SOURCE: Lightscape Technologies Inc.

Lightscape Technologies Inc.

February 17, 2009 14:16 ET

Lightscape Technologies Reports Fiscal 2009 Third Quarter Results

HONG KONG--(Marketwire - February 17, 2009) - Lightscape Technologies Inc. (OTCBB: LTSC), an operator of LED out-of-home billboards and provider of LED solutions, reported financial results for the fiscal 2009 third quarter ending December 31, 2008.

Total net revenue for the three months ended December 31, 2008 was $1.70 million, a 53% decrease from $3.62 million for the three months ended December 31, 2007. Gross profit margin was 34% for the three months ended December 31, 2008 as compared to 19% for the three months ended December 31, 2007. The improvement in gross margin is primarily attributable to improved cost control related to the Company's LED solutions business, namely supplies of LED modules and video screens, and a higher proportion of revenue from LED consultancy contracts, which are generally of a higher profit margin as compared to LED supply and build contracts.

The Company's LED solutions segment had a strong quarter, with revenue accounting for $1,406,668, up 115% and 88% compared to the first and second quarters of this fiscal year, respectively.

Net loss for the three months ended December 31, 2008 was $0.79 million, or $0.01 per fully diluted share, compared to a net loss of $0.55 million, or $0.01 per fully diluted share, for the three months ended December 31, 2007.

Total net revenue for the nine months ended December 31, 2008 was $4,344,097, an 11% decrease from the total net revenue of $4,889,296 for the nine months ended December 31, 2007. Net loss for the nine months ended December 31, 2008 was $2,521,221 compared to a net loss of $2,864,561 for the nine months ended December 31, 2007.

Bondy Tan, President and CEO of Lightscape, said, "It's been a challenging year for Lightscape considering the volatile market and advertising environments, but we've still been able to achieve some substantive corporate milestones. With our innovative LED solutions and support from strategic partners, we secured several new contracts from high-profile clients in the past quarters, and we expect that trend to continue into the future. We also significantly improved our gross margin by securing more favorable contracts with our OEM suppliers of LED hardware. As we move into 2009, we will take every measure to manage risks and operational expenditure."

"In addition to our partnership with Ogilvy & Mather Group to sell advertising space on our LED out-of-home media network, we continue to step up our sales efforts. We have appointed LIME, a diversified media conglomerate, as a sales representative for our expanding and cost-effective LED billboard network. With LED out-of-home advertising billboards being installed at premium spots in Beijing, Hong Kong and other major Chinese cities, Lightscape's network is an attractive choice for advertisers to bring their sales messages to the widest possible number of potential customers."

Business Highlights

--  Lightscape was commissioned to design, supply and build three outdoor
    LED billboards for Le Royal Arc, a leading 6-star hotel complex in Macau.
--  Lightscape was appointed as the technical consultant to Prudential, one
    of the world's largest financial services institutions, for the company's
    existing LED rooftop signage as well as the development of innovative 3D
    and 2D animations.
--  Lightscape was contracted to undertake several LED lighting projects
    for the retail stores of Chow Tai Fook Jewellery Co. Ltd. in China and Hong
    Kong.
--  Lightscape has begun selling advertising on its network of LED out-of-
    home media properties. Six LED out-of-home advertising billboards are set
    to go live in five separate locations in China and Hong Kong.
--  Lightscape has engaged LIME, a diversified media conglomerate, as a
    sales representative for its LED out-of-home media network.
    

Results of Operations

Total net revenue for the three months ended December 31, 2008 was $1,701,299, representing a 53% decrease from the total net revenue of $3,617,194 for the three months ended December 31, 2007.

Revenue related to the Company's LED solutions business decreased by 53% to $1,406,668 for the three months ended December 31, 2008 from $2,975,913 during the three months ended December 31, 2007. The decrease in revenues was due primarily to the completion of fewer LED solutions contracts during the three months ended December 31, 2008. The LED solutions business is expected to contribute increased revenues in the foreseeable future as several key projects are expected to be initiated and/or completed in the near future.

Revenue from the Company's other business, which includes sales of lighting source products, was $294,631 for the three months ended December 31, 2008, compared to $641,281 for the three months ended December 31, 2007, representing a decrease of 54%. The decrease in sales of lighting source products was due primarily to the effect of a change of local senior executives and internal restructuring in the Company's Beijing subsidiary during the three months ended December 31, 2008 and in prior periods.

Total cost of revenues for the three months ended December 31, 2008 was $1,114,434, which represents a decrease of 62% as compared to total cost of revenues of $2,927,284 for the three months ended December 31, 2007. The decrease in the total cost of revenues during the three months ended December 31, 2008 corresponds to the 53% decrease in total sales revenues.

Operating expenses for the three months ended December 31, 2008 were $1,378,714, which represents a 14% increase in operating expenses over $1,205,072 for the three months ended December 31, 2007. Selling and marketing expenses, general and administrative expenses, and amortization of intangible assets constitute the main components of the Company's operating expenses. The Company has recently introduced internal measures to control costs including salary reduction for management.

Selling and marketing expenses for the three months ended December 31, 2008 increased approximately 85% to $276,204 from $149,356 for the three months ended December 31, 2007. The increase was mainly due to higher marketing expenses associated with the Company's attendance and booths at the Hong Kong International Lighting Fair 2008 held in October 2008 as compared to expenditure at the 2007 fair, and increased staff costs incurred in order to build up the Company's project pipeline of LED solutions contracts and establish the sales network for the LED out-of-home advertising business. 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 LED out-of-home 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 in January 2009.

General and administrative expenses increased by 16% during the three months ended December 31, 2008 to $976,071 from $844,309 for the three months ended December 31, 2007. The increase was mainly due to increased staff, accounting, investor relations, public relations and business development costs for the three months ended December 31, 2008 to provide the foundation to support the Company's anticipated overall business growth, particularly its LED out-of-home advertising and LED solutions businesses. The Company anticipates that general and administrative costs will continue to 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 a company-wide cost-cutting initiative implemented in January 2009.

There was a decrease in provision for doubtful debts amounting to $174,709 during the three months ended December 31, 2008 as compared to $nil for the three months ended December 31, 2007. This was due primarily to the completion of a review of the Company's doubtful debts provision plan performed by management.

As of December 31, 2008, the Company had a net working capital surplus of $9,346,579 compared with a surplus of $11,490,237 as of March 31, 2008, representing a decrease in working capital of $2,143,658. The cash and cash equivalents of the Company decreased to $1,557,685 as at December 31, 2008 as compared to $3,978,500 as of March 31, 2008.

Lightscape incurred capital expenditures of $549,361 during the nine months ended December 31, 2008 and $243,256 for the nine months ended December 31, 2007. The increase in capital expenditures for the nine months ended December 31, 2008 as compared to December 31, 2007 was mainly attributable to increased purchases of plant and equipment.

During the nine months ended December 31, 2008, the Company obtained short-term borrowings through an account receivable factoring loan. This loan commenced on September 29, 2008 with a non-bank financial institution at a principal amount of $400,896 with a maturity date of 60 days, which was subsequently extended to 90 days, at an annual interest rate of 10%. This loan was repaid in full on the maturity date of December 29, 2008.

Additional information regarding Lightscape's financial performance for the three and nine months ending December 31, 2008 and a comparison to the periods ended December 31, 2007 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 one of the leading digital media and LED solutions companies in Asia. Lightscape is building an LED out-of-home media network in China focused on LED billboards in prime locations. The Company also designs, markets, sells and installs large-scale LED video screens and LED systems, operates LED out-of-home advertising billboards, and provides LED screen rentals. Lightscape is headquartered in Hong Kong, and the Company has offices in Singapore, 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 secure LED solutions contracts from high-profile clients; Lightscape intends to expand its installations of LED out-of-home advertising billboards at premium spots in Beijing, Hong Kong and other major Chinese cities; the first six LED out-of-home advertising billboards in Lightscape's network are set to go live in five separate locations in China and Hong Kong; Lightscape expects its LED solutions business to contribute increased revenues in the foreseeable future as several key projects are expected to be initiated and/or completed in the near future; Lightscape anticipates that selling and marketing expenses will remain steady or increase in the future but that any such increases are expected to be limited as a result of a company-wide cost-cutting initiative implemented in January 2009; Lightscape anticipates overall business growth, particularly within the Company's LED out-of-home advertising and LED solutions businesses; and Lightscape anticipates that its general and administrative costs will continue to increase in the foreseeable future alongside the anticipated expansion of the Company's operations but that 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, China and Singapore specifically; competition with larger companies with greater resources and more experience in providing LED out-of-home 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 (UNAUDITED)
       Expressed in US dollars (except for number of common shares)



                           Three Months Ended         Nine Months Ended
                               December 31,              December 31,
                            2008         2007         2008         2007
                        -----------  -----------  -----------  -----------
                             $            $            $            $
                        -----------  -----------  -----------  -----------
Revenues:
  Advertising revenue             -            -            -            -
  LED solutions
   revenue                1,406,668    2,975,913    2,809,537    2,999,155
  Other revenue             294,631      641,281    1,534,560    1,890,141

                        -----------  -----------  -----------  -----------
Total net revenues        1,701,299    3,617,194    4,344,097    4,889,296
                        -----------  -----------  -----------  -----------

Cost of revenues:
  Cost of sales of
   Advertising revenue            -            -            -            -
  Cost of sales of LED
   solutions revenue       (870,190)  (2,482,775)  (1,866,193)  (2,570,252)
  Contract costs of
   Other revenue           (244,244)    (444,509)  (1,106,149)  (1,292,931)

                        -----------  -----------  -----------  -----------
Total cost of revenues   (1,114,434)  (2,927,284)  (2,972,342)  (3,863,183)
                        -----------  -----------  -----------  -----------

Gross profit                586,865      689,910    1,371,755    1,026,113

Allowance for doubtful
 debts                      174,709            -      (72,244)           -
Amortization               (184,928)    (133,846)    (578,282)    (401,537)
Depreciation                (50,606)     (77,561)    (145,225)    (229,603)
Loss on disposal of
 property, plant and
 equipment                  (65,614)           -      (65,614)           -
Selling and marketing
 expenses                  (276,204)    (149,356)    (562,501)    (507,112)
General and
 administrative
 expenses                  (976,071)    (844,309)  (2,803,263)  (2,516,306)
                        -----------  -----------  -----------  -----------

Loss from operations       (791,849)    (515,162)  (2,885,374)  (2,628,445)

Interest expense            (12,726)      (1,903)     (22,980)    (397,548)
Interest income                 183        3,619          792       39,071
Gain on redemption of
 redeemable convertible
 notes and options                -            -            -      194,968
Other income                  9,944        5,446       25,030       13,170
                        -----------  -----------  -----------  -----------
Loss from continuing
 operations before
 income tax and
 minority interests        (794,448)    (507,900)  (2,852,532)  (2,778,784)
Income tax benefit            5,084            -      212,061            -
                        -----------  -----------  -----------  -----------

Net loss from
 continuing operations
 before minority
 interests                 (789,364)    (507,900)  (2,640,471)  (2,778,784)
Minority interests           10,083       19,988      108,164       77,783
                        -----------  -----------  -----------  -----------

Net loss from
 continuing operations     (779,281)    (487,912)  (2,532,307)  (2,701,001)
                        -----------  -----------  -----------  -----------

Discontinued operations
  Net profit (loss) from
   discontinued
   operations, net of
   income taxes              (8,748)     (64,015)      11,086     (163,560)
                        -----------  -----------  -----------  -----------

Net loss attributable
 to common shareholders    (788,029)    (551,927)  (2,521,221)  (2,864,561)
                        ===========  ===========  ===========  ===========

Loss per share
- Basic and diluted
  Continuing
   operations                 (0.01)       (0.01)       (0.05)       (0.07)
  Discontinued
   operations                     -            -            -            -
                        -----------  -----------  -----------  -----------
   Total                      (0.01)       (0.01)       (0.05)       (0.07)
                        ===========  ===========  ===========  ===========

Weighted average number
 of common shares
 outstanding
- Basic and diluted      55,876,410   44,584,019   55,876,410   40,797,592
                        ===========  ===========  ===========  ===========







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



                                              December 31,     March 31,
                                                  2008           2008
                                               (Unaudited)     (Audited)
                                              -------------  -------------
                                                    $              $
                                              -------------  -------------
ASSETS
Current assets:
  Cash and cash equivalents                       1,545,038      3,976,565
  Accounts receivable, net of allowance for
   doubtful accounts of $839,180 on
   December 31, 2008 and $817,790 on
   March 31, 2008                                 3,289,828      4,438,207
  Costs and estimated earnings in excess of
   billings on uncompleted Contracts                137,617        639,035
  Prepaid expenses and other current assets       4,086,633      1,742,031
  Inventories                                     3,713,141      3,903,798
  Current assets of discontinued operations         725,001        699,847
                                              -------------  -------------

Total current assets                             13,497,258     15,399,483
                                              -------------  -------------

Intangible assets, net                            1,149,987      1,700,114
Goodwill                                          4,476,574      4,476,574
Plant and equipment, net                          4,805,043      4,650,398
Net investment in sales-type leases of
 discontinued operations                             58,484        126,521
                                              -------------  -------------

                                                 10,490,088     10,953,607
                                              -------------  -------------

TOTAL ASSETS                                     23,987,346     26,353,090
                                              =============  =============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Bank loans - current portion                       49,311              -
  Trade payables                                  1,461,240      2,413,203
  Amount due to a director                          771,208              -
  Amount due to a director of a subsidiary          150,965              -
  Accrued expenses and other current
   liabilities                                    1,419,698        763,797
  Obligations under capital leases - current
   portion                                           11,196          1,774
  Income tax payable                                 10,606        366,281
  Current liabilities of discontinued
   operations                                       276,455        364,191
                                              -------------  -------------

Total current liabilities                         4,150,679      3,909,246
                                              -------------  -------------

Non-current liabilities:
  Bank loans - long-term portion                     35,806              -
  Obligations under capital leases -
   non-current portion                                4,434          5,469
                                              -------------  -------------

Total non-current liabilities                        40,240          5,469
                                              -------------  -------------

Total liabilities                                 4,190,919      3,914,715
                                              -------------  -------------

Minority interest                                 1,313,539      1,421,702
                                              -------------  -------------

Shareholders' equity:
Preferred stock, par value of $0.001
 each; 100,000,000 shares authorized, none
 issued or outstanding

Common stock
Authorized:
800,000,000 common shares, par value $0.001
 per share
Issued and outstanding:
55,876,410 common shares at December 31, 2008
 and at March 31, 2008                               55,876         55,876
Additional paid-in capital                       34,140,708     34,140,708
Common stock warrants                               344,673        344,673
Statutory surplus reserves                           28,944         28,944
Accumulated other comprehensive income            1,069,878      1,082,442
Accumulated deficit                             (17,157,191)   (14,635,970)
                                              -------------  -------------

Total shareholders' equity                       18,482,888     21,016,673
                                              -------------  -------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY       23,987,346     26,353,090
                                              =============  =============

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