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LED Medical Diagnostics Inc. Reports 2014 Third Quarter Results

2014-11-28 19:14 ET - News Release

BURNABY, BC -- (Marketwired) -- 11/29/14

LED Medical Diagnostics Inc. (TSX VENTURE: LMD) (OTCQX: LEDIF) (FRANKFURT: LME) ("LED Medical" or the "Company") today announced its financial results for the third quarter ended September 30, 2014, reported in United States dollars and in accordance with International Financial Reporting Standards ("IFRS"). The Company's results are presented in comparison to the third quarter ended September 30, 2013. All balances are expressed in United States dollars unless otherwise stated.

"I am pleased to announce revenue growth of 86% to $4,273,818 during the nine months ended September 30, 2014 as compared to the same prior year period. We provided annual revenue guidance of $9.0 million to $11.0 million which the Company is working diligently to achieve," states Dr. David Gane, Chief Executive Officer. "Revenue growth in 2014 is a direct result of optimizing our VELscope distribution channel and by adding new third party digital imaging product lines to complement our VELscope product offering. We have made a substantial investment in our Company which includes inventory as at September 30, 2014 to fulfil the anticipated sales orders to be received in the fourth quarter of fiscal 2014. I am proud of what we have built to date inclusive of the team assembled and the progress we have made to position ourselves to capitalize on the busy sales cycle that lays ahead until the end of the year. We are closer than ever to realizing our goal of becoming a leading player in the North American digital dental imaging market."

Business Highlights

Notable business developments and achievements up to the reporting date include the following:

  • On August 13, 2014, the Company announced the availability of its new digital intraoral camera, the LED IC100. Designed with simplicity, functionality and versatility in mind. The LED IC100 intraoral camera captures high-resolution images to provide practitioners with an enhanced patient education tool.
  • On August 19 2014, the Company officially introduced the LED IC200. This product is the second intraoral camera in the Company's product portfolio and is elegantly designed to acquire high-resolution intraoral and extraoral images with auto focus and a large depth of field.
  • During September 2014, the Company showcased its new Digital Imaging products at the California Dental Association (CDA) Annual Conference entitled "CDA Presents the Art and Science of Dentistry", the American Association of Oral and Maxillofacial Surgeons 94th Annual Meeting and the American Academy of Periodontology 100th Annual Meeting and Exhibition. The CDA conference alone was attended by more than 27,000 dental professionals.
  • On October 14, 2014, LED Medical announced the renewal of its exclusive international distribution agreement (outside North America) for the VELscope® Vx for a three year term with DenMat Holding LLP. This agreement requires minimum annual purchases of the VELscope® Vx product line by DenMat and is subject to another three-year extension at the mutual agreement of both parties.

Financial Highlights

Financial Position as at September 30 2014

Net working capital1 as at September 30, 2014 was $2,357,635 which includes cash of $815,036.

Three-Month Comparative Results

The Company reported revenue of $1,628,643 for the three months ended September 30, 2014 as compared to $911,387 for the three months ended September 30, 2013. Operating loss was $1,977,051 for the three months ended September 30, 2014, as compared to a net loss of $260,326 for the three months ended September 30, 2013.

The Company's calculated gross margin2 was 36% for the three months ended September 30, 2014, which is lower than the 64% gross margin during the three months ended September 30, 2013. Total operating expenses for the three months ended September, 2014 were $2,577,852 as compared to $840,383 for the three months ended September 30, 2013.

EBITDA3 for the three months ended September 30, 2014 was negative $1,623,618 compared to negative $139,816 for the three months ended September 30, 2013.

Included in the Company's net loss of $2,693,861 for the three months ended September 30, 2014 is $777,504 in mark to market adjustments on Canadian dollar denominated warrants. Exclusive of the mark to market adjustment, the Company's net loss would be $1,916,357 for the third quarter of fiscal 2014. Included in the Company's net loss of $1,959,503 for the three months ended September 30, 2013, is a loss of $2,065,653 in mark to market adjustments on Canadian dollar denominated warrants resulting in the Company's net income of $106,150 exclusive of the mark to market adjustment loss.

Nine-Month Comparative Results

The Company reported revenue of $4,273,818 for the nine months ended September 30, 2014 as compared to $2,303,860 for the nine months ended September 30, 2013. Operating loss was $4,816,499 for the nine months ended September 30, 2014, as compared to a net loss of $1,923,094 for the nine months ended September 30, 2013.

The Company's calculated gross margin2 was 47% for the nine months ended September 30, 2014, which is lower than the 60% gross margin during the nine months ended September 30, 2013. Total operating expenses for the nine months ended September, 2014 were $6,812,708 as compared to $3,302,749 for the nine months ended September 30, 2013.

EBITDA3 for the nine months ended September 30, 2014 was negative $4,061,343 compared to negative $916,082 for the nine months ended September 30, 2013.

Included in the Company's net loss of $5,505,294 for the nine months ended September 30, 2014 is $693,979 in mark to market adjustments on Canadian dollar denominated warrants. Exclusive of the mark to market adjustment, the Company's net loss would be $4,811,315 for this fiscal 2014 period. Included in the Company's net loss of $5,494,416 for the nine months ended September 30, 2013 is $3,822,587 in mark to market adjustments on Canadian dollar denominated warrants. Exclusive of the mark to market adjustment, the Company's net loss would be $1,671,829.

Financial Guidance for Fiscal Year 2014

The Company is providing guidance for the full fiscal year ending December 31, 2014 ("fiscal year 2014"). This guidance is intended solely to give investors an understanding of management's expectations for the full fiscal year in light of recent industry sales trends, seasonality of the business and recognition that much of the sales generated in the dental industry occur in the fourth quarter. The guidance does not take into account, or give effect for, any events that are beyond the Company's reasonable control.

                                                                            
Full Fiscal Year Ending December 31, 2014             Quantitative Guidance 
                                                                            
Net Revenues                                              $9.0M - $11.0M    
                                                                            

Financial Statements and Management's Discussion & Analysis

Please see the interim condensed consolidated financial statements and related Management's Discussion & Analysis ("MD&A") for more details. The interim condensed consolidated financial statements for the nine months ended September 30, 2014 and related MD&A have been reviewed and approved by the Company's Audit Committee and Board of Directors. The Company has prepared this truncated news release to alert investors to its results and that a more detailed explanation and analysis is readily available in the MD&A. These reports have been filed on SEDAR at www.sedar.com and also posted to www.ledmd.com.

About LED Medical Diagnostics Inc.

Founded in 2003 and headquartered in Burnaby, British Columbia, Canada, LED Medical Diagnostics Inc. is a leading developer of LED-based visualization technologies for the medical industry. The Company is currently listed on the Toronto Stock Exchange (TSX-V) under the symbol "LMD", the OTCQX under the symbol "LEDIF", as well as the Frankfurt Stock Exchange under the symbol "LME". For more information, visit www.ledmd.com.

LED Dental Inc., a wholly-owned subsidiary, is backed by an experienced leadership team dedicated to a higher level of service and support. LED Dental offers advanced diagnostic imaging equipment that seamlessly integrates into dental practices. The Company is committed to providing dental practitioners with the best technology available by identifying and adding strong products to its growing portfolio. Additionally, the company manufactures the award-winning VELscope® Vx Enhanced Oral Assessment System, the first system in the world to apply tissue fluorescence visualization technology to the oral cavity. The VELscope® Vx is now used to conduct more screenings for oral cancer and other oral mucosal diseases than any other adjunctive device. For more information, call 888.541.4614 or visit www.leddental.com.

1 Net Working Capital is a non-IFRS measure that does not have a standardized meaning and may not be comparable to a similar measure disclosed by other issuers. This measure does not have a comparable IFRS measure. Working capital is defined as current assets less current liabilities. The Company believes that the inclusion of this no-IFRS measure financial measure provides investors with an alternative presentation useful to investors' understanding of the Company's core operating results and trends.

2 Gross margin is a non-IFRS measure that does not have a standard meaning and may not be comparable to a similar measure disclosed by other issuers. Gross margin referenced here relates to revenues less cost of sales. This measure does not have a comparable IFRS measure and is used by the Company to manage and evaluate the operating performance of the Company.

3 EBITDA or Earnings before Interest, Taxes Depreciation and Amortization is a non-IFRS measure that does not have a standardized meaning and may not be comparable to a similar measure disclosed by other issuers. This measure does not have a comparable GAAP measure. EBITDA referenced here relates to net loss and comprehensive loss and excludes interest, income taxes, depreciation, amortization, finder's warrants issuance costs, stock-based compensation, deferred share unit compensation, mark to market adjustments on Canadian dollar denominated warrants, foreign exchange gain or loss and other income. This measure does not have a comparable IFRS measure and is used by the Company to manage and evaluate the cash operating loss of the business.

Forward-Looking Statements

This press release contains statements which, to the extent that they are not recitations of historical fact, may constitute forward-looking information under applicable Canadian securities legislation. Such forward-looking statements or information includes financial and other projections as well as statements regarding the Company's future plans, objectives, performance, revenues, growth, profits, operating expenses or the Company's underlying assumptions and the Company's intention to expand its technology beyond dental applications including "costs of production", "capital expenditures", "costs and timing of the development of new products", "hedging practices", "currency exchange rate fluctuations", "requirements for additional capital", "government regulation of medical device operations" and "insurance coverage". Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", "believes" or variations of such words and phrases or statements that certain actions, events or results "may", "would", "could", "might" or "will be taken", "occur" or "be achieved" or the negative connotation thereof. Persons reading this Management's Discussion and Analysis are cautioned that such statements or information are only predictions, and that the Company's actual future results or performance may be materially different. Factors that could cause actual events or results to differ materially from those suggested by these forward-looking statements include, but are not limited to: economic conditions; dilution; limited history of profits and operations; operational risk; distributor risks; working capital; potential conflicts of interest; speculative investment; intellectual property risks; disruptions in production; reliance on key personnel; seasonality; management's estimates; development of new customers and products risks; stock price volatility risk; sales and marketing risk; competitors and competition risk; regulatory requirements; reliance on few suppliers; reliance on subcontractors; operating cost and quarterly results fluctuations; fluctuations in exchange rates; product liability and medical malpractice claims; access to credit and additional financing; taxation; market acceptance of the Company's products and services; customer and industry analyst perception of the Company and its technology vision and future prospects; technological change, new products and standards; risks related to acquisitions and international expansion; reliance on large customers; concentration of sales; international operations and sales; management of growth and expansion; dependence upon key personnel and hiring; the Company not adequately protecting its intellectual property; risks related to product defects and product liability; and including, but not limited to, other factors described in the Company's reports filed on SEDAR, including its financial statements and management's discussion and analysis for the year ended December 31, 2013. In drawing a conclusion or making a forecast or projection set out in the forward-looking information, the Company takes into account the following material factors and assumptions in addition to the above factors: the Company's ability to execute on its business plan; the acceptance of the Company's products and services by its customers; the timing of execution of outstanding or potential customer contracts by the Company; the sales opportunities available to the Company; the Company's subjective assessment of the likelihood of success of a sales lead or opportunity; the Company's historic ability to generate sales leads or opportunities; and that sales will be completed at or above the Company's estimated margins. This list is not exhaustive of the factors that may affect the Company's forward-looking information. These and other factors should be considered carefully and readers should not place undue reliance on such forward-looking information. All forward-looking statements made in this Management's Discussion and Analysis are qualified by this cautionary statement and there can be no assurance that actual results or developments anticipated by the Company will be realized. The Company disclaims any intention or obligation to update or revise forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

                                                                            
                                                                            
----------------------------------------------------------------------------
LED MEDICAL DIAGNOSTICS INC.                                                
Condensed Interim Consolidated Statements of Financial Position             
(Expressed in U.S. Dollars)                                                 
----------------------------------------------------------------------------
                                                                            
                                               September 30,  December 31,  
                                                    2014           2013     
============================================================================
                                                                            
Assets                                                                      
Current assets                                                              
  Cash                                         $     815,036  $   4,358,986 
  Trade and other receivables                        878,106        503,736 
  Inventory                                        2,514,870        412,307 
  Inventory held by distributor                      191,165        165,832 
  Prepaid expenses and deposits                      735,158        297,164 
                                               -----------------------------
Total current assets                               5,134,335      5,738,025 
                                                                            
Non-current assets                                                          
  Letter of credit                                   280,000              - 
  Property and equipment                             276,113         23,150 
  Patents and intellectual property                   43,008         62,362 
                                               =============================
                                               $   5,733,456  $   5,823,537 
============================================================================
Liabilities and Shareholders' Deficiency                                    
Current liabilities                                                         
  Trade payables and accrued liabilities       $   1,745,532  $     793,046 
  Advances from distributor                          671,715        495,494 
  Deferred Revenue                                     1,266              - 
  Current portion of finance lease obligation          4,187          3,690 
  Warrants                                           354,000              - 
                                               -----------------------------
Total current liabilities                          2,776,700      1,292,230 
                                                                            
Non-current liabilities                                                     
  Long-term portion of finance lease                                        
   obligation                                              -          3,190 
  Warrants                                                 -      3,672,958 
                                               -----------------------------
Total liabilities                                  2,776,700      4,968,378 
                                               -----------------------------
                                                                            
Shareholders' deficiency                                                    
  Share capital                                   34,145,786     27,242,071 
  Stock-based payment reserve                      1,679,550        970,004 
  Warrants reserve                                 4,718,328      4,724,698 
  Accumulated other comprehensive income             474,458        474,458 
  Deficit                                        (38,061,366)   (32,556,072)
                                               -----------------------------
                                                   2,956,756        855,159 
                                               =============================
                                               $   5,733,456  $   5,823,537 
============================================================================
                                                                            
                                                                            
                                                                            
                                                                            
----------------------------------------------------------------------------
LED MEDICAL DIAGNOSTICS INC.                                                
Condensed Interim Consolidated Statements of Operations and Comprehensive   
 Loss                                                                       
(Expressed in U.S. Dollars)                                                 
----------------------------------------------------------------------------
                                                                            
                   Three months   Three months    Nine months    Nine months
                          ended          ended          ended          ended
                  September 30,  September 30,  September 30,  September 30,
                          2014            2013          2014            2013
                                                                            
----------------------------------------------------------------------------
                                                                            
Revenues         $   1,628,643  $     911,387  $   4,273,818  $   2,303,860 
Cost of goods                                                               
 sold                1,027,842        331,330      2,277,609        924,205 
                 -----------------------------------------------------------
                       600,801        580,057      1,996,209      1,379,655 
                 -----------------------------------------------------------
                                                                            
Expenses                                                                    
  Sales and                                                                 
   marketing         1,621,028        158,776      3,910,005        818,111 
  Research and                                                              
   development         215,625        121,706        721,548        322,257 
  Administration       387,766        439,391      1,425,999      1,121,264 
  Stock-based                                                               
   compensation        331,695         45,898        709,546        597,691 
  Deferred share                                                            
   unit                                                                     
   compensation              -         65,149              -        380,580 
  Other                                                                     
   operating                                                                
   expenses             21,738          9,463         45,610         62,846 
                 -----------------------------------------------------------
                                                                            
                     2,577,852        840,383      6,812,708      3,302,749 
                 -----------------------------------------------------------
Operating loss      (1,977,051)      (260,326)    (4,816,499)    (1,923,094)
                 -----------------------------------------------------------
                                                                            
Other income                                                                
 (expenses)                                                                 
                                                                            
  Mark to market                                                            
   adjustments                                                              
   on Canadian                                                              
   dollar                                                                   
   denominated                                                              
   warrants           (777,504)    (2,065,653)      (693,979)    (3,822,587)
  Foreign                                                                   
   exchange                                                                 
   (loss) gain          60,694        366,435          5,184        255,364 
                 -----------------------------------------------------------
                      (716,810)    (1,699,218)      (688,795)    (3,567,223)
                 -----------------------------------------------------------
Net income                                                                  
 (loss) before                                                              
 incomes taxes      (2,693,861)    (1,959,544)    (5,505,294)    (5,490,317)
Income taxes                 -            (41)             -          4,099 
                 -----------------------------------------------------------
Net income                                                                  
 (loss) and                                                                 
 comprehensive                                                              
 income (loss)                                                              
 for the period  $  (2,693,861) $  (1,959,503) $  (5,505,294) $  (5,494,416)
                 -----------------------------------------------------------
                                                                            
Income (loss)                                                               
 per share -                                                                
 basic and                                                                  
 diluted                ($0.03)        ($0.03)        ($0.07)        ($0.12)
                 ===========================================================
                                                                            
Weighted average                                                            
 number of                                                                  
 shares                                                                     
 outstanding -                                                              
 basic and                                                                  
 diluted            82,312,719     57,985,508     75,207,052     47,735,508 
============================================================================
                                                                            
                                                                            
                                                                            
                                                                            
----------------------------------------------------------------------------
LED MEDICAL DIAGNOSTICS INC.                                                
Consolidated Statements of Cash Flow                                        
(Expressed in U.S. Dollars)                                                 
----------------------------------------------------------------------------
                                                                            
                   Three months   Three months    Nine months    Nine months
                          ended          ended          ended          ended
                  September 30,  September 30,  September 30,  September 30,
                           2014           2013           2014           2013
----------------------------------------------------------------------------
Cash flows from                                                             
 operating                                                                  
 activities                                                                 
  Net income                                                                
   (loss) for                                                               
   the period    $  (2,693,861) $  (1,959,503) $  (5,505,294) $  (5,494,416)
                                                                            
Adjustments to                                                              
 net income                                                                 
 (loss) for                                                                 
 items not                                                                  
 involving cash:                                                            
  Depreciation                                                              
   of equipment         15,287          3,010         26,256          9,387 
  Amortization                                                              
   of                                                                       
   intellectual                                                             
   property              6,451          6,453         19,354         19,354 
  Warrants                                                                  
   issuance                                                                 
   costs                     -              -              -         34,105 
  Mark to market                                                            
   adjustments                                                              
   on Canadian                                                              
   dollar                                                                   
   denominated                                                              
   warrants            777,504      1,679,155        693,979      3,436,089 
  Settlement of                                                             
   warrant                                                                  
   liability                                                                
   upon exercise                                                            
   and expiry of                                                            
   warrants          2,961,577              -      3,912,642                
  Stock-based                                                               
   compensation        331,696         45,898        709,546        597,691 
  Unrealized                                                                
   foreign                                                                  
   exchange gain    (3,020,844)             -     (4,019,303)             - 
                 -----------------------------------------------------------
                    (1,622,190)      (224,987)    (4,162,820)    (1,397,790)
                 -----------------------------------------------------------
Changes in                                                                  
 working capital                                                            
 assets and                                                                 
 liabilities:                                                               
  Trade and                                                                 
   other                                                                    
   receivables         (94,065)       245,213       (374,370)       819,092 
  Inventory         (1,129,413)      (229,988)    (2,102,563)      (277,304)
  Inventory held                                                            
   by                                                                       
   distributor         (48,709)       265,200        (25,333)       397,200 
  Prepaid                                                                   
   expenses and                                                             
   deposits           (440,583)      (101,919)      (717,993)       (90,421)
  Trade payables                                                            
   and accrued                                                              
   liabilities         260,285       (198,392)       952,482       (312,977)
  Advances from                                                             
   distributor         110,569       (494,531)       176,221     (1,370,695)
  Deferred                                                                  
   revenue              (6,681)             -          1,266              - 
                 -----------------------------------------------------------
Changes in                                                                  
 working capital                                                            
 assets and                                                                 
 liabilities        (1,348,597)      (514,417)    (2,090,290)      (835,105)
                 -----------------------------------------------------------
Cash flows used                                                             
 in operating                                                               
 activities         (2,970,787)      (739,404)    (6,253,110)    (2,232,895)
                 -----------------------------------------------------------
                                                                            
Cash flows from                                                             
 investing                                                                  
 activities                                                                 
  Purchase of                                                               
   equipment           (98,635)        (1,876)      (279,220)        (3,067)
  Restricted                                                                
   cash                      -            (99)             -            173 
                 -----------------------------------------------------------
Cash flows used                                                             
 in investing                                                               
 activities            (98,635)        (1,975)      (279,220)        (2,894)
                 -----------------------------------------------------------
                                                                            
Cash flows from                                                             
 financing                                                                  
 activities                                                                 
  Issuance of                                                               
   common                                                                   
   shares, net                                                              
   of issuance                                                              
   costs                     -         (2,880)             -      1,855,294 
  Issuance of                                                               
   share                                                                    
   purchase                                                                 
   warrants in                                                              
   private                                                                  
   placement                 -              -              -        386,497 
  Proceeds from                                                             
   exercise of                                                              
   warrants          2,047,308              -      2,991,073              - 
  Repayment of                                                              
   finance lease                                                            
   obligation           (1,250)          (766)        (2,693)        (2,176)
                 -----------------------------------------------------------
Cash flows                                                                  
 provided by                                                                
 (used in)                                                                  
 financing                                                                  
 activities          2,046,058         (3,646)     2,988,380      2,239,615 
                 -----------------------------------------------------------
                                                                            
(Decrease)                                                                  
 increase in                                                                
 cash               (1,023,364)      (745,025)    (3,543,950)         3,826 
Cash, beginning                                                             
 of period           1,838,400      1,718,435      4,358,986        969,584 
                 -----------------------------------------------------------
Cash, end of                                                                
 period          $     815,036  $     973,410  $     815,036  $     973,410 
============================================================================
                                                                            
                                                                            

Contacts:

For media relations, please contact:

Chris Koch
LED Dental Ltd.
Phone: 678-293-9413
E-Mail: chris.koch@leddental.com

For Investor relations, please contact:

Beverly Brooks
Investor Relations
LED Medical Diagnostics Inc.
Phone: 844-952-7327
E-Mail: investorrelations@leddental.com

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