SOURCE: Lightscape Technologies Inc.

Lightscape Technologies Inc.

November 27, 2009 10:31 ET

Lightscape Technologies Reports Fiscal 2010 Second Quarter Results

Digital OOH Network Now Totals 372 Screens Across 27 Cities

Non-Core Operations Being Sold to Focus on Profitable Digital OOH Network

HONG KONG--(Marketwire - November 27, 2009) - Lightscape Technologies Inc. (OTCBB: LTSC), an operator of digital out-of-home (OOH) advertising media and provider of LED solutions, announced financial results for the fiscal quarter ending September 30, 2009.

Total net revenue from continuing operations for the three months ended September 30, 2009 was $1.27 million, a 350% increase from $0.28 million for the three months ended September 30, 2008. Overall gross profit margin was 26% for the three months ended September 30, 2009, with a gross margin in the digital OOH advertising business of 79%.

Net loss from continuing operations for the three months ended September 2009 was $0.61 million, or $0.01 per fully diluted share, compared to a net loss of $0.44 million, or $0.01 per fully diluted share, for the three months ended September 30, 2008.

At the end of the quarter, Lightscape's OOH network totaled over 35 LED billboards and more than 300 LCD screens across 27 cities in Greater China and Hong Kong with utilization rates continuing to grow steadily. Current paying advertising clients include global financial service providers, leading consumer electronics manufacturers, high-end Chinese fashion brands and site-specific local restaurants and building tenants.

During the second quarter, the Company's lighting source products business, Beijing Aihua New Enterprise Lighting Appliance Co. Limited ("Aihua"), was classified as held for sale and discontinued. Over the past two fiscal years, Aihua accounted for $5,427,619 in net losses for Lightscape. Additionally, a non-core subsidiary in the LED solutions business was sold. The discontinuation of these businesses resulted in a non-cash net loss from discontinued operations for the three months ended September 2009 of $7.86 million, or $0.14 per fully diluted share.

Bondy Tan, President and CEO of Lightscape, said, "We decided to exit the lighting source products business by holding for sale our subsidiary company Aihua during the second quarter. Our decision to discontinue operations in this business segment is intended to more effectively utilize our financial and human resources by focusing on our core LED out-of-home advertising and LED solutions businesses which we consider to have more promising potential for revenue and margin growth. Subsequent to the end of our second quarter, we signed an agreement for the sale of this unit at a price of $1,140,751. It is expected that the sale of Aihua will considerably reduce our operational and non-operational expenses in the future, resulting in significant improvements in our operating results."

Continued Mr. Tan, "During the second quarter, we also continued to focus on opportunities in our core digital OOH advertising business. After the work we completed during calendar year 2008 and into 2009 to build up our digital OOH advertising network, we continued to grow our revenue from this segment during the second quarter. We see excellent opportunities for growth in this business and we will continue to build and expand the company's OOH advertising network through partnerships with major property owners and developers and by forming strategic relationships with advertising agencies."

Business Highlights

--  Lightscape continues to focus on its exclusive OOH advertising
    relationship with New World Group to ramp-up the network of locations at
    New World Department Stores China properties throughout Mainland China
--  booked $260,026 of advertising revenue generated by digital OOH
    advertising network, achieving a gross profit margin of 79%
--  Lightscape signed an agreement for the sale of its non-core lighting
    source products business for $1.14 million subsequent to the second quarter
    in order to free up capital and resources to grow its digital OOH
    advertising business
    

Results of Operations

Total net revenue from continuing operations for the three months ended September 30, 2009 was $1,270,340, representing a 350% increase from the total net revenue of $282,424 for the three months ended September 30, 2008. The increase in net revenues is attributable to increased sales across both the digital OOH advertising business and the LED solutions business.

Specifically, revenue related to the digital OOH advertising business was $260,026 for the three months ended September 30, 2009 as compared to $nil during the three months ended September 30, 2008, and a 38% increase over $188,625 for the Company's last quarter ending June 30, 2009. The gross profit margin on the digital OOH advertising business was 79% for the three months ended September 30, 2009. The digital OOH advertising business is expected to contribute increased revenues in the foreseeable future as the Company ramps up several key network installations which were completed during past quarters and are expected to generate increased advertising revenue in the future. The Company has formed strategic partnerships with Ogilvy & Mather Group, a major advertising agency in Hong Kong, and LIME, a diversified media conglomerate, to sell advertising space on its digital OOH network. The Company is also in the process of negotiating strategic partnership agreements and contracts with other advertising agencies and additional advertisers for the sales of advertising space on the network.

Revenue related to the Company's LED solutions business increased by 273% to $1,010,314 for the three months ended September 30, 2009 from $270,709 during the three months ended September 30, 2008. The increase in revenues was due primarily to the completion of more LED solutions contracts during the three months ended September 30, 2009 as compared to a smaller number of contracts completed during the three months ended September 30, 2008, and the acceleration of certain major contracts towards technical completion. The gross profit margin on the LED solutions business was 12% for the three months ended September 30, 2009. The LED solutions business is expected to contribute increased revenues in the foreseeable future as several key projects are expected to be completed in the near future.

Total cost of revenues from continuing operations for the three months ended September 30, 2009 was $942,706, which represents an increase of 457% as compared to total cost of revenues of $169,235 for the three months ended September 30, 2008. The increase in the total cost of revenues from continuing operations during the three months ended September 30, 2009 was due primarily to the corresponding 350% increase in overall sales revenues. The overall gross profit margin was 26% for the three months ended September 30, 2009 as compared to 40% for the three months ended September 30, 2008, with the decrease due mainly to lower gross margins from the LED solutions business.

Operating expenses from continuing operations for the three months ended September 30, 2009 were $890,668, which represents a 16% increase in operating expenses from $769,467 for the three months ended September 30, 2008. Selling and marketing expenses, general and administrative expenses constitute the main components of the Company's operating expenses. Earlier in 2009, the Company introduced internal measures to control costs, including salary reduction for management.

Selling and marketing expenses of continuing operations for the three months ended September 30, 2009 increased approximately 308% to $143,376 from $35,159 for the three months ended September 30, 2008. The increase corresponds to the 350% increase in total net revenues and was mainly due to increased costs incurred in order to build up the sales network for the digital OOH advertising business, and to build up the Company's project pipeline of LED solutions contracts. The Company anticipates that selling and marketing expenses will remain steady or increase in the future to support the Company's further expansion in its core digital OOH advertising and LED solutions businesses, however, any such increases are expected to be limited as a result of a company-wide cost-cutting initiative implemented throughout 2009.

General and administrative expenses of continuing operations decreased by 3% during the three months ended September 30, 2009 to $631,840 from $653,773 for the three months ended September 30, 2008. The decrease was mainly due to the cost savings achieved as a result of the company-wide cost-cutting initiative implemented throughout 2009. The Company anticipates that general and administrative costs will remain steady or increase in the foreseeable future as the Company's operations continue to expand, however, such increases are expected to be limited as a result of the cost-cutting initiative.

As of September 30, 2009, the Company had a net working capital surplus from continuing operations of $1,751,070 compared to a surplus of $2,684,131 as of March 31, 2009, representing a decrease in working capital of $933,061. The cash and cash equivalents of the Company attributable to continuing operations decreased to $224,042 as at September 30, 2009 as compared to $342,729 as of March 31, 2009. Cash attributable to discontinued operations totaled $127,780 as of September 30, 2009 and $47,470 as of March 31, 2009.

Lightscape incurred capital expenditures of $430,733 during the six months ended September 30, 2009 and $7,406 for the six months ended September 30, 2008. The increase in capital expenditures for the six months ended September 30, 2009 as compared to September 30, 2008 was mainly attributable to increased purchases of digital OOH advertising equipment.

Financing activities of continuing operations generated cash of $619,849 for the six months ended September 30, 2009 as compared to financing activities generating cash of $952,726 for the six months ended September 30, 2008. The decrease in net cash flow generated by financing activities of continuing operations was mainly due to the repayment of bank loans during the six months ended September 30, 2009 as compared to six months ended September 30, 2008.

Additional information regarding Lightscape's financial performance for the three and six months ending September 30, 2009 and a comparison to the periods ended September 30, 2008, can be found in the financial tables below and in the Company's Quarterly Report on Form 10-Q, which has been filed with the Securities and Exchange Commission.

About Lightscape Technologies

Lightscape Technologies Inc. (OTCBB: LTSC) is a leading digital media and LED solutions companies in Asia. Lightscape is building a digital out-of-home media network in China focused on LED billboards and LCD screens in prime locations. The Company also designs, markets, sells and installs LED systems and provides LED screen rentals. Lightscape is headquartered in Hong Kong, and the Company has offices in China and Macau. For additional information, please visit www.lightscapetech.com.hk.

Cautionary Disclaimer -- Forward-Looking Statements

This news release contains "forward-looking statements," as that term is defined in Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States Securities Exchange Act of 1934, as amended. Such forward-looking statements include, among others, the estimation, expectation and/or claim, as applicable, that: Lightscape expects to close the sale transaction of subsidiary company Aihua; Lightscape expects that the sale of Aihua will considerably reduce operational and non-operational expenses in the future, resulting in significant improvement in operating results; Lightscape expects an MOU agreement signed with New World Department Stores China to enable the Company to expand its digital OOH advertising network at properties throughout China; Lightscape expects its digital OOH advertising business to contribute increased revenues in the foreseeable future as the Company ramps up several key network installations which were completed during past quarters and are expected to generate increased advertising revenue in the future; Lightscape expects Ogilvy & Mather and LIME to sell advertising space on its digital OOH advertising network; Lightscape expects its LED solutions business to contribute increased revenues in the foreseeable future as several key projects are expected to be completed in the near future; and Lightscape anticipates that selling, marketing, general and administrative expenses will remain steady or increase in the future to support the Company's further expansion in its core digital OOH advertising and LED solutions businesses, but such increases are expected to be limited as a result of a company-wide cost-cutting initiative implemented in January 2009. Actual results could differ from those projected in any forward-looking statements due to a variety of risks, uncertainties and other factors, including, but not limited to, delays in the supply of LED modules, LED video screens and other hardware; risks of downturns in economic conditions generally and in Hong Kong and China specifically; competition with larger companies with greater resources and more experience in providing digital OOH advertising services and LED solutions; the availability of timely financing; and the Company's ability to manage growth. These forward-looking statements are made as of the date of this news release and the Company assumes no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements. Although the Company believes that the beliefs, plans, expectations and intentions contained in this press release are reasonable, there can be no assurance those beliefs, plans, expectations, or intentions will prove to be accurate. Investors should consider all of the information set forth herein and should also refer to the risk factors disclosed in the Company's periodic reports filed from time-to-time with the Securities and Exchange Commission and available at www.sec.gov.

(financial tables to follow)


             LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF OPERATIONS
                  AND COMPREHENSIVE LOSS (UNAUDITED)
     Expressed in US dollars (except for number of common shares)


                              Three Months Ended       Six Months Ended
                                September 30,           September 30,
                               2009        2008        2009        2008
                            ----------  ----------  ----------  ----------
                                $           $           $           $
                            ----------  ----------  ----------  ----------
Revenues:
   Advertising revenue         260,026           -     448,651           -
   LED solutions revenue     1,010,314     270,709   1,784,319     923,658
   Other revenue                     -      11,715           -      22,667

                            ----------  ----------  ----------  ----------
Total net revenues           1,270,340     282,424   2,232,970     946,325
                            ----------  ----------  ----------  ----------

Cost of revenues:
   Cost of sales of
    Advertising revenue (i)     53,884           -      93,156           -
   Cost of sales of LED
    solutions revenue          888,822     169,046   1,529,470     676,681
   Costs of Other revenue            -         189           -         378

                            ----------  ----------  ----------  ----------
Total cost of revenues         942,706     169,235   1,622,626     677,059
                            ----------  ----------  ----------  ----------

Gross profit                   327,634     113,189     610,344     269,266

Bad debts                      (36,584)          -     (36,584)          -
Amortization                   (38,219)    (53,855)    (76,438)   (125,546)
Depreciation                   (40,110)    (26,680)    (79,645)    (62,690)
Loss on disposal of
 property, plant and
 equipment                        (539)          -        (539)          -
Selling and marketing
 expenses                     (143,376)    (35,159)   (310,521)    (97,885)
General and administrative
 expenses                     (631,840)   (653,773) (1,349,094) (1,459,972)

                            ----------  ----------  ----------  ----------
Loss from operations          (563,034)   (656,278) (1,242,477) (1,476,827)
Interest expense, net of
 interest income               (48,123)     (6,902)    (47,964)     (6,953)
Other income                     4,217      13,645      23,332      13,645
                            ----------  ----------  ----------  ----------

Loss from continuing
 operations before income
 tax and noncontrolling
 interests                    (606,940)   (649,535) (1,267,109) (1,470,135)
Income tax provision                 -     206,977           -     206,977
                            ----------  ----------  ----------  ----------

Net loss from continuing
 operations before
 noncontrolling interests     (606,940)   (442,558) (1,267,109) (1,263,158)
Less:  net income
 attributable to the
 noncontrolling interests            -           -           -           -
                            ----------  ----------  ----------  ----------

Net loss from continuing
 operations attributable to
 Lightscape Technologies
 Inc.                         (606,940)   (442,558) (1,267,109) (1,263,158)
                            ----------  ----------  ----------  ----------

Discontinued operations
    Net (loss) from
     discontinued
     operations, net of
     income taxes             (116,658)   (296,773)   (210,922)   (470,034)
    Gain on disposal of
     discontinued component     54,172           -      54,172           -
    Impairment loss on
     subsidiary held for
     sale                   (8,835,266)          -  (8,835,266)          -
    Noncontrolling interest
     share of related
     impairment loss         1,042,496               1,042,496
                            ----------  ----------  ----------  ----------

    Net (loss) from
     discontinued
     operations             (7,855,256)   (296,773) (7,949,520)   (470,034)
                            ----------  ----------  ----------  ----------
    Net loss attributable
     to Lightscape
     Technologies Inc.      (8,462,196)   (739,331) (9,216,629) (1,733,192)

    Other comprehensive
     income
    Foreign currency
     translation adjustment
     arising during the
     period                    (36,257)    (33,374)      1,789     119,920
                            ----------  ----------  ----------  ----------
    Comprehensive loss      (8,498,453)   (772,705) (9,214,840) (1,613,272)
                            ==========  ==========  ==========  ==========

    Loss per share
    Basic and diluted
    Continuing operations        (0.01)      (0.01)      (0.02)      (0.02)
    Discontinued operations      (0.14)          -       (0.14)      (0.01)
                            ----------  ----------  ----------  ----------
    Total                        (0.15)      (0.01)      (0.16)      (0.03)
                            ==========  ==========  ==========  ==========

    Weighted average number
     of common shares
     outstanding
    Basic and diluted       55,876,410  55,876,410  55,876,410  55,876,410
                            ==========  ==========  ==========  ==========



(i) Includes depreciation of plant and equipment of $53,884 and $93,156 for
the three months ended September 30, 2009 and 2008, respectively, and $Nil
and $Nil for the six months ended September 30, 2009 and 2008,
respectively.


                   LIGHTSCAPE TECHNOLOGIES INC. AND SUBSIDIARIES
                            CONSOLIDATED BALANCE SHEETS
                              Expressed in US dollars




                                                 September 30,   March 31,
                                                      2009         2009
                                                  (Unaudited)
                                                  -----------  -----------
                                                       $            $
                                                  -----------  -----------
ASSETS
Current assets:
 Cash and cash equivalents                            224,042      342,729
 Accounts receivable, net of allowance for
  doubtful accounts of $561,254 on September 30,
  2009 and $415,383 on March 31, 2009               1,695,800    1,213,334
 Costs and estimated earnings in excess of
  billings on uncompleted contracts                   428,044      673,312
 Prepaid expenses and other current assets          1,966,740    1,041,616
 Inventories - LED                                  1,264,975    1,264,975
 Inventories - others, including valuation
  allowance of $162,801 on September 30, 2009 and
  $162,782 on March 31, 2009                                -            -
 Current assets of discontinued operations          3,205,952   12,435,386
                                                  -----------  -----------

Total current assets                                8,785,553   16,971,352
                                                  -----------  -----------

Intangible assets, net                                  6,615       82,431
Goodwill                                              776,378      776,378
Plant and equipment, net                              345,499      279,738
Out-of-home advertising equipment, net              1,985,000    1,824,421
Construction in progress - Out-of-home
 advertising equipment                                266,250      266,250
Deferred cost                                         104,404      111,132
Accounts receivable, due after one year and net
 of allowance for doubtful accounts of $Nil on
 September 30, 2009 and $145,871 on March 31,
 2009                                                       -      200,889
Prepaid expenses and other current assets - due
 after one year                                             -        8,612
Net investment in sales-type leases of
 discontinued operations                               20,438       36,359
                                                  -----------  -----------

                                                    3,504,584    3,586,210
                                                  -----------  -----------

TOTAL ASSETS                                       12,290,137   20,557,562
                                                  ===========  ===========

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
 Short-term bank borrowings                           456,694            -
 Secured loan                                         257,069            -
 Trade payables                                       877,560      358,939
 Amount due to a director                             592,589      745,501
 Accrued expenses and other current liabilities     1,632,821      747,395
 Obligations under capital leases - current
  portion                                              11,799            -
 Income tax payable                                         -            -
 Current liabilities of discontinued operations     1,200,549    1,170,508
                                                  -----------  -----------

Total current liabilities                           5,029,081    3,022,343
                                                  -----------  -----------

Non-current liabilities:
Obligations under capital leases - non-current
 portion                                               47,199            -
                                                  -----------  -----------

Total non-current liabilities                          47,199            -
                                                  -----------  -----------

Total liabilities                                   5,076,280    3,022,343
                                                  -----------  -----------

Shareholders’ equity:
Common stock
Authorized:
800,000,000 common shares, par value $0.001 per
 share
100,000,000 preferred shares, par value $0.001
 per share
Issued and outstanding:
55,876,410 common shares at September 30, 2009
 and at March 31, 2009
                                                       55,876       55,876
Additional paid-in capital                         34,140,708   34,140,708
Common stock warrants                                 344,673      344,673
Other reserves                                         28,944       28,944
Accumulated other comprehensive income              1,079,143    1,077,353
Accumulated deficit                               (28,435,851) (19,219,220)
                                                  -----------  -----------
Total shareholders’ equity                          7,213,493   16,428,335
                                                  -----------  -----------
Noncontrolling interest                                   364    1,106,884
                                                  -----------  -----------
Total Equity                                        7,213,857   17,535,219
                                                  -----------  -----------

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY         12,290,137   20,557,562
                                                  ===========  ===========


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