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LED Medical Diagnostics Reports 2013 Second Quarter Results

BURNABY, BRITISH COLUMBIA -- (Marketwired) -- 08/26/13 -- LED Medical Diagnostics Inc. (TSX VENTURE:LMD)(OTCQX:LEDIF)(FRANKFURT:LME) ("LED" or the "Company") today announced its financial results for the second quarter ended June 30, 2013, 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 ended March 31, 2013 and June 30, 2012 (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.), also in accordance with IFRS all balances are expressed in U.S. dollars unless otherwise stated.

Financial Highlights


--  Revenue increased by 4% to $1,083,000 for the three months ended June
    30, 2013 compared to $1,038,000 over the same period in the prior year. 
--  EBITDA(1) for three months ended June 30, 2013 of ($104,000) compared to
    the same period in the prior year of approximately ($495,000). 

"I am pleased to report encouraging results from the second quarter of 2013. Our revenues were up considerably from the first quarter. In fact, the Company came very close to breaking even," stated Peter Whitehead, LED Founder and Chief Executive Officer. "At this stage of our development a neutral quarter can be seen as a positive result, and as confirmation that the infrastructure we've laid out for our internal sales force is beginning to show results. Demand for the VELscope Vx remains strong, and I am optimistic that between now and the end of the year our sales momentum will continue to improve."

Three Month Comparative Results

For the three months ended June 30, 2013, the Company reported revenues of approximately $1,083,000 which is higher than the approximately $310,000 for three months ended March 31, 2013 and approximately $1,038,000 for the three months ended June 30, 2012.

Gross margin(2) was 59% during the three months ended June 30, 2013, compared to the three months ended March 31, 2013 of 53% and to 54% during the three months ended June 30, 2012. The Company's margin varies depending on the mix of VELscope equipment versus disposables sales for any given period.

Core operating expenses (excluding stock-based compensation, deferred share unit compensation, mark to market adjustments on Canadian dollar denominated warrants and other operating expenses)(3) for the three months ended June 30, 2013 of approximately $740,000 were 8% lower than the three months ended March 31, 2013 and 30% lower than the three months ended June 30, 2012.

EBITDA(1) for the three months ended June 30, 2013 was approximately ($104,000) compared to approximately ($638,000) for the three months ended March 31, 2013 and ($495,000) for the three months ended June 30, 2012. The Company reported a net loss of approximately $2.2 million for the three months ended June 30, 2013 compared to a net loss of approximately $1.33 million for the three months ended March 31, 2013 and $195,000 for the three months ended June 30, 2012.

Six Month Comparative Results

For the six months ended June 30, 2013, the Company reported revenues of approximately $1.4 million which is lower than the approximately $2.0 million for the six months ended June 30, 2012.

Gross margin(2) was 57% during the six months ended June 30, 2013 compared to the six months ended June 30, 2012 of 49%.

Core operating expenses (excluding stock-based compensation, deferred share unit compensation, mark to market adjustments on Canadian dollar denominated warrants and other operating expenses)(3) for the six months ended June 30, 2013 of approximately $1.5 million were lower than the six months ended June 30, 2012 of $2.5 million.

EBITDA(1) for the six months ended June 30, 2013 was approximately ($742,000) compared to approximately ($1.5 million) for the six months ended June 30, 2012. The Company reported a net loss of approximately $3.5 million for the six months ended June 30, 2013 compared to a net loss of approximately $1.4 million for the six months ended June 30, 2012.

Cash was approximately $1,718,000 with net working capital(4) of approximately $972,000 million as of June 30, 2013 compared to cash of approximately $607,000 with negative net working capital(4) of approximately $1,109,000 as of March 31, 2013.

(1) EBITDA or Earnings before Interest, Taxes, Depreciation and Amortization is a 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 GAAP measure. EBITDA referenced here relates to operating loss and excludes amortization, depreciation, stock-based compensation, deferred share unit compensation 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. Core operating expenses excludes stock-based compensation, deferred share unit compensation, mark to market adjustments on Canadian dollar denominated warrants and other operation expenses.

(4) 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. Working Capital is defined as current assets less current liabilities.

Business Highlights

Notable developments and achievements during the first quarter of fiscal 2013 included the following:


--  On April 24, 2013, the Company announced the results of an independent
    study published in "Oral Surgery, Oral Medicine, Oral Pathology, Oral
    Radiology" (Vol. 114 No. 3) that confirms the use of quantitative
    cytology ("QC") testing, as an adjunctive tool, successfully identifying
    high-risk potentially malignant disorders of the oral mucosa. 

--  On May 7, 2013, the Company cited a recent clinical study documenting
    the ability of its VELscope® Vx Enhanced Oral Assessment adjunctive
    technology to detect cancerous and pre-cancerous lesions that are missed
    by conventional exams. 

--  On June 10, 2013, the Company announced that its patented VELscope® Vx
    oral examination device is currently involved in a Phase III study
    sponsored by the University of British Columbia in collaboration with
    the Terry Fox Research Institute and the British Columbia Cancer Agency.

--  On June 14, 2013, the Company completed a non-brokered private placement
    of 17,000,000 units at an issue price of $0.15 per unit for gross
    proceeds of $2.55 million. 

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, Core Operating Expenses 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 core operating expenses is provided as a proxy for cash expenses incurred from the operations of the business. 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 and three months ended March 31, 2013.

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 press release 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 www.ledmd.com. 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 www.leddental.com.


LED MEDICAL DIAGNOSTICS INC.
Interim Condensed Consolidated Statements of Financial Position
(Unaudited and Expressed in U.S. Dollars)
                                                                           
                                                                      As at
                                                       As at    December 31,
                                               June 30, 2013           2012
---------------------------------------------------------------------------
                                                                           
ASSETS                                                                     
CURRENT                                                                    
  Cash                                            $1,718,435       $969,584
  Restricted cash                                      4,754          5,026
  Receivables                                        940,698      1,514,577
  Inventory                                          343,783        296,467
  Inventory held by the distributor                  386,400        518,400
  Prepayments                                         57,802         69,300
                                                ---------------------------
                                                   3,451,872      3,373,354
PROPERTY AND EQUIPMENT                                22,828         28,015
PATENTS AND INTELLECTUAL PROPERTY                     75,265         88,167
                                                ---------------------------
                                                                           
                                                  $3,549,965     $3,489,536
                                                ---------------------------
                                                                           
LIABILITIES AND SHAREHOLDERS' DEFICIT                                      
CURRENT LIABILITIES                                                        
  Trades payable and accrued liabilities          $1,574,424     $1,689,009
  Advances from the distributor                      901,948      1,778,112
  Current portion of finance lease obligation          3,317          2,982
                                                ---------------------------
                                                   2,479,689      3,470,103
LONG TERM LIABILITIES                                                      
  Long term portion of finance lease                                       
   obligation                                          5,133          6,879
  Warrants                                         2,283,899        140,467
                                                ---------------------------
                                                   4,768,721      3,617,449
                                                ---------------------------
                                                                           
SHAREHOLDERS' DEFICIT                                                      
  Share capital                                   26,516,415     24,658,241
  Stock-based payments reserve                       614,288         62,495
  Warrants reserve                                   311,851        277,748
  Accumulated other comprehensive income             474,458        474,458
  Deficit                                        (29,135,768)   (25,600,855)
                                                ---------------------------
                                                                           
                                                  (1,218,756)      (127,913)
                                                ---------------------------
                                                                           
                                                  $3,549,965     $3,489,536
---------------------------------------------------------------------------


LED MEDICAL DIAGNOSTICS INC.
Interim Condensed Consolidated Statements of Operations and Comprehensive
 Loss
(Unaudited and Expressed in U.S. Dollars)

---------------------------------------------------------------------------
                  Three months   Three months     Six months     Six months
                         ended  ended June 30,         ended  ended June 30,
                       June 30,          2012        June 30,          2012
For the                   2013      (Restated)          2013      (Restated)
---------------------------------------------------------------------------
                                                                           
SALES               $1,082,883     $1,037,788     $1,392,473     $2,036,926
COST OF GOODS                                                              
 SOLD                  446,509        473,343        592,875      1,035,764
                  ---------------------------------------------------------
                       636,374        564,445        799,598      1,001,162
                  ---------------------------------------------------------
                                                                           
EXPENSES                                                                   
  Sales and                                                                
   marketing           327,299        667,526        659,335      1,550,841
  Research and                                                             
   development         110,794        141,158        200,551        315,145
  Administration       302,145        250,588        681,873        591,061
  Stock-based                                                              
   compensation        200,462              -        551,793              -
  Deferred                                                                 
   share unit                                                              
   compensation         27,850              -        315,431              -
  Mark to                                                                  
   market                                                                  
   adjustments                                                             
   on Canadian                                                             
   dollar                                                                  
   denominated                                                             
   warrants          1,795,163       (296,493)     1,756,934        (81,293)
  Other                                                                    
   operating                                                               
   expenses             43,743         13,105         53,383         30,378
                  ---------------------------------------------------------
                                                                           
                     2,807,456        775,884      4,219,300      2,406,132
                  ---------------------------------------------------------
                                                                           
OPERATING LOSS      (2,171,082)      (211,439)    (3,419,702)    (1,404,970)
                  ---------------------------------------------------------
                                                                           
OTHER INCOME                                                               
 (EXPENSES)                                                                
  Foreign                                                                  
   exchange                                                                
   (loss) gain         (28,615)        17,182       (111,071)       (43,126)
  Interest                                                                 
   income                    -              -              -            287
  Loss on                                                                  
   disposal of                                                             
   assets                    -           (702)             -           (702)
  Miscellaneous                                                            
   income                    -            373              -          2,475
                  ---------------------------------------------------------
                       (28,615)        16,853       (111,071)       (41,066)
                  ---------------------------------------------------------
                                                                           
NET LOSS BEFORE                                                            
 INCOME TAXES       (2,199,697)      (194,586)    (3,530,773)    (1,446,036)
                                                                           
INCOME TAXES             1,442              -          4,140              -
                  ---------------------------------------------------------
                                                                           
NET LOSS AND                                                               
 COMPREHENSIVE                                                             
 LOSS FOR THE                                                              
 PERIOD            ($2,201,139)     ($194,586)   ($3,534,913)   ($1,446,036)
                  ---------------------------------------------------------
                                                                           
LOSS PER SHARE                                                             
 - BASIC AND                                                               
 FULLY DILUTED          ($0.05)        ($0.01)        ($0.08)        ($0.04)
                  ---------------------------------------------------------
                                                                           
WEIGHTED                                                                   
 AVERAGE NUMBER                                                            
 OF SHARES                                                                 
 OUTSTANDING -                                                             
 BASIC AND                                                                 
 FULLY DILUTED      44,161,332     36,335,508     42,582,193     36,335,508
                  ---------------------------------------------------------


LED MEDICAL DIAGNOSTICS INC.
Interim Condensed Consolidated Statements of EBITDA and Loss
(Expressed in U.S. Dollars)

---------------------------------------------------------------------------
                  Three months   Three months     Six months     Six months
                         ended  ended June 30,         ended  ended June 30,
                       June 30,          2012        June 30,          2012
For the                   2013      (Restated)          2013      (Restated)
---------------------------------------------------------------------------
                                                                           
SALES               $1,082,883     $1,037,788     $1,392,473     $2,036,926
COST OF GOODS                                                              
 SOLD                  446,509        473,343        592,875      1,035,764
                  ---------------------------------------------------------
                       636,374        564,445        799,598      1,001,162
                  ---------------------------------------------------------
                                                                           
EXPENSES                                                                   
  Sales and                                                                
   marketing           327,299        667,526        659,335      1,550,841
  Research and                                                             
   development         110,794        141,158        200,551        315,145
  Administration       302,145        250,588        681,873        591,061
                  ---------------------------------------------------------
                       740,238      1,059,272      1,541,759      2,457,047
                  ---------------------------------------------------------
EBITDA                (103,864)      (494,827)      (742,161)    (1,455,885)
                  ---------------------------------------------------------
                                                                           
OTHER INCOME                                                               
 (EXPENSES)                                                                
  Stock-based                                                              
   compensation       (200,462)             -       (551,793)             -
  Deferred                                                                 
   share unit                                                              
   compensation        (27,850)             -       (315,431)             -
  Mark to                                                                  
   market                                                                  
   adjustments                                                             
   on Canadian                                                             
   dollar                                                                  
   denominated                                                             
   warrants         (1,795,163)       296,493     (1,756,934)        81,293
  Other                                                                    
   operating                                                               
   expenses            (43,743)       (13,105)       (53,383)       (30,378)
  Foreign                                                                  
   exchange                                                                
   gain (loss)         (28,615)        17,182       (111,071)       (43,126)
  Interest                                                                 
   income                    -              -              -            287
  Loss on                                                                  
   disposal of                                                             
   assets                    -           (702)             -           (702)
  Miscellaneous                                                            
   income                    -            373              -          2,475
                  ---------------------------------------------------------
                    (2,095,833)       300,241     (2,788,612)         9,849
                  ---------------------------------------------------------
                                                                           
NET LOSS BEFORE                                                            
 INCOME TAXES       (2,199,697)      (194,586)    (3,530,773)    (1,446,036)
                                                                           
INCOME TAXES             1,442              -          4,140              -
                  ---------------------------------------------------------
                                                                           
NET LOSS FOR                                                               
 THE PERIOD                                                                
 UNDER IFRS        ($2,201,139)     ($194,586)   ($3,534,913)   ($1,446,036)
                  ---------------------------------------------------------


LED MEDICAL DIAGNOSTICS INC.
Interim Condensed Consolidated Statements of Changes in Shareholders'
 Deficit
(Unaudited and Expressed in U.S. Dollars)

---------------------------------------------------------------------------
                                                 Stock-based               
                     Number of          Share       Payments       Warrants
                        Shares        Capital       Reserves        Reserve
---------------------------------------------------------------------------
                                                                           
Balance,                                                                   
 January 1,                                                                
 2013               40,985,508    $24,658,241        $62,495       $277,748
Stock-based                                                                
 compensation                -              -        351,331              -
Net loss for                                                               
 the period                  -              -              -              -
---------------------------------------------------------------------------
Balance, March                                                             
 31, 2013           40,985,508    $24,658,241       $413,826       $277,748
Shares issued                                                              
 for cash           17,000,000      2,507,621              -              -
Less allocated                                                             
 to share                                                                  
 purchase                                                                  
 warrants                    -       (386,497)             -              -
Share issuance                                                             
 costs                       -       (262,950)             -              -
Finder's                                                                   
 warrants                                                                  
 issued                                                                    
 pursuant to                                                               
 private                                                                   
 placement                   -              -              -         34,103
Stock-based                                                                
 compensation                -              -        200,462              -
Net loss for                                                               
 the period                  -              -              -              -
---------------------------------------------------------------------------
Balance, June                                                              
 30, 2013           57,985,508    $26,516,415       $614,288       $311,851
---------------------------------------------------------------------------
                                                                           
Balance,                                                                   
 January 1,                                                                
 2012                                                                      
 (Restated)         36,335,508    $23,713,352        $62,495       $277,748
Net loss for                                                               
 the period                  -              -              -              -
Reclassification                                                            
 of warrants                 -       (136,624)             -              -
---------------------------------------------------------------------------
Balance, March                                                             
 31, 2012                                                                  
 (Restated)         36,335,508    $23,576,728        $62,495       $277,748
Net loss for                                                               
 the period                  -              -              -              -
---------------------------------------------------------------------------
Balance, June                                                              
 30, 2012                                                                  
 (Restated)         36,335,508    $23,576,728        $62,495       $277,748
---------------------------------------------------------------------------

------------------------------------------------------------
                                        Other          Total
                                Comprehensive   Shareholders'
                       Deficit         Income        Deficit
------------------------------------------------------------
                                                            
Balance,                                                    
 January 1,                                                 
 2013             ($25,600,855)      $474,458      ($127,913)
Stock-based                                                 
 compensation                -              -        351,331
Net loss for                                                
 the period         (1,333,774)             -     (1,333,774)
------------------------------------------------------------
Balance, March                                              
 31, 2013         ($26,934,629)      $474,458    ($1,110,356)
Shares issued                                               
 for cash                    -              -      2,507,621
Less allocated                                              
 to share                                                   
 purchase                                                   
 warrants                    -              -       (386,497)
Share issuance                                              
 costs                       -              -       (262,950)
Finder's                                                    
 warrants                                                   
 issued                                                     
 pursuant to                                                
 private                                                    
 placement                   -              -         34,103
Stock-based                                                 
 compensation                -              -        200,462
Net loss for                                                
 the period         (2,201,139)             -     (2,201,139)
------------------------------------------------------------
Balance, June                                               
 30, 2013         ($29,135,768)      $474,458    ($1,218,756)
------------------------------------------------------------
                                                            
Balance,                                                    
 January 1,                                                 
 2012                                                       
 (Restated)       ($24,733,922)      $474,458      ($205,869)
Net loss for                                                
 the period         (1,251,450)             -     (1,251,450)
Reclassification                                             
 of warrants                 -              -       (136,624)
------------------------------------------------------------
Balance, March                                              
 31, 2012                                                   
 (Restated)       ($25,985,372)       474,458    ($1,593,943)
Net loss for                                                
 the period           (194,586)             -       (194,586)
------------------------------------------------------------
Balance, June                                               
 30, 2012                                                   
 (Restated)       ($26,179,958)      $474,458    ($1,788,529)
------------------------------------------------------------


LED MEDICAL DIAGNOSTICS INC.
Interim Condensed Consolidated Statements of Cash Flows
(Unaudited and Expressed in U.S. Dollars)

---------------------------------------------------------------------------
                  Three months   Three months     Six months     Six months
                         ended  ended June 30,         ended  ended June 30,
                       June 30,          2012        June 30,          2012
For the                   2013      (Restated)          2013      (Restated)
---------------------------------------------------------------------------
                                                                           
CASH FLOWS FROM                                                            
 OPERATING                                                                 
 ACTIVITIES                                                                
  Net loss for                                                             
   the period      ($2,201,139)     ($194,586)   ($3,534,913)   ($1,446,036)
                                                                           
Adjustments to                                                             
 net loss for                                                              
 items not                                                                 
 involving                                                                 
 cash:                                                                     
  Depreciation                                                             
   of equipment          3,189          6,654          6,378         17,476
  Amortization                                                             
   of                                                                      
   intangible                                                              
   assets                6,451          6,451         12,902         12,902
  Warrants                                                                 
   issuance                                                                
   costs                34,103              -         34,103              -
  Loss on                                                                  
   disposal of                                                             
   assets                    -            702              -            702
  Accrued                                                                  
   interest on                                                             
   shareholder                                                             
   loans                     -              -              -          2,583
  Mark to                                                                  
   market                                                                  
   adjustments                                                             
   on Canadian                                                             
   dollar                                                                  
   denominated                                                             
   warrants          1,795,163       (296,493)     1,756,935        (81,293)
  Stock-based                                                              
   compensation        200,462              -        551,793              -
                  ---------------------------------------------------------
                      (161,771)      (477,272)    (1,172,802)    (1,493,666)
                  ---------------------------------------------------------
Changes in                                                                 
 working                                                                   
 capital assets                                                            
 and                                                                       
 liabilities:                                                              
  Receivables         (667,340)      (938,471)       573,879       (750,580)
  Inventory             72,667        (37,875)       (47,316)       290,600
  Inventory                                                                
   held by                                                                 
   distributor         132,000       (195,000)       132,000       (436,247)
  Prepayments           11,519          8,562         11,498        (29,617)
  Trades                                                                   
   payable and                                                             
   accrued                                                                 
   liabilities         (58,132)       737,752       (114,585)       665,936
  Advances from                                                            
   the                                                                     
   distributor        (460,342)       736,170       (876,164)     1,635,441
                  ---------------------------------------------------------
  Changes in                                                               
   working                                                                 
   capital                                                                 
   assets and                                                              
   liabilities        (969,628)       311,138       (320,688)     1,375,533
                  ---------------------------------------------------------
                                                                           
Cash flows used                                                            
 in operating                                                              
 activities         (1,131,399)      (166,134)    (1,493,490)      (118,133)
                  ---------------------------------------------------------
                                                                           
CASH FLOWS FROM                                                            
 INVESTING                                                                 
 ACTIVITIES                                                                
  Purchase of                                                              
   equipment            (1,191)             -         (1,191)       (16,758)
  Restricted                                                               
   cash                    167            101            272         19,670
                  ---------------------------------------------------------
  Cash flows                                                               
   provided by                                                             
   (used in)                                                               
   investing                                                               
   activities           (1,024)           101           (919)         2,912
                  ---------------------------------------------------------
                                                                           
CASH FLOWS FROM                                                            
 FINANCING                                                                 
 ACTIVITIES                                                                
  Issuance of                                                              
   common                                                                  
   shares, net                                                             
   of issuance                                                             
   costs             1,858,174              -      1,858,174              -
  Issuance of                                                              
   share                                                                   
   purchase                                                                
   warrants in                                                             
   private                                                                 
   placement           386,497              -        386,497              -
  Repayment of                                                             
   finance                                                                 
   lease                                                                   
   obligation             (723)          (584)        (1,411)        (1,143)
  Repayment of                                                             
   shareholder                                                             
   loans                     -              -              -       (105,379)
                  ---------------------------------------------------------
Cash flows                                                                 
 provided by                                                               
 (used in)                                                                 
 financing                                                                 
 activities          2,243,948           (584)     2,243,260       (106,522)
                  ---------------------------------------------------------
                                                                           
CHANGE IN CASH                                                             
 AND CASH                                                                  
 EQUIVALENTS         1,111,525       (166,617)       748,851       (221,743)
CASH -                                                                     
 BEGINNING OF                                                              
 PERIOD                606,910        920,646        969,584        975,772
                  ---------------------------------------------------------
CASH - END OF                                                              
 PERIOD             $1,718,435       $754,029     $1,718,435       $754,029
                  ---------------------------------------------------------

Restatement

In the preparation of the Company's consolidated financial statements for the year ended December 31, 2012, management identified historical errors as follows:


--  the functional currency of its subsidiary, LED Dental Inc. should have
    been U.S. dollars rather than Canadian dollars from June 1, 2006; 
--  the functional currency of LED, should have been U.S. dollars rather
    than Canadian dollars from January 1, 2012; and, 
--  revenue recognition for a distributor's agreement which had previously
    been recognized upon shipment to the distributor has been corrected to
    be recognized upon sell through to the end customer. 

As a result, the Company has restated its consolidated financial statements for the three and six months ended June 30, 2012.

The following table summarizes the impact of the restatement adjustments on the Company's previously reported consolidated financial statements for the three months ended June 30, 2012:


                                                  Correcting               
                                  As reported     adjustment    As restated
                                 ------------------------------------------
Consolidated statements of                                                 
 loss and comprehensive loss                                               
Sales                              $1,773,958      ($736,170)    $1,037,788
Cost of goods sold                    668,343       (195,000)       473,343
Depreciation and amortization          13,147            (42)        13,105
Mark to market adjustments on                                              
 Canadian dollar denominated                                               
 warrants                                   -       (296,493)      (296,493)
Foreign exchange gain (loss)            9,645          7,537         17,182
Net and comprehensive income                                               
 (loss) for the period                 42,540       (237,126)      (194,586)
Loss per share - basic and                                                 
 diluted                                $0.00         ($0.01)        ($0.01)
                                                                           
Consolidated statements of                                                 
 shareholders' deficit                                                     
Deficit, beginning of period     ($23,730,035)   ($2,255,337)  ($25,985,372)
Deficit, end of period           ($23,687,495)   ($2,492,463)  ($26,179,958)
                                 ------------------------------------------

The following table summarizes the impact of the restatement adjustments on the Company's previously reported consolidated financial statements for the six months ended June 30, 2012:


                                                  Correcting               
                                  As reported     adjustment    As restated
                                 ------------------------------------------
Consolidated statements of                                                 
 loss and comprehensive loss                                               
Sales                              $3,601,122    ($1,564,196)    $2,036,926
Cost of goods sold                  1,449,164       (413,400)     1,035,764
Depreciation and amortization          30,561           (183)        30,378
Mark to market adjustments on                                              
 Canadian dollar denominated                                               
 warrants                                   -        (81,293)       (81,293)
Foreign exchange gain (loss)          (11,111)       (32,015)       (43,126)
Net and comprehensive loss for                                             
 the period                          (344,673)    (1,101,363)    (1,446,036)
Loss per share - basic and                                                 
 diluted                               ($0.01)        ($0.03)        ($0.04)
                                                                           
Consolidated statements of                                                 
 shareholders' deficit                                                     
Deficit, beginning of period     ($23,342,822)   ($1,391,100)  ($24,733,922)
Deficit, end of period           ($23,687,495)   ($2,492,463)  ($26,179,958)
                                 ------------------------------------------

Contacts:
LED Medical Diagnostics Inc.
Mark Komonoski, Investor Relations
(403) 255-8483 or Toll-Free: (877) 255-8483
Cell: (403) 470-8384
mark.komonoski@ledmd.com
Skype: mkomonoski

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