Mr. Peter Whitehead reports
LED MEDICAL DIAGNOSTICS REPORTS 2012 FOURTH QUARTER AND FULL-YEAR FINANCIAL RESULTS
LED Medical Diagnostics Inc. has released its financial results for the fourth quarter and full year ended Dec. 31, 2012, reported in U.S. dollars and in accordance with international financial reporting standards. The company's results are presented in comparison with the three months and 12 months ended Dec. 31, 2011, also in accordance with IFRS, which have been restated due to the company's transition to the U.S.-dollar functional and reporting currency and for the revision of its revenue recognition policy pertaining to sales made to Henry Schein Inc. All balances are expressed in U.S. dollars unless otherwise stated.
Financial highlights:
- Revenues for fiscal 2012 were approximately $6.3-million, an 11-per-cent
increase over fiscal 2011.
- Revenues for fourth quarter 2012 were approximately $1.4-million, which is
consistent with fourth quarter 2011.
- Earnings before interest, taxes, depreciation and amortization for fiscal 2012 were negative $728,000 and for fourth quarter 2012 were negative $84,000
compared with 2011 comparable periods of approximately negative $2.5-million and
negative $631,000, respectively.
"During late fiscal 2012, we terminated our exclusive distribution relationship with Henry Schein Inc. During the same time frame, we reached an agreement with DenMat Holdings LLC to assume the role of exclusive manager of LED's global distribution strategy. The shift in alliance from Henry Schein to DenMat caused a temporary disruption to our activities in the marketplace. As a result of the transition in our sales and marketing activities to our new distribution partner in late 2012, the company's revenues were lower than anticipated but still resulted in increase from prior year," stated Peter Whitehead, LED founder and chief executive officer. "With the DenMat relationship now in place, we expect to see an aggressive sales and marketing program working at full pace by mid-2013, which is expected to result in increased future revenue after 2013. The Denmat relationship should allow the company's financial situation to improve significantly in the longer term by optimizing our sales and marketing efforts. Our optimism is further buoyed by our experience that demand for the VELscope Vx appears to remain strong."
Three-month comparative results
For the three months ended Dec. 31, 2012, the company reported revenues of approximately $1.4-million, which is consistent with approximately $1.4-million for the fourth quarter of 2011. Revenues were lower in the three months ended Dec. 31, 2012, compared with revenues of approximately $2.9-million for the three months ended Sept. 30, 2012.
Gross margins were 46 per cent during the three months ended Dec. 31, 2012, which were higher than the three months ended Dec. 31, 2011, of 44 per cent. The company's margins vary depending on the mix of equipment versus disposables sales for any given period.
Total operating expenses (excluding other operating expenses and mark-to-market adjustments on Canadian-dollar denominated warrants) for the three months ended Dec. 31, 2012, of approximately $726,000 were 49 per cent lower than the three months ended Dec. 31, 2011, of approximately $1.4-million.
EBITDA for the three months ended Dec. 31, 2012, was approximately negative $84,000 compared with approximately negative $630,000 for the three months ended Dec. 31, 2011. The company reported a net loss of approximately $175,000 for the three months ended Dec. 31, 2012, compared with a net loss of approximately $3.1-million for the three months ended Dec. 31, 2011.
Twelve-month comparative results
For the year ended Dec. 31, 2012, the company reported revenues of approximately $6.3-million as compared with approximately $5.7-million for the year ended Dec. 31, 2011, an increase of 11 per cent over the comparable period. The increase is attributable to the increased sales by Henry Schein to its end customers during the first half of fiscal 2012 in addition to sales orders received from the company's new distribution partner, Denmat, in late fiscal 2012.
Gross margins were 57 per cent during the year ended Dec. 31, 2012, which were higher than the gross margins of 52 per cent for the year ended Dec. 31, 2011. The company's margins vary depending on the mix of equipment versus disposables sales for any given period.
Total operating expenses (excluding other operating expenses and mark-to-market adjustments on Canadian-dollar-denominated warrants) for the year ended Dec. 31, 2012, of approximately $4.4-million were 24 per cent lower than the year ended Dec. 31, 2011, of approximately $5.7-million.
EBITDA for the year ended Dec. 31, 2012, was approximately negative $728,000 compared with approximately negative $2.5-million for the year ended Dec. 31, 2011. The company reported a net loss of approximately $867,000 for its fiscal 2012 compared with a net loss of approximately $4.1-million for the year ended Dec. 31, 2011.
Cash was approximately $970,000 (inclusive of the net proceeds from the approximately $1.1-million equity financing completed by the company in late 2012) with negative net working capital of approximately $97,000 as of Dec. 31, 2012, compared with cash of approximately $976,000 with negative net working capital of approximately $356,000 as of Dec. 31, 2011.
Business highlights
Notable developments and achievements during the fourth quarter included the following:
-
On Oct. 12, 2012, the corporation announced that, subject to TSX
Venture Exchange approval, it has agreed to extend the term of certain
warrants to acquire a total of 5,599,897 common shares of the company
that are scheduled to expire between Oct. 31, 2012, and Feb. 22,
2013. The extension ranges from between three to seven months. As a
result of the extension, all outstanding series of LED warrants will now
expire on May 22, 2013, other than warrants previously granted to one of
LED's product distributors. The warrants were originally issued between
July 9, 2010, and Feb. 22, 2011, when the company was a private
issuer, and have exercise prices ranging from 65 cents to $1 per common
share.
- On Nov. 7, 2012, the corporation announced that its VELscope
enhanced oral assessment technology has been used to conduct an
estimated 25 million oral cancer exams since its 2006 introduction.
- In November, 2012, the corporation announced that the VELscope Vx
enhanced oral assessment system, the market-leading early-stage oral
cancer detection device approved by the Food and Drug Administration, Health Canada, and European
regulators, has been chosen by Dentistry Today magazine for one of its
annual Top 50 Technology Products awards. Dentistry Today's Top 50
Technology Products represent the best and brightest technologies
available to dental professionals each year. The recipients are
determined based on input from readers of Dentistry Today.
- On Dec. 21, 2012, the corporation announced that it raised $1,162,500 (Canadian) on a planned minimum raise of $1-million.
The audit committee of the company has reviewed the contents of this news release.
Change in functional and reporting currency
The company has changed the functional currency of the parent company entity from Canadian dollars to U.S. dollars as of Jan. 1, 2012, to reflect the transition from an entity with some operations to a holding company for the group companies upon the completion of the reverse takeover in November, 2011. This change was effected prospectively from Jan. 1, 2012, onward.
The company also changed its reporting currency on Dec. 31, 2012, from Canadian dollars to U.S. dollars given LED's listing on the OTC stock exchange in the United States and on the Frankfurt Stock Exchange in early 2013 reflective of LED becoming a global company. This change also results in increased comparability for LED to other global technology companies.
Revision to revenue recognition policy
The company also revised its prior revenue recognition policy pertaining to the sales of its product in fiscal 2011 and 2012 to Henry Schein from sell to this distributor to sell through this distributor to its end customers. While legal title with the risks and rewards of ownership is transferred to Henry Schein as at the date at which the company's products are sold to this distributor, the participation by the company in the provision to this distributor of special market development pricing adjustments, pertaining to the LED products to increase overall market share of the company, results in the company not being able to estimate such marketing-oriented expenses reasonably at the time of sale and shipment to Henry Schein, resulting in the required deferral of revenue recognition until all such marketing-oriented expenses are fully determinable. There is no such issue in the company's distribution arrangement with Denmat resulting in the company recognizing revenue at the time of sale and shipment to Denmat. As a result, the financial results for prior periods have been restated.
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT AND COMPREHENSIVE LOSS
(expressed in U.S. dollars)
Three months
Three months ended Year ended
ended Dec. 31, Year ended Dec. 31,
Dec. 31, 2011 Dec. 31, 2011
2012 (restated) 2012 (restated)
Sales $ 1,389,994 $ 1,427,136 $ 6,312,754 $ 5,707,670
Cost of goods sold 747,510 803,000 2,745,477 2,760,253
Total 642,484 624,136 3,567,277 2,947,417
Expenses
Sales and marketing 348,950 966,689 2,564,798 3,696,533
Research and
development 94,504 148,974 523,492 746,525
Administration 282,533 298,498 1,207,122 1,155,195
Mark-to-market
adjustments on
Canadian-dollar-
denominated warrants 14,558 -- 3,843 --
Other operating
expenses 77,730 63,337 59,776 129,561
Total expenses 818,275 1,477,498 4,359,031 5,727,814
Operating (loss) (175,791) (853,362) (791,754) (2,780,397)
Other income (expenses)
Foreign exchange gain
(loss) 1,162 (446,606) (64,511) 342,513
Interest income 81 2,568 389 2,568
(Loss) on disposal of
assets -- -- (702) --
Miscellaneous income
(expenses) 10 (106,813) 2,485 4,840
Amalgamation
transaction costs -- (1,690,590) -- (1,690,590)
Total other income
(expenses) 1,253 (2,241,441) (62,339) (1,340,669)
Net (loss) before income
taxes (174,538) (3,094,803) (854,093) (4,121,066)
Income taxes -- 28,483 12,840 28,483
Net (loss) for the period $ (174,538) $(3,123,286) $ (866,933) $(4,149,549)
Other comprehensive
income (loss) -- 500,091 -- (247,965)
Comprehensive (loss) for
the period $ (174,538) $(2,623,195) $ (866,933) $(4,397,514)
Net (loss) per share --
basic and diluted $ (0.00) $ (0.09) $ (0.02) $ (0.13)
We seek Safe Harbor.
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