Galway Metals Inc. press release

ART Advanced Research Technologies Announces 2005 First Quarter Financial Results

2005-05-06

TSXV - TSX Venture Exchange · Gold · Zinc · Copper · Silver · Lead · Antimony · Molybdenum · Tungsten · Canada

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