-- Three-Fold Increase in Revenues Marks Fifth Consecutive Quarter of Top-Line and Bottom-Line Growth --
Neovasc Inc. (TSXV: NVC), today announced financial results for the three months ended March 31, 2009.
"Neovasc is pleased to announce the results from this most recent quarter which marks the fifth consecutive quarter of revenue growth for the company, with sales growth of almost 300% compared to the same period last year," said Alexei Marko, chief executive officer of Neovasc. "Our biological tissue business is now operating at breakeven, and we expect to continue to see significant year-over-year revenue growth for 2010. We continue to progress on activities related to commercializing Neovasc's Reducer product for treating refractory angina, building on the momentum from our March presentation at the American College of Cardiology annual meeting where long-term follow-up data confirmed that the Reducer was safe and improved angina symptoms in the majority of patients for three years post-implantation."
Christopher Clark, chief financial officer of Neovasc added, "After the end of the period, on April 23, 2010, 97% of the expiring warrants from our April 2010 financing were exercised, for proceeds of $1.4 million, which we have earmarked for the Reducer COSIRA trial. We are delighted with this high level of participation, which we view as a strong vote of confidence from our existing investors."
In addition, Neovasc announced today that it has granted a total of 330,000 options to directors of the company. These options have an exercise price of $0.355. All of the options granted vest immediately.
Financial Results
Results for the three months ended March 31, 2010 and 2009 follow:
Revenues
Revenues increased almost 300% year-over-year to $1,065,841 for the three months ended March 31, 2010 from $355,484 for the same period in 2009. These increases reflect increased revenues from our tissue products and services business.
Sales of products for the three months ended March 31, 2010 were $737,962, compared to $298,630 in the same period in 2009, representing an increase of 147%. These revenues include sales of Peripatch products and contract manufacturing revenues in the first quarter of 2010, and Peripatch, contract manufacturing and catheter products in prior periods. The Company ceased manufacture of its Metricath product at the end of 2009.
Revenue from consulting services for the three months ended March 31, 2010 were $327,879, compared to $56,854 in the same period in 2009, representing an increase of 477%. The Company is continuing to expand its consulting services business where possible.
Cost of Sales
The cost of sales for the three months ended March 31, 2010 was $582,945, as compared to $149,760 in the comparable period in 2009. The overall gross margin for the first quarter of 2010 declined to 45%, compared to the 58% gross margin reported in 2009.
The decline in gross margin for the first quarter of 2010 was due to the impact of exchange rates, sales volume discounts to customers and a shift in product mix to certain lower margin products. In the three months ended March 31, 2010, 96% of the company's sales were derived from customers in the United States and Europe and were denominated in U.S. and European Union currency. During the first quarter of 2010, the U.S. dollar and European Union euro depreciated 3% and 9% respectively, negatively impacting recorded sales figures.
Expenses
Total expenses for the three months ended March 31, 2010 were $885,209, as compared to $1,930,494 for the same periods in 2009, representing a decrease of $1,045,285. The decrease in expenses from the first quarter of 2009 to the first quarter of 2010 reflects the elimination of operating expenses incurred at our Israeli facility of $367,000, a decrease in selling expenses of $258,000, and a reduction in general and administrative expenses of $264,000.
Sales and marketing expenses declined 85% to $44,891 for the three months ended March 31, 2010, from $302,885 for the same period in 2009. The Company terminated its direct sales force for its catheter products in the fourth quarter of 2008 and will continue to minimize sales and marketing costs while it focuses on continuing to grow its business-to-business revenue streams.
General and administrative expenses were $487,203 for the three months ended March 31, 2010 as compared to $750,829 for the same period of 2009, representing a decrease of 35%. These decreases reflect the Company's tighter business focus and the implementation of rigorous cost-cutting measures.
Product development and clinical trial expenses were $353,115 for the three months ended March 31, 2010 as compared to $876,780 for the same period of 2009, representing a decrease of 60% over the same period in 2009. The decrease in product development and clinical trial expenses of $367,000 primarily reflected expense reductions at our Israel operation. In the first quarter of 2010, product development expenditures were focused on activities supporting initiation of our Reducer COSIRA trial.
Amortization and Other Expenses
Amortization and other expenses for the three months ended March 31, 2010 were $68,816 as compared to amortization and other expenses of $21,470 for the same period in 2009. In the first quarter of 2010 the Company experienced a foreign exchange loss of $39,129 compared to an $8,518 gain in the same period of 2009.
Net Losses
The consolidated net loss for the three months ended March 31, 2010 was $471,129 or $0.02 basic loss per share, as compared with a net loss of $1,746,240 or $0.10 basic loss per share for the comparable period in 2009.
LIQUIDITY AND CAPITAL RESOURCES
The Company finances its operations and capital expenditures with cash generated from operations, lines of credit, long-term debt and equity financings. At March 31, 2010, the Company had cash and cash equivalents of $758,823, as compared to cash and cash equivalents of $111,368 at December 31, 2009. In addition, at March 31, 2010 the Company had restricted cash related to a security on long-term debt of $50,000 (December 31, 2009 - $50,000) included in long-term assets.
At March 31, 2009 the Company had working capital of $1,122,217 as compared to a negative working capital of $28,502 at December 31, 2009. The increase in working capital during the first quarter of 2010 was predominantly due to the net impact of an increase in cash from completion of a non-brokered private placement during the first quarter of 2010; an increase in accounts receivable, reflecting relatively high sales revenues recorded at the end of the quarter in March; an increase in inventory, as levels of tissue raw material were increased in anticipation of upcoming sales; and a decrease in accounts payable as the Company continues to pay down its prior debts.
Cash used in operations was $826,476 for the three months ended March 31, 2010, as compared to $1,514,482 for the same period in 2009. The decrease in cash usage for the three months ended March 31, 2010 as compared to same period of 2009 is primarily the result of the Company's increased sales and decreased operating expenses in the first quarter of 2010.
Net cash used in investing activities was $30,855 on capital assets for the three months ended March 31, 2010 compared to net cash used of $7,971 in 2009. The Company made minimum purchases of equipment in the first quarters of 2010 and 2009.
Net cash provided by financing activities was $1,504,786 for the three months ended March 31, 2010, compared to cash used of $3,476 in the same period of 2009. On February 19, 2010, the Company completed a non-brokered private placement of 5,691,658 units at the price of $0.27 per unit for aggregate gross proceeds of $1,536,748. Each unit consists of one common share of Neovasc stock and one-half of one common share purchase warrant of Neovasc stock. Each whole warrant will entitle the holder thereof to purchase one common share of Neovasc stock at the exercise price of $0.40 per share for a period of one year after the closing date of the offering. Share issue costs were $22,015.
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