Novadaq Technologies Inc.
TSX : NDQ

Novadaq Technologies Inc.

November 06, 2006 10:52 ET

Novadaq Reports Financial Results for Third Quarter of 2006




TORONTO, ONTARIO--(Marketwire - Nov. 6, 2006) -

Attention Business/Financial Editors:

Novadaq® Technologies Inc. (TSX:NDQ), a developer of medical imaging systems
for the operating room, today reported its results for the third quarter ended
September 30, 2006.

"The third quarter was an extremely busy and strategically successful
period for us. I am very proud of the milestones our team has achieved," said
Arun Menawat, President and Chief Executive Officer of Novadaq Technologies
Inc. "Since the beginning of July we have made significant advancements on a
number of key initiatives that will drive commercialization of our products.
These include a CMS recommendation made for a reimbursement code for the SPY
System, positive results from our clinical trial of the OPTTX System and
initiation of the clinical development for LUNA. We have now also received
regulatory approval to market OPTTX in Europe."

Selected Third Quarter, 2006 Financial and Operating Highlights

- SPY®: Presented to Centers for Medicare & Medicaid Services (CMS)
the federal agency responsible for administering the United States'
health-related programs, resulting in a recommendation for a unique
ICD-9-CM reimbursement code. Signed an exclusive European and Emerging
Markets distribution agreement with Eastman Kodak Company for the SPY
System. Announced the hiring of Jack Randle as Divisional Vice
President, Sales for Novadaq's Cardiac Business to further enhance the
commercialization of the SPY System.

- OPTTX®: Presented results from a clinical trial of 40 patients,
demonstrating that, among other positive results, at the end of the
treatment, on average the visual acuity was stable, and 29% of all
patients seen at this visit had an improvement in vision. This
percentage rose to 50% for those patients that followed the trial
visit schedule. These results were a major factor in the receipt of
the necessary CE Mark Certificates to market the OPTTX System in
Europe.

- LUNA™: Researchers from the University of Rochester won the award
for Best Scientific Paper at the 24th World Congress of Endourology.
The team submitted virtual posters in the areas of bladder cancer and
testicular torsion visualization, as well as radical prostatectomy,
for which their paper was recognized. Initiated first human clinical
trial in Rochester on partial nephrectomy.

Financial Results

Three Months Ended September 30, 2006 "Q3-2006" Compared to Three Months
Ended September 30 2005 "Q3-2005"

Revenue increased to approximately $532,000 in Q3-2006 from approximately
$222,000 in Q3-2005 including a five fold increase in procedural revenue
resulting from an increase in the installed base of SPY Systems. The capital
sale based revenue recorded in Q3-2006 related to the distribution agreement
with Kodak which was completed in September 2006 for Europe and Emerging
Markets. Procedure based revenue decreased to approximately $402,000 in
Q3-2006 from approximately $500,000 in Q2-2006 or by 20%. During the summer
months, 2 additional Spy Systems were placed, and SPY System utilization rates
during the summer months were also lower than in the second quarter of 2006.

Gross profit as a percentage of sales decreased to approximately 51% in
Q3-2006 from approximately 72% in Q3-2005. The difference relates primarily to
capital sales of SPY Systems completed in each period. The blended sales model
employed in Europe in 2006 involves lower capital sales prices and initial
gross profits on SPY Systems, and higher expected ongoing procedure based
revenue streams. Gross profit as a percentage of sales decreased from
approximately 58% in Q2-2006 to 51% in Q3-2006, primarily due to lower
utilization rates achieved during the summer months.

Sales and marketing expenses increased by approximately $798,000 to
approximately $1,134,000 in Q3-2006 from approximately $336,000 in Q3-2005 to
support the commercial launch of the SPY System in the US. Significant
increases included the cost of hiring 12 Clinical Educators, increased
commission expense, and increased marketing costs. Sales and marketing
expenses in Q3 2006 decreased slightly from Q2-2006.

Research and development expenses increased by approximately $362,000 to
approximately $1,164,000 in Q3-2006 from $802,000 in Q3-2005. The overall
increase relates primarily to increases in OPTTX System design and testing
costs. Research and development costs in Q3-2006 decreased slightly from
Q2-2006.

General and administration expenses increased to approximately $852,000
in Q3-2006 from $512,000 in Q3-2005, and from $675,000 in Q2-2006. The overall
increase over the entire period includes an increase in professional fees,
salaries, investor relations costs and insurance.

Depreciation expense increased to approximately $45,000 in Q3-2006 from
$6,000 in Q3-2005 and from approximately $40,000 in Q2-2006, primarily as a
result of additional computer hardware, software and other office equipment to
support the growth of the Company's infrastructure.

The Company had a total investment return of approximately $284,000 in
Q3-2006 on its cash and short-term investments, compared to $215,000 in
Q3-2005. The increase in investment returns over Q3-2005 is primarily the
result of higher interest rates.

Net loss increased by approximately $1,614,000 to approximately
$2,741,000 in Q3-2006 from approximately $1,128,000 in Q3-2005 primarily as a
result of an increase in sales and marketing costs of approximately $798,000,
an increase in research and development expenses of approximately $362,000, an
increase in general and administrative expenses of approximately $340,000, and
a reduction in foreign exchange gain of approximately $254,000, offset
partially by an increase in investment returns of approximately $69,000. Net
loss increased in Q3-2006 by approximately $129,000 from Q2-2006 due to
increased general and administrative expenses.

Nine Months Ended September 30, 2006 "YTD-2006" Compared to Nine Months
Ended September 30 2005 "YTD-2005"

Revenue in YTD 2006 was approximately $1,559,000, or 353% of YTD 2005
revenue of approximately $442,000. This included an increase in procedure
based revenue from approximately $155,000 to approximately $1,232,000 due
primarily to the increasing installed based in the US.

Sales and marketing expenses increased to approximately $3,088,000 in YTD
2006 from approximately $739,000 in YTD 2005 primarily due to the expansion of
commercialization activities in the US.

Research and development expenses increased to approximately $3,789,000
in YTD 2006 from approximately $2,469,000 in YTD 2005 primarily due to
increases in salary expense for engineering staff hired to increase product
development capacity, clinical and regulatory staff to accelerate OPTTX and
LUNA programs, expenses associated with the SPY patient registry and visionary
programs, and patent and trademark costs incurred to protect developments in
OPTTX and LUNA, and expanded applications of SPY.

General and administration expenses decreased from approximately
$2,201,000 in YTD 2005 to approximately $2,094,000 in YTD 2006 primarily as a
result of a significant reduction in stock based compensation expense which
was unusually high in YTD-2005 due to the contractual vesting of all pre-2005
options upon the initial public offering completed in June 2005. The reduction
in stock based compensation was mostly offset by general increases in
administrative costs to support the commercial launch of SPY in the US, and
public company costs.

As at September 30, 2006 the Company had cash, cash equivalents and
short-term investments of approximately $19,976,000, a decrease of
approximately $2,799,000 from December 31, 2005. The decrease was primarily
the result of the cash used in operations of approximately $6,321,000, and
cash invested in property and equipment and licenses of approximately
$1,926,000, offset partly by proceeds of approximately $5,463,000 from the
exercise of warrants in YTD-2006.

As at September 30, 2006 there were a total of 19,709,561 common shares
(21,449,872 on a fully diluted basis) and no preferred shares outstanding.

Conference call

Novadaq will host a conference call and live webcast on Monday,
November 6, 2006 at 4:30 p.m. E.T. to discuss its third quarter 2006 results.
To access the conference call by telephone, dial 416-644-3414 or
1-800-814-4862. Please connect approximately ten minutes prior to the
beginning of the call to ensure participation. The conference call will be
archived for replay until November 13, 2006 at midnight. To access the
archived conference call, dial 416-640-1917 or 1-877-289-8525 and enter the
reservation number 21208114 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 90
days.

About Novadaq Technologies

Novadaq Technologies Inc. (TSX:NDQ) develops and commercializes medical
devices based on its proprietary imaging platform for the diagnosis and
treatment of human vascular and ophthalmic diseases and conditions. Novadaq's
SPY Intra-operative Imaging System, commercially available worldwide, enables
cardiac surgeons to visually assess coronary vasculature and bypass graft
functionality during the course of open-heart surgery. Novadaq's ophthalmic
product, the OPTTX System, is aimed at the diagnosis, evaluation and treatment
of wet Age-related Macular Degeneration (AMD) by using the same core imaging
technology that is used in the SPY System. Novadaq received CE Mark approval
for the OPTTX System in November 2006 and expects a limited launch in Europe
by year end. Novadaq's product for urology, LUNA is designed to enable
surgeons to visualize nerve bundles during the course of urological procedures
such as radical prostatectomy in order to reduce negative outcomes including
impotency. For more information, please visit the company's website at
www.novadaq.com.

This press release contains certain information that may constitute
forward-looking information within the meaning of securities laws. In some
cases, forward-looking information can be identified by the use of terms such
as "may", "will", "should", "expect", "plan", "anticipate", "believe",
"intend", "estimate", "predict", "potential", "continue" or other similar
expressions concerning matters that are not historical facts. Forward-looking
information may relate to management's future outlook and anticipated events
or results, and may include statements or information regarding the future
financial position, business strategy and strategic goals, research and
development activities, projected costs and capital expenditures, financial
results, research and clinical testing outcomes, taxes and plans and
objectives of or involving Novadaq. Without limitation information regarding
future sales and marketing activities, SPY System placement targets and
utilization rates, the implementation of a reimbursement code for the SPY
System, future revenues and research and development activities, and the
planned European commercial launch of the OPTTX System, as well as the
Company's plans for each of the SPY System, the OPTTX System and LUNA, is
forward-looking information.

Forward-looking information is based on certain factors and assumptions
regarding, among other things, market acceptance and the rate of market
penetration of Novadaq's SPY System, the effect of a recommended reimbursement
code for the SPY System, the clinical results of the use of the SPY System,
the results from clinical tests of the OPTTX System and LUNA , and potential
opportunities in the AMD treatment market and in image guided conventional and
minimally invasive urological applications including nerve-sparing radical
prostatectomy. While the Company considers these assumptions to be reasonable
based on information currently available to it, they may prove to be
incorrect.

Forward looking-information is subject to certain factors, including
risks and uncertainties that could cause actual results to differ materially
from what we currently expect. These factors include risks relating to the
transition from research and development activities to commercial activities,
market acceptance and adoption of the SPY System and of the OPTTX System, the
risk that a recommended reimbursement code will not be fully implemented or
that it will not affect acceptance of the SPY System, risks related to third
party contractual performance, dependence on key suppliers for components of
the SPY System and the OPTTX System, regulatory and clinical risks, risks
relating to the protection of intellectual property, risks inherent in the
conduct of research and development activities, including the risk of
unfavorable or inconclusive clinical trial outcomes, potential product
liability, competition and the risks posed by potential technological
advances, and risks relating to fluctuations in the exchange rate between the
US dollar and the Canadian dollar.

You should not place undue importance on forward-looking information and
should not rely upon this information as of any other date. While Novadaq may
elect to, Novadaq is under no obligation and does not undertake to update this
information at any particular time.

This press release was prepared by management from information available
to November 3, 2006.

Summary financial statements attached:

For complete financial statements please go to www.sedar.com



<<
NOVADAQ TECHNOLOGIES INC.
Incorporated under the laws of Canada

BALANCE SHEETS
(expressed in U.S.$)
Unaudited


As at As at
September 30, December 31,
2006 2005
$ $
-------------------------------------------------------------------------

ASSETS

Current
Cash and cash equivalents 413,581 750,726
Short-term investments 19,562,000 22,023,537
Accounts receivable 226,893 233,977
Investment tax credits receivable 5,214 41,341
Prepaid expenses and other receivables 501,667 553,534
Inventory 257,429 410,064
-------------------------------------------------------------------------
Total current assets 20,966,784 24,013,179
-------------------------------------------------------------------------
Property, plant and equipment, net 1,983,337 464,484
Deferred charges 5,442 11,259
Licenses, net 2,716,795 3,030,711
-------------------------------------------------------------------------
25,672,358 27,519,633
-------------------------------------------------------------------------
-------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY

Current
Accounts payable and accrued liabilities 1,651,507 1,432,455
Current portion of deferred revenue 31,126 37,351
-------------------------------------------------------------------------
Total current liabilities 1,682,633 1,469,806
-------------------------------------------------------------------------
Deferred revenue - 21,789
-------------------------------------------------------------------------
Total liabilities 1,682,633 1,491,595
-------------------------------------------------------------------------

Shareholders' equity
Share capital 51,719,132 46,255,988
Contributed surplus 3,638,508 3,411,851
Deficit (31,367,915) (23,639,801)
-------------------------------------------------------------------------
Total shareholders' equity 23,989,725 26,028,038
-------------------------------------------------------------------------
25,672,358 27,519,633
-------------------------------------------------------------------------
-------------------------------------------------------------------------



NOVADAQ TECHNOLOGIES INC.

STATEMENTS OF LOSS AND DEFICIT
(expressed in U.S.$,)
Unaudited


Three months ended Nine months ended
September 30, September 30,
2006 2005 2006 2005
$ $ $ $
-------------------------------------------------------------------------

Revenue 531,805 222,425 1,559,291 441,900
Cost of sales 261,166 62,798 759,073 140,369
-------------------------------------------------------------------------
Gross profit 270,639 159,627 800,218 301,531
-------------------------------------------------------------------------

Operating expenses
Sales and marketing 1,133,956 336,024 3,088,197 738,644
Research and
development 1,163,750 801,870 3,788,912 2,469,443
General and
administration 851,603 511,727 2,093,712 2,200,873
Depreciation 45,021 5,947 122,631 17,915
Amortization 109,660 109,472 328,916 321,435
Loss (gain) on
foreign exchange (7,935) (263,343) (84,456) (474,697)
-------------------------------------------------------------------------
3,296,055 1,501,696 9,337,912 5,273,613
-------------------------------------------------------------------------
Loss before the
following (3,025,416) (1,342,070) (8,537,694) (4,972,082)
Other income - - 60,896 -
Interest income 284,345 215,249 748,684 339,724
-------------------------------------------------------------------------
Net loss for the
period (2,741,071) (1,126,821) (7,728,114) (4,632,358)

Deficit, beginning
of period (28,626,845) (20,270,880) (23,639,801) (16,765,343)
-------------------------------------------------------------------------
Deficit, end of
period (31,367,916) (21,397,701) (31,367,915) (21,397,701)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Basic and diluted
loss per share (0.14) (0.06) (0.40) (0.28)
-------------------------------------------------------------------------
-------------------------------------------------------------------------



NOVADAQ TECHNOLOGIES INC.

STATEMENTS OF CASH FLOWS
(expressed in U.S.$)
Unaudited


Three months ended Nine months ended
September 30, September 30,
2006 2005 2006 2005
$ $ $ $
-------------------------------------------------------------------------

OPERATING ACTIVITIES
Net loss for
the period (2,741,071) (1,126,821) (7,728,114) (4,632,358)
Add (deduct) items
not involving cash
Depreciation and
amortization 279,613 131,932 736,234 367,239
Stock based
compensation 81,825 34,500 226,657 1,103,440
-------------------------------------------------------------------------
(2,379,633) (960,389) (6,765,223) (3,161,679)
Net change in non-cash
working capital
balances related
to operations 137,152 (654,599) 444,568 852,875
-------------------------------------------------------------------------
Cash (used) in
operating activities (2,242,481) (1,614,988) (6,320,655) (2,308,804)
-------------------------------------------------------------------------

FINANCING ACTIVITIES
Issuance of common
shares 837 2,700 5,463,144 18,250,323
-------------------------------------------------------------------------
Cash provided by
financing activities 837 2,700 5,463,144 18,250,323
-------------------------------------------------------------------------

INVESTING ACTIVITIES
Purchase of property,
plant and equipment (409,087) (171,113) (1,926,171) (273,776)
Purchase of licenses - - (15,000) (125,000)
Investments in
short-term inv.,net 2,992,767 1,807,736 2,461,537 (15,795,519)
-------------------------------------------------------------------------
Cash provided by
(used in) investing 2,583,680 1,636,623 520,366 (16,194,295)
-------------------------------------------------------------------------

Net increase
(decrease) in cash
and cash equivalents
during the period 342,036 24,335 (337,145) (252,776)
Cash and cash equiv.
beginning of period 71,545 157,269 750,726 434,380
-------------------------------------------------------------------------
Cash and cash
equivalents, end
of period 413,581 181,604 413,581 181,604
-------------------------------------------------------------------------
-------------------------------------------------------------------------
>>


For further information: visit our website at www.novadaq.com.

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