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LED Medical Diagnostics Reports 2013 Second Quarter Results

  • January 14, 2014
  • News Releases

BURNABY, British Columbia – August 26, 2013 – LED Medical Diagnostics Inc. (“LED Medical, the Company”) today announced its financial results for the second quarter ended June 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 March 31, 2013 and June 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 increased by 4% to $1,083,000 for the three months ended June 30, 2013 compared to $1,038,000 over the same period in the prior year.
  • EBITDA1 for three months ended June 30, 2013 of ($104,000) compared to the same period in the prior year of approximately ($495,000).

“I am pleased to report encouraging results from the second quarter of 2013. Our revenues were up considerably from the first quarter. In fact, the Company came very close to breaking even,” stated Peter Whitehead, LED Founder and Chief Executive Officer. “At this stage of our development a neutral quarter can be seen as a positive result, and as confirmation that the infrastructure we’ve laid out for our internal sales force is beginning to show results. Demand for the VELscope Vx remains strong, and I am optimistic that between now and the end of the year our sales momentum will continue to improve.”

Three Month Comparative Results

For the three months ended June 30, 2013, the Company reported revenues of approximately $1,083,000 which is higher than the approximately $310,000 for three months ended March 31, 2013 and approximately $1,038,000 for the three months ended June 30, 2012.

Gross margin2 was 59% during the three months ended June 30, 2013, compared to the three months ended March 31, 2013 of 53% and to 54% during the three months ended June 30, 2012. The Company’s margin varies depending on the mix of VELscope equipment versus disposables sales for any given period.

Core operating expenses (excluding stock-based compensation, deferred share unit compensation, mark to market adjustments on Canadian dollar denominated warrants and other operating expenses)3 for the three months ended June 30, 2013 of approximately $740,000 were 8% lower than the three months ended March 31, 2013 and 30% lower than the three months ended June 30, 2012.

EBITDA1 for the three months ended June 30, 2013 was approximately ($104,000) compared to approximately ($638,000) for the three months ended March 31, 2013 and ($495,000) for the three months ended June 30, 2012. The Company reported a net loss of approximately $2.2 million for the three months ended June 30, 2013 compared to a net loss of approximately $1.33 million for the three months ended March 31, 2013 and $195,000 for the three months ended June 30, 2012.

Six Month Comparative Results

For the six months ended June 30, 2013, the Company reported revenues of approximately $1.4 million which is lower than the approximately $2.0 million for the six months ended June 30, 2012.

Gross margin2 was 57% during the six months ended June 30, 2013 compared to the six months ended June 30, 2012 of 49%.

Core operating expenses (excluding stock-based compensation, deferred share unit compensation, mark to market adjustments on Canadian dollar denominated warrants and other operating expenses)3 for the six months ended June 30, 2013 of approximately $1.5 million were lower than the six months ended June 30, 2012 of $2.5 million.

EBITDA1 for the six months ended June 30, 2013 was approximately ($742,000) compared to approximately ($1.5 million) for the six months ended June 30, 2012. The Company reported a net loss of approximately $3.5 million for the six months ended June 30, 2013 compared to a net loss of approximately $1.4 million for the six months ended June 30, 2012.

Cash was approximately $1,718,000 with net working capital4 of approximately $972,000 million as of June 30, 2013 compared to cash of approximately $607,000 with negative net working capital4 of approximately $1,109,000 as of March 31, 2013.

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.

2Non-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.

3Non-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.

4Non-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.

Business Highlights

Notable developments and achievements during the first quarter of fiscal 2013 included the following:

  • On April 24, 2013, the Company announced the results of an independent study published in “Oral Surgery, Oral Medicine, Oral Pathology, Oral Radiology” (Vol. 114 No. 3) that confirms the use of quantitative cytology (“QC”) testing, as an adjunctive tool, successfully identifying high-risk potentially malignant disorders of the oral mucosa.
  • On May 7, 2013, the Company cited a recent clinical study documenting the ability of its VELscope® Vx Enhanced Oral Assessment adjunctive technology to detect cancerous and pre-cancerous lesions that are missed by conventional exams.
  • On June 10, 2013, the Company announced that its patented VELscope® Vx oral examination device is currently involved in a Phase III study sponsored by the University of British Columbia in collaboration with the Terry Fox Research Institute and the British Columbia Cancer Agency.
  • On June 14, 2013, the Company completed a non-brokered private placement of 17,000,000 units at an issue price of $0.15 per unit for gross proceeds of $2.55 million.

The Audit Committee of the Company has reviewed the contents of this news release.

Non-GAAP 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.

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.

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