LED Medical Diagnostics Inc. (OTCQX:LEDIF, LMD.V) is the global leader in tissue fluorescence visualization for oral screening and a supplier of dental imaging technologies. LED Dental Inc., the company's wholly-owned operating subsidiary, manufactures and markets the VELscope Vx Enhanced Oral Assessment System, a medical device that is based on technology developed in partnership with the British Columbia Cancer Agency, and initially financed by more than $50 million from the American and Canadian governments and private organizations. As the dental industry's leading screening device, the VELscope Vx is used for detecting a wide range of oral mucosal abnormalities, from bacterial infections to oral cancer. Since the introduction of the VELscope Vx, in excess of 25 million examinations have been performed by more than 12,000 dentists in 23 countries. LED Dental now also includes the LED Imaging division that provides dentists and oral health specialists with advanced diagnostic imaging products and software.
In Q4 2013, LED Medical recognized an opportunity to leverage its market position with its VELscope Vx device to evolve into a high-value, comprehensive dental imaging supplier by adding a portfolio of complementary diagnostic imaging products. The company implemented a new sales and marketing-focused executive management team (with the former CEO transitioning to lead future product development) and centralized its sales, marketing and operations teams in Atlanta, Georgia, the hub of dental distribution for North America. Most notably, the company appointed Dr. David Gane as CEO of LED Medical and Lamar Roberts as president of LED Dental.
Gane and Roberts have both demonstrated success in growing dental technology companies. Gane is an experienced corporate strategist in the industry, most recently serving as vice president of dental imaging for Carestream Dental, part of the Onex Corporation (OTCPK:ONEXF, OCX.TO) family of companies. Gane also held an executive position at PracticeWorks, which was acquired by Eastman Kodak (NYSE:KODK) in June 2003. Kodak ultimately sold its healthcare business to Onex Healthcare Holdings, Inc., a subsidiary of Onex Corporation. Roberts has held several senior leadership positions with 360imaging, Carestream Dental and PracticeWorks. He was instrumental in building PracticeWorks' sales to $150 million, prior to its sale to Kodak for $500 million. The division was later sold to Carestream Dental, a company which has a distinguished history of leading companies from early growth stages to becoming industry giants. In particular, Roberts is a proven director of mergers, acquisitions, integrations, sales, marketing, product management and operations.
Since their appointments with LED Medical, Gane and Roberts have quickly positioned the company as a reliable provider of innovative and clinically relevant dental imaging technologies to the North American market. One of the initial changes was a shift in the company's distribution of the VELscope Vx from a single, exclusive source to nine major distributors across the continent. Agreements have been made with industry leaders such as Patterson Dental (NASDAQ:PDCO), Burkhart Dental and Benco Dental, as well as regional distributors such as Atlanta Dental Supply Company and Nashville Dental, Inc. These new partners have helped increase market penetration of the VELscope Vx product line, with more than 5,000 sales representatives worldwide.
New product enhancements for the VELscope Vx are also underway, and the company is participating in key clinical studies that could extend the product's usage into new surgical applications. One such long-term study, the "Canadian Optically-Guided Approach for Oral Lesions Surgical" ("COOLS") clinical trial, is evaluating the recurrence rate of oral cancers after surgical removal using the fluorescence technology of the VELscope Vx, as compared to the traditional white-light approach.
In April 2014, the company founded a new division called LED Imaging, and signed its first partnership agreement with Ray Co., a subsidiary of Samsung (OTC:SSNLF), to supply a "best-of-class", multi-function Cone Beam Computed Tomography (CBCT) imaging system, the "RAYSCAN Alpha - Expert", to the U.S. market. There is a major market shift underway from film-based systems to faster, more efficient and higher-quality digital imaging solutions. In 2012 alone, U.S. sales for CBCT scanners grew by 23.3% to more than $208MM. Small field-of-view units, such as the RAYSCAN Alpha - Expert, comprised 83.4% ($173.5MM)
Additionally, Gane and Roberts oversaw the launch of two new products, LED Imaging Software and the LED IS100 digital radiography intraoral sensor. LED Imaging Software enables dental professionals to capture, manipulate, save, store and share clinical images, and is designed with true open-architecture, allowing integration with any dental practice's current management system, as well as compatibility with imaging devices from a variety of manufacturers. The LED IS100 is an intraoral sensor for routine dental X-rays during examinations; it allows dental professionals to make the transition from antiquated film products to digital imaging, while maintaining a high level of diagnostic capability.
LED Medical's net revenues increased to $1,054,886 for the three months ended March 31, 2014. This is an increase of 214% from the three months ended March 31, 2013. The company experienced its best net revenues quarter since the three-month period ended June 30, 2013 as a result of the optimization of sales channels through non-exclusive distribution partnerships throughout North America. The operating loss for the three months ended March 31, 2014 was $1,206,789, which is less than the operating loss for the three months ended March 31, 2013 of $1,286,849. These losses are due to increased investment in both sales and marketing resources and research & development.
LED exited Q1 with $3.2M in cash and equivalents. The company has since raised approximately $760k through the exercise of warrants. The current monthly burn rate is about $500k. And while the warrant exercises will result in incremental dilution, the recent cash raises should further facilitate the implementation and rollout of the company's new initiatives for growth.
LED Medical faces a number of risks, including technological change, dependence on a small number of customers, market competition and product liability claims. In addition, the company is faced with the same types of risks with which many smaller companies must deal, including share price fluctuations, as well as credit, key personnel, quarterly earnings fluctuations, interest rate, dilution, liquidity and currency risks. Moreover, an investment in the securities of the company may be regarded as speculative due to the company's stage of development.
By bringing an experienced and high-performing team with a big vision to LED Medical, Gane and Roberts have been able to swiftly initiate new industry partnerships and product launches to position the company as a rising leader in its field. The efforts of both Gane and Roberts are reflected in LED Medical's rising revenues. Future partnerships and acquisitions will help LED Medical further develop a comprehensive portfolio of best-in-class imaging technologies and services to meet the needs of dental professionals throughout North America. With the industry expected to sustain strong growth over the next few years, this leadership team looks to bring the same level of success to LED Medical that they have brought to other dental technology companies in the past.
 "US Market for Dental Imaging Devices", September 2013, iData Research Inc.
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