BURNABY, BC
-- (Marketwired)
-- 08/26/14
LED Medical Diagnostics Inc. ("LED Medical" or the "Company") (TSX VENTURE: LMD) (OTCQX: LEDIF) (FRANKFURT: LME) today announced its financial results for the second quarter ended June 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 second quarter ended June 30, 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 April 2, 2014, we announced that our wholly-owned US 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, we 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 α - Expert dental imaging system.
- On April 15, 2014, we announced that we entered a non-exclusive distribution partnership with Atlanta Dental Supply and Nashville Dental.
- On April 22, 2014, we 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 α - Expert, a multi-function digital imaging system, as part of their clinical training.
- On April 24, 2014, we 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.
- On May 14, 2014, our LED Imaging division introduced its new digital radiography intraoral sensor, the LED IS100. Designed with simplicity and versatility in mind, the LED IS100 intraoral sensor is a replacement for traditional dental film as it captures intraoral images of the teeth and supporting bone structures. The LED IS100 intraoral sensor is the third product to be added to LED Imaging's portfolio since the launch of the division on April 2, 2014.
- On June 4, 2014, we announced that Wes Newsom and Joan Fiore joined the Atlanta based LED team in the role of director of product line management for digital imaging and vice president of client services, respectively.
"Our excitement grows as our offices in Atlanta are nearing completion with a move in date mid-October. This will complete our transformation from a VELscope company to a multi-product dental technology provider. We look forward to the onset of the busy trade season ahead, especially Q4 where we expect most of our annual revenues to occur and providing revenue guidance for the full fiscal year ending December 31, 2014. We welcome both the opportunities and challenges that lay before us as we continue to position the Company as a preeminent digital dental imaging leader."
Financial Highlights
Financial Position as at June 30, 2014
Working capital(1) as at June 30, 2014 was $69,212, which includes cash of $1,838,400. This is compared to working capital of $4,445,795 at December 31, 2013, which included cash of $4,358,986. The decrease in working capital is due primarily to the classification of the Company's warrant liability as current, as it is expected to be settled upon expiration of these warrants, at June 14, 2015, at the latest. Subsequent to June 30, 2014, the Company received $1,420,000 in proceeds from warrant exercises.
Three-Month Comparative Results
The Company reported revenue of $1,590,289 for the three months ended June 30, 2014 as compared to $1,082,883 for the three months ended June 30, 2013. Operating loss was $1,636,691 for the three months ended June 30, 2014, as compared to an operating loss of $375,919 for the three months ended June 30, 2013.
The Company's calculated gross margin(2) was 54% for the three months ended June 30, 2014, which is a slight decrease in comparison to the 59% gross margin during the three months ended June 30, 2013. Total operating expenses for the three months ended June 30, 2014 were $2,498,717 as compared to $1,012,293 for the three months ended June 30, 2013. Core operating expenses (excluding stock-based compensation, deferred share unit compensation and other operating expenses) for the three months ended June 30, 2014 were $2,298,421, as compared to $740,238 for the three months ended June 30, 2013.
EBITDA(3) for the three months ended June 30, 2014 was negative $1,363,323 compared to negative $94,224 for the three months ended June 30, 2013.
Included in the Company's net income of $76,825 for the three months ended June 30, 2014, is a gain of $1,778,644 in mark to market adjustments on Canadian dollar denominated warrants. Exclusive of the mark to market adjustment, the Company would have incurred a net loss of $1,701,819. Included in the Company's net loss of $2,201,139 for the three months ended June 30, 2013, is a loss of $1,795,163 in mark to market adjustments on Canadian dollar denominated warrants. Exclusive of the mark to market adjustment, the Company's net loss would be $405,976.
Six-Month Comparative Results
The Company reported revenue of $2,645,175 for the six months ended June 30, 2014 as compared to $1,392,473 for the six months ended March 31, 2013. Operating loss was $2,839,448 for the six months ended June, 2014, as compared to an operating loss of $1,662,768 for the six months ended June 30, 2014.
The Company's calculated gross margin was 53% for the six months ended June 30, 2014, which is slightly lower than the 57% gross margin during the six months ended June 30, 2013. Total operating expenses for the six months ended June 30, 2014 were $4,234,856 as compared to $2,462,366 for the six months ended June 30, 2013, representing a 72% increase. Core operating expenses (excluding stock-based compensation, deferred share unit compensation and other operating expenses) for the six months ended June 30, 2014 were $3,833,134, as compared to $1,541,759 for the six months ended June 30, 2013, representing a 149% increase.
EBITDA for the six months ended June 30, 2014 was negative $2,437,726 compared to negative $742,161 for the six months ended June 30, 2013.
Included in the Company's net loss of $2,811,433 for the six months ended June 30, 2014, is a gain of $83,525 in mark to market adjustments on Canadian dollar denominated warrants. Exclusive of the mark to market adjustment, the Company would have incurred a net loss of $2,894,958. Included in the Company's net loss of $3,534,913 for the six months ended June 30, 2013, is a loss of $1,756,934 in mark to market adjustments on Canadian dollar denominated warrants. Exclusive of the mark to market adjustment, the Company's net loss would have been $1,777,979.
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
We anticipate increasing sales of the digital imaging product portfolio in the latter part of Q3 and throughout Q4 of Fiscal 2014 due to seasonal buying patterns in the dental industry as a result of tax incentives for dental and medical health practitioners in the US. We look forward to potentially exceeding the Company's revenue guidance through greater than anticipated impact of the our marketing and tradeshow programs in addition to the receipt of more favorable terms from key suppliers while also expecting to manage our operating expenses in line with the Company's anticipated revenue growth.
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 three and six months ended June 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.
Non-IFRS Measures
The following and preceding discussion of financial results includes references to Gross Margin, EBITDA, Core Operating Expenses and Working Capital, which are non-IFRS financial measures. The measure of gross margin is provided as management believes this is a good indicator in evaluating the operating performance of the Company. EBITDA is defined as 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. The measure of working capital is provided as management believes this is a good indicator of the operating liquidity available to the Company.
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.
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)
June 30, December 31,
2014 2013
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Assets
Current assets
Cash $ 1,838,400 $ 4,358,986
Trade and other receivables 784,041 503,736
Inventory 1,385,457 412,307
Inventory held by distributor 142,456 165,832
Prepaid expenses and deposits 574,274 297,164
-------------------------------
Total current assets 4,724,628 5,738,025
Non-current assets
Property and equipment 192,766 23,150
Patents and intellectual property 49,459 62,362
-------------------------------
$ 4,966,853 $ 5,823,537
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Liabilities and Shareholders' Deficiency
Current liabilities
Trade payables and accrued liabilities $ 1,485,243 $ 793,046
Advances from distributor 561,146 495,494
Deferred Revenue 7,947 -
Current portion of finance lease
obligation 4,032 3,690
Warrants 2,597,044 -
-------------------------------
Total current liabilities 4,655,412 1,292,230
Non-current liabilities
Long-term portion of finance lease
obligation 1,405 3,190
Warrants - 3,672,958
-------------------------------
Total liabilities 4,656,817 4,968,378
-------------------------------
Shareholders' Deficiency
Share capital 29,136,901 27,242,071
Stock-based payment reserve 1,347,854 970,004
Warrants reserve 4,718,328 4,724,698
Accumulated other comprehensive income 474,458 474,458
Deficit (35,367,505) (32,556,072)
-------------------------------
310,036 855,159
-------------------------------
$ 4,966,853 $ 5,823,537
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LED MEDICAL DIAGNOSTICS INC.
Condensed Interim Consolidated Statements of Operations and Comprehensive
Loss
(Expressed in U.S. Dollars)
Three Three
months months Six months Six months
ended ended ended ended
June 30, June 30, June 30, June 30,
2014 2013 2014 2013
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Revenues $ 1,590,289 $ 1,082,883 $ 2,645,175 $ 1,392,473
Cost of goods sold 724,230 446,509 1,249,767 592,875
---------------------------------------------------
866,059 636,374 1,395,408 799,598
---------------------------------------------------
Expenses
Sales and marketing 1,545,537 327,299 2,288,978 659,335
Research and
development 247,342 110,794 505,923 200,551
Administration 505,543 302,145 1,038,233 681,873
Stock-based
compensation 186,352 200,462 377,850 551,793
Deferred share unit
compensation - 27,850 - 315,431
Other operating
expenses 13,944 43,743 23,872 53,383
---------------------------------------------------
2,498,718 1,012,293 4,234,856 2,462,366
---------------------------------------------------
Operating loss (1,632,659) (375,919) (2,839,448) (1,662,768)
---------------------------------------------------
Other income (expenses)
Mark to market
adjustments on
Canadian dollar
denominated warrants
1,778,644 (1,795,163) 83,525 (1,756,934)
Foreign exchange
(loss) gain (63,419) (28,615) (55,510) (111,071)
---------------------------------------------------
1,715,225 (1,823,778) 28,015 (1,868,005)
---------------------------------------------------
Net income (loss) before
incomes taxes 82,566 (2,199,697) (2,811,433) (3,530,773)
Income taxes - 1,442 - 4,140
---------------------------------------------------
Net income (loss) and
comprehensive income
(loss) for the period $ 82,566 $(2,201,139) $(2,811,433) $(3,534,913)
---------------------------------------------------
Income (loss) per share
- basic and diluted $ 0.00 ($0.04) ($0.04) ($0.06)
---------------------------------------------------
Weighted average number
of shares outstanding -
basic and diluted 74,593,222 57,985,308 74,091,379 57,985,308
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LED MEDICAL DIAGNOSTICS INC.
Consolidated Statements of Cash Flow
(Expressed in U.S. Dollars)
Three Three
months months Six months Six months
ended ended ended ended
June 30, June 30, June 30, June 30,
2014 2013 2014 2013
----------------------------------------------------------------------------
Cash flows from
operating activities
Net income (loss) for
the period $ 82,566 $(2,201,139) $(2,811,433) $(3,534,913)
Adjustments to net
income (loss) for items
not involving cash:
Depreciation of
equipment 7,492 3,189 10,969 6,378
Amortization of
intellectual property 6,452 6,451 12,903 12,902
Warrants issuance
costs - 34,103 - 34,103
Mark to market
adjustments on
Canadian dollar
denominated warrants (1,778,644) 1,795,163 (83,525) 1,756,935
Settlement of warrant
liability upon
exercise and expiry
of warrants 692,240 951,065
Stock-based
compensation 186,352 200,462 377,850 551,793
Unrealized foreign
exchange gain (643,403) - (998,459) -
---------------------------------------------------
(1,446,945) (161,771) (2,540,630) (1,172,802)
---------------------------------------------------
Changes in working
capital assets and
liabilities:
Trade and other
receivables (178,543) (667,340) (280,305) 573,879
Inventory (811,048) 72,667 (973,150) (47,316)
Inventory held by
distributor 22,925 132,000 23,376 132,000
Prepaid expenses and
deposits (88,606) 11,519 (277,410) 11,498
Trade payables and
accrued liabilities 435,135 (58,132) 692,197 (114,585)
Advances from
distributor 87,560 (460,342) 65,652 (876,164)
Deferred revenue 7,947 - 7,947 -
---------------------------------------------------
Changes in working
capital assets and
liabilities (524,630) (969,628) (741,693) (320,688)
---------------------------------------------------
Cash flows used in
operating activities (1,971,575) (1,131,399) (3,282,323) (1,493,490)
---------------------------------------------------
Cash flows from
investing activities
Purchase of equipment (153,414) (1,191) (180,585) (1,191)
Restricted cash - 167 - 272
---------------------------------------------------
Cash flows used in
investing activities (153,414) (1,024) (180,585) (919)
---------------------------------------------------
Cash flows from
financing activities
Issuance of common
shares, net of
issuance costs - 1,858,174 - 1,858,174
Issuance of share
purchase warrants in
private placement - 386,497 - 386,497
Proceeds from exercise
of warrants 785,608 - 943,765 -
Repayment of finance
lease obligation (299) (723) (1,443) (1,411)
---------------------------------------------------
Cash flows provided by
(used in) financing
activities 785,309 2,243,948 942,322 2,243,260
---------------------------------------------------
(Decrease) increase in
cash (1,339,680) 1,111,525 (2,520,586) 748,851
Cash, beginning of
period 3,178,080 606,910 4,358,986 969,584
---------------------------------------------------
Cash, end of period $ 1,838,400 $ 1,718,435 $ 1,838,400 $ 1,718,435
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(1) 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.
For media relations, please contact:
Lindley Presley
Brandware Public Relations
Phone: 770.649.0880 ext. 309
E-Mail: lpresley@brandwarepr.com
For investor relations, please contact:
Mark Komonoski
Investor Relations
LED Medical Diagnostics Inc. (TSX.V: LMD, OTCQX: LEDIF, FSE: LME)
Phone: 403.255.8483
Toll-Free: 877.255.8483
Cell: 403.470.8384
E-Mail: mark.komonoski@ledmd.com
Skype: mkomonoski
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