LED Medical Diagnostics Inc.
TSX VENTURE : LMD

LED Medical Diagnostics Inc.

December 06, 2011 20:15 ET

LED Reports 2011 Third Quarter Financial Results

Strong revenue growth over prior year due to launch of VELscope Vx

BURNABY, BRITISH COLUMBIA--(Marketwire - Dec. 6, 2011) - LED Medical Diagnostics Inc. (TSX VENTURE:LMD) ("LED" or the "Company"), a leading medical diagnostics company, today announced its financial results for the three and nine months ended September 30, 2011. For the nine months ended September 30, 2011, the Company increased revenue by 275% over the prior year to $5.1 million compared to approximately $1.4 million in the same period of the prior year. Results are reported in Canadian 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, 2011 and September 30, 2010, respectively, also in accordance with IFRS.

"We are very proud of having developed one of the world's leading adjunctive cancer screening tool, the VELscope Vx, which was successfully launched at the beginning of this year in the North American market. The VELscope Vx is the newest handheld version of our patented VELscope technology and is the culmination of years of research and development and earlier sales efforts," said Peter Whitehead, President and Chief Executive Office. Whitehead continued, "This year's launch of the VELscope Vx has resulted in revenues of $5.1 million for the nine months ended September 30, 2011, a significant increase of 275% over the prior year's revenues of $1.4 million. In addition, our consumables sales have increased to $930,437 from $436,348 over this period, an increase of 113%. Partnering with industry leader Henry Schein, we have greatly expanded our sales and distribution reach and continue to brand our flagship product while we push for international expansion."

"For the third quarter ended September 30, 2011, the Company reported revenues of approximately $555,915 as compared to approximately $270,657 for the third quarter of 2010, an increase of 51% over the prior year period. Revenues were lower this quarter from the second and first quarters of 2011 of $1.8 million and $3.0 million, respectively, which was attributable to the seasonality of the industry and the traditionally slow months of the summer. Based on orders booked to date, the Company expects an increase in revenues in our fourth quarter and strong annual revenue growth over prior years," stated Mr. Whitehead.

Total operating expenses, excluding other operating expenses, for the three months ended September 30, 2011 were 9% lower than the preceding three months ended June 30, 2011 and 79% higher than the comparable three months ended September 30, 2010. Earnings before other operating expenses, finance income and foreign exchange gain (loss) ("EBITDA") for the three months ended September 30, 2011 was ($984,446) compared to ($684,268) for the previous three months ended June 30, 2011 and ($555,882) for the comparable three months ended September 30, 2010. Cash and cash equivalents were approximately $219,411 with net working capital of approximately ($639,011) as of September 30, 2011, compared to cash and cash equivalents of approximately $269,010 with negative net working capital of approximately ($1.0 million as of December 31, 2010.

On November 21, 2011, the Company amalgamated with Searchlight Capital Corporation. In connection with the transaction, holders of common shares of Searchlight received one common share of the Company for every 1.66666 common shares of Searchlight held. Concurrent with the completion of this arrangement, the Company completed a non-brokered private placement unit offering in the amount of $1.1 million with each unit consisting of one common share of the Company and one-half of a share purchase warrant where each whole warrant is exercisable into one common share of the Company at an exercise price of $1.00 for a period of 18 months. The private placement units are subjected to a four month hold period.

The new accounting policies under IFRS have been consistently applied to all of the periods presented in this news release. Further details on the conversion to IFRS are provided in Management's Discussion and Analysis and in the notes to the Company's unaudited condensed consolidated financial statements as at and for the three and nine months ended September 30, 2011.

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

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 that involve risks and uncertainties. Such forward-looking statements or information may include financial and other projections as well as statements regarding the Company's future plans, objectives, performance, revenues, growth, profits, operating expenses or the company's underlying assumptions. 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 press release are cautioned that such statements or information are only predictions, and that the Company'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: the need to develop products to meet the Company's customer's requirements; the possibility of development or deployment difficulties or delays; the dependence on the Company's customer's satisfaction; the timing of entering into significant contracts; customers' continued commitment to the deployment of the Company's solutions; the performance of the global economy and growth in sales; market acceptance of the Company's products; the success of certain business combinations engaged in by the Company or by its competitors; possible disruptive effects of organizational or personnel changes; technological change, new products and standards; risks related to international expansion; concentration of sales; international operations and sales; dependence upon key personnel and hiring; reliance on a limited number of suppliers; industry growth; competition; intellectual property; product defects and product liability; currency exchange rate risk; and other factors described in the Company's reports filed on SEDAR, including its financial report for the three months ended September 30, 2011. This list is not exhaustive of the factors that may affect the Company'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 Company will be realized. The Company 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.

LED Medical Diagnostics Inc. ("LED") develops and commercializes medical devices based on its proprietary imaging platform to aid in the detection and treatment of disease in human tissues. The Company has developed a device it now markets under the trade name VELscope®. The device is used in the dental industry to help identify oral soft tissue abnormalities including those which may be cancerous or precancerous and also to help define appropriate margins for surgical excision. The VELscope® system consists of a combined light source and handpiece and accompanying consumables used for each exam. The Company's head office is located at 235 - 5589 Byrne Road, Burnaby, British Columbia, Canada, V5J 3J1 LED is publicly traded (TSX VENTURE:LMD). For more information, call (604) 434- 4614, or visit www.VELscope.com.

LED MEDICAL DIAGNOSTICS INC.
Condensed Consolidated Statements of Financial Position
(Expressed in Canadian Dollars - Unaudited)
Sept 30, 2011 Dec 31, 2010
ASSETS
CURRENT
Cash and cash equivalents $ 219,411 $ 269,010
Restricted cash 25,000 25,000
Receivables 285,655 42,837
Inventory 901,845 203,758
Investment tax credits recoverable - 350,000
Prepayments 155,785 50,848
1,587,696 941,453
EQUIPMENT 48,523 37,630
PATENTS AND INTELLECTUAL PROPERTY 328,187 367,570
$ 1,964,406 $ 1,346,653
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Bank indebtedness $ - $ -
Accounts payable and accrued liabilites 2,098,034 1,263,438
Warranty provision 28,044 22,200
Income taxes payable - 10,713
Deferred income - 3,250
Due to shareholders 98,280 689,491
Current portion of capital lease obligation 2,349 2,002
2,226,707 1,991,094
CAPITAL LEASE OBLIGATION 10,810 12,618
2,237,517 2,003,712
SHAREHOLDERS' EQUITY (DEFICIT)
Share capital 20,756,959 19,234,499
Share-based payments reserve 1,550,460 1,550,460
Warrants reserve 120,208 120,208
Convertible debt reserve -
Deficit (22,700,738) (21,562,226)
(273,111) (657,059)
$ 1,964,406 $ 1,346,653
LED MEDICAL DIAGNOSTICS INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Expressed in Canadian Dollars - Unaudited)
Three month period ended Nine month period ended
Sept 30 Sept 30 Sept 30 Sept 30
2011 2010 2011 2010
SALES $ 555,915 $ 270,657 $ 5,121,874 $ 1,365,036
COST OF GOODS SOLD 189,479 87,009 2,214,474 496,357
GROSS PROFIT 366,436 183,648 2,907,400 868,679
EXPENSES
Amortization of intangible assets 13,127 13,127 39,381 39,381
Bad debt - - - 22,624
Business development 366,929 129,443 953,338 331,559
Consulting fees 219,045 135,053 473,203 352,917
Amortization of equipment 9,557 4,580 28,671 12,295
Insurance 4,931 15,137 33,424 65,427
Interest and bank charges 13,946 18,013 73,840 54,623
Office 55,794 53,651 141,776 107,208
Professional fees 4,949 12,012 245,310 205,999
Rental 31,662 19,700 96,825 73,472
Research and development, net of investment tax credit 5,322 76,997 80,986 404,602
Salaries and wages 586,916 250,754 1,757,019 759,585
Telephone 21,330 7,938 47,330 38,138
Travel 23,142 22,390 88,288 70,726
Vehicle 20,971 3,030 67,518 9,443
Warranty 9,891 13,425 30,943 45,357
1,387,512 775,249 4,157,852 2,593,356
INCOME (LOSS ) BEFORE OTHER INCOME (EXPENSES ) (1,021,076) (591,601) (1,250,452) (1,724,677)
OTHER INCOME (EXPENSES) 1,581 (8,029) 111,940 (17,603)
NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD FOR THE PERIOD $ (1,019,495) $ (599,630) $ (1,138,512) $ (1,742,280)
Weighted average number of shares outstanding
Basic and diluted 29,566,357 24,553,507 29,566,357 23,600,163
Net income per share
Basic and diluted $ (0.03) $ (0.02) $ (0.04) $ (0.07)
LED MEDICAL DIAGNOSTICS INC.
Condensed Consolidated Statements of Changes in Equity (deficit)
(Expressed in Canadian Dollars - Unaudited)
Share Capital Reserves
Number of Common Share-based Convertible Total
shares shares payments Warrants debt Deficit equity
$ $ $ $ $ $
Balance at January 1, 2010 23,107,855 16,219,390 2,352,355 - 609,417 (18,526,007) 655,155
Reclassification of share-based payment compensation on expiry/cancellation of options - - (801,895) - - 801,895 -
Net and comprehensive loss for the period - - - - - (593,187) (593,187)
Balance at March 31, 2010 23,107,855 16,219,390 1,550,460 - 609,417 (18,317,299) 61,968
Shares issued for advisory services 140,000 70,000 - - - - 70,000
Net and comprehensive loss for the period - - - - - (549,462) (549,462)
Balance at June 30, 2010 23,247,855 16,289,390 1,550,460 - 609,417 (18,866,761) (417,494)
Shares issued for cash 1,430,000 715,000 - - - - 715,000
Net and comprehensive loss for the period (599,630) (599,630)
Balance at September 30, 2010 24,677,855 17,004,390 1,550,460 - 609,417 (19,466,392) (302,125)
Shares issued for cash 2,795,169 1,397,720 1,397,720
Share issuance costs (2,278) (2,278)
Shares issued on conversion of convertible note 1,255,000 609,417 (609,417) -
Shares issued for advisory services 450,500 225,250 225,250
Warrants issued for consulting services 100,385 100,385
Warrants issued for financing 19,823 19,823
Net and Comprehensive income for the period (2,095,834) (2,095,834)
Balance at December 31, 2010 29,178,524 19,234,499 1,550,460 120,208 - (21,562,226) (657,059)
Net and comprehensive income for the period - - - - - 525,671 525,671
Shares issued for cash 2,029,999 1,522,460 - - - - 1,522,460
Balance at March 31, 2011 31,208,523 20,756,959 1,550,460 120,208 - (21,036,555) 1,391,072
Net and comprehensive income for the period (644,688) (644,688)
Balance at June 30, 2011 31,208,523 20,756,959 1,550,460 120,208 - (21,681,243) 746,384
Net and compreshensive income for the period (1,019,495) (1,019,495)
Balance at September 30, 2011 31,208,523 20,756,959 1,550,460 120,208 - (22,700,738) (273,111)
LED MEDICAL DIAGNOSTICS INC.
Condensed Consolidated Statements of Cash Flows
(Expressed in Canadian Dollars - Unaudited)
Three months ended Nine months ended
Sept 30, Sept 30 Sept 30, Sept 30
2011 2010 2011 2010
OPERATING ACTIVITIES
Net income (loss) for the period $(1,019,495) $(599,630) $(1,138,512) $(1,742,280)
Adjustments for:
Depreciation of equipment 9,557 4,580 28,671 12,295
Amortization of intangible assets 13,127 13,127 39,381 39,381
Effective interest on capital leases 726 - 2,255 -
Interest expense 8,102 7,890 60,926 31,348
(987,983) (574,034) (1,007,279) (1,659,256)
Changes in working capital assets and liabilities (55,038) 112,186 140,718 549,816
Cash flows used by operating activities (1,043,021) (461,848) (866,561) (1,109,440)
Interest paid (726) - (14,259) (23,458)
Income taxes paid - - (10,083) (10,510)
Net cash flows used by operating activities (1,043,747) (461,848) (890,903) (1,143,408)
INVESTING ACTIVITIES
Purchase of equipment - - (39,563) -
Cash flows used by investing activities - - (39,563) -
FINANCING ACTIVITIES
Issuance of common shares, net of issuance costs - - 1,522,460 715,000
Proceeds from shareholder loans - 400,000 - 400,000
Repayment of capital lease obligation (513) - (2,239) -
Interest paid on shareholder loans (13,359) - (86,359) -
Repayment of shareholder loans (267,968) - (552,995) -
Cash flows provided by financing activities (281,840) 400,000 880,867 1,115,000
CHANGE IN CASH AND CASH EQUIVALENTS (1,325,587) (61,848) (49,599) (28,408)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 1,544,998 426,857 269,010 393,417
CASH AND CASH EQUIVALENTS - END OF PERIOD $219,411 $365,009 $219,411 $365,009

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