Novadaq reports fiscal 2007 year-end and fourth quarter results

    TORONTO, March 25 /CNW/ - Novadaq(R) Technologies Inc. (TSX: NDQ), a
developer of real-time medical imaging systems and image guided therapies for
the operating room, today announced financial results for the fourth quarter
and year ended December 31, 2007. In this press release, unless otherwise
indicated, all dollar amounts are expressed in US dollars.
    "A year ago I stated that our vision of becoming the imaging company of
the operating room began to take shape in 2006. In 2007 it gained momentum,"
said Dr. Arun Menawat, President and Chief Executive Officer of Novadaq
Technologies Inc. "Though we met with obstacles this past year in the form of
an ICG shortage, SPY sales bounced back and the business is regaining
momentum. We received clearance for two new indications for SPY; obtained the
rights to PLC's CO(2) HEART LASER in the United States, opening a sales
channel with its current installed base; completed an upsized financing in
tough markets; and created two new products - PINPOINT and SPYscope through
the acquisition of certain assets from Xillix. 2007 was a transformative year
and we continue to further our mission, to become the imaging company of the
operating room."

    2007 Operating Highlights

    -   SPY(R) received 510(k) clearance for use during plastic
        reconstruction and micro surgery.
    -   Acquired exclusive US distribution rights to PLC Medical System
        Inc.'s HEART LASER(TM) System for image guided laser
        revascularization. Included rights to an installed base of 150 Laser
    -   US Centers for Medicare & Medicaid Services (CMS) establishes
        reimbursement code for SPY imaging procedures.
    -   Completed upsized round of financing: $30 Million (CDN) private
        placement of common shares.
    -   Acquired intellectual property and certain capital assets and
        inventory from Xillix(TM) Technologies Corp. resulting in two new
        minimally invasive imaging systems: PINPOINT(TM) and SPYscope.
    -   Launched the PINPOINT endoscopic imaging system, the company's first
        minimally invasive autofluorescence imaging system at the Annual
        Meeting of American College of Chest Physicians (ACCP), CHEST 2007.
        Autofluorescence was recommended by the College of Chest Physicians
        in the 2007 Evidence Based Guidelines for detection and treatment
        guidance in the management of lung cancer.

    Events Subsequent to Year End

    -   SPY received 510(k) clearance for use during organ transplant.

    Financial Results

    Year Ended December 31, 2007 Compared to Year Ended December 31, 2006

    Total revenue increased by approximately $8,111,000 from approximately
$2,175,000 in 2006 to approximately $10,286,000 in 2007. Approximately
$7,490,000 of this increase related to sale of TMR products pursuant to
distribution rights acquired from Edwards Lifesciences LLC in March 2007.
Approximately $413,000 of the increase related to increased SPY revenue
representing a 19% increase from 2006. Growth in SPY revenue was negatively
impacted by an interruption in the supply of ICG which began to affect SPY
sales as early as March 2007 and which was not fully resolved until September
2007. Approximately $194,000 of the increase related to the sale of the first
PINPOINT systems in December 2007.
    Gross profit as a percentage of sales decreased from 53% in 2006 to
46% in 2007. The primary reason for the decrease was that a number of used
CO(2) lasers acquired from Edwards were sold at relatively low margins. In
addition, SPY systems were relatively inactive during part of 2007 as a result
of the ICG interruption resulting in low or negative margins after
depreciation expense.
    Sales and marketing expenses increased by approximately $5,155,000 to
approximately $9,741,000 in 2007 from $4,586,000 in 2006. The increase relates
primarily to a decision to build a direct sales team to support the SPY
business as well as the acquired TMR distribution business. Sales and
marketing expenses as a percentage of revenue decreased from 211% in 2006 to
just under 95% in 2007.
    Research and development expenses increased by approximately $482,000 to
$5,585,000 in 2007 from $5,103,000 in 2006. The overall increase relates
primarily to costs assumed in connection with the acquisition of intellectual
property and know-how of Xillix. In connection with the acquisition the
Company established a research and development facility staffed by former
employees of Xillix. The primary focus of the research and development team
since acquisition has been on the development of an endoscopic application of
the SPY technology.
    General and administration expenses increased by approximately
$1,854,000 to $4,812,000 in 2007 from $2,958,000 in 2006. The increase
resulted primarily from an increase in professional fees of approximately
$645,000 related to costs incurred in Japan to protect issued patents; an
increase in employee costs of approximately $529,000 incurred to support the
TMR business acquired, the research and development facility staffed by former
employees of Xillix, a write-off of $265,000 of corporate transaction costs
incurred, and an increase in insurance expense of approximately $119,000
related to liability coverage for the acquired TMR business.
    Depreciation expense increased by $117,000 to $288,000 in 2007 from
$171,000 in 2006. The increase related primarily to the purchase of computer
hardware and software and other infrastructure to support the Company's
growth. Amortization expense increased by $537,000 to $976,000 in 2007 from
$439,000 in 2006 as are result of the acquisition of intangible assets in
connection with the purchase of TMR distribution rights, and Xillix patent
    Net loss increased by approximately $4,625,000 as a result of the changes
described above.
    As at December 31, 2007 the Company had cash, cash equivalents and
short-term investments of approximately $18,861,000, an increase of
approximately $2,032,000 from December 31, 2006. The increase in cash is the
result of net proceeds of a private placement of $25,972,000 offset by cash
used in operating activities of $15,614,000, investments in TMR business
assets of $5,819,000 (including repayment of a $3,000,000 note payable)
investments in intangible assets of $1,296,000, and investments in property
plant and equipment of $1,201,000.
    As at March 21, 2008 there were a total of 24,533,982 common shares
(26,162,395 on a fully diluted basis) and no preferred shares outstanding. As
at March 21, 2008 a total of 1,628,413 stock options were outstanding under
the Company's employee stock option plan.

    Quarter Ended December 31, 2007 Compared to Quarter Ended
    September 30, 2007

    Total revenue increased to approximately $2,959,000 in Q4-2007 from
$2,149,000 in Q3-2007 representing an increase of 37%. Recurring revenue,
which includes consumable kit and rental revenue, increased to approximately
$1,405,000 in Q4-2007 from approximately $1,235,000 in Q3-2007 representing an
increase of a 14%. The meaningful recurring revenue growth rate indicates that
disruptions to the TMR business related to the acquisition, and to the SPY
business related to the ICG supply interruption have now been addressed.
    Capital sale revenue increased to $1,266,000 in Q4-2007 from
$617,000 Q3-2007.
    Service revenue primarily relates to extended service contracts where
revenue is recognized over the term of the contract. Service revenue decreased
in Q4 2007 by approximately 3% from Q3-2007.
    Gross profit increased to approximately $1,301,000 in Q4-2007 from
approximately $929,000 in Q3-2007 as a result of increased recurring revenue
and capital sales. The gross profit percentage achieved in Q4-2007 was similar
to Q3-2007.
    Sales and marketing expenses increased to approximately $2,542,000 in
Q4-2007 from approximately $2,093,000 in Q3-2007. Sales and marketing expenses
were quite volatile in 2007 as the company hired a direct sales team early in
early Q1-2007, added the capital sales team from Edwards in connection with
the TMR acquisition in late Q1-2007, rationalized the sales team by
eliminating overlaps in geographic coverage in late Q2- 2007 and finally,
supplemented the team in Q4-2007 to address weakness identified in Q4-2007.
While there were a number of hires which occurred in Q1-2008 to complete this
process, future adjustments to the sales team are expected to be much less
drastic than experienced in 2007.
    Research and development expenses increased to approximately
$1,533,000 in Q4-2007 from approximately $1,452,000 in Q3-2007. The largest
increase in cost related to a software development project commenced in
Q4-2007 related to flow and perfusion quantification applications to be
implemented in the SPY system in the second half of 2008.
    General and administration expenses increased to approximately
$1,509,000 in Q4-2007 from $1,371,000 in Q3-2007. Expenses recorded in Q4-2007
include a write-off of approximately $265,000 of corporate transaction costs
which had been incurred throughout 2007. The costs were written off on the
basis that the Company ceased to be engaged on a regular and ongoing basis
with completion of the corporate transactions and it is not likely that
activities will resume within the next three months. General and
administration expenses not including the write-down of corporate transaction
costs were approximately $127,000 lower in Q4-2007 than in Q3-2007.
    Depreciation and amortization expenses in Q4-2007 were consistent with
    The Company had interest expense in Q3-2007 of approximately
$74,000 relating to a $3,000,000 note payable issued on March 20, 2007 in
connection with the acquisition of TMR distribution rights. The note was
repaid on September 25, 2007 and there was no interest incurred in Q4-2007.
    Interest income decreased to approximately $253,000 in Q4-2007 from
approximately $339,000 in Q3-2007 resulting primarily from lower investment
balances in Q4-2007. The lower investment balance relates partly to the
repayment of the Edwards Note and the reduction in interest income was partly
offset by the reduction in interest expense.
    Net loss increased to approximately $4,432,000 in Q4-2007 from
approximately $4,083,000 in Q3-2007 primarily as a result of an increase in
sales and marketing costs of approximately $449,000, an increase in general
and administrative expenses of approximately $138,000, an increase in research
and development costs of $81,000 which were partly offset by an increase in
gross profit of $372,000.

    Conference call

    Novadaq will host a conference call on Tuesday, March 25, 2008 at
4:30 p.m. EST. to discuss the financial results for the fourth quarter and
full year ended December 31, 2007. To access the conference call by telephone,
dial 416-644-3417 or 1-800-732-6179. Please connect approximately ten minutes
prior to the beginning of the call to ensure participation. The conference
call will be archived for replay until April 1, 2008 at midnight. To access
the archived conference call, dial 416-640-1917 or 1-877-289-8525 and enter
the reservation number 21266249 followed by the number sign.
    A live audio webcast of the conference call will be available at 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
365 days.

    About Novadaq Technologies

    Novadaq Technologies Inc. (TSX: NDQ) develops and commercializes medical
imaging systems and real-time image guided therapies for use in the operating
room. Novadaq's proprietary ICG imaging systems can be used to visualize blood
vessels, nerves and the lymphatic system during a variety of surgical
procedures. Novadaq's SPY Imaging System, commercially available worldwide,
enables cardiac surgeons to visually assess coronary vasculature and bypass
graft functionality during the course of heart bypass surgery. The SPY System
is expandable to include upgrade kits for use during other surgeries such as
other cardiovascular, plastic, reconstructive and organ transplant surgery
allowing surgeons to evaluate blood flow and tissue and organ perfusion. In
addition, SPY is ideal for use during urological procedures enabling surgeons
to visualize vessels, tumors, the lymphatic system and potentially nerve
bundles. Novadaq's OPTTX(R) 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 Imaging System. Novadaq also offers
the FDA approved PINPOINTTM endoscopic system for visualizing native tissue
fluorescence which allows surgeons to differentiate between healthy and
cancerous tissue in the lung during thoracic surgery. Novadaq is also the
exclusive United States distributor of PLC Medical's CO(2) HEART LASER System
for TMR (Trans-Myocardial Revascularization). For more information, please
visit the company's website at

    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 and the SPY 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.

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

    As at December 31                                     2007          2006
                                                             $             $
    Cash and cash equivalents                        7,417,929     2,311,973
    Short-term investments                          11,443,506    14,517,288
    Accounts receivable                              4,743,993       440,046
    Current portion of prepaid expenses and other
     receivables                                     1,185,708       375,949
    Inventory                                        2,031,932       185,792
    Total current assets                            26,823,068    17,831,048
    Property, plant and equipment, net               2,785,342     1,933,896
    Long-term investments                              426,000             -
    Deferred charges                                         -         9,713
    Deferred development costs                         331,183       231,356
    Prepaid expenses                                   323,761             -
    Intangible assets, net                          11,030,760     2,607,135
                                                    41,720,114    22,613,148

    Accounts payable and accrued liabilities         6,289,724     1,753,959
    Current portion of deferred revenue                995,099        61,786
    Total current liabilities                        7,284,823     1,815,745
    Deferred revenue                                   446,118             -
    Total liabilities                                7,730,941     1,815,745

    Shareholders' equity
    Share capital                                   80,109,644    51,721,632
    Contributed surplus                              4,285,187     3,751,492
    Accumulated comprehensive loss                     (69,000)
    Deficit                                        (50,336,658)  (34,675,721)
    Total shareholders' equity                      33,989,173    20,797,403
                                                    41,720,114    22,613,148

                            (expressed in U.S. $)

    Years ended December 31                               2007          2006
                                                             $             $
    Product sales                                    9,351,663     2,175,023
    Service revenue                                    934,724             -
    Total revenues                                  10,286,387     2,175,023
    Cost of sale                                     5,604,817     1,018,520
    Gross profit                                     4,681,570     1,156,503

    Operating expenses
    Sales and marketing                              9,741,483     4,586,511
    Research and development                         5,585,368     5,103,157
    General and administration                       4,811,772     2,958,173
    Depreciation                                       288,597       171,342
    Amortization                                       975,544       438,576
    Gain on foreign exchange                          (277,121)      (22,399)
                                                    21,125,643    13,235,360
    Loss before the following                      (16,444,073)  (12,078,857)
    Interest expense                                  (161,188)            -
    Other income                                             -        60,896
    Write-down of investment                           (55,000)
    Interest income                                    999,324       982,041
    Net loss for the year                          (15,660,937)  (11,035,920)

    Deficit, beginning of year                     (34,675,721)  (23,639,801)
    Deficit, end of year                           (50,336,658)  (34,675,721)

    Basic and fully diluted loss per share               (0.70)        (0.57)

                            (expressed in U.S. $)

    Years ended December 31                               2007          2006
                                                             $             $
    Net Loss                                       (15,660,937)  (11,035,920)
    Unrealized loss on investment                      (69,000)
    Comprehensive loss                             (15,729,937)  (11,035,920)

                            (expressed in U.S. $)

    Years ended December 31                               2007          2006
                                                             $             $
    Net loss for the year                          (15,660,937)  (11,035,920)
    Add (deduct) items not involving cash
      Depreciation and amortization                  2,096,585     1,034,269
      Foreign exchange gain on cash held in
       foreign currency                                (24,759)         (326)
      ARS impairment loss                               55,000
      Stock-based compensation                         533,695       339,641
                                                   (13,000,416)   (9,662,336)
    Net change in deferred revenue and
     deferred charges                                  105,149         4,192
    Net change in non-cash working capital balances
     related to operations                          (2,719,277)      574,751
    Cash used in operating activities              (15,614,544)   (9,083,393)

    Repayment of note payable                       (3,000,000)            -
    Issuance of common shares                       26,588,274     5,465,644
    Cash provided by financing activities           23,588,274     5,465,644

    Deferred development costs                         (99,828)     (231,356)
    Purchase of property, plant and equipment       (1,201,822)   (2,081,223)
    Purchase of intangible assets                   (1,296,054)      (15,000)
    Purchase of TMR business                        (2,818,612)            -
    Disposal (purchase) of short-term
     investments, net                                3,073,783     7,506,249
    Disposal (purchase) of long-term
     investments, net                                 (550,000)
    Cash provided by (used in) investing activities (2,892,533)    5,178,670

    Foreign exchange gain on cash held in foreign
     currency                                           24,759           326

    Net increase in cash and cash equivalents
     during the year                                 5,105,956     1,561,247
    Cash and cash equivalents, beginning of year     2,311,973       750,726
    Cash and cash equivalents, end of year           7,417,929     2,311,973

    %SEDAR: 00022069E

For further information:

For further information: visit our website at, or
contact: Arun Menawat, PhD, MBA, President & CEO, Novadaq Technologies Inc.,
(905) 629-3822 x 202,; Michael Moore, Investor Relations,
The Equicom Group, (416) 815-0700 x 241,

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