Mr. David Gane reports

LED MEDICAL DIAGNOSTICS INC. REPORTS 2016 FOURTH QUARTER AND FULL YEAR RESULTS

LED Medical Diagnostics Inc. has released its financial results for the fourth quarter and full year ended Dec. 31, 2016, reported in U.S. dollars and in accordance with international financial reporting standards. The company's results are presented in comparison with the fourth quarter and full year ended Dec. 31, 2015. All balances are expressed in U.S. dollars unless otherwise stated.

"LED experienced a decline in revenue in fiscal 2016 of $10.2-million from $13.1-million in the prior fiscal 2015, which is partially attributable to the company experiencing cash constraints in late fiscal 2016 that hindered its ability to purchase inventory in order to capitalize on sales opportunities during the height of seasonality for capital equipment purchases in the U.S. dental market. This was addressed by the company's recent capitalization initiatives tied to the acquisition of Apteryx Inc. in early fiscal 2017," commented company chief executive officer Dr. David Gane. "The integration of Apteryx into our business is going well, and we anticipate a positive impact on financial performance over the balance of the year due to our newly expanded customer base and software product offerings at higher gross margins."

Financial highlights

LED Medical reported revenue of $10.2-million as compared with the prior fiscal year revenue of $13.1-million, and revenues for the three months ended Dec. 31, 2016, of $1.9-million.

Three-month comparative results

The company reported revenue of $1.9-million for the three months ended Dec. 31, 2016, which is down 67 per cent compared with $5.6-million for the three months ended Dec. 31, 2015, and 25 per cent lower compared with $2.5-million for the three months ended Sept. 30, 2016. Net loss was $1.39-million for the three months ended Dec. 31, 2016, as compared with a net loss of $1.1-million for the three months ended Dec. 31, 2015. Inclusive of accounting adjustments, the company's calculated gross margin (1) was 14 per cent for the three months ended Dec. 31, 2016, as compared with 29 per cent in the three months ended Dec. 31, 2015. Total operating expenses for the three months ended Dec. 31, 2016, were $1.52-million as compared with $2.55-million for the three months ended Dec. 31, 2015. Core operating expenses (2) (excluding stock-based compensation, deferred share unit compensation and other operating expenses) for the three months ended Dec. 31, 2016, were $1.4-million, as compared with $2.4-million for the three months ended Dec. 31, 2015.

12-month comparative results

The company reported revenue of $10.2-million for the year ended Dec. 31, 2016, which is down 22 per cent compared with $13.1-million for the year ended Dec. 31, 2015. Net loss was $5.4-million for the year ended Dec. 31, 2016, as compared with a net loss of $5.2-million for the year ended Dec. 31, 2015. Gross margin (1) was 24 per cent for the year ended Dec. 31, 2016, a decrease from 27 per cent in the year ended Dec. 31, 2015. Total operating expenses for the year ended Dec. 31, 2016, were $7.0-million as compared with $8.8-million for the year ended Dec. 31, 2015. Core operating expenses (2) (excluding stock-based compensation, deferred share unit compensation and other operating expenses) for the year ended Dec. 31, 2016, were $7.0-million, as compared with $8.3-million for the year ended Dec. 31, 2015.

Business highlights, financial statements, and management's discussion and analysis

On Feb. 13, 2017, LED Medical Diagnostics announced the closing of the acquisition of Apteryx, an Ohio-based imaging software company, for an aggregate purchase price of $10.25-million. Through a combination of debt and equity, the company raised gross proceeds totalling approximately $14.4-million (Canadian) with which to make the acquisition.

"These two related transactions provided LED a needed recapitalization of its business, as well as the addition of a new profitable business unit expected to transform the company in 2017," commented LED chief executive officer Dr. David Gane. "The revenue decrease in 2016 is largely attributed to the company's low available cash position at Sept. 30, 2016, and resultant inability to purchase inventory to take advantage of Q4 sales opportunities during the height of sales seasonality," added Dr. Gane.

Gross margins in fourth quarter 2016 were abnormally low due to lower margins on imaging sales due to year-end competitive pricing pressures and a significant year-end inventory adjustment.

Please see the audited consolidated financial statements and related management's discussion and analysis for more details. The audited consolidated financial statements for the year ended Dec. 31, 2016, 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 a more detailed explanation and analysis are readily available in the MD&A. These reports have been filed on SEDAR and also posted to the company's website.

About LED Medical Diagnostics Inc.

Founded in 2003 and headquartered in Vancouver, B.C., Canada, LED Medical Diagnostics, through its wholly owned subsidiaries LED Dental Inc. and LED Dental Ltd., provides dentists and oral health specialists with advanced diagnostic imaging products and software, in addition to the award-winning VELscope Vx tissue fluorescence visualization technology. Backed by an experienced leadership team and dedicated to a higher level of service and support, LED Dental is committed to providing dental practitioners with the best technology available by identifying and adding leading products to its growing portfolio.

(1) Gross margin is a non-international financial reporting standard 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.

(2) Core operating expense 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. Core operating expense includes sales and marketing, research and development, and administration expense. The company believes that the inclusion of this non-IFRS measure financial measure provides investors with an alternative presentation useful to investors' understanding of the company's core operating results and trends.

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