Dr. David Gane reports

LED MEDICAL DIAGNOSTICS INC. REPORTS 2014 FIRST QUARTER RESULTS

LED Medical Diagnostics Inc. has provided its financial results for the first quarter ended March 31, 2014, reported in United States dollars and in accordance with international financial reporting standards (IFRS). The company's results are presented in comparison with the first quarter ended March 31, 2013. All balances are expressed in United States dollars unless otherwise stated.

Business highlights

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

• On Jan. 14, 2014, the company announced that it signed an agreement with the B.C. Cancer Agency (BCCA) to create and commercialize a progression-risk assessment test for oral cancer. The test is based on a quantifiable genetic phenomenon known as "loss of heterozygosity" or "LOH."
• On Jan. 21, 2014, the company announced that it entered a non-exclusive distribution partnership with Patterson Dental in the United States and Canadian markets.
• On Feb. 25, 2014, the company announced the appointment of Lamar Roberts as president of its wholly owned U.S. subsidiary LED Dental Ltd.
• On March 26, 2014, the company announced the appointment of Dr. Jeffrey Brooks as vice-president of imaging of its wholly owned subsidiary LED Dental Ltd.
• On April 2, 2014, the company announced that its wholly owned U.S. operating subsidiary, LED Dental Ltd., released a new brand initiative to further its goal of providing advanced imaging technologies to dental and specialty practices in the United States and Canada. The branding initiative includes a new logo to further unify the business under the LED Imaging name.
• On April 3, 2014, the company announced that the LED Imaging division of its wholly owned subsidiary, LED Dental Ltd., is partnering with Ray Co. Ltd., a subsidiary of Samsung, to sell, install and provide support for the Rayscan alpha -- expert dental imaging system.
• On April 15, 2014, the company announced that it entered a non-exclusive distribution partnership with Atlanta Dental Supply and Nashville Dental.
• On April 22, 2014, the company announced that the LED Imaging division of its wholly owned subsidiary, LED Dental Ltd., entered a partnership with the UT College of Dentistry. Residents and dental students will receive hands-on training with the Rayscan alpha -- expert, a multifunction digital imaging system, as part of their clinical training.
• On April 24, 2014, the company announced that the LED Imaging division of its wholly owned subsidiary, LED Dental Ltd., is launching its LED Imaging Software to integrate with the company's growing portfolio of imaging technologies.

"The first quarter of fiscal 2014 will be remembered as a time of transitioning the VELscope Vx line to an expanded and optimized distribution channel and diversifying our product portfolio to include additional digital dental imaging technologies," states Dr. David Gane, chief executive officer of LED Medical. "Our selection of world-class manufacturing partners allows us to resell the finest diagnostic dental imaging products available while leveraging our partners brand identity and significant product investments. We will continue to actively invest in our team and infrastructure throughout 2014 and look forward to launching new imaging products over the course of the year to leverage our newly created sales and marketing asset."

Financial highlights

Financial position as at March 31, 2014

Working capital as at March 31, 2014, was $3,438,228, which includes cash of $3,178,080. This is compared with working capital of $4,445,795 at Dec. 31, 2013, which included cash of $4,358,986. Working capital is a non-IFRS measure that does not have a standardized meaning and may not be comparable with 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.

Three-month comparative results

The company reported revenue of $1,054,886 for the three months ended March 31, 2014, as compared with $309,590 for the three months ended March 31, 2013. Operating loss was $1,206,789 for the three months ended March 31, 2014, as compared with a net loss of $1,286,849 for the three months ended March 31, 2014.

The company's calculated gross margin was 50 per cent for the three months ended March 31, 2014, which is consistent with the 53-per-cent gross margin during the three months ended March 31, 2013. Total operating expenses for the three months ended March 31, 2014, were $1,736,138 as compared with $1,450,073 for the three months ended March 31, 2013, representing a 20-per-cent increase. Core operating expenses (excluding stock-based compensation, deferred share unit compensation and other operating expenses) for the three months ended March 31, 2014, were $1,534,712, as compared with $801,521 for the three months ended March 31, 2013, representing a 91-per-cent increase. Gross margin is a non-IFRS measure that does not have a standard meaning and may not be comparable with 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.

EBITDA (earnings before interest, taxes, depreciation and amortization) for the three months ended March 31, 2014, was negative $1,005,363 compared with negative $638,297 for the three months ended March 31, 2013. EBITDA is a non-IFRS measure that does not have a standardized meaning and may not be comparable with a similar measure disclosed by other issuers. This measure does not have a comparable GAAP (generally accepted accounting principles) 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.

Included in the company's net loss of $2,893,999 for the three months ended March 31, 2014, is $1,695,119 in mark-to-market adjustments on Canadian-dollar-denominated warrants. Exclusive of the mark-to-market adjustment, the company's net loss would be $1,198,880. Included in the company's net loss of $1,333,774 for the three months ended March 31, 2013, is a gain of $38,229 in mark-to-market adjustments on Canadian-dollar-denominated warrants. Exclusive of the mark-to-market adjustment, the company's net loss would be $1,372,003.

Financial statements and management's discussion and analysis

Please see the interim condensed consolidated financial statements and related management's discussion and analysis (MD&A) for more details. The interim condensed consolidated financial statements for the three months ended March 31, 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 and also posted to the company's website.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
                  (expressed in U.S. dollars)
         For the three months ended March 31, 2014, and 2013

                                               March 31,      March 31,
                                                    2014           2013

Revenues                                      $1,054,886       $309,590
Cost of goods sold                               525,537        143,366
                                              ----------     ----------
                                                 529,349        163,224
Expenses
Sales and marketing                              743,441        332,036
Research and development                         258,581         89,757
Administration                                   532,690        379,728
Stock-based compensation                         191,498        351,331
Deferred share unit compensation                       -        287,581
Other operating expenses                           9,928          9,640
                                              ----------     ----------
                                               1,736,138      1,450,073
                                              ----------     ----------
Operating (loss)                              (1,206,789)    (1,286,849)
Other expenses
Mark-to-market adjustments on Canadian-
dollar-denominated warrants                    1,695,119        (38,229)
Foreign exchange (gain) loss                      (7,909)        82,456
                                              ----------     ----------
Net (loss) before income taxes                (2,893,999)    (1,331,076)
Income taxes                                           -          2,698
                                              ----------     ----------
Net (loss) and comprehensive (loss) for the
year                                         $(2,893,999)   $(1,333,774)
                                              ==========     ==========
(Loss) per share -- basic and diluted             $(0.04)        $(0.03)

We seek Safe Harbor.