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3D Diagnostic Imaging

  • BY: Andrew Hore |
  • POSTED: 06/08/2012 |

3D Diagnostic Imaging is an example of a company that uses the tough stock market conditions as an excuse for its poor share price performance when its own failures are to blame.

The company is seeking shareholder approval to leave Aim saying that it wants to cut costs and it is difficult to raise cash to develop the business. It has raised more than £4m in less than two years and has consistently failed to meet any of its forecasts.

3D Diagnostic Imaging has the rights to a handheld device used to detect tooth decay. It looks like an electric toothbrush and uses a disposable sensor. The sensor is held against each tooth in turn and a tiny electrical current passed through that tooth. A tooth with healthy enamel will impede the electric current.

3D Diagnostic Imaging took on the technology developed by failed Aim-quoted company IDMoS, which itself could not raise additional funds in order to continue trading. IDMoS had invested all the £9m it had raised in developing the dental disease detection technology.

3D Diagnostic Imaging’s subsidiary CarieScan acquired the rights to the intellectual property, which was originally developed by Dundee University and St Andrews University, from the administrators of IDMoS in May 2008. The device, which is now known as CarieScan PRO, was already fully developed and had gained medical approvals but had not been commercialised.

3D Diagnostic Imaging joined Plus-quoted on 21 April 2009. A share placing at 7p a share raised £200,000, which was equivalent to the expenses of the flotation. Scottish Enterprise, Evolve Capital and other investors converted £1.8m worth of loan notes at 4p a share.

3D Diagnostic Imaging raised £2.71m at 6p a share when it moved to Aim in November 2010. Less than one year later a further £1.41m was raised at 2p a share.

Prior to the proposed cancelation, the share price had slumped from 6p to 0.32p a share in fewer than two years. The share price has more than halved to 0.15p, which values the company at £360,000.

To put this share price performance in perspective, prior to joining Aim 3D Diagnostic Imaging was expected to generate revenues of £1.8m in the year to June 2011 and £5.2m in 2012. The 2010-11 outcome was £700,000, while the forecast for 2011-12 had been cut to £1.7m by September 2011. In reality the 2011-12 revenues will be lower than the previous year. It was originally anticipated that the company would be profitable in 2011-12 but that will not happen.

High levels of stock held by distributors and manufacturing problems have hit revenues. Cost cutting has helped to reduce the level of loss. The directors’ have previously deferred their salaries and the chief executive is reducing its salary by 60% and the finance director his salary by 80%. The non-executive chairman is waiving his pay.

Aim-quoted Evolve Capital owns 32.8% of 3D Diagnostic Imaging and in 2011 it invested a further £500,000 – more than the current value of the company. The total cost of the whole investment is £1.79m, while the value of the investment in the books at the end of 2011 was £503,000. The investment is worth around £380,000 less than that today. Evolve is valued at £1.14m at the current share price of 0.38p a share. Pro forma net asset value is £4.76m.

Download the latest AIM Journal from http://www.hubinvest.com/AIMPDFJuly2012_34.pdf

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