BURNABY, BRITISH COLUMBIA--(Marketwired - Nov. 20, 2013) - LED Medical Diagnostics Inc. ("LED Medical, the Company") (TSX VENTURE:LMD)(OTCQX:LEDIF)(FRANKFURT:LME) today announced its financial results for the third quarter ended September 30, 2013, reported in United States dollars and in accordance with International Financial Reporting Standards ("IFRS"). The Company's results are presented in comparison to the three months ended June 30, 2013 and September 30, 2012 (which have been restated due to the Company's transition to United States dollar ("U.S.") functional and reporting currency and for the revision of its revenue recognition policy pertaining to sales made to Henry Schein Inc.), also in accordance with IFRS all balances are expressed in U.S. dollars unless otherwise stated.
Financial Highlights
- Revenue decreased by 68% to $911,387 for the three months ended September 30, 2013 compared to $2,885,834 over the same period in the prior year.
- EBITDA(1) decreased by 117% to ($139,816) for three months ended September 30, 2013 compared to $811,255 over the same period in the prior year.
Three Month Comparative Results
For the three months ended September 30, 2013, the Company reported revenues of $911,387 which is less than the $1,082,883 for three months ended June 30, 2013 and $2,885,834 for the three months ended September 30, 2012.
Gross margin(2) was 64% during the three months ended September 30, 2013, compared to the three months ended June 30, 2013 of 59% and to 67% during the three months ended September 30, 2012. The Company's margin varies depending on the mix of VELscope devices and disposables sales for any given period.
Core operating expenses (excluding stock-based compensation, deferred share unit compensation and other operating expenses)(3) for the three months ended September 30, 2013 of $719,873 were 3% lower than the three months ended June 30, 2013 and 35% lower than the three months ended September 30, 2012.
EBITDA(1) for the three months ended September 30, 2013 was ($139,816) compared to ($103,864) for the three months ended June 30, 2013 and $811,255 for the three months ended September 30, 2012. The Company reported a net loss of $1,959,503 for the three months ended September 30, 2013 compared to a net loss of $2,201,139 for the three months ended June 30, 2013 and net income of $753,643 for the three months ended September 30, 2012.
Nine Month Comparative Results
For the nine months ended September 30, 2013, the Company reported revenues of $2,303,860 which is lower than the $4,922,760 in revenues for the nine months ended September 30, 2012.
Gross margin(2) was 60% during the nine months ended September 30, 2013 compared to the nine months ended September 30, 2012 of 59%.
Core operating expenses (excluding stock-based compensation, deferred share unit compensation and other operating expenses)(3) for the nine months ended September 30, 2013 of $2,261,632 were lower than the nine months ended September 30, 2012 of $3,569,423.
EBITDA(1) for the nine months ended September 30, 2013 was approximately ($881,977) compared to ($644,630) for the nine months ended September 30, 2012. The Company reported a net loss of $5,494,416 for the nine months ended September 30, 2013 compared to a net loss of approximately $692,394 for the nine months ended September 30, 2012.
Cash was $973,410 with net working capital(4) of approximately $741,493 as of September 30, 2013 compared to cash of $1,718,435 with net working capital(4) of $972,183 as of June 30, 2013.
Business Highlights
Notable business developments and achievements up to the reporting date included the following:
- On August 28, 2013, the Company announced that its VELscope® Vx Enhanced Oral Assessment System received the Pride Institute's "Best of Class" Technology Award for 2013. This is the third consecutive year the Company has received this award;
- On October 3, 2013, the Company announced that effective October 10, 2013, Dr. David Gane, was appointed as CEO;
- On October 24, 2013, the Company announced its appointment of Lamar Roberts as Vice President of Sales and Marketing;
- On October 28, 2013, the Company announced that it had received final approval of the TSX Venture Exchange and completed a non-brokered private placement of 15,000,000 units at an issue price of CDN$0.35 per unit for gross proceeds of up to $5.25 million;
- On October 29, 2013, the Company announced that it entered into a Canadian National Distribution Agreement with Sinclair Dental, effective September 15, 2013 for a period of one year, subject to the attainment of quarterly sales volume; and
- On November 5, 2013, the Company announced that its global distribution agreement for the VELscope® Vx product line between DenMat Holdings, LLC ("DenMat") and LED Medical Diagnostics' wholly owned subsidiary, LED Dental. Inc., is no longer an exclusive agreement for North America.
"This past quarter, although challenging, is expected to be memorable as the catalyst for this important change in leadership and vision in the Company," stated Dr. David Gane, Chief Executive Officer. "I am energized to play such an important role at this turning point in LED's future. I intend to make our stakeholders, employees and management team prouder than ever to be associated with LED.
"We start Q4 with a proven management team and a significant investment. It is anticipated that this will enable the Company to fund the execution of its renewed vision which will include significant investments in research and development and needed improvements in its sales and marketing infrastructure. I thank Peter Whitehead, as exiting CEO for his service and leadership. I'm confident in his abilities to provide new product development leadership as he transitions from his management role to concentrate on research, development, special projects and business opportunities for the Company. The Company has recently optimized its relationship with DenMat and is in the process of expanding its sales channels in North America and other Global markets. I believe strongly in our plan to diversify beyond the VELscope® by expanding our offering with the addition of complementary imaging products and services which we expect will contribute stability to the Company as well as revenue growth in 2014."
Financial Statements and Management Discussion & Analysis
Please see the unaudited condensed consolidated interim financial statements and related Management's Discussion & Analysis ("MD&A") for more details. The unaudited condensed consolidated interim financial statements for the three and nine month periods ended September 30, 2013 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 new release to alert investors to its results and tha ta 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 reference to Gross Margin, EBITDA, Core Operating Expenses and Working Capital, which are all non-IFRS financial measures. The measure of gross margin is provided as management believes this is a good indicator in evaluation the operating performance of the Company. EBITDA is defined as operating loss less other operating expenses. The measure is provided as a proxy for the cash earnings from the operations of the business as operating loss for the Company includes non-cash amortization and depreciation expense. The measure of core operating expenses is provided as a proxy for cash expenses incurred from the operations of the business. The measure of working capital is provided as management believes this is a good indicator of the operating liquidity available to the Company.
Change in Functional and Reporting Currency
The Company has changed the functional currency of the parent company entity from Canadian dollar to United States dollar as of January 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 ("RTO") in November 2011. This change was effected prospectively from January 1, 2012 onwards.
The Company also changed their reporting currency on December 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 their 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 LED product to increase overall market share of the Company results in the Company not being able to reasonably estimate such marketing oriented expenses 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.
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 Corporation's future plans, objectives, performance, revenues, growth, profits, operating expenses or the Corporation's underlying assumptions and the Company's intention to expand its technology beyond dental applications. The words "may", "would", "could", "will", "likely", "expect", "anticipate", "intend", "plan", "forecast", "project", "estimate" and "believe" or other similar words and phrases may identify forward-looking statements or information. Persons reading this Management's Discussion and Analysis are cautioned that such statements or information are only predictions, and that the Corporation'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; volatility of stock price; 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 Corporation's products and services; customer and industry analyst perception of the Corporation 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 Corporation 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 Corporation's reports filed on SEDAR, including its financial statements and management's discussion and analysis for the year ended December 31, 2012 and three months ended March 31, 2013.
In drawing a conclusion or making a forecast or projection set out in the forward-looking information, the Corporation takes into account the following material factors and assumptions in addition to the above factors: the Corporation's ability to execute on its business plan; the acceptance of the Corporation's products and services by its customers; the timing of execution of outstanding or potential customer contracts by the Corporation; the sales opportunities available to the Corporation; the Corporation's subjective assessment of the likelihood of success of a sales lead or opportunity; the Corporation's historic ability to generate sales leads or opportunities; and that sales will be completed at or above the Corporation's estimated margins. This list is not exhaustive of the factors that may affect the Corporation'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 press release are qualified by this cautionary statement and there can be no assurance that actual results or developments anticipated by the Corporation will be realized. The Corporation 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.
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.
Through its wholly-owned subsidiary, LED Dental Inc., the company manufactures the VELscope® Vx Enhanced Oral Assessment System, the first system in the world to apply tissue fluorescence visualization technology to the oral cavity. VELscope® Vx devices are now used to conduct more screenings for oral cancer and other oral diseases than any other adjunctive device. To date, there have been more than 12,000 VELscope® Vx systems sold globally and they have been used to perform more than 25 million exams. For more information, call 604.434.4614 or visit www.leddental.com.
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.
| (1) |
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 operating loss and excludes amortization, depreciation, stock-based compensation, deferred share unit compensation and mark to market adjustments on Canadian dollar denominated warrants.. Please refer to the reconciliation of EBITDA to reported financial results attached to this press release. |
| (2) |
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. |
| (3) |
Non-IFRS measure that does not have a standard meaning and may not be comparable to a similar measure disclosed by other issuers. Core operating expenses excludes stock-based compensation, deferred share unit compensation, mark to market adjustments on Canadian dollar denominated warrants and other operation expenses. |
| (4) |
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. |