Novadaq Reports Third Quarter 2013 Financial Results

TORONTO, ONTARIO--(Marketwired - Oct 22, 2013) - Novadaq® Technologies Inc. (NVDQ)(NDQ.TO) ("Novadaq" or the "Company"), a developer of clinically-relevant imaging solutions for use in surgical and outpatient wound care procedures, today announced financial results for its third quarter ended September 30, 2013. Unless otherwise indicated, all dollar amounts in this press release are expressed in United States (U.S.) dollars.

Novadaq reported total third quarter 2013 revenues of $8.9 million, representing an increase of 49% as compared to third quarter of 2012. Revenue growth was driven primarily by continued adoption of SPY® technology procedures and higher capital system sales. Third quarter of 2013 recurring revenues for Novadaq's SPY businesses increased by 23% year-over-year to $3.5 million, and sales of SPY technology capital equipment, including PINPOINT®, LUNA™ SPY Elite®, and Firefly™, increased to $4.5 million representing an increase of 119% compared with the year ago quarter.

Third quarter gross profit of $5.7 million (65% margin), represents an increase of 49% compared with $3.9 million (65% margin) in Q3-2012.

Third quarter of 2013 operating contribution (cash contributed by operating activities before changes in working capital) was $0.6 million compared with an operating contribution of $0.1 million in the third quarter of 2012. This difference was driven mainly by higher revenues and gross profit, offset by increased selling and distribution expenses associated with the build-out of the PINPOINT and LUNA sales and marketing infrastructure. During the third quarter, working capital contributed $1.2 million, and $3.7 million was invested in fixed assets, including $1.2 million to build SPY systems, and $2.5 million to acquire assets and intellectual property related to the surgical scintigraphy imaging technology, the surgical marker, nerve and lymph node localization, and erythrocyte labelling.

Net loss of $6.9 million for the third quarter of 2013 decreased by $2.4 million compared with the $9.3 million net loss in third quarter 2012. Third quarter of 2013 loss per share was $0.14. Excluding the impact of non-cash $5.9 million warrants revaluation expense in third quarter 2013, loss per share was $0.02, compared with $0.03 in third quarter 2012.

Cash and cash equivalents were $86.9 million at September 30, 2013, reflecting a decrease of $1.6 million, compared to the cash position as of June 30, 2013.

During the third quarter of 2013, Novadaq shipped 160 SPY technology systems. One hundred and thirty nine systems were shipped to hospitals, and the installed base grew to approximately 1,100 systems. Novadaq estimates that SPY imaging was used in 16% of breast reconstruction surgeries in the United States exiting the quarter.

"The most notable achievement for Novadaq in the third quarter was the sale of 31 PINPOINT, LUNA and SPY Elite systems," commented Dr. Arun Menawat, Novadaq's President and CEO. "We remain focussed on building our direct sales team further and continuing clinical studies to drive adoption of our PINPOINT and LUNA systems."

Conference Call

Novadaq is pleased to invite all interested parties to participate in a conference call today, Tuesday, October 22, 2013, at 8:30 a.m. Eastern Time during which the results will be discussed.

Those wishing to access the live conference call by telephone should dial 1-877-407-8031 (within Canada and the United States) or 1-201-689-8031 (international callers) several minutes prior to the beginning of the call. A telephonic replay of the conference call will be made available until midnight on November 22, 2013 and can be accessed by dialing 1-877-660-6853 (within Canada and the United States) or 1-201-612-7415 (international callers) and entering the conference identification number 100629 when prompted.

The call will be archived for 90 days on the Company's website at http://www.novadaq.com/investors/events. 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:

Enabling medical professionals with clinically-relevant, point-of-care imaging solutions to enhance the lives of patients and their caregivers, while reducing health care costs, is Novadaq's global mission. SPY® fluorescence imaging technology provides surgeons with real-time visualization, leading to improved outcomes and reduced costs without exposing the patient to radiation. More than 80 peer-reviewed publications demonstrate that the use of SPY imaging during complex surgery, leads to fewer post-operative complications and lower hospital costs.

SPY Imaging Systems are United States Food and Drug Administration 510(k) cleared for use in seven surgical specialties. The endoscopic version of SPY called PINPOINT®, combines the capabilities of SPY Imaging with high definition ("HD") visible light visualization offered by conventional endoscopes. LUNA™ is used to assess perfusion in patients being treated for non-healing wounds. In August 2013, Novadaq acquired the surgical scintigraphy imaging technology, which is being developed for perioperative imaging of sentinel lymph nodes and tumor margins. Our unique business model of partnering with market-leading companies to drive adoption of our imaging technology, while building our own commercial infrastructure, is the cornerstone of our corporate strategy for growth.

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, the Company's strategy, strategic goals, research and development activities, research and clinical testing outcomes, taxes, capital expenditures, future operations, future financial position, future revenues/results, projected costs, prospects and plans and objectives of management.

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 available at www.sec.gov and www.sedar.com, 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 STATEMENTS OF FINANCIAL POSITION

(Unaudited)
(expressed in U.S. dollars, except common shares outstanding)

As at
September 30,
2013
As at
December 31,
2012
ASSETS
Current assets
Cash and cash equivalents $86,913,608 $38,954,181
Accounts receivable 5,869,959 4,056,954
Prepaid expenses and other assets 1,141,727 852,674
Inventories 3,680,591 1,713,577
Non-current assets
Property and equipment, net 12,535,370 10,717,661
Deferred tax assets - 170,442
Intangible assets, net 3,352,539 1,121,808
Total Assets $113,493,794 $57,587,297
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $4,609,020 $3,407,329
Provisions 246,720 85,260
Deferred revenue 867,673 637,864
Deferred partnership fee revenue 1,300,000 1,300,000
Repayable government assistance 66,976 203,148
Convertible debentures - 4,656,746
Non-current liabilities
Deferred tax liabilities - 170,442
Deferred revenue 161,432 144,204
Deferred partnership fee revenue 2,316,666 3,291,666
Repayable government assistance - 17,946
Shareholder warrants 26,510,990 13,002,930
Total Liabilities $36,079,477 $26,917,535
Shareholders' equity
Share capital $207,323,007 $139,946,563
Contributed surplus 8,317,847 7,908,224
Equity component of convertible debentures - 1,454,353
Deficit (138,226,537) (118,639,378)
Total Shareholders' equity $77,414,317 $30,669,762
Total Liabilities and Shareholders' Equity $113,493,794 $57,587,297
Common shares outstanding 48,616,605 40,226,243

Novadaq Technologies Inc.

INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

(Unaudited)
(expressed in U.S. dollars)

For the three months ended For the nine months ended
September 30,
2013
September 30,
2012
September 30,
2013
September 30,
2012
Product sales $8,000,161 $5,101,480 $21,376,114 $13,266,856
Royalty revenue 364,500 349,812 1,272,944 1,304,145
Partnership fee revenue 325,000 325,000 975,000 975,000
Service revenue 206,133 208,207 648,128 597,378
Total revenues 8,895,794 5,984,499 24,272,186 16,143,379
Cost of sales 3,153,741 2,123,048 8,929,135 6,256,292
Gross profit 5,742,053 3,861,451 15,343,051 9,887,087
Selling and distribution costs 3,336,720 1,289,035 9,197,424 3,569,361
Research and development expenses 2,159,453 1,777,474 5,692,477 4,317,536
Administrative expenses 1,264,217 1,863,593 4,367,689 4,971,898
Write-down of equipment 25,488 - 25,488 -
Write-down of inventory - 57,540 31,285 57,540
Total operating expenses 6,785,878 4,987,642 19,314,363 12,916,335
Loss from operations (1,043,825) (1,126,191) (3,971,312) (3,029,248)
Finance costs (3,218) (178,673) (179,707) (527,095)
Finance income 34,123 25,407 66,827 40,829
Warrants revaluation adjustment (5,881,543) (8,038,030) (15,460,467) (11,947,389)
Gain on investment - 25,000 25,000 25,000
Loss from operations before income taxes (6,894,463) (9,292,487) (19,519,659) (15,437,903)
Income tax expense (22,500) - (67,500) -
Net loss and comprehensive loss for the period ($6,916,963) ($9,292,487) ($19,587,159) ($15,437,903)
Basic and diluted loss and comprehensive loss per share for the period ($0.14) ($0.23) ($0.43) ($0.41)

Novadaq Technologies Inc.

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)
(expressed in U.S. dollars)

For the three months ended For the nine months ended
September 30,
2013
September 30,
2012
September 30,
2013
September 30,
2012
OPERATING ACTIVITIES
Loss and comprehensive loss for the period ($6,916,963) ($9,292,487) ($19,587,159) ($15,437,903)
Items not affecting cash
Depreciation of property and equipment 866,890 588,023 2,396,719 1,502,201
Amortization of intangible assets 76,188 284,190 246,683 866,435
Stock-based compensation 641,102 305,753 1,857,797 921,377
Imputed interest on convertible debentures - 109,617 169,056 320,957
Warrants revaluation adjustment 5,881,543 8,038,030 15,460,467 11,947,389
Gain on investment - (25,000) (25,000) (25,000)
Write-down of equipment 25,488 - 25,488 -
Write-down of inventory - 57,540 31,285 57,540
574,248 65,666 575,336 152,996
Changes in working capital
Decrease (increase) in accounts receivable 923,674 35,813 (1,813,005) (877,796)
Increase in inventories (346,139) (670,885) (1,998,299) (1,256,355)
Decrease (increase) in prepaid expenses and other 270,880 265,506 (118,611) 51,491
(Decrease) increase in accounts payable and accrued liabilities (136,457) 929,700 1,205,189 1,898,837
Increase (decrease) in deferred revenue 445,499 (18,382) 223,716 1,253
Net change in non-cash working capital balances related to operations 1,157,457 541,752 (2,501,010) (182,570)
Decrease in long-term deferred revenue (346,339) (314,477) (957,772) (1,008,700)
Cash provided by (used in) operating activities 1,385,366 292,941 (2,883,446) (1,038,274)
INVESTING ACTIVITIES
Purchase of property and equipment (1,327,969) (761,809) (4,466,186) (4,429,008)
Purchase of intangibles (2,477,414) - (2,477,414) -
Disposals of property and equipment 70,848 1,395 226,270 89,855
Redemption of long-term investment - 25,000 25,000 25,000
Cash used in investing activities (3,734,535) (735,414) (6,692,330) (4,314,153)
FINANCING ACTIVITIES
Proceeds from issuance of common shares - - 57,856,500 40,336,250
Transaction costs paid relating to issuance of common shares - - (3,181,570) (3,389,352)
Repayment of government assistance (46,453) (39,985) (154,118) (137,342)
Proceeds from exercise of options 786,759 3,457 2,398,876 77,283
Proceeds from exercise of warrants - - 621,912 -
Cash provided (used in) by financing activities 740,306 (36,528) 57,541,600 36,886,839
Net increase (decrease) in cash and cash equivalents (1,608,863) (479,001) 47,965,824 31,534,412
Impact of foreign exchange on cash and cash equivalents 1,891 10,355 (6,397) 10,004
Cash and cash equivalents at beginning of period 88,520,580 41,646,670 38,954,181 9,633,608
Cash and cash equivalents at end of period $86,913,608 $41,178,024 $86,913,608 $41,178,024