16. Convertible Debentures

On August 1, 2008, we executed a Securities Purchase Agreement with respect to the private placement of the Debentures. Among the investors were Steven Brueck, J. James Gaynor, Louis Leeburg, Robert Ripp, Gary Silverman and James Magos, all of whom were directors or officers of LightPath as of August 1, 2008. Mr. Magos resigned effective September 2, 2008.

Interest accruing on the Debentures was paid by issuing Class A common stock. Interest due for August 1, 2008 to August 1, 2011 was paid by issuing 27,893 shares of Class A common stock in October 2008 and 665,692 shares in December 2008. Interest accruing from August 1, 2011 to August 1, 2013, the maturity date, was paid by issuing 41,832 shares in August 2011 and 76,078 shares in August 2012.

Investors also received warrants to purchase up to 950,974 shares of our common stock (the "Warrants"). The Warrants were exercisable for a period of five years beginning on August 1, 2008 with 65% of the Warrants, exercisable for 618,133 shares, priced at $1.68 per share and the remaining 35% of the Warrants, exercisable for 332,841 shares, priced at $1.89 per share. We received gross proceeds of $970,315 from the exercise of these warrants.

We paid a commission to the exclusive placement agent for the offering, First Montauk Securities Corp. ("First Montauk"). We also issued to First Montauk and its designees warrants to purchase an aggregate of 190,195 shares of our Class A common stock at an exercise price equal to $1.68 per share. The warrants were exercisable for a period of five years beginning on August 1, 2008.

On December 31, 2008, the Debentures were amended to allow debenture holders to convert 25% of their Debentures into shares of Class A common stock. As a result, $732,250 of the Debentures were converted into 475,496 shares of Class A common stock. As an inducement to partially convert the Debentures, we issued additional warrants.

On March 25, 2013, the Company and the remaining Debenture holders holding approximately 93.10% of the outstanding principal amount of the Debentures executed the Conversion Agreement in connection with the early conversion of the Debentures. The Debenture holders party to the Conversion Agreement were Steven Brueck, J. James Gaynor, Louis Leeburg, Robert Ripp and Gary Silverman, all of whom are directors or officers of the Company, and BBE, a greater than 5% beneficial stockholder of the Company. In consideration of converting the Debentures prior to the maturity date, the Company issued to each Debenture holder additional shares of Class A common stock to compensate the converting Debenture holders for the difference between the conversion price per share, or $1.54, and the closing bid price per share of common stock as reported on the Nasdaq Capital Market on March 22, 2013, or $0.79 (the "Conversion Incentive Shares"). In connection with the conversion of the Debentures, the Company issued a total of 1,148,738 shares of common stock, 559,448 of which we issued as Conversion Incentive Shares.

In order to ensure BBE did not exceed its 19.9% beneficial ownership limitation, set forth in the Conversion Agreement, BBE partially converted its Debenture and the Company prepaid the outstanding principal amount due under BBE's Debenture following the partial conversion.

The remaining Debenture holder not party to the Conversion Agreement consented to the Company prepaying the outstanding principal amount due under its Debenture. The Company paid this amount, which totaled $75,000, on March 28, 2013.

The summary of the Debenture conversion activity by fiscal year is as follows:

	Outstanding Principal				Repayment of Outstanding
Fiscal Year	Amount Converted		Shares Issued		Principal Amounts
2009	$	732,250		475,487	$	0
2010	$	262,500		170,455	$	0
2011	$	832,500		540,592	$	0
2012	$	14,250		0	$	14,250
2013	$	1,087,500		589,590	$	180,000

The issuance of the Conversion Incentive Shares also resulted in an adjustment to the exercise price of the warrants issued to certain investors on June 11, 2012 in connection with the Company's private placement. The exercise price of the warrants was adjusted from $1.32 to $1.26 per share. Since the Conversion Incentive Shares were issued to related party debt holders, the value of such shares was considered a capital contribution and was included as an offset to additional paid-in capital with no effect on the statement of operations and comprehensive income (loss).

Total principal outstanding on the Debentures and the principal amount outstanding specifically to directors, officers and stockholders owning at least 10% of the Company's securities under the Debentures was $0 and $0, respectively at June 30, 2013 and $1,087,500 and $1,012,500, respectively at June 30, 2012.