LightPath Technologies completes $2.9 million financing

AUGUST 4, 2008 -- LightPath says it will use the funds as working capital. However, it didn't raise enough to fund a proposed joint venture in China.

AUGUST 4, 2008 -- LightPath Technologies Inc. (search for LightPath), a manufacturer of precision optical products, announced that it has raised gross proceeds of approximately $2,929,000 through the sale of 8% convertible debentures to a group of institutional and private investors. LightPath says it will use the funds as working capital.

Jim Gaynor, president and CEO, said, "We are pleased that in this difficult financial environment we were able to complete our offering. The proceeds will help us continue to fuel our marketing efforts and increase our growth in China. We will be announcing our interim financial results for the fourth quarter in August and final results are planned for the second half of September. We anticipate that those results will reflect continued progress on our expanding revenue base and sustained reductions in our fixed overhead structure as well as our variable costs."

Bob Ripp, chairman, commented, "As a sign of confidence five directors of the board as well as two of LightPath's senior executives have invested in this financing. This represented 12% of the total amount raised. LightPath has the cost structure in place to pursue its new business model, and with the continued cooperation of CDGM as well as the growth in relationships with other Chinese suppliers and customers, LightPath believes it will continue to improve its market share position and operational financial performance. We also remain confident that in the future we will have the opportunity to further leverage our technology and manufacturing expertise in China with a Chinese partner."

Since the company was unable to raise the entire required $5 million for its proposed joint venture with CDGM, China's largest glass manufacturer, LightPath says it will use some of the current proceeds to make "a modest investment" in the imaging consumer market for cell phones and digital cameras. The investment will be for an optical design team, sales staff, and manufacturing equipment. The personnel and equipment will be deployed in China.

Ripp concluded, "While we were not able to secure all of the $5 million financing necessary to fund our investment in the proposed joint venture with CDGM, I thank our partner CDGM for their patience and flexibility and for continuing discussions about working towards penetrating the consumer imaging market together."

The debentures are immediately convertible into 1,901,948 shares of common stock. Investors also received warrants to purchase up to 950,974 shares of the company's common stock. The warrants are exercisable for a period of five years beginning on August 1, 2008 with 65% of the warrants priced at $1.68 per share and 35% of the warrants priced at $1.89 per share. If all of the warrants were exercised, LightPath would receive additional proceeds in the amount of $1,645,184. Interest on the debentures is payable quarterly commencing on October 1, 2008. The interest due on October 1, 2008 was prepaid by the company on August 1, 2008 by issuing shares of common stock in payment of such interest. The remaining interest payments may be paid in cash or in LightPath common stock.

Investors who participated in LightPath's July 2007 common stock private placement equity were offered an incentive to invest in the current offering. Four investors from the 2007 offering participated in the current offering and as a result LightPath reduced the exercise price of the warrants they received in the 2007 offering from $5.50 per share to $2.61 per share. Additionally, such investors were issued 73,228 incentive shares.

None of the debentures, the warrants, the shares into which the debentures are convertible or the shares issuable upon exercise of the warrants or the incentive shares have been registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration. The company has agreed to cause the shares to be issued upon conversion of the debenture and the shares issuable upon exercise of the warrants and the incentive shares to be registered for resale with the Securities and Exchange Commission. This release does not constitute an offer to sell securities.

First Montauk Securities Corp. acted as exclusive placement agent for the offering.

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