HONG KONG, Aug. 14 /PRNewswire-FirstCall/ -- Lightscape Technologies Inc. (BULLETIN BOARD: LTSC) , a provider of innovative lighting design solutions, advanced lighting products and customized energy management solutions, today reported first quarter operating results.
For the three months ended June 30, 2007, revenue decreased 56% to $0.85 million compared to $1.9 million in the prior year. This decrease was primarily attributable to decreased sales of LED lighting design solutions and HID lighting source products derived from subsidiary Beijing Illumination. Gross profit decreased to $0.2 million compared to $1.3 million in the prior year period as a result of the decrease in revenues.
Net loss for the first quarter was $1.3 million, or ($0.04) per diluted share, compared to a loss of $0.2 million, or ($0.01) per diluted share in the prior year period.
Bondy Tan, President and CEO of Lightscape Technologies commented, "During the first quarter, we continued our concentrated business development efforts within our core LED lighting solutions business. Our focus on building solid foundations for multiple revenue streams within the LED lighting business has laid the groundwork for generating future revenues. However, during this transitional period while we ramp-up our LED business development activities, our efforts have not yet been positively reflected in our financial results. We expect the results of our efforts to begin to be realized during the latter portion of our second quarter, with momentum building during the second half of our fiscal year."
Outlook for 2008 Fiscal Year
The Company believes the major contributors to growth will come from several segments within its LED lighting solutions business:
LED Lighting Systems
During the first quarter, we submitted various proposals and tender bids to provide LED solutions for a number of sizeable development projects in Mainland China, Singapore, Hong Kong and Macau. Our proposals and bids encompass lighting design consultancy, supply and build of our designed LED lighting systems (including LED video walls), and audio-visual multi-media system design and content creation. As a first step, we have received lighting design consultancy contracts with several of these development projects. Under these contracts, we are responsible for the lighting design work for the projects. Securing the design consultancy contracts serves as a springboard for our ability to secure the more lucrative supply and build contracts for the project developments.
One of the key projects for which we secured a design consultancy contract is a new high-end commercial and residential development located on Huai Hai Zhong Road in Shanghai. This landmark project, which is being developed by one of the major property developers in Asia, includes 2.7 million square feet of luxury mall, residential and office complexes. A key component of the project's luxury-styled commercial and residential elements will be the application of architecturally appealing LED lighting systems which our company has been contracted to design, including an elegant yet vibrant façade. We are optimistic that our work on the design consultancy contract will enable our company to secure the supply and build contract for this project, which would lead to revenue generation from the multiple phases of this project over the coming years.
During the first quarter, we also secured a design consultancy contract with a new high-rise retail and residential tower located at the gateway of Orchard Road in Singapore. This project, which is jointly owned and managed by two of the largest property developers in Asia, includes a 56-story residential tower and 1 million square feet of retail space. This project is designed to be a prime ultra-luxury residential and retail landmark in Singapore. Innovative LED lighting systems, audio-visual and multi-media effects are expected to play a major role in the enhancement of this project's ultra-luxury character. Through our design consultancy contract, we are confident in our ability to secure supply and build contracts for this project, which would begin generating revenue for our company before the end of fiscal 2008.
We have also secured a design consultancy contract for a mega-sized retail and residential development located in Hong Kong's central business district on Victoria Harbor. This project includes a 67-story luxury residential tower which will be a landmark in Hong Kong. We are in the process of submitting tender bids for this project which, if contracts are secured, would result in comprehensive work beginning in the second half of fiscal 2008 with revenue generation expected before the end of fiscal 2008.
In addition to our involvement with new high-end projects being developed by some of the major property developers in Asia, we have also secured lighting design consultancy contracts for existing properties owned by these developers. These projects typically entail the design of the same type of LED lighting solutions as for new developments, but with solutions being implemented mainly as retrofits. We expect to secure supply and build contracts with some of these projects in our second quarter, which would begin generating revenue before the end of fiscal 2008 and into 2009.
OEM and Licensing
Our OEM business, which consists of our proprietary Lightscape Multimedia and Video Show Control System, continues to show promise and will be an area that we will continue to pursue through the remainder of fiscal 2008. The Lightscape product is a powerful, PC-based software system for the authoring, control and playback of intricate, large-scale lighting and audio effects. This business primarily targets LED manufacturers and LED lighting system designers which use our Lightscape software system to create and control lighting effects for their own LED lighting systems. We have recently redesigned the Lightscape software into a more simplified version for our OEM customers. We expect to roll-out the updated version of the Lightscape software in the second quarter of fiscal 2008, which is expected to improve order demand from our existing OEM customers as well as attract new orders from other lighting manufacturers and designers.
LED Rentals
We are also ramping-up efforts to provide short-term rentals of LED lighting hardware. The main products we plan to rent are LED panels and LED video walls. One of the key markets for our LED rental segment is expected to be the advertising industry. We are currently pursuing a strategic relationship with a large outdoor advertising company with extensive operations in Greater China to jointly capitalize on LED-based advertising opportunities in Greater China. Our new LED rental segment is expected to provide a solid source of recurring revenue, and is expected to begin contributing to our revenue stream before the end of our fiscal 2008.
Mr. Tan continued, "During the first quarter, we also undertook initiatives to enhance our sales and marketing capabilities. We formed agreements with two new distributors to expand the distribution channels for our range of LED lighting solutions in our target markets in Greater China and Asia. ES-Team Lighting Pte Ltd. is a major LED and lighting distributor based in Singapore which has a strong regional coverage including Singapore, Malaysia and Taiwan. Our second agreement with Gruppe Lighting Hong Kong Ltd. is expected to provide enhanced market coverage in Hong Kong, Macau and Mainland China. To further enhance the exposure of our LED lighting solutions and our company to potential customers and strategic partners, we plan to attend several major conventions focused on LED lighting and the general lighting industry. These include the Hong Kong International Lighting Fair 2007 in October 2007, Light+Building 2008 in Frankfurt in April 2008, and Light Middle East in Dubai in May 2008.
Mr. Tan continued, "During the first quarter, our majority-owned subsidiary Beijing Illumination contributed lower revenue and returns to our bottom line compared to the first quarter of fiscal 2007. The lower results were due primarily to Beijing Illumination's change of local senior executives and internal restructuring during the three months ended June 30, 2007. The purpose of the changes and restructuring was to tighten manufacturing costs and foster the company's sales and marketing networks in Shanghai, Guangzhou, Hainan and Zhuhai, China. The company has also entered negotiations to appoint local sales agents in Korea, Thailand and Singapore to expand its sales and marketing reach in Southeast Asia. Although these changes led to lower revenue and profit contributions during our first quarter, they are expected to lead to a long-term strengthening of revenue growth and margins. As a result, we anticipate that Beijing Illumination will contribute stronger financial results to Lightscape in the second half of fiscal 2008, and we maintain an overall positive outlook for this subsidiary.
Mr. Tan concluded, "Overall we are pleased with the initiatives we have completed and the progress we have achieved, particularly within our core LED lighting solutions business. We are building solid foundations for future revenue growth within selected segments of the LED lighting business, including revenue streams that are expected to be recurring. We remain excited about the opportunities ahead and we expect the results of our efforts to begin to be realized during the latter portion of our second quarter, with momentum building during the second half of our fiscal year."
Additional information regarding Lightscape Technologies' financial performance as of and for the three months ended June 30, 2007 and a comparison to the three months ended June 30, 2006 can be found on the attached balance sheet and statements of operations and in the company's Quarterly Report on Form 10-QSB.
About Lightscape Technologies
Lightscape Technologies Inc. (OTCBB: LTSC) delivers innovative lighting design solutions, advanced lighting products and customized energy management solutions. Through wholly owned subsidiary Lightscape Technologies (Macau) Ltd., Lightscape Technologies designs, markets and sells LED-based lighting systems, licenses proprietary LED digital controller software, and provides LED lighting hardware rentals. Through subsidiary Beijing Illumination (Hong Kong) Limited, Lightscape Technologies manufactures and sells HID (High- Intensity Discharge) lighting products and Ultra High-Pressure Mercury Lamps. Through wholly owned subsidiary Tech Team Development Limited, Lightscape Technologies provides total energy management products and solutions which optimize energy consumption, lower costs, and enhance competitiveness for clients. Our headquarters are in Hong Kong, and we have offices in Singapore, China and Macau.
Safe Harbor Provision
The Private Securities Litigation Reform Act of 1995 provides a "Safe Harbor" for forward-looking statements. This Press Release may contain, in addition to historical information, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are identified by their use of terms and phrases such as "believe," "expect," "plan," "anticipate" and similar expressions identifying forward- looking statements. Investors should not rely on forward-looking statements because they are subject to a variety of risks, uncertainties and other factors that could cause actual results to differ materially from Lightscape's expectations, and Lightscape expressly does not undertake any duty to update forward-looking statements. These factors include, but are not limited to, risks in product development and market acceptance of and demand for the company's products and services; risks of downturns in economic conditions generally; risks of intellectual property rights associated with competition and competitive pricing pressures; risks of foreign sales and high customer concentration; risks related to Lightscape's and its subsidiaries' ability to secure supply and build contracts with potential project developers in Shanghai, Singapore and Hong Kong; risks related to Lightscape's and its subsidiaries' ability to secure sufficient working capital in order to deliver upon new supply and build contracts with potential project developers in Shanghai, Singapore and Hong Kong; risks related to Lightscape's and its subsidiaries' ability to collect payments receivable under supply and build contracts that may be signed; and other factors which may cause the actual results, performance or achievements of Lightscape Technologies to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Information concerning potential factors that could affect the company is detailed from time to time in the company's reports filed with the Securities and Exchange Commission.
LIGHTSCAPE TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Expressed in US dollars
Three Months Ended
June 30,
2007 2006
$ $
Revenues:
Sale of energy saving solutions 35,688 7,394
Sale of lighting source products 804,579 1,889,229
Sale and contract revenue of lighting design
solutions - -
Rental income - 964
Commission and service income 10,317 15,904
Sales-type lease income 1,160 5,023
Total net revenues 851,744 1,918,514
Cost of revenues:
Sale of energy saving solutions (17,770) (14,729)
Sale of lighting source products (559,683) (635,488)
Sale and contract revenue of lighting design
solutions (68,407) -
Rental income - (474)
Commission and service income - (2,455)
Total cost of revenues (645,860) (653,146)
Gross profit 205,884 1,265,368
Amortization of intangible assets (233,511) (147,246)
Selling and marketing expenses (197,141) (147,319)
General and administrative expenses (856,518) (979,924)
Loss from operations (1,081,286) (9,121)
Interest expense (356,053) (90,430)
Interest income 24,303 1,624
Other income 57,996 75,318
Equity share of the result of joint venture - 64,710
(Loss) profit before income tax and minority
interests (1,355,040) 42,101
Income tax - (93,798)
Net loss (1,355,040) (51,697)
Minority interests 35,068 (171,257)
Net loss attributable to shareholders of the
Company (1,319,972) (222,954)
Loss per share
- Basic (0.04) (0.01)
- Diluted (0.04) (0.01)
Weighted average number of common shares
outstanding
- Basic 37,451,410 30,603,344
- Diluted 37,451,410 30,603,344
LIGHTSCAPE TECHNOLOGIES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Expressed in US dollars
June 30, March 31,
2007 2007
(Unaudited) (Audited)
$ $
ASSETS
Current assets:
Cash and cash equivalents 1,703,512 4,117,107
Other investments, net of write-off amount
of $31,516 on June 30, 2007 and $31,516 on
March 31, 2007 - -
Trade receivables, net of allowance for
doubtful accounts of $413,000 on June 30,
2007 and $413,082 on March 31, 2007 4,540,771 4,823,265
Net investment in sales-type leases -
current portion 221,411 196,501
Prepaid expenses and other current assets 3,127,158 2,246,172
Inventories 1,684,231 1,708,020
Total current assets 11,277,083 13,091,065
Intangible assets 4,047,101 4,280,612
Goodwill 5,003,437 5,003,437
Plant and equipment, net 4,120,420 4,162,554
Construction in progress 1,716,666 1,715,141
Net investment in sales-type leases -
non-current portion 285,937 329,238
15,173,561 15,490,982
TOTAL ASSETS 26,450,644 28,582,047
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings 3,652 3,678
Options 2,619,000 2,619,000
Trade payables 1,988,814 2,973,388
Amount due to a director 40,296 39,846
Amount due to a shareholder 45,161 46,546
Accrued expenses and other current
liabilities 1,217,759 1,172,812
Obligations under capital leases - current
portion 1,774 1,774
Income tax payable 381,236 396,719
Total current liabilities 6,297,692 7,253,763
Non-current liabilities:
Obligations under capital leases - non-
current portion 6,799 6,947
Redeemable convertible notes 346,767 147,047
Total non-current liabilities 353,566 153,994
Total liabilities 6,651,258 7,407,757
Minority interest 1,830,847 1,865,916
COMMITMENTS AND CONTINGENCIES
(see Notes 17 and 18)
Shareholders' equity:
Common stock
Authorized:
800,000,000 common shares, par value $0.001
per share
100,000,000 preferred shares, par value $0.001
per share
Issued and outstanding:
37,451,410 common shares at June 30, 2007 and
at March 31, 2007 37,451 37,451
Additional paid-in capital 24,139,333 24,139,333
Other reserves 28,944 28,944
Accumulated other comprehensive income 302,678 322,541
Accumulated deficit (6,539,867) (5,219,895)
Total shareholders' equity 17,968,539 19,308,374
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 26,450,644 28,582,047
