Novadaq Technologies Inc.
TSX : NDQ

Novadaq Technologies Inc.

May 12, 2008 09:00 ET

Novadaq Reports Financial Results for the First Quarter of 2008

TORONTO, ONTARIO—-(Marketwire – May 12, 2008) - Novadaq® Technologies Inc. (TSX:NDQ), a developer of real-time imaging and image guidance systems for use in the operating room, today announced financial results for the first quarter ended March 31, 2008. In this press release, unless otherwise indicated, all dollar amounts are expressed in US dollars.

Q1 2008 Highlights

- SPY gaining traction with 14 new SPY systems installed, 22% increase in SPY consumable sales and 20% increase in SPY capital revenue from Q4 2007.

- Sentara Hospital System, Virginia's largest cardiac surgery program completes multiple SPY System capital purchase and adopts SPY as standard of care.

- SPY adopted in 9 leading plastic and reconstructive surgery centers (including Cleveland Clinic, Duke University, and University of Southern California) since Q4 2007 launch.

- SPY Scope testing in large animal model continues to demonstrate efficacy of SPY imaging in minimally invasive surgery applications and is on-track for human trials in Q4 2008.

Events Subsequent to Q1 2008

- Positive results from two European centers using OPTTX presented at the Association for Research in Vision and Ophthalmology annual meeting support OPTTX partnership opportunities.

"I am pleased with the developing fundamentals of the SPY business as we had our best quarter for SPY placements, and showed strong growth in consumable and capital sales." said Dr. Arun Menawat, President and Chief Executive Officer of Novadaq Technologies Inc. "Plastic surgery has been a catalyst in accelerating SPY adoption, and continued growth in SPY will be supported by the launch of quantification software in the second half of 2008 and by our continued support in getting surgeons paid for SPY procedures."

Financial Results

Quarter Ended March 31, 2008 "Q1-2008" Compared to Quarter Ended March 31, 2007 "Q1-2007"

Revenue increased to approximately $2,773,000 in Q1-2008 from approximately $1,427,000 in Q1-2007. Recurring revenue, which includes SPY and TMR consumables, rentals and parts increased from approximately $693,000 in Q1-2007 to $1,496,000 in Q1-2008. The primary reason for the increase is that TMR consumable revenue was recognized for a full quarter in 2008. Capital sale revenue increased from approximately $734,000 in Q1-2007 to $919,000 in Q1-2008, as an increase in SPY capital of $540,000 was partly offset by a decrease in TMR capital of $363,000. Service revenue, which increased from nil in Q1-2007 to approximately $358,000 in Q1-2008 relates partly to the TMR business which was acquired in the last few days of Q1-2007, and to PINPOINT, which was acquired after Q1-2007.

Recurring revenue and service revenue increased from Q4-2007 to Q1-2008 whereas capital sale revenue decreased, as an increase in SPY capital sale revenue was more than offset by decreases in TMR and PINPOINT capital revenue.

Gross profit increased to approximately $1,305,000 in Q1-2008 from approximately $679,000 in Q1-2007 as a result of the increase in revenue described above. Gross profit as a percent of sales was substantially unchanged.

Sales and marketing expenses increased by approximately $567,000 to approximately $2,784,000 in Q1-2008 from approximately $2,217,000 in Q1-2007 due to expansion of a direct sales team through 2007 and into 2008. $242,000 of the increase occurred from Q4-2007 to Q1-2008.

Research and development expenses increased by approximately $317,000 to approximately $1,612,000 in Q1-2008 from approximately $1,295,000 in Q1-2007. The increase relates primarily to the establishment of a research and development center in Vancouver B.C. staffed by former employees of Xillix. Research and development expenses in Q1-2008 increased by $79,000 from Q4-2007. The increase related primarily to patent costs.

General and administration expenses increased by approximately $581,000 to approximately $1,459,000 in Q1-2008 from $878,000 in Q1-2007. Increases relate primarily to costs incurred to defend patents in Japan and general increases to support a direct sales team, and the acquired TMR business. General and administrative expenses in Q1-2008 decreased by $50,000 from Q4-2007 due to lower professional fees.

Depreciation expense increased to approximately $89,000 in Q1-2008 from approximately $52,000 in Q1-2007 primarily as a result of computer equipment purchased in 2007 for sales representatives hired during the period. Depreciation expense in Q1-2008 was generally consistent with Q4-2007.

Amortization increased by from $121,000 in Q1-2007 to $308,000 in Q1-2008 as a result of the acquisition of intangibles related to TMR and Xillix. Amortization in Q1-2008 was slightly higher than amortization in Q4-2007 because the final earn out amount associated with the TMR acquisition was calculated effective December 31, 2007.

The Company had interest expense in Q1-2007 of approximately $9,000 relating to a $3,000,000 note payable issued on March 20, 2007 in connection with the acquisition of TMR distribution rights. The note was repaid in 2007 and there was no interest expense in Q1-2008.

Interest income decreased by approximately $36,000 to $158,000 in Q1-2008 from $194,000 in Q1-2007. The primary reason was lower interest rates.

Net loss increased by approximately $1,138,000 to approximately $4,839,000 in Q1-2008 from approximately $3,701,000 in Q1-2007 primarily as a result of an increase in sales and marketing costs of approximately $567,000, an increase in R&D expenses of approximately $317,000, an increase in general and administrative expenses of approximately $581,000 which were partly offset by an increase in gross profit of $626,000.

As at March 31, 2008 the Company had cash, cash equivalents and short-term investments of approximately $14,775,000, a decrease of approximately $4,086,000 from December 31, 2007. Approximately $4,075,000 of the decrease relates to a net loss incurred during the period after deducting items not involving cash, a source of approximately $2,489,000 in net changes in non-cash working capital relating primarily to the collection of accounts receivable from Edwards, an investment in the TMR business of $2,089,000 relating to the payment to Edwards of earn-out purchase consideration, and an investment of approximately $436,000 in property, plant and equipment.

As at March 31, 2008 there were a total of 24,533,982 common shares (26,094,395 on a fully diluted basis) and no preferred shares outstanding. As at March 31, 2008 a total of 1,560,413 stock options were outstanding under the Company's employee stock option plan.

Conference call

Novadaq will host a conference call on Monday, May 12, 2008 at 10:00 a.m. EST. to discuss the financial results for the first quarter ended March 31, 2008. To access the conference call by telephone, dial 416-644-3422 or 1-800-731-5319. Please connect approximately ten minutes prior to the beginning of the call to ensure participation. The conference call will be archived for replay until May 19, 2008 at midnight. To access the archived conference call, dial 416-640-1917 or 1-877-289-8525 and enter the reservation number 21270216 followed by the number sign.

A live audio webcast of the conference call will be available at www.novadaq.com. Please connect at least ten minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be archived at the above website for 365 days.

Q1 2008 Financial Report

For complete financial results, please see our filings at www.sedar.com.

About Novadaq Technologies

Novadaq Technologies Inc. commercializes real-time imaging and image guidance systems for use in the operating room. With one set of proprietary core technologies, Novadaq's products have multiple applications. Novadaq's SPY® System enables cardiac surgeons to diagnose intra-operatively by visually assessing coronary vasculature and bypass graft functionality during the course of heart bypass surgery. The SPY System is also indicated for use during other surgeries, such as cardiovascular, plastic, reconstructive, organ transplant and urological procedures. SPY can be used to visualize blood vessels, tumors, tumor margins and the lymphatic system. Novadaq introduced PINPOINT™, its first minimally invasive imaging system for autofluorescence in October 2007. PINPOINT™ allows surgeons to differentiate between healthy and cancerous tissue in the lung and other hollow organs. Further expanding its portfolio of minimally invasive products, Novadaq is developing SPYscope which combines the typical features of a standard endoscope with the additional capabilities of SPY imaging. Novadaq is the exclusive United States distributor of PLC Medical's CO2 HEART LASER System, used in the same cardiac procedures as the SPY System. Novadaq also offers the OPTTX® System, which leverages the company1s core imaging technology and is designed for the diagnosis, evaluation and treatment of wet Age-related Macular Degeneration (AMD). For more information, please visit the company's website at www.novadaq.com.

Forward looking Statements

Certain statements included in this press release may be considered forward-looking. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from those implied by such statements, and therefore these statements should not be read as guarantees of future performance or results. All forward-looking statements are based on Novadaq's current beliefs as well as assumptions made by and information currently available to Novadaq and relate to, among other things, results of future clinical tests of PINPOINT and the SPY System, anticipated financial performance, business prospects, strategies, regulatory developments, market acceptance and future commitments. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Due to risks and uncertainties, including the risks and uncertainties identified by Novadaq in its public securities filings actual events may differ materially from current expectations. Novadaq disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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