as  other  isolator
development efforts.

                                       60

RESULTS OF OPERATIONS

THREE MONTHS ENDED DECEMBER 31, 2001 COMPARED TO THE THREE MONTHS ENDED DECEMBER
31, 2000

CONSOLIDATED OPERATIONS

     Our  consolidated  revenues  totaled $2.4 million for the second quarter of
fiscal  2002,  a decrease  of  approximately  $5.4  million or 69%  compared  to
revenues  for the second  quarter of fiscal 2001.  The  decrease  was  primarily
attributable to a decrease in telecom product sales of $4.4 million or 56% and a
decrease in traditional optics sales of $1 million or 13%.

     In the  second  quarter  of  fiscal  2002,  consolidated  cost of sales was
approximately  159% of product sales, an increase from the comparable  period of
fiscal  2001,  in which cost of sales was  approximately  61% of product  sales.
During  the  quarter,  the  Company  recorded  a  write  down  of  inventory  of
approximately  $1.2 million.  Excluding the inventory  write down, cost of sales
during the quarter would have been  approximately  109%, an increase of 48% from
the comparable period of fiscal 2001, due primarily to the  underutilization  of
manufacturing  facilities  and staff  because  of reduced  sales of telecom  and
traditional optics products during the quarter.

     During the second quarter of fiscal 2002,  sales declined  approximately 30
percent  from levels  noted  during the first  quarter.  The Company  also noted
several  factors in its evaluation of the value of inventory  during the quarter
which resulted in a charge of approximately $1.2 million to write down inventory
to net  realizable  value.  The Company  received a  determination  that certain
lenses  and raw  materials  did not pass  qualification  requirements  for their
particular  applications during the quarter.  In addition,  the value of certain
finished  lens had  diminished  due to a change in market  conditions  because a
competitor began reducing prices for similar products to a level below our cost.
Finally,  the Company noted  uncertainty  regarding the realization of value for
certain  finished  products  on hand for a recently  cancelled  purchase  order.
Specifically,   charges  to  write-down  inventory  of  approximately  $517,000,
$171,000 and $247,000 were recorded for finished goods,  work in process and raw
materials,  respectively.  In addition,  inventory  write-off's of $220,000 were
recorded  ($100,000  of finished  goods and $120,000 of raw  materials)  and the
related  inventory  was  disposed of in January 2002 as no  alternative  use was
identified.

     During  the  second   quarter  of  fiscal   2002,   selling,   general  and
administrative costs decreased by $1.4 million from the second quarter of fiscal
2001  to  $2.9  million,  due  primarily  to  a  decrease  of  $1.3  million  in
administration  and  manufacturing  support personnel costs. We incurred several
non-cash  charges  during  the  second  quarter  of fiscal  2002,  including  an
impairment  charge of approximately $7 million related to intangible  assets and
manufacturing   equipment,   $2.4  million  in   amortization  of  goodwill  and
intangibles  from  acquisitions,  and $1.8 million in  stock-based  compensation
charges.  The impairment  consists of approximately  $6.5 million related to the
values assigned to certain intangibles at acquisition during April and September
2000,  which may not be recoverable due to reduced revenue  forecasts from those
expected at acquisition as a result of the downturn in the telecom industry, and
approximately $0.5 million due to the removal of excess manufacturing lines used
for collimator  production.  In addition,  the Company reversed the net deferred
tax liability of approximately  $3.3 million  established in connection with the
non-taxable  purchase of Geltech against the related  intangible assets prior to
the impairment charge as the carrying value of the remaining Geltech  intangible
assets was reduced in connection with the impairment.

     Research and development  costs increased by approximately  $0.4 million to
$2.2 million in the second  quarter of fiscal 2002 versus 2001.  The majority of
development  work consisted of expenses  associated with automation  development
and  products in the areas of  telecommunication  switches,  isolators  and next
generation  optical  subassemblies,  waveguides,  lens  arrays and  sub-assembly
technologies.

                                       61

     Investment and other income  decreased  approximately  $474,000 as interest
earned on investments in the second quarter of fiscal 2002 declined due to lower
interest  rates and a decrease in cash  balances.  Interest and other expense in
the second quarter of fiscal 2002 and the  comparable  period of fiscal 2001 was
not significant.

     Net loss of $17.6  million in the second  quarter of fiscal  2002  includes
$11.2 million from the non-cash charges described above and $1.2 million related
to inventory write-offs, which if excluded, would have resulted in a net loss of
$5.2 million.  These net loss figures  represent an increase from the comparable
period of fiscal 2001, which reported a net loss of $8.9 million  including $6.5
million in non-cash  charges,  which if excluded,  would have  resulted in a net
loss of $2.4  million.  The $2.8  million  increase  in net loss  excluding  the
non-cash  charges  was due  primarily  to the  $5.4  million  decrease  in total
revenues offset by the decreased cost of sales of $2.1 million, and decreases in
operating costs primarily in selling,  general and administrative  expense which
were offset by increased  research and development costs. Net loss applicable to
common  shareholders  of $17.6  million  for the second  quarter of fiscal  2002
included  an  additional  charge of $22,407  attributable  to the premium on our
outstanding  preferred  stock. Net loss per share of $0.91 in the second quarter
of fiscal 2002 was an increase of $0.45 compared to the second quarter of fiscal
2001 net loss per share of $0.46. Net loss applicable to common shareholders for
the second quarter of fiscal 2001 of $8.9 million included $18,551  attributable
to the premium on the Company's outstanding preferred stock.

     Sales  backlog  does not  represent  sales,  rather it is an  indicator  of
customer  orders  received by the Company.  Sales  revenues  from orders will be
recognized  in future  quarters as the products are shipped,  generally  nine to
twelve months after orders are received.  At December 31, 2001, our consolidated
backlog  was $4.4  million,  consisting  of $3.2  million in orders for  telecom
components  and $1.2 million in orders for lenses.  During the second quarter of
fiscal 2002, the Company  revised its policy for  disclosing  sales backlog such
that  unscheduled  orders  or orders  with a  delivery  past 12 months  would be
excluded from the backlog, which caused the Company to decrease reported backlog
to $6.4 million from the previously  disclosed sales backlog of $16.5 million at
September  30, 2001,  which was comprised of $14.6 million in orders for telecom
components and $1.9 million in orders for lenses.

TELECOM SEGMENT

     For the second quarter of fiscal 2002,  telecom product sales decreased 75%
to approximately  $1.5 million from $5.8 million for the comparable  period last
year.  Telecom  segment  sales for fiscal 2002  include  isolator  sales of $0.6
million,  $0.3 million of  collimator  product  sales and $0.6 million of active
telecom components sales.

     The telecom  segment  incurred an  operating  loss of $3.7  million for the
second  quarter of fiscal  2002 as  compared  to a loss of $1.6  million for the
comparable period last year due primarily to decreased sales,  lower margins and
inventory write-offs.

TRADITIONAL OPTICS SEGMENT

     During the second quarter of fiscal 2002, our approximately $0.9 million of
segment sales were  comprised of $0.7 million in finished lens product sales and
$0.2  million  from laser optic lens sales,  compared  with $1.9 million for the
comparable  period last year.  The  decrease of $1 million  from the  comparable
period  of the  prior  year was due  primarily  to the  reduced  sales of optics
products used in data storage which accounted for approximately  $1.7 million of
traditional optics sales for the second quarter of fiscal 2001.

     The traditional  optics segment incurred an operating loss of approximately
$1.1  million for the second  quarter of fiscal  2002 as  compared to  operating
income of  approximately  $275,000  for the  comparable  period  last year.  The
increased   loss  during  the  quarter  was  primarily  due  to  reduced  sales,
unfavorable margins and inventory write-offs.

                                       62

SIX MONTHS ENDED  DECEMBER 31, 2001,  COMPARED TO THE SIX MONTHS ENDED  DECEMBER
31, 2000

CONSOLIDATED OPERATIONS

     Our consolidated  revenues totaled $5.8 million for the first six months of
fiscal 2002, a decrease of  approximately $5 million or 46% compared to revenues
for the first six months of fiscal 2001. The decrease was primarily attributable
to a decrease in telecom  product sales of $5.1 million or 47%,  offset by 1% or
$0.1 million  increase in  traditional  optics sales.  Sales  generated from the
acquired Geltech business  (September 2000) accounted for $2.9 million or 49% of
the total  revenue in fiscal 2002 as  compared  to $3.4  million or 32% of total
revenue for the comparable period of fiscal 2001.

     In the first six months of fiscal 2002, consolidated cost of sales was 118%
of product  sales,  an increase  from the  comparable  period of fiscal 2001, in
which cost of sales was 59% of  product  sales.  During  the  second  quarter of
fiscal 2002,  the Company  recorded a write down of  inventory of  approximately
$1.2  million.  Excluding  the  inventory  write down,  cost of sales during the
quarter  would  have  been  approximately  98%,  an  increase  of 39%  from  the
comparable  period of fiscal 2001.  Approximately 36% of the increase was due to
the  reduction  in sales  for  telecom  products,  and the  underutilization  of
manufacturing  facilities and staff. In addition, in the first quarter of fiscal
2002, we determined  that we were selling some  traditional  optic products at a
negative   gross  margin,   which   impacted   consolidated   gross  margins  by
approximately  3%. To counter these cost  overages we reduced the  manufacturing
staff,  eliminated  unprofitable  traditional  optic  products,  and  closed our
Auburn,  California  facility  resulting  in a total  decrease in  manufacturing
personnel of 37% since June 30, 2001. It is anticipated that these measures will
improve  our  cost of  sales  in  future  quarters  as we work  to  balance  our
manufacturing  capabilities and product lines; however,  economic conditions may
result in pricing  pressure in future quarters of fiscal 2002 which could reduce
margins.

     During the six months ended December 31, 2001, total inventory  declined 4%
from prior levels  before  consideration  of the  inventory  write down recorded
during the second quarter of fiscal 2002. Raw materials  continue to make up the
majority of our  inventory  at $2.5 million or 63% of total  inventory.  We have
approximately  $2  million of raw  materials  on hand  specifically  used in the
production of isolators that have long lead times and the Company has elected to
maintain a sufficient quantity of these materials.  Our inventory turn ratio was
2.9 times and 4.0 times for the six months ended  December  31, 2001,  and 2000,
respectively,  which is  indicative  of the  reduction in sales  experienced  in
fiscal 2002.

     During the second quarter of fiscal 2002,  sales declined  approximately 30
percent  from levels  noted  during the first  quarter.  The company  also noted
several  factors in its evaluation of the value of inventory  during the quarter
which resulted in a charge of approximately $1.2 million to write down inventory
to net  realizable  value.  The Company  received a  determination  that certain
lenses and raw materials  did not pass certain  qualification  requirements  for
their  particular  applications  during the quarter.  In addition,  the value of
certain  finished  lens had  diminished  due to a change  in  market  conditions
because a competitor began reducing prices for similar products to a level below
our cost.  Finally,  the Company noted uncertainty  regarding the realization of
value for certain finished  products on hand for a recently  cancelled  purchase
order. Specifically,  charges to write-down inventory of approximately $517,000,
$171,000 and $247,000 were recorded  related to finished goods,  work in process
and raw materials,  respectively. In addition, inventory write-off's of $220,000
were recorded ($100,000 of finished goods and $120,000 of raw materials) and the
related  inventory  was  disposed of in January 2002 as no  alternative  use was
identified.

     During  the  first  six  months  of  fiscal  2002,  selling,   general  and
administrative costs decreased by $1 million from first the six months of fiscal
2001, to $6.7 million,  even after including $1.4 million accrued for legal fees
and the proposed litigation settlement, and $0.5 million of administrative costs
incurred by Geltech.  These  increases were offset by a decrease of $2.7 million
in administration and manufacturing support personnel costs. We incurred several
non-cash  charges  during  the first six  months of fiscal  2002,  including  an
impairment  charge of $7 million related to intangible  assets and manufacturing
equipment,  $5.1  million in  amortization  of  goodwill  and  intangibles  from
acquisitions, and $4.7 million in stock-based compensation charges. In addition,

                                       63

the Company  reversed  the net  deferred tax  liability  of  approximately  $3.3
million  established  in  connection  with the  non-taxable  purchase of Geltech
against the related  intangible  assets  prior to the  impairment  charge as the
carrying  value of the  remaining  Geltech  intangible  assets  was  reduced  in
connection with the impairment.

     Research and development  costs increased by approximately  $1.1 million to
$4.2 million in the first six months of fiscal 2002 versus fiscal 2001, of which
$0.3 million was due to Geltech.  The majority of development  work consisted of
expenses  associated  with  automation  development and products in the areas of
telecommunication switches, isolators and next generation optical subassemblies,
waveguides,  lens arrays and sub-assembly technologies.  In an effort to control
research  and  development  costs,  the Company has  reduced  development  staff
levels,  deferred  any  additional  effort on the switch  project  and is in the
process of subleasing the New Jersey development facility.

     Investment and other income included a non-recurring  gain of approximately
$390,000  related to the first quarter sale of certain assets located in Auburn,
CA, while interest earned on investments decreased approximately $971,000 during
the first six months of fiscal  2002 as a result of lower  interest  rates and a
decrease in cash  balances.  Interest  expense in during the first six months of
fiscal 2002 and the comparable period of fiscal 2001 was not significant.

     Net loss of $28  million  in the first six months of fiscal  2002  includes
$16.8 million from the non-cash charges described above, $1.4 million related to
litigation settlement costs and $1.2 million for inventory write-offs,  which if
excluded,  would have resulted in a net loss of $8.6 million. As compared to the
first six  months of fiscal  2001  which  reported  a net loss of $25.8  million
including  $20.8  million in non-cash  charges,  which if  excluded,  would have
resulted  in a net loss of $5  million.  The $3.6  million  increase in net loss
excluding the non-cash  charges was due primarily to the $5 million  decrease in
total  revenues,  offset  by  decreased  cost of  sales  of $0.7  million  while
decreases in operating  costs primarily in selling,  general and  administrative
expense  were offset by  increased  research  and  development  costs.  Net loss
applicable  to common  shareholders  of $28  million for the first six months of
fiscal 2002 included an additional charge of $48,016 attributable to the premium
on our outstanding preferred stock. Net loss per share of $1.45 in the first six
months of fiscal 2002 was an increase of $0.07  compared to the first six months
of  fiscal  2001 net loss per  share of  $1.38.  Net loss  applicable  to common
shareholders  for the first six months of fiscal 2001 of $25.8 million  included
$45,464  attributable  to the  premium on the  Company's  outstanding  preferred
stock.

TELECOM SEGMENT

     For the first six months of fiscal 2002,  telecom  product sales  decreased
59% to  approximately  $3.5 million from $8.6 million for the comparable  period
last year.  Telecom segment sales in the first six months of fiscal 2002 include
isolator sales of $1.8 million,  $0.7 million of collimator product sales and $1
million of active telecom components sales.

     The telecom  segment  incurred an  operating  loss of $6.2  million for the
first six months of fiscal 2002 as  compared  to a loss of $3.4  million for the
comparable  period last year due primarily to decreased  sales,  reduced margins
due to underutilization of capacity, inventory write-offs and increased research
and development costs associated with the switch project.

     The decrease in telecom  sales for the first six months  together  with the
decreased  sales  backlog  reflect  the  general  market  condition  for optical
components  and the  broader  telecommunications  sector.  We  continue  to work
closely with our customers to manage excess inventory levels as well as focus on
next generation  products.  During the first six months of fiscal 2002, our work
on next  generation  systems  led to design  wins and  corresponding  orders but
overall spending levels are currently restrained.  We have implemented processes
built  around  automated  platforms  that are  resulting  in  significant  yield
improvements  that we believe are unmatched in the photonics  industry.  We have
also  been able to  maintain  robust  design  activity  throughout  most of this
downturn which we attribute to the  reliability of our products  demonstrated by
the  completion  of full  Telcordia  qualifications  during the first quarter of
fiscal 2002. It is our belief that the  photonics  industry will begin to mature

                                       64

as the industry  moves out of this downturn and that there will be less focus on
rapid capacity  expansion and more focus on  manufacturing  and process  issues.
Specifically,  we believe  attention will shift to the  implementation of highly
automated  manufacturing  processes and yield  improvements  where we believe we
have a significant advantage over some of our competitors.

TRADITIONAL OPTICS SEGMENT

     During the first six months of fiscal 2002, our approximately  $2.3 million
of  traditional  optics segment sales were comprised of $1.8 million in finished
lens  products and $0.5 million from laser optic lens sales,  compared with $2.2
million for the comparable  period last year. During the first quarter of fiscal
2002,  we have stopped  manufacturing  several  product  lines,  including  data
storage lenses, due to unfavorable  margins. In addition,  due to the closure of
the Auburn,  CA, facility we consolidated the manufacturing of all finished lens
products into the Orlando, FL, facility.

     The traditional  optics segment incurred an operating loss of approximately
$1.8 million for the first six months of fiscal 2002 as compared to an operating
loss of approximately $42,000 for the comparable period last year. The increased
loss was  primarily  due to reduced  sales,  unfavorable  margins and  inventory
write-offs we incurred during the first six months of fiscal 2002.

FISCAL YEAR ENDED JUNE 30, 2001 COMPARED TO FISCAL YEAR ENDED JUNE 30, 2000

TELECOM SEGMENT - (optoelectronics and fiber telecommunications)

During fiscal 2001, telecom product sales increased to approximately $21 million
from $1.5 million for fiscal 2000. The telecom segment results include  isolator
sales of $13 million,  $4.2 million of collimator product sales and $3.8 million
of aspheric  optics for active  telecom  product  sales.  Sales  generated  from
acquired  businesses  accounted  for $15.8  million  or 81% of the  increase  in
telecom revenue.

Sales to the  Agere  Systems,  Inc.  ("Agere")  (formerly  the  Microelectronics
division of Lucent  Technologies  Inc.)  represent 50% of the current open sales
orders and 55% of the telecom sales for fiscal 2001.

In August 2000, we introduced the LP1600  opto-mechanical switch which employs a
patented retro-reflecting mirror design in conjunction with our Gen3 collimator.
Due to the  current  economic  environment  we have  elected  to delay  expenses
related to the  launch of this  product;  however,  we will  concentrate  on the
development  of further  enhancements  to existing  product  lines.  The telecom
segment  incurred an operating  loss of $7.2 million for fiscal 2001 as compared
to an operating loss of $7.5 million for the comparable period of fiscal 2000.

Significant  events  which  impacted  our  telecom  segment  during  fiscal 2001
include:

*    Continued  record  telecom  sales of $21  million.  The  completion  of the
     expansion  of  the  Horizon  automated   manufacturing  facility  which  is
     dedicated  to large  volume  isolator  production  and the  development  of
     next-generation  optical  subassemblies  contributed  to the overall  sales
     growth as well as the inclusion of sales from Geltech's  telecom  products.
     Horizon  released a new line of isolator  assemblies for application in the
     metro  and  access  telecom  markets.  This  line is  based  on a  flexible
     manufacturing   platform  which  can  address  a  wide  range  of  customer
     specifications while attracting lower cost applications;
*    The September 20, 2000, expansion of our telecom products to include active
     components  through the  acquisition  of privately  held Geltech.  We began
     acquisition  talks with  Geltech,  due to our  interest in their  precision
     molded  aspheric  optics  used in the active  telecommunication  components
     markets.  The  acquisition  purchase price was $27.5 million which was paid
     through  the  issuance  of  822,737  shares  of Class A common  stock  plus

                                       65

     approximately  $1 million in  acquisition  costs for an aggregate  purchase
     price of approximately $28.5 million;
*    Changes to LightPath's management team included the addition of Dennis Yost
     as  LightPath's  Chief  Operating  Officer and  promotion  of Bob Cullen to
     Executive Vice President in charge of Technology Integration. Mr. Yost will
     focus on the advancement of our telecom lines, specifically collimators and
     arrays. Mr. Cullen, the current President of Horizon,  expanded his role to
     assist in the further  automation of the Company  including  manufacturing,
     packaging,  assembly  and  test  methods;  and o The  Company's  additional
     investment in LightChip, Inc. of $7.2 million (significant investors in the
     August 2000 private placement included Berkeley International, Morgenthaler
     Ventures, J.P. Morgan Capital, AT&T Ventures and LightPath).

Geltech acquisition

On August 9, 2000,  the Company  entered into a definitive  agreement to acquire
Geltech  Inc.,  a  Delaware  corporation,  for an  aggregate  purchase  price of
approximately  $28.5  million.  Geltech is a  manufacturer  of precision  molded
aspheric optics used in the active telecommunication  components markets. On the
closing date,  September  20, 2000,  LightPath  acquired all of the  outstanding
shares of Geltech in exchange for 822,737  shares of Class A common  stock.  The
acquisition  has been accounted for using the purchase method of accounting and,
accordingly,  the results of  operations  of Geltech  have been  included in the
Company's  consolidated  financial  statements  from  September 20, 2000. In the
first quarter of fiscal 2001,  the Company  recorded an immediate  non-recurring
charge of $9.1 million, due to acquired in-process research and development. The
value  assigned to  in-process  R&D was  determined  based on  estimates  of the
resulting net cash flows from diffraction gratings,  waveguides, lens arrays and
sub-assembly  technologies  and the  discounting  of such cash  flows to present
value.  These programs were in various stages of completion  ranging from 30% to
50% of completion,  with estimated  completion dates through December 2001. This
in-process research will have no alternative future uses if the products are not
feasible. Revenues from in-process products are estimated primarily beginning in
fiscal 2002,  with  projected  research  and  development  costs-to-complete  of
approximately  $2.25  million.  Geltech had no revenues  from these  programs in
fiscal 2001 which is consistent with the projected  revenues.  In projecting net
cash flows  resulting from  diffraction  gratings,  waveguides,  lens arrays and
sub-assembly  technologies,  management  estimated revenues,  cost of sales, R&D
expenses,  selling,  general and administrative (SG&A) expenses and income taxes
for those projects. These estimates were based on the following assumptions:

     *    Estimated  revenues  projected a compound annual growth rate over nine
          years of  approximately  132%.  Projections  of revenue growth for the
          various products in development  were based on management's  estimates
          of market size and growth  supported  by market data and by the nature
          and expected  timing of the  development  of the products by LightPath
          and its competitors. Pro forma growth rate in fiscal 2001 was 27%.
     *    The estimated  cost of sales as a percentage of revenue,  initially at
          51%  increasing to 60%, was consistent  with the historical  rates for
          Geltech's business as well as its business plan analysis.  Actual cost
          of sales percentage in fiscal 2001 was 60%.
     *    Estimated  SG&A costs were  expected to decrease  as a  percentage  of
          sales, from 21% initially to approximately 13% in later years.  Actual
          SG&A costs as a percentage of sales in fiscal 2001 was 26%.
     *    The estimated R&D costs were expected to remain  approximately  10% of
          sales as most R&D efforts are in a development or  maintenance  phase.
          Actual R&D costs as a percentage of sales in fiscal 2001 was 12%.
     *    A 38% effective tax rate was estimated.

The projected net cash flows for the in-process projects were discounted using a
range  of  30%  to  65%  weighted-average   cost  of  capital  (WACC)  based  on
consideration  of the  perceived  risk of  each  project  considering  estimated
completion  percentage,   technology  advances,  market  acceptance  and  future
projected financial expectations.  The calculation produces the average required
rate of return of an  investment in an operating  enterprise.  The WACC selected

                                       66

was based upon venture  capital  rates of return as required for  investment  in
companies  during their early stages of  development  and reflective of the risk
associated with corresponding  development/operating challenges. A WACC range of
25% to 30% was used to  determine  the  value  of the  return  of the  developed
technology,  the  customer  list and other  intangibles  acquired as part of the
purchase of Geltech.

Geltech  revenues for fiscal 2001 used in the  projected  net cash flows for the
purchase  price were greater than those  achieved  during fiscal 2001 due to the
economic downturn within the telecom industry in the third and fourth quarter of
our fiscal year. Expenses have approximated the projections  resulting in actual
net cash flows for the ten months  below the  original  projections.  Management
believes that the original  projections of net cash flows from Geltech  continue
to be  reasonable  assuming  current  sales  deferrals  reverse in future years,
although there can be no assurance this will occur.

HORIZON ACQUISITION

     On April 14, 2000, we acquired  Horizon for a total purchase price of $40.2
million,  including  approximately  $2.0 million of  acquisition  costs and $2.8
million related to the fair value of LightPath  stock options  exchanged for the
outstanding  vested stock options of Horizon.  In connection with the allocation
of the  purchase  price to  identifiable  intangible  assets,  $4.2  million was
allocated to in-process research and development ("R&D") which was expensed upon
acquisition as required under  generally  accepted  accounting  principles.  The
in-process  R&D  related  to the  micro-collimator  products  as well as  active
alignment  and  isolator   injection   molding   technologies  that  were  under
development at the time of acquisition. These programs were in various stages of
completion  ranging from 50% to 60% of  completion,  with  estimated  completion
dates through June 2001. As of June 30, 2001 these  programs were not completed,
with a revised completion date of June 2002. Horizon had no sales in fiscal 2001
from these programs which is consistent with the revenue projections.  The value
assigned to in-process  R&D was  determined  based on estimates of the resulting
net cash flows from  micro-collimator  products as well as active  alignment and
isolator  injection molding  technologies and the discounting of such cash flows
to present value. In projecting net cash flows  resulting from  micro-collimator
products  as  well  as  active   alignment   and  isolator   injection   molding
technologies,  management  estimated  revenues,  cost of  sales,  R&D  expenses,
selling,  general and administrative  (SG&A) expenses and income taxes for those
projects. These estimates were based on the following assumptions:

     *    Estimated  revenues  projected a compound annual growth rate over five
          years of approximately  117%. The majority of projected  revenues were
          ascribed  to  micro-collimators.  Projections  of revenue  growth were
          based on management's estimates of market size and growth supported by
          market data and by the nature and expected  timing of the  development
          of the products by LightPath and its competitors.  Actual sales growth
          rate in fiscal 2001 was 484%.
     *    The estimated  cost of sales as a percentage of revenue,  initially at
          50% declining to 47%, was  consistent  with the  historical  rates for
          Horizon's  business as well as their  business plan  analysis.  Actual
          cost of sales percentage in fiscal 2001 was 59%.
     *    Estimated  SG&A  costs  were  expected  to  decrease   slightly  as  a
          percentage  of  sales,  with a 20%  average.  Actual  SG&A  costs as a
          percentage of sales in fiscal 2001 was 26%.
     *    The estimated R&D costs were expected to remain at 2% of sales as most
          R&D  efforts  are  in a  maintenance  phase.  Actual  R&D  costs  as a
          percentage of sales in fiscal 2001 was 11%.
     *    A 40% effective tax rate was estimated.

The projected net cash flows for the in-process projects were discounted using a
30%  weighted-average  cost of capital  (WACC).  The  calculation  produces  the
average required rate of return of an investment in an operating enterprise. The
WACC  selected  was based upon venture  capital  rates of return as required for
investment in companies  during their early stages of development and reflective
of the risk associated with corresponding  development/operating  challenges.  A

                                       67

WACC of 25% was used to  determine  the  value of the  return  of the  developed
technology,  the  customer  list and other  intangibles  acquired as part of the
purchase of Horizon.

TRADITIONAL OPTICS SEGMENT

     During fiscal 2001, the majority of our traditional optics product sales of
approximately $5.1 million were from Geltech's lens sales and existing customers
for  laser  optic  lenses.   Traditional   optics  sales  in  fiscal  2000  were
approximately  $768,000.  The growth was  primarily  due to the  acquisition  of
Geltech's  traditional optics business in September 2000, which accounted for $4
million of traditional  optics product sales in fiscal 2001.  Geltech's products
are used in data storage and by manufacturers of medical equipment. The majority
of their sales are due to custom quotations as they have no direct  distribution
channels.  Revenues for fiscal 2000 included  approximately  $167,000 in license
fees and government funded subcontracts. The traditional optics segment reported
operating  income of  approximately  $73,000  for fiscal  2001 as compared to an
operating loss of approximately $365,000 for fiscal 2000.

     Joining with the German optical products  manufacturer  Linos AG, a pioneer
in the  field of  photonics  (which  acquired  Rodenstock  Prazisionsoptik  GmbH
("Rodenstock"),  precision optics division in June 2000), we are proceeding with
the marketing program for the development,  production and joint-distribution of
GRADIUM  based  optical  products  in  Europe.  We  believe  our  agreement  and
relationships will continue to grow under the Linos AG/Rodenstock  alliance.  We
believe the  relationship  with Linos  AG/Rodenstock  may create new and sustain
existing  markets  for  GRADIUM  in  Europe,  primarily  in the area of  imaging
systems. Our remaining  distributors  continue to work with existing markets for
GRADIUM in their  respective  countries,  primarily in the area of the YAG laser
market.

CONSOLIDATED OPERATIONS

     Our  consolidated  revenues  totaled  $26.1  million  for fiscal  2001,  an
increase of  approximately  $23.9 million or 1054% over fiscal 2000.  The growth
was primarily  attributable  to increases of $12.1 million (51%) in isolator and
other sales, $7.8 million (33%) in active telecom components and finished lenses
and $4 million (16%)  primarily in collimator  products.  Sales  generated  from
acquired businesses  accounted for $19.9 million or 83% of the increase in total
revenue.

     During fiscal 2001, consolidated cost of sales was 58% of total revenues, a
decrease from fiscal 2000, when cost of sales was 62% of product sales (excludes
product  development  fees). The decrease was primarily due to increased margins
on isolator products. It is anticipated that we will maintain  approximately 60%
cost  of  sales  for  fiscal  2002  as  we  work  to  expand  our  manufacturing
capabilities  and product  lines;  however,  economic  conditions  may result in
pricing pressure in fiscal 2002 which could cause a further decrease in margins.

     During fiscal 2001, selling,  general and administrative costs increased by
$13.3 million from fiscal 2000 to $19.3  million,  due to $1.6 million  incurred
for  litigation  settlement,  $0.7  million for legal costs  incurred in Class E
shareholder  litigation,  $5.3  million  of  administrative  costs  incurred  by
acquired  companies,  Horizon and Geltech,  and $5.7  million from  increases in
LightPath personnel in administration, manufacturing overhead and support.

     We incurred  non-cash  charges  totaling  $47.6 million during fiscal 2001,
including $13.7 million for impairment of goodwill and intangible  asset related
to the  deferral  of  sales  by a  significant  customer  and  consolidation  of
traditional   optics   facilities,   $11.2   million  in  non-cash   stock-based
compensation charges,  $13.6 million in amortization of goodwill and intangibles
from  acquisitions,  and a  non-recurring  charge of $9.1 million for in-process
research and development from the acquisition of Geltech.

     Research and development costs increased by approximately $5.6 million from
fiscal 2000 to $7.1  million in fiscal  2001,  of which $2.1  million was due to
acquisitions.  The majority of development work consisted of expenses associated

                                       68

with the Gen3 collimator assembly,  LP1600  opto-mechanical  switch, lens arrays
and the New Jersey  facility  where  development  work is on-going to expand the
Company's  products to the areas of switches,  interconnects and  cross-connects
for the  telecommunications  industry.  Our acquired  businesses  continue their
efforts in the area of  isolators  and next  generation  optical  subassemblies,
diffraction gratings, waveguides, lens arrays and sub-assembly technologies.

     Investment income increased  approximately  $1.4 million in fiscal 2001 due
to the increase in interest  earned on temporary  investments  as a result of an
increase in cash balances. Interest expense was not significant in 2001. In July
1999,  we  issued  $1  million  aggregate  principal  amount  of 6%  convertible
debentures and paid approximately  $10,000 of interest expense. We recognized an
interest  charge of  $381,869  in the first  quarter of fiscal year 2000 for the
beneficial  conversion feature associated with the Debentures and $43,926 of the
remaining debt discount was amortized  from the issuance date through  September
24, 1999 when all of the  Debentures  were  converted and related  warrants were
exercised resulting in the issuance of approximately one million shares of Class
A Common Stock.

     Net loss of $60.8  million  in  fiscal  2001  represented  an  increase  of
approximately  $45.2  million from fiscal 2000.  Of this amount,  $47.6  million
related to non-cash charges described above and $2.3 million related to one-time
charges for a litigation  settlement and the legal costs associated with Class E
shareholder litigation.  Non-cash charges in fiscal 2000 were approximately $9.8
million.  Excluding  the  non-cash  and one time  charges  from both years,  the
remaining $5.1 million  increase in net loss was due primarily to increased cost
of sales and operating costs,  primarily in selling,  general and administrative
expense and a $5.6 million  increase in research and  development  costs.  These
increased  costs were  partially  offset by the $23.9 million  increase in total
revenues, $1.4 million increase in interest income and the $402,000 reduction of
interest expense during fiscal 2001. Net loss applicable to common  shareholders
of $60.9  million  for fiscal  2001  included  an  additional  charge of $89,549
attributable to the premium on our  outstanding  preferred  stock.  Net loss per
share of $(3.19) in fiscal 2001 represented an increase of $1.33 compared to the
fiscal  2000 net loss  per  share of  $(1.86).  Net loss  applicable  to  common
shareholders  of $17.8 million in fiscal 2000  included an additional  charge of
$2.1 million for the imputed  dividend and $137,281  attributable to the premium
on the Company's outstanding preferred stock.

     At June 30, 2001, our consolidated  backlog,  which represents an indicator
of customer orders received by the Company, was $17 million. The backlog,  which
consists of orders for $11.8 million in isolators, $1.8 million for collimators,
$1.4 million in active  components and $2 million for lenses,  compares to March
31, 2001 sales backlog of $19.1 million,  December 31, 2000 sales backlog of $23
million  and  September  30,  2000 sales  backlog of $10.2  million.  Within our
current  backlog are purchase  orders where  shipments have been pushed-out past
their  original  delivery  dates and the customers have not yet provided us with
revised shipment dates. Accordingly,  we are unable to determine the quarters in
which we  anticipate  shipment  will occur.  Sales  revenues from orders will be
recognized in future quarters as the products are shipped.

FISCAL YEAR ENDED JUNE 30, 2000 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1999

TELECOM SEGMENT

     During  fiscal  2000,  our  optoelectronics  and  fiber  telecommunications
segment was impacted by:

     *    receipt of  approximately  $65.5 million in proceeds from the exercise
          of  outstanding  warrants  and  stock  options  and the net  financial
          investment  of $4.7 million in July and November  private  placements,
          which proceeds are available to grow this segment;
     *    the April 2000 expansion of our telecom products to include  isolators
          through the  acquisition  of privately  held Horizon  Photonics,  Inc.
          ("Horizon"). We began acquisition talks with Horizon in February 2000,

                                       69

          due to our interest in their  automated  production of passive optical
          components  and  complimentary  product lines of isolators.  The April
          2000 acquisition  involved a purchase price of $36.2 million, of which
          $1 million  was paid in cash and the  balance  was  exchanged  for 1.4
          million shares of Class A common stock;
     *    the enhancement of our management  team with the November  addition of
          Robert Ripp,  former Chairman and CEO of AMP, Inc.,  with  substantial
          business experience and knowledge of the telecommunications  industry,
          as Chairman of the Board, and the hiring of Stephen Barna, formerly of
          Lucent and AT&T, as VP Marketing & Sales;
     *    continued  record  sales from  customers  such as Avanex  Corp.  which
          reflect qualification of our collimator lens, Corning Inc.'s purchases
          of our large beam collimator,  and continued product enhancements such
          as the Gen3 collimator, which has the lowest documented insertion loss
          reported to date in these devices; and
     *    the increase in the Company's  investment in LightChip by $1.6 million
          (investors   in  the   December   1999  private   placement   included
          Morgenthaler, J.P. Morgan Capital, AT&T Ventures and LightPath).

     Telecom product sales increased to approximately $1,498,000, which includes
LightPath's $554,000 of collimator product sales and, during the fourth quarter,
Horizon's isolator sales of approximately  $944,000.  LightPath's  product sales
alone are  approximately  ten times greater than our entire telecom  revenues of
$57,029 in fiscal 1999.

     In fiscal 2000, our  optoelectronics and fiber  telecommunications  segment
continued its efforts to:

          *    increase  the sale of  collimator  assemblies  and lenses and the
               distribution  of  collimator  samples to potential  customers for
               testing;
          *    develop fiberoptic switches; and
          *    obtain patent  protection for its proprietary  telecommunications
               products and processes.

     In the fall of 1999, we completed the  installation  of a clean room in our
original manufacturing area to meet anticipated future customer demands. Shortly
thereafter,  in response to the  acceptance  of our  collimator  product line by
various  customers,  we  began  an  expansion  of our  manufacturing  production
capability.  We leased  3,600 square feet  adjacent to our original  Albuquerque
facility  to house the  engineering  staff and glass  research  and  development
projects.  During January 2000, we completed negotiations on an additional lease
for more than 17,000 square feet of  manufacturing  space in the vicinity of our
existing facility. In this space we built a 5,000 square foot clean room and ten
collimator  manufacturing  stations. In addition, we leased approximately 11,500
square feet at a facility in New Jersey for  development  of the optical  switch
engine to be sold as an enabling component for an optical cross connect system.

     We have continued the fiberoptic,  mechanical  switch  development  process
with a  separate  business  unit of E-TEK.  Due to the  acquisition  of E-TEK by
JPS-Uniphase  and the current  economic  environment,  we have  elected to delay
expenses related to the launch of this product;  however, we will concentrate on
the development of further  enhancements to existing product lines. In addition,
we have expanded our  strategic  alliance with Hikari Glass Co., Ltd. to include
products based on our automated laser polishing and laser fusion  processes.  We
believe this agreement will increase our presence  throughout  Asia where Hikari
has a strong marketing and sales presence.

     In fiscal year 2000,  we were  awarded five  additional  US patents and one
foreign patent.  Three of these patents relate to telecom products or processes,
with the most significant being the proprietary  process to fuse fibers directly
to a larger optical  component such as the collimator  lens. We terminated three
in process patents related to GRADIUM technology.

     The internal focus in fiscal 2000 was for the sale and shipment of products
and samples of our SMF Assembly.  Based on the results of customers' testing and
qualification of our collimating lens by Avanex Corp., we believe  higher-volume

                                       70

production  orders will develop in the future.  We anticipate  such orders to be
received in response to customer use that confirms that the SMF Assembly  offers
superior  performance  in the areas of back  reflection  and insertion loss at a
very competitive  price. We believe that our increased sales orders for the year
reflect this positive feedback and customer qualification.

Horizon acquisition

     On April 14, 2000, we acquired  Horizon for a total purchase price of $40.2
million,  including  approximately  $2.0 million of  acquisition  costs and $2.8
million related to the fair value of LightPath  stock options  exchanged for the
outstanding  vested stock options of Horizon.  In connection with the allocation
of the  purchase  price to  identifiable  intangible  assets,  $4.2  million was
allocated to in-process research and development ("R&D") which was expensed upon
acquisition as required under  generally  accepted  accounting  principles.  The
in-process  R&D  related  to the  micro-collimator  products  as well as  active
alignment  and  isolator   injection   molding   technologies  that  were  under
development at the time of acquisition. These programs were in various stages of
completion  ranging from 50% to 60% of  completion,  with  estimated  completion
dates through June 2001.  The value  assigned to in-process  R&D was  determined
based on  estimates  of the  resulting  net  cash  flows  from  micro-collimator
products as well as active alignment and isolator injection molding technologies
and the  discounting of such cash flows to present value. In projecting net cash
flows resulting from  micro-collimator  products as well as active alignment and
isolator injection molding technologies,  management estimated revenues, cost of
sales, R&D expenses,  selling,  general and  administrative  (SG&A) expenses and
income taxes for those  projects.  These  estimates  were based on the following
assumptions:

          *    Estimated  revenues  projected a compound annual growth rate over
               five years of  approximately  117%.  The  majority  of  projected
               revenues  were  ascribed  to  micro-collimators.  Projections  of
               revenue  growth were based on  management's  estimates  of market
               size and growth  supported  by market  data and by the nature and
               expected  timing of the  development of the products by LightPath
               and its competitors.
          *    The estimated cost of sales as a percentage of revenue, initially
               at 50% declining to 47%, was consistent with the historical rates
               for Horizon's business as well as their business plan analysis.
          *    Estimated  SG&A costs were  expected  to  decrease  slightly as a
               percentage of sales, with a 20% average.
          *    The estimated R&D costs were expected to remain at 2% of sales as
               most R&D efforts are in a maintenance phase.
          *    A 40% effective tax rate was estimated.

The projected net cash flows for the in-process projects were discounted using a
30%  weighted-average  cost of capital  (WACC).  The  calculation  produces  the
average required rate of return of an investment in an operating enterprise. The
WACC  selected  was based upon venture  capital  rates of return as required for
investment in companies  during their early stages of development and reflective
of the risk associated with corresponding  development/operating  challenges.  A
WACC of 25% was used to  determine  the  value of the  return  of the  developed
technology,  the  customer  list and other  intangibles  acquired as part of the
purchase of Horizon.

TRADITIONAL OPTICS SEGMENT

     During  fiscal 2000,  the majority of our sales to the  traditional  optics
segment were comprised of laser optic lenses.  Annual revenues of  approximately
$768,000,  included  $125,000  in  license  fees and  $42,400  in  revenues  for
government  funded  subcontracts  utilizing  GRADIUM  glass  in  optoelectronics
applications.  Joining with the German optical products manufacturer  Rodenstock
Prazisionsoptik GmbH ("Rodenstock") we are proceeding with the marketing program
for the development,  production and joint-distribution of GRADIUM based optical
products in Europe.  We believe the relationship  with Rodenstock may create new
and sustain  existing  markets for GRADIUM in Europe,  primarily  in the area of
imaging  systems.  Our  remaining  distributors  continue to work with  existing

                                       71

markets for GRADIUM in their respective countries,  primarily in the area of the
YAG laser market.

CONSOLIDATED OPERATIONS

     Our consolidated revenues totaled $2.3 million for fiscal 2000, an increase
of  approximately  $1.2  million or 109% over  fiscal  1999.  The  increase  was
primarily  attributable  to an increase of  $943,000  (87%) in Horizon  isolator
sales, and an increase of $442,000 (41%), in additional product sales, primarily
telecom  products.  These increases were offset by a $206,000  decrease (19%) in
product development/license fees as the government subcontract has concluded.

     In fiscal 2000,  consolidated cost of sales was 62% of product sales, which
represents an increase  from fiscal 1999,  when cost of sales was 57% of product
sales.  The increase was primarily due to lower margins in the fourth quarter at
Horizon,  which  were  attributable  to a  materials  issue  that has since been
resolved.  Our margins  were 48% on telecom  products  and sales to  traditional
optics distributors during the year. It is anticipated that our telecom products
will  continue  to  maintain a lower cost of sales than our  traditional  optics
products.  Additionally,  with increased volume and the increased utilization of
off-shore lens finishers,  the cost of traditional  optics  production  could be
decreased.

     Selling,  general and  administrative  costs  increased  by $3 million from
fiscal  1999 to $6  million.  Of this  increase,  $450,000  is  attributable  to
Horizon,  and  $2.5  million  is  attributable  to  increases  in  personnel  in
administration and manufacturing  support.  We incurred several non-cash charges
during the fourth  quarter of fiscal  2000,  including  Horizon's  $4.2  million
non-recurring  in-process  research  and  development  charge,  $2.4  million in
amortization  of  Horizon's  goodwill  and  intangibles,  and  $2.7 in  non-cash
stock-based  compensation  charges,  primarily due to Mr. Ripp's stock  options.
Research  and  development  costs  increased by  approximately  $834,000 to $1.4
million in fiscal 2000 versus fiscal 1999 of which  $196,000 was due to Horizon.
The  majority of  development  work  consisted of expenses  associated  with the
collimator assembly design and the New Jersey facility where development work is
on-going  to  expand  the   Company's   products  to  the  areas  of   switches,
interconnects and cross-connects for the  telecommunications  industry.  Horizon
continues its efforts in the area of isolators and micro-collimators.

     Investment income increased  approximately $1 million in fiscal 2000 due to
the  increase  in interest  earned on  temporary  investments  as a result of an
increase  in cash  balances.  In July  1999,  we  issued  $1  million  aggregate
principal amount of 6% convertible  debentures and paid approximately $10,000 of
interest  expense.  We  recognized  an interest  charge of $381,869 in the first
quarter of fiscal year 2000 for the "beneficial  conversion  feature" associated
with the  Debentures  and $43,926 of the  remaining  debt discount was amortized
from the issuance  date through  September  24, 1999 when all of the  Debentures
were  converted  and related  warrants were  exercised  into  approximately  one
million shares of Class A Common Stock.  Interest expense was not significant in
fiscal 1999. We account for our investment in LightChip under the cost method as
of December 1999. We discontinued application of the equity method of accounting
when our pro-rata share of LightChip's losses  (approximately 12.4% based on its
pro-rata  investment in LightChip preferred stock) had reduced the investment to
zero.  As a result,  we recognized  LightChip  total losses of $0 in 2000 versus
$361,671 in fiscal 1999.

     Net loss of $15.6 million in fiscal 2000, which  represented an increase of
approximately  $12.5 million from fiscal 1999,  included $3.2 million related to
non-cash  stock-based  compensation  charges, a $4.2 non-recurring  write off of
Horizon's  in-process research and development,  $2.4 million in amortization of
Horizon's goodwill and intangibles, and $425,000 from the recognition of charges
associated  with the  debenture  issuance and interest  expense.  The  remaining
increase  was due  primarily  to increased  cost of sales and  operating  costs,
primarily  in  selling,  general  and  administrative  expense  and an  $834,000
increase in research and development costs. These increased costs were partially
offset by the $1.2 million  increase in total revenues,  $1 million  increase in
interest income and the $362,000 reduction of our share of LightChip's loss. Net
loss applicable to common  shareholders of $17.8 million  included an additional
charge of $2.1 million for the imputed dividend and $137,281 attributable to the
premium  on our  outstanding  preferred  stock.  Net loss per  share of $1.86 in
fiscal year 2000 was $1.07 more than the fiscal 1999 net loss per share of $.79.

                                       72

Net loss per share increased due to the preferred stock dividend,  however,  the
increase was offset by an increase in the number of weighted shares  outstanding
for fiscal 2000 versus fiscal 1999.  The fiscal 1999 net loss per share contains
$224,651 attributable to the premium on the preferred stock.

     At June 30, 2000, our consolidated  backlog,  which represents an indicator
of customer orders received by the Company, was $4.3 million. The backlog, which
consists  of orders for $2.7  million in  isolators,  $1.3 for  collimators  and
$305,000  for lenses,  compares to June 30, 1999  backlog of $35,000 for lenses,
$10,000 for  collimators  and $100,000 for  government  project  funding.  Sales
revenues from orders will be  recognized in future  quarters as the products are
shipped.

LIQUIDITY AND CAPITAL RESOURCES

     We financed our initial operations through private placements of equity and
debt until  February  1996 when our initial  public  offering of units of common
stock and Class A and B Warrants  generated net proceeds of  approximately  $7.2
million. From June 1997 through November 1999, we completed four preferred stock
and one convertible debt private placements,  which generated total net proceeds
of  approximately  $12  million.  During  fiscal 2000 and 2001,  we received net
proceeds of  approximately  $67.6 million from the exercise of stock options and
warrants  issued at the initial public  offering or in connection  with previous
private  placements.  While the Company has no firm  commitments  for any future
financing at this time, management believes that its financial resources will be
sufficient to finance LightPath's operations and capital expenditures, excluding
acquisitions, for the next twelve months.

     Cash used in  operations  for the six months ended  December 31, 2001,  was
approximately  $6.7 million,  a decrease of approximately  $2.9 million from the
same  period  of  fiscal  2001.  Working  capital  needs  declined  due  to  the
maintenance  of accounts  receivable  and inventory  balances and the accrual of
certain  settlement costs which were not paid as of December 31, 2001. We expect
to continue to incur net losses until such time,  if ever,  as we obtain  market
acceptance  of our products at sale prices and volumes  which  provide  adequate
gross revenues to offset our operating  costs.  During six months ended December
31,  2001,  we expended  approximately  $2.4 million for capital  equipment  and
patent  protection,  offset by proceeds from the sale of assets of approximately
$0.4  million.  The  majority of the capital  expenditures  during the year were
related to the equipment used to enhance or expand our manufacturing facilities.
An  additional  $0.8  million  has been  budgeted  in  fiscal  2002 for  various
manufacturing and development projects. Additionally, approximately $1.6 million
of cash would be expended if all of the former  holders of Class E Common  Stock
selected the cash alternative under the settlement offer in the Delaware action.

     Cash used in operations for fiscal 2001 was approximately  $15 million,  an
increase of approximately  $11.7 million from fiscal 2000. Working capital needs
increased  approximately $6 million as a result of growth in accounts receivable
due to increased sales and increased raw materials maintained in inventory.  The
remaining $5.7 million increase is due to increased  administrative costs due to
our  acquisitions  and increases in  personnel.  During fiscal 2001, we expended
approximately  $7.3 million for capital  equipment  and patent  protection.  The
majority  of the  capital  expenditures  during  the year  were  related  to the
development  of our clean rooms and equipment  used to expand our  manufacturing
facilities.  We have budget  commitments for fiscal 2002 to expend an additional
$6.8  million  for  capital  equipment,   manufacturing  facilities  and  patent
protection.  Of this amount,  $3.6 million has been  budgeted to be used to fund
expansion of Geltech's manufacturing  facilities while the remaining fiscal 2002
budgeted  capital  expenditures  are for research and development  equipment and
construction  of additional  collimator and isolator  manufacturing  and testing
stations.

     In August 2000,  we purchased  $7.2 million of  LightChip,  Inc.  preferred
stock as part of a private placement in which LightChip, Inc. issued $65 million
of convertible preferred stock to outside investors including LightPath.

                                       73

     In September  2000, we acquired  Geltech,  a Delaware  corporation,  for an
aggregate purchase price (including expenses) of approximately $28.5 million. We
acquired all of the outstanding  shares of Geltech for 822,737 shares of Class A
common stock.  Acquisition  costs of approximately $1 million were provided from
working capital.  Since the acquisition,  approximately $1.5 million of acquired
debt has been repaid from working capital.

INFLATION; SEASONALITY

     The Company has not been  significantly  impacted by inflation in 2001, due
to the nature of its  product  components.  The Company  does not  believe  that
seasonal factors will have a significant  impact on its business.  However,  the
Company  is  impacted  by  changes  in the  general  business  condition  of the
telecommunications  industry  and, as a result,  has  experienced  a downturn in
sales in fiscal 2001, which could continue in the future.

RECENT ACCOUNTING PRONOUNCEMENTS

     On October 3, 2001 the FASB issued  Statement No. 144,  "Accounting for the
Impairment  or  Disposal  of  Long-Lived   Assets,"  which  addresses  financial
accounting  and reporting for the  impairment or disposal of long-lived  assets.
SFAS 144  supersedes  SFAS 121,  "Accounting  for the  Impairment  of Long-Lived
Assets and for  Long-Lived  Assets to Be Disposed  Of," but retains  many of the
fundamental provisions of SFAS 121. SFAS 144 also supersedes APB Opinion No. 30,
"Reporting  the Results of  Operations,  Reporting  the Effects of Disposal of a
Segment of a Business,  and  Extraordinary,  Unusual and Infrequently  Occurring
Events and  Transactions."  SFAS 144  retains the  requirement  in Opinion 30 to
report separately discontinued operations and extends this reporting requirement
to a component of an entity that either has been disposed of or is classified as
held for sale.  SFAS 144 is effective for fiscal years  beginning after December
15, 2001, and interim  periods within those fiscal years.  Early  application is
permitted. LightPath does not expect the adoption of SFAS 144 to have a material
impact on its financial statements or results of operations.

     In June 2001,  the FASB  issued  Statement  No. 143,  ACCOUNTING  FOR ASSET
RETIREMENT  OBLIGATIONS,  which addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated  asset retirement  costs.  The standard applies to legal  obligations
associated  with the  retirement  of  long-lived  assets  that  result  from the
acquisition,  construction,  development  and  (or)  normal  use of  the  asset.
Statement  No.  143  requires  that the fair value of a  liability  for an asset
retirement  obligation  be recognized in the period in which it is incurred if a
reasonable  estimate of fair value can be made.  The fair value of the liability
is added to the  carrying  amount of the  associated  asset and this  additional
carrying  amount is  depreciated  over the life of the asset.  The  liability is
accreted at the end of each period through charges to operating expense.  If the
obligation is settled for other than the carrying  amount of the liability,  the
Company will recognize a gain or loss on settlement. The Company is required and
plans to adopt the  provisions  of  Statement  No.  143 for the  quarter  ending
September  30, 2002.  To  accomplish  this,  the Company must identify all legal
obligations  for asset  retirement  obligations,  if any, and determine the fair
value of these  obligations on the date of adoption.  The  determination of fair
value is complex and will require the Company to gather market  information  and
develop cash flow models. Additionally,  the Company will be required to develop
processes  to  track  and  monitor  these  obligations.  Because  of the  effort
necessary  to  comply  with  the  adoption  of  Statement  No.  143,  it is  not
practicable  for management to estimate the impact of adopting this Statement at
the date of this report.

     In June 2001, the FASB issued Statement No. 141, BUSINESS COMBINATIONS, and
Statement No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS.  Statement 141 requires
that the purchase  method of  accounting  be used for all business  combinations
initiated  after  June  30,  2001,  as  well  as all  purchase  method  business
combinations  completed  after  June 30,  2001.  Statement  141  also  specifies
criteria  that  intangible   assets  acquired  in  a  purchase  method  business
combination  must  meet in  order  to be  recognized  and  reported  apart  from
goodwill.  Statement 142 will require that goodwill and  intangible  assets with
indefinite  useful  lives no longer be  amortized,  but  instead  be tested  for
impairment at least annually in accordance with the provisions of Statement 142.
Statement 142 will also require that  intangible  assets with  estimable  useful

                                       74

lives  be  amortized  over  their  respective  estimated  useful  lives to their
estimated  residual  values,  if any, and reviewed for  impairment in accordance
with FAS Statement No. 121,  ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED  ASSETS
AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF.

     The Company is required to adopt the provisions of Statement 141 on July 1,
2002. The Company had no business combinations  initiated prior to July 1, 2001.
Goodwill  and  intangible  assets  acquired in business  combinations  completed
before July 1, 2001,  will continue to be amortized and tested for impairment in
accordance with the appropriate  pre-Statement 142 accounting requirements prior
to the adoption of Statement 142.

     Statement  141 will  require,  upon  adoption of  Statement  142,  that the
Company evaluate those of its existing  intangible assets and goodwill that were
acquired  in prior  business  combinations,  and to make  any  reclassifications
necessary  to conform with the new  criteria in  Statement  141 for  recognition
apart from  goodwill.  Upon  adoption of  Statement  142,  the  Company  will be
required to reassess  the useful  lives and  residual  values of all  intangible
assets acquired,  and make any necessary  amortization period adjustments by the
end of the first interim period after  adoption.  In addition,  to the extent an
intangible asset is identified as having an indefinite  useful life, the Company
will be required to test the intangible  asset for impairment in accordance with
the provisions of Statement 142 within the first interim period.  Any impairment
loss  will  be  measured  as of the  date  of  adoption  and  recognized  as the
cumulative  effect  of a change in  accounting  principle  in the first  interim
period.

     In  connection  with  Statement  142's  transitional   goodwill  impairment
evaluation,  the Statement  will require the Company to perform an assessment of
whether  there is an  indication  that  goodwill  is  impaired as of the date of
adoption.  To accomplish this, the Company must identify its reporting units and
determine the carrying  value of each reporting unit by assigning the assets and
liabilities,  including the existing  goodwill and intangible  assets,  to those
reporting units as of the date of adoption. The Company will then have up to six
months from the date of adoption to determine  the fair value of each  reporting
unit and compare it to the reporting  unit's  carrying  amount.  To the extent a
reporting  unit's carrying  amount exceeds its fair value, an indication  exists
that the reporting  unit's goodwill may be impaired and the Company must perform
the second step of the  transitional  impairment  test. In the second step,  the
Company must compare the implied fair value of the  reporting  unit's  goodwill,
determined  by allocating  the  reporting  unit's fair value to all of it assets
(recognized and  unrecognized) and liabilities in a manner similar to a purchase
price allocation in accordance with Statement 141, to its carrying amount,  both
of which  would be  measured  as of the date of  adoption.  This  second step is
required to be completed  as soon as possible,  but no later than the end of the
year of adoption.  Any  transitional  impairment  loss will be recognized as the
cumulative effect of a change in accounting principle in the Company's statement
of earnings.

     The  Company  expects to have  unamortized  goodwill  in the amount of $2.3
million  remaining  at July 1, 2002,  which  will be  subject to the  transition
provisions of Statements 141 and 142.  Amortization  expense related to goodwill
was $2.95  million for the year ended June 30,  2001.  Because of the  extensive
effort  needed  to  comply  with  adopting  Statements  141 and  142,  it is not
practicable to reasonably  estimate the impact of adopting  these  Statements on
the Company's financial statements at the date of this report, including whether
it will be required  to  recognize  any  transitional  impairment  losses as the
cumulative effect of a change in accounting principle.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The  Company  invests  liquid  cash  primarily  in money  market  accounts,
certificate  of  deposits  or in  overnight  repurchase  agreements.  Due to the
short-term nature of these investments,  we believe that the market risk related
to these investments is minimal.

                                       75

                                  LEGAL MATTERS

     Certain  legal  matters  have been passed upon for us by Squire,  Sanders &
Dempsey L.L.P., Phoenix, Arizona.

                                     EXPERTS

     The consolidated financial statements of LightPath Technologies, Inc. as of
June 30, 2001 and 2000, and for each of the years in the three year period ended
June 30, 2001,  have been included herein and in the  registration  statement in
reliance  upon  the  report  of KPMG  LLP,  independent  accountants,  appearing
elsewhere  herein,  and upon the authority of said firm as experts in accounting
and auditing.

                                       76

          INDEX TO FINANCIAL STATEMENTS AND MANAGEMENT'S DISCUSSION AND
           ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS


Unaudited Condensed Balance Sheets as of December 31, 2001 and
  June 30, 2000 ..........................................................  F-2
Unaudited Condensed Statements of Operations for the three and six months
  ended December 31, 2001 and 2000........................................  F-3
Unaudited Condensed Statements of Cash Flows for the three and six months
  ended December 31, 2001 and 2000........................................  F-4
Notes to Condensed Financial Statements (unaudited).......................  F-5

Report of KPMG LLP, Independent Auditors..................................  F-12
Consolidated Balance Sheets as of June 30, 2001, and 2000 ................  F-13
Consolidated Statements of Operations for fiscal years ended
  June 30, 2001, 2000 and 1999............................................  F-14
Consolidated Statements of Stockholders' Equity for fiscal years ended
  June 30, 2001, 2000 and 1999............................................  F-15
Consolidated Statements of Cash Flows for fiscal years ended
  June 30, 2001, 2000 and 1999............................................  F-16
Notes to Consolidated Financial Statements................................  F-17

                                      F-1

                          LIGHTPATH TECHNOLOGIES, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)



                                                                                DECEMBER 31,      JUNE 30,
                                                                                    2001            2001
                                                                               -------------    -------------
                                                                                          
ASSETS
Current assets:
  Cash and cash equivalents                                                    $  20,777,024    $  29,273,034
  Trade accounts receivable - less allowance of $183,413 and $120,947              1,937,183        2,579,483
  Inventories                                                                      3,984,708        5,414,587
  Prepaid expenses and other receivables                                             659,174        1,058,187
                                                                               -------------    -------------
       Total current assets                                                       27,358,089       38,325,291

Property and equipment - net                                                      11,699,853       12,046,891
Intangible assets - net                                                           10,908,448       25,683,341
Investment in LightChip, Inc. and other assets                                     8,440,065        8,234,885
                                                                               -------------    -------------
       Total assets                                                            $  58,406,455    $  84,290,408
                                                                               =============    =============

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                                             $     789,855    $   1,276,204
  Accrued liabilities                                                              1,504,972          300,263
  Accrued payroll and benefits                                                       946,666        1,131,252
  Current portion of capital lease obligations                                       116,654          242,475
                                                                               -------------    -------------
       Total current liabilities                                                   3,358,147        2,950,194

Deferred income taxes                                                                     --        3,316,304
Redeemable convertible preferred stock - see note 6                                1,465,086        1,417,070

Commitments and contingencies

Stockholders' equity
  Common stock: Class A, $.01 par value, voting;
    34,500,000 shares authorized; 19,478,667 and 19,371,167 shares
    issued and outstanding                                                           194,787          193,712
   Additional paid-in capital                                                    186,705,752      181,708,752
   Accumulated deficit                                                          (133,317,317)    (105,295,624)
                                                                               -------------    -------------
       Total stockholders' equity                                                 53,583,222       76,606,840
                                                                               -------------    -------------
       Total liabilities, redeemable convertible preferred stock
         and stockholders' equity                                              $  58,406,455    $  84,290,408
                                                                               =============    =============


SEE ACCOMPANYING NOTES.
                                      F-2

                          LIGHTPATH TECHNOLOGIES, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)



                                                                THREE MONTHS ENDED               SIX MONTHS ENDED
                                                                   DECEMBER 31,                    DECEMBER 31,
                                                               2001            2000            2001            2000
                                                           ------------    ------------    ------------    ------------
                                                                                               
REVENUES
   Telecom product and lens sales                          $  2,325,704    $  7,757,106    $  5,675,758    $ 10,654,675

   Product development fees and other sales                      71,167           3,500         179,159         170,870
                                                           ------------    ------------    ------------    ------------
Total revenues                                                2,396,871       7,760,606       5,854,917      10,825,545

COSTS AND EXPENSES
   Cost of sales (exclusive of stock-based compensation
     of $6,956, none, $13,912 and none, for the three
     months ended December 31, 2001 and 2000, and the
     six months ended December 31, 2001 and 2000,
     respectively)                                            3,804,654       4,711,487       6,918,421       6,436,261

   Selling, general and administrative (exclusive of
     stock-based compensation of $1,869,294, $2,782,773,
     $4,678,346 and $5,482,773 for the three months
     ended December 31, 2001 and 2000, and the six
     months ended December 31, 2001 and 2000,
     respectively)                                            2,888,398       4,275,338       6,725,666       7,683,828

   Research and development (exclusive of stock-based
     compensation of none, none, $13,767 and none for
     the three months ended December 31, 2001 and 2000,
     and the six months ended December 31, 2001 and
     2000, respectively)                                      2,169,419       1,768,900       4,221,873       3,131,243

   Impairment of long-lived and intangible assets             6,955,229              --       6,955,229              --

   Stock-based compensation                                   1,876,250       2,782,773       4,706,025       5,482,773

   Amortization of goodwill and intangibles                   2,410,063       3,676,212       5,100,819       6,214,342

   Acquired in process research and development                      --              --              --       9,100,000
                                                           ------------    ------------    ------------    ------------
Total costs and expenses                                     20,104,013      17,214,710      34,628,033      38,048,447
                                                           ------------    ------------    ------------    ------------
Operating loss                                              (17,707,142)     (9,454,104)    (28,773,116)    (27,222,902)

OTHER INCOME (EXPENSE)

   Investment and other income, net                              89,716         609,143         799,439       1,439,208
                                                           ------------    ------------    ------------    ------------

Net loss                                                   $(17,617,426)   $ (8,844,961)   $(27,973,677)   $(25,783,694)

Imputed dividend on preferred stock                             (22,407)        (18,551)        (48,016)        (45,464)
                                                           ------------    ------------    ------------    ------------

Net loss applicable to common shareholders                 $(17,639,833)   $ (8,863,512)   $(28,021,693)   $(25,829,158)
                                                           ============    ============    ============    ============

Basic and diluted net loss per share                       $      (0.91)   $      (0.46)   $      (1.45)   $      (1.38)
                                                           ============    ============    ============    ============

Number of shares used in per share calculation               19,392,308      19,242,857      19,381,738      18,785,241
                                                           ============    ============    ============    ============


SEE ACCOMPANYING NOTES.

                                      F-3

                          LIGHTPATH TECHNOLOGIES, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)



                                                              SIX MONTHS ENDED
                                                                DECEMBER 31,
                                                            2001            2000
                                                        ------------    ------------
                                                                  
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                $(27,973,677)   $(25,783,694)
Adjustments to reconcile net loss to net cash used in
operating activities:
   Depreciation and amortization                           6,579,098       7,343,661
   Impairment of long-lived and intangible assets          6,955,229              --
   Stock-based compensation                                4,706,025       5,482,773
   Acquired in process research and development                   --       9,100,000
Changes in operating assets and liabilities
(net of the effect of the acquisition of Geltech,
Inc.):
   Trade receivables                                         642,300      (3,192,176)
   Inventories                                             1,429,879      (1,721,669)
   Prepaid expenses and other                                453,013        (153,655)
   Accounts payable and accrued expenses                     533,774        (647,184)
                                                        ------------    ------------
Net cash used in operating activities                     (6,674,359)     (9,571,944)

CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment additions, net                     (2,315,255)     (3,968,052)
Proceeds from sale of assets                                 372,480              --
Patent and license agreement costs                           (45,105)        (33,550)
Acquisition of Geltech, Inc., net of cash acquired                --         (18,411)
Investment in LightChip                                           --      (7,234,885)
                                                        ------------    ------------
Net cash used in investing activities                     (1,987,880)    (11,254,898)

CASH FLOWS FROM FINANCING ACTIVITIES
Payments on capital leases                                  (125,821)       (797,561)
Proceeds from exercise of stock options and warrants         292,050       1,143,351
                                                        ------------    ------------
Net cash provided by financing activities                    166,229         345,790
                                                        ------------    ------------
Net decrease in cash and cash equivalents                 (8,496,010)    (20,481,052)
Cash and cash equivalents at beginning of period          29,273,034      58,728,130
                                                        ------------    ------------
Cash and cash equivalents at end of period              $ 20,777,024    $ 38,247,078
                                                        ============    ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Class A common stock, warrant and stock options
 issued to acquire Geltech, Inc.                        $         --    $ 27,723,054

Note receivable in exchange for equipment               $    270,000    $         --

Class E common stock issued                             $         --    $        556

Class E common stock redemption                         $         --    $     40,221
                                                        ============    ============


SEE ACCOMPANYING NOTES.

                                      F-4

                          LIGHTPATH TECHNOLOGIES, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
                                DECEMBER 31, 2001

ORGANIZATION

LightPath Technologies,  Inc. ("LightPath" or the "Company") was incorporated in
Delaware on June 15,  1992.  On April 14,  2000,  the Company  acquired  Horizon
Photonics,  Inc.  ("Horizon").  On  September  20,  2000,  the Company  acquired
Geltech,  Inc.  ("Geltech").  The  Company  is  engaged  in  the  production  of
collimator, isolator, and precision molded aspherical optics used in the telecom
components  market,   GRADIUM(R)  glass  lenses  and  other  optical  materials.
Additionally, Geltech has a unique and proprietary line of all-glass diffraction
gratings  (StableSil(R)) for telecom applications as well as a product family of
Sol-Gel based waveguides. The Company also performs research and development for
optical  solutions  for the  fiber  telecommunications  and  traditional  optics
markets.  As used herein,  the terms  ("LightPath" or the  "Company"),  refer to
LightPath  individually  or,  as the  context  requires,  collectively  with its
subsidiaries on a consolidated basis.

BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance  with the  requirements  of Article 10 of Regulation  S-X
and,  therefore,  do not include all information  and footnotes  necessary for a
fair presentation of financial position,  results of operations,  and cash flows
in conformity with generally accepted accounting principles.  These consolidated
financial   statements   should  be  read  in  conjunction  with  the  Company's
consolidated  financial statements and related notes included in its Form 10-KSB
for the fiscal  year  ended June 30,  2001,  as filed  with the  Securities  and
Exchange Commission on August 29, 2001.

These statements are unaudited but include all adjustments, which include normal
recurring  adjustments,  that the Company considers  necessary to present fairly
the financial position,  results of operations and cash flows of the Company for
the interim periods presented. Results of operations for interim periods are not
necessarily indicative of results which may be expected for the year as a whole.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CONSOLIDATED  FINANCIAL  STATEMENTS  include the accounts of the Company and its
wholly-owned  subsidiaries.  All significant intercompany transactions have been
eliminated in consolidation.

CASH AND CASH EQUIVALENTS consist of cash in the bank and temporary  investments
with maturities of ninety days or less when purchased.

INVENTORIES  which consists  principally of raw  materials,  lenses,  isolators,
collimators  and  components  are  stated at the lower of cost or  market,  on a
first-in,   first-out  basis.  Inventory  costs  include  materials,  labor  and
manufacturing overhead.

PROPERTY  AND  EQUIPMENT  are  stated  at  cost  and   depreciated   using  both
straight-line  and  accelerated  methods over the estimated  useful lives of the
related assets ranging from three to seven years.  Platinum molds less estimated
salvage value are depreciated on a straight-line basis over the estimated useful
lives ranging from one to two years.

INTANGIBLE  ASSETS  consisting of goodwill,  customer list and supply contracts,
licenses,  patents, trademarks and others are recorded at cost. Upon issuance of
the  license,  patent or  trademark,  these  assets are being  amortized  on the
straight-line  basis  over the  estimated  useful  lives of the  related  assets
ranging  from  ten to  seventeen  years.  Goodwill,  customer  list  and  supply
contracts and other intangibles are being amortized on straight-line  basis over
the estimated period of benefit ranging from two to eight

                                      F-5

                          LIGHTPATH TECHNOLOGIES, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
                                DECEMBER 31, 2001

years. The  recoverability of the carrying values of these intangible assets are
evaluated on a recurring basis.

INVESTMENTS  consists of the  Company's  ownership  interest in  LightChip  Inc.
(LightChip) which is accounted for under the cost method.

INCOME TAXES are accounted for under the asset and  liability  method.  Deferred
income tax assets and  liabilities  are  computed  for  differences  between the
financial  statement and tax bases of assets and liabilities that will result in
taxable or  deductible  amounts in the future  based upon  enacted  tax laws and
rates  applicable to the periods in which the differences are expected to affect
taxable income.  Valuation  allowances are established  when necessary to reduce
deferred tax assets to the amount expected to be realized.

REVENUE is generally  recognized from product sales when products are shipped to
the customer  provided that LightPath has received a valid purchase  order,  the
price is fixed, title has transferred,  collection of the associated  receivable
is  reasonably  assured,  and there are no  remaining  significant  obligations.
Revenues from product  development  agreements  are recognized as milestones are
completed  in  accordance  with the  terms  of the  agreements.  Provisions  for
estimated losses are made in the period in which such losses are determined.

RESEARCH AND DEVELOPMENT costs are expensed as incurred.

STOCK-BASED  COMPENSATION  is accounted for using the intrinsic  value method as
prescribed  by APB Opinion No. 25,  ACCOUNTING  FOR STOCK  ISSUED TO  EMPLOYEES,
under which no compensation expense is recognized when the exercise price of the
employees  stock  option  equals or exceeds the market  price of the  underlying
stock on the date of grant and other  requirements  are met.  For stock  options
granted to non-employees,  stock-based compensation is determined using the fair
value  method  as  prescribed   by  SFAS  123,   "Accounting   for   Stock-Based
Compensation."

MANAGEMENT  MAKES  ESTIMATES  and  assumptions  during  the  preparation  of the
Company's  consolidated financial statements that affect amounts reported in the
financial  statements and  accompanying  notes.  Such estimates and  assumptions
could  change in the future as more  information  becomes  known,  which in turn
could impact the amounts reported and disclosed herein.

FAIR VALUES OF FINANCIAL INSTRUMENTS of the Company are disclosed as required by
Statement of Financial  Accounting  Standards  No. 107,  DISCLOSURES  ABOUT FAIR
VALUES  OF  FINANCIAL  INSTRUMENTS.  The  carrying  amounts  of  cash  and  cash
equivalents, trade accounts receivable, accounts payable and accrued liabilities
approximate fair value.

LONG-LIVED  ASSETS are reviewed  for  impairment  whenever  events or changes in
circumstances  indicate  that  the  carrying  amount  of the  assets  may not be
recoverable.  When an evaluation is required,  the estimated future undiscounted
cash flows associated with the asset are compared to the asset's carrying amount
to determine if a write-down to fair value is required. See Notes 3 and 4.

2. INVENTORIES

The components of inventories include the following at:

                                              December 31         June 30
                                                 2001               2001
                                              ----------         ----------
     Raw materials                            $2,525,626         $3,208,838
     Work in process                             460,473            971,916
     Finished goods                              998,609          1,233,833
                                              ----------         ----------
     Total inventories                        $3,984,708         $5,414,587
                                              ==========         ==========

                                      F-6

                          LIGHTPATH TECHNOLOGIES, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
                                DECEMBER 31, 2001


3. PROPERTY AND EQUIPMENT

During the second  quarter of fiscal 2002,  the Company  recorded an  impairment
charge to write off certain excess manufacturing equipment with a carrying value
of  approximately  $553,000 which was used in the production of collimators  and
was removed  from  service by the  Company  due to changes in the  manufacturing
process.

4. INTANGIBLE ASSETS

Intangible assets consist of the following:

                                            Life      December 31       June 30
                                          In years       2001             2001
                                          --------       ----             ----

     Goodwill                                4        $ 5,203,365    $ 5,203,365
     Customer list and supply contract       4          1,041,750      4,800,000
     Developed technology                  2 - 4        6,064,981     18,000,000
     Covenant not-to-compete                 3          3,100,000      3,100,000
     Other intangibles                     2 - 5        2,860,000      2,860,000
     Patents and trademarks granted       10 - 17         602,673        582,787
     License agreements                      17            46,560         46,560
     Patent applications in process                       146,539        127,800
                                                      -----------    -----------
                                                       19,065,868     34,720,512
     Less accumulated amortization                      8,157,420      9,037,171
                                                      -----------    -----------
      Total intangible assets                         $10,908,448    $25,683,341
                                                      ===========    ===========

Pursuant to SFAS No. 121,  "Accounting  for the Impairment of Long-Lived  Assets
and for  Long-Lived  Assets  to be  Disposed  of,"  the  Company  evaluated  the
recoverability of its the long-lived  assets as of December 31, 2001,  including
the  intangible  assets  acquired  in April 2000 and  September  2000,  when the
Company  purchased  Horizon  Photonics,   Inc.   ("Horizon")  and  Geltech  Inc.
("Geltech"),  respectively.  While revenues from the sale of Horizon's  products
was  substantial  during  fiscal  2001,  Horizon  has had to defer sales under a
supply contract to a significant  customer since May 2001. At June 30, 2001, the
Company determined that the estimated future  undiscounted cash flows related to
the customer supply contract and associated goodwill recorded in connection with
the  acquisition  of  Horizon  were  below  the  carrying  value of the  related
intangible  assets and the intangibles were written down to their estimated fair
value at June 30, 2001. In November 2001,  the customer  indicated they will not
take delivery of any remaining  orders which  resulted in the  impairment of the
remaining  carrying value of the customer supply contract of approximately  $1.5
million as of December 31, 2001.  In addition,  Geltech  continued to experience
sales growth during the first quarter of fiscal 2002, however, design changes by
a major  customer  in  October  2001 as well  as the  continued  decline  in the
telecommications  industry  has lead to a  significant  decline in future  sales
projections and growth  potential at Geltech.  At December 31, 2001, the Company
determined that the estimated future  undiscounted cash flows remaining from the
developed  technology and customer list recorded in connection with the purchase
of Geltech  were below the  carrying  value of the  related  intangible  assets.
Accordingly,  the Company recorded an impairment  charge of  approximately  $4.9
million to write down the carrying value of these intangibles to their estimated
fair value of  approximately  $4.7 million at December 31, 2001.  The  estimated
fair values of the intangible  assets were based on the  anticipated  discounted
future  cash flows from  revised  sales  forecasts.  In  addition,  the  Company
reversed  the  net  deferred  tax  liability  of   approximately   $3.3  million
established in connection with the  non-taxable  purchase of Geltech against the
related  intangible  assets prior to the impairment charge as the carrying value
of the remaining  Geltech  intangible  assets was reduced in connection with the
impairment.

                                      F-7

                          LIGHTPATH TECHNOLOGIES, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
                                DECEMBER 31, 2001

5. ACQUISITIONS

On September 20, 2000,  the Company  acquired all of the  outstanding  shares of
Geltech,  a leading  manufacturer of precision molded  aspherical optics used in
the active  telecom  components  market to provide a highly  efficient  means to
couple laser diodes to fibers or waveguides.  Additionally, Geltech has a unique
and  proprietary  line of  all-glass  diffraction  gratings  (StableSil(R))  for
telecom  applications such as optical  switching,  mux/demux and laser tuning as
well as a product family of Sol-Gel based waveguides.  LightPath acquired all of
the  outstanding  shares of Geltech for 822,737  shares of Class A common  stock
(valued at $27.5 million)  which  resulted an aggregate  purchase price of $28.5
million  including  acquisition  costs.  The  acquisition has been accounted for
using the  purchase  method of  accounting  and,  accordingly,  the  results  of
operations of Geltech have been included in the Company's consolidated financial
statements  from  September 20, 2000.  In the first quarter of fiscal 2001,  the
Company  recorded an  immediate  non-recurring  charge of $9.1  million,  due to
acquired in-process research and development based on an assessment of purchased
technology of Geltech.

6. REDEEMABLE CONVERTIBLE PREFERRED STOCK

The Series F  Convertible  Preferred  Stock has a stated  value and  liquidation
preference  of $10,000  per share,  plus a 7% per annum  premium.  There are 127
shares of Series F Convertible  Preferred Stock outstanding at December 31, 2001
and June  30,  2001,  respectively.  The  holders  of the  Series F  Convertible
Preferred Stock are not entitled to vote or to receive dividends.  Each share of
Series F Convertible Preferred Stock is convertible at the option of the holder,
into Class A common  stock  based on its  stated  value at the  conversion  date
divided by a conversion  price. The conversion price is defined as the lesser of
$5.00 or 80% of the average  closing bid price of the  Company's  Class A common
stock for the five days preceding the conversion date. The Company accounted for
the  beneficial  conversion  feature  associated  with the Series F  Convertible
Preferred Stock at issuance.

The  certificate  of  designation  of the Series F Convertible  Preferred  Stock
provides  the  Company the right to convert  any  outstanding  shares to Class A
common  stock or redeem  them for cash  three  years  from the date of  issuance
(effective November 2002). In addition,  the certificate of designation provides
that In the event of any  liquidation,  dissolution or winding up of the Company
("Liquidation  Event"),  either  voluntary or  involuntary,  the then Holders of
shares of Series F  Preferred  Stock  shall be entitled to receive an amount per
share  equal  to the sum of (i) the  Original  Series  F Issue  Price  for  each
outstanding  share of Series F Preferred Stock and (ii) an amount equal to seven
percent (7%) of the Original  Series F Issue Price,  per annum. At each Holder's
option,  a sale,  conveyance or disposition of all or  substantially  all of the
assets of the Company or the  effectuation  by the Company of a  transaction  or
series of related  transactions  in which more than fifty  percent  (50%) of the
voting  power of the Company is disposed of shall be deemed to be a  Liquidation
Event as defined above. A consolidation,  merger, acquisition, or other business
combination  of the Company with or into any other  publicly  traded  company or
companies shall not be treated as a Liquidation Event as defined above, however,
a  consolidation,  merger,  acquisition,  or other  business  combination of the
Company with or into any other non-publicly traded company or companies in which
the  surviving  entity is not a publicly  traded  company  shall be treated as a
Liquidation Event as defined above.

Based on the SEC staff guidance  addressed in EITF Topic D-98,  which  indicates
that the  possibility  that any  triggering  event that is not solely within the
control of the issuer could occur - without regard to probability - requires the
security  to  be  classified  outside  of  permanent  equity,  the  Company  has
classified the Series F preferred stock outside of stockholders' equity, for all
periods presented.

7. STOCKHOLDERS' EQUITY

The Company's  authorized  common stock includes,  2,000,000 shares of Class E-1
common stock, 2,000,000 shares of Class E-2 common stock and 1,500,000 shares of
Class E-3 common stock  (collectively the "E Shares") with $.01 par value. The E
Shares  were  automatically  convertible  into  Class A  common  stock  upon the
attainment of certain  conversion  provisions  through June 30, 2000.  Since the
conversion  provisions  expired without being met, the E Shares were redeemed by
the Company,  effective  as of December  30, 2000.  The holders of E Shares will
receive their  redemption  value of $.0001 per share upon  resolution of certain
stockholder litigation relating to E Shares. See Note 10.

                                      F-8

                          LIGHTPATH TECHNOLOGIES, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
                                DECEMBER 31, 2001



                                                  Class A         Warrants
                                                   Common      Class C, E, L,   Common Stock
                                                   Stock         and other        Options
                                                   -----         ---------        -------
                                                                        
     Shares outstanding at June 30, 2001         19,371,167        299,300       4,249,454

           Options granted                               --             --         358,745
           Options exercised                        107,500             --        (107,500)
           Option forfeitures                            --             --        (318,458)
                                                 ----------        -------       ---------

     Shares outstanding at December 31, 2001     19,478,667        299,300       4,182,241
                                                 ==========        =======       =========


8. NET LOSS PER SHARE

Basic net loss per common  share is  computed  based upon the  weighted  average
number  of  shares  of Class A  common  stock  outstanding  during  each  period
presented.  The computation of Diluted net loss per common share does not differ
from the basic  computation  because  potentially  issuable  securities would be
anti-dilutive.  The following  outstanding  securities  were not included in the
computation of diluted earnings per share at December 31, 2001: 4,182,241 shares
of Class A common stock  issuable upon exercise of  outstanding  stock  options,
299,300  shares  of Class A common  stock  issuable  upon  exercise  of  private
placement  and  other  warrants,  and  541,092  shares  of Class A common  stock
issuable upon the conversion of  convertible  preferred  stock  (292,483  shares
based on the fixed conversion price at closing).  A seven percent premium earned
by the  preferred  shareholders  increased  the net loss  applicable  to  common
shareholders by $22,407 and $18,551 for the three months ended December 31, 2001
and 2000,  respectively,  and by $48,016 and  $45,464  for the six months  ended
December 31, 2001 and 2000, respectively.

9. SEGMENT INFORMATION

Optoelectronics and Fiber Telecommunications  ("Telecom") and Traditional Optics
are the Company's  reportable  segments  under SFAS No. 131,  "Disclosure  about
Segments of an  Enterprise  and Related  Information".  For the six months ended
December 31, 2001,  Telecom product sales represent  approximately  60% of total
revenues and  Traditional  Optics  sales  represent  approximately  40% of total
revenues  of  the  Company.  The  telecom  segment  is  based  primarily  on the
development and sale of fiber collimators and fiber-optic  switches,  free space
isolators,  precision molded aspheric optics and other related passive component
products for the optoelectronics segment of the telecommunications industry. The
traditional  optics  segment is based  primarily  upon the sale of lenses to the
data  storage  and  medical  equipment  market and the  development  and sale of
GRADIUM glass in the form of lenses and blanks for the general optics markets.

Summarized  financial  information  concerning the Company's reportable segments
for the six and three months ended December 31, is shown in the following table.

                                   Traditional   Corporate and
                      Telecom        Optics        Other (1)         Total
                      -------        ------        ---------         -----

     SIX MONTHS ENDED
     DECEMBER 31

     Revenues (2)
          2001     $  3,544,155    2,310,762               --     $  5,854,917
          2000     $  8,643,480    2,182,065               --     $ 10,825,545

     Segment operating loss (3)
          2001     $ (6,220,057)  (1,793,727)     (20,759,332)    $(28,773,116)
          2000     $ (3,429,433)     (41,966)     (23,751,503)    $(27,222,902)

                                      F-9

                          LIGHTPATH TECHNOLOGIES, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
                                DECEMBER 31, 2001

                                   Traditional   Corporate and
                      Telecom        Optics        Other (1)         Total
                      -------        ------        ---------         -----
continued

THREE MONTHS ENDED
DECEMBER 31

     Revenues (2)

             2001  $  1,474,768      922,103               --     $  2,396,871
             2000  $  5,828,224    1,932,382               --     $  7,760,606

     Segment operating loss (3)

             2001  $(3,727,435)   (1,066,997)     (12,912,710)    $(17,707,142)

             2000  $(1,604,472)      275,081       (8,124,713)    $ (9,454,104)

----------
(1)  Corporate  functions include certain members of executive  management,  the
     corporate  accounting  and  finance  function,  non-cash  charges and other
     typical administrative functions which are not allocated to segments.

(2)  There were no material inter-segment sales during all periods presented.

(3)  In  addition  to  unallocated  corporate  functions,  management  does  not
     allocate interest expense,  interest income, and other non-operating income
     and expense amounts in the  determination  of the operating  performance of
     the reportable segments.

10. CONTINGENCIES

On May 2, 2000,  the Company  commenced a class  action  lawsuit in the Chancery
Court of Delaware,  New Castle County.  The action seeks a declaratory  judgment
with  respect  to the  Company's  right to redeem  the  Class E Common  Stock on
December  30,  2000 for $.0001 per  share,  the right of the  holders of Class E
Common  Stock to vote at the Annual  Meeting  held on  October 6, 2000,  and for
certification  of the  holders of Class E Common  Stock as a class and the named
defendants as its  representatives.  The named  defendants are Donald E. Lawson,
former President,  Chief Executive Officer and Director of the Company, who owns
an aggregate  of 25,000  shares of Class E Common  Stock,  Louis G.  Leeburg,  a
Director of the Company, who owns an aggregate of 7,272 shares of Class E Common
Stock, and William  Leeburg,  who owns or controls an aggregate of 21,816 shares
of Class E Common Stock. The Company proposed a settlement of this lawsuit which
the Delaware  Chancery Court heard on January 8, 2001.  The settlement  proposal
was made to include  all holders of Class E Common  Stock.  On February 2, 2001,
the Delaware  Chancery  Court issued a letter in which it indicated that holders
of Class E Common  Stock must be provided an  opportunity  to request  exclusion
from the settlement class. The Company has re-evaluated the proposed  settlement
offer and in December  2001  determined  it will proceed with the  settlement to
include a provision that each E shareholder  has the right to request  exclusion
from the settlement class. The final settlement terms allow the holders of Class
E Common Stock to elect to receive either $0.40 for each share of Class E Common
Stock or receive an option to purchase  five shares of Class A Common  Stock for
each 100 shares of Class E Common Stock they hold for a period of two years with
an exercise price of $3.73 per share.  The Company  estimates that if all of the
Class E Common Stock were exchanged for options, approximately 40,220 options to
acquire  201,102  shares of Class A Common Stock would be issued  resulting in a
settlement  charge equal to the  estimated  fair value of the options  issued of
approximately  $458,000.  If all of the Class E Common Stock were  exchanged for
cash, a settlement charge of approximately  $1.6 million would be recorded.  The
Company has determined that it is probable that the settlement  offer will occur
and an  estimated  settlement  charge of $1.1  million  has been  accrued  as of
December 31, 2001.

                                      F-10

                          LIGHTPATH TECHNOLOGIES, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
                                DECEMBER 31, 2001


On or about June 9, 2000,  a small group of holders of Class E Common Stock (the
"Texas  Plaintiffs")  commenced  an action in a state court in Texas (the "Texas
Action").  The Texas  Plaintiffs  allege  that the actions of the  Company,  and
certain named  individuals,  leading up to and  surrounding  the Company's  1995
proxy  statement  constitute  fraud,  negligent  misrepresentation,   fraudulent
inducement, breach of fiduciary duty and civil conspiracy. In general, the Texas
Plaintiffs allege  misrepresentations and omissions in connection with a request
from the Company that its shareholders consent to a recapitalization,  resulting
in a 5.5 to 1 reverse  stock split and the  issuance  of certain  Class E Common
Stock. The Texas Plaintiffs  further allege that, as a result of the defendants'
actions,  they were induced to consent to the  Company's  recapitalization.  The
Company  believes the  allegations  underlying the Texas Action have no basis in
fact and that this lawsuit is without  merit.  The Company has retained  counsel
and is vigorously  defending against these claims. The participants in the Texas
Action will be  provided  the  opportunity  to accept the  settlement  discussed
above. In addition,  the Company participated in a mediation proceeding relating
to the Texas  Action on October 23, 2001.  During the six months ended  December
31, 2001,  the Company  incurred and expensed legal fees  associated  with these
claims of approximately $525,000,  however, an insurance claim for the aggregate
amount  incurred in  connection  with the Texas  Action in excess of  applicable
deductibles  has been filed by the Company.  During the first  quarter of fiscal
2002,  one of the  insurance  companies  responsible  for the  claim,  which had
previously  filed for  reorganization,  was declared  insolvent.  The Company is
working  with  regulatory  agencies  to resolve and collect the monies due under
this policy,  although the Company  currently  considers any potential  recovery
under this policy as speculative. Accordingly, no claim for recovery is recorded
as of December 31, 2001.

LightPath is subject to various other claims and lawsuits in the ordinary course
of its  business,  none  of  which  are  currently  considered  material  to the
Company's  financial  condition and results of  operations.  Except as set forth
above, there have been no material developments in any legal actions reported in
the Company's Form 10-KSB for the year ended June 30, 2001.

                                      F-11

                    FINANCIAL STATEMENTS FOR FISCAL YEAR 2001


                    REPORT OF KPMG LLP, INDEPENDENT AUDITORS


The Board of Directors
LightPath Technologies, Inc.:


We have  audited  the  accompanying  consolidated  balance  sheets of  LightPath
Technologies,  Inc., as of June 30, 2001 and 2000, and the related  consolidated
statements of  operations,  stockholders'  equity,  and cash flows for the three
years ended June 30,  2001.  These  consolidated  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in  all  material   respects,   the  financial  position  of  LightPath
Technologies,  Inc.,  as of June 30,  2001 and 2000,  and the  results  of their
operations  and their cash  flows for the three  years  ended  June 30,  2001 in
conformity with accounting principles generally accepted in the United States of
America.

                                    KPMG LLP

Albuquerque, New Mexico
August 1, 2001

                                      F-12

                          LIGHTPATH TECHNOLOGIES, INC.
                           CONSOLIDATED BALANCE SHEETS



                                                                                   JUNE 30,          JUNE 30,
                                                                                     2001              2000
                                                                                -------------      -------------
                                                                                             
ASSETS
Current assets:
  Cash and cash equivalents                                                    $  29,273,034      $  58,728,130
  Trade accounts receivable - less allowance of $120,947 and $15,000               2,579,483            841,533
  Inventories (NOTE 2)                                                             5,414,587          1,690,058
  Other receivables and advances to employees                                        442,116             17,733
  Prepaid expenses and other                                                         616,071            225,451
                                                                               -------------      -------------
Total current assets                                                              38,325,291         61,502,905

Property and equipment - net (NOTE 3)                                             12,046,891          6,482,039
Goodwill and intangible assets - net (NOTE 4)                                     25,683,341         31,727,811
Investment in LightChip, Inc. (NOTE 6)                                             8,234,885          1,000,000
                                                                               -------------      -------------
Total assets                                                                   $  84,290,408      $ 100,712,755
                                                                               =============      =============

LIABILITIES, REDEEMABLE COMMON AND CONVERTIBLE PREFERRED STOCK
  AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                                             $   1,276,204      $   1,573,531
  Accrued liabilities                                                                300,263            469,771
  Accrued payroll and benefits                                                     1,131,252            330,734
  Capital lease obligations and note payable (NOTE 7)                                242,475                 --
                                                                               -------------      -------------
Total current liabilities                                                          2,950,194          2,374,036

Deferred income taxes (NOTE 11)                                                    3,316,304                 --

Commitments and contingencies (NOTE 15)

Redeemable convertible preferred stock (NOTE 9)

   $.01 par value; stated value of $10,000 per share; 5,000,000 shares
    authorized; 127 and 153 Series F shares issued and outstanding                 1,417,070          1,601,698

Redeemable common stock (NOTE 10)
  Class E-1, E-2 and E-3 - performance based and redeemable common stock 0
  and 4,022,037 shares issued and outstanding                                             --             40,221

Stockholders' equity: (NOTES 10 AND 12)
   Common stock: Class A, $.01 par value, voting; 34,500,000 shares
     authorized; 19,371,167 and 18,136,254 shares issued and outstanding             193,712            181,363
   Additional paid-in capital                                                    181,708,752        140,958,151
   Accumulated deficit                                                          (105,295,624)       (44,442,714)
                                                                               -------------      -------------
Total stockholders' equity                                                        76,606,840         96,696,800
                                                                               -------------      -------------
Total liabilities, redeemable common and convertible preferred stock
  and stockholders' equity                                                     $  84,290,408      $ 100,712,755
                                                                               =============      =============


SEE ACCOMPANYING NOTES.

                                      F-13

                          LIGHTPATH TECHNOLOGIES, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS



                                                                                    YEAR ENDED JUNE 30
                                                                         2001              2000              1999
                                                                     ------------      ------------      ------------
                                                                                                
REVENUES
   Telecom product and lens sales                                    $ 25,257,391      $  2,098,841      $    712,317
   Product development fees and other sales                               885,765           167,423           373,809
                                                                     ------------      ------------      ------------
Total revenues                                                         26,143,156         2,266,264         1,086,126

COSTS AND EXPENSES
   Cost of sales (exclusive of stock-based compensation
     of $11,875 and none, for the year ended June 30,
     2001 and 2000, respectively)                                      15,283,694         1,309,711           409,417
   Selling, general and administrative (exclusive of stock-based
     compensation of $11,127,536 and $3,144,490, for the year
     ended June 30, 2001 and 2000, respectively)                       19,291,630         5,942,029         2,918,184
   Research and development (exclusive of stock-based
     compensation of $25,094 and none, for the year
     ended June 30, 2001 and 2000, respectively)                        7,089,931         1,449,347           615,371
   Asset impairment (NOTES 3 AND 4)                                    13,772,867                --                --
   Stock-based compensation                                            11,164,505         3,144,980                --
   Amortization of goodwill and intangibles                            13,566,807         2,418,119                --
   Acquired in process research and development                         9,100,000         4,200,000                --
                                                                     ------------      ------------      ------------
Total costs and expenses                                               89,269,434        18,464,186         3,942,972
                                                                     ------------      ------------      ------------
Operating loss                                                        (63,126,278)      (16,197,922)       (2,856,846)

OTHER INCOME (EXPENSE)
Investment income                                                       2,436,438         1,062,952            95,362
Interest and other expense                                                (73,521)         (475,097)          (10,863)
Equity in Loss of LightChip, Inc. (NOTE 6)                                     --                --          (361,671)
                                                                     ------------      ------------      ------------
Net loss                                                             $(60,763,361)     $(15,610,067)     $ (3,134,018)
Imputed dividend and premium on preferred stock                           (89,549)       (2,231,943)         (224,651)
                                                                     ------------      ------------      ------------
Net loss applicable to common shareholders
(NOTE 12)                                                            $(60,852,910)     $(17,842,010)     $ (3,358,669)
                                                                     ============      ============      ============

Basic and diluted net loss per share (NOTE 12)                       $      (3.19)     $      (1.86)     $      (0.79)
                                                                     ============      ============      ============

Number of shares used in per share calculation                         19,064,141         9,586,817         4,271,313
                                                                     ============      ============      ============


SEE ACCOMPANYING NOTES.

                                      F-14

                          LIGHTPATH TECHNOLOGIES, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY



                                                              CLASS A
                                                           COMMON STOCK
                                                     ------------------------       ADDITIONAL
                                                      NUMBER OF                      PAID-IN         ACCUMULATED
                                                       SHARES         AMOUNT         CAPITAL           DEFICIT            TOTAL
                                                     ----------     ---------     -------------     -------------     -------------
                                                                                                       
Balances at June 30, 1998                             3,330,607     $  33,306     $  22,651,915     $ (23,242,035)    $    (556,814)
   Issuance of common stock                               8,344            83            27,476                --            27,559
   Exercise of stock options                              7,264            73            39,586                --            39,659
   Issuance of common stock upon conversion of 12
     Series A shares,  103 Series B shares and
     277 Series C shares of convertible
     preferred stock                                  1,614,488        16,145         4,141,441                --         4,157,586
   Premium on Series A, Series B and Series C
     convertible preferred stock                             --            --                --          (224,651)         (224,651)
   Net loss                                                  --            --                --        (3,134,018)       (3,134,018)
                                                     ----------     ---------     -------------     -------------     -------------

Balances at June 30, 1999                             4,960,703     $  49,607     $  26,860,418     $ (26,600,704)    $     309,321
   Issuance of common stock                              66,429           664           258,136                --           258,800
   Exercise of stock options and unit purchase
     options                                            682,521         6,825         3,214,108                --         3,220,933
   Exercise of warrants
      Debt                                              577,350         5,774         1,264,396                --         1,270,170
      Equity                                          8,764,665        87,647        60,930,062                --        61,017,709

   Issuance of common stock upon conversion of 37
     shares Series A , 1 share Series B, 84 shares
     Series C and 255 shares Series F convertible
     preferred stock                                  1,066,970        10,670         3,923,831                --         3,934,501

   Issuance of common stock upon conversion of
     6% convertible debentures                          569,801         5,698         1,313,423                --         1,319,121

   Issuance of common stock and stock options
     to acquire Horizon Photonics, Inc.               1,447,815        14,478        37,954,135                --        37,968,613

   Stock-based compensation                                  --            --         3,144,980                --         3,144,980

   Imputed dividend on Series F convertible
     preferred stock                                         --            --         2,094,662        (2,094,662)               --

   Premium on Series A , Series B, Series C and
     Series F convertible preferred stock                    --            --                --          (137,281)         (137,281)

   Net loss                                                  --            --                --       (15,610,067)      (15,610,067)
                                                     ----------     ---------     -------------     -------------     -------------


Balances at June 30, 2000                            18,136,254     $ 181,363     $ 140,958,151     $ (44,442,714)    $  96,696,800
   Exercise of stock options                            306,255         3,063         1,501,562                --         1,504,625
   Exercise of warrants and unit purchase
     options                                             50,217           502            65,487                --            65,989
   Issuance of common stock upon conversion of
     26 shares Series F convertible preferred
     stock                                               55,704           557           273,620                --           274,177
   Issuance of common stock and stock options
     to acquire Geltech, Inc.                           822,737         8,227        27,705,609                --        27,713,836
   Redemption E1, E2, E3 common stock                        --            --            39,818                --            39,818
   Stock-based compensation                                  --            --        11,164,505                --        11,164,505
   Premium on Series F convertible preferred stock           --            --                --           (89,549)          (89,549)
    Net loss                                                 --            --                --       (60,763,361)      (60,763,361)

                                                     ----------     ---------     -------------     -------------     -------------
Balances at June 30, 2001                            19,371,167     $ 193,712     $ 181,708,752     $(105,295,624)    $  76,606,840
                                                     ==========     =========     =============     =============     =============


SEE ACCOMPANYING NOTES.

                                      F-15

                          LIGHTPATH TECHNOLOGIES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                                               YEAR ENDED JUNE 30
                                                                 ------------------------------------------------
                                                                     2001              2000              1999
                                                                 ------------      ------------      ------------
                                                                                            
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                                       $(60,763,361)     $(15,610,067)     $ (3,134,018)
  Adjustments to reconcile net loss to net cash
   used in operating activities:
    Depreciation and amortization                                  16,261,789         3,090,322           375,358
    Equity in loss of LightChip                                            --                --           361,671
    Debt discount                                                          --           425,795                --
    Write off abandoned patent applications                                --           132,011                --
    Asset impairment                                               13,772,867                --                --
    Stock-based compensation                                       11,164,505         3,144,980                --
    Acquired in-process research and development                    9,100,000         4,200,000                --
  Changes in operating assets and liabilities
    (net of the effect of acquisitions):
    Receivables, net and advances to employees                       (945,878)          639,450           (57,984)
    Inventories                                                    (2,656,444)         (531,698)         (107,608)
    Prepaid expenses and other                                       (317,053)         (197,858)           24,505
    Accounts payable and accrued liabilities,
      including payroll                                              (588,408)        1,451,545          (123,666)
                                                                 ------------      ------------      ------------
  Net cash used in operating activities                           (14,971,983)       (3,255,520)       (2,661,742)

CASH FLOWS FROM INVESTING ACTIVITIES
  Property and equipment additions, net                            (7,230,694)       (5,148,438)         (437,223)
  Costs incurred in acquiring patents and license agreements          (84,630)          (58,324)          (79,223)
  Acquisitions, net of cash acquired                                  (18,411)       (2,164,662)               --
  Investment in LightChip                                          (7,234,885)       (1,570,000)         (713,333)
                                                                 ------------      ------------      ------------
  Net cash used in investing activities                           (14,568,620)       (8,941,424)       (1,229,779)

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from issuance of 6% convertible
   debentures, net of discount and offering costs                          --           893,326                --
  Payment on notes payable and capital leases                      (1,484,704)          (30,000)               --
  Proceeds from sales of Convertible Series F
   preferred stock, net                                                    --         3,880,324                --
  Proceeds from exercise of common stock options
   and warrants, net                                                1,570,211        65,509,236            39,950
  Proceeds from issuance of common stock                                   --           258,800            27,559
                                                                 ------------      ------------      ------------
  Net cash provided by financing activities                            85,507        70,511,686            67,509
                                                                 ------------      ------------      ------------
  Net (decrease) increase in cash and cash                        (29,455,096)       58,314,742        (3,824,012)
   equivalents
  Cash and cash equivalents at beginning of period                 58,728,130           413,388         4,237,400
                                                                 ------------      ------------      ------------
  Cash and cash equivalents at end of period                     $ 29,273,034      $ 58,728,130      $    413,388
                                                                 ============      ============      ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Interest paid                                                  $     72,811      $      1,180      $      2,930
                                                                 ============      ============      ============
  Non cash investing and financing activities:
  Class A common stock, warrant and stock options
  issued for acquisitions                                        $ 27,713,836      $ 37,968,613      $         --
                                                                 ============      ============      ============
  Class A common stock issued upon conversion of
   preferred stock                                               $    274,177      $  3,934,501      $  4,157,586
                                                                 ============      ============      ============

  Preferred stock premium                                        $    (89,549)     $   (137,281)     $   (224,651)
                                                                 ============      ============      ============
  Class E common stock - redeemed in 2001 and
   issued in 2000 and 1999                                       $     40,221      $        421      $        291
                                                                 ============      ============      ============


SEE ACCOMPANYING NOTES.

                                      F-16

                          LIGHTPATH TECHNOLOGIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2001 AND 2000

ORGANIZATION

LightPath Technologies,  Inc. ("LightPath" or the "Company") was incorporated in
Delaware on June 15, 1992 as the  successor  to LightPath  Technologies  Limited
Partnership  formed in 1989, and its predecessor,  Integrated Solar Technologies
Corporation  formed in 1985.  On April 14, 2000,  the Company  acquired  Horizon
Photonics,  Inc.  ("Horizon").  On  September  20,  2000,  the Company  acquired
Geltech,  Inc.  ("Geltech").  The  Company  is  engaged  in  the  production  of
collimator,  isolator,  and precision molded aspheric optics used in the telecom
components  market,   GRADIUM(R)  glass  lenses  and  other  optical  materials.
Additionally, Geltech has a unique and proprietary line of all-glass diffraction
gratings  (StableSil(R)) for telecom applications as well as a product family of
Sol-Gel based waveguides. The Company also performs research and development for
optical  solutions  for the  fiber  telecommunications  and  traditional  optics
markets.  As used herein,  the terms  ("LightPath" or the  "Company"),  refer to
LightPath  individually  or,  as the  context  requires,  collectively  with its
subsidiaries on a consolidated basis.

The Company has incurred substantial losses since inception.  During fiscal year
1996,  the Company  completed an initial public  offering  ("IPO") and in fiscal
years 1997,  1998 and 2000 the Company  completed  four  private  placements  of
convertible preferred stock and one private placement for convertible debentures
to  raise  additional  capital.  These  funds  were  used to  further  research,
development and  commercialization of optoelectronic  products and GRADIUM glass
lenses.  During  fiscal  year  2000,  warrants  issued  at the IPO  and  private
placement warrants were exercised for approximately $65.5 million.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CONSOLIDATED  FINANCIAL  STATEMENTS  include the accounts of the Company and its
wholly-owned  subsidiaries.  All significant intercompany transactions have been
eliminated in consolidation.

CASH AND CASH EQUIVALENTS consist of cash in the bank and temporary  investments
with maturities of ninety days or less when purchased.

INVENTORIES  which consists  principally of raw  materials,  lenses,  isolators,
collimators  and  components  are  stated at the lower of cost or  market,  on a
first-in,   first-out  basis.  Inventory  costs  include  materials,  labor  and
manufacturing overhead.

PROPERTY  AND  EQUIPMENT  are  stated  at  cost  and   depreciated   using  both
straight-line  and  accelerated  methods over the estimated  useful lives of the
related assets ranging from three to seven years.  Platinum molds less estimated
salvage value are depreciated on a straight-line basis over the estimated useful
lives ranging from one to two years.

INTANGIBLE  ASSETS  consisting of goodwill,  customer list and supply contracts,
licenses,  patents, trademarks and others are recorded at cost. Upon issuance of
the  license,  patent or  trademark,  these  assets are being  amortized  on the
straight-line  basis  over the  estimated  useful  lives of the  related  assets
ranging  from  ten to  seventeen  years.  Goodwill,  customer  list  and  supply
contracts and other intangibles are being amortized on straight-line  basis over
the  estimated   period  of  benefit  ranging  from  two  to  eight  years.  The
recoverability  of the carrying values of these intangible  assets are evaluated
on a recurring basis.

INVESTMENTS  consists of the  Company's  ownership  interest in  LightChip  Inc.
(LightChip) which is accounted for under the cost method.

                                      F-17

                          LIGHTPATH TECHNOLOGIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

INCOME TAXES are accounted for under the asset and  liability  method.  Deferred
income tax assets and  liabilities  are  computed  for  differences  between the
financial  statement and tax bases of assets and liabilities that will result in
taxable or  deductible  amounts in the future  based upon  enacted  tax laws and
rates  applicable to the periods in which the differences are expected to affect
taxable income.  Valuation  allowances are established  when necessary to reduce
deferred tax assets to the amount expected to be realized.

REVENUE is generally  recognized from product sales when products are shipped to
the customer  provided that LightPath has received a valid purchase  order,  the
price is fixed, title has transferred,  collection of the associated  receivable
is  reasonably  assured,  and there are no  remaining  significant  obligations.
Revenues from product  development  agreements  are recognized as milestones are
completed  in  accordance  with the  terms  of the  agreements.  Provisions  for
estimated losses are made in the period in which such losses are determined.

Sales to the Agere Systems,  Inc (formerly  Microelectronics  division of Lucent
Technologies Inc.) were approximately  $11.5 million which represents 44% of all
revenues for the year ended June 30, 2001. Sales to Lucent  Technologies,  Inc.,
for the year ended June 30,  2000 were  approximately  $930,000  or 41% of total
revenues.

RESEARCH AND DEVELOPMENT costs are expensed as incurred.

STOCK-BASED  COMPENSATION  is accounted for using the intrinsic  value method as
prescribed  by APB Opinion No. 25,  ACCOUNTING  FOR STOCK  ISSUED TO  EMPLOYEES,
under which no compensation expense is recognized when the exercise price of the
employees  stock  option  equals or exceeds the market  price of the  underlying
stock on the date of grant and other requirements are met. For options issued to
non-employees,  stock-based  compensation  is accounted for using the fair value
method as  prescribed  by Statement of Financial  Accounting  Standards No. 123,
ACCOUNTING FOR STOCK-BASED COMPENSATION (SFAS 123).

Pro forma  information  required by SFAS 123 has been  presented  as if the fair
value method using a Black-Scholes option pricing model had been applied.

MANAGEMENT  MAKES  ESTIMATES  and  assumptions  during  the  preparation  of the
Company's  consolidated financial statements that affect amounts reported in the
financial  statements and  accompanying  notes.  Such estimates and  assumptions
could  change in the future as more  information  becomes  known,  which in turn
could impact the amounts reported and disclosed herein.

FAIR VALUES OF FINANCIAL INSTRUMENTS of the Company are disclosed as required by
Statement of Financial  Accounting  Standards  No. 107,  DISCLOSURES  ABOUT FAIR
VALUES  OF  FINANCIAL  INSTRUMENTS.  The  carrying  amounts  of  cash  and  cash
equivalents, trade accounts receivable, accounts payable and accrued liabilities
approximate fair value.

LONG-LIVED  ASSETS are reviewed  for  impairment  whenever  events or changes in
circumstances  indicate  that  the  carrying  amount  of the  assets  may not be
recoverable.  When an evaluation is required,  the estimated future undiscounted
cash flows associated with the asset are compared to the asset's carrying amount
to determine if a write-down to fair value is required. See Notes 3 and 4.

                                      F-18

                          LIGHTPATH TECHNOLOGIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

2. INVENTORIES

The components of inventories include the following at June 30:

                                                 2001               2000
                                              ----------         ----------
     Raw materials                            $3,208,838         $  733,050
     Work in process                             971,916            459,789
     Finished goods                            1,233,832            497,219
                                              ----------         ----------
     Total inventories                        $5,414,587         $1,690,058
                                              ==========         ==========

3. PROPERTY AND EQUIPMENT

Property and equipment consist of the following at June 30:

                                                   2001             2000
                                               -----------      -----------
     Manufacturing equipment                   $13,755,183      $ 5,339,963
     Computer equipment and software             1,182,772          757,595
     Furniture and fixtures                        604,567          296,318
     Platinum molds                                656,073          931,815
     Leasehold improvements                      1,667,582        1,022,857
                                               -----------      -----------
                                                17,866,177        8,348,548
     Less accumulated depreciation               5,819,286        1,866,509
                                               -----------      -----------
     Total property and equipment              $12,046,891      $ 6,482,039
                                               ===========      ===========

During the fourth  quarter of fiscal 2001,  the Company  recorded an  impairment
charge  of  approximately  $408,000  related  to  equipment  held for  disposal,
expected  to be  completed  during  the first  quarter of fiscal  2002.  The net
carrying value of the equipment held for disposal was  approximately  $90,000 at
June 30, 2001. The equipment was used for the  production of traditional  optics
in California, which the Company is consolidating into its Florida facilities.

4. INTANGIBLE ASSETS

Intangible assets consist of the following at June 30:

                                            Life
                                          In years         2001         2000
                                          --------         ----         ----

     Goodwill                                 4        $ 5,203,365   $11,797,725
     Customer list and supply contract      4 - 8        4,800,000    15,900,000
     Developed technology                   2 - 4       18,000,000     2,400,000
     Covenant not-to-compete                  3          3,100,000     2,000,000
     Other intangibles                      2 - 5        2,860,000     1,520,000
     Patents and trademarks granted        10 - 17         582,787       509,095
     License agreements                      17             46,560        40,000
     Patent applications in process                        127,800        60,845
                                                       -----------   -----------
                                                        34,720,512    34,227,665
     Less accumulated amortization                       9,037,171     2,499,854
                                                       -----------   -----------
     Total intangible assets                           $25,683,341   $31,727,811
                                                       ===========   ===========

Pursuant to SFAS No. 121,  "Accounting  for the Impairment of Long-Lived  Assets
and for  Long-Lived  Assets  to be  Disposed  of,"  the  Company  evaluated  the
recoverability of the long-lived assets including the intangible assets acquired

                                      F-19

                          LIGHTPATH TECHNOLOGIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


in April 2000, when the Company  purchased  Horizon  Photonics Inc.  ("Horizon")
(see Note 5). While revenue was substantial for fiscal 2001,  Horizon has had to
defer sales to a  significant  customer  since May 2001.  At June 30, 2001,  the
Company  determined that the estimated future  undiscounted cash flows remaining
from this  customer  supply  agreement  and  associated  goodwill were below the
carrying  value of the  related  intangible  assets.  Accordingly,  the  Company
adjusted the carrying  value of the  goodwill and customer  supply  agreement to
their estimated fair value of approximately  $2.1 million resulting in a noncash
impairment  loss of  approximately  $13.4 million.  The estimated fair value was
based on anticipated discounted future cash flows.

5. ACQUISITIONS

On April 14, 2000, the Company acquired Horizon, a California  corporation which
is an emerging leader in the automated  production of passive optical components
for the telecommunications and data communications  markets.  LightPath acquired
all of the outstanding shares of Horizon for approximately 1.4 million shares of
Class A common  stock and $1 million  cash.  The Company  assumed  approximately
$250,000  of  indebtedness  of  Horizon,  which was repaid  upon  closing of the
transaction  and  incurred   approximately  $1  million  in  acquisition  costs.
Additionally,  LightPath issued  replacement  stock options for all of Horizon's
outstanding  employee stock options  (approximately  193,000  shares).  The fair
value of the options  issued of  approximately  $2.8  million is included in the
final  determination  of the purchase price.  The acquisition has been accounted
for using the purchase  method of accounting  and,  accordingly,  the results of
operations of Horizon have been included in the Company's consolidated financial
statements from April 14, 2000.

The  purchase  price was  allocated  to  tangible  net assets  and  identifiable
intangible  assets with the unallocated  purchase price  attributed to goodwill.
The value of tangible assets acquired and liabilities assumed approximated their
historical  book  value at April  14,  2000.  The  estimated  fair  value of the
tangible  net assets,  identifiable  intangible  assets and  goodwill,  based on
management's assessment, are as follows:

                                                      Fair Value
                                                    at Acquisition
                                                    --------------
     Current assets                                  $  1,908,395
     Equipment                                          1,112,267
     Patents                                               29,016
     In-process research and development                4,200,000
     Customer list                                     15,900,000
     Developed technology                               2,400,000
     Covenants not-to-compete                           2,000,000
     Patents, trademark & tradename                     1,300,000
     Acquired work force                                  220,000
     Goodwill                                          11,797,725
     Other liabilities                                   (623,576)
                                                     ------------
     Total                                           $ 40,243,827
                                                     ============

In the fourth  quarter of fiscal  2000,  the  Company  recorded a  non-recurring
charge of $4.2  million,  due to acquired  in-process  research and  development
based on an  assessment  of the  purchased  technology  of Horizon.  This charge
represents technology that did not meet the accounting definitions of "completed
technology,"  and will have no  alternative  future uses if the products are not
feasible. This assessment analyzed certain Micro-Collimator  products as well as
active alignment and isolator  injection  molding  technologies  that were under
development at the time of acquisition. These programs were in various stages of
completion  ranging from 50% to 60% of  completion,  with  estimated  completion
dates through June 2001. This in-process  research and development  will have no
alternative  future  use  if  the  products  are  not  feasible.  Revenues  from
in-process  products are estimated  primarily beginning in the second quarter of
fiscal 2001,  with  projected  research  and  development  costs-to-complete  of
approximately  $1.1 million.  The fair value of these  development  programs was
determined in accordance with views expressed by the staff of the Securities and
Exchange Commission.

                                      F-20

                          LIGHTPATH TECHNOLOGIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

On September 20, 2000,  the Company  acquired all of the  outstanding  shares of
Geltech,  for an  aggregate  purchase  price  of  approximately  $28.5  million,
comprised of 822,737  shares of Class A common stock  (valued at $27.5  million)
and approximately $1 million in acquisition costs. The number of shares of Class
A common  stock  issued to the former  shareholders  of Geltech was based on the
average  closing  price of the Class A common  stock for five days  prior to the
date of the purchase agreement, August 9, 2000. Geltech, a Delaware corporation,
is a leading manufacturer of precision molded aspheric optics used in the active
telecom  components  market to provide a highly  efficient means to couple laser
diodes  to  fibers  or  waveguides.  Additionally,  Geltech  has  a  unique  and
proprietary line of all-glass  diffraction  gratings  (StableSil(R)) for telecom
applications such as optical switching,  mux/demux and laser tuning as well as a
product family of Sol-Gel based diffraction  gratings.  The acquisition has been
accounted for using the purchase  method of  accounting  and,  accordingly,  the
results  of   operations   of  Geltech  have  been  included  in  the  Company's
consolidated financial statements from September 20, 2000.

The purchase  price was  allocated  to the tangible net assets and  identifiable
intangible  assets.  The value of the tangible net assets acquired  approximated
their historical book value at the date of the acquisition  excluding previously
acquired  goodwill and certain licensed  technology at the acquisition  date. In
addition,  a net  deferred  tax  liability  of  approximately  $3.3  million was
recorded following a reduction in the Company's deferred tax valuation allowance
of approximately $5 million at the acquisition date. The estimated fair value of
the  tangible  net  assets  and  identifiable   intangible   assets,   based  on
management's assessment, are as follows:

                                                          Fair Value
                                                        At Acquisition
                                                        --------------
     Current assets                                      $  3,127,107
     Equipment                                              1,437,137
     Patents                                                   62,577
     In-process research and development                    9,100,000
     Customer list                                          2,700,000
     Developed technology                                  15,600,000
     Covenants not-to-compete                               1,100,000
     Patents, trademark & tradename                           600,000
     Acquired work force                                      740,000
     Current liabilities                                     (922,091)
     Long-term debt and capital leases                     (1,727,179)
     Deferred income taxes                                 (3,316,304)
                                                         ------------
     Total                                               $ 28,501,247
                                                         ============

In the first quarter of fiscal 2001, the Company recorded a non-recurring charge
of $9.1 million, due to acquired in-process research and development based on an
assessment  of the  purchased  technology  of Geltech.  This  charge  represents
technology   that  did  not  meet  the  accounting   definitions  of  "completed
technology,"  and thus should be charged to earnings  under  generally  accepted
accounting  principles.  This assessment analyzed certain diffraction  gratings,
waveguides,   lens  arrays  and  sub-assembly   technologies   that  were  under
development at the time of acquisition. These programs were in various stages of
completion  ranging from 30% to 50% of  completion,  with  estimated  completion
dates through  December 2001. This in-process  research will have no alternative
future uses if the products are not feasible.  Revenues from in-process products
are estimated  primarily  beginning in fiscal 2002, with projected  research and
development costs-to-complete of approximately $2.25 million. The estimated fair
value of these  development  programs was  determined in  accordance  with views
expressed by the staff of the Securities and Exchange Commission.

The following unaudited pro forma information presents the results of operations
of the Company as if the  acquisitions of Horizon and Geltech had taken place at
the  beginning  of  fiscal  2000 and  excludes  the  write-off  of the  acquired
in-process   research  and   development  of  $4.2  million  and  $9.1  million,
respectively.

                                      F-21

                          LIGHTPATH TECHNOLOGIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

     Pro forma                                        June 30,    June 30,
     (in 000's except per share data)                   2001        2000
                                                      --------    --------
     Revenues                                         $ 28,628    $ 11,622
     Net loss applicable to common shareholders       $(54,189)   $(27,084)
     Net loss per basic and diluted share             $  (2.82)   $  (2.33)

The unaudited pro forma information is presented for informational purposes only
and is not  necessarily  indicative of the results of  operations  that actually
would have been achieved had the acquisitions  been consummated as of that date,
nor is it intended to be a projection of future results.

6. INVESTMENT IN LIGHTCHIP, INC.

On August 21, 2000,  LightChip issued  additional  shares of voting  convertible
preferred stock for $60 million,  of which the Company funded $7.2 million,  its
pro-rata  interest.  The Company's  combined  common stock and  preferred  stock
voting interest in LightChip  decreased to approximately  16.4% after the August
2000 issuance of voting convertible preferred stock.

During fiscal 1999, the Company discontinued application of the equity method of
accounting to its investment in LightChip,  a development  stage company,  since
its  pro-rata  share of  LightChip's  losses had reduced the  investment  to its
remaining  contractually committed obligation for future funding of $570,000. In
October 1999, LightChip issued additional shares of voting convertible preferred
stock for $3  million,  of which the  Company  funded its  $570,000  contractual
obligation.

On December 8, 1999,  LightChip issued additional  shares of voting  convertible
preferred stock for $16 million,  of which the Company funded $1 million and the
Company's combined common stock and preferred stock voting interest in LightChip
decreased to  approximately  18%  following  the  investment.  Accordingly,  the
Company began  accounting for its investment in LightChip  under the cost method
in December 1999. In accordance with the SEC staff position stated in EITF Topic
D-84, the Company's pro-rata share of LightChip losses through December 8, 1999,
totaling  $514,288 were not  recognized as a result of the Company's  additional
investment.

7. CAPITAL LEASES AND NOTE PAYABLE

The Company has capital lease obligations with various institutions,  payable in
monthly  installments  which expire throughout June 30, 2002, at 11.1% to 13.4%.
These  obligations  are generally  secured by the equipment  purchased under the
agreement.  Geltech is  currently  in  negotiations  with  Corning  Incorporated
related to their  licensing  agreement and has not repaid the $77,613 balance on
the note payable to Corning  Incorporated  that was originally due in July 1999.
The Company  continues to accrue  interest on the note (prime rate plus .5%) and
any unpaid  amounts  are  included  in the capital  lease  obligations  and note
payable at June 30,  2001.  The Company  incurred  interest  expense of $77,904,
$1,180 and $2,930 in years ended June 30, 2001, 2000 and 1999, respectively.

Geltech has a line of credit with a bank for $500,000 which expires in June 2002
and $500,000 was  available at June 30, 2001.  Borrowings  are limited to 75% of
certain accounts receivable and 50% of certain inventory  balances.  Interest is
payable  monthly at the prime rate plus 1.5% (6.75% at June 30, 2001).  The line
of credit is  collateralized  by accounts  receivable,  intangible  assets,  and
inventory. Geltech is required to maintain various financial covenants.

8. CONVERTIBLE DEBENTURES

On July 28, 1999, the Company completed a private placement for $1,000,000 of 6%
Convertible  Debentures  (the  "Debentures").  The Debentures  were  immediately
convertible  into shares of Class A common stock at a conversion  price of $1.76

                                      F-22

                          LIGHTPATH TECHNOLOGIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

per share.  Debenture  holders also received Class I warrants to acquire 427,350
shares  of Class A common  stock  (fair  value  estimated  by  management  to be
$618,131).  The warrant  agreement  provided for an exercise  price of $2.20 per
share.  The warrants were  immediately  exercisable and had a five year life. On
September 24, 1999 all of the Debentures and the related warrants were converted
into 997,151 shares of Class A common stock.  Interest of $9,370 was paid to the
debenture holders.  The Company recognized an interest charge of $381,869 in the
first  quarter  of  fiscal  year  2000  for the  beneficial  conversion  feature
associated  with the  Debentures  and  $43,926  of the  remaining  discount  was
amortized from the issuance date through the conversion date.

In connection with the private  placement of the Debentures,  the Company issued
150,000 Class J warrants to the placement  agent,  with terms identical to those
issued to the Debenture holders.  During the six months ended December 31, 1999,
150,000  shares of Class A common stock were issued upon  exercise of all of the
outstanding Class J warrants.

9. REDEEMABLE CONVERTIBLE PREFERRED STOCK

Authorized  5,000,000 shares of preferred stock. From June 1997 to January 1998,
the Board of Directors  designated 950 shares as Series A, Series B and Series C
Convertible  Preferred  Stock;  $.01 par value. The Company entered into private
placement  transactions  which  provided  proceeds  on the sale of 785 shares of
Series A,  Series B and  Series C  Preferred  Stock  totaling  $7,850,000,  less
issuance  costs  of  approximately  $660,000,   resulting  in  net  proceeds  of
approximately $7,190,000 by their respective final closing dates. As of June 30,
2001, all Series A, Series B and Series C shares were converted to common stock.

In  October  1999,  the Board of  Directors  designated  500  shares as Series F
Convertible  Preferred Stock; $.01 par value. The Company entered into a private
placement  transaction  which  provided  proceeds  on the sale of 408  shares of
Series  F  Preferred   Stock  totaling   $4,080,000,   less  issuance  costs  of
approximately $180,000 resulting in net proceeds of approximately  $3,900,000 by
the final closing date, November 2, 1999.

Designations,  rights, and preferences related to the remaining preferred shares
may be  determined  by the  Board  of  Directors.  The  terms of any  series  of
preferred  stock may include  priority claims to assets and dividends and voting
or other rights.

The  Series A,  Series B,  Series C and  Series F  Convertible  Preferred  Stock
(collectively  "Convertible Preferred Stock") has a stated value and liquidation
preference of $10,000 per share, plus an 8% per annum premium (7% Series F). The
holders  of the  Convertible  Preferred  Stock  are not  entitled  to vote or to
receive dividends. Each share of Convertible Preferred Stock is convertible into
Class A common  stock at the option of the holder  based on its stated  value at
the  conversion  date divided by a conversion  price.  The  conversion  price is
defined  as the lesser of  $5.625,  $7.2375,  $6.675 and $5.00 for the Series A,
Series B, Series C and Series F Convertible  Preferred Stock,  respectively,  or
85% (80% Series F) of the average  closing  bid price of the  Company's  Class A
common stock for the five days  preceding the  conversion  date.  The beneficial
conversion  feature  in each of the Series A,  Series B and  Series C  Preferred
Stock  was  recognized  as an  imputed  dividend  prior  to June 30,  1998.  The
beneficial  conversion feature in the Series F Preferred Stock was recognized as
an  imputed  dividend  for the year  ending  June 30,  2000,  in the  amount  of
$2,094,662,  increasing net loss applicable to common shareholders from the date
of issuance to the first date that conversion can occur.

The  certificate  of  designation  of the Series F Convertible  Preferred  Stock
provides  the  Company the right to convert  any  outstanding  shares to Class A
common  stock or redeem  them for cash  three  years  from the date of  issuance
(effective November 2002). In addition,  the certificate of designation provides
that In the event of any  liquidation,  dissolution or winding up of the Company
("Liquidation  Event"),  either  voluntary or  involuntary,  the then Holders of
shares of Series F  Preferred  Stock  shall be entitled to receive an amount per
share  equal  to the sum of (i) the  Original  Series  F Issue  Price  for  each
outstanding  share of Series F Preferred Stock and (ii) an amount equal to seven
percent (7%) of the Original  Series F Issue Price,  per annum. At each Holder's
option,  a sale,  conveyance or disposition of all or  substantially  all of the

                                      F-23

                          LIGHTPATH TECHNOLOGIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

assets of the Company or the  effectuation  by the Company of a  transaction  or
series of related  transactions  in which more than fifty  percent  (50%) of the
voting  power of the Company is disposed of shall be deemed to be a  Liquidation
Event as defined above. A consolidation,  merger, acquisition, or other business
combination  of the Company with or into any other  publicly  traded  company or
companies shall not be treated as a Liquidation Event as defined above, however,
a  consolidation,  merger,  acquisition,  or other  business  combination of the
Company with or into any other non-publicly traded company or companies in which
the  surviving  entity is not a publicly  traded  company  shall be treated as a
Liquidation Event as defined above.

Based on the SEC staff guidance  addressed in EITF Topic D-98,  which  indicates
that the  possibility  that any  triggering  event that is not solely within the
control of the issuer could occur - without regard to probability - requires the
security  to  be  classified  outside  of  permanent  equity,  the  Company  has
classified the Series F preferred stock outside of stockholders' equity, for all
periods presented.

Preferred stock activity during the fiscal periods ended June 30, 2001, 2000 and
1999 were as follows:



                                                             CONVERTIBLE PREFERRED STOCK
                                               -----------------------------------------------------
     SHARES OUTSTANDING AT:                    SERIES A    SERIES B    SERIES C    SERIES F    TOTAL
                                               --------    --------    --------    --------    -----
                                                                                
     June 30, 1998                                49          104         361          --        514
       Conversions to common stock               (12)        (103)       (277)         --       (392)
     June 30, 1999                                37            1          84          --        122
       Issuance of Series F preferred stock       --           --          --         408        408
       Conversions to common stock               (37)          (1)        (84)       (255)      (377)
     June 30, 2000                                --           --          --         153        153
       Conversions to common stock                --           --          --         (26)       (26)
     June 30, 2001                                --           --          --         127        127


10. STOCKHOLDERS' EQUITY

The  Company  completed  an IPO on February  22, 1996 for the sale of  1,840,000
units at an initial public  offering price of $5.00.  Each unit consisted of one
share of Class A common stock, one Class A warrant and one Class B warrant.

Common Stock - The Company's common stock consists of the following:

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

The Company's  authorized  common stock includes,  2,000,000 shares of Class E-1
common stock, 2,000,000 shares of Class E-2 common stock and 1,500,000 shares of
Class E-3 common stock  (collectively  the "E Shares" ) with $.01 par value. The
stockholders  of E Shares are  entitled to one vote for each share held.  Each E
Share was  automatically  convertible  into one share of Class A common stock in
the event  that the  Company's  income  before  provision  of  income  taxes and
extraordinary  items or any charges  which result from the  conversion  of the E
Shares  was  equal to or in excess of a  minimum  value of  approximately  $13.5
million in fiscal 2000.  Since the conversion  provisions  expired without being
met as of June 30, 2000, the E Shares were redeemed by the Company, effective as
of September  30, 2000.  The holders of E Shares will receive  their  redemption
value of $.0001 per share upon  resolution  of  certain  stockholder  litigation
relating to E Shares. See Note 15.

                                      F-24

                          LIGHTPATH TECHNOLOGIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Warrants

On January 11, 2000, the Company called all of its outstanding  Class A warrants
for  redemption on February 10, 2000. On May 15, 2000, the Company called all of
its outstanding Class B warrants for redemption on June 13, 2000. As of June 30,
2001, substantially all of the outstanding Class A warrants and Class B warrants
were exercised for net proceeds of approximately $56 million and resulted in the
issuance  of  approximately   7.5  million  shares  of  Class  A  common  stock.
Unexercised  Class A and Class B  warrants  were  redeemed  at price of $.05 per
warrant on the  redemption  date.  Each Class A warrant  entitled  the holder to
purchase  one  share of Class A  common  stock  and one  Class B  warrant  at an
exercise price of $6.50 until February 2001.  Each Class B warrant  entitled the
holder to purchase  one share of Class A common  stock at an  exercise  price of
$8.75 until  February  2001.  The warrants were  redeemable by the Company on 30
day's  written  notice at a redemption  price of $.05 per warrant if the closing
price of the Class A common  stock for any 30  consecutive  trading  days ending
within 15 days of the notice  averages  in excess of $9.10 per share for Class A
warrants and $12.25 per share for Class B warrants.

Class C, Class E, Class G and Class K warrants  were issued in  connection  with
the private  placements of Series A, Series B, Series C and Series F Convertible
Preferred  Stock.  A total of 320,000  Class C, 317,788 Class E, 365,169 Class G
and 489,600 Class K warrants were granted to the  preferred  stockholders  which
entitle the holder to purchase  one share of Class A common stock at an exercise
price of $5.63, $7.24, $6.68 and $5.00, respectively, expiring from July 2000 to
November 2002. Each of the investors in the Series F Convertible Preferred Stock
previously invested in the Company's Series A, B and C Preferred Stock. In order
to  induce  them to invest  in the  Series F  Convertible  Preferred  Stock,  in
November  1999 the Company  reduced  the  applicable  exercise  prices by twenty
percent and extended  the  expiration  dates by three years for all  outstanding
Class C, E and G warrants issued in connection with the sale of such Series A, B
and C Preferred Stock. A total of 64,000 Class D, 47,668 Class F, 58,427 Class H
and  125,000  Class L  warrants  were  granted to the  placement  agent for each
private  placement  which  entitles  the holder to purchase one share of Class A
common stock at an exercise price of $5.63, $7.24, $6.68 and $5.00 respectively,
expiring from July 2002 until November  2004. The Company  registered the resale
of the Class A common  stock  underlying  the Series A,  Series B,  Series C and
Series F Preferred  Stock and the associated  warrants on individual  Form S-3's
which are all effective.  During fiscal 2001, 47,000 private placement  warrants
were exercised resulting in the issuance of approximately 41,633 shares of Class
A common stock. During fiscal 2000,  approximately 1.6 million private placement
warrants were exercised  resulting in the issuance of approximately  1.3 million
shares of Class A common stock.

On November 5, 1999 Robert Ripp entered  into an  agreement  to purchase  62,500
shares of LightPath  Class A Common Stock for $4.00 per share in connection with
his  election  to serve as  Chairman  of the Board of  Directors.  Mr. Ripp also
received  warrants to purchase up to 281,250  shares of Class A Common  Stock at
$6.00 per share at any time through  November 10, 2009.  The  underlying  shares
were  registered  on a Form S-3 that became  effective on January 18,  2000.  In
connection  with the  Geltech  acquisition,  the  Company  assumed a warrant  to
purchase up to 6,753  shares of Class A Common  Stock at $25.27 per share at any
time through June 2004. In connection with the IPO, the  underwriter  received a
Unit Purchase  Option to acquire up to 160,000 IPO Units at an exercise price of
$6.75 per unit. Each IPO unit consists of one Class A common share,  one Class A
warrant  to acquire a share of Class A common  stock and a Class B warrant,  and
one Class B warrant.  All of the remaining Unit Purchase  Options were exercised
during fiscal 2001 for 8,584 shares of Class A common stock.

The following  table provides  information on warrants  during fiscal 2001, 2000
and 1999.

                                      F-25

                          LIGHTPATH TECHNOLOGIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED



                                                                      Warrants
                                              ----------------------------------------------------------
                                                                Class           Class
                                                               C, E, G,        D, F, H
Outstanding                                   Class A & B       I & K           J & L           Other
-----------                                   -----------       -----           -----           -----
                                                                                  
     June 30, 1998                             4,519,000         914,068         123,345              --
                                              ----------      ----------      ----------      ----------

     June 30, 1999                             4,519,000         914,068         123,345              --
                                              ----------      ----------      ----------      ----------

       Issuance of securities                  2,950,469         916,950         275,000         281,250
       Conversions and exercises - equity     (7,469,469)     (1,392,371)       (201,345)             --
       Conversions -  debt                            --        (427,350)       (150,000)             --
                                              ----------      ----------      ----------      ----------
     June 30, 2000                                    --          11,297          47,000         281,250
                                              ----------      ----------      ----------      ----------
       Issuance of securities                                                                      6,753
       Conversions and exercises - equity             --              --         (47,000)             --
                                              ----------      ----------      ----------      ----------
     June 30, 2001                                    --          11,297              --         288,003
                                              ==========      ==========      ==========      ==========


INCOME TAXES

There was no  provision  for income  taxes during the years ended June 30, 2001,
2000 and 1999.

Significant  components of the Company's deferred tax assets and liabilities are
as follows at June 30:



     Deferred tax assets:                                   2001              2000
                                                        ------------      ------------
                                                                    
        Start-up expenses, net                          $         --      $    601,000
        Research and development expenses                    895,000           815,000
        Net operating loss and credit carryforwards       20,648,000         9,999,000
        Stock based compensation                           5,038,000           240,000
        Inventory                                            654,000                --
        Other                                                661,000                --
                                                        ------------      ------------
     Gross deferred tax assets                            27,896,000        11,655,000
     Valuation allowance for deferred tax assets         (20,968,000)       (3,337,000)
                                                        ------------      ------------
     Total deferred tax assets                             6,928,000         8,318,000
     Deferred tax liabilities-
     intangible assets and other                         (10,244,000)       (8,318,000)
                                                        ------------      ------------
     Net deferred tax liability                         $ (3,316,000)     $         --
                                                        ============      ============


The  valuation  allowance  has  increased  by  approximately  $17.6  million and
decreased by approximately $4.6 million during the years ended June 30, 2001 and
2000,  respectively.  The  change is  primarily  due to the  interaction  of the
combining  companies tax positions  related to the  non-taxable  acquisitions of
Geltech in 2001 and Horizon in 2000 which created a deferred tax  liability.  To
the extent that approximately $4.6 million of the valuation allowance related to
acquired  tax  attributes  is reduced in future  periods,  the  benefit  will be
recognized as a reduction to goodwill and  intangible  assets prior to recording
any future benefits.

The reconciliation of income tax attributable to operations computed at the U.S.
federal  statutory  tax rates  and the  actual  tax  provision  of zero  results
primarily from the change in the valuation allowance.

                                      F-26

                          LIGHTPATH TECHNOLOGIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

At June 30, 2001, the Company has consolidated net operating loss  carryforwards
for federal income tax purposes of  approximately  $52 million  (including  $8.5
million of acquired net  operating  losses)  which will expire from 2009 through
2021, if not previously utilized.  The Company also has research and development
credit  carryforwards  of  approximately  $660,000  which will  expire from 2009
through 2021, if not  previously  utilized.  A portion of the net operating loss
carryforwards   and  the  majority  of  the  research  and  development   credit
carryforwards  are subject to certain  limitations of the Internal  Revenue Code
which restrict their annual utilization in future periods.

12. EMPLOYEE AND DIRECTOR STOCK OPTION PLANS

At June 30, 2001, the Company has three stock based compensation plans which are
described   below.   The  Company   applies  APB  Opinion  No.  25  and  related
Interpretations  and SFAS 123  (non-employee  grants only) in accounting for its
plans.  No  compensation  costs have been recognized for its fixed stock options
grants to employees where the fair market value of the underlying  stock equaled
the option price at the date of grant.

In June 1992, the Company implemented the Omnibus Incentive Plan (the "Incentive
Plan"),  and the Directors Stock Option Plan (the "Directors Plan"). The Company
has reserved  3,275,000  shares of common  stock for awards under the  Incentive
Plan. The number of shares  reserved for award by the Directors Plan at June 30,
2001 is 450,000 shares of common stock.

The Incentive  Plan  authorizes the Company to grant various awards using common
stock,  and cash to officers and key  employees of the Company.  Prior to fiscal
2001,  only  incentive  stock  options  had been  issued  under the plan with an
exercise  price equal to the fair market  value of the  underlying  stock on the
date the options are granted and an average vesting period of four years. During
fiscal 2001, following the Geltech acquisition, the Company issued 130,000 stock
options with  exercise  prices below fair market value on the date of grant.  In
addition,  the Company issued 67,912 shares of common stock for time accelerated
restricted stock awards to management  which vest upon continued  employment for
five  years,  or three  years  if  certain  performance  criteria  are met.  The
intrinsic  value of the  restricted  stock awards is being  recognized  over the
vesting  period.  The Company  recognized a stock-based  compensation  charge of
approximately  $330,000 in fiscal 2001,  related to the restricted  stock awards
and  the  in-the-money  options.  The  term of the  options  granted  under  the
Incentive Plan cannot exceed ten years and grants to  stockholders  who hold 10%
or more of the Company  stock  cannot  exceed five years from the date of grant.
There are  approximately  440,000 options under the Incentive Plan available for
grant at June 30, 2001.

The Directors Plan  authorizes  the Company to grant awards to certain  eligible
non-employee  directors of the Company using common  stock.  Under the plan each
non-employee  director receives options to purchase shares of the Company common
stock.  Prior to fiscal 2001,  the  director's  option vested ratably over their
three year term.  In fiscal  2001,  the plan  adopted an annual grant which vest
monthly over the year.  Each option  granted  under the  Directors  Plan will be
granted at a price equal to the fair market value of the underlying stock on the
date the options are granted with a term of ten years.  There are  approximately
128,000 options under the Director Plan available for grant at June 30, 2001.

In addition,  the Company has issued nonqualified  options to certain directors,
officers  and  consultants  to the  Company  not  covered  by the  Incentive  or
Directors  Plans.  In  November  1999,  the  Company  entered  into a  Directors
Compensation Agreement,  pursuant to which the Company's Chairman could elect to
receive a restricted  stock grant if the closing price of the Company's  Class A
common stock exceeded  certain targets during the term of the agreement.  During
the quarter  ended March 31, 2000,  the target  prices  defined in the agreement
were reached resulting in the recording of a non-cash  stock-based  compensation
charge  which was subject to  adjustment  for changes in the market value of the
Class A common stock. Accordingly through March 31, 2000, the Company recognized
a non-cash stock-based  compensation charge of approximately $710,000, under the
terms of the  original  agreement.  Subsequent  to March 31,  2000,  the Company
modified the terms of the  Directors  Compensation  Agreement  whereby the share
substitution  clause was deleted.  The Chairman received two nonqualified  stock
option  grants to acquire 1 million  and  500,000  shares each of Class A Common
Stock with a ten-year term which vest on December 1, 2001.  The exercise  prices
are $6 and $24 per  share,  respectively.  Based  on the  terms  of the  options

                                      F-27

                          LIGHTPATH TECHNOLOGIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

granted (1 million granted with an exercise  prices less than market),  non-cash
charges of  approximately  $18 million will be amortized over the vesting period
of the options. In addition,  219,000 and 150,000 options were granted in fiscal
2001 and 2000,  respectively,  to  officers  at a price equal to the fair market
value of the  underlying  stock on the date of grant,  with a term of ten years.
The board of directors  accelerated  the vesting of certain options issued which
resulted in  recording  of  stock-based  compensation  charges of  approximately
$35,000 and $400,000 during the year ended June 30, 2001 and 2000, respectively.
In the aggregate,  approximately $11.2 and $3.1 million of non-cash charges were
recorded for the years ended June 30, 2001 and 2002, respectively.

A summary of the status of the stock option plans as of June 30, 2001,  2000 and
1999 and changes during the years then ended is presented below:



                                                                                    Weighted
                                                                                     Average
Shares under option:             Incentive Plan   Directors Plan   Nonqualified   Exercise Price
--------------------             --------------   --------------   ------------   --------------
                                                                        
Outstanding at June 30, 1998          864,974           71,500          47,401      $     7.61
Granted at market value               266,600          167,880              --      $     3.52
Exercised                                  --               --          (7,264)     $     5.50
Lapsed or canceled                   (132,700)         (33,331)           (209)     $     6.49
                                   ----------       ----------      ----------      ----------
Outstanding at June 30, 1999          998,874          206,049          39,928      $     6.29
Granted at market value               718,321           60,227         650,000      $    16.47
Granted below market value                 --               --       1,000,000      $     6.00
Exercised                            (419,257)         (36,000)             --      $     4.77
Lapsed or canceled                    (18,181)              --            (435)     $     5.18
                                   ----------       ----------      ----------      ----------
Outstanding at June 30, 2000        1,279,757          230,276       1,689,493      $    10.82
Granted at market value             1,032,781           80,000         219,000      $    17.00
Granted below market value            130,000               --              --      $    33.43
Exercised                            (254,656)         (46,510)         (7,645)     $     4.96
Lapsed or canceled                    (68,400)         (24,642)        (10,000)     $    14.99
                                   ----------       ----------      ----------      ----------
Outstanding at June 30, 2001        2,119,482          239,124       1,890,848      $    13.86
                                   ==========       ==========      ==========      ==========

Options exercisable:
June 30, 2001                         565,270          215,188          66,848      $    11.31
                                   ==========       ==========      ==========      ==========
June 30, 2000                         487,591          180,728          39,493      $     6.67
                                   ==========       ==========      ==========      ==========
June 30, 1999                         502,891          115,464          39,328      $     7.16
                                   ==========       ==========      ==========      ==========


The following table summarizes information about fixed stock options outstanding
at June 30, 2001:



                                  Options Outstanding                         Options Exercisable
                   -------------------------------------------------     ------------------------------
                      Number         Weighted-Avg.                          Number
    Range of       outstanding at      Remaining       Weighted-Avg.    Exercisable at    Weighted-Avg.
Exercise Prices    June 30, 2001   Contractual Life   Exercise Price     June 30, 2001   Exercise Price
---------------    -------------   ----------------   --------------     -------------   --------------
                                                                              
   $  1 to 6           415,998         7.4 Years          $ 3.91              225,198        $ 4.14
   $ 6 to 12         2,049,307            8.1             $ 7.92              366,671        $ 7.60
   $13 to 19           574,500            9.2             $17.18              128,500        $17.53
   $19 to 29         1,040,681            9.0             $24.22               92,219        $25.62
   $30 to 52           168,968            8.6             $35.15               34,718        $35.83
                    ----------                                             ----------
   $ 1 to 52         4,249,454            8.4             $13.86              847,306        $11.31
                    ==========                                             ==========


Had  compensation  costs for the Company's stock based  compensation  plans been
determined  using the fair value method of FASB Statement No. 123, the Company's
net loss would have been increased to the pro forma amounts indicated below:

                                      F-28

                          LIGHTPATH TECHNOLOGIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED



                                                              2001             2000             1999
                                                          -------------    -------------    -------------
                                                                                   
Net loss applicable to common shareholders, as reported   $ (60,852,910)   $ (17,842,010)   $  (3,358,669)
                                                          =============    =============    =============

Net loss applicable to common shareholders, pro forma     $ (62,327,788)   $ (18,719,290)   $  (4,375,669)
                                                          =============    =============    =============

Basic and diluted net loss per share, as reported         $       (3.19)   $       (1.86)   $       (0.79)
                                                          =============    =============    =============

Basic and diluted net loss per share, pro forma           $       (3.27)   $       (1.95)   $       (1.02)
                                                          =============    =============    =============


The  weighted-average  fair value of options granted during the years ended June
30,  2001,  2000 and 1999 was $13.63,  $9.33 and $2.27,  respectively.  The fair
value of each incentive option grant is estimated on the date of grant using the
Black-Scholes   option-pricing   model  with  the   following   weighted-average
assumptions used for grants in fiscal 2001, 2000 and 1999: dividend yield of 0%;
expected  volatility of 125% (100% for fiscal 1999);  risk free interest rate of
7%; and expected lives of 3 years.

13. NET LOSS PER SHARE

Basic net loss per common  share is  computed  based upon the  weighted  average
number  of  common  shares  outstanding   during  each  period  presented.   The
computation  of Diluted net loss per common share does not differ from the basic
computation because potentially issuable securities would be anti-dilutive.  The
following outstanding securities were not included in the computation of diluted
earnings per share at June 30,  2001:  4,249,454  Class A common stock  options,
private placement and other warrants to acquire 299,300 shares of Class A common
stock and 307,340  Class A shares  issuable upon the  conversion of  convertible
preferred stock (minimum of 283,520 shares based on the fixed  conversion  price
at closing).

A premium  ranging from 7 to 8 percent earned by the preferred  shareholders  of
$89,549,  $137,281,  and $224,651  increased  the net loss  applicable to common
shareholders for the years ended June 30, 2001, 2000, and 1999, respectively. In
addition, net loss applicable to common shareholders was increased by an imputed
dividend in the amount of  $2,094,662  during the year ended June 30, 2000.  The
imputed dividend resulted from a beneficial  conversion  feature associated with
the Series F Preferred Stock issued on November 2, 1999.

14. PENSION PLAN

The Company implemented a defined  contribution plan on January 1, 1997 covering
substantially all employees.  Annual  discretionary  contributions,  if any, are
made by the  Company  to match a  portion  of the  funds  employees  contribute.
Company matching  contributions  during the fiscal year ended June 30, 2001 were
approximately  $65,000. There were no company matching contributions made during
the fiscal years ended June 30, 2000 and 1999.

15. COMMITMENTS AND CONTINGENCIES

The Company has operating  leases for office equipment and office space. At June
30, 2001, the Company has entered into lease  agreements for  manufacturing  and
office  facilities in Albuquerque,  New Mexico,  Walnut and Auburn,  California,
Warren, New Jersey and Orlando,  Florida.  These leases, which are generally for
five year terms with renewal options, expire beginning in March 2002 through May
2005. Equipment rental agreements are generally for three year terms.  Equipment
and office rent expense  recognized for the years ended June 30, 2001,  2000 and
1999  was  approximately   $950,000,   $285,000,  and  $143,000,   respectively.
Commitments under noncancelable  operating leases are approximately $1.5 million
for 2002;  $1.3 million for 2003; $1 million for 2004; $0.8 million for 2005 and
$0.6 million for 2006.

The  Company  has  employment  agreements,  which  expire in March 2002  through
September  2003,  with officers and key employees which provide for an aggregate
payment of salaries of  approximately  $1.2  million  annually.  The Company has
outstanding  purchase  commitments  for  approximately  $1.3 million at June 30,

                                      F-29

                          LIGHTPATH TECHNOLOGIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

2001, the majority of these  commitments  are for raw materials,  lens finishing
and advertising while the balance is for manufacturing, research and development
equipment.

On May 2, 2000,  the Company  commenced a class  action  lawsuit in the Chancery
Court of Delaware,  New Castle County.  The action seeks a declaratory  judgment
with respect to the Company's  right to redeem the Class E Common Stock on March
31, 2001 for $.0001 per share,  the right of the holders of Class E Common Stock
to  vote  at the  Annual  Meeting  to be  held  on  October  6,  2000,  and  for
certification  of the  holders of Class E Common  Stock as a class and the named
defendants as its  representatives.  The named  defendants are Donald E. Lawson,
President,  Chief Executive  Officer and a Director of the Company,  who owns an
aggregate of 25,000 shares of Class E Common Stock, Louis G. Leeburg, a Director
of the Company,  who owns an aggregate of 7,272 shares of Class E Common  Stock,
and William Leeburg, who owns or controls an aggregate of 21,816 shares of Class
E Common Stock.  The Company entered into a proposed  settlement of this lawsuit
whereby the holders of Class E Common  Stock could elect to receive  either $.40
for each  share of Class E Common  Stock or a two year  option to  purchase  one
Class A Common Stock for each 100 shares of Class E Common Stock they hold.  The
option  would be priced at the fair market  value of the Class A Common Stock on
the  settlement  date.  The Company  estimates that if all of the Class E Common
Stock were exchanged for options to purchase Class A Common Stock, approximately
40,221  shares of Class A Common  Stock  would be issued.  If all of the Class E
Common  Stock were  exchanged  for cash,  approximately  $1.6  million  would be
expended.  On January 8, 2001, the Delaware Chancery Court held a hearing on the
proposed settlement.  The settlement proposal was made to include all holders of
Class E Common Stock holders.  On February 2, 2001, the Delaware  Chancery Court
issued a letter in which it indicated  that holders of Class E Common Stock must
be provided an opportunity to request  exclusion from the settlement  class.  In
July 2001,  the Chancery Court agreed to postpone  further action  regarding the
proposed  settlement  pending the  currently  scheduled  mediation  of the Texas
action.  Due to the uncertainty  regarding the proposed  settlement  offer,  the
different  exchange  methods and the coverage of insurance for such claims,  the
Company has not been able to  determine  that it is probable  that the  proposed
settlement  will occur nor the likely  amounts  to be accrued  for any  possible
settlement costs.

On or about June 9,  2000,  a small  group of  holders  of Class E Common  Stock
commenced an action in a state court in Texas (the "Texas Action").  In essence,
the  Texas  Action  makes  various   allegations   regarding  the  circumstances
surrounding  the  issuance of the Class E Common Stock and seeks  damages  based
upon those  allegations.  The Company  believes the  allegations  underlying the
Texas Action have no basis in fact and that this lawsuit is without merit. As of
June 30, 2001, the Company has expensed legal fees associated with this claim of
approximately  $650,000 and has filed an insurance  claim for the amount related
to the lawsuit, in excess of deductible amounts.  One of the insurance companies
responsible for the claim has filed for  reorganization.  The company is working
with  regulatory  agencies  to  resolve  and  collect  the monies due under this
policy.

On November 15, 2000, the Company filed a complaint against Carmichael & Company
LLC, in the State of New Mexico, for violation of its agreement with the Company
as  financial  advisors  and seeking to  terminate  the  agreement.  On or about
November  15,  2000,  Carmichael  & Company  LLC filed a  complaint  against the
Company  in the  State  of  New  York,  for  breach  of  contract  and  claiming
approximately  $5 million in damages.  On April 5, 2001,  the parties met in New
Mexico for mediation  and was settled by payment of $1.3 million to  Carmichael.
The Company  incurred  approximately  $300,000 in legal fees in connection  with
this matter during fiscal 2001. The financial advisor contract with Carmichael &
Company LLC was terminated and both parties  released the other from any further
claims.

The Company is involved in various legal actions arising in the normal course of
business.  After taking into  consideration  legal counsel's  evaluation of such
actions,  management  is of the  opinion  that  their  outcome  will  not have a
significant effect on the Company's financial position or results of operations.

                                      F-30

                          LIGHTPATH TECHNOLOGIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

16. RELATED PARTY TRANSACTIONS

During the fiscal years ended June 30, 2001, 2000, and 1999,  current  directors
(or their firms) of the Company,  provided legal and consulting  services to the
Company  for which  they  billed  the  Company  an  aggregate  of  approximately
$405,000, $425,000, and $127,000, respectively.

Sales  to  Lucent  Technologies,  Inc.,  which  owned  approximately  3% of  the
outstanding  Class A common  stock of the  Company,  for the year ended June 30,
2000 were approximately $930,000.

17. SEGMENT INFORMATION

Optoelectronics  and Fiber  Telecommunications  ("Telecom"),  represents  81% of
total revenues of the Company,  and Traditional Optics,  represents 19% of total
revenues,  are the Company's reportable segments under SFAS No.  131,"Disclosure
about Segments of an Enterprise and Related Information" (SFAS 131). The telecom
segment is based primarily on the development and sale of fiber  collimators and
fiber-optic switches, free space isolators, precision molded aspheric optics and
other related passive component products for the optoelectronics  segment of the
telecommunications  industry.  The traditional optics segment is based primarily
upon the sale of lenses to the data storage and medical equipment market and the
development  and sale of GRADIUM  glass in the form of lenses and blanks for the
general  optics  markets.  During  fiscal 2001  approximately  $13.4  million in
telecom  sales were derived from one  isolator and one  collimator  customer and
approximately  $.6  million of  traditional  lens sales  were  derived  from one
medical equipment  customer.  During fiscal 2000  approximately  $1.3 million in
sales  were  derived  from  one  isolator  and  one   collimator   customer  and
approximately  $227,000 of lens sales were derived from two YAG laser customers.
During  fiscal 1999  approximately  $78,000 in sales were derived from one wafer
chip inspection  customer and  approximately  $72,000 of lens sales were derived
from one YAG laser customer.

                                      F-31

                          LIGHTPATH TECHNOLOGIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Summarized  financial  information  concerning the Company's reportable segments
for the respective years ended June 30, is shown in the following table.

                                       Traditional    Corporate
Segment Information        Telecom       Optics      And other(1)     Total
-------------------      -----------   ----------    ----------    ------------

Revenues(2)

                 2001    $21,076,466    5,066,690            --    $ 26,143,156
                 2000    $ 1,497,911      768,353            --    $  2,266,264
                 1999    $    57,029    1,029,097            --    $  1,086,126

Segment operating loss(3)

                 2001    $(7,201,837)      73,162   (55,997,603)   $(63,126,278)
                 2000    $(7,540,317)    (365,316)   (8,292,289)   $(16,197,922)
                 1999    $(1,172,653)    (211,218)   (1,472,975)   $ (2,856,846)

Depreciation and
  amortization

                 2001    $13,450,705    2,617,060       194,024    $ 16,261,789
                 2000    $ 2,468,543      558,205        63,574    $  3,090,322
                 1999    $    72,337      224,445        78,576    $    375,358

Capital expenditures
  for segment assets

                 2001    $ 5,500,656    1,146,402       583,636    $  7,230,694
                 2000    $ 2,768,108    2,255,552       124,778    $  5,148,438
                 1999    $   389,709       47,514            --    $    437,223

Total assets

                 2001    $40,307,590   12,899,691    31,083,127    $ 84,290,408
                 2000    $38,225,268    3,325,638    59,161,849    $100,712,755

                                                   Other Foreign
                           United                    Countries
Geographic Information     States        Canada      (over 15)        Total
----------------------   -----------   ----------    ----------    ------------
Revenues(4)      2001    $22,236,329    1,678,633     2,228,194    $ 26,143,156
                 2000    $ 1,749,974           --       516,290    $  2,266,264
                 1999    $   678,746           --       407,380    $  1,086,126

----------
(1)  Corporate  functions include certain members of executive  management,  the
     corporate accounting and finance function and other typical  administrative
     functions  which are not allocated to segments.  Corporate  assets  include
     cash and cash equivalents,  other receivables,  advances,  prepaid expenses
     and  unallocated  property  and  equipment.  The  Company's  investment  in
     LightChip is included in the assets of the Telecom segment.
(2)  There were no material  inter-segment sales during the years ended June 30,
     2001, 2000 or 1999.
(3)  In  addition  to  unallocated  corporate  functions,  management  does  not
     allocate interest expense,  interest income, other non-operating income and
     expense amounts in the  determination  of the operating  performance of the
     reportable segments
(4)  Revenues attributed to foreign countries are export sales, and are based on
     the destination of the shipment.  The Company has no long lived assets in a
     foreign country.

                                      F-32

No  dealer,  sales  person  or  other  person  has been  authorized  to give any
information  or to make any  representation  other than those  contained in this
prospectus and, if given or made, such information or representation must not be
relied upon as having been  authorized by the company or any  underwriter.  This
prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any of the securities  offered hereby 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 in such  jurisdiction.  Neither the
delivery  of this  prospectus  nor any sale  made  hereunder  shall,  under  any
circumstances,  create any implication that the information herein is correct as
of any time  subsequent  to the date  hereof or that there has been no change in
the affairs of the company since such date.

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
Available Information.......................................................   2
Prospectus Summary..........................................................   4
The Company.................................................................   4
The Offering................................................................   5
Risk Factors................................................................   9
Use of Proceeds.............................................................  26
Determination of Offering Price.............................................  26
Plan of Distribution........................................................  27
Description of Options......................................................  27
Interest of Named Experts and Counsel.......................................  33
Information with respect to the Registrant:
- Description of the Business...............................................  34
- Price Range of Common Stock...............................................  57
- Selected Historical Consolidated Financial Data...........................  57
- Supplementary Quarterly Consolidated Financial Data (Unaudited)...........  59
- Management's Discussion and Analysis of Financial Condition
  and Results of Operations.................................................  59
Legal Matters...............................................................  76
Experts.....................................................................  76
Index to Financial Statements............................................... F-1




                                 40,250 OPTIONS
                   TO PURCHASE SHARES OF CLASS A COMMON STOCK


                          LIGHTPATH TECHNOLOGIES, INC.



                            -------------------------
                                   PROSPECTUS
                                 APRIL __, 2002
                            -------------------------


                               PART II TO FORM S-2


                   INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

     It is estimated that the following  expenses will be incurred in connection
with the proposed  offering  hereunder.  All of such  expenses  will be borne by
LightPath:

                                                                       Amount
                                                                       ------
SEC Registration Fee...............................................  $    128.80
Legal fees and expenses............................................  $ 40,000.00
Accounting fees and expenses.......................................  $ 25,000.00
Printing expenses (1)..............................................  $  2,000.00
                                                                     -----------
Total..............................................................  $ 67,128.80
                                                                     ===========
(1) Estimated

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

     Article TENTH of  LightPath's  Certificate  of  Incorporation,  as amended,
provides  that,  with certain  exceptions,  no director of the Company will face
personal  liability  to  the  corporation  or its  shareholders  for  breach  of
fiduciary duty. Exceptions to this indemnification provision include breaches of
a director's duty of loyalty, acts or omissions involving bad faith, intentional
misconduct or knowing  violations  of the law,  transactions  yielding  improper
personal  benefits to any  director,  and Section  174 of the  Delaware  General
Corporation Law.

     Article VII of the Company's Bylaws provides,  in summary, that the Company
is required to indemnify to the fullest extent  permitted by applicable law, any
person made or threatened to be made a party or involved in a lawsuit, action or
proceeding by reason that such person is or was an officer,  director,  employee
or agent of the  Company.  Indemnification  is against  all  liability  and loss
suffered  and  expenses  reasonably  incurred.  Unless  required by law, no such
indemnification  is required by the Company of any person  initiating such suit,
action or  proceeding  without  board  authorization.  Expenses  are  payable in
advance if the indemnified  party agrees to repay the amount if he is ultimately
found to not be entitled to indemnification.

                                      II-1

ITEM 16. EXHIBITS.

Exhibit
Number                    Description
------                    -----------

4.1      Form of Option                                                   *
4.2      Certificate of Designations of Series F Preferred Stock          1
5        Opinion of Squire, Sanders & Dempsey L.L.P. re legality
         of securities to be offered                                      2
8        Opinion of Squire, Sanders & Dempsey L.L.P. re tax matters       *


10.4     Directors Compensation Agreement with Amendment for
         Robert Ripp                                                      3
10.6     Omnibus Incentive Plan                                           4
10.7     Directors Stock Option Plan                                      5
10.8     Amended Omnibus Incentive Plan                                   3
10.9     Merger Agreement dated April 14, 2000 between Registrant
         and Horizon Photonics, Inc.                                      6
10.10    Merger Agreement dated August, 2000 between Registrant
         and Geltech, Inc.                                                7
23.1     Consent of KPMG LLP                                              *
23.2     Consent of Ernst & Young LLP                                     *
23.3     Consent of Squire, Sanders & Dempsey L.L.P. (included in
         its opinion filed as exhibit 5)                              See Exh. 5
23.4     Consent of Squire, Sanders & Dempsey L.L.P. re tax matters
         (included in its opinion filed as exhibit 8)                 See Exh. 8
24       Powers of Attorney (included on the signature page              See
         on page II-4)                                                Page II-4


99.1     Stipulation of Settlement                                        8
99.2     Supplemental Notice of Class Action, Class Action
         Determination and Approval of Class Action Settlement            8
99.3     Order and Final Judgment                                         8
99.4     Notice of Election                                               8

----------
1.   This exhibit was filed as an exhibit to our Registration  Statement on Form
     S-3 (File No: 333-94303) dated January 10, 2000 and is incorporated  herein
     by reference thereto.
2.   This exhibit was filed as an exhibit to Amendment No. 2 to our Registration
     Statement on Form S-2 (File No:  333-73832)  dated February 28, 2002 and is
     incorporated herein by reference thereto.
3.   This exhibit was filed as an exhibit to our Registration  Statement on Form
     S-8 (File No: 333-50976) dated November 30, 2000 and is incorporated herein
     by reference thereto.
4.   This exhibit was filed as an exhibit to our Registration  Statement on Form
     S-8 (File No: 333-23515 and 333-23511,  respectively)  dated March 18, 1997
     and is incorporated herein by reference thereto.
5.   This exhibit was filed as an exhibit to our Registration  Statement on Form
     S-8 (File No: 333-50974) dated November 30, 2000 and is incorporated herein
     by reference thereto.
6.   This exhibit was filed as an exhibit to our Registration  Statement on Form
     S-3 (File No: 333-37622) dated June 12, 2000 and is incorporated  herein by
     reference thereto.
7.   This exhibit was filed as an exhibit to our Registration  Statement on Form
     S-3 (File No: 333-47992) dated October 20, 2000 and is incorporated  herein
     by reference thereto.
8.   This exhibit was filed as an exhibit to Amendment No. 3 to our Registration
     Statement  on Form S-2 (File No:  333-73832)  dated  March 25,  2002 and is
     incorporated herein by reference thereto.
*    Filed herewith.


                                      II-2

ITEM 17. UNDERTAKINGS

     A.   Insofar  as   indemnification   for  liabilities   arising  under  the
Securities Act may be permitted to directors,  officers and controlling  persons
of LightPath pursuant to the foregoing  provisions,  or otherwise,  we have been
informed  that in the opinion of the  Securities  and Exchange  Commission  such
indemnification  is against public policy as expressed in the Securities Act and
is,  therefore,  unenforceable.  In the event  that a claim for  indemnification
against such  liabilities  (other than the payment by the registrant of expenses
incurred or paid by a director,  officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director,  officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been  settled by  controlling  precedent,  submit to a court of  appropriate
jurisdiction the question whether such  indemnification  by it is against public
policy as  expressed  in the  Securities  Act and will be  governed by the final
adjudication of such issue.

     B.   The undersigned Registrant hereby undertakes to:

          (1) File, during any period in which it offers or sells securities,  a
post-effective amendment to this registration statement to:

               (i) include any  prospectus  required by section  10(a)(3) of the
Securities Act;

               (ii)  reflect  in the  prospectus  any  facts  or  events  which,
individually or together,  represent a fundamental  change in the information in
the  registration  statement.  Notwithstanding  the  foregoing,  any increase or
decrease  in  volume  of  securities  offered  (if the  total  dollar  value  of
securities offered would not exceed that which was registered) and any deviation
from  the  low or  high  end of the  estimated  maximum  offering  range  may be
reflected in the form of prospectus  filed with the Commission  pursuant to Rule
424(b) if, in the  aggregate,  the changes in the volume and price  represent no
more than a 20% change in the maximum aggregate  offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement;


               (iii) include any additional or changed  material  information on
the plan of distribution.




          (2) For  determining  liability  under the Securities  Act, treat each
such post-effective  amendment as a new registration statement of the securities
offered,  and the offering of the securities at that time to be the initial bona
fide offering.

          (3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.

                                      II-3


                                   SIGNATURES

     Pursuant to the  requirements of the Securities Act of 1933, the Registrant
certifies  that it has  reasonable  grounds to believe  that it meets all of the
requirements  for  filing  on Form S-2 and has  duly  caused  this  Registration
Statement  to be  signed  on its  behalf  by the  undersigned,  there  unto duly
authorized, in the City of Albuquerque, State of New Mexico, on April 12, 2002.


                                        LIGHTPATH TECHNOLOGIES, INC.,
                                        a Delaware corporation

                                        /s/ Donna Bogue
                                        ----------------------------------------
                                        By: Donna Bogue, Chief Financial Officer
                                            and Treasurer

SPECIAL POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS,  that each of the  undersigned,  constitutes and
appoints  each  of  Robert  Ripp  and  Donna  R.  Bogue,  his  true  and  lawful
attorney-in-fact  and agent with full power of substitution and  resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all pre and post-effective amendments (including all subsequent registration
statements  and  amendments  thereto filed pursuant to Rule 462(b)) to this Form
S-2 Registration Statement,  and to file the same with all exhibits thereto, and
all  documents  in  connection  therewith,  with  the  Securities  and  Exchange
Commission,  granting such attorney-in-fact and agents, full power and authority
to do and perform  each and every act and thing  requisite  and  necessary to be
done in person,  hereby ratifying and confirming all that such  attorney-in-fact
and agents may lawfully do or cause to be done by virtue hereof. Pursuant to the
requirements of the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the dates stated.




         Signature                              Title                                 Date
         ---------                              -----                                 ----


                                                                           
/s/ Robert Ripp                    Chairman of the Board and Interim             April 12, 2002
-----------------------------      CEO (Interim Principal Executive Officer)
Robert Ripp

/s/ Donna R. Bogue                 CFO and Treasurer (Principal Financial and    April 12, 2002
-----------------------------      Accounting Officer)
Donna R. Bogue

*
-----------------------------
James L. Adler, Jr.                Director                                      April 12, 2002

*
-----------------------------
Louis Leeburg                      Director                                      April 12, 2002

*
-----------------------------
Robert Bruggeworth                 Director                                      April 12, 2002

*
-----------------------------
Dr. Steve Brueck                   Director                                      April 12, 2002

*
-----------------------------
Gary Silverman                     Director                                      April 12, 2002

*By /s/ Robert Ripp
-----------------------------
Robert Ripp, attorney-in-fact                                                    April 12, 2002



                                      II-4