LED Medical Diagnostics Reports 2012 Fourth Quarter and Full-Year Financial Results
Company restates prior year financial statements
(firmenpresse) - BURNABY, BRITISH COLUMBIA -- (Marketwired) -- 05/02/13 -- LED Medical Diagnostics Inc. (TSX VENTURE: LMD)(OTCQX: LEDIF)(FRANKFURT: LME) ("LED" or the "Company") today announced its financial results for the fourth quarter and full year ended December 31, 2012, 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 and twelve months ended December 31, 2011, also in accordance with IFRS 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. All balances are expressed in U.S. dollars unless otherwise stated.
Financial Highlights
"During late fiscal 2012, we terminated our exclusive distribution relationship with Henry Schein Inc. During the same time frame we reached an agreement with DenMat Holdings, LLC ("Denmat") to assume the role of exclusive manager of LED's global distribution strategy. The shift in alliance from Henry Schein to DenMat caused a temporary disruption to our activities in the marketplace. As a result of the transition in our sales and marketing activities to our new distribution partner in late 2012, the Company's revenues were lower than anticipated but still resulted in increase from prior year," stated Peter Whitehead, LED Founder and Chief Executive Officer. "With the DenMat relationship now in place, we expect to see an aggressive sales and marketing program working at full pace by mid 2013 which is expected to result in increased future revenue after 2013. The Denmat relationship should allow the Company's financial situation to improve significantly in the longer term by optimizing our sales and marketing efforts. Our optimism is further buoyed by our experience that demand for the VELscope Vx appears to remain strong."
Three Month Comparative Results
For the three months ended December 31, 2012, the Company reported revenues of approximately $1.4 million which is consistent with approximately $1.4 million for the fourth quarter of 2011. Revenues were lower in the three months ended December 31, 2012 compared to revenues of approximately $2.9 million for the three months ended September 30, 2012.
Gross margins(2) were 46% during the three months ended December 31, 2012, which was higher than the three months ended December 31, 2011 of 44%. The Company's margins vary depending on the mix of equipment versus disposables sales for any given period.
Total operating expenses (excluding other operating expenses and mark to market adjustments on Canadian dollar denominated warrants)(3) for the three months ended December 31, 2012 of approximately $726,000 were 49% lower than the three months ended December 31, 2011 of approximately $1.4 million.
EBITDA for the three months ended December 31, 2012 was approximately ($84,000) compared to approximately ($630,000) for the three months ended December 31, 2011. The Company reported a net loss of approximately $175,000 for the three months ended December 31, 2012 compared to a net loss of approximately $3.1 million for the three months ended December 31, 2011.
Twelve Month Comparative Results
For the year ended December 31, 2012 the Company reported revenues of approximately $6.3 million as compared to approximately $5.7 million for the year ended December 31, 2011, an increase of 11% over the comparable period. The increase is attributable to the increased sales by Henry Schein to its end customers in during the first half of fiscal 2012 in addition to sales orders received from the Company's new distribution partner, Denmat in late fiscal 2012.
Gross margins were 57% during the year ended December 31, 2012 which was higher than the gross margins of 52% for the year ended December 31, 2011. The Company's margins vary depending on the mix of equipment versus disposables sales for any given period.
Total operating expenses (excluding other operating expenses and mark to market adjustments on Canadian dollar denominated warrants) for the year ended December 31, 2012 of approximately $4.4 million were 24% lower than the year ended December 31, 2011 of approximately $5.7 million.
EBITDA for the year ended December 31, 2012 was approximately ($728,000) compared to approximately ($2.5 million) for the year ended December 31, 2011. The Company reported a net loss of approximately $867,000 for its fiscal 2012 compared to a net loss of approximately $4.1 million for the year ended December 31, 2011.
Cash was approximately $970,000 (inclusive of the net proceeds from the approximately $1.1 million equity financing completed by the Company in late 2012) with negative net working capital of approximately $97,000 as of December 31, 2012 compared to cash of approximately $976,000 with negative net working capital of approximately $356,000 as of December 31, 2011.
Business Highlights
Notable developments and achievements during the fourth quarter included the following:
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 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 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.
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. Such forward-looking statements or information includes financial and other projections as well as statements regarding the Corporation's future plans, objectives, performance, revenues, growth, profits, operating expenses or the Corporation's underlying assumptions and the Company's intention to expand its technology beyond dental applications. 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 Management's Discussion and Analysis are cautioned that such statements or information are only predictions, and that the Corporation'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: economic conditions; dilution; limited history of profits and operations; operational risk; distributor risks; working capital; potential conflicts of interest; speculative investment; volatility of stock price; intellectual property risks; disruptions in production; reliance on key personnel; seasonality; management's estimates; development of new customers and products risks; stock price volatility risk; sales and marketing risk; competitors and competition risk; regulatory requirements; reliance on few suppliers; reliance on subcontractors; operating cost and quarterly results fluctuations; fluctuations in exchange rates; product liability and medical malpractice claims; access to credit and additional financing; taxation; market acceptance of the Corporation's products and services; customer and industry analyst perception of the Corporation and its technology vision and future prospects; technological change, new products and standards; risks related to acquisitions and international expansion; reliance on large customers; concentration of sales; international operations and sales; management of growth and expansion; dependence upon key personnel and hiring; the Corporation not adequately protecting its intellectual property; risks related to product defects and product liability; and including, but not limited to, other factors described in the Corporation's reports filed on SEDAR, including its financial statements and management's discussion and analysis for the year ended December 31, 2012.
In drawing a conclusion or making a forecast or projection set out in the forward-looking information, the Corporation takes into account the following material factors and assumptions in addition to the above factors: the Corporation's ability to execute on its business plan; the acceptance of the Corporation's products and services by its customers; the timing of execution of outstanding or potential customer contracts by the Corporation; the sales opportunities available to the Corporation; the Corporation's subjective assessment of the likelihood of success of a sales lead or opportunity; the Corporation's historic ability to generate sales leads or opportunities; and that sales will be completed at or above the Corporation's estimated margins. This list is not exhaustive of the factors that may affect the Corporation'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 Annual Information Form (AIF) are qualified by this cautionary statement and there can be no assurance that actual results or developments anticipated by the Corporation will be realized. The Corporation 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.
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 . 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 .
Restatement
In the preparation of the Company's consolidated financial statements for the year ended December 31, 2012, management identified historical errors as follows:
As a result, the Company has restated its consolidated financial statements for the year ended December 31, 2011.
The following table summarizes the impact of the restatement adjustments on the Company's previously reported consolidated financial statements:
Impact on Consolidated Statements of Cash Flows
The errors noted above related to an overstatement of revenue and cost of goods sold and understatement of foreign exchange gain/loss and other comprehensive income on the consolidated statements of loss and comprehensive loss, the impact of the errors on the consolidated statements of cash flows are as follows:
(1) 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. EBITDA referenced here relates to operating loss less other operating expenses 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.
(2) 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.
(3) Non-IFRS measure that does not have a standard meaning and may not be comparable to a similar measure disclosed by other issuers. Total expenses excludes other operating expenses and Mark to market adjustments on Canadian dollar denominated warrants.
Contacts:
LED Medical Diagnostics Inc.
Mark Komonoski, Investor Relations
(403) 255-8483 or Toll-Free: (877) 255-8483
Cell: (403) 470-8384
/ Skype: mkomonoski
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Datum: 02.05.2013 - 20:21 Uhr
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