Novadaq Corp. Reports Fiscal 2008 Full-Year and Fourth Quarter Financial Results

TORONTO, ONTARIO--(Marketwire - March 16, 2009) - 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 fiscal year and fourth quarter ended December 31, 2008. In this press release, unless otherwise indicated, all dollar amounts are expressed in United States dollars.

2008 Highlights

- SPY® continued to gain momentum:

- SPY kits sales up 76% over 2007;

- SPY capital sales up 61% over 2007; and

- 50 new SPY units placed in 2008.

- Added 5 peer reviewed publications or society presentations to the total of more than 30 now featuring SPY. A presentation featuring SPY given during the 2008 American Urological Association conference was designated as the best poster in its scientific session.

- Commenced introduction of SPY-Q image analysis software which enables surgeons to objectively analyze SPY images in the operating room and assists in improving critical operative decision making.

- Leveraged the cleared indications for the use of SPY in reconstructive surgeries to include esophageal, colorectal and organ transplant.

- Completed development of SPY scope in Q4, on track for FDA submission and introduction at SAGES in April and subsequent commercial launch in H1-2009.

Events Subsequent to Year-End

- License, Development and Supply Agreements signed with Intuitive Surgical Inc., the global leader in the rapidly emerging field of robotic-assisted minimally invasive surgery.

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

- Cost structure was further reduced, extending the Company’s cash runway so that it can continue to work toward achieving net profitability through its direct sales and technology alliances.

- Balance sheet strengthened through the completion of a $5.15 million private placement of senior unsecured convertible debentures.

Three Months Ended December 31, 2008

Revenue decreased 4% to $2,830,000 in Q4-2008 from $2,959,000 in Q4-2007. This was driven by a year-over-year 56% reduction in capital sales which was substantially offset by a 35% increase in recurring revenue and a 31% increase in service revenue. Q4-2008 capital sales were negatively impacted by the effect of a worsening credit market on customers. The increase in recurring revenue relates primarily to an increase in SPY consumable sales to a growing installed base.

The Company incurred restructuring costs of approximately $223,000 associated with personnel-related termination costs in the fourth quarter of 2008. Including these termination charges, Novadaq’s Q4-2008 net loss was $3,523,000 or $0.14 per share, compared to $4,433,000, or $0.18 per share in Q4-2007.

Cash used in operating activities in Q4-2008 was $2,921,000 including a use $278,000 in net changes in non-cash working capital balances related to operations. This represents a 27% decrease in cash used in operating activities from Q4-2007 and a 15% decrease from Q3-2008.

Twelve Months Ended December 31, 2008

Revenue increased 20% to $12,372,000 in 2008 from $10,286,000 in 2007. Gross profit as a percentage of sales increased to 50% in 2008 from 46% in 2007. The primary reasons for the increase were an increase in the portion of revenue derived from high margin SPY capital sales and an increase in SPY utilization and consumable sales. Novadaq’s 2008 net loss was $16,799,000, or $0.68 per share, compared to $15,661,000, or $0.70 per share, in 2007. Cash used in operating activities for the twelve months ending December 31, 2008 was $12,010,647 compared to $15,614 544 for the year ended December 31, 2007.

As at December 31, 2008, Novadaq had cash, cash equivalents and short-term investments of $3,992,000. The Company noted that this amount does not include any of the $2 million upfront license payment made to it by Intuitive Surgical pursuant to their License and Development Agreement announced on January 12, 2009, or any of the net proceeds from its previously announced $5.15 million private placement of senior unsecured convertible debentures which closed on February 18, 2009.

“2008 truly started to define Novadaq now and for the future as “the SPY imaging company” -- SPY for open surgical procedures and SPY scope for minimally invasive surgical procedures,” commented Dr. Arun Menawat, Novadaq’s President and Chief Executive Officer. “SPY revenue growth and new SPY placements have provided us with a very solid foundation upon which to further grow in 2009, and we are in the fortunate position of having sufficient capital to continue to execute on our business plan. As we work toward achieving net profitability through our direct sales and technology alliances, our focus will remain on the four A’s of all successful new medical technology rollouts -- Awareness, Acceptance, Adoption and Acceleration.”

Conference Call

Novadaq is pleased to invite all interested parties to participate in a conference call today, March 16, 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 March 30, 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 316222 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 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. CONSOLIDATED BALANCE SHEET (expressed in U.S. dollars) As at December 31 2008 2007 $ $ --------------------------- ASSETS Current Cash and cash equivalents 3,991,833 7,417,929 Short-term investments - 11,443,506 Accounts receivable 3,242,490 4,743,993 Current portion of prepaid expenses and other receivables 1,092,356 1,185,708 Inventory 1,186,878 2,031,932 --------------------------- Total current assets 9,513,557 26,823,068 --------------------------- Long-term investments 200,000 426,000 Property, plant and equipment, net 2,585,963 2,785,342 Prepaid expenses and other receivables 203,094 323,761 Deferred development costs 405,195 331,183 Intangible assets, net 9,797,772 11,030,760 --------------------------- 22,705,581 41,720,114 --------------------------- --------------------------- LIABILITIES AND SHAREHOLDERS’ EQUITY Current Accounts payable and accrued liabilities 3,311,389 6,289,724 Current portion of deferred revenue 772,805 995,099 --------------------------- Total current liabilities 4,084,194 7,284,823 --------------------------- Deferred revenue 308,850 446,118 --------------------------- Total liabilities 4,393,044 7,730,941 --------------------------- Shareholders’ equity Share capital 80,144,379 80,109,644 Contributed surplus 5,304,247 4,285,187 Accumulated other comprehensive loss - (69,000) Deficit (67,136,089) (50,336,658) --------------------------- Total shareholders’ equity 18,312,537 33,989,173 --------------------------- 22,705,581 41,720,114 --------------------------- --------------------------- Novadaq Technologies Inc. CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT (expressed in U.S. dollars) Year ended December 31 2008 2007 $ $ ------------------------------ REVENUE Product sales 10,707,679 9,351,663 Service revenue 1,663,906 934,724 ------------------------------ Total revenue 12,371,585 10,286,387 Cost of sales 6,162,663 5,604,817 ------------------------------ Gross profit 6,208,922 4,681,570 ------------------------------ OPERATING EXPENSES Sales and marketing 10,329,269 9,741,483 Research and development 5,642,563 5,585,368 General and administration 5,662,912 4,811,772 Depreciation 361,057 288,597 Amortization 1,232,988 975,544 Loss (gain) on foreign exchange 61,366 (277,121) ------------------------------ Total operating expenses 23,290,155 21,125,643 ------------------------------ Loss before the following (17,081,233) (16,444,073) Interest expense - (161,188) Gain (write down) on investments 5,000 (55,000) Interest income 276,802 999,324 ------------------------------ Net loss for the year (16,799,431) (15,660,937) Deficit, beginning of period (50,336,658) (34,675,721) ------------------------------ Deficit, end of period (67,136,089) (50,336,658) ------------------------------ ------------------------------ Basic and fully diluted loss per share ($0.68) ($0.70) ------------------------------ ------------------------------ Novadaq Technologies Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (expressed in U.S. dollars) Year ended December 31 2008 2007 $ $ -------------------------- Net loss for the period (16,799,431) (15,660,937) Unrealized gain (loss) on long-term investment - (69,000) Realized gain on redemption of long-term investment 44,000 - Reclassification to net income 25,000 - -------------------------- Comprehensive loss (16,730,431) (15,729,937) -------------------------- -------------------------- Novadaq Technologies Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (expressed in U.S. dollars) Year ended December 31 2008 2007 $ $ ------------------------- OPERATING ACTIVITIES Net loss for the period (16,799,431) (15,660,937) Add (deduct) items not involving cash Depreciation and amortization 2,400,185 2,096,585 (Gain) loss on redemption of long-term investment (5,000) 55,000 Stock-based compensation 1,019,060 533,695 ------------------------- (13,385,186) (12,975,657) Net change in deferred revenue and deferred charges (217,911) 105,149 Net change in non-cash working capital balances related to operations 1,592,450 (2,744,036) ------------------------- Cash used in operating activities (12,010,647) (15,614,544) ------------------------- FINANCING ACTIVITIES Repayment of note payable - (3,000,000) Issuance of common shares, net 34,735 26,588,274 ------------------------- Cash provided by financing activities 34,735 23,588,274 ------------------------- INVESTING ACTIVITIES Deferred development costs (74,012) (99,828) Purchase of property, plant and equipment (967,818) (1,201,822) Purchase of intangible assets - (1,296,054) Redemption of long-term investments 300,000 - Purchase of TMR business (2,089,284) (2,818,612) Disposal (purchase) of long-term investments, net - (550,000) Disposal (purchase) of short-term investments, net 11,443,506 3,073,783 ------------------------- Cash provided by (used in) investing activities 8,612,392 (2,892,533) ------------------------- Foreign exchange gain (loss) on cash held in foreign currency (62,576) 24,759 ------------------------- Net increase (decrease) in cash and cash equivalents (3,426,096) 5,105,956 Cash and cash equivalents, beginning of year 7,417,929 2,311,973 ------------------------- Cash and cash equivalents, end of year 3,991,833 7,417,929 ------------------------- -------------------------