Novadaq Technologies Inc.
TSX : NDQ

Novadaq Technologies Inc.

November 13, 2008 07:00 ET

Novadaq Reports Financial Results for the Third Quarter of 2008

TORONTO, ONTARIO--(Marketwire - Nov. 13, 2008) - Novadaq® Technologies Inc. (TSX:NDQ), a leading developer of real-time imaging and image guidance systems for use in the operating room, today announced its financial results for the third quarter ended September 30, 2008. In this press release, unless otherwise indicated, all dollar amounts are expressed in US dollars.

Q3-2008 Highlights

- SPY continued to gain:

-- SPY kits sales up 123% over Q3-2007 and up 41% from Q2-2008;

-- SPY capital sales up 37% over Q3-2007 but down sequentially in a difficult capital sales environment; and

-- 25 units placed.

- As projected, the FDA cleared the Company's new SPY analysis tools mid-quarter. These are a set of software that reside within the SPY device and provide surgeons with real time information, such as quantification of tissue perfusion and other important parameters, that they can use for immediate clinical decisions. The SPY analysis tools will be introduced commercially in January 2009

- Animal testing of the SPY scope continued to confirm the efficacy of SPY imaging in minimally invasive surgery applications. Human trials are scheduled in Q4-2008 and subsequent commercial launch in H1-2009.

Revenue increased 54% to $3,311,000 in Q3-2008 from $2,149,000 in Q3-2007. This was driven by year-over-year total revenue gains in all three of the Company's businesses primarily driven by increases in recurring revenues. Largely as a result of the Company's product mix continuing to move toward the higher margin SPY product set, the gross margin percentage increased to 52% in Q3-2008 compared to 43% in Q3-2007. Novadaq's Q3-2008 net loss was $4,066,000, or $0.17 per share, compared to $4,083,000, or $0.17 per share, in Q3-2007.

As at September 30, 2008, the Company had cash, cash equivalents and short-term investments of $6,946,000. The Company used cash of $3,417,107 in operations in Q3-2008 down from $4,190,783 in Q2-2008. This is reflective of ongoing cost containment actions.

"This is the fourth consecutive quarter where SPY disposable revenues have grown in double digits," commented Dr. Arun Menawat, Novadaq's President and Chief Executive Officer. "While SPY continues to capture the hearts and minds of thought leaders across multiple surgical disciplines, interest among plastic and reconstructive surgeons has been building with particular strength. We are maintaining our emphasis on the three A's of all successful new medical technology roll-outs - awareness, acceptance and adoption."

Conference Call

Novadaq is pleased to invite all interested parties to participate in a conference call today, November 13, at 10:00 a.m. Eastern Time during which these results will be discussed.

Those wishing to access the live conference call by telephone should dial 1-877-407-8033 (within Canada and the United States) or 201-689-8033 (international callers) several minutes prior to the beginning of the call. A telephonic replay of the conference call will be made available until November 27, 2008 at midnight and can be accessed by dialing 1-877-660-6853 (within Canada and the United States) or 201-612-7415 (international callers) and entering the account number 286 and the conference identification number 301976 when prompted.

The call will also be webcast live and archived for 365 days on the company's website at http://www.novadaq.com under the "Events" tab in the Investors section. In addition, a replay of the call will be available for download to a portable audio player or computer, as an MP3 or podcast file, at the same location on Novadaq's website.

About Novadaq Technologies Inc.

Novadaq develops and commercializes real-time imaging and image guidance systems for use in the operating room. Novadaq's SPY® Imaging System uniquely enables surgeons to visualize blood vessels, tumors, tumor margins, blood flow and the lymphatic system in real-time during surgery. This core technology is now being applied to and across multiple surgical markets such as cardiac, plastic and reconstructive, urological, general, micro and transplant. The PINPOINT™ System for endoscopic autofluorescence imaging is Novadaq's first minimally invasive product. PINPOINT allows surgeons to differentiate between healthy and cancerous tissue in the lung and other hollow organs. Expanding its portfolio of minimally invasive products, Novadaq's SPY scope combines the typical features of a standard endoscope with the capabilities of SPY imaging. The SPY scope may unlock the full potential of certain minimally invasive surgeries by effectively addressing the limited field of vision that has until now constrained surgeons. Novadaq also leverages its core technology to offer the OPTTX® System, which is designed for the diagnosis, evaluation and treatment of wet Age-related Macular Degeneration (AMD). Novadaq is the exclusive United States distributor of PLC Medical's (CO)2 (HEART LASER™ System, which is used in the same cardiac procedures as the SPY Imaging) System. For more information, please visit the company's website at http://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, SPY scope and the SPY Imaging 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.



CONSOLIDATED BALANCE SHEET
(Expressed in U.S. Dollars)

As at As at
September 30, December 31,
2008 2007
$ $
-----------------------------
(unaudited)

ASSETS
Cash and cash equivalents 4,444,773 7,417,929
Short-term investments 2,501,695 11,443,506
Accounts receivable 3,092,431 4,743,994
Current portion of prepaid expenses and
other receivables 1,181,815 1,185,707
Inventory 1,231,795 2,031,932
-----------------------------
Total current assets 12,452,509 26,823,068
-----------------------------
Long-term investments 200,000 426,000
Property, plant and equipment, net 2,889,107 2,785,342
Prepaid expenses and other receivables 241,480 323,761
Deferred development costs 331,183 331,183
Intangible assets, net 10,106,019 11,030,760
-----------------------------
26,220,298 41,720,114
-----------------------------
-----------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued liabilities 3,490,049 6,289,722
Current portion of deferred revenue 777,860 995,099
-----------------------------
Total current liabilities 4,267,909 7,284,821
-----------------------------
Deferred revenue 352,129 446,118
-----------------------------
Total liabilities 4,620,038 7,730,939
-----------------------------

Shareholders' equity
Share capital 80,144,379 80,109,644
Contributed surplus 5,093,328 4,285,187
Accumulated other comprehensive loss (25,000) (69,000)
Deficit (63,612,447) (50,336,656)
-----------------------------
Total shareholders' equity 21,600,260 33,989,175
-----------------------------
26,220,298 41,720,114
-----------------------------
-----------------------------


CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
(Expressed in U.S. Dollars)

Three months ended Nine months ended
September 30 September 30
2008 2007 2008 2007
$ $ $ $
----------------------------------------------------
(unaudited)
Revenues
Product sales 2,909,912 1,852,198 8,318,461 6,681,913
Service revenue 401,555 297,130 1,222,701 645,764
----------------------------------------------------
Total revenues 3,311,467 2,149,328 9,541,162 7,327,677
Cost of sales 1,587,806 1,220,417 4,681,125 3,947,225
----------------------------------------------------
Gross profit 1,723,661 928,911 4,860,037 3,380,452
----------------------------------------------------

Operating expenses
Sales and marketing 2,708,064 2,093,398 8,506,607 7,199,554
Research and
development 1,511,777 1,452,054 4,457,442 4,052,452
General and
administration 1,193,763 1,371,076 4,257,287 3,302,303
Depreciation 92,983 86,987 266,759 198,786
Amortization 308,247 293,347 924,741 676,164
Loss (gain) on
foreign exchange 15,763 (20,066) 14,430 (235,153)
----------------------------------------------------
Total operating
expenses 5,830,597 5,276,796 18,427,266 15,194,106
----------------------------------------------------
Loss before the
following (4,106,936) (4,347,885) (13,567,229) (11,813,654)
Interest expense - (74,061) - (161,188)
Gain on investments 5,000 - 30,000 -
Interest income 36,286 338,856 261,438 746,537
----------------------------------------------------
Net loss for the period (4,065,650) (4,083,090) (13,275,791) (11,228,305)

Deficit, beginning
of period (59,546,797) (41,820,937) (50,336,656) (34,675,722)
----------------------------------------------------
Deficit, end of period (63,612,447) (45,904,027) (63,612,447) (45,904,027)
----------------------------------------------------
----------------------------------------------------

Basic and fully
diluted loss
per share (0.17) (0.17) (0.54) (0.52)
----------------------------------------------------
----------------------------------------------------


CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Expressed in U.S. Dollars)

Three months ended Nine months ended
September 30 September 30
2008 2007 2008 2007
$ $ $ $
----------------------------------------------------
(unaudited)

Net loss for the period (4,065,650) (4,083,090) (13,275,791) (11,228,305)
Unrealized gain
on investment 5,000 - 25,000 -
----------------------------------------------------
Comprehensive loss (4,060,650) (4,083,090) (13,250,791) (11,228,305)
----------------------------------------------------


CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. Dollars)

Three months ended Nine months ended
September 30 September 30
2008 2007 2008 2007
$ $ $ $
---------------------------------------------------
(unaudited)
OPERATING ACTIVITIES
Net loss for the period (4,065,650) (4,083,090) (13,275,791) (11,228,305)
Add (deduct) items not
involving cash
Depreciation and
amortization 594,489 528,583 1,787,509 1,485,874
Gain on redemption of
long-term investment (5,000) - (30,000) -
Stock-based compensation 228,675 178,956 808,141 395,074
---------------------------------------------------
(3,247,486) (3,375,551) (10,710,141) (9,347,357)
Net change
in non-cash working
capital balances
related to
operations (169,621) (87,699) 1,516,257 (2,266,996)
---------------------------------------------------
Cash used in
operating activities (3,417,107) (3,463,250) (9,193,884) (11,614,353)
---------------------------------------------------

FINANCING ACTIVITIES
Repayment of
note payable - (3,000,000) - (3,000,000)
Issuance of common
shares, net - 201,128 34,735 26,032,205
---------------------------------------------------
Cash provided
by (used in)
financing activities - (2,798,872) 34,735 23,032,205
---------------------------------------------------

INVESTING ACTIVITIES
Deferred development
costs - 3,564 - (99,824)
Purchase of property,
plant and equipment (56,836) (305,900) (966,534) (962,725)
Purchase of
intangible assets - (325,007) - (1,330,055)
Redemption of
long-term investments 50,000 - 300,000 -
Purchase of TMR business - (280,782) (2,089,284) (2,666,899)
Sale (purchase) of
short-term investments 1,026,741 7,640,377 8,941,811 (7,592,323)
---------------------------------------------------
Cash provided
by (used in)
investing activities 1,019,905 6,732,252 6,185,993 (12,651,826)
---------------------------------------------------

Net increase (decrease)
in cash and
cash equivalents (2,397,202) 470,130 (2,973,156) (1,233,974)
Cash and cash
equivalents, beginning
of period 6,841,975 607,869 7,417,929 2,311,973
---------------------------------------------------
Cash and cash
equivalents, end
of period 4,444,773 1,077,999 4,444,773 1,077,999
---------------------------------------------------


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