Neovasc Inc. Reports Financial Results for the First Quarter of 2010

-- Three-Fold Increase in Revenues Marks Fifth Consecutive Quarter of Top-Line and Bottom-Line Growth --

TSX Venture Exchange: NVC

VANCOUVER, May 17 /CNW/ - Neovasc Inc. (TSXV: NVC), today announced financial results for the three months ended March 31, 2009.

"Neovasc is pleased to announce the results from this most recent quarter which marks the fifth consecutive quarter of revenue growth for the company, with sales growth of almost 300% compared to the same period last year," said Alexei Marko, chief executive officer of Neovasc. "Our biological tissue business is now operating at breakeven, and we expect to continue to see significant year-over-year revenue growth for 2010. We continue to progress on activities related to commercializing Neovasc's Reducer product for treating refractory angina, building on the momentum from our March presentation at the American College of Cardiology annual meeting where long-term follow-up data confirmed that the Reducer was safe and improved angina symptoms in the majority of patients for three years post-implantation."

Christopher Clark, chief financial officer of Neovasc added, "After the end of the period, on April 23, 2010, 97% of the expiring warrants from our April 2010 financing were exercised, for proceeds of $1.4 million, which we have earmarked for the Reducer COSIRA trial. We are delighted with this high level of participation, which we view as a strong vote of confidence from our existing investors."

In addition, Neovasc announced today that it has granted a total of 330,000 options to directors of the company. These options have an exercise price of $0.355. All of the options granted vest immediately.

Financial Results

Results for the three months ended March 31, 2010 and 2009 follow:

Revenues

Revenues increased almost 300% year-over-year to $1,065,841 for the three months ended March 31, 2010 from $355,484 for the same period in 2009. These increases reflect increased revenues from our tissue products and services business.

Sales of products for the three months ended March 31, 2010 were $737,962, compared to $298,630 in the same period in 2009, representing an increase of 147%. These revenues include sales of Peripatch products and contract manufacturing revenues in the first quarter of 2010, and Peripatch, contract manufacturing and catheter products in prior periods. The Company ceased manufacture of its Metricath product at the end of 2009.

Revenue from consulting services for the three months ended March 31, 2010 were $327,879, compared to $56,854 in the same period in 2009, representing an increase of 477%. The Company is continuing to expand its consulting services business where possible.

Cost of Sales

The cost of sales for the three months ended March 31, 2010 was $582,945, as compared to $149,760 in the comparable period in 2009. The overall gross margin for the first quarter of 2010 declined to 45%, compared to the 58% gross margin reported in 2009.

The decline in gross margin for the first quarter of 2010 was due to the impact of exchange rates, sales volume discounts to customers and a shift in product mix to certain lower margin products. In the three months ended March 31, 2010, 96% of the company's sales were derived from customers in the United States and Europe and were denominated in U.S. and European Union currency. During the first quarter of 2010, the U.S. dollar and European Union euro depreciated 3% and 9% respectively, negatively impacting recorded sales figures.

Expenses

Total expenses for the three months ended March 31, 2010 were $885,209, as compared to $1,930,494 for the same periods in 2009, representing a decrease of $1,045,285. The decrease in expenses from the first quarter of 2009 to the first quarter of 2010 reflects the elimination of operating expenses incurred at our Israeli facility of $367,000, a decrease in selling expenses of $258,000, and a reduction in general and administrative expenses of $264,000.

Sales and marketing expenses declined 85% to $44,891 for the three months ended March 31, 2010, from $302,885 for the same period in 2009. The Company terminated its direct sales force for its catheter products in the fourth quarter of 2008 and will continue to minimize sales and marketing costs while it focuses on continuing to grow its business-to-business revenue streams.

General and administrative expenses were $487,203 for the three months ended March 31, 2010 as compared to $750,829 for the same period of 2009, representing a decrease of 35%. These decreases reflect the Company's tighter business focus and the implementation of rigorous cost-cutting measures.

Product development and clinical trial expenses were $353,115 for the three months ended March 31, 2010 as compared to $876,780 for the same period of 2009, representing a decrease of 60% over the same period in 2009. The decrease in product development and clinical trial expenses of $367,000 primarily reflected expense reductions at our Israel operation. In the first quarter of 2010, product development expenditures were focused on activities supporting initiation of our Reducer COSIRA trial.

Amortization and Other Expenses

Amortization and other expenses for the three months ended March 31, 2010 were $68,816 as compared to amortization and other expenses of $21,470 for the same period in 2009. In the first quarter of 2010 the Company experienced a foreign exchange loss of $39,129 compared to an $8,518 gain in the same period of 2009.

Net Losses

The consolidated net loss for the three months ended March 31, 2010 was $471,129 or $0.02 basic loss per share, as compared with a net loss of $1,746,240 or $0.10 basic loss per share for the comparable period in 2009.

LIQUIDITY AND CAPITAL RESOURCES

The Company finances its operations and capital expenditures with cash generated from operations, lines of credit, long-term debt and equity financings. At March 31, 2010, the Company had cash and cash equivalents of $758,823, as compared to cash and cash equivalents of $111,368 at December 31, 2009. In addition, at March 31, 2010 the Company had restricted cash related to a security on long-term debt of $50,000 (December 31, 2009 - $50,000) included in long-term assets.

At March 31, 2009 the Company had working capital of $1,122,217 as compared to a negative working capital of $28,502 at December 31, 2009. The increase in working capital during the first quarter of 2010 was predominantly due to the net impact of an increase in cash from completion of a non-brokered private placement during the first quarter of 2010; an increase in accounts receivable, reflecting relatively high sales revenues recorded at the end of the quarter in March; an increase in inventory, as levels of tissue raw material were increased in anticipation of upcoming sales; and a decrease in accounts payable as the Company continues to pay down its prior debts.

Cash used in operations was $826,476 for the three months ended March 31, 2010, as compared to $1,514,482 for the same period in 2009. The decrease in cash usage for the three months ended March 31, 2010 as compared to same period of 2009 is primarily the result of the Company's increased sales and decreased operating expenses in the first quarter of 2010.

Net cash used in investing activities was $30,855 on capital assets for the three months ended March 31, 2010 compared to net cash used of $7,971 in 2009. The Company made minimum purchases of equipment in the first quarters of 2010 and 2009.

Net cash provided by financing activities was $1,504,786 for the three months ended March 31, 2010, compared to cash used of $3,476 in the same period of 2009. On February 19, 2010, the Company completed a non-brokered private placement of 5,691,658 units at the price of $0.27 per unit for aggregate gross proceeds of $1,536,748. Each unit consists of one common share of Neovasc stock and one-half of one common share purchase warrant of Neovasc stock. Each whole warrant will entitle the holder thereof to purchase one common share of Neovasc stock at the exercise price of $0.40 per share for a period of one year after the closing date of the offering. Share issue costs were $22,015.

    
    Neovasc Inc.
    Interim Consolidated Balance Sheets

    -------------------------------------------------------------------------
                                                     March 31,   December 31,
                                                         2010           2009
    -------------------------------------------------------------------------
    ASSETS

    CURRENT
      Cash and cash equivalents                  $    758,823   $    111,368
      Accounts receivable                             614,910        442,540
      Inventory                                       516,196        404,309
      Prepaid expenses and other assets                40,611         15,771
    -------------------------------------------------------------------------
                                                    1,930,540        973,988
    RESTRICTED CASH AND CASH EQUIVALENTS               50,000         50,000
    PROPERTY AND EQUIPMENT                          1,252,718      1,249,326
    -------------------------------------------------------------------------
                                                 $  3,233,258   $  2,273,314
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES

    CURRENT
      Accounts payable and accrued liabilities   $    768,014   $    962,512
      Current portion of long-term debt                40,309         39,978
    -------------------------------------------------------------------------
                                                      808,323      1,002,490
    LONG-TERM DEBT                                    346,819        357,097
    -------------------------------------------------------------------------
                                                    1,155,412      1,359,587
    -------------------------------------------------------------------------

    SHAREHOLDERS' EQUITY

    Share capital                                  62,163,358     60,648,625
    Contributed surplus                             4,752,134      4,631,349
    Deficit                                       (64,837,376)   (64,366,247)
    -------------------------------------------------------------------------
                                                    2,078,116        913,727
    -------------------------------------------------------------------------
                                                 $  3,233,258   $  2,273,314
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Neovasc Inc.
    Interim Consolidated Statements of Operations, Comprehensive Loss and
    Deficit
    For the three months ended March 31

    -------------------------------------------------------------------------
                                                         2010           2009
    -------------------------------------------------------------------------
    SALES
      Product sales                              $    737,962   $    298,630
      Consulting services                             327,879         56,854
    -------------------------------------------------------------------------
                                                    1,065,841        355,484

    COST OF SALES                                     582,945        149,760
    -------------------------------------------------------------------------
    GROSS PROFIT                                      482,896        205,724
    -------------------------------------------------------------------------

    EXPENSES
      Selling                                          44,891        302,885
      General and administration                      487,203        750,829
      Product development and clinical trials         353,115        876,780
      Amortization                                     27,463         32,356
    -------------------------------------------------------------------------
                                                      912,672      1,962,850
    -------------------------------------------------------------------------
    LOSS BEFORE OTHER INCOME (EXPENSES)              (429,776)    (1,757,126)
    -------------------------------------------------------------------------
    OTHER INCOME (EXPENSES)
      Interest income                                     114          9,621
      Interest on long-term debt                       (2,338)        (7,253)
      (Loss)/Gain on foreign exchange                 (39,129)         8,518
    -------------------------------------------------------------------------
                                                      (41,353)        10,866
    -------------------------------------------------------------------------
    NET LOSS AND COMPREHENSIVE LOSS FOR THE PERIOD   (471,129)    (1,746,240)
    DEFICIT, BEGINNING OF THE PERIOD              (64,366,247)   (59,889,963)
    -------------------------------------------------------------------------
    DEFICIT, END OF THE PERIOD                   $(64,837,376)  $(61,636,203)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    BASIC AND DILUTED LOSS PER SHARE             $      (0.02)  $      (0.10)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
      WEIGHTED AVERAGE NUMBER OF COMMON SHARES
       OUTSTANDING                                 29,982,559     17,756,951
      WEIGHTED AVERAGE NUMBER OF FULLY DILUTED
       SHARES OUTSTANDING                          31,666,130     18,132,559
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Neovasc Inc.
    Interim Consolidated Statements of Cash Flows
    For the three months ended March 31

    -------------------------------------------------------------------------
                                                         2010           2009
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES
      Net loss for the period                    $   (471,129)  $ (1,746,240)
      Items not affecting cash
        Amortization                                   27,463         32,356
        Stock-based compensation                      120,785         86,052
    -------------------------------------------------------------------------
                                                     (322,881)    (1,627,832)
      Change in non-cash operating assets and
       liabilities
        Accounts receivable                          (172,370)       134,506
        Inventory                                    (111,887)      (148,612)
        Prepaid expenses and other assets             (24,840)        (6,279)
        Accounts payable and accrued liabilities     (194,498)       133,735
    -------------------------------------------------------------------------
                                                     (826,476)    (1,514,482)
    -------------------------------------------------------------------------
    INVESTING ACTIVITY
      Purchase of property and equipment              (30,855)        (7,971)
    -------------------------------------------------------------------------
                                                      (30,855)        (7,971)
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES
      Repayment of long-term debt                      (9,947)        (5,031)
      Proceeds from share issue, net of costs
       of $22,015                                   1,514,733              -
      Proceeds from exercise of stock options               -          1,555
    -------------------------------------------------------------------------
                                                    1,504,786         (3,476)
    -------------------------------------------------------------------------
    (DECREASE)/INCREASE IN CASH                       647,455     (1,525,929)
    CASH AND CASH EQUIVALENTS,
      BEGINNING OF THE PERIOD                         111,368      2,498,439
    -------------------------------------------------------------------------
      END OF THE PERIOD                          $    758,823   $    972,510
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    REPRESENTED BY:
      Cash                                            758,823        (33,120)
      Cashable guaranteed investment certificates           -      1,005,630
    -------------------------------------------------------------------------
                                                 $    758,823   $    972,510
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    SUPPLEMENTAL CASH FLOW INFORMATION
      Interest paid                              $      2,338   $      7,253
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

About Neovasc Inc.

Neovasc Inc. is a new specialty vascular device company that develops, manufactures and markets medical devices for the rapidly growing vascular and surgical marketplace. The company's current products include the Neovasc Reducer(TM), a novel product in development to treat refractory angina, as well as a line of advanced biological tissue technologies that are used to enhance surgical outcomes and as key components in a variety of third-party medical products. For more information, visit: www.neovasc.com.

Statements contained herein that are not based on historical or current fact, including without limitation statements containing the words "anticipates," "believes," "may," "continues," "estimates," "expects," and "will" and words of similar import, constitute "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, events or developments to be materially different from any future results, events or developments expressed or implied by such forward-looking statements. Such factors include, among others, the following: general economic and business conditions, both nationally and in the regions in which the Company operates; history of losses and lack of and uncertainty of revenues, ability to obtain required financing, receipt of regulatory approval of product candidates, ability to properly integrate newly acquired businesses, technology changes; competition; changes in business strategy or development plans; the ability to attract and retain qualified personnel; existing governmental regulations and changes in, or the failure to comply with, governmental regulations; liability and other claims asserted against the Company; and other factors referenced in the Company's filings with Canadian securities regulators. Although the Company believes that expectations conveyed by the forward-looking statements are reasonable based on the information available to it on the date such statements were made, no assurances can be given as to the future results, approvals or achievements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The Company does not assume the obligation to update any forward-looking statements except as otherwise required by applicable law.



For further information: For further information: Corporate contact: Neovasc Inc., Chris Clark, (604) 248-4138; U.S. media & investor contact: GendeLLindheim BioCom Partners, Barbara Lindheim, (212) 918-4650


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