LED Announces Closing of Apteryx, Inc. Acquisition and Related Financings

Apteryx becomes new wholly owned standalone subsidiary of LED
Vancouver, British Columbia, February 13, 2017 - LED Medical Diagnostics Inc. ("LED" or the "Company") (TSX-V: LMD) is pleased to announce the closing of the previously announced acquisition of Apteryx, Inc. ("Apteryx") for an aggregate purchase price of US$10.25 million, and the closing of the related financings for gross proceeds totaling approximately C$14.4 million.

"Today is a key moment toward a bright future for both LED and Apteryx," stated LED Chief Executive Officer, Dr. David Gane. "We are very excited to add such a talented team that brings a vast amount of experience and leadership to the LED family.  With this transaction, collectively, we have created a leading North American dental imaging Company that possesses some of the industry’s best technologies, a significant customer base, strong growing and recurring revenue streams with very high margins and a platform for continued growth.  Furthermore, we have recapitalized the business, providing LED with sufficient financial resources to capture additional revenue opportunities on an accelerated basis in the years to come."

Kevin Crucs, founder and Chief Executive Officer of Apteryx concluded, "I am so proud of the company that the entire Apteryx team has built over the years. By combining our resources under one shared vision, both LED and Apteryx will have a significant and lasting impact in the dental industry through integrated, open source, best in class solutions."

Key Benefits of the Transaction:

  • Expected to be significantly accretive to revenue, EBITDA, and net income for the 2017 fiscal year
  • Diversifies LED's revenue base and revenue timing, adding significant recurring revenue opportunities
  • Apteryx has a proven and consistent history of profitable operations and attractive financial operating margins
  • Establishes LED as a leader in imaging software to dental practices across the United States
  • Provides LED with a range of software applications to augment its hardware offerings establishing the Company as an end-to-end dental imaging solution provider in a growing market
  • Provides LED the addition of significant customer user base of dental professionals as well as partnership opportunities with Apteryx's existing OEM distribution partners for new and existing LED imaging products
  • The addition of a software development team which will help expand development of new products
  • Provides LED critical mass to support significant growth operationally and financially
  • Kevin Crucs, founder of Apteryx, is joining LED in a senior leadership role and is taking a portion of the acquisition proceeds in LED stock
  • LED management team is very familiar with Apteryx's management team and products. LED is currently a customer of Apteryx products and services
  • Significant expansion of LED's IP portfolio with addition of 28 patents

Details of the Acquisition

LED has closed the acquisition of 100% of the capital stock of Apteryx for aggregate consideration of US$10.25 million. At closing, LED paid US$6.987 million in cash and issued approximately 33.9 million common shares of LED to the seller at C$0.07, representing US$1.8 million of value.  An additional US$1.2 million of the purchase price will be paid in cash in tranches over the next 18 months. The final payment of US$450,000 will be paid in common shares of LED or in cash at LED's option, 24 months from closing. The common shares issued to the seller at closing are subject to an escrow agreement, with staged releases over 24 months. Kevin Crucs, founder and Chief Executive Officer of Apteryx, will be joining the senior management team of LED and will continue to lead the Apteryx business as a significant shareholder of LED. Apteryx will operate as a standalone subsidiary of LED Medical Diagnostics.

Detail of the Concurrent Financings

LED has also closed the following series of financings for gross proceeds of approximately C$14.4 million.

  • A brokered private placement of equity units of LED (the "Equity Units" comprising the "Brokered Equity Offering") for gross proceeds of approximately C$11.5 million. The Equity Units were priced at C$0.06 per Equity Unit, each consisting of one common share and one-half of one common share purchase warrant, with each whole warrant being exercisable for a period of 24 months into one common share of LED at a price of C$0.10 per common share.
  • A brokered private placement of 88 debenture units of LED (the "Debenture Units" comprising the "Brokered Debenture Offering") for gross proceeds of C$880,000. Each Debenture Unit consisting of C$10,000 principal value 12% senior secured debentures maturing 24 months from the closing date, and 21,250 common shares of LED.
  • A non-brokered private placement of Equity Units for gross proceeds of approximately C$1.8 million.
  • A non-brokered private placement of 27 Debenture Units for gross proceeds of C$270,000.

Certain insiders of LED, including directors and officers, acquired a total of approximately 9.2 million Equity Units in the offering.

A portion of the net proceeds was used to fund the cash portion of the purchase price of Apteryx, and the remainder will be used for working capital and general corporate purposes.

Bloom Burton Securities Inc. acted as sole agent and financial advisor (the "Agent") to LED for the acquisition of Apteryx, the Brokered Equity Offering, and the Brokered Debenture Offering. In connection with the Brokered Equity Offering, the Agent received a cash commission of 7% of the gross proceeds of the offering and non-transferable broker warrants (the "Equity Broker Warrants") equal to 7% of the aggregate number of Equity Units sold under the offering. Each Equity Broker Warrant is exercisable at C$0.06 for a period of 24 months into one Equity Unit (as defined herein). In connection with the Brokered Debenture Offering, the Agent received a cash commission of 4% of the gross proceeds of the offering and non-transferable broker warrants (the "Debenture Broker Warrants") equal to 4% of the principal amount raised in the Debenture financing divided by $0.10. Each Debenture Broker Warrant is exercisable for a period of 24 months into one common share of LED at a price of C$0.10 per common share.

The acquisition and related financings have been approved by the TSX Venture Exchange.  The equity financing is subject to final approval by the TSX Venture Exchange.

About Apteryx, Inc.

Apteryx, Inc. was founded in 1995 to create and develop software applications and systems that are leading products in their respective industry segments. Apteryx's products include XrayVision and XVlite, an imaging suite of applications that digitize x-rays and other images for dental practitioners; XrayVision DCV DICOM software for the institutional dental market; XVWeb, a cloud-based PACS and DICOM server; and other Windows-based applications and utilities. For additional information visit the Apteryx web site at www.apteryx.com

About LED Medical Diagnostics Inc.

Founded in 2003 and headquartered in Vancouver, British Columbia, Canada, LED Medical Diagnostics Inc., through its wholly-owned subsidiaries LED Dental Inc. and LED Dental Ltd., provide dentists and oral health specialists with advanced diagnostic imaging products and software, in addition to the award-winning VELscope® Vx tissue fluorescence visualization technology. Backed by an experienced leadership team and dedicated to a higher level of service and support, LED Dental is committed to providing dental practitioners with the best technology available by identifying and adding leading products to its growing portfolio.

The Company is currently listed on the 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, call 884.952.7327 or visit www.leddental.com/investor-relations.

Investor Relations:

Glen Akselrod
Phone: 905.326.1888 ext 10
Email: glen@bristolir.com

Media Contact:

LED Dental
Chris Koch
Phone: 678.293.9413
Email: chris.koch@leddental.com

Corporate Contact:

LED Medical
David Gane, CEO
Phone: 604.434.4614 ext 227
Email: david.gane@leddental.com

Forward Looking Statement

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 include statements regarding, but not limited to, the expected financial impact of the acquisition of Apteryx, Inc., as well as statements regarding the Company's future plans, objectives, performance, revenue, profitability, and future strategy. Persons reading this press release 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:; acquisition integration risks; regulatory risk including national security review risk by the Committee on Foreign Investment in the United States; economic conditions; dilution; limited history of profits and operations; operational risk; distributor risks; working capital; potential conflicts of interest; speculative investment; 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 Company's products and services; customer and industry analyst perception of the Company 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 Company not adequately protecting its intellectual property; risks related to product defects and product liability; reliance on third party suppliers; future working capital investments in accounts receivable and inventory; credit terms from suppliers; and including, but not limited to, other factors described in the Company's reports filed on SEDAR, including its financial statements and management's discussion and analysis for the three and nine months ended September 30, 2016 and its Annual Information Form and financial report for the year ended December 31, 2015. 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.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.