BURNABY, British Columbia – May 2, 2013 – LED Medical Diagnostics Inc. (“LED Medical, the Company”) today announced its financial results for the fourth quarter and full year ended December 31, 2012, 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 and twelve months ended December 31, 2011, also in accordance with IFRS 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. All balances are expressed in U.S. dollars unless otherwise stated.
- Revenues for fiscal 2012 were approximately $6.3 million, an 11% increase over fiscal 2011.
- Revenues for Q4 2012 were approximately $1.4 million, which is consistent with Q4 2011.
- EBITDA1 for fiscal 2012 of ($728,000) and Q4 2012 of ($84,000) compared to 2011 comparable periods to approximately ($2.5) million and ($631,000), respectively.
“During late fiscal 2012, we terminated our exclusive distribution relationship with Henry Schein Inc. During the same time frame we reached an agreement with DenMat Holdings, LLC (“Denmat”) to assume the role of exclusive manager of LED’s global distribution strategy. The shift in alliance from Henry Schein to DenMat caused a temporary disruption to our activities in the marketplace. As a result of the transition in our sales and marketing activities to our new distribution partner in late 2012, the Company’s revenues were lower than anticipated but still resulted in increase from prior year,” stated Peter Whitehead, LED Founder and Chief Executive Officer. “With the DenMat relationship now in place, we expect to see an aggressive sales and marketing program working at full pace by mid 2013 which is expected to result in increased future revenue after 2013. The Denmat relationship should allow the Company’s financial situation to improve significantly in the longer term by optimizing our sales and marketing efforts. Our optimism is further buoyed by our experience that demand for the VELscope Vx appears to remain strong.”
Three Month Comparative Results
For the three months ended December 31, 2012, the Company reported revenues of approximately $1.4 million which is consistent with approximately $1.4 million for the fourth quarter of 2011. Revenues were lower in the three months ended December 31, 2012 compared to revenues of approximately $2.9 million for the three months ended September 30, 2012.
Gross margins2 were 46% during the three months ended December 31, 2012, which was higher than the three months ended December 31, 2011 of 44%. The Company’s margins vary depending on the mix of equipment versus disposables sales for any given period.
Total operating expenses (excluding other operating expenses and mark to market adjustments on Canadian dollar denominated warrants)3 for the three months ended December 31, 2012 of approximately $726,000 were 49% lower than the three months ended December 31, 2011 of approximately $1.4 million.
EBITDA for the three months ended December 31, 2012 was approximately ($84,000) compared to approximately ($630,000) for the three months ended December 31, 2011. The Company reported a net loss of approximately $175,000 for the three months ended December 31, 2012 compared to a net loss of approximately $3.1 million for the three months ended December 31, 2011.
Twelve Month Comparative Results
For the year ended December 31, 2012 the Company reported revenues of approximately $6.3 million as compared to approximately $5.7 million for the year ended December 31, 2011, an increase of 11% over the comparable period. The increase is attributable to the increased sales by Henry Schein to its end customers in during the first half of fiscal 2012 in addition to sales orders received from the Company’s new distribution partner, Denmat in late fiscal 2012.
Gross margins were 57% during the year ended December 31, 2012 which was higher than the gross margins of 52% for the year ended December 31, 2011. The Company’s margins vary depending on the mix of equipment versus disposables sales for any given period.
Total operating expenses (excluding other operating expenses and mark to market adjustments on Canadian dollar denominated warrants) for the year ended December 31, 2012 of approximately $4.4 million were 24% lower than the year ended December 31, 2011 of approximately $5.7 million.
EBITDA for the year ended December 31, 2012 was approximately ($728,000) compared to approximately ($2.5 million) for the year ended December 31, 2011. The Company reported a net loss of approximately $867,000 for its fiscal 2012 compared to a net loss of approximately $4.1 million for the year ended December 31, 2011.
Cash was approximately $970,000 (inclusive of the net proceeds from the approximately $1.1 million equity financing completed by the Company in late 2012) with negative net working capital of approximately $97,000 as of December 31, 2012 compared to cash of approximately $976,000 with negative net working capital of approximately $356,000 as of December 31, 2011.
Notable developments and achievements during the fourth quarter included the following:
- On October 12, 2012, the Corporation announced that, subject to TSX Venture Exchange approval, it has agreed to extend the term of certain warrants to acquire a total of 5,599,897 common shares of the Company that are scheduled to expire between October 31, 2012 and February 22, 2013. The extension ranges from between three to seven months. As a result of the extension, all outstanding series of LED warrants will now expire on May 22, 2013, other than warrants previously granted to one of LED”s product distributors. The warrants were originally issued between July 9, 2010 and February 22, 2011 when the Company was a private issuer, and have exercise prices ranging from $0.65 to $1.00 per common share.
- On November 7, 2012, the Corporation announced that its VELscope® enhanced oral assessment technology has been used to conduct an estimated 25 million oral cancer exams since its 2006 introduction.
- On November 20, 2012, the Corporation announced that the VELscope Vx Enhanced Oral Assessment System, the market-leading early-stage oral cancer detection device approved by the FDA, Health Canada, and European regulators, has been chosen by Dentistry Today magazine for one of its annual “Top 50 Technology Products” awards. Dentistry Today”s “Top 50 Technology Products” represent the best and brightest technologies available to dental professionals each year. The recipients are determined based on input from readers of Dentistry Today.
- On December 21, 2012, the Corporation announced that it raised CDN $1,162,500 on a planned minimum raise of one million dollars.
The Audit Committee of the Company has reviewed the contents of this news release.
The following and preceding discussion of financial results includes reference to Gross Margin, EBITDA 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 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.
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 tissue abnormalities than any other adjunctive device. For more information, visit www.leddental.com.