TIDMLSIC
RNS Number : 5928Z
Lifeline Scientific, Inc
21 September 2015
Lifeline Scientific, Inc.
("Lifeline" or the "Company")
Half Yearly Report
Lifeline Scientific (AIM: LSIC), the transplantation technology
company, announces its half yearly results for the six months ended
30 June 2015. The results build upon growth achieved in 2014 and
show expected improvement at the operating level. The Company
continues to drive planned new product and territory expansion
initiatives and remains confident of delivering further growth for
the full year in line with market expectations.
Financial highlights
-- Transplantation products and services revenues up by 1.3% to US$15.0m (H1 2014: US$14.8m)
-- North America revenues up 3.8% to US$12.4m (H1 2014:
US$12.0m)
-- Revenue outside of North America of US$2.6m (H1 2014:
US$2.8m) representing 17.2% of total revenue (H1 2014: 19.2%)
-- LifePort(R) proprietary consumables steady at US$8.5m (H1
2014: US$8.5m)
-- Gross profit decreased 4.5% to US$8.9m (H1 2014: US$9.4m)
-- Income from operations of US$0.1m (2014:US$0.0m)
-- Net income of US$0.1m (H1 2014: US$0.1m loss)
-- Net cash generated from operations of US$1.0m (H1 2014: US$0.3m)
-- Cash of US$3.1m as of 30 June 2015 (as of 31 December 2014: US$3.3m)
Operational highlights
-- Installed base of LifePort Kidney Transporters grew to 204
leading transplant programmes in 28 countries worldwide (H1 2014:
185 in 27 countries)
-- Key account wins in North America and further adoption in Europe and Middle East
-- China FDA (CFDA) approvals awarded for KPS-1 and SPS-1
-- Preliminary results from pivotal multi-centre clinical study
in Brazil show statistically significant benefits with LifePort vs.
static cold storage for donor kidneys
-- US FDA review underway for LifePort Liver Transporter
-- Early sales recorded of LifePort Liver Transporter and
complementary products under observational research protocols
-- Several new patents issued supporting LifePort and related products
-- Additional medical journal articles published further
establishing clinical benefits of hypothermic machine preservation
for donor kidneys
Post-period end highlights
-- CFDA approvals awarded for LifePort Kidney Transporter and
its full suite of proprietary single-use consumables allows for
national commercial launch
David Kravitz, Chief Executive Officer of Lifeline, said:
"The long awaited regulatory approvals from China's FDA for our
full suite of LifePort Kidney Transporter products and our market
leading organ preservation and flush solutions, KPS-1 and SPS-1,
was particularly significant and paves the way for the national
launch of our products in China later this year. These account wins
and the CFDA approvals, combined with other regulatory and major
new account wins in important growth territories, is further
evidence that our plans for geographical expansion are on track.
With LifePort Liver Transporter progressing through regulatory
review and a solid slate of pipeline opportunities, prospects for
the Company remain strong and I believe that Lifeline is at a key
inflection point for growth. We are encouraged by the positive
outlook for the second half of 2015 and into 2016 and it is in this
context that we are exploring a full range of strategic and
financial alternatives to best deliver maximum shareholder
value."
For further information please contact:
Lifeline Scientific, Inc. www.lifeline-scientific.com
David Kravitz, CEO Tel: +1 847 294 0300
Lisa Kieres, CFO Tel: +1 847 294 0300
Panmure Gordon (UK) Limited +44 (0)20 7886 2500
Freddy Crossley / Duncan Monteith (Corporate
Finance)
Maisie Atkinson (Corporate Broking)
Walbrook PR +44 (0)20 7933 8780 or lifeline@walbrookpr.com
Paul McManus +44 (0)7980 541 893
Mike Wort +44 (0)7900 608 002
About Lifeline Scientific Inc.
Lifeline Scientific, Inc. is a Chicago-based global medical
technology company with regional offices in Brussels and Sao Paulo.
The Company's focus is the development of innovative products that
improve transplant outcomes and lower the overall costs of
transplantation. Its lead product, LifePort Kidney Transporter, is
the global market-leading medical device for hypothermic machine
preservation of donor kidneys. LifePorts and novel solutions
designed for preservation of other organs are in development, with
LifePort Liver Transporter next in line for commercial launch. For
more information please visit www.lifeline-scientific.com
About LifePort Kidney Transporter
Created with the challenges of organ recovery and transport in
mind, LifePort Kidney Transporter is a proprietary medical device
designed to help improve kidney preservation, evaluation and
transport prior to transplantation. It has been widely studied in
clinical trials throughout the world and is the standard of care
for machine preservation of kidneys. Employed by surgeons in over
200 leading transplant programmes in 29 countries, LifePorts have
successfully preserved more than 70,000 kidneys indicated for
clinical transplant. For more information please visit
www.organ-recovery.com
About LifePort Liver Transporter
LifePort Liver Transporter is modelled upon the clinically
proven technology platform of LifePort Kidney Transporter and the
Company's early HMP prototype successfully used in clinical
transplant studies by surgeons at New York-Presbyterian
Hospital/Columbia University Medical Center. LifePort Liver
Transporter and the Company's proprietary machine preservation
solution, Vasosol(R), are in the process of US and international
regulatory registrations. The system is designed to help improve
outcomes in liver transplantation by enabling the clinical use of
hypothermic machine perfusion, and has been developed in
consultation with clinical and research teams specialising in liver
transplantation at Columbia University Medical Center and the
University of Chicago. The system employs a rugged, streamlined
ergonomic design for ease of use and transportability from donor
bedside to recipient operating room. For more information please
visit: http://www.organ-recovery.com/pipeline.php
Chairman's Statement
Revenues from transplantation products and services were
US$15.0m (H1 2014: US$14.8m), representing overall growth of 1.3%
compared to the same period last year.
We saw steady growth in our core North American market with
revenues up 3.8% to US$12.4m (H1 2014: US$12.0m). Revenues outside
North America were slightly down to US$2.6m (H1 2014: US$2.8m), a
fall of 9.1%. Revenues outside of North America represent 17.2% of
the total revenue for the period (H1 2014: 19.2%).
Whilst overall sales outside of North America dipped slightly,
we expect to make important H2 headway in Brazil and Asia,
particularly following the receipt of formal CFDA regulatory
approvals for the full suite of LifePort(R) Kidney Transporter
products and preservation solutions. Ahead of these approvals China
product sales of US$3.3m were realised during LifePort Kidney
Transporter's three year pre-launch period, including US$0.2m for
the six months ending 30 June 2015 (H1 2014: nil) where our
products were being used under clinical research exemptions.
In Europe, adoption of the full suite of LifePort Kidney
Transporter products continues to increase following our French
National Tender award last year. Revenue in local currency for that
region of EUR2.1m increased 13.3% for the period over last year (H1
2014: EUR1.8m), with proprietary LifePort Kidney consumables
increasing by 24%. Consolidated, in US$, the resulting European
sales decreased slightly on the previous year at US$2.3m (H1 2014:
US$2.5m), due to a strengthening of the dollar year-on-year. Sales
from South America accounted for US$0.1m (H1 2014: US$0.3m),
reflecting previously announced systemic complexities around
importation of medical products in Brazil. We are optimistic about
growth in these markets over the medium and long term as
concentrated efforts are in place to accelerate LifePort adoption
and preservation solution sales.
LifePort proprietary consumables are in line with last year at
US$8.5m (H1 2014: US$8.5m) and sales of our solutions products
increased by 11.4% to US$5.6m (H1 2014: US$5.0m). LifePort Kidney
Transporter unit sales were down to US$0.5m year-on-year (H1 2014:
US$0.8m), as the comparable period benefited from a relatively high
number of LifePort orders that arose following our win of the
French National tender. We also saw the first pre-regulatory
approval sales of our new LifePort Liver Transporter, with US$0.1m
in revenue for product use under observational research
protocols.
While gross profit decreased 4.5% to US$8.9m (H1 2014: US$9.4m),
due primarily to a relatively high volume of lower margin solution
sales, EBITDA increased to US$0.7m (H1 2014: US$0.5m) reflecting
sound operating cost controls and reduced research and development
expenditure as LifePort Liver Transporter moves into
commercialisation.
Net cash generated from operations for the period increased
significantly, reaching US$1.0m (H1 2014: US$0.3m). The cash
position of the Company remains strong, with cash balances as of 30
June 2015 of US$3.1m (31 December 2014: US$3.3m) and a revolver
balance of US$2.2m (31 December 2014: US$2.2m). Research and
development costs were significantly reduced to US$0.5m (H1 2014:
US$1.4m).
(MORE TO FOLLOW) Dow Jones Newswires
September 21, 2015 02:01 ET (06:01 GMT)
The regulatory approvals from the CFDA were significant as they
considerably increase the size and potential for growth of our
global market opportunity. Over time, China alone could become a
larger transplant market than both the US and Europe combined. This
and other key account wins in Europe and the Middle East
demonstrate significant progress in our geographic expansion
efforts, and underpin the opportunity for further growth in the
second half of 2015 and beyond. Furthermore, as regulatory reviews
advance for our LifePort Liver Transporter, we are preparing for
its commercial introduction, and Lifeline's future appears very
promising indeed.
John Garcia
Chairman
21 September 2015
Chief Executive Officer's review
The Company continued to drive its planned new product and
territory expansion initiatives in this period and expects to see
further growth in 2015. This drive has been supported by additional
revenue contribution from key high value contract wins exceeding
US$1.2m, which further illustrates our capabilities for ensuring
LifePort(R) benefits are well understood within the worldwide
transplant community. This progress coupled with the long awaited
CFDA regulatory approvals for our LifePort Kidney Transporter and
full product line, gives us confidence that the Company is on track
to meet market expectations for the full year.
Territories Progress
North America
North America continues to be the largest contributor to the
Company's revenue base, with first half 2015 revenues accounting
for 83% of worldwide sales, an increase of 3.8% to US$12.4m (H1
2014: US$12.0m). In July 2015, we announced a major new account win
as the Alabama regional transplant programme adopted our full suite
of LifePort Kidney Transporter and solutions products. This key
account is anticipated to bring annualised revenues of over
US$0.8m, with an initial contribution reflected in final year
results. We are grateful to see these new accounts coming on board
as we broaden our geographical reach in the US. LifePort Kidney
Transporter is now the standard of machine preservation of donor
kidneys in nearly all major US Organ Procurement Organisations and
in all provinces in Canada.
Europe
France is one of Europe's three largest national markets for
kidney transplant procedures and remains a key territory for the
Company. Nationwide, there is now an installed base of over 100
LifePort Kidney Transporters. We received new orders to supply
LifePorts and related consumables to new transplant programme
accounts in Paris, Nancy, Metz, and Montpellier, taking the number
of LifePort exclusive sites to 33 of France's 34 renal transplant
programmes.
In addition to our success in France, the Swiss national
transplant system adopted LifePort as their standard of care for
machine preservation of renal allografts and placed initial orders
for Switzerland's six transplant centres, while new LifePort
accounts were also opened respectively in Barcelona, Spain;
Innsbruck, Austria; and Riyadh, Saudi Arabia.
China
On 3 September 2015 we announced the long awaited CFDA
regulatory approval for LifePort Kidney Transporter and its full
complement of single-use consumables for commercial sale in China.
This important milestone for the Company allows our LifePort
products to be formally launched nationwide in China; a key target
growth market for the Company. This positive development followed
our February announcement of regulatory approvals in China for our
market leading clinical organ preservation and flush solutions,
SPS-1(R) and KPS-1(R). During LifePort's three year regulatory
review process, 21 of China's major renal transplant centres
adopted LifePort under observational research protocols during
which time revenues of over US$3.3m were realised by the Company
and a reported 1,340 LifePort preserved kidneys were successfully
transplanted.
As China undergoes a transformational positive change in the
structure and management of its national transplant and donor
recovery programmes, Chinese health authorities have recognised the
need for state-of-the-art technologies to help bridge the gap of
the nation's very large unmet demand for transplants. Recently
China's health ministry reported an official national transplant
waiting list of 30,000 registered patients, with an overall
estimate of patients in need at more than 300,000. Lifeline has
made strategically significant investments of time and capital in
developing the China market including key commercial distribution
and clinical relationships that serve China's reported 169 renal
transplant hospitals. With the Company's full suite of core
products having now received regulatory approval for commercial
sales to hospitals, and our nationwide distribution partners on
board, we are looking forward to supporting the commercial roll-out
of our products, and achieving important growth in this region
during the next year and beyond.
Brazil
New clinical evidence from a pivotal 10-centre, independent
investigator driven LifePort trial has produced very encouraging
results. This is particularly significant as Brazil is the world's
second largest national renal transplant market with over 4,500
deceased donor kidneys recovered annually for transplants across
127 renal transplant centers. We are experiencing continued
enthusiasm for LifePort adoption among leading clinicians and organ
procurement centers across the country, and during the period, our
Brazilian distributors welcomed Real Hospital Português de
Beneficência em Pernambuco as a new LifePort and solutions
customer.
We continue to work closely with opinion leading Brazilian
transplant surgeons, organ procurement organisations, and health
ministry officials to create practical solutions to logistical and
process challenges associated with the importation of our products
from the US. This effort includes ongoing negotiations with
national level transplant administration leadership attempting to
organise an approximate US$2.4m national order for LifePort.
Advancing this process is the Company's top priority in Brazil for
2015.
Further supporting long-term optimism, our Brazil distributor
reports that combined orders for LifePort and our branded
preservation solutions valued at near US$2.0m, are in process from
several leading transplant programmes. While past precedent
suggests that no assurances can be given on timing or completion of
these orders, this reported progress is very encouraging. Lifeline
has recognised over US$4.0m in high margin revenues generated
through our Brazil distributor since Brazil's regulatory agency,
ANVISA, began awarding commercialisation approvals for our products
late in 2010.
Most notably, our prospects for broad LifePort adoption in South
America recently received important support from the reporting of
preliminary results of Brazil's pivotal 10-centre LifePort clinical
trial. This prospective, randomised study compared outcomes of
transplant patients with kidneys preserved on LifePort vs. the
present standard of kidney preservation in Brazil: static storage
in a cool box filled with ice. Led by surgeons and scientists at
the highly regarded Hospital do Rim, the world's largest volume
renal transplant centre, the study investigators report their
initial data showing a statistically significant reduction in
delayed graft function (DGF), faster recovery of kidney function
post-transplant, and reduced incidence of acute graft rejection.
This data will be formally presented at the annual Brazilian
Transplantation Association congress in late October and we expect
to provide more detail following publication of this compelling
data.
New Clinical Evidence
We continue to be encouraged by the publication of additional
scientific research papers and clinical data supporting broad
clinical adoption of LifePort Kidney Transporter. As well, the peer
reviewed and published clinical trial results from studies using
early prototypes of our LifePort Liver Transporter have provided
solid support for our regulatory filings now in process. These data
underpin the principal mission of Lifeline Scientific: to help
patients in need of a life-saving transplant by enabling clinicians
to improve transplant outcomes through improved technology for
organ preservation, evaluation and transport. During the period
under review there have been two notable publications one of which
provides a promising case study for informing protocols used for
kidney transplants in key institutions within the UK and
abroad.
The first study, led by Drs. Andrew Ready, Alison Guy, and
colleagues in the Department of Renal Surgery at the New Queen
Elizabeth Hospital Birmingham, one of the UK's largest centres for
renal transplantation, was published in the June edition of
Experimental and Clinical Transplantation. The study titled:
"Hypothermic Machine Perfusion Permits Extended Cold Ischemia Times
With Improved Early Graft Function", has led the New Queen
Elizabeth Hospital to implement a standard of practice whereby all
deceased donor kidneys intended for transplant are placed on
LifePort Kidney Transporter. These clinical outcomes show a direct
correlation between the reporting of good quality data and the
commercial adoption of new technologies such as LifePort Kidney
Transporter. In addition, and as a direct response to the
publication of these findings, Belfast City Hospital, Northern
Ireland, where conditions often require longer preservations times
for donor kidneys prior to transplant, has also adopted
LifePort.
(MORE TO FOLLOW) Dow Jones Newswires
September 21, 2015 02:01 ET (06:01 GMT)
A second study, supporting the new Lifeline Liver Transporter,
by Dr. James Guarrera and colleagues at New York-Presbyterian
Hospital/Columbia University Medical Center, was published in the
American Journal of Transplantation titled: "Hypothermic Machine
Preservation (HMP) Facilitates Successful Transplantation of
"Orphan" Extended Criteria Donor Livers." The HMP liver transplant
recipients experienced higher one-year survival rates, shorter
hospital stays and fewer long-term complications. Even more
impressive, the HMP livers used in the Study were considered
"orphan livers," defined as organs rejected by every transplant
centre in the United Network for Organ Sharing region where they
were originally offered. The authors concluded that HMP (using an
early prototype LifePort Liver Transporter system), has meaningful
clinical utility with the potential to increase the number of donor
livers suitable for transplantation, closing the wide gap between
organ supply and demand.
New Technology Developments and Product Innovations
While awaiting regulatory approvals for LifePort Liver
Transporter, we continue to gather data from observational human
factors studies designed to help us prepare for end-user training
and providing logistical advice to client liver transplant centres
during our post-clearance product launch. These data are confirming
LifePort Liver Transporter's intended design for ease of use and
robustness under the rigours of real-life organ recovery practice.
In preparation for the launch of LifePort Liver Transporter we are
also building product inventory, customer training and service
infrastructure to support initial commercialisation.
Developed under the Lifeline umbrella, Tissue Testing
Technologies, LLC ("T3"), a 49% owned strategic affiliate, was
awarded three new grants totaling US$1.56m by the US National
Institutes of Health (NIH) to create improved preservation and
evaluation systems for various cells, tissues, and organs. The
awards focus on specific aspects of cryopreservation aimed at
improving tissue viability and ensuring process standardisation and
consistency of supply. The research protocol is specifically
designed to advance Lifeline's proprietary ice-free vitrification
technology (-70c preservation) of engineered human tissue
equivalents used for in vitro toxicology testing. The research will
focus on optimising the Company's technology developed in an
earlier NIH Phase I grant, and further characterise preserved
Epiderm constructs with an aim to demonstrate that the overall
integrity and function of the construct has not changed.
Optimisation will include making the preservation process more
efficient, along with storage studies to determine optimal tissue
storage times. In addition, the protocol will be applied to other
relevant tissue equivalents, such as Epiderm-FT, EpiAirway and
EpiOcular, currently being commercially used in toxicity studies. A
growing demand for scientific research, diagnostic and clinical
applications of naturally occurring and engineered cells, tissues
and organs has created a large and growing market. Recent industry
analysis projects the market for bio-preservation products and
services to grow beyond US$800m within the next five years.
Through our research and product development collaborations,
meaningful advancements were also made in the development of
LifePort based technology for real time, ex vivo evaluation of key
biomarkers of organ viability, and patient point-of-care
therapeutic drug monitoring (TDM) assays for commonly used
post-transplant immunosuppressant drugs. Initial studies evaluating
aspects of the multi-thermic LifePort Workstation and LifePort
embedded technologies for delivering supplemental oxygen to
perfusate during ex vivo organ preservation are also underway.
Summary & Outlook
The first half of 2015 further demonstrated LifePort Kidney
Transporter's growing recognition as the clinical standard
worldwide for machine preservation of donor kidneys, as the
installed LifePort base expanded globally into 11 major new
transplant programmes. These new accounts are expected to deliver
continued growth in the second half and beyond.
A key milestone achievement, and a major driver of potential
future growth, is the long awaited approval from the CFDA for our
full LifePort Kidney Transporter offering allowing the China
national launch of our products to begin towards the end of this
year. We are confident that this remains a key growth territory
with the potential to become a larger market for transplantation
than the US and EU combined over the next five to seven years.
Brazil's recent approval of our newest generation of LifePort
Kidney Transporter with available features such as GPS/GPRS
capability was an important achievement and the initial reports of
key scientific evidence supporting LifePort adoption and strong
clinician support and pipeline of demand from Brazil is a reminder
of the additional significance this market hold for future growth.
In addition, notable progress was made advancing the US regulatory
review for our new LifePort Liver Transporter and preparations for
commercial product introduction.
In keeping with our Company's mission, we are committed to
staying closely in touch with our customer communities of
clinicians, patients and payors, and will continue to develop
product innovations driven by their needs.
The pipeline of growth opportunities for our Company remains
strong as is the outlook for the second half of 2015 and into 2016.
As a Board we believe that Lifeline is at a key inflection point
for growth. Now more than ever we are encouraged by the Company's
positive outlook and it is in this context that we are exploring a
full range of strategic and financial alternatives to best deliver
maximum shareholder value.
David Kravitz
Chief Executive Officer
21 September 2015
LIFELINE SCIENTIFIC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
30 June 2015 and 2014
(In US Dollars unless otherwise noted)
UNAUDITED
2015 2014
US$ US$
Current Assets
Cash and cash equivalents 3,052,021 2,535,142
Receivables
Customers (net of allowance for doubtful
accounts of $308,000 and $0 as of 30 June
2015 and 2014, respectively) 6,508,385 6,899,704
Grant 12,000 79,909
Deferred tax assets 97,472 97,472
Income taxes receivable 56,030 -
Inventories 6,830,276 5,977,631
Prepaid expenses, deposits, and other 1,254,061 1,003,210
------------- -------------
Total Current Assets 17,810,245 16,593,068
Non-current Assets
Property and equipment (net of accumulated
depreciation
and amortisation) 3,284,459 3,556,914
Intangibles (net of accumulated amortisation) 4,899,709 4,018,111
Deferred tax assets 3,242,213 1,942,213
Goodwill 64,710 64,710
Other 67,671 91,152
------------- -------------
Total Non-current Assets 11,558,762 9,673,100
------------- -------------
Total Assets 29,369,007 26,266,168
============= =============
Current Liabilities
Revolving line of credit 2,171,147 1,000,000
Accounts payable 1,173,453 1,701,022
Income taxes payable - 10,428
Long-term debt due within one year - 470,118
Capital lease obligations due within one
year 18,630 25,010
Accrued expenses
Interest due within one year 6,186 185,247
Salaries and other compensation 706,056 720,789
Other 1,565,080 1,100,228
Deferred rent 83,162 11,778
Deferred revenue 106,728 98,700
------------- -------------
Total Current Liabilities 5,830,442 5,323,320
Non-current Liabilities
Long-term debt (net of portion included
in current liabilities) - 582,179
Deferred rent (net of portion included
in current liabilities) 245,361 372,398
Accrued interest (net of portion included
in current liabilities) - 147,560
Capital leases (net of portion included
in current liabilities) 39,946 75,969
------------- -------------
Total Non-current Liabilities 285,307 1,178,106
------------- -------------
Total Liabilities 6,115,749 6,501,426
------------- -------------
Stockholders' Equity
Common stock, $0.01 par value; authorized
- 30,000,000 shares; issued and outstanding
- 19,516,434 and 19,453,613 shares as
(MORE TO FOLLOW) Dow Jones Newswires
September 21, 2015 02:01 ET (06:01 GMT)
of 30 June 2015 and 2014, respectively 195,164 194,536
Additional paid-in capital 93,674,973 94,480,758
Other accumulated comprehensive loss (750,533) (272,219)
Accumulated deficit (69,866,346) (73,472,398)
------------- -------------
Total Lifeline Scientific, Inc. Stockholders'
Equity 23,253,258 20,930,677
============= =============
Non-controlling interest - (1,165,935)
Total Stockholders' Equity 23,253,258 19,764,742
------------- -------------
Total Liabilities and Stockholders' Equity 29,369,007 26,266,168
============= =============
LIFELINE SCIENTIFIC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Six months ended 30 June 2015 and 2014
(In US Dollars unless otherwise noted)
UNAUDITED
2015 2014
US$ US$
Net revenue
Product sales and service fee revenue 15,019,466 14,820,733
Grant revenue - 297,242
----------- -----------
Total net revenue 15,019,466 15,117,975
Cost of revenue 6,070,896 5,752,202
----------- -----------
Gross profit 8,948,570 9,365,773
----------- -----------
Gross profit percentage 59.6% 62.0%
Operating expenses
Research and development 512,662 1,350,193
Selling, general, and administrative 8,261,543 8,024,491
Loss (gain) from disposal of property
and equipment 3,979 (697)
Loss from abandonment of intangibles 35,539 -
----------- -----------
Total operating expenses 8,813,723 9,373,987
----------- -----------
Income (loss) from operations 134,847 (8,214)
----------- -----------
Other expense (income)
Interest expense 37,087 52,482
Interest income (348) (1,294)
----------- -----------
Total other expense 36,739 51,188
----------- -----------
Income (loss) before income taxes 98,108 (59,402)
Income tax expense (benefit) 3,197 (3,137)
----------- -----------
Net income (loss) 94,911 (56,265)
Less: net loss attributable to non-controlling
interest - 86,499
----------- -----------
Net income (loss) attributable to Lifeline
Scientific, Inc. 94,911 30,234
=========== ===========
Basic income (loss) per share 0.00 0.00
Diluted income (loss) per share 0.00 0.00
Basic weighted average shares outstanding
(in shares) 19,498,865 19,445,881
Diluted weighted average shares outstanding
(in shares) 20,077,680 20,163,366
LIFELINE SCIENTIFIC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)
INCOME
Six months ended 30 June 2015 and 2014
(In US Dollars unless otherwise noted)
UNAUDITED
2015 2014
US$ US$
Net income (loss) 94,911 (56,265)
Foreign currency translation (228,238) (18,509)
---------- ---------
Comprehensive loss (133,327) (74,774)
Comprehensive loss attributable to non-controlling
interest - (86,499)
---------- ---------
Comprehensive (loss) income attributable to
Lifeline Scientific, Inc. (133,327) 11,725
========== =========
LIFELINE SCIENTIFIC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
EQUITY
Six months ended 30 June 2015 and 2014
(In US Dollars unless otherwise noted)
UNAUDITED
Lifeline Scientific, Inc. Stockholders
Other
Additional Accumulated
Paid-in Comprehensive Accumulated Non-controlling
Total Shares Par Value Capital Loss Deficit Interest
----------- ----------- ---------- ----------- ---------------- ------------- ----------------
Balance, 1
January
2014 19,685,198 19,446,720 194,467 94,326,509 (253,710) (73,502,632) (1,079,436)
Issuance of
common
stock in
conjunction
with cashless
option
exercise - 6,893 69 (69) - - -
Stock-based
compensation 154,318 - - 154,318 - - -
Foreign
currency
translation (18,509) - - - (18,509) - -
Net loss (56,265) - - - - 30,234 (86,499)
----------- ----------- ---------- ----------- ---------------- ------------- ----------------
Balance, 30
June
2014 19,764,742 19,453,613 194,536 94,480,758 (272,219) (73,472,398) (1,165,935)
=========== =========== ========== =========== ================ ============= ================
Balance,
1January
2015 23,261,074 19,496,434 194,964 93,549,662 (522,295) (69,961,257) -
Issuance of
common
stock in
conjunction
with option
exercise 11,903 20,000 200 11,703 - - -
Stock-based
compensation 113,608 - - 113,608 - - -
Foreign
currency
translation (228,238) - - - (228,238) - -
Net income 94,911 - - - - 94,911 -
----------- ----------- ---------- ----------- ---------------- ------------- ----------------
Balance, 30
June
2015 23,253,258 19,516,434 195,164 93,674,973 (750,533) (69,866,346) -
=========== =========== ========== =========== ================ ============= ================
LIFELINE SCIENTIFIC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended 30 June 2015 and 2014
(In US Dollars unless otherwise noted)
UNAUDITED
2015 2014
US$ US$
Cash flows from operating activities
Net income (loss ) 94,911 (56,265)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Depreciation and amortisation of property
and equipment 471,590 407,777
Amortisation of intangibles 112,219 89,716
Stock-based compensation 113,608 154,318
Loss (gain) on disposal of property and
equipment 3,979 (697)
Loss on abandonment of intangibles 35,539 -
(Increase) decrease in:
Receivables 2,487,086 957,015
Inventories (922,366) (642,536)
Prepaid expenses and deposits (440,334) 292,539
Other assets 267,793 269,317
Increase (decrease) in:
Accounts payable (1,186,997) (399,550)
Accrued expenses (218,918) (735,457)
Accrued interest - (9,671)
Deferred revenue 61,350 20,806
Deferred rent 75,504 (31,021)
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Other liabilities - (238)
------------ ------------
Total adjustments 860,053 372,318
------------ ------------
Net cash provided by operating activities 954,964 316,053
------------ ------------
Cash flows from investing activities
Payments related to intangible assets
and legal fees
associated with patent filings (610,420) (492,677)
Capital expenditures (505,524) (1,158,804)
------------ ------------
Net cash used in investing activities (1,115,944) (1,651,481)
------------ ------------
Cash flows from financing activities
Cash received from option exercises 11,903 -
(Repayments) borrowings under capital
lease obligations, net (14,520) 34,298
Borrowings of long-term debt - 1,000,000
Principal payments on long-term debt (2,106) (174,178)
------------ ------------
Net cash (used in) provided by financing
activities (4,723) 860,120
------------ ------------
Effect of foreign currency exchange rate
changes on cash (106,053) (11,690)
Net decrease in cash and cash equivalents (271,756) (486,998)
------------ ------------
Cash and cash equivalents, beginning of
period 3,323,777 3,022,140
------------ ------------
Cash and cash equivalents, end of period 3,052,021 2,535,142
============ ============
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General: The accompanying condensed consolidated financial
statements of Lifeline Scientific, Inc. (the "Company") are
unaudited and do not include all of the footnotes required by
accounting principles generally accepted in the United States of
America ("US GAAP"). In the opinion of management of the Company,
these condensed consolidated financial statements contain all
adjustments necessary for a fair presentation of the results for
the interim periods presented. These statements should be read in
conjunction with the Company's annual report as of and for the year
ended 31 December 2014.
Principles of Consolidation: The Company was incorporated in the
state of Delaware as Organ Recovery Systems, Inc. on 1 October
1998. On 20 December 2007, the Company changed its name to Lifeline
Scientific, Inc. The Company is consolidated with the following
subsidiaries:
ORS Europe, NV (1)
Cell and Tissue Systems, Inc. (2)
Organ Recovery Systems, Inc. (1)
ORS Representacoes do Brasil LTDA (1)
(1) A wholly-owned subsidiary
(2) 49.00% owned prior to 19 December 2014; a wholly-owned
subsidiary afterwards
Intercompany balances and transactions have been eliminated in
consolidation.
The Consolidation Topic of US GAAP requires consolidation by the
primary beneficiary where the variable interest entity does not
have sufficient equity at risk to finance its activities without
additional subordinated financial support from other parties. The
application of this guidance resulted in the consolidation of Cell
and Tissue Systems, Inc. ("CTS"), which was created during the year
ended 31 December 2005 and was deemed to be a variable interest
entity. CTS was primarily formed to meet regulatory requirements in
order to enhance its ability and capacity to apply for funding from
available government sources. The Company contributed $490 for the
49% ownership needed to form the variable interest entity. CTS had
an accumulated deficit as of 30 June 2014.
In accordance with the requirements of the accounting standard
under US GAAP that establishes accounting and reporting standards
for non-controlling interests in a subsidiary in consolidated
financial statements, the Company classified the non-controlling
interest of CTS within the equity section of the consolidated
balance sheets and separately reports the amounts attributable to
controlling and non-controlling interests in the consolidated
statements of operations for the six months ended 30 June 2014.
On 19 December 2014, the Company acquired the remaining
outstanding 51.00% stock of CTS for $510. No gain or loss was
recorded in conjunction with this transaction as the Company has
already been consolidating CTS. The non-controlling interest was
derecognised in connection with the acquisition of the equity
interest not already owned. The difference between the
non-controlling interest and the consideration paid is reflected in
the equity of the Company.
Also on 19 December 2014, the Company jointly formed Tissue
Testing Technologies LLC ("T3") with another party. T3 was formed
to meet regulatory requirements in order to obtain research grants
from various government sources. Under the terms of the operating
agreement, the Company owns 49% of T3 and the other party owns 51%.
.
Cash and Cash Equivalents: The Company considers all money
market accounts and short-term investments with an original
maturity of three months or less and US Treasury money markets to
be cash equivalents. The majority of cash and cash equivalents as
of 30 June 2015 and 30 June 2014 were held through a single
financial institution, and the balances held at times may exceed
federally insured limits. The Company has not experienced any
losses in such accounts. The Company believes it is not exposed to
any significant credit risk on cash and cash equivalents.
Receivables: Receivables are carried at original invoice or
closing statement amount less estimates made for doubtful
receivables. Management determines the allowance for doubtful
accounts by reviewing and identifying troubled accounts on a
monthly basis and by using historical experience applied to an
aging of accounts. A receivable is considered to be past due if any
portion of the receivable balance is outstanding for more than 90
days. The Company does not charge interest on past due receivables.
Receivables are written off when deemed uncollectible. Recoveries
of receivables previously written off are recorded when
received.
Inventories: Inventories are valued at the lower of cost
(first-in, first-out) or market.
Depreciation and Amortisation: The Company's policy is to
depreciate or amortise the cost of property and equipment over the
estimated useful lives of the assets using the straight-line
method. The cost of leasehold improvements is amortised over the
estimated useful lives, or the applicable lease term, if
shorter.
Years
Computer equipment 3-5
Furniture and fixtures 5-7
Equipment under capital
lease 5-7
Laboratory equipment 3-7
Leasehold improvements 5-8
Tooling and moulds 1-15
Vehicles 5
Long-Lived Assets: Long-lived assets to be held are reviewed for
events or changes in circumstances that indicate that their
carrying value may not be recoverable. The Company periodically
reviews the carrying value of long-lived assets to determine
whether or not an impairment to such value has occurred. Management
believes that no impairment of long-lived assets exists as of 30
June 2015 and 2014.
Intangibles: The cost of intangible assets is being amortised
over the remaining lives of the assets acquired as follows:
Years
Certification marks 20
Patents 17
Licensing agreement 10
Professional and regulatory fees associated with obtaining the
licenses that enable the Company to sell its products (i.e.
certification marks) are capitalised and amortised over the shorter
of the useful life of the related licenses or 20 years. Legal fees
associated with filings for patents that are pending are
capitalised if management believes that it is probable that such
patent applications will be successful. Patent costs are not
amortised until the patent is obtained. During the year ended 31
December 2010, the Company signed an agreement that allows for the
licensing of technology to support the Company's product
development efforts. The agreement is being amortised over the
remaining estimated life of the licensed technology, or 10
years.
Goodwill: Goodwill results from business acquisitions and
represents the excess of the purchase price over the fair value of
acquired tangible assets and liabilities and identifiable
intangible assets. In accordance with accounting for goodwill under
US GAAP, goodwill is not amortised, but instead tested for
impairment on an annual basis. The Company has applied Financial
Accounting Standards Board ("FASB") Accounting Standards Update
("ASU") No. 2011-08, "Testing Goodwill for Impairment", in
connection with the performance of the annual goodwill impairment
test. Under FASB ASU 2011-08, entities are provided with the option
of first performing a qualitative assessment on none, some, or all
of its reporting units to determine whether further quantitative
impairment testing is necessary. An entity may also bypass the
qualitative assessment for any reporting unit in any period and
proceed directly to the quantitative impairment test.
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Goodwill must be tested on an annual basis or if an event occurs
or circumstances change that would more likely than not reduce the
fair value of the reporting unit below its carrying amount. During
the year ended 31 December 2014, the Company was not required to
record any impairments to the carrying value of goodwill or
indefinite-lived intangible assets. During the six months ended 30
June 2015 and 2014, the Company identified no events or
circumstances that would trigger an interim assessement of
goodwill.
Deferred Rent: Minimum rent expense is recognised over the term
of the lease. The Company recognises minimum rent starting when
possession of the property is taken from the landlord. When a lease
contains a predetermined fixed escalation of the minimum rent, rent
expense is recognised on a straight-line basis. Any difference
between the recognised rent expense and the amounts payable under
the lease is reported as deferred rent in the consolidated balance
sheets. The Company records include a tenant allowance on its
facility lease in Itasca, Illinois, which is recorded as a
component of deferred rent and amortised as a reduction to rent
expense over the term of the lease. Future payments for common area
maintenance, insurance, real estate taxes, and other occupancy
costs to which the Company is obligated are excluded from minimum
lease payments.
Fair Value of Financial Instruments: US GAAP defines fair value
as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market
participants as of the measurement date. US GAAP describes three
approaches to measuring the fair value of assets and liabilities:
the market approach, the income approach, and the cost approach.
Each approach includes multiple valuation techniques. US GAAP does
not prescribe which valuation technique should be used when
measuring fair value, but does establish a fair value hierarchy
that prioritises the inputs used in applying the various
techniques. Inputs broadly refer to the assumptions that market
participants use to make pricing decisions, including assumptions
about risk. Level 1 inputs are given the highest priority in the
hierarchy while Level 3 inputs are given the lowest priority.
Assets and liabilities carried at fair value are classified in one
of the following three categories based on the nature of the inputs
to the valuation technique used:
Level 1 - Observable inputs that reflect unadjusted quoted
prices for identical assets or liabilities in active markets as of
the reporting date. Active markets are those in which transactions
for the asset or liability occur in sufficient frequency and volume
to provide pricing information on an ongoing basis.
Level 2 - Observable market-based inputs or unobservable inputs
that are corroborated by market data.
Level 3 - Unobservable inputs that are not corroborated by
market data. These inputs reflect management's best estimate of
fair value using its own assumptions about the assumptions a market
participant would use in pricing the asset or liability.
The carrying values of cash and cash equivalents, accounts
receivable, accounts payable, and revolving line of credit
approximate their fair values because of the short-term nature of
these instruments. The carrying values of long-term debt and
capital leases approximate their fair values as the stated interest
rates approximate current market interest rates of long-term debt
and capital leases with similar terms.
Product Warranty: Estimated future costs applicable to products
sold under warranty are charged to expense in the year of sale and
the related liability is classified as current. The accrued
warranty liability as of 30 June 2015 and 2014 was $168,047 and
$179,310, respectively.
Revenue Recognition: Product sales revenue is recognised upon
shipment of product to the client. Service fee revenue is
recognised when services are performed. Deferred and unbilled
revenue is recognised in the consolidated balance sheets.
Grant revenue is recognised when earned. Grant revenues are
deemed earned to the extent of the total allowable expenditures
incurred, which are specified in the grant contract. In some cases,
a portion of the grant revenue is paid at the time the grant is
initiated. These advances are deferred and recognised using the
proportional performance model. Unbilled services are at times
recorded for revenue recognised to date and relate to amounts that
are currently unbillable to the client pursuant to contractual
terms.
The Company sells extended warranties on its LifePort product
for a specific period of months. This revenue is deferred and
recognised over the term of the warranties on a straight-line
basis.
Income Taxes: Income taxes are provided for the tax effects of
transactions reported in the consolidated financial statements and
consist of taxes currently due plus deferred taxes related
primarily to differences between the basis of property and
equipment, bad debts, intangibles, and accrued expenses for
financial and income tax reporting. The deferred tax assets and
liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the
assets and liabilities are recovered or settled. The carrying value
of the Company's deferred tax assets is dependent upon its ability
to generate sufficient taxable income in the future. The Company
has established a valuation allowance against its net deferred tax
assets to reflect the uncertainty of realising the deferred tax
benefits, given historical losses and limited history of current
earnings. A valuation allowance is required when it is more likely
than not that all or a portion of a deferred tax asset will not be
realised. During the year ended 31 December 2014, $1,300,000 of the
valuation allowance was reversed to reflect the likelihood of
future taxable income, which will most likely result in the
utilisation of a portion of the Company's net operating losses.
During the six months ended 30 June 2015, the Company determined no
change to this estimate was required.
The Company is subject to US federal, state, and local taxes as
well as foreign taxes in Belgium and Brazil. The Company's tax
years extending back to the year ended 31 December 2010 remain open
to examination for both federal and state jurisdictions; for
foreign jurisdictions the Company's tax years extending back to
December 31, 2011 remain open for examination. The Company's policy
is to recognise interest and penalties related to uncertain tax
positions as a component of income tax expense. During the six
months ended 30 June 2015 and 2014, the Company did not recognise
expense for interest and penalties. As of 30 June 2015 and 2014,
the Company had $137,000 and $118,000, respectively, accrued for
the payment of interest and penalties. The Company does not expect
the total amount of unrecognised tax benefits to significantly
change during the next 12 months.
The Company's consolidated financial statements provide for any
related US tax liabilities on earnings of foreign subsidiaries that
may be repatriated, aside from qualifying undistributed earnings of
certain foreign subsidiaries that are intended to be indefinitely
reinvested in operations outside of the US.
The Company accounts for unrecognised tax benefits in accordance
with US GAAP, which prescribes a more likely than not threshold for
consolidated financial statement presentation and measurement of a
tax position taken or expected to be taken in a tax return. A tax
position is recognised as a benefit only if it is "more likely than
not" that the tax position would be sustained in a tax examination,
with a tax examination being presumed to occur. The amount
recognised is the largest amount of tax benefit that is greater
than 50% likely of being realised on examination. For tax positions
not meeting the "more likely than not" test, no tax benefit is
recorded.
Stock Options: In accordance with US GAAP, the Company accounts
for the cost of employee services received in exchange for an award
of equity instruments utilising the grant date fair value of the
award. Stock-based awards that do not require future service (i.e.,
vested awards) are expensed immediately. The expense associated
with stock-based employee awards that require future service are
amortised over the relevant service period.
Management Estimates: The preparation of consolidated financial
statements in conformity with US GAAP requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities as of the date of the consolidated financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The estimates included by the Company in these consolidated
financial statements relate to warranty reserves, allowance for
doubtful accounts, the useful lives of patents and the license
agreement, the useful lives of depreciable property and equipment,
and the valuation allowance for deferred tax assets.
Research and Development: Expenditures relating to the
development of new products and procedures are expensed as
incurred.
Foreign Currency Translation: The financial position and results
of operations of the Company's foreign subsidiaries are measured
using the subsidiary's local currency as the functional currency.
Assets and liabilities of the foreign subsidiaries are translated
to US dollars using exchange rates in effect as of the consolidated
balance sheet dates. Income and expense items are translated at
monthly average rates of exchange. The resultant translation gains
or losses are included as part of the components of stockholders'
equity designated as other comprehensive loss.
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Contingencies: During the six months ended 30 June 2013, the
Company settled a dispute with a third party. Under the settlement,
the Company was owed $1,000,000, payable through April 2015. The
Company recognized the full amount of the settlement amount as a
reduction to selling, general, and administrative expenses in the
consolidated statements of operations for the six months ended 30
June 2013. As of 30 June 2014, the Company had received payments of
$619,559 related to this settlement. As of 30 June 2015, the third
party had paid the settlement in its entirety.
In addition to the aforementioned matter, the Company may
experience litigation arising in the ordinary course of business.
These claims are evaluated for possible exposure by management of
the Company and their legal counsel.
Reclassifications: Certain prior year amounts have been
reclassified to conform to the current year
presentation. These reclassifications had no effect on net
income (loss) or stockholders' equity.
NOTE 2 - INVENTORIES
2015 2014
US$ US$
---------- ----------
Medical devices, parts, and solutions 5,814,709 4,677,868
Raw materials 1,015,567 1,299,763
---------- ----------
6,830,276 5,977,631
========== ==========
NOTE 3 - PROPERTY AND EQUIPMENT
2015 2014
US$ US$
------------ ------------
Property and equipment in progress 340,564 781,153
Computer equipment 626,386 549,959
Furniture and fixtures 832,946 874,847
Equipment under capital lease 109,468 76,846
Laboratory equipment 2,991,381 2,846,378
Leasehold improvements 1,134,308 1,157,531
Tooling and moulds 1,717,619 893,678
Vehicles 131,180 223,566
------------ ------------
7,883,852 7,403,958
Accumulated depreciation and amortisation (4,599,393) (3,847,044)
------------ ------------
3,284,459 3,556,914
============ ============
During the six months ended 30 June 2015 and 30 June 2014, the
Company recognised property and equipment depreciation and
amortisation expense of $471,590 and $407,777 respectively.
NOTE 4 - INTANGIBLES
Intangible assets consist of the following:
2015 2014
US$ US$
------------ ----------
Licensing agreement 141,931 141,931
Regulatory certification fees 1,133,242 629,606
Patents issued 2,519,092 2,195,981
Patents pending 2,229,582 1,999,596
------------ ----------
6,023,847 4,967,114
Less: Accumulated amortisation (1,124,138) (949,003)
------------ ----------
4,899,709 4,018,111
============ ==========
During the six months ended 30 June 2015 and 30 June 2014, the
Company recognised intangible amortisation expense of $112,219 and
$89,716, respectively. During the six months ended 30 June 2015 and
30 June 2014, the Company abandoned patents issued and patents
pending with an original cost of $35,539 and $0, respectively.
NOTE 5 - LINE OF CREDIT AGREEMENT
During August 2009, the Company entered into a two-year working
capital line of credit agreement with Silicon Valley Bank ("SVB")
to support potential future cash needs of the Company. This line of
credit agreement, and amendments in 2010, 2011, 2012, and 2013,
provided for a revolving line of credit not to exceed an aggregate
principal amount of $3,000,000, limited to qualifying receivables
as defined, and granted a security interest in and lien upon all of
the assets of Lifeline Scientific, Inc. and Organ Recovery Systems,
Inc. in favour of SVB. The maturity of the line of credit agreement
was 21 September 2014. The outstanding principal under the
revolving line of credit accrued interest at an annual rate of
1.25% above the prime rate (3.25% as of 30 June 2014). During the
six months ended 30 June 2014, the Company drew upon this line of
credit in the amount of $1,000,000. In addition, a $750,000, 36
month term loan at a 5.50% unsecured or a 2.75% secured rate was
made available to the Company. During the year ended 31 December
2012, the Company drew upon this term loan in the amount of
$525,000 (at a secured rate of 2.75%) to support the Company's
growth plans. The financing agreement was amended during the period
ended 30 June 2013 to adjust the financial covenant requirement.
The financing agreements contain financial covenants which require
the Company to maintain a minimum tangible net worth (as defined).
As of 30 June 2014, the Company was in compliance with all
covenants.
On 18 September 2014, the Company entered into a new loan and
security agreement with The PrivateBank and Trust Company ("PB").
The loan and security agreement provides for a revolving line of
credit, not to exceed an aggregate principal amount of $6,000,000
but limited to qualifying receivables and inventories, as defined.
The outstanding principal under the loan and security agreement
accrues interest at PB's prime rate, as defined. The loan and
security agreement contains financial covenants which require the
Company to maintain a minimum tangible net worth, as defined, and a
minimum fixed charge coverage ratio, as defined. The Company was in
compliance with its financial covenants as of 30 June 2015. The
loan and security agreement is secured by substantially all assets
of the Company, and expires 17 September 2015. The Company used
proceeds from the loan and security agreement to repay the
outstanding principal of the prior line of credit agreement with
SVB. Accordingly, the balances of $2,171,147 as of 30 June 2015 and
$1,000,000 as of 30 June 2014 have been classified as short-term in
the condensed consolidated balance sheets. PB has formal credit
approval for the line of credit extension through 15 September 2016
with the remaining open items of legal documentation currently in
process.
NOTE 6 - INCOME TAXES
At the end of its interim six month periods, the Company makes
its best estimate of the annual expected effective income tax rate
and applies that rate to its ordinary earnings or loss for each six
month interim period. The income tax provision or benefit related
to significant, unusual, or extraordinary items, if applicable,
that will be separately reported or reported net of their related
tax effects are individually computed and recognised in the six
month interim period in which those items occur. In addition, the
effect of changes in enacted tax laws or rates, tax status,
judgment on the realisability of a beginning of the year tax asset
in future years or income tax contingencies is recognised in the
six month interim period in which the change occurs.
The computation of the annual expected effective income tax rate
at each six month interim period requires certain estimates and
assumptions including, but not limited to, the expected pre-tax
loss for the year, projections of the proportion of loss taxed in
foreign jurisdications, permanent and temporary differences, and
the likelihood of the realisability of deferred tax assets
generated in the current year. The accounting estimates used to
compute the provision or benefit for income taxes may change as new
events occur, more experience is acquired, additional information
is obtained, or the Company's tax environment changes.
Income tax (benefit) consists of the following components:
2015 2014
US$ US$
--------- ---------
Current (benefit) expense
Federal (27,739) (40,254)
Foreign 10,936 17,117
State 20,000 20,000
--------- ---------
Total income tax expense (benefit) 3,197 (3,137)
========= =========
The net deferred tax assets (liabilities) in the accompanying
consolidated balance sheets include the following components:
2015 2014
US$ US$
-------------- -------------
Deferred tax liabilities (1,635,716) (1,387,003)
Deferred tax assets 22,213,229 22,688,789
-------------- -------------
Net deferred tax assets 20,577,513 21,301,786
Valuation allowance (17,237,828) (19,262,101)
-------------- -------------
Net deferred tax assets 3,339,685 2,039,685
============== =============
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