Novadaq Corp. Reports First Quarter 2009 Financial Results

TORONTO, ONTARIO--(Marketwire - May 12, 2009) - Novadaq® Technologies Inc. (TSX: NDQ), a leading developer of real-time imaging systems for use in the operating room, today announced its financial results for the first quarter ended March 31, 2009. In this press release, unless otherwise indicated, all dollar amounts are expressed in United States dollars.

Q1- 2009 Highlights

- SPY® continued to gain momentum:

-- SPY kits sales up 64% over Q1-2008 and up 27% from Q4-2008; and

-- SPY capital sales up 51% over Q1-2008 and up 75% from Q4-2008.

- Signed License, Development and Supply Agreements with Intuitive Surgical Inc. (NASDAQ: ISRG), the global leader in the rapidly emerging field of robotic-assisted minimally invasive surgery.

- Positive interim results from the SPY VICTORIA™ Cardiac Surgery Registry were released during the Society of Thoracic Surgery meeting in San Francisco.

- Reduced cost structure, extending the Company’s cash so that it can continue to work toward achieving net profitability through direct sales and technology alliances.

- Completed a $5.15 million private placement of senior unsecured convertible debentures, which further strengthened the balance sheet.

- Initiated human studies of SPY scope at the University of Rochester and submitted FDA 510(k) application for SPY scope.

Events Subsequent to Q1

- Achieved first development milestone outlined in the License Agreement with Intuitive Surgical and received $1.0 million payment;

- Showcased SPY scope at the annual meeting of the Society of Gastrointestinal and Endoscopic Surgeons (SAGES), the largest meeting of endoscopic surgeons in the U.S.; and

- Added one new peer-reviewed journal article authored by plastic reconstructive surgeons from Duke University, which concluded that SPY can positively impact the outcomes of a variety of reconstructive surgeries and potentially reduce the costs of complications.

Three Months Ended March 31, 2009

Revenue increased 9% to $3,014,000 in Q1-2009 from $2,773,000 in Q1-2008. This was driven by year-over-year total revenue increases in Spy capital sales and Spy 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 55% in Q1-2009 compared to 47% in Q1-2008. Novadaq’s Q1-2009 net loss was $2,471,000, or $0.10 per share, compared to $4,839,000, or $0.20 per share, in Q1-2008.

As at March 31, 2009, the Company had cash and cash equivalents of $8,636,000. The Company’s cash used in operating activities was $355,000 in Q1-2009 down from $2,921,000 in Q4-2008. The Company increased their cash and cash equivalents largely due to funds received from our development agreement and from issuance of convertible debentures.

“Our strategy of becoming the SPY imaging company continues to take shape. SPY registry data analysis further validates that SPY imaging improves clinical outcomes and reduces hospital costs. We also made major progress towards entering the minimally invasive surgical market, by creating a technology alliance with Intuitive Surgical for SPY imaging in robotic surgery and by furthering the development of SPY scope for non-robotic procedures,” commented Dr. Arun Menawat, Novadaq’s President and Chief Executive Officer. “Our revenues are up over last year and the revenue mix continues to move towards higher margin products. We have successfully adjusted to the current economic reality by reducing our cash burn and raising the necessary capital to continue focusing on the execution of our business plan.”

Conference Call

Novadaq is pleased to invite all interested parties to participate in a conference call today, Tuesday, May 12, 2009 at 10:00 AM Eastern Time during which these results will be discussed.

Those wishing to access the live conference call by telephone should dial 1-877-407-0778 (within Canada and the United States) or 201-689-8565 (international callers) several minutes prior to the beginning of the call. A telephonic replay of the conference call will be made available until May 19, 2009 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 321848 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 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 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. To expand its portfolio of minimally invasive products, Novadaq is developing SPY scope which combines the typical features of a standard endoscope with the capabilities of SPY Imaging. The ability to visualize tissue perfusion and flow through vessels, ducts and the lymphatic system adds another dimension to the images available to surgeons during endoscopic surgical procedures. 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 CO2 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.

 Novadaq Technologies Inc. INTERIM CONSOLIDATED BALANCE SHEET (Unaudited) (expressed in U.S. dollars) As at As at March 31, December 31, 2009 2008 $ $ ---------------------------- ASSETS Current Cash and cash equivalents 8,636,093 3,991,833 Accounts receivable 3,804,095 3,242,490 Current portion of prepaid expenses and other receivables 1,104,137 1,092,356 Inventory 980,390 1,186,878 ---------------------------- Total current assets 14,524,715 9,513,557 ---------------------------- Long-term investments 150,000 200,000 Long-term receivables 87,500 - Property, plant and equipment, net 2,409,432 2,585,963 Prepaid expenses and other receivables 154,902 203,094 Deferred development costs 405,195 405,195 Intangible assets, net 9,489,526 9,797,772 ---------------------------- 27,221,270 22,705,581 ---------------------------- ---------------------------- LIABILITIES AND SHAREHOLDERS’ EQUITY Current Accounts payable and accrued liabilities 3,226,416 3,311,389 Current portion of deferred revenue 2,712,549 772,805 ---------------------------- Total current liabilities 5,938,965 4,084,194 ---------------------------- Long-term debt 3,166,512 - Deferred revenue 256,658 308,850 ---------------------------- Total liabilities 9,362,135 4,393,044 ---------------------------- Shareholders’ equity Share capital 80,144,379 80,144,379 Contributed surplus 7,322,205 5,304,247 Deficit (69,607,449) (67,136,089) ---------------------------- Total shareholders’ equity 17,859,135 18,312,537 ---------------------------- 27,221,270 22,705,581 ---------------------------- ---------------------------- Novadaq Technologies Inc. INTERIM CONSOLIDATED STATEMENT OF LOSS AND COMPREHENSIVE LOSS AND DEFICIT (Unaudited) (expressed in U.S. dollars) Three-month period ended March 31, March 31, 2009 2008 $ $ ---------------------------- REVENUE Product sales 2,648,780 2,414,585 Service revenue 364,886 358,077 ---------------------------- Total revenue 3,013,666 2,772,662 Cost of sales 1,360,283 1,468,191 ---------------------------- Gross profit 1,653,383 1,304,471 ---------------------------- OPERATING EXPENSES Sales and marketing 1,817,842 2,784,126 Research and development 966,584 1,612,091 General and administration 842,207 1,459,018 Depreciation 95,664 88,815 Amortization 308,246 308,247 Loss on foreign exchange 30,373 49,526 ---------------------------- Total operating expenses 4,060,916 6,301,823 ---------------------------- Loss before the following: (2,407,533) (4,997,352) Interest expense (31,319) - Imputed interest expense (35,496) - Interest income 2,988 158,420 ---------------------------- Net loss and comprehensive loss for the period (2.471,360) (4,838,932) ---------------------------- Deficit, beginning of period (67,136,089) (50,336,656) ---------------------------- Deficit, end of period (69,607,449) (55,175,588) ---------------------------- ---------------------------- Basic and fully diluted loss per share (0.10) (0.20) ---------------------------- ---------------------------- Novadaq Technologies Inc. INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) (expressed in U.S. dollars) Three-month period ended March 31, March 31, 2009 2008 $ $ ---------------------------- OPERATING ACTIVITIES Net loss for the period (2,471,360) (4,838,932) Add items not involving cash Depreciation and amortization 577,934 586,845 Imputed interest expense 35,496 - Stock based compensation 86,565 177,261 ---------------------------- (1,771,365) (4,074,826) Net change in non-cash working capital balances related to operations 1,416,254 2,494,772 ---------------------------- Cash used in operating activities (355,111) (1,580,054) ---------------------------- FINANCING ACTIVITIES Issuance of convertible debentures, net of transaction costs 5,062,409 - Issuance of common shares, net - 25,000 ---------------------------- Cash provided by financing activities 5,062,409 25,000 ---------------------------- INVESTING ACTIVITIES Purchase of plant, property and equipment (93,157) (435,987) Purchase of TMR business - (2,089,284) Redemption of long-term investment 50,000 - Sale of short-term investments, net - 4,182,398 ---------------------------- Cash (used in) provided by investing activities (43,157) 1,657,127 ---------------------------- Foreign exchange gain (loss) on cash held in foreign currency (19,881) (5,940) ---------------------------- Net increase in cash and cash equivalents during the period 4,644,260 96,133 Cash and cash equivalents, beginning of period 3,991,833 7,417,929 ---------------------------- Cash and cash equivalents, end of period 8,636,093 7,514,062 ---------------------------- ----------------------------