ART Advanced Research Technologies Announces Third Quarter 2008 Financial Results

ART Advanced Research Technologies Inc. (ART) (TSX: ARA), a Canadian medical device company and a leader in optical molecular imaging products for the healthcare and pharmaceutical industries, announces its financial results for the third quarter ended September 30, 2008. ART reported revenues of $1,354,365 for the three-month period ended September 30, 2008, compared to $267,741 for the same quarter in 2007. For the nine-month period ended September 30, 2008, revenues were $3,809,146, compared to $703,907 for the same period in 2007. For the 2008 third quarter, the operating loss decreased by $364,326, or 17%, to $1,725,482, from $2,089,808 for the same period a year ago. For the nine-month period ended September 30, 2008, the operating loss was $4,150,766, compared to $7,566,216, for the nine-month period ended September 30, 2007. ART incurred a net loss for the three-month period ended September 30, 2008, of $1,545,940 or $0.02 per share, compared to $2,200,777 or $0.04 per share for the same quarter in 2007. For the nine-month period ended September 30, 2008, the net loss was $3,926,616 or $0.04 per share, compared to $6,939,854 or $0.12 per share, for the nine-month period ended September 30, 2007. All dollar amounts referenced herein are in U.S. dollars, unless otherwise stated.

2008 Third Quarter Highlights

- ART recognized revenue of $1.3 million from Optix® unit sales, and has a backlog representing approximately $600,000 in additional Optix unit sales.

- ART closed a private placement of approximately $6.0 million in preferred shares.

- ART continued to manage expenses carefully, resulting in a lower burn-rate compared to last year.

Post Quarter Events

- Final scans using the SoftScan® device were completed for the treatment monitoring pilot study at the Sunnybrook Health Sciences Centre in Toronto and, deeming these results as significant, the team at Sunnybrook will be submitting them for publication in a peer-reviewed journal.

Revenues

For the three-month period ended September 30, 2008, revenues were $1,354,365, compared to $267,741 for the same period ended September 30, 2007. Sales resulting from products amounted to $1,221,436 in the quarter ended September 30, 2008, compared to $267,741 for the same quarter of last year. Revenues resulting from sales of products for the nine-month period ended September 30, 2008 amounted to $2,464,825, compared to $703,907 for the same period of last year. The increase in product sales in 2008 when compared to 2007 is explained by the Company's transition to a direct distribution model. By selling directly to its customers, the Company now generates a higher revenue per system since it does not have to provide discounts to an exclusive distributor. During the quarter ended September 30, 2008, product sales resulted from the sale of four Optix® systems and Fenestra® products whereas for the same quarter in 2007, product sales included Fenestra products and add-ons for Optix systems only. The Company sold one service contract, and recognized a total of $132,929 in services and other revenues during the third quarter ended September 30, 2008. During the same period ended September 30, 2007, there were no sales resulting from services. During the nine-month period ended September 30, 2008, ART sold the first SoftScan unit, five Optix units, and add-ons for Optix systems that resulted in the conversion of two single-wavelength Optix systems to the MX2 version. Also, the Company recognized revenues totaling $1,075,517 from services rendered on behalf of GE, as ART is completing the transition out of the Optix distribution agreement with GE. During the nine-month period ended September 30, 2007, there were no sales of add-ons for Optix systems that resulted in the conversion of single-wavelength Optix systems to the MX2 version and there were no sales resulting from services.

Gross Margin

During the three-month and nine-month periods ended September 30, 2008, ART generated a gross margin of 45% and 62% respectively from the sales of its products, compared to 66% and 55% for the same periods in the previous year. The gross margin generated on the sales of services and other revenues was 92% and 95% respectively for the three-month and nine-month periods ended September 30, 2008. No gross margin on sales of services is recorded for 2007, as there were no sales of service contracts during the same period in 2007. The decrease of the gross margin ratio for the three-month period ended September 30, 2008, compared to the same quarter of the previous year, is primarily due to a different sales product mix. For the three-month period ended September 30, 2008, the lower gross margin ratio is explained by the fact that ART accounted for the cost of four systems during the current period, as compared to last year when the Company mainly sold add-ons, for which a higher gross margin ratio is typically recognized. The increase in the gross margin ratio during the nine-month period ended September 30, 2008, compared to the same period in 2007 resulted from services and other revenues as well as the sale of the SoftScan unit in the first quarter of 2008, where the gross margin on this unit represented almost 100% of the sale, given that this unit had been sold as a prototype and therefore expensed as incurred in previous years.