Revenues up by 162% compared to the same quarter a year ago
MONTREAL, May 6 /CNW Telbec/ - ART Advanced Research Technologies Inc.
(ART) (TSX: ARA), a leader in optical molecular imaging products for the
healthcare and pharmaceutical industries, is pleased to announce its financial
results for the first quarter ended March 31, 2005, where it reported a sales
increase of 162% to $1,011,350, up from $386,000 for the same quarter a year
ago. The company posted a net loss of $3,243,694 ($0.08 per share) for the
quarter ended March 31, 2005, compared to U.S.$ 2,081,748 (U.S.$0.06 per
share) for the three-month period ended March 31, 2004.
"ART achieved significant sales growth in the first quarter of 2005. We
believe this performance is a demonstration of our continued success in
implementing our business plan and of the progress on our priorities for 2005,
notably to increase our market share in the preclinical optical imaging sector
through our alliance with GE Healthcare," reported President and CEO Micheline
Bouchard. "Early response to the new eXplore Optix(TM) MW system has been very
favorable, as customers are both upgrading their existing system to multi-
wavelength capability and in some cases adding a second system. As for
SoftScan(R), authorization from Health Canada's Therapeutic Products
Directorate will allow us to initiate patient enrollment at two clinical sites
in Canada, including the McGill University Health Centre," added Ms. Bouchard.
As of March 31, 2005, ART's working capital was $9.0 million, including
$9.0 million in cash and short-term investments. ART believes that cash, cash
equivalents and short-term investments will be sufficient to meet its
operating cash requirements, including the development of products through
research and development activities and capital expenditures, up to early
2006.
Financial Highlights (in US dollars)
For the three-month period ended March 31, 2005, revenues generated
through the sales of the eXplore Optix system were $ 1,011,350, compared to
$ 386,000 for the three-month period ended March 31, 2004. Sales resulting
from the eXplore Optix product amounted to $ 752,850 compared to $ 386,000 for
the same quarter of last year. Sales resulting from maintenance totaled
$ 258,500 compared to nil in the quarter ended March 31, 2004. Sales resulting
from maintenance include upgrades of the single-wavelength system to the new
multiwavelength system and the sale of demonstration units. These revenues of
the eXplore Optix product originated from sales in North America, Europe and
Asia and were generated through ART's distributor, GE Healthcare. These
revenues also included repeat orders in the first quarter from existing users
of the eXplore Optix system, including leading pharmaceutical companies.
During the quarter ended March 31, 2005, ART generated a gross margin of 35%
from its eXplore Optix product sales and a 3% gross margin from sales
resulting from maintenance. The combined gross margin decrease during the
quarter was principally due to the fact that ART transitioned to the new
multiwavelength base system and offered the possibility to its customer base
to upgrade their base system to the new system at a preferential price.
The Company's research and development ("R & D") expenditures for the
three-month period ended March 31, 2005, net of investment tax credits,
amounted to $2,670,044, compared to $1,506,132 for the three-month period
ended March 31, 2004. The increase in R&D expenditures in this quarter
compared to the one of last year relates to the medical sector and is mainly
due to the cost associated to the preparation of the SoftScan pivotal study,
including the manufacturing of the SoftScan clinical prototypes, the
negotiation of the protocols with the selected sites and the cost related to
site selections both in Canada and in the United States. As a result, ART
obtained authorization from Health Canada's Therapeutic Products Directorate
to begin its pivotal clinical study in Canada for its SoftScan optical breast
imaging system. In the pharmaceutical sector, ART pursued the development of
its eXplore Optix product extensions, such as the 3D time domain optical
reconstruction software (which is now scheduled to be released in the second
half of 2005). During the three-month period ended March 31, 2005, 85% of the
R&D expenditures were dedicated to the medical sector and 15% to the
pharmaceutical sector.
Selling, general, and administrative ("SG&A") expenses for the three-
month period ended March 31, 2005, totaled $872,083, compared to $807,351 for
the three-month period ended December 31, 2004. SG&A expenses consist
principally of salaries, professional fees and other costs associated with
marketing activities. SG&A expenses were principally engaged to support
commercial activities related to the eXplore Optix product as well as support
its overall activities.
Net loss for the three-month period ended March 31, 2005 was $3,243,694
or $0.08 per share, compared to $2,081,748 or $0.06 per share for the three-
month period ended March 31, 2004. The increase in net loss resulted mainly
from higher R&D expenditures related to clinical trial preparation.
The financial statements, accompanying notes to the consolidated
financial statements, and Management's Discussion and Analysis for three-month
period ended March 31, 2005, will be available online at www.sedar.com or at
www.art.ca. Summary financial tables are provided below.
Conference Call
ART will host a conference call today at 8:30 AM (EDT). The telephone
number to access the conference call is (800) 387-6216 (U.S. and Canada).
Outside of North America, please dial (416) 405-9328. A replay of the call
will be available until May 13, 2005. When dialing in for the replay from
North America, please dial (800) 408-3053 or from outside of North America,
please dial (416) 695-5800. The access code for the replay is
3150528(pound sign).
A detailed list of the risks and uncertainties affecting the Company can
be found in its Annual Report in Form 20-F.
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 ART Advanced Research Technologies Inc.'s regulatory filings with
Canadian Securities Commissions and with the Securities and Exchange
Commission in the United States.
About ART
ART Advanced Research Technologies Inc. is a leader in optical molecular
imaging products for the healthcare and pharmaceutical industries. ART has
developed two products based on its innovative technology. The first is
eXplore Optix(TM), a molecular imaging device designed for monitoring
physiological changes in living systems at the preclinical study phases of new
drugs. eXplore Optix(TM) is distributed by GE Healthcare and is used by
industry and academic leaders worldwide to bring new and better treatments to
patients faster. The second is SoftScan(R), a medical imaging device designed
to improve the diagnosis and treatment of breast cancer. ART is
commercializing its 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 about ART, visit
the web site at www.art.ca .
Financial Statements (in US$)
-------------------------------------------------------------------------
<<
ART Advanced Research Technologies Inc.
Balance Sheets
(In U.S. dollars)
(Unaudited)
_________________________________________________________________________
_________________________________________________________________________
March 31, December 31,
2005 2004
_________________________________________________________________________
ASSETS
Current assets
Cash $ 1,960,590 $ 631,164
Term deposit, 1.45%, maturing
in April 2005 248,016 249,584
Commercial papers, 2.48% to 2.52%
(2.24% to 2.51% in 2004),
maturing from May to June 2005 6,833,533 10,950,403
Accounts receivable 1,092,092 883,604
Investment tax credits receivable 410,573 815,760
Inventories 788,615 1,014,551
Prepaid expenses 216,621 144,882
_____________ _____________
11,550,040 14,689,948
------------- -------------
Property and equipment 724,051 547,406
Patents 1,504,572 1,527,533
Deferred development costs 94,660 -
_____________ _____________
$ 13,873,323 $ 16,764,887
_____________ _____________
_____________ _____________
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities $ 2,496,720 $ 2,155,073
Deferred grant 91,322 -
_____________ _____________
2,588,042 2,155,073
------------- -------------
SHAREHOLDERS' EQUITY
Share capital and share purchase
warrants (Note 3) 80,696,107 80,696,107
Contributed surplus (Note 4) 532,053 474,698
Deficit (71,365,935) (68,122,241)
Cumulative translation adjustment 1,423,056 1,561,250
_____________ _____________
11,285,281 14,609,814
_____________ _____________
$ 13,873,323 $ 16,764,887
_____________ _____________
_____________ _____________
On behalf of the board,
Director Director
The accompanying notes are an integral part of the financial
statements.
The unaudited quarterly financial statements have not been reviewed by
external auditors.
ART Advanced Research Technologies Inc.
Operations and Deficit
(In U.S. dollars)
(Unaudited)
_________________________________________________________________________
_________________________________________________________________________
Three-month periods ended
March 31, 2005 March 31, 2004
_________________________________________________________________________
Sales
Products $ 752,850 $ 386,000
Maintenance 258,500 -
_____________ _____________
1,011,350 386,000
------------- -------------
Cost of sales
Products 488,647 183,239
Maintenance 250,674 -
_____________ _____________
739,321 183,239
_____________ _____________
Gross margin 272,029 202,761
------------- -------------
Operating expenses
Research and development, net of
investment tax credits
(2005: $123,147; 2004: $149,676) 2,670,044 1,506,132
Selling, general and administrative 872,083 807,351
Amortization 56,480 63,506
_____________ _____________
3,598,607 2,376,989
_____________ _____________
Operating loss 3,326,578 2,174,228
Interest income (56,311) (54,160)
Foreign exchange gain (26,573) (38,320)
_____________ _____________
Net loss 3,243,694 2,081,748
Deficit, beginning of year 68,122,241 56,753,062
Share and share purchase warrant
issue expenses - 1,345,988
_____________ _____________
Deficit, end of period $ 71,365,935 $ 60,180,798
_____________ _____________
_____________ _____________
Basic and diluted net loss per
share (Note 2) $ 0.08 $ 0.06
_____________ _____________
_____________ _____________
Basic and diluted weighted average
number of common shares outstanding 42,664,523 36,891,856
_____________ _____________
_____________ _____________
Number of common shares outstanding,
end of period 42,664,523 42,658,523
_____________ _____________
_____________ _____________
The accompanying notes are an integral part of the financial
statements.
The unaudited quarterly financial statements have not been reviewed by
external auditors.
ART Advanced Research Technologies Inc.
Cash Flows
(In U.S. dollars)
(Unaudited)
_________________________________________________________________________
_________________________________________________________________________
Three-month periods ended
March 31, 2005 March 31, 2004
_________________________________________________________________________
OPERATING ACTIVITIES
Net loss $ (3,243,694) $ (2,081,748)
Items not affecting cash
Amortization 56,480 63,506
Stock-based compensation (Note 4) 57,355 27,765
Net change in working capital items
Accounts receivable (211,084) 229,372
Investment tax credits receivable 394,539 (149,677)
Inventories 216,530 (105,689)
Prepaid expenses (71,647) 48,882
Accounts payable and accrued liabilities 350,284 268,851
Deferred grant 90,061 -
_____________ _____________
Cash flows from operating activities (2,361,176) (1,698,738)
------------- -------------
INVESTING ACTIVITIES
Short-term investments 9,749,504 (7,606,982)
Property and equipment (220,898) (25,999)
Patents - (84,810)
Deferred development costs (93,353) -
_____________ _____________
Cash flows from investing activities 9,435,253 (7,717,791)
------------- -------------
FINANCING ACTIVITIES
Shares and share purchase warrants - 12,714,401
Share and share purchase warrant
issue expenses - (1,345,988)
_____________ _____________
Cash flows from financing activities - 11,368,413
Effect of foreign currency translation
adjustments 86,975 27,493
_____________ _____________
86,975 11,395,906
_____________ _____________
Net increase in cash and cash equivalents 7,161,052 1,979,377
Cash and cash equivalents,
beginning of year 1,633,071 4,200,128
_____________ _____________
Cash and cash equivalents, end of period $ 8,794,123 $ 6,179,505
_____________ _____________
_____________ _____________
CASH AND CASH EQUIVALENTS
Cash $ 1,960,590 $ 6,179,505
Commercial papers 6,833,533 -
_____________ _____________
$ 8,794,123 $ 6,179,505
_____________ _____________
_____________ _____________
Supplemental disclosure of cash
flow information
Interest received $ 44,322 $ 4,440
The accompanying notes are an integral part of the financial
statements.
The unaudited quarterly financial statements have not been reviewed by
external auditors.
>>
ART Advanced Research Technologies Inc.
Notes to Financial Statements
(In U.S. dollars)
(Unaudited)
_________________________________________________________________________
1- BASIS OF PRESENTATION
These interim financial statements as at March 31, 2005 are unaudited.
They have been prepared by the Company in accordance with Canadian
generally accepted accounting principles. In the opinion of management,
they contain all adjustments necessary to present fairly the Company's
financial position as at March 31, 2005 and December 31, 2004 and its
results of operations and its cash flows for the three-month periods
ended March 31, 2005 and March 31, 2004.
The accounting policies and methods of computation adopted in these
financial statements are the same as those used in the preparation of the
Company's most recent annual financial statements. All disclosures
required for annual financial statements have not been included in these
financial statements. These financial statements should be read in
conjunction with the Company's most recent annual financial statements.
_________________________________________________________________________
2- ACCOUNTING POLICIES
Basic and diluted loss per common share and information pertaining to
number of shares
The Company uses the treasury stock method to determine the dilutive
effect of the share purchase warrants and the stock options. Per share
amounts have been computed based on the weighted average number of common
shares outstanding for all periods presented. The diluted loss per share
is calculated by adjusting outstanding shares to take into account the
dilutive effect of stock options and share purchase warrants. For all
periods presented, the effect of stock options and share purchase
warrants was not included as the effect would be anti-dilutive.
Consequently, there is no difference between the basic and diluted net
loss per share.
<<
_________________________________________________________________________
3- SHARE CAPITAL AND SHARE PURCHASE WARRANTS
The following table presents the changes in the number of outstanding
common shares:
March 31, 2005 December 31, 2004
__________________________ __________________________
Common shares Common shares
__________________________ __________________________
Number Value Number Value
____________ _____________ ____________ _____________
Issued and fully paid
Balance, beginning
of year 42,664,523 $ 78,678,625 34,238,523 $ 65,955,938
Issue of shares
for cash - - 8,420,000 12,714,401(a)
Issue of shares
for cash following
the exercise of
stock options - - 6,000 8,286
____________ _____________ ____________ _____________
Balance, end
of period 42,664,523 $ 78,678,625 42,664,523 $ 78,678,625
____________ _____________ ____________ _____________
____________ _____________ ____________ _____________
The following table presents the changes in the number of share purchase
warrants outstanding:
March 31, 2005
___________________________________________
Weighted
average
exercise
price
Number Value CA$
_____________ _____________ _____________
Balance, beginning of year 2,194,422 $ 2,017,482 2.28
Issue of share purchase warrants - - -
Expiry of share purchase warrants - - -
_____________ _____________
Balance, end of period 2,194,422 $ 2,017,482 2.28
_____________ _____________
_____________ _____________
December 31, 2004
___________________________________________
Weighted
average
exercise
price
Number Value CA$
_____________ _____________ _____________
Balance, beginning of year 3,208,422 $ 1,914,746 4.84
Issue of share purchase warrants 546,000 162,736(b) 2.15
Expiry of share purchase
warrants (1,560,000) (60,000) 7.50
_____________ _____________
Balance, end of period 2,194,422 $ 2,017,482 2.28
_____________ _____________
_____________ _____________
(a) In March 2004, the Company issued 8,420,000 common shares through
a public offering for gross cash proceeds of $12,714,401.
Commission and other transaction costs amounting to $1,440,576
were incurred and included in the deficit.
(b) In December 2004, the Company issued to an agent 546,000 share
purchase warrants at an exercise price of CA$2.15, by way of
private placement, and received, in consideration, aggregate
proceeds of $241,904. This private placement of share purchase
warrants was coincident with, and set as a condition for, the
payment of a sum of $241,904 to the agent in consideration for the
settlement of all claims and disputes between the agent and ART.
With respect to the share purchase warrants issue, 50% of the
share purchase warrants are exercisable immediately and the
balance beginning December 2005. The share purchase warrants will
expire five years from the date of issue. The Company evaluated
the fair value of the share purchase warrants at $162,736 using
the Black & Scholes model. The valuation assumptions are listed
below:
- Expected life: 5 years;
- Expected volatility: 70%;
- Weighted average risk-free interest rate: 3.71%;
- Dividend rate: 0%.
_________________________________________________________________________
4- STOCK-BASED COMPENSATION PLAN
As at March 31, 2005, the Company offered a compensation plan to
employees, which is described in its most recent annual financial
statements.
The following table presents the changes in the number of stock options
outstanding:
March 31, 2005 December 31, 2004
__________________________ __________________________
Weighted Weighted
average average
exercise exercise
Number price Number price
of options CA$ of options CA$
____________ _____________ ____________ _____________
Balance, beginning
of year 2,467,374 2.81 1,431,600 3.79
Options granted 2,000 1.04 1,282,574(a) 1.96
Options exercised - - (6,000) 1.91
Options cancelled (62,000) 3.85 (240,800) 4.18
____________ _____________
Balance, end of
period 2,407,374 2.78 2,467,374 2.81
____________ _____________
____________ _____________
Options exercisable
end of period 1,241,140 3.83 1,222,898 3.63
____________ _____________
____________ _____________
(a) On January 27, 2004, in consideration for renouncing to the cash
payment of the prior year's bonuses, certain officers and
employees were granted a total of 288,740 options to buy common
shares at an exercise price of CA$3.23. The expense related to the
bonuses had been accrued in the eight-month period ended December
31, 2003. Upon issuance of the options, the bonus accrual was
reversed and an amount of $253,976, representing the fair value of
the options, was credited to contributed surplus.
The following table provides information on options outstanding and
exercisable as of March 31, 2005:
Options outstanding Options exercisable
_________________________________ _____________________
Weighted
Weighted average Weighted
average remaining average
Exercise exercise contractual exercise
price Number price life Number price
CA$ outstanding CA$ (years) exercisable CA$
____________________________ ________ __________ ___________ ________
1.04 (at) 1.99 1,077,400 1.34 8.74 261,300 1.75
2.00 (at) 2.99 283,734 2.28 8.15 110,267 2.38
3.00 (at) 3.99 628,240 3.25 8.63 451,573 3.26
4.00 (at) 4.99 137,000 4.60 2.41 137,000 4.60
5.00 (at) 5.99 5,000 5.95 5.68 5,000 5.95
6.00 (at) 6.99 111,000 6.00 3.88 111,000 6.00
7.00 (at) 7.50 165,000 7.50 4.95 165,000 7.50
____________ ____________
2,407,374 2.78 7.79 1,241,140 3.83
____________ ____________
____________ ____________
The fair value of stock options granted during the three-month period
ended March 31, 2005 and 2004 was estimated on the grant date using the Black
& Scholes option-pricing model with the following assumptions for the stock
options granted since the beginning of the fiscal year:
- Weighted average expected life: 4.5 years (3.3 years in 2004);
- Expected volatility: 70% (70% in 2004);
- Weighted average risk-free interest rate: 3.70% (2.95% in 2004);
- Dividend rate: 0% (0% in 2004).
The weighted average fair value of stock options granted during the three-
month periods ended March 31, 2005 and 2004 was $0.50 and $1.02 respectively.
The Company recorded an expense of $57,355, ($27,765 in 2004), using the
fair value method in its operations and deficit statement for stock options
granted to employees in the three-month periods ended March 31, 2005 and 2004.
The fair value of stock options outstanding as at March 31, 2005 was
CA$1.60, and was estimated on the grant date using the Black & Scholes option-
pricing model.
During the fiscal year ended April 30, 2003, the Company did not record
any compensation cost related to stock options granted to employees. If the
compensation cost had been determined using the fair-value-based method at the
grant date of stock options awarded to employees, the net loss and loss per
share would have been adjusted to the pro forma amounts indicated in the
following table:
________________________________
________________________________
Three-month periods ended
March 31, 2005 March 31, 2004
________________________________
Net loss as reported $ 3,243,694 $ 2,081,748
Less: compensation expense recognized in
the statement of operations and deficit (57,355) (27,765)
Plus: total compensation expenses 102,698 77,940
_____________ _____________
Pro forma net loss $ 3,289,037 $ 2,131,923
_____________ _____________
_____________ _____________
Basic and diluted loss per share
As reported $ (0.08) $ (0.06)
Pro forma $ (0.08) $ (0.06)
_________________________________________________________________________
5- SEGMENT INFORMATION
The Company operates in two sectors for financial reporting purposes; the
medical sector and the pharmaceutical sector. The medical sector includes
the research, design, development and marketing of SoftScan(R) time
domain optical breast imaging device. The pharmaceutical sector includes
the research, design, development and commercialization of eXplore
Optix(TM) product.
The information pertaining to the two operating segments are summarized
as follows:
___________________________________________
___________________________________________
Three-month period ended
March 31, 2005
___________________________________________
Pharmaceutical Medical Total
Sales
Products $ 752,850 $ - $ 752,850
Maintenance 258,500 - 258,500
_____________ _____________ _____________
1,011,350 - 1,011,350
------------- ------------- -------------
Cost of sales
Products 488,647 - 488,647
Maintenance 250,674 - 250,674
_____________ _____________ _____________
739,321 - 739,321
_____________ _____________ _____________
Gross margin 272,029 - 272,029
------------- ------------- -------------
Operating expenses
Research and development
expenses, net of investment
tax credits 390,629 2,279,415 2,670,044
Selling, general and
administrative 333,019 539,064 872,083
Amortization 27,459 29,021 56,480
_____________ _____________ _____________
751,107 2,847,500 3,598,607
_____________ _____________ _____________
Operating loss 479,078 2,847,500 3,326,578
Interest income (16,465) (39,846) (56,311)
Foreign exchange gain (7,770) (18,803) (26,573)
_____________ _____________ _____________
Net loss $ 454,843 $ 2,788,851 $ 3,243,694
_____________ _____________ _____________
_____________ _____________ _____________
___________________________________________
___________________________________________
Three-month period ended
March 31, 2004
___________________________________________
Pharmaceutical Medical Total
Sales
Products $ 386,000 $ - $ 386,000
Maintenance - - -
_____________ _____________ _____________
386,000 - 386,000
------------- ------------- -------------
Cost of sales
Products 183,239 - 183,239
Maintenance - - -
_____________ _____________ _____________
183,239 - 183,239
_____________ _____________ _____________
Gross margin 202,761 - 202,761
------------- ------------- -------------
Operating expenses
Research and development
expenses, net of investment
tax credits 507,701 998,431 1,506,132
Selling, general and
administrative 286,532 520,819 807,351
Amortization 42,133 21,373 63,506
_____________ _____________ _____________
836,366 1,540,623 2,376,989
_____________ _____________ _____________
Operating loss 633,605 1,540,623 2,174,228
Interest income (15,186) (38,974) (54,160)
Foreign exchange gain (10,745) (27,575) (38,320)
_____________ _____________ _____________
Net loss $ 607,674 $ 1,474,074 $ 2,081,748
_____________ _____________ _____________
_____________ _____________ _____________
As at March 31, 2005 and December 31, 2004, the majority of identifiable
assets consisted of cash, short-term investments and property and equipment
used for corporate head office purposes. Identifiable assets by segment are
summarized as follows:
_____________ _____________
_____________ _____________
March 31, December 31,
2005 2004
_____________ _____________
Pharmaceutical $ 2,190,772 $ 2,132,979
Medical 1,573,262 1,734,349
Corporate 10,109,289 12,897,559
_____________ _____________
$ 13,873,323 $ 16,764,887
_____________ _____________
_____________ _____________
The unaudited quarterly financial statements have not been reviewed by
external auditors.
>>
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