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"I am pleased with the developing fundamentals of the SPY business as wehad our best quarter for SPY placements, and showed strong growth inconsumable and capital sales." said Dr. Arun Menawat, President and ChiefExecutive Officer of Novadaq Technologies Inc. "Plastic surgery has been acatalyst in accelerating SPY adoption, and continued growth in SPY will besupported by the launch of quantification software in the second half of 2008and by our continued support in getting surgeons paid for SPY procedures."
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Revenue increased to approximately $2,773,000 in Q1-2008 fromapproximately $1,427,000 in Q1-2007. Recurring revenue, which includes SPY andTMR consumables, rentals and parts increased from approximately $693,000 inQ1-2007 to $1,496,000 in Q1-2008. The primary reason for the increase is thatTMR consumable revenue was recognized for a full quarter in 2008. Capital salerevenue increased from approximately $734,000 in Q1-2007 to $919,000 inQ1-2008, as an increase in SPY capital of $540,000 was partly offset by adecrease in TMR capital of $363,000. Service revenue, which increased from nilin Q1-2007 to approximately $358,000 in Q1-2008 relates partly to the TMRbusiness 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 Q1-2008whereas capital sale revenue decreased, as an increase in SPY capital salerevenue was more than offset by decreases in TMR and PINPOINT capital revenue.
Gross profit increased to approximately $1,305,000 in Q1-2008 fromapproximately $679,000 in Q1-2007 as a result of the increase in revenuedescribed above. Gross profit as a percent of sales was substantiallyunchanged.
Sales and marketing expenses increased by approximately $567,000 toapproximately $2,784,000 in Q1-2008 from approximately $2,217,000 in Q1-2007due to expansion of a direct sales team through 2007 and into 2008. $242,000of the increase occurred from Q4-2007 to Q1-2008.
Research and development expenses increased by approximately $317,000 toapproximately $1,612,000 in Q1-2008 from approximately $1,295,000 in Q1-2007.The increase relates primarily to the establishment of a research anddevelopment center in Vancouver B.C. staffed by former employees of Xillix.Research and development expenses in Q1-2008 increased by $79,000 fromQ4-2007. The increase related primarily to patent costs.
General and administration expenses increased by approximately $581,000 toapproximately $1,459,000 in Q1-2008 from $878,000 in Q1-2007. Increases relateprimarily to costs incurred to defend patents in Japan and general increasesto support a direct sales team, and the acquired TMR business. General andadministrative expenses in Q1-2008 decreased by $50,000 from Q4-2007 due tolower professional fees.
Depreciation expense increased to approximately $89,000 in Q1-2008 fromapproximately $52,000 in Q1-2007 primarily as a result of computer equipmentpurchased in 2007 for sales representatives hired during the period.Depreciation expense in Q1-2008 was generally consistent with Q4-2007.
Amortization increased by from $121,000 in Q1-2007 to $308,000 in Q1-2008as a result of the acquisition of intangibles related to TMR and Xillix.Amortization in Q1-2008 was slightly higher than amortization in Q4-2007because the final earn out amount associated with the TMR acquisition wascalculated effective December 31, 2007.
The Company had interest expense in Q1-2007 of approximately $9,000rela
