Novadaq Reports Financial Results for the First Quart...(2008 Q1-2008 Compared to Quarter Ended...),Health

March 31, 2007 "Q1-2007"

Revenue increased to approximately $2,773,000 in Q1-2008 from approximately $1,427,000 in Q1-2007. Recurring revenue, which includes SPY and TMR consumables, rentals and parts increased from approximately $693,000 in Q1-2007 to $1,496,000 in Q1-2008. The primary reason for the increase is that TMR consumable revenue was recognized for a full quarter in 2008. Capital sale revenue increased from approximately $734,000 in Q1-2007 to $919,000 in Q1-2008, as an increase in SPY capital of $540,000 was partly offset by a decrease in TMR capital of $363,000. Service revenue, which increased from nil in Q1-2007 to approximately $358,000 in Q1-2008 relates partly to the TMR business which was acquired in the last few days of Q1-2007, and to PINPOINT, which was acquired after Q1-2007.

Recurring revenue and service revenue increased from Q4-2007 to Q1-2008 whereas capital sale revenue decreased, as an increase in SPY capital sale revenue was more than offset by decreases in TMR and PINPOINT capital revenue.

Gross profit increased to approximately $1,305,000 in Q1-2008 from approximately $679,000 in Q1-2007 as a result of the increase in revenue described above. Gross profit as a percent of sales was substantially unchanged.

Sales and marketing expenses increased by approximately $567,000 to approximately $2,784,000 in Q1-2008 from approximately $2,217,000 in Q1-2007 due to expansion of a direct sales team through 2007 and into 2008. $242,000 of the increase occurred from Q4-2007 to Q1-2008.

Research and development expenses increased by approximately $317,000 to approximately $1,612,000 in Q1-2008 from approximately $1,295,000 in Q1-2007. The increase relates primarily to the establishment of a research and development center in Vancouver B.C. staffed by former employees of Xillix. Research and development expenses in Q1-2008 increased by $79,000 from Q4-2007. The increase
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