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LED Medical Diagnostics Inc. Reports 2014 Second Quarter Results

  • August 26, 2014
  • News Releases

Burnaby, British Columbia – August 26, 2014 – LED Medical Diagnostics Inc. (“LED Medical” or the “Company”) 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 capital1 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 margin2 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.

EBITDA3 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 audited 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.

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.

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1Working 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.

2Gross 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.

3EBITDA 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.

Investor Relations:

Mark Komonoski
Investor Relations
LED Medical Diagnostics Inc.
TSX.V: LMD | OTCQX: LEDIF | FSE: LME

Toll-Free: 877.255.8483
Office: 403.255.8483
Mobile: 403.470.8384
E-Mail:
Skype: mkomonoski

Media Inquiries:

Chris Koch
LED Imaging
Office: 404.502.4438
Email:

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