Friday, 14 November 2008

LMS Reports Q2 - Revenues Up, Expenses Down - What’s the Problem?

LMS Medical Systems (LMZ - TSX)
Shares outstanding: 25.8m
Fully Diluted: 30.7 million


The over riding issue is the market's concern about LMS being able to continue as an operating entity. The fact that the chaotic market has beaten down almost every company compounds the problem of raising capital in these condition.

Secondly, even though LMS’ direct sales force is diligently working and recurring revenues are increasing, the company was counting on its major distribution "partner" to contribute to its numbers. The second quarter results suggest LMS received little help and drove almost all the revenues on its own. That in itself is a positive but the missing partner contribution is the elephant in the room.

All that considered, the bottom line is simple, LMS’ second quarter was a fundamentally good one.

- Second quarter revenues were $888,000, up 21% from the same period last year.

- Recurring revenue totaled $485,000 for the quarter, which represented 55% of total revenue.

- The company’s backlog increased to $4.1 million.

- Operating expenses are down 13% from the same quarter last year.

What happens now? Only time will tell but what-ever is going to happen must occur quickly. LMS has been cutting costs dramatically but needs capital to get through this period.

To read the full release, click here.