LightPath Enters Joint Venture
ORLANDO, Fla., Jan. 17 -- LightPath Technologies Inc. announced that on Jan. 8 it entered into a joint venture agreement with CDGM Glass Co. Ltd., China's largest optical glass manufacturer producing preforms for optical companies to convert into optical lenses. LightPath and CDGM will each own a 50-percent interest in the joint venture, which will be organized under the name LightPath CDGM Chengdu Optical Co. Ltd. and located in Chengdu, China. CDGM is owned by China South Industries Group Corp., a state-owned enterprise.
The initial capital contribution of each party to the joint venture will be a cash investment equivalent to $5 million. The purpose of the joint venture will initially be to develop, mold and manufacture aspheric lenses with a diameter of less than 20 mm for high-volume visible imaging applications for cell phones, digital cameras and video equipment, Lightpath said in a statement. The new company may also assemble modules that will include the lenses for such applications.
The joint venture will sell and distribute its products in China and international markets and will provide technical and after-sale services. Target production volume is one million lenses per month, which Lightpath said they believe can be achieved after 12 months of manufacturing operations. If LightPath and CDGM agree, the joint venture's production capacity can be expanded with additional investment of $5 million from each partner.
LightPath has agreed to produce Viper presses, which will be sold to the joint venture. LightPath anticipates that production of the presses will require an additional investment by LightPath of approximately $4 1/2 million. It has agreed to license some of its technology to the joint venture for which it will receive a 3-percent royalty based on the new company's sales.
Joe Wu, LightPath's executive vice president, has been appointed general manager of LightPath CDGM Chengdu Optical and will be responsible for its operations. LightPath said it intends to consolidate the joint venture for financial statement purposes, since it has the right to appoint a majority of the members to the joint venture's board of directors and CDGM does not have substantive participating rights.
The joint venture agreement is subject to governmental approval in Chengdu, China. Subject to the parties meeting the capital investment requirements in their agreement, the new company will begin operations once it is issued a business license from the Chengdu Municipal Administration Bureau for Industry and Commerce, expected no later than July 1.
Robert Ripp, chairman of LightPath's board, said the joint venture represents "a major step of the strategy shift that we have been implementing. We have been making investments to allow LightPath to compete in the high-volume, low-cost lens market. We believed that the way for LightPath to execute its transformational strategy in the 'consumer market' for optical lenses was to partner with a major material supplier like CDGM to reduce the execution risk of that strategy. We have implemented several variable cost reduction measures that will give us a lower production cost base and, in turn, allow us to be more aggressive in competitively pricing our products."
He siad LightPath intends to continue to enhance and expand, as appropriate, the Shanghai and Orlando facilities to meet the market demands for visible imaging applications for its lenses above 11 mm, laser- based industrial high-volume tools, infrared applications, and high-volume laser telecom applications, as well as other industrial laser applications and defense applications.
For more information, visit: www.lightpath.com