ART Advanced Research Technologies Inc.
TSX : ARA

ART Advanced Research Technologies Inc.

August 14, 2007 16:02 ET

ART Advanced Research Technologies Announces 2007 Second Quarter Financial Results

MONTREAL, QUEBEC--(Marketwire - Aug. 14, 2007) - ART Advanced Research Technologies Inc. ("ART") (TSX:ARA), a Canadian medical device company and a leader in optical molecular imaging products for the healthcare and pharmaceutical industries, today announces its financial results for the second quarter ended June 30, 2007. All dollar amounts referenced herein are in US dollars, unless otherwise stated.

ART incurred a net loss for the three-month period ended June 30, 2007 of $3,170,391 or $0.06 per share, compared to $3,643,064 or $0.07 per share for the three-month period ended June 30, 2006. For the six-month period ended June 30, 2007, the net loss was $4,739,077 or $0.08 per share, compared to $6,785,096 or $0.14 per share, for the six-month period ended June 30, 2006.

Second Quarter Highlights:

- ART has restructured its marketing approach for eXplore Optix® through a new distribution arrangement with GE Healthcare, and by leveraging its core expertise in optical imaging to work more closely with large pharmaceutical companies. ART retains the exclusivity with respect to distributing eXplore Optix directly in North America while GE Healthcare retains exclusivity with respect to the distribution of eXplore Optix in the rest of the world (with a strong focus in Asia and Europe). The Company is thus transitioning from a business-to-business relationship with distributors to a mix of distributor and direct sales relationships.

- ART announced the commercial launch of a new version of its in vivo optical molecular imaging system, called eXplore Optix MX2, offering new functionalities to make the product more competitive in the preclinical market. A webcast demonstration of the new system and its applications attracted well over 60 current and potential customers.

- ART presented preliminary results from a pilot study being conducted at Sunnybrook Health Sciences Centre in Toronto, indicating that the SoftScan® optical imaging device will potentially be effective at showing earlier evidence of a therapeutic response to breast cancer treatment.

Post-Quarter Highlights:

- ART announced the initiation of a prepurchase and evaluation process for a SoftScan optical breast imaging system at the Ville Marie Medical and Women's Health Center in Montreal, Canada, and, as a result, anticipates that it will soon make its first breakthrough sale of SoftScan in Canada.

- ART announced an agreement to develop and conduct clinical research with the Stanford Breast Imaging Section of Stanford University to evaluate the effectiveness of the SoftScan optical breast imaging system in treatment monitoring and diagnosis of breast cancer.

Revenues

For the three-month period ended June 30, 2007, revenues were $41,951, compared to $828,673 for the same period ended June 30, 2006. Sales resulting from products amounted to $41,951, compared to $664,056 for the same quarter of last year. There were no sales resulting from maintenance for the six-month period, compared to $164,617 in the same period ended June 30, 2006. Revenues resulting from sales of products for the six-month period ended June 30, 2007 amounted to $436,165, compared to $1,466,612 for the same period of last year. During the quarter ended June 30, 2007, the Company sold only Fenestra® products. There were no eXplore Optix units sold during that period (one unit during the six-month period ended June 30, 2007) compared to three units (seven for the six-month period ended June 30, 2006) during the same quarter in the previous year. Sales from products include the multi-wavelength eXplore Optix system as well as add-ons and the sales of the Fenestra product. Sales resulting from maintenance include upgrades of the single-wavelength system to the new multiwavelength system and the sale of demonstration units.

The Company is in a transition phase for the distribution of its eXplore Optix system. ART is now implementing a new sales distribution model, comprised of a mix of direct and indirect sales channels. As part of this new marketing strategy, ART is in the process of recruiting up to five sales professionals, combined with in-house application specialists. This will allow the Company to solidify sales while providing higher gross margins per system sold. The strategy ART has adopted has been benchmarked against highly successful sales programs used by high-end imaging product companies, and validated through consultations with senior and experienced sales executives.

Furthermore, ART has developed a commercialization plan to allow for the sale and support of SoftScan systems in Canada and in Europe, including the hiring of an experienced executive director responsible for the effective marketing and sale of SoftScan. Following the close of the second quarter, ART announced that the Ville Marie Medical and Women's Health Center ("Ville Marie") in Montreal, Canada, had initiated the evaluation and purchasing process of a SoftScan optical breast imaging system under the terms of ART's SoftScan Prepurchase and Evaluation Program. Ville Marie thus intends to introduce SoftScan into its future first-line multi-imaging breast cancer detection and treatment monitoring process, after an evaluation by its staff of the on-site capabilities of SoftScan and its seamless integration into the patients' workflow.

Cost of sales

Cost of sales for the three-month period ended June 30, 2007 was $2,708, compared to $507,628 in the second quarter of 2006. For the six-month period ended June 30, 2007, cost of sales was $222,192, compared to $1,005,666 for the six-month period ended June 30, 2006. During the three and six-month periods ended June 30, 2007, ART generated a gross margin of $39,243 or 94% and $213,973 or 49% respectively from the sales of its products compared to $294,263 or 44% and $598,781 or 41% for the same periods in the previous year. The gross margin generated on the sales of maintenance was 16% for both the three and six-month periods ended June 30, 2006. The increase of the gross margin, as a percentage of sales, in the three-month and six-month periods ended in 2007 compared to the same periods of the previous year, is due to the mixed composition of sales. The sales of Fenestra products represented a higher proportion of the total sales in the current period of 2007 and provided a higher margin as a percentage of sales than the sales of eXplore Optix systems. Cost of sales consisted principally of raw materials, royalties and manufacturing costs.

Operating expenses

The Company's research and development ("R&D") expenditures for the three-month period ended June 30, 2007, net of investment tax credits amounted to $1,689,083, compared to $2,385,340 for the same period ended June 30, 2006. For the six-month period ended June 30, 2007, R&D expenditures, net of investment tax credits, were $2,897,498, compared to $4,349,112 for the six-month period ended June 30, 2006. The R&D expenditures consist principally of the salaries and fringe benefit expenses of employees involved in R&D projects, of consultation fees paid for clinical studies, the cost associated with the preparation and conduct of the clinical studies and of the cost of prototypes. The decrease in R&D expenditures during the three-month and the six-month periods ended June 30, 2007, compared to the same periods last year, relates to the medical sector and in particular the SoftScan program, and is mainly due to lower contract research costs engaged in the current period of 2007 following the Health Canada approval obtained in December 2006 and the CE marking received for Europe in February 2007. The decrease of clinical testing expenses incurred in the six-month period ended June 30, 2007 compared to the same period of 2006 approximates $645,000.

Selling, general, and administrative ("SG&A") expenses for the three-month period ended June 30, 2007 totaled $1,533,667, compared to $986,932 for the same period ended June 30, 2006. For the six-month period ended June 30, 2007, SG&A expenses were $2,618,195, compared to $1,979,435 for the six-month period ended June 30, 2006. SG&A expenses consist principally of salaries, professional fees and other costs associated with marketing activities and intellectual property maintenance fees. The increase in SG&A expenses during the three-month and the six-month periods ended June 30, 2007 compared to the same periods of 2006 mainly results from professional fees engaged for the distribution of ART's product lines, including direct marketing activities to support the commercialization of the eXplore Optix, SoftScan and Fenestra products. During the three-month period ended June 30, 2007, non-recurring professional fees amounted to approximately $143,600.

Net Loss

As a result, the net loss for the three-month period ended June 30, 2007 was $3,170,391 or $0.06 per share, compared to $3,643,064 or $0.07 per share for the three-month period ended June 30, 2006. For the six-month period ended June 30, 2007, the net loss was $4,739,077 or $0.08 per share, compared to $6,785,096 or $0.14 per share, for the six-month period ended June 30, 2006.

Financial Outlook

As of June 30, 2007 ART's cash position was $4.3 million and its working capital close to $5 million. In this context management is actively pursuing additional funding for its ongoing activities, and more specifically for its commercialization effort. Along with this funding initiative, ART has also initiated a process designed to rationalize its operations and reduce expenses with a focus on commercialization and support of all of its products. As at June 30, 2007, without taking into account future revenues but taking into account savings from the current rationalization initiative, the Company had approximately six months of cash.

The financial statements, accompanying notes to the financial statements, and Management's Discussion and Analysis for the three-month period ended June 30, 2007, will be available online at www.sedar.com or at www.art.ca. Summary financial tables are provided below. A detailed list of the risks and uncertainties affecting the Company can be found in the Management's Discussion and Analysis.

Conference Call

ART will host a conference call today at 4:30 PM (EDT). The telephone number to access the conference call is (514) 868-2590 when dialing within the Montreal area, or (866) 898-9626 for the rest of North America. Outside of North America, please dial (514) 868-2590. A replay of the call will be available until August 22, 2007. To listen to the replay from the Montreal area, please dial (514) 861-2272, or, (800) 408-3053 for the rest of North America. From outside of North America, please dial (514) 861-2272. The access code for the replay is 3230155#.

About ART

ART Advanced Research Technologies Inc. is a leader in molecular imaging products for the healthcare and pharmaceutical industries. ART has developed products in medical imaging, medical diagnostics, disease research, and drug discovery with the goal of bringing new and better treatments to patients faster. eXplore Optix®, an optical molecular imaging device designed for monitoring physiological changes in living systems at the preclinical study phases of new drugs, is distributed by ART in North America and by GE Healthcare in the rest of the world, with a focus in Europe and Asia, and is used by industry and academic leaders worldwide. SoftScan®, an optical medical imaging device, is designed to improve the diagnosis and treatment of breast cancer. ART is commercializing these products in a global strategic alliance with GE Healthcare, a world leader in mammography and imaging. Finally, the Fenestra® line of molecular imaging contrast products provide image enhancement for a wide range of preclinical Micro CT applications allowing scientists to see greater detail in their imaging studies, with potential extension into other major imaging modalities. ART's shares are listed on the TSX under the ticker symbol ARA. For more information on ART, visit our website at www.art.ca .

This press release may contain forward-looking statements subject to risks and uncertainties that would cause actual events to differ materially from expectations. These risks and uncertainties are described in the most recent Annual Information Form and the financial statements for the year ended December 31, 2006, available on SEDAR (www.sedar.com).



ART Advanced Research Technologies Inc.
Balance Sheets
(In U.S. dollars)
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June 30, December 31,
2007 2006
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ASSETS (unaudited) (audited)
Current assets
Cash $816,090 $6,546,936
Term deposits, 3.95%, maturing in July 2007 516,502 -
Term deposits, 4%, maturing in December 2007
and March 2008 3,009,029 -
Accounts receivable 763,878 625,189
Investment tax credits receivable 685,101 353,583
Inventories 1,874,945 1,715,592
Prepaid expenses 348,304 331,782
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8,013,849 9,573,082
Property and equipment 557,873 504,426
Patents 2,054,571 1,962,038
Deferred development costs 762,437 459,488
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$11,388,730 $12,499,034
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LIABILITIES
Current liabilities
Credit facility $563,169 $-
Accounts payable and accrued liabilities 2,409,188 3,256,756
Deferred grant 141,712 129,552
Income taxes payable - 806,751
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3,114,069 4,193,059

SHAREHOLDERS' EQUITY
Share capital and share purchase warrants 27,953,017 24,126,432
Contributed surplus 3,748,607 3,586,059
Deficit (26,182,123) (21,247,643)
Accumulated other comprehensive income 2,755,160 1,841,127
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8,274,661 8,305,975
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$11,388,730 $12,499,034
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On behalf of the Board,

Director Director



ART Advanced Research Technologies Inc.
Shareholders' Equity and Comprehensive Income
(In U.S. dollars)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Common Shares Preferred Shares
--------------------------------------------------------------------------
(audited) Number Amount Number Amount

--------------------------------------------------------------------------
Balance as at
January 1, 2006 42,664,523 $78,678,625 6,341,982 $5,900,000

Net loss - - - -
Translation adjustment - - - -
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Comprehensive income - - - -
--------------------------------------------------------------------------

Reduction of stated
capital - (70,585,829) - -

Issue of shares for
cash 9,333,400 6,283,708 2,000,000 2,007,043

Issue of shares for
business acquisition 251,058 185,000 - -

Issue of share purchase
warrants - - - -

Share and share purchase
warrant issue expenses - - - -

Stock-based compensation - - - -

Convertible debentures
settlement - - - -

Expired warrants - - - -

Shares to be issued for
business acquisition 162,369 95,262 - -

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Balance as at
December 31, 2006 52,411,350 $14,656,766 8,341,982 $7,907,043
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--------------------------------------------------------------------------

To be issued as
at December 31, 2006 (162,369) (95,262) - -

Balance as at
January 1, 2007 52,248,981 $14,561,504 8,341,982 $7,907,043

(unaudited)

Net loss - - - -
Translation adjustment - - - -
--------------------------------------------------------------------------
Comprehensive income - - - -
--------------------------------------------------------------------------


Issue of shares for
business acquisition 162,369 95,262 - -

Issue of shares
for cash 10,879,242 3,390,696 - -

Issue of share purchase
warrants - - - -

Share and share
purchase warrant
issue expenses - - - -

Stock-based
compensation - - - -

Expired warrants - - - -

--------------------------------------------------------------------------
Balance as at
June 30, 2007 63,290,592 $18,047,462 8,341,982 $7,907,043
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ART Advanced Research Technologies Inc.
Shareholders' Equity and Comprehensive Income
(In U.S. dollars)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Share
capital and
Share Equity
purchase Component of
Warrants Warrants Convertible
--------------------------------------------------------------------------
(audited) Number Amount Total Debentures
--------------------------------------------------------------------------

Balance as at
January 1, 2006 4,022,817 $2,553,099 $87,131,724 $1,510,467

Net loss - - - -
Translation adjustment - - - -
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Comprehensive income - - - -
--------------------------------------------------------------------------

Reduction of stated
capital - - (70,585,829) -

Issue of shares for
cash - - 8,290,751 -

Issue of shares for
business acquisition - - 185,000 -

Issue of share purchase
warrants 678,891 146,648 146,648 -

Share and share
purchase warrant issue
expenses - - - -

Stock-based compensation - - - -

Convertible debentures
settlement - - - (1,510,467)

Expired warrants (743,185) (1,137,124) (1,137,124) -

Shares to be issued
for business acquisition - - 95,262 -

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Balance as at
December 31, 2006 3,958,523 $1,562,623 $24,126,432 $-
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To be issued as at
December 31, 2006 - - (95,262) -

Balance as at
January 1, 2007 3,958,523 $1,562,623 $24,031,170 $-

(unaudited)

Net loss - - - -
Translation adjustment - - - -
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Comprehensive income - - - -
--------------------------------------------------------------------------


Issue of shares for
business acquisition - - 95,262 -

Issue of shares
for cash - - 3,390,696 -

Issue of share
purchase warrants 2,175,841 497,303 497,303 -

Share and share
purchase warrant
issue expenses - - - -

Stock-based
compensation - - - -

Expired warrants (373,336) (61,414) (61,414) -

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Balance as at
June 30, 2007 5,761,028 $1,998,512 $27,953,017 $-
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ART Advanced Research Technologies Inc.
Shareholders' Equity and Comprehensive Income
(In U.S. dollars)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Accumulated
Other
Contributed Comprehensive
(audited) Surplus Deficit Income Total
--------------------------------------------------------------------------

Balance as at
January 1, 2006 $721,051 $(82,033,557) $2,039,128 $9,368,813

Net loss - (8,754,767) - (8,754,767)
Translation adjustment - - (198,001) (198,001)
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Comprehensive income - (8,754,767) (198,001) (8,952,768)
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Reduction of stated
capital - 70,585,829 - -

Issue of shares for cash - - - 8,290,751

Issue of shares for
business acquisition - - - 185,000

Issue of share purchase
warrants - - - 146,648

Share and share purchase
warrant issue expenses - (1,045,148) - (1,045,148)

Stock-based compensation 268,206 - - 268,206

Convertible debentures
settlement 1,459,678 - - (50,789)

Expired warrants 1,137,124 - - -

Shares to be issued
for business
acquisition - - - 95,262

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Balance as at
December 31, 2006 $3,586,059 $(21,247,643) $1,841,127 $8,305,975
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--------------------------------------------------------------------------

To be issued as at
December 31, 2006 - - - (95,262)

Balance as at
January 1, 2007 $3,586,059 $(21,247,643) $1,841,127 $8,210,713

(unaudited)

Net loss - (4,739,077) - (4,739,077)
Translation adjustment - - 914,033 914,033
--------------------------------------------------------------------------
Comprehensive income - (4,739,077) 914,033 (3,825,044)
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Issue of shares for
business acquisition - - - 95,262

Issue of shares for
cash - - - 3,390,696

Issue of share
purchase warrants - - - 497,303

Share and share
purchase warrant
issue expenses - (195,403) - (195,403)

Stock-based
compensation 101,134 - - 101,134

Expired warrants 61,414 - - -

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Balance as at
June 30, 2007 $3,748,607 $(26,182,123) $2,755,160 $8,274,661
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ART Advanced Research Technologies Inc.
Operations
(In U.S. dollars)
(unaudited)
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Three-month Six-month
periods ended periods ended
June 30 June 30
2007 2006 2007 2006
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Sales
Products $41,951 $664,056 $436,165 $1,466,612
Maintenance - 164,617 - 164,617
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41,951 828,673 436,165 1,631,229
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Cost of sales
Products 2,708 369,793 222,192 867,831
Maintenance - 137,835 - 137,835
--------------------------------------------------------------------------
2,708 507,628 222,192 1,005,666
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Gross margin 39,243 321,045 213,973 625,563
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Operating expenses
Research and
development, net
of investment
tax credits 1,689,083 2,385,340 2,897,498 4,349,112
Selling, general
and administrative 1,533,667 986,932 2,618,195 1,979,435
Amortization 88,637 71,449 174,688 144,600
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3,311,387 3,443,721 5,690,381 6,473,147
--------------------------------------------------------------------------
Operating loss 3,272,144 3,122,676 5,476,408 5,847,584
Financial expenses 38,878 520,388 73,974 937,512
--------------------------------------------------------------------------
Loss from operations
before income taxes 3,311,022 3,643,064 5,550,382 6,785,096
Current income taxes (140,631) - (811,305) -
--------------------------------------------------------------------------
Net loss $3,170,391 $3,643,064 $4,739,077 $6,785,096
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Basic and diluted
net loss per share $0.06 $0.07 $0.08 $0.14
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Basic and diluted
weighted average
number of
common shares
outstanding 54,016,714 47,582,281 58,551,176 47,486,066
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Number of common
shares outstanding,
end of period 63,290,592 52,248,981 63,290,592 52,248,981
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ART Advanced Research Technologies Inc.
Cash Flows
(In U.S. dollars)
(Unaudited)
--------------------------------------------------------------------------
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Three-month Six-month
periods ended periods ended
June 30 June 30
2007 2006 2007 2006
--------------------------------------------------------------------------

OPERATING ACTIVITIES
Net loss $(3,170,391) $(3,643,064) $(4,739,077) $(6,785,096)
Items not affecting
cash
Amortization 88,637 71,449 174,688 144,600
Stock-based
compensation 43,682 73,283 101,134 141,455
Interest on
convertible
debentures - 316,459 - 666,960
Net changes in
working capital
items
Accounts receivable 178,309 99,519 (139,584) 221,626
Investment tax
credits receivable (176,379) (35,007) (282,353) (69,745)
Inventories (23,308) 578,181 61 (95,952)
Prepaid expenses 29,339 (525) 15,135 (52,994)
Accounts payable
and accrued
liabilities 631,743 (274,535) (931,069) (18,940)
Deferred grant - (1,858) - 40,190
Income taxes payable (140,630) - (811,304) -
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Cash flows from
operating activities (2,538,998) (2,816,098) (6,612,369) (5,807,896)
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INVESTING ACTIVITIES
Business acquisition - (281,023) - (600,657)
Short-term investments (369,565) - (2,759,459) 4,288,738
Property and equipment (74,176) (180,001) (96,151) (181,733)
Deferred development
costs (88,255) (15,209) (241,807) (31,332)
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Cash flows from
investing activities (531,996) (476,233) (3,097,417) 3,475,016
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FINANCING ACTIVITIES
Credit facility 546,398 - 546,398 -
Repayment of senior
convertible debentures - (625,000) - (1,250,000)
Issue of convertible
preferred shares - 2,031,361 - 2,031,361
Issue of common shares
and share purchase
warrants - 6,283,707 3,887,999 6,283,707
Equity issue expenses (124,728) (909,956) (195,403) (909,956)
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Cash flows from
financing activities 421,670 6,780,112 4,238,994 6,155,112
Effect of foreign
currency translation
adjustments 226,596 152,786 256,448 143,848
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648,266 6,932,898 4,495,442 6,298,960
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Net increase (decrease)
in cash and cash
equivalents (2,422,728) 3,640,567 (5,214,344) 3,966,080
Cash and cash
equivalents,
beginning of year 3,755,320 5,184,655 6,546,936 4,859,142
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Cash and cash
equivalents, end
of period $1,332,592 $8,825,222 $1,332,592 $8,825,222
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CASH AND CASH
EQUIVALENTS
Cash $816,090 $7,952,298 $816,090 $7,952,298
Term deposit 516,502 - 516,502 -
Commercial paper - 872,924 - 872,924
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$1,332,592 $8,825,222 $1,332,592 $8,825,222
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Supplemental
disclosure of cash
flow information
Interest received $18,362 $37,345 $23,333 $81,506
Interest paid 1,305 120,309 25,573 246,837

Contact Information