LED Announces Transformative Transaction and Private Placement Financing

Transaction is significantly accretive to revenue, EBITDA, and net income
Vancouver, British Columbia, January 20, 2017 - LED Medical Diagnostics Inc. ("LED" or the "Company") (TSX-V: LMD) is pleased to announce that it has entered into a definitive purchase agreement to acquire 100% of Apteryx, Inc. ("Apteryx"). Apteryx is a profitable, software development company with well-established applications for the dental imaging market with strong brand recognition across the dental industry, including the United States armed forces, United States Government agencies and Dental Universities. LED expects this transaction to be immediately accretive, allowing the Company to reach profitability prior to the end of 2017. The Company expects the transaction to be closed in the first quarter of 2017, subject to financing and regulatory and other approvals customary for a transaction of this nature. Apteryx was founded by Kevin Crucs in 1995. It has 18 employees and is headquartered in Akron, Ohio.

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

"The Apteryx team are top of their class when it comes to dental imaging software innovation and development," stated LED CEO Dr. David Gane.  "Combining Apteryx with LED provides the combined company with a compelling financial profile, significant embedded and organic growth and exciting opportunities to build a leading, pure play dental technology company. Also – and just as importantly – LED is gaining a wonderful management and R&D team from Apteryx and we know that they will thrive while helping us build an even stronger LED."

Kevin Crucs, founder and Chief Executive Officer of Apteryx said, "I am interested in having a significant and lasting impact in the dental industry through integrated, open source, best in class, interoperable solutions and know that the team at LED has that same, shared vision that we can enact and accelerate together."

Transaction Details

Pursuant to the binding agreement, LED will purchase 100% of the capital stock of Apteryx for US$10.25 million, subject to adjustment, of which US$6,800,000 is payable in cash at closing, US$700,000 payable in cash in tranches over 18 months, a hold back of US$500,000 and US$2,250,000 of which is payable in common shares of LED, based on a price per share of CDN$0.07. Eighty percent (80%) of the consideration shares will be issued at closing and will be subject to an escrow agreement, with staged releases over 24 months.  The balance of the consideration shares will be issued 24 months after the closing, subject to any required TSX Venture Exchange approval, or settled in cash at the option of LED.  Following the transaction, Kevin Crucs will join 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.

Transaction Financing

The transaction will be financed primarily by an equity financing by way of a brokered private placement of units of LED (the “Units”) priced at C$0.06 per Unit, for gross proceeds of approximately C$11,000,000. Each Unit will consist 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.  In addition, the transaction will also be financed by a debt financing by way of a brokered private placement of 12% senior secured debentures of the Company (the “Debentures”) of approximately C$2 million, maturing 24 months from the closing date (the “Closing Date”) of the Acquisition. The Company intends to grant a total of 2,550,000 common shares of the Company as a loan bonus to the holders of the Debentures in connection with the issuance of the Debentures.

The proceeds of the equity and debt private placements will be held in escrow pending closing of the Acquisition. The net proceeds will be used by LED to fund the cash portion of the acquisition price, and for working capital and general corporate purposes.  All securities issued in connection with the transaction will be subject to a hold period expiring four months and one day after the Closing Date.

Bloom Burton Securities Inc. is acting as sole agent and financial advisor (the “Agent”) to LED for the acquisition of Apteryx and related financings. In connection with the Unit offering, the Agent will receive a cash commission of 7% of the gross proceeds of the offering and non-transferable broker units equal to 7% of the aggregate number of Units sold under the offering. In connection with the Debenture offering, the Agent will receive a cash commission of 4% of the gross proceeds of the offering and non-transferable broker units equal to 4% of the principal amount raised in the Debenture financing divided by $0.10.  Each broker unit will consist of one common share of LED 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 CDN$0.10 per common share.

The acquisition and transaction financing are subject to the approval of the TSX Venture Exchange.  The acquisition qualifies as an “expedited acquisition” under the policies of 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 expectation to close the acquisition of Apteryx, Inc and the expected financial impact of the acquisition, as well as statements regarding the acquisition-related financings and 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 closing risks including failure to obtain regulatory approval; acquisition integration risks; acquisition financing risk; 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.