Novadaq Corp. Reports Financial Results For Third Quarter Of 2005

TORONTO, Nov. 10 /PRNewswire-FirstCall/ - Novadaq(R) Technologies Inc. today announced its financial results for the third quarter and nine months ended September 30, 2005.

"Our initiatives in the third quarter were largely focused on strengthening our position in the U.S. for the SPY(R) Intra-operative Imaging System. The establishment of our U.S. subsidiary, the training of our Sorin sales distribution partners, the hiring of our U.S. based clinical educators and the appointment of two co-Chief Medical Advisors will help us to accelerate SPY System placements and will ensure continued growth for Novadaq in the world's largest medical technology market," said Arun Menawat, President and CEO of Novadaq Technologies Inc. "Also in this quarter, we further advanced our OPTTX(TM) program by initiating our clinical trial at Toronto Western Hospital.

Key Developments - Ramped up placements of the SPY System through Sorin in key cardiac centers in the United States. - Hired U.S. based clinical educators to support sales to the cardiac surgery market. - Appointed two co-Chief Medical Advisors who will assist the Novadaq marketing team and clinical educators in the development and implementation of physician, hospital and payer targeted initiatives that will support efforts to establish the SPY System as a standard of care in cardiac surgery. - Advanced implementation of educational and marketing programs to support growth in sales and ensure continuous feedback from clinicians providing Novadaq with the credibility and critical mass to ramp up placements and meet commercialization goals. - Established a U.S. subsidiary to extend infrastructure and ensure support for sales growth in the world's largest medical technology market. Novadaq Corp. will be lead by General Manager, Rick Mangat, co-founder of Novadaq, co-inventor of the SPY System. - Executed on clinical advancement for the OPTTX System to treat wet AMD at Toronto Western Hospital, a leading center for the treatment of vascular diseases of the eye. Financial Results

Revenue in 2005 Q3 was $222,425, representing an increase of $204,641 over revenue in 2004 Q3 of $17,784. $117,000 of this increase related to the capital sale of a SPY imaging device outside the U.S. in September 2005. No SPY imaging devices were sold in 2004 Q3. Approximately $88,000 of the increase is attributable to increased procedural revenue, consumable supply sales, and other non-capital sale revenue. The SPY System received regulatory clearance in the United States in January 2005 and the first device was installed in the United States in March 2005. As at September 30, 2005 there were a total of 10 SPY imaging devices installed in the United States.

Cost of sales increased by $66,786 to $78,405 in 2005 Q3 as compared to $11,620 in 2004 Q3. Gross profit for the period increased to $144,020 in 2005 Q3 from $6,164 in 2004 Q3. As a percentage of sales, gross profit increased to 65% in 2005 Q3 from 35% in 2004 Q3. The increase in gross profit percentage is attributable primarily to the capital sale of a SPY imaging device in 2005 Q3. The gross profit percentage earned on capital sales is higher than the percentage earned on procedural revenue as the procedural gross profit is net of sales commissions, and the cost of consumable supplies.

Sales and marketing expenses increased to $320,417 in 2005 Q3 from $36,068 in 2004 Q3. The increase in sales and marketing expenses was a result of the commercial launch of the SPY System in the United States in 2005, and included an increase in employee and related office and travel costs (approximately $227,000), as well as marketing materials and advertising (approximately $58,000).

Research and development expenses increased by $532,719 to $801,870 in 2005 Q3 from $269,151 in 2004 Q3. This increase is related to several factors, including design and manufacturing costs for next generation OPTTX devices for use in clinical trials (increase of approximately $114,000), which are currently in the testing phase. The overall increase also reflects employee and related office and travel costs for additional engineering staff to support design efforts, clinical staff to plan and execute OPTTX trials (increase of approximately $289,000), increases in patent costs (approximately $65,000) and regulatory consulting fees (approximately $37,000).

General and administration expenses increased by $230,019 to $511,727 in 2005 Q3 from $281,708 in 2004 Q3. This increase is related to increases in employee, office and travel costs (approximately $98,000), increases in D&O insurance (approximately $75,000) and increases in professional fees (approximately $52,000).

Depreciation expense decreased by $9,586 from 2004 Q3 to 2005 Q3 as certain SPY imaging devices that were being used in research and development in 2004, were converted to revenue producing assets during 2005. Amortization of these devices was included in depreciation expense in 2004 Q3 and cost of sales in 2005 Q3. Amortization increased by $5,944 from 2004 Q3 to 2005 Q3 as a result of license payments made in June 2005 which are capitalized and amortized.

Interest income increased by $199,070 from 2004 Q3 to 2005 Q3 as a result of the increase in cash and short term investment balances following completion of the Company's initial public offering on June 10, 2005.

Net loss increased by $454,713 to $1,126,822 in 2005 Q3 from $672,109 in 2004 Q3. The increase in net loss was primarily related to increases in sales and marketing expenses (approximately $284,000), research and development expenses (approximately $532,000) and increased general and administrative expenses (approximately $230,000). This was partially offset by increased gross profit (approximately 138,000), increased foreign exchange gains (approximately $252,000) and increased interest income (approximately $199,000).

As at September 30, 2005 the Company had cash, cash equivalents and short-term investments of $24,941,017, an increase of $15,542,743 over December 31, 2004. The increase in these balances was primarily the result of the initial public offering completed on June 10, 2005 for net proceeds of $17,850,019 offset by cash used in operations during 2005 YTD.

The number of common shares outstanding as of September 30, 2005 was 17,991,361.

Conference call

Novadaq will host a conference call on Thursday, November 10, 2005 at 4:30 p.m. ET to discuss its third quarter 2005 results. To access the conference call by telephone, dial 1-800-814-4890 or 416-644-3427. 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 17, 2005 at midnight. To access the archived conference call, dial 416-640-1917 or 1-877-289-8525 enter the reservation number 21160122 followed by the number sign.

A live audio webcast of the conference call will be available at Again, 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 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 enables surgeons to visually assess coronary vasculature and bypass graft functionality during the course of cardiac 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. The OPTTX System is currently being evaluated in clinical trials.

For more information, please visit the company's website at

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, 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.

Summary financial statements attached: For complete financial statements please go to NOVADAQ TECHNOLOGIES INC. Incorporated under the laws of Canada BALANCE SHEETS (expressed in US$) Unaudited As at As at September 30, December 31, 2005 2004 $ $ ------------------------------------------------------------------------- ASSETS Current Cash and cash equivalents 181,604 434,380 Short-term investments 24,759,413 8,963,894 Accounts receivable 210,267 1,082,659 Investment tax credits receivable 41,352 54,468 Prepaid expenses and other receivables 530,458 58,644 Inventory 54,896 65,529 ------------------------------------------------------------------------- Total current assets 25,777,990 10,659,574 ------------------------------------------------------------------------- Property, plant and equipment, net 274,514 41,542 Deferred charges 13,198 19,015 Licenses, net 3,140,183 3,336,618 ------------------------------------------------------------------------- 29,205,885 14,056,749 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Accounts payable and accrued liabilities 934,438 478,692 Current portion of deferred revenue 37,351 37,286 ------------------------------------------------------------------------- Total current liabilities 971,789 515,978 ------------------------------------------------------------------------- Deferred revenue 31,126 59,206 ------------------------------------------------------------------------- Total liabilities 1,002,915 575,184 ------------------------------------------------------------------------- Shareholders' equity Share capital 46,216,340 27,966,017 Contributed surplus 3,384,331 2,280,891 Deficit (21,397,701) (16,765,343) ------------------------------------------------------------------------- Total shareholders' equity 28,202,970 13,481,565 ------------------------------------------------------------------------- 29,205,885 14,056,749 ------------------------------------------------------------------------- ------------------------------------------------------------------------- NOVADAQ TECHNOLOGIES INC. STATEMENTS OF LOSS AND DEFICIT (expressed in US$) Unaudited Three months ended Nine months ended September 30, September 30, 2005 2004 2005 2004 $ $ $ $ ------------------------------------------------------------------------- Revenue 222,425 17,784 441,900 54,447 Cost of sales 78,405 11,620 155,976 34,778 ------------------------------------------------------------------------- Gross profit 144,020 6,164 285,924 19,669 ------------------------------------------------------------------------- Operating expenses Sales and marketing 320,417 36,068 723,037 117,611 Research and development 801,870 269,151 2,469,443 842,634 General and administration 511,727 281,708 2,200,873 1,119,340 Depreciation 5,947 15,534 17,915 45,408 Amortization 109,472 103,528 321,435 303,561 Loss (gain) on foreign exchange (263,343) (11,537) (474,697) (8,192) ------------------------------------------------------------------------- 1,486,090 694,452 5,258,006 2,420,362 ------------------------------------------------------------------------- Loss before the following (1,342,070) (688,288) (4,972,082) (2,400,693) Interest income 215,249 16,179 339,724 19,271 ------------------------------------------------------------------------- Net loss for the year (1,126,821) (672,109) (4,632,358) (2,381,422) Deficit, beginning of period (20,270,880) (15,701,792) (16,765,343) (15,701,792) ------------------------------------------------------------------------- Deficit, end of period (21,397,701) (16,373,901) (21,397,701) (18,083,214) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic and diluted loss per share (0.06) (0.05) (0.28) (0.18) ------------------------------------------------------------------------- ------------------------------------------------------------------------- NOVADAQ TECHNOLOGIES INC. STATEMENTS OF CASH FLOWS (expressed in US$) Unaudited Three months ended Nine months ended September 30, September 30, 2005 2004 2005 2004 $ $ $ $ ------------------------------------------------------------------------- OPERATING ACTIVITIES Net loss for the period (1,126,821) (865,550) (4,632,358) (2,574,863) Add (deduct) items not involving cash Depreciation and amortization 131,932 119,062 367,239 359,245 Stock based compensation 34,500 228,000 1,103,440 568,000 ------------------------------------------------------------------------- (960,389) (518,488) (3,161,679) (1,647,618) Net change in non-cash working Capital balances related to operations (654,599) (150,740) 852,875 (48,116) ------------------------------------------------------------------------- Cash (used) in operating activities (1,614,988) (669,228) (2,308,804) (1,695,734) ------------------------------------------------------------------------- FINANCING ACTIVITIES Issuance common shares, net 2,700 8,604,358 18,250,323 8,604,358 ------------------------------------------------------------------------- Cash provided by financing activities 2,700 8,604,358 18,250,323 8,604,358 ------------------------------------------------------------------------- INVESTING ACTIVITIES Purchase of property, plant and equipment (171,113) (7,274) (273,776) (38,342) Purchase of licenses - (175,000) (125,000) (175,000) Investments in short-term inv.,net 1,807,736 739,032 (15,795,519) 1,738,657 ------------------------------------------------------------------------- Cash provided by (used in) investing 1,636,623 556,758 (16,194,295) 1,525,315 ------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents during the period 24,335 8,491,888 (252,776) 8,433,939 Cash and cash equiv. beginning of period 157,269 89,841 434,380 147,790 ------------------------------------------------------------------------- Cash and cash equivalents, end of period 181,604 8,581,729 181,604 8,581,729 ------------------------------------------------------------------------- -------------------------------------------------------------------------

Novadaq Technologies Inc.

CONTACT: Arun Menawat, PhD, MBA, President & CEO, Novadaq TechnologiesInc., Phone: (905) 629-3822 x 202,; InvestorRelations: Michael Moore, The Equicom Group, Phone: (416) 815-0700 x 240,

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