ART Advanced Research Technologies Inc. (ART) (TSX: ARA), a
Canadian medical device company and a leader in optical molecular
imaging products for the healthcare and pharmaceutical industries,
announces its financial results for the third quarter ended
September 30, 2008. ART reported revenues of $1,354,365 for the
three-month period ended September 30, 2008, compared to $267,741
for the same quarter in 2007. For the nine-month period ended
September 30, 2008, revenues were $3,809,146, compared to $703,907
for the same period in 2007. For the 2008 third quarter, the
operating loss decreased by $364,326, or 17%, to $1,725,482, from
$2,089,808 for the same period a year ago. For the nine-month
period ended September 30, 2008, the operating loss was $4,150,766,
compared to $7,566,216, for the nine-month period ended September
30, 2007. ART incurred a net loss for the three-month period ended
September 30, 2008, of $1,545,940 or $0.02 per share, compared to
$2,200,777 or $0.04 per share for the same quarter in 2007. For the
nine-month period ended September 30, 2008, the net loss was
$3,926,616 or $0.04 per share, compared to $6,939,854 or $0.12 per
share, for the nine-month period ended September 30, 2007. All
dollar amounts referenced herein are in U.S. dollars, unless
otherwise stated.
2008 Third Quarter Highlights
- ART recognized revenue of $1.3 million from Optix� unit sales,
and has a backlog representing approximately $600,000 in additional
Optix unit sales.
- ART closed a private placement of approximately $6.0 million
in preferred shares.
- ART continued to manage expenses carefully, resulting in a
lower burn-rate compared to last year.
Post Quarter Events
- Final scans using the SoftScan� device were completed for the
treatment monitoring pilot study at the Sunnybrook Health Sciences
Centre in Toronto and, deeming these results as significant, the
team at Sunnybrook will be submitting them for publication in a
peer-reviewed journal.
Revenues
For the three-month period ended September 30, 2008, revenues
were $1,354,365, compared to $267,741 for the same period ended
September 30, 2007. Sales resulting from products amounted to
$1,221,436 in the quarter ended September 30, 2008, compared to
$267,741 for the same quarter of last year. Revenues resulting from
sales of products for the nine-month period ended September 30,
2008 amounted to $2,464,825, compared to $703,907 for the same
period of last year. The increase in product sales in 2008 when
compared to 2007 is explained by the Company's transition to a
direct distribution model. By selling directly to its customers,
the Company now generates a higher revenue per system since it does
not have to provide discounts to an exclusive distributor. During
the quarter ended September 30, 2008, product sales resulted from
the sale of four Optix� systems and Fenestra� products whereas for
the same quarter in 2007, product sales included Fenestra products
and add-ons for Optix systems only. The Company sold one service
contract, and recognized a total of $132,929 in services and other
revenues during the third quarter ended September 30, 2008. During
the same period ended September 30, 2007, there were no sales
resulting from services. During the nine-month period ended
September 30, 2008, ART sold the first SoftScan unit, five Optix
units, and add-ons for Optix systems that resulted in the
conversion of two single-wavelength Optix systems to the MX2
version. Also, the Company recognized revenues totaling $1,075,517
from services rendered on behalf of GE, as ART is completing the
transition out of the Optix distribution agreement with GE. During
the nine-month period ended September 30, 2007, there were no sales
of add-ons for Optix systems that resulted in the conversion of
single-wavelength Optix systems to the MX2 version and there were
no sales resulting from services.
Gross Margin
During the three-month and nine-month periods ended September
30, 2008, ART generated a gross margin of 45% and 62% respectively
from the sales of its products, compared to 66% and 55% for the
same periods in the previous year. The gross margin generated on
the sales of services and other revenues was 92% and 95%
respectively for the three-month and nine-month periods ended
September 30, 2008. No gross margin on sales of services is
recorded for 2007, as there were no sales of service contracts
during the same period in 2007. The decrease of the gross margin
ratio for the three-month period ended September 30, 2008, compared
to the same quarter of the previous year, is primarily due to a
different sales product mix. For the three-month period ended
September 30, 2008, the lower gross margin ratio is explained by
the fact that ART accounted for the cost of four systems during the
current period, as compared to last year when the Company mainly
sold add-ons, for which a higher gross margin ratio is typically
recognized. The increase in the gross margin ratio during the
nine-month period ended September 30, 2008, compared to the same
period in 2007 resulted from services and other revenues as well as
the sale of the SoftScan unit in the first quarter of 2008, where
the gross margin on this unit represented almost 100% of the sale,
given that this unit had been sold as a prototype and therefore
expensed as incurred in previous years.
Operating Expenses
The Company's research and development ("R&D") expenditures
for the three-month period ended September 30, 2008, net of
investment tax credits, amounted to $637,713, compared to
$1,093,057 for the same period ended September 30, 2007. For the
nine-month period ended September 30, 2008, R&D expenditures,
net of investment tax credits, were $2,110,642, compared to
$3,990,556 for the nine-month period ended September 30, 2007. The
R&D expenditures during the three-month and the nine-month
periods ended September 30, 2008, decreased by 42% and 47%
respectively, compared to the same periods in 2007. The decrease
was related to the medical sector given that the SoftScan program
reached important approval milestones in the first quarter of 2007
by obtaining the CE marking for Europe. As well, in the preclinical
sector, a decrease in R&D expenses was due to the completion of
the project leading to the new Optix MX2 system. The costs
associated with the achievement of these milestones, therefore, did
not have to be incurred again in 2008. As a part of its R&D
activities, ART continued to support the Optix product as R&D
teams collaborated with clients for the development of applications
using the new MX2 version of the system.
Selling, general, and administrative ("SG&A") expenses for
the three-month period ended September 30, 2008, totaled
$1,523,315, compared to $1,088,071 for the same period ended
September 30, 2007. For the nine-month period ended September 30,
2008, SG&A expenses were $4,275,379, compared to $3,706,266 for
the nine-month period ended September 30, 2007. The SG&A
expenses increased by $435,244 during the three-month period ended
September 30, 2008 and by $569,113 in the nine-month period ended
September 30, 2008, compared to the same periods of 2007. The
increase of the SG&A expenses during the three-month and the
nine-month periods was mainly due to the hiring of the new direct
sales force, which was effective in the first quarter of 2008, and
the direct marketing expenses incurred to support the
commercialization of the Optix, SoftScan and Fenestra products.
Net Loss
As a result of the foregoing factors, the net loss for the
three-month period ended September 30, 2008, was $1,545,940 or
$0.02 per share, compared to $2,200,777 or $0.04 per share for the
quarter ended September 30, 2007. For the nine-month period ended
September 30, 2008, the net loss was $3,926,616 or $0.04 per share,
compared to $6,939,854 or $0.12 per share, for the nine-month
period ended September 30, 2007.
Financial Position
As at September 30, 2008, ART has $5,018,947 in cash and cash
equivalents, and a working capital of $6,527,294.
The financial statements, accompanying notes to the financial
statements, and Management's Discussion and Analysis for the
three-month period ended September 30, 2008, will be available
online at www.sedar.com, or at www.art.ca, in the "Investors"
section. Summary financial tables are provided below. A detailed
list of the risks and uncertainties affecting the Company can be
found in the Management's Discussion and Analysis for the year
ended December 31, 2007, and in the Company's most recent Annual
Information Form, available on SEDAR at www.sedar.com.
Conference Call
ART will host a conference call today at 5:00 PM (EDT). The
telephone number to access the conference call is (514) 861-1531
when dialing within the Montreal area, or (877) 667-7766 for the
rest of North America. Outside of North America, please dial (514)
861-1531. A replay of the call will be available until November 25,
2008. To listen to the replay from the Montreal area, please dial
(514) 861-2272, or, (800) 408-3053 for the rest of North America.
From outside of North America, please dial (514) 861-2272. The
access code for the replay is 3273598#.
About ART
ART Advanced Research Technologies Inc. is a leader in molecular
imaging products for the healthcare and pharmaceutical industries.
ART has developed products in medical imaging, medical diagnostics,
disease research, and drug discovery with the goal of bringing new
and better treatments to patients faster. The Optix� optical
molecular imaging system, designed for monitoring physiological
changes in living systems at the preclinical study phases of new
drugs, is used by industry and academic leaders worldwide. The
SoftScan� optical medical imaging device is designed to improve the
diagnosis and treatment of breast cancer. Finally, the Fenestra�
line of molecular imaging contrast products provides image
enhancement for a wide range of preclinical Micro CT applications
allowing scientists to see greater detail in their imaging studies,
with potential extension into other major imaging modalities. ART
is commercializing some of these products in a global strategic
alliance with GE Healthcare, a world leader in mammography and
imaging. ART's shares are listed on the TSX under the ticker symbol
ARA. For more information on ART, visit our website at
www.art.ca.
This press release may contain forward-looking statements
subject to risks and uncertainties that would cause actual events
to differ materially from expectations. These risks and
uncertainties are described in the most recent Annual Information
Form and the financial statements for the year ended December 31,
2007, available on SEDAR (www.sedar.com).
Financial Statements (in U.S. dollars)
ART Advanced Research Technologies Inc.
Balance sheets
(In U.S. dollars)
September 30, December 31,
2008 2007
(unaudited)
-------------------------------------------------------------------------
ASSETS
Current assets
Cash $1,631,977 $561,325
Term deposits, 2.75% maturing in October
2008 (2007 - 4.05% maturing in January
2008) 3,386,970 3,026,329
Accounts receivable 2,303,600 1,768,146
Investment tax credits receivable 755,430 1,558,709
Inventories 1,350,241 1,510,499
Prepaid expenses 815,471 260,199
-------------------------------------------------------------------------
10,243,689 8,685,207
Property and equipment 505,525 551,210
Patents 1,774,108 2,135,855
Deferred development costs 2,304,556 1,268,438
-------------------------------------------------------------------------
$14,827,878 $12,640,710
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES
Current liabilities
Bank loan 566,091 605,266
Accounts payable and accrued liabilities 2,851,705 2,652,219
Deferred revenues 110,579 156,167
Deferred grant 147,962 152,305
Current portion of obligations under
capital leases 40,058 -
-------------------------------------------------------------------------
3,716,395 3,565,957
Obligations under capital leases 55,823 -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
3,772,218 3,565,957
-------------------------------------------------------------------------
-------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Share capital and share purchase warrants 39,142,553 32,217,942
Contributed surplus 4,823,965 4,537,336
Deficit (35,518,077) (31,007,264)
Accumulated other comprehensive income 2,607,219 3,326,739
-------------------------------------------------------------------------
11,055,660 9,074,753
-------------------------------------------------------------------------
$14,827,878 $12,640,710
-------------------------------------------------------------------------
-------------------------------------------------------------------------
ART Advanced Research Technologies Inc.
Shareholders's Equity
As at September 30, 2008
(In U.S. dollars)
Common Shares Preferred Shares
-------------------------------------------------------------------------
Number Amount Number Amount
-------------------------------------------------------------------------
Balance as at January 1,
2007 52,248,981 $14,561,504 8,341,982 $7,907,043
Net loss
Translation adjustment
-------------------------------------------------------------------------
Comprehensive loss
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Issue of shares for
business acquisition 162,369 95,262
Issue of shares for
cash 42,129,242 8,373,257
Issue of share purchase
warrants
Share and share purchase
warrant issue expenses
Stock-based compensation
Expired warrants
-------------------------------------------------------------------------
Balance as at December
31, 2007 94,540,592 $23,030,023 8,341,982 $7,907,043
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited)
Balance as at
January 1, 2008 94,540,592 $23,030,023 8,341,982 $7,907,043
Net loss
Translation adjustment
-------------------------------------------------------------------------
Comprehensive income
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Issue of shares for
cash 53,101,296 7,100,000
Share issue expenses
Stock-based compensation
Expired warrants
-------------------------------------------------------------------------
Balance as at September
30, 2008 94,540,592 $23,030,023 61,443,278 $15,007,043
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Share Capital
and Share
Purchase
Warrants Warrants
-------------------------------------------------------------------------
Number Amount Total
-------------------------------------------------------------------------
Balance as at January 1, 2007 3,958,523 $1,562,623 $24,031,170
Net loss
Translation adjustment
-------------------------------------------------------------------------
Comprehensive loss
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Issue of shares for business
acquisition 95,262
Issue of shares for cash 8,373,257
Issue of share purchase warrants 2,175,841 497,288 497,288
Share and share purchase warrant
issue expenses
Stock-based compensation
Expired warrants (1,278,573) (779,035) (779,035)
-------------------------------------------------------------------------
Balance as at December 31, 2007 4,855,791 $1,280,876 $32,217,942
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited)
Balance as at January 1, 2008 4,855,791 $1,280,876 $32,217,942
Net loss
Translation adjustment
-------------------------------------------------------------------------
Comprehensive income
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Issue of shares for cash 7,100,000
Share issue expenses
Stock-based compensation
Expired warrants (594,907) (175,389) (175,389)
-------------------------------------------------------------------------
Balance as at September 30, 2008 4,260,884 $1,105,487 $39,142,553
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Accumulated
Other
Contributed Comprehensive
Surplus Deficit Income Total
-------------------------------------------------------------------------
Balance as at
January 1, 2007 $3,586,059 $(21,247,643) $1,841,127 $8,210,713
Net loss (8,623,447) (8,623,447)
Translation
adjustment 1,485,612 1,485,612
-------------------------------------------------------------------------
Comprehensive loss (8,623,447) 1,485,612 (7,137,835)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Issue of shares for
business acquisition 95,262
Issue of shares for
cash 8,373,257
Issue of share
purchase warrants 497,288
Share and share
purchase warrant
issue expenses (1,136,174) (1,136,174)
Stock-based
compensation 172,242 172,242
Expired warrants 779,035 -
-------------------------------------------------------------------------
Balance as at
December 31, 2007 $4,537,336 $(31,007,264) $3,326,739 $9,074,753
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(unaudited)
Balance as at
January 1, 2008 $4,537,336 $(31,007,264) $3,326,739 $9,074,753
Net loss (3,926,616) (3,926,616)
Translation adjustment (719,520) (719,520)
-------------------------------------------------------------------------
Comprehensive income (3,926,616) (719,520) (4,646,136)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Issue of shares for
cash 7,100,000
Share issue expenses (584,197) (584,197)
Stock-based
compensation 111,240 111,240
Expired warrants 175,389 -
-------------------------------------------------------------------------
Balance as at
September 30, 2008 $4,823,965 $(35,518,077) $2,607,219 $11,055,660
-------------------------------------------------------------------------
-------------------------------------------------------------------------
ART Advanced Research Technologies Inc.
Operations
(In U.S. dollars)
(Unaudited)
Three-month Periods ended Nine-month Periods ended
September 30 September 30
-------------------------------------------------------------------------
2008 2007 2008 2007
-------------------------------------------------------------------------
Sales
Products $1,221,436 $267,741 $2,464,825 $703,907
Services and other
revenues 132,929 - 1,344,321 -
-------------------------------------------------------------------------
1,354,365 267,741 3,809,146 703,907
-------------------------------------------------------------------------
Cost of sales
Products 672,385 91,120 924,580 313,312
Services and other
revenues 11,051 - 68,151 -
-------------------------------------------------------------------------
683,436 91,120 992,731 313,312
-------------------------------------------------------------------------
Gross margin 670,929 176,621 2,816,415 390,595
-------------------------------------------------------------------------
Operating expenses
Research and
development, net of
investment tax
credits 637,713 1,093,057 2,110,642 3,990,556
Selling, general
and administrative 1,523,315 1,088,071 4,275,379 3,706,266
Amortization 235,383 85,301 581,160 259,989
-------------------------------------------------------------------------
2,396,411 2,266,429 6,967,181 7,956,811
-------------------------------------------------------------------------
Operating loss 1,725,482 2,089,808 4,150,766 7,566,216
Other expenses
(revenues) (179,542) 110,969 (224,150) 184,943
-------------------------------------------------------------------------
Loss from operations
before income taxes 1,545,940 2,200,777 3,926,616 7,751,159
Current income taxes
(recovery) - - - (881,305)
-------------------------------------------------------------------------
Net loss $1,545,940 $2,200,777 $3,926,616 $6,939,854
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic and diluted net
loss per share $0.02 $0.04 $0.04 $0.12
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic and diluted
weighted average
number of common
shares outstanding 94,540,592 63,290,592 94,540,592 60,148,336
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Number of common
shares outstanding,
end of period 94,540,592 63,290,592 94,540,592 63,290,592
-------------------------------------------------------------------------
-------------------------------------------------------------------------
ART Advanced Research Technologies Inc.
Cash Flows
(In U.S. dollars)
(Unaudited)
Three-month Periods ended Nine-month Periods ended
September 30 September 30
-------------------------------------------------------------------------
2008 2007 2008 2007
-------------------------------------------------------------------------
OPERATING ACTIVITIES
Net loss $(1,545,940)$(2,200,777) $(3,926,616)$(6,939,854)
Items not affecting cash
Amortization 235,383 85,301 581,160 259,988
Stock-based
compensation 37,080 28,274 111,240 129,274
Gain on disposal of
fixed assets (835) - (27,542) -
Net changes in working
capital items
Accounts receivable (333,907) (90,352) (669,177) (229,936)
Investment tax credits
receivable (155,018) (178,725) 748,638 (461,078)
Inventories 257,283 19,805 57,806 19,866
Prepaid expenses (44,314) 55,568 (603,903) 70,703
Accounts payable and
accrued liabilities 792,624 (165,761) 365,924 (1,096,831)
Deferred revenues (82,375) - (34,848) -
Deferred grant - - 5,821 -
Income taxes payable - - - (811,304)
-------------------------------------------------------------------------
Cash flows from operating
activities (840,019) (2,446,667) (3,391,497) (9,059,172)
-------------------------------------------------------------------------
INVESTING ACTIVITIES
Short-term investments - 2,017,154 - (742,305)
Additions of property
and equipment (1,657) (16,629) (11,402) (112,780)
Proceeds from disposal of
property and equipment 1,617 - 60,789 -
Patents (27,466) - (159,309) -
Deferred development
costs (471,601) (251,829) (1,235,147) (493,635)
-------------------------------------------------------------------------
Cash flows from investing
activities (499,107) 1,748,696 (1,345,069) (1,348,720)
-------------------------------------------------------------------------
FINANCING ACTIVITIES
Bank loan - - 546,398
Repayment of obligations
under capital leases (9,761) - (27,756) -
Issue of convertible
preferred shares 6,000,000 - 7,100,000 -
Issue of common shares
and share purchase
warrants - - - 3,887,999
Equity issue expenses (502,004) - (584,197) (195,403)
-------------------------------------------------------------------------
Cash flows from financing
activities 5,488,235 - 6,488,047 4,238,994
Effect of foreign
currency translation
adjustments (256,497) 59,985 (320,188) 316,568
-------------------------------------------------------------------------
5,231,738 59,985 6,167,859 4,555,562
-------------------------------------------------------------------------
Net increase (decrease)
in cash and cash
equivalents 3,892,612 (637,986) 1,431,293 (5,852,330)
Cash and cash equivalents,
beginning of period 1,126,335 1,332,592 3,587,654 6,546,936
-------------------------------------------------------------------------
Cash and cash equivalents,
end of period $5,018,947 $694,606 $5,018,947 $694,606
-------------------------------------------------------------------------
-------------------------------------------------------------------------
CASH AND CASH
EQUIVALENTS
Cash $1,631,977 $544,606 $1,631,977 $544,606
Term deposits 3,386,970 150,000 3,386,970 150,000
-------------------------------------------------------------------------
$5,018,947 $694,606 $5,018,947 $694,606
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Supplemental disclosure
of cash flow
information
Interest paid $13,113 $69,912 $46,128 $93,344
Interest received $15,521 $17,315 $51,661 $44,193
-------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
Contacts: ART Advanced Research Technologies Inc. Jacques Bedard
Chief Financial Officer 514-832-0777 jbedard@art.ca www.art.ca
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