LED Medical Diagnostics Inc LEDIF

RE:SG&A growth out of control here

[Alexsorenthor34]

As for the mushrooming SG&A expenses. I will quote Nick Hodge on this one. "Many people don't like Mushrooms because they're grown in s#!+. But it's a necessary fertilizer. And I think that's what's going on here. Remember the reasons we are invested in this company. It's going from a single-product story with exclusive distribution agreements to a multi faceted dental distribution company selling it's own and other firms' products through its own channels and non-exclusive deals. The rampant rise in spending is the cost of that transition — bringing in new management, building a new sales office and team, attending multiple trade shows, purchasing demo equipment, and building inventories. As the company notes in the Management Discussion & Analysis of earnings: To date, the Company has had a significant portion of its revenues derived from sales to its former exclusive distribution partners. The Company has transitioned to a non-exclusive distribution structure by terminating all previously exclusive distribution partnerships and entering non-exclusive distribution agreements with multiple distribution partners. During this transition period,the Company underwent a general shift in resources to sales and marketing from administration as new distribution agreements were negotiated. The cost of building inventory is mentioned several times in that discussion — a thinly-veiled hint that sales will be drastically higher in the near term. It had 13 employees at the end of the third quarter last year. It has 40 now. Administrative employees remained the same (and administration costs went down), R&D employees remained the same, but sales and marketing employees grew 386%, from seven employees to 34. What's more, the company reiterated its full-year sales guidance of $9-11 million, which tells me it's still expecting a very robust fourth quarter. Bottom line is the company, even if it doesn't quite get to $9 million, will still at least triple revenues in 2014 compared to 2013. To me, that's a sign the transition is working. I'm sticking with it."