RICHMOND, BC, Aug. 29 /PRNewswire-FirstCall/ -- Neovasc Inc. (TSXV: NVC), a new specialty vascular device company comprised of the former Medical Ventures Corp., Neovasc Medical Ltd. and B-Balloon Ltd., today announced financial results for the second quarter and six months ended June 30, 2008, the final period of operations of Medical Ventures Corp.
Neovasc Chief Executive Officer Alexei Marko noted, "With these second quarter results, we have formally closed the books on Medical Ventures. The consolidation of the three companies is solidly underway and Neovasc is now well positioned as an innovative vascular intervention company with an exciting pipeline of products and technologies."
Financial Results
Results for the three and six months ended June 30, 2008 follow. All amounts are in Canadian dollars.
Revenues
Revenues increased 25% year-over-year from $345,811 for the quarter ended June 30, 2007 to $433,061 for the quarter ended June 30, 2008 and increased 29% year-over-year from $672,059 for the six months ended June 30, 2007 to $866,546 for the six months ended June 30, 2008. The increase in revenues was primarily the result of growth in product sales, which increased 97% year-over-year for the quarter and 60% for the six months ending June 30, 2008.
Expenses
The cost of sales and services for the three and six months ended June 30, 2008 was $220,344 and $428,604 as compared to $201,189 and $320,740 in the comparative periods of 2007. The gross margin for the second quarter of 2008 was about 49%, compared to 42% in the second quarter of 2007, reflecting changes in the product mix sold during the respective periods. The 51% gross margin in the first half of 2008 was almost unchanged from the gross margin of 52% recorded in 2007. Total expenses excluding cost of sales and services for the second quarter of 2008 were $2,149,886, down from $2,544,375 in the comparative period of 2007, primarily as a result of decreases in research and development and clinical trial costs. Total expenses for the six months ended June 30, 2008 and 2007 were $4,105,186 and $4,211,916, respectively.
Net Losses
The consolidated net loss for the three and six months ended June 30, 2008 was $1,915,673 and $3,657,248, or $0.02 and $0.03 per share as compared with a net loss of $2,308,497 and $3,728,549, or $0.02 and $0.04 per share for the comparative periods in 2007. The decrease in net loss in the second quarter of 2008 was primarily the result of increased revenues from medical device sales and decreased total expenses.
Cash Position
At June 30, 2008, the Company had cash and cash equivalents of $118,847 and restricted cash related to a security on long-term debt of $50,000, offsetting a bank overdraft of $234,346 as compared to cash of $3,242,404 as of December 31, 2007. At June 30, 2008 the Company had a working capital deficit of $99,826 as compared to working capital of $3,431,266 at December 31, 2007. Cash reserves were bolstered by an $8,325,000 equity financing the Company completed after the close of the second quarter, on July 1, 2008.
Acquisition Background
On January 30, 2008 the Company entered into an agreement to acquire Neovasc Medical Ltd and B-Balloon Ltd, two pre-commercial medical device development companies based in Israel. The acquisitions were completed on July 1, 2008 and Neovasc Medical and B-Balloon became wholly-owned subsidiaries of the expanded new company, which was renamed Neovasc Inc.
Warrant and Option Offer
In connection with the acquisitions, the Company made an offer to all holders of warrants and options outstanding at April 30, 2008, to repurchase those warrants in exchange for a lesser number of common shares of the Company and to reduce the options to a lesser number of nominally priced options.
Share Consolidation
Concurrent with the acquisitions, the Company consolidated its shares, warrants and options on a 1 for 20 basis. Any warrants and options that were not tended pursuant to the Warrant and Option Offer were also consolidated on a 1 for 20 basis.
Issuance of Securities
Following the acquisitions, the Company had 17,574,000 shares outstanding on a fully-diluted basis (including common shares issued and outstanding and common shares reserved for issuance upon the exercise of warrants and options.)
Financing
The Company raised $8,325,000 on July 1, 2008 through a private placement of units. The units were issued at a price of $4.00 each and consisted of one common share and 0.62 warrants, each whole warrant exercisable for one common share at $5.00 for a period of 18 months.
NEOVASC INC. (Formerly Medical Ventures Corp.) Interim Consolidated Balance Sheets ------------------------------------------------------------------------- June 30, December 31, 2008 2007 ------------------------------------------------------------------------- (Unaudited) ASSETS CURRENT Cash and cash equivalents $ 118,847 $ 3,242,404 Accounts receivable 340,648 568,964 Inventory 377,754 384,124 Prepaid expenses and other assets 188,340 18,755 ------------------------------------------------------------------------- 1,025,589 4,214,247 RESTRICTED CASH AND CASH EQUIVALENTS 50,000 50,000 PROPERTY AND EQUIPMENT 1,317,809 1,425,553 ------------------------------------------------------------------------- $ 2,393,398 $ 5,689,800 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES CURRENT Bank overdraft $ 234,346 $ - Accounts payable and accrued liabilities 840,803 735,310 Current portion of long-term debt 19,964 19,559 Current portion of repayable contribution agreement 30,302 28,112 ------------------------------------------------------------------------- 1,125,415 782,981 LONG-TERM DEBT 429,100 441,540 REPAYABLE CONTRIBUTION AGREEMENT 285,071 283,959 ------------------------------------------------------------------------- 1,839,586 1,508,480 ------------------------------------------------------------------------- SHAREHOLDERS' EQUITY Share capital 28,592,620 28,835,081 Contributed surplus 1,248,838 976,637 Deficit (29,287,646) (25,630,398) ------------------------------------------------------------------------- 553,812 4,181,320 ------------------------------------------------------------------------- $ 2,393,398 $ 5,689,800 ------------------------------------------------------------------------- NEOVASC INC. (Formerly Medical Ventures Corp.) Interim Consolidated Statements of Operations and Deficit For the three and six months ended June 30 ------------------------------------------------------------------------- Three months ended Six months ended 2008 2007 2008 2007 ------------------------------------------------------------------------- (Unaudited) (Unaudited) (Unaudited) (Unaudited) SALES Product sales $ 433,061 $ 219,325 $ 837,924 $ 523,443 Consulting services - 126,486 28,622 148,616 ------------------------------------------------------------------------- 433,061 345,811 866,546 672,059 COST OF SALES, including underutilized capacity of $25,144 220,344 201,189 428,604 320,740 ------------------------------------------------------------------------- GROSS PROFIT 212,717 144,622 437,942 351,319 ------------------------------------------------------------------------- EXPENSES Selling 785,491 785,131 1,534,995 1,252,319 General and administration 779,363 783,663 1,317,648 1,293,614 Product development and clinical trials 414,958 790,643 1,036,703 1,442,563 Inventory write down 94,404 124,170 94,404 124,170 Amortization 75,670 60,768 121,436 99,250 ------------------------------------------------------------------------- 2,149,886 2,544,375 4,105,186 4,211,916 ------------------------------------------------------------------------- LOSS BEFORE OTHER INCOME (EXPENSES) (1,937,169) (2,399,753) (3,667,244) (3,860,597) ------------------------------------------------------------------------- OTHER INCOME (EXPENSES) Interest income 14,208 40,541 23,303 82,080 Interest on long-term debt (5,021) (2,858) (12,535) (5,736) Accreted interest on repayable contribution agreement (3,846) - (7,685) - Gain on foreign exchange 16,155 53,573 6,913 55,704 ------------------------------------------------------------------------- 21,496 91,256 9,996 132,048 ------------------------------------------------------------------------- NET LOSS AND COMPREHENSIVE LOSS FOR THE PERIOD (1,915,673) (2,308,497) (3,657,248) (3,728,549) DEFICIT, BEGINNING OF PERIOD (27,371,973) (19,320,489) (25,630,398) (17,900,437) ------------------------------------------------------------------------- DEFICIT, END OF PERIOD $(29,287,646) $(21,628,986) $(29,287,646) $(21,628,986) ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- BASIC AND DILUTED LOSS PER SHARE $ (0.02) $ (0.02) $ (0.03) $ (0.04) ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 111,209,545 100,566,564 111,209,545 85,952,975 ------------------------------------------------------------------------- ------------------------------------------------------------------------- NEOVASC INC. (Formerly Medical Ventures Corp.) Interim Consolidated Statements of Cash Flows For the three and six months ended June 30 ------------------------------------------------------------------------- Three months ended Six months ended 2008 2007 2008 2007 ------------------------------------------------------------------------- (Unaudited) (Unaudited) (Unaudited) (Unaudited) OPERATING ACTIVITIES Net loss for the period $ (1,915,673) $ (2,308,497) $ (3,657,248) $ (3,728,549) Items not affecting cash Inventory write down 94,404 124,170 94,404 124,170 Amortization 75,670 60,768 121,436 99,250 Accreted Interest on repayable contribution agreement 3,846 - 7,685 - Stock-based compensation 16,457 62,693 29,740 93,758 ------------------------------------------------------------------------- (1,725,296) (2,060,866) (3,403,983) (3,411,371) Change in non-cash operating assets and liabilities Accounts receivable 38,235 (23,625) 228,316 (56,477) Inventory 81,126 113,642 (88,034) 135,648 Prepaid expenses and other assets (40,440) 63,530 (169,585) (6,278) Accounts payable and accrued liabilities 118,393 108,468 105,493 306,888 ------------------------------------------------------------------------- (1,527,982) (1,798,851) (3,327,793) (3,031,590) ------------------------------------------------------------------------- INVESTING ACTIVITY Purchase of property and equipment (6,510) (12,324) (13,692) (33,142) ------------------------------------------------------------------------- (6,510) (12,324) (13,692) (33,142) ------------------------------------------------------------------------- FINANCING ACTIVITIES Repayment of long-term debt (7,265) (5,100) (12,035) (10,200) Repayment of repayable contribution agreement (2,655) (2,556) (4,383) (2,556) Proceeds from share issue, net of costs - 7,251,421 - 7,251,421 (9,920) 7,243,765 (16,418) 7,238,665 (DECREASE)/INCREASE IN CASH (1,544,412) 5,432,590 (3,357,903) 4,173,933 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,428,913 1,440,078 3,242,404 2,698,735 ------------------------------------------------------------------------- END OF PERIOD $ (115,499) $ 6,872,668 $ (115,499) $ 6,872,668 ------------------------------------------------------------------------- ------------------------------------------------------------------------- REPRESENTED BY: (Bank Overdraft) /Cash (234,346) 524,676 (234,346) 524,676 Cashable guaranteed investment certificates 118,847 6,347,992 118,847 6,347,992 ------------------------------------------------------------------------- $ (115,499) $ 6,872,668 $ (115,499) $ 6,872,668 ------------------------------------------------------------------------- ------------------------------------------------------------------------- NON CASH TRANSACTIONS Change in Asset Use - 53,592 - 53,952 SUPPLEMENTAL CASH FLOW INFORMATION Interest paid 5,021 3,130 12,535 6,050 ------------------------------------------------------------------------- About Neovasc Inc.
Neovasc Inc. develops, manufactures and markets medical devices for the rapidly growing vascular and surgical marketplace. The company's current products help doctors diagnose and treat a wide range of health conditions, including vascular diseases and obesity. They include the Metricath(R) arterial and in-stent measurement system, and PeriPatch(TM) surgical tissue and staple line reinforcement products. Neovasc also provides contract medical device development and manufacturing services as well as a pipeline of newly acquired technologies and products. For more information, visit: http://www.neovasc.com/.
Statements contained herein that are not based on historical or current fact, including without limitation statements containing the words "anticipates," "believes," "may," "continues," "estimates," "expects," and "will" and words of similar import, constitute "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, events or developments to be materially different from any future results, events or developments expressed or implied by such forward-looking statements. Such factors include, among others, the following: general economic and business conditions, both nationally and in the regions in which the Company operates; history of losses and lack of and uncertainty of revenues, ability to obtain required financing, receipt of regulatory approval of product candidates, ability to properly integrate newly acquired businesses, technology changes; competition; changes in business strategy or development plans; the ability to attract and retain qualified personnel; existing governmental regulations and changes in, or the failure to comply with, governmental regulations; liability and other claims asserted against the Company; and other factors referenced in the Company's filings with Canadian securities regulators. Although the Company believes that expectations conveyed by the forward-looking statements are reasonable based on the information available to it on the date such statements were made, no assurances can be given as to the future results, approvals or achievements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The Company does not assume the obligation to update any forward-looking statements except as otherwise required by applicable law.
