January 21, 2008, Orlando, FL--LightPath Technologies has entered into a joint venture agreement with CDGM Glass Co. Ltd. LightPath and CDGM will each own a 50% interest in the joint venture, which will be organized under the name "LightPath CDGM Chengdu Optical Co. Ltd." and located in Chengdu, China. The initial capital contribution of each party to the joint venture will be a cash investment equivalent to US$5 million.
CDGM is owned by China South Industries Group Corp., a state owned enterprise. CDGM is China's largest optical glass manufacturer producing preforms for optical companies to convert into optical lens.
The initial business purpose of the joint venture shall 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. The joint venture 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. The target production volume of the joint venture is 1 million lenses per month, which the parties 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 US$5 million from each of the joint-venture partners.
The market demand for cell phones and digital cameras is about 700 million lenses per year, according to the study "The Development of Camera Phone Module Industry, 2005-2006" by Beijing RIC Consulting Co. Ltd. (2007). The study states the number of phones and cameras that use greater than 3 mega pixel resolutions is about 10% of the market. LightPath believes that aspheric lenses above the 3 mega pixel ranges for cell phones, digital cameras and other equipment will significantly enhance the resolution and provide the potential for future functional enhancements in such equipment and will replace the mixed plastic and glass lenses currently used for such applications.
LightPath is providing several key elements that are integral to the operation of the joint venture as follows:
--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 US$4.5 million.
--LightPath has agreed to license certain of its technology to the joint venture for which it will receive a 3% royalty based upon sales by the joint venture.
--Joe Wu, LightPath's Executive Vice President, has been appointed as the General Manager of the joint venture with responsibility over the day- to-day operations of the joint venture.
The joint venture agreement is subject to governmental approval in Chengdu, China. Subject to the parties meeting the capital investment requirements of the joint venture agreement, the joint venture will be established and commence operations upon satisfaction of all licensing requirements and the Chengdu Municipal Administration Bureau for Industry and Commerce has issued a business license for the joint venture. LightPath and CDGM have commenced transitional efforts and expect the joint venture to be operational by no later than July 1, 2008.