Novadaq (NVDQ) 6-K Interim Consolidated Statements of Financial Position

Exhibit 99.1

Novadaq Technologies Inc.

INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Unaudited)

(expressed in U.S. dollars, except common shares outstanding)

	Notes	As at June 30, 2013			As at December 31, 2012
ASSETS
Current assets
Cash and cash equivalents		$	88,520,580		$	38,954,181
Accounts receivable			6,793,633			4,056,954
Prepaid expenses and other assets			1,412,607			852,674
Inventories	2		3,334,452			1,713,577
Non-current assets
Property and equipment, net	3		12,170,627			10,717,661
Deferred tax assets			—			170,442
Intangible assets, net			951,313			1,121,808
Total Assets		$	113,183,212		$	57,587,297
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities		$	4,867,658		$	3,407,329
Provisions			124,680			85,260
Deferred revenue			420,142			637,864
Deferred partnership fee revenue	6		1,300,000			1,300,000
Repayable government assistance	5		113,429			203,148
Convertible debentures	5		—			4,656,746
Non-current liabilities
Deferred tax liabilities			—			170,442
Deferred revenue			182,771			144,204
Deferred partnership fee revenue	6		2,641,666			3,291,666
Repayable government assistance	5		—			17,946
Shareholder warrants	4		20,629,447			13,002,930
Total Liabilities		$	30,279,793		$	26,917,535
Shareholders’ Equity
Share capital	9	$	206,054,317		$	139,946,563
Contributed surplus	7		8,158,676			7,908,224
Equity component of convertible debentures	5		—			1,454,353
Deficit			(131,309,574	)		(118,639,378	)
Total Shareholders’ Equity		$	82,903,419		$	30,669,762
Total Liabilities and Shareholders’ Equity		$	113,183,212		$	57,587,297
Common shares outstanding	9		48,401,444			40,226,243

See accompanying notes to the interim condensed consolidated financial statements

1

Novadaq Technologies Inc.

INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

(Unaudited)

(expressed in U.S. dollars)

		For the three months ended						For the six months ended
	Notes	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012
Product sales		$	7,075,710		$	4,511,331		$	13,375,953		$	8,165,376
Royalty revenue			467,766			346,250			908,444			954,333
Partnership fee revenue	6		325,000			325,000			650,000			650,000
Service revenue			229,473			208,924			441,995			389,171
Total revenues			8,097,949			5,391,505			15,376,392			10,158,880
Cost of sales			3,043,252			2,087,707			5,775,394			4,133,244
Gross profit			5,054,697			3,303,798			9,600,998			6,025,636
Selling and distribution costs			3,512,448			1,216,839			5,860,704			2,280,326
Research and development expenses			2,045,826			1,378,331			3,533,024			2,540,062
Administrative expenses			1,742,733			1,637,355			3,103,472			3,108,305
Write-down of inventory			31,285			—			31,285			—
Total operating expenses			7,332,292			4,232,525			12,528,485			7,928,693
Loss from operations			(2,277,595	)		(928,727	)		(2,927,487	)		(1,903,057	)
Finance costs	5		(5,300	)		(175,691	)		(176,489	)		(348,422	)
Finance income			17,861			14,995			32,704			15,422
Warrants revaluation adjustment	4		(7,472,882	)		(311,110	)		(9,578,924	)		(3,909,359	)
Gain on investment			25,000			—			25,000			—
Loss from operations before income taxes			(9,712,916	)	($	1,400,533	)		(12,625,196	)	($	6,145,416	)
Income tax expense			(25,000	)		—			(45,000	)		—
Net loss and comprehensive loss for the period		($	9,737,916	)	($	1,400,533	)	($	12,670,196	)	($	6,145,416	)
Basic and diluted loss and comprehensive loss per share for the period	10	($	0.21	)	($	0.04	)	($	0.29	)	($	0.17	)

See accompanying notes to the interim condensed consolidated financial statements

2

Novadaq Technologies Inc.

INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

(expressed in U.S. dollars)

	Share capital		Contributed surplus			Equity component of convertible debentures			Deficit			Total
As at December 31, 2012	$	139,946,563	$	7,908,224		$	1,454,353		($	118,639,378	)	$	30,669,762
Loss and comprehensive loss		—		—			—			(2,932,280	)		(2,932,280	)
Exercise of convertible debenture		6,194,625		—			(1,434,840	)		—			4,759,785
Exercise of warrants		932,322		(23,052	)		—			—			909,270
Exercise of stock options		76,110		(26,908	)		—			—			49,202
Stock-based compensation		—		399,837			—			—			399,837
As at March 31, 2013	$	147,149,620	$	8,258,101		$	19,513		($	121,571,658	)	$	33,855,576
Loss and comprehensive loss		—		—			—			(9,737,916	)		(9,737,916	)
Public offering		54,674,930		—			—			—			54,674,930
Exercise of convertible debenture		85,530		—			(19,513	)		—			66,017
Exercise of warrants		1,665,039		—			—			—			1,665,039
Exercise of stock options		2,479,198		(916,283	)		—			—			1,562,915
Stock-based compensation		—		816,858			—			—			816,858
As at June 30, 2013	$	206,054,317	$	8,158,676			—		($	131,309,574	)	$	82,903,419
As at December 31, 2011	$	98,695,023	$	6,772,298		$	1,454,353		($	106,295,245	)	$	626,429
Loss and comprehensive loss		—		—			—			(4,744,883	)		(4,744,883	)
Exercise of warrants		130,627		(130,627	)		—			—			—
Stock-based compensation		—		253,488			—			—			253,488
As at March 31, 2012	$	98,825,650	$	6,895,159		$	1,454,353		($	111,040,128	)	($	3,864,966	)
Loss and comprehensive loss		—		—			—			(1,400,533	)		(1,400,533	)
Public offering		36,946,898		—			—			—			36,946,898
Exercise of stock options		115,808		(41,982	)		—			—			73,826
Exercise of warrants		582,461		—			—			—			582,461
Stock-based compensation		—		362,136			—			—			362,136
As at June 30, 2012	$	136,470,817	$	7,215,313		$	1,454,353		($	112,440,661	)	$	32,699,822

See accompanying notes to the interim condensed consolidated financial statements

3

Novadaq Technologies Inc.

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(expressed in U.S. dollars)

		For the three months ended						For the six months ended
	Notes	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012
OPERATING ACTIVITIES
Loss and comprehensive loss for the period		($	9,737,916	)	($	1,400,533	)	($	12,670,196	)	($	6,145,416	)
Items not affecting cash
Depreciation of property and equipment	3		808,894			495,996			1,529,829			914,178
Amortization of intangible assets			55,586			287,492			170,495			582,245
Stock-based compensation	7		816,858			362,136			1,216,695			615,624
Imputed interest on convertible debentures	5		2,073			106,964			169,056			211,340
Warrants revaluation adjustment	4		7,472,882			311,110			9,578,924			3,909,359
Write-down of inventory	2		31,285			—			31,285			—
			(550,338	)		163,165			26,088			87,330
Changes in non-cash working capital
Increase in accounts receivable			(1,748,098	)		(786,978	)		(2,736,679	)		(913,609	)
Increase in inventories			(944,171	)		(91,750	)		(1,652,160	)		(585,470	)
(Increase) decrease in prepaid expenses and other assets			(689,167	)		438,620			(389,491	)		(214,015	)
Increase (decrease) in accounts payable and accrued liabilities			984,821			(876,295	)		1,341,646			969,137
(Decrease) increase in deferred revenue			(220,002	)		(20,752	)		(221,783	)		19,635
Net change in non-cash working capital balances related to operations			(2,616,617	)		(1,337,155	)		(3,658,467	)		(724,322	)
Decrease in long term deferred revenue			(319,589	)		(336,573	)		(611,433	)		(694,223	)
Cash used in operating activities			(3,486,544	)		(1,510,563	)		(4,243,812	)		(1,331,215	)
INVESTING ACTIVITIES
Purchase of property and equipment	3		(1,886,301	)		(1,753,917	)		(3,138,217	)		(3,667,199	)
Disposals of property and equipment	3		127,652			58,743			155,422			88,460
Cash used in investing activities			(1,758,649	)		(1,695,174	)		(2,982,795	)		(3,578,739	)
FINANCING ACTIVITIES
Proceeds from issuance of common shares	9		57,856,500			40,336,250			57,856,500			40,336,250
Transaction costs paid relating to issuance of common shares	9		(3,181,570	)		(3,389,352	)		(3,181,570	)		(3,389,352	)
Repayment of government assistance			(53,504	)		(56,926	)		(107,665	)		(97,357	)
Proceeds from exercise of options			1,562,915			73,826			1,612,117			73,826
Proceeds from exercise of warrants			368,281			—			621,912			—
Cash provided by financing activities			56,552,622			36,963,798			56,801,294			36,923,367
Net increase in cash and cash equivalents			51,307,429			33,758,061			49,574,687			32,013,413
Impact of foreign exchange on cash and cash equivalents			(6,716	)		(5,644	)		(8,288	)		(351	)
Cash and cash equivalents at beginning of period			37,219,867			7,894,253			38,954,181			9,633,608
Cash and cash equivalents at end of period		$	88,520,580		$	41,646,670		$	88,520,580		$	41,646,670

See accompanying notes to the interim condensed consolidated financial statements

4

Novadaq Technologies Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS PERIODS ENDED JUNE 30, 2013

(Unaudited)

(expressed in U.S. dollars except as otherwise indicated)

1. BASIS OF PRESENTATION

Basis of preparation

These interim condensed consolidated financial statements for the three and six months period ended June 30, 2013 of Novadaq Technologies Inc. [the “Company”] were prepared in accordance with International Accounting Standard 34,Interim Financial Reporting [“IAS 34”], as issued by the International Accounting Standards Board [“IASB”].

The same accounting policies and methods of computation were followed in the preparation of these interim condensed consolidated financial statements as were followed in the preparation of the annual consolidated financial statements for the year ended December 31, 2012 prepared in accordance with International Financial Reporting Standards [“IFRS”] as issued by the IASB. The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual consolidated financial statements. Accordingly, these interim condensed consolidated financial statements for the three and six months periods ended June 30, 2013 should be read together with the annual consolidated financial statements for the year ended December 31, 2012, which are available on SEDAR at www.sedar.com.

The preparation of interim condensed consolidated financial statements in accordance with IAS 34 requires the use of certain critical accounting estimates. It also requires management to exercise judgment in applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are consistent with those disclosed in the notes to the annual consolidated financial statements for the year ended December 31, 2012. These interim condensed consolidated financial statements were authorized for issue by the Board of Directors on July 31, 2013.

New standards, interpretations and amendments adopted by the Company

The accounting policies adopted in the preparation of these interim condensed consolidated financial statements are consistent with those followed in the preparation of the Company’s annual consolidated financial statements for the year ended December 31, 2012, except as noted below.

[a] IFRS 10 - Consolidated Financial Statements, IFRS 11 - Joint Arrangements, IFRS 12 - Disclosure of Interests in Other Entities and amendments to IAS 27 - Separate Financial Statements and IAS 28 – Investments in Associates

The adoption of these standards and amendments had no impact on the financial statements of the Company.

[b] IFRS 13 - Fair Value Measurement

IFRS 13 defines fair value and provides guidance for measuring fair value and identifies the required disclosures pertaining to fair value measurement. The application of IFRS 13 has not materially impacted the fair value measurements applied by the Company.

5

Novadaq Technologies Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS PERIODS ENDED JUNE 30, 2013

(Unaudited)

(expressed in U.S. dollars except as otherwise indicated)

[c] IAS 1 - Presentation of Financial Statements

The amendment enhances the presentation of other comprehensive income [“OCI”] in the financial statements, primarily by requiring the components of OCI to be presented separately for items that may be reclassified to the statement of earnings from those that remain in equity. The amendment affected presentation only and had no impact on the Company’s financial position or performance.

Accounting Standards Issued But Not Yet Applied

Certain new standards, interpretations, amendments and improvements to existing standards were issued by the IASB or IFRS Interpretations Committee (IFRIC) that are mandatory for fiscal periods beginning January 1, 2015 or later. The standards are described in the Company’s Annual Consolidated Financial Statements for the year ended December 31, 2012 and there have not been any additional standards applicable to the Company issued since except as noted below. In May 2013, the IASB issued amendments to IAS 36 Impairment of Assets. These narrow-scope amendments to IAS 36 address the disclosure of information about the recoverable amount of impaired assets it that amount is based on fair value less costs of disposal. The amendments are to be applied retrospectively for annual periods beginning on or after January 1, 2014. Earlier application is permitted for periods when the entity has already applied IFRS 13.

2. INVENTORIES

Inventories by category are as follows:

	June 30, 2013		December 31, 2012
	$		$
Raw materials		2,825,608		1,168,045
Medical devices, software and parts		481,002		499,502
TMR kits		27,842		46,030
		3,334,452		1,713,577

For the three and six months period ended June 30, 2013, the Company wrote down $31,285 of inventory to its net realizable value [three and six months period ended June 30, 2012 - nil]. Inventories are valued at the lower of cost and net realizable value. Cost is determined on a first-in, first-out basis for finished goods and weighted average for raw materials.

For the three months period ended June 30, 2013, $1,050,526 [three months period ended June 30, 2012 - $417,466] of inventory has been recognized in cost of sales. For the six months period ended June 30, 2013, $1,707,161 [six months ended June 30, 2012 - $806,297] of inventory has been recognized in cost of sales.

6

Novadaq Technologies Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS PERIODS ENDED JUNE 30, 2013

(Unaudited)

(expressed in U.S. dollars except as otherwise indicated)

3. PROPERTY AND EQUIPMENT

	Medical devices			Furniture and fixtures			Computer equipment			Leasehold improvements			Total
	$			$			$			$			$
Cost:
Opening balance at January 1, 2013		14,989,715			410,413			1,254,189			236,628			16,890,945
Additions		1,209,124			6,536			36,256			—			1,251,916
Disposals		(30,887	)		—			—			—			(30,887	)
Balance at March 31, 2013		16,167,952			416,949			1,290,445			236,628			18,111,974
Additions		1,849,203			8,423			28,675			—			1,886,301
Disposals		(132,197	)		—			—			—			(132,197	)
Balance at June 30, 2013		17,884,958			425,372			1,319,120			236,628			19,866,078
Depreciation:
Opening balance at January 1, 2013		(4,471,158	)		(390,981	)		(1,180,775	)		(130,370	)		(6,173,284	)
Depreciation		(667,498	)		(2,369	)		(17,050	)		(34,018	)		(720,935	)
Disposals		3,117			—			—			—			3,117
Balance at March 31, 2013		(5,135,539	)		(393,350	)		(1,197,825	)		(164,388	)		(6,891,102	)
Depreciation		(755,660	)		(2,931	)		(20,196	)		(30,107	)		(808,894	)
Disposals		4,545			—			—			—			4,545
Balance at June 30, 2013		(5,886,654	)		(396,281	)		(1,218,021	)		(194,495	)		(7,695,451	)
Net book value at June 30, 2013		11,998,304			29,091			101,099			42,133			12,170,627

	Medical devices			Furniture and fixtures			Computer equipment			Leasehold improvements			Total
	$			$			$			$			$
Cost:
Opening balance at January 1, 2012		8,971,551			392,190			1,161,916			185,902			10,711,559
Additions		6,350,607			18,223			92,273			50,726			6,511,829
Disposals		(332,443	)		—			—			—			(332,443	)
Balance at December 31, 2012		14,989,715			410,413			1,254,189			236,628			16,890,945
Depreciation:
Opening balance at January 1, 2012		(2,488,182	)		(386,898	)		(1,121,429	)		(91,064	)		(4,087,573	)
Depreciation		(2,039,898	)		(4,083	)		(59,346	)		(39,306	)		(2,142,633	)
Disposals		56,922			—			—			—			56,922
Balance at December 31, 2012		(4,471,158	)		(390,981	)		(1,180,775	)		(130,370	)		(6,173,284	)
Net book value at December 31, 2012		10,518,557			19,432			73,414			106,258			10,717,661

As at June 30, 2013, medical devices include construction-in-progress of $2,488,843 [December 31, 2012 - $1,188,369], which are not being depreciated. Depreciation will commence when the devices are placed at the medical institutions.

For the three and six months periods ended June 30, 2013, additions included expenditures of $895,984 [three months period ended June 30, 2012 - $1,672,735] and $1,619,919 [six months period ended June 30, 2012 - $3,493,224], respectively, on SPY Elite systems placed at medical institutions to generate revenue and Pinpoint systems for use in clinical trials.

7

Novadaq Technologies Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS PERIODS ENDED JUNE 30, 2013

(Unaudited)

(expressed in U.S. dollars except as otherwise indicated)

4. WARRANTS

	Broker Warrants						February 2010 Shareholder Warrants						March 2011 Shareholder Warrants						Total
	#			$			#			$			#			$			$
December 31, 2011		78,066			93,679			609,838			1,768,439			2,129,339			6,509,666			8,371,784
Exercised		(58,856	)		(70,627	)		(67,407	)		(437,889	)		(507,493	)		(3,395,609	)		(3,904,125	)
Revaluation		—			—			—			1,924,278			—			6,634,045			8,558,323
December 31, 2012		19,210			23,052			542,431			3,254,828			1,621,846			9,748,102			13,025,982
Exercised		(19,210	)		(23,052	)		(86,336	)		(655,649	)		—			—			(678,701	)
Revaluation		—			—			—			580,245			—			1,525,797			2,106,042
March 31, 2013		—			—			456,095			3,179,424			1,621,846			11,273,899			14,453,323
Exercised		—			—			(62,222	)		(661,049	)		(60,331	)		(635,709	)		(1,296,758	)
Revaluation		—			—			—			1,666,928			—			5,805,954			7,472,882
June 30, 2013		—			—			393,873			4,185,303			1,561,515			16,444,144			20,629,447

On March 24, 2011, the Company closed a private placement of $14,280,240, net of transaction costs of $998,207, in exchange for 4,731,864 units at a price of CDN $3.17 per unit. Each unit consists of one common share and 0.45 of a warrant, representing 2,129,339 warrants. Each warrant has a five-year term and is exercisable for one common share at an exercise price of CDN $3.18. Because such warrants were denominated in Canadian dollars [a currency different from the Company’s functional currency], they are recognized as a financial liability at fair value through profit or loss. In determining the fair value of the warrants, the Company used theBlack-Scholes option pricing model with the following assumptions: weighted average volatility rate of 66%; risk-free interest rate of 1.98%; expected life of five years; and an exchange rate of 1.026. Shareholder warrants were initially valued at U.S. $1.86 each and revalued at December 31, 2012 at U.S. $6.01 per warrant.

For the three month period ended June 30, 2013, 62,222 warrants were exercised from the March 2011 issuance at an exercise price of $3.18 CDN. As at June 30, 2013, the warrants were revalued at U.S. $10.53 per warrant utilizing the following assumptions: volatility rate of 46%; risk-free interest rate of 1.08%; expected life of 2.73 years; and an exchange rate of 0.9513.

In February 2010, the Company closed a private placement of U.S. $6,610,157, net of cash transaction costs of $511,180, in which 3,049,205 units at CDN $2.43 per unit were issued. Each unit is comprised of one common share and one-fifth warrant. Each warrant has a five-year term and is exercisable for one common share at an exercise price of CDN $3.00. Because such warrants were denominated in Canadian dollars [a currency different from the Company’s functional currency], they are recognized as a financial liability at fair value through profit or loss. Broker cashless warrants of 128,066 were also issued as part of broker compensation which are exercisable for one common share at CDN $2.82 over a three-year term. Such broker warrants represented compensation provided to the brokers in connection with the private placement and were accounted for as non-cash transaction costs. The fair value of broker compensation for the services provided approximated the fair value of those warrants. In determining the initial fair value of the shareholder warrants, the Company used theBlack-Scholes option pricing model with the following assumptions: volatility rate of 69%; risk-free interest rate of 1.88%; expected life of five years for shareholder warrants and three years for broker warrants; and an exchange rate of 0.960. Shareholder warrants were initially valued at U.S. $1.47 each and revalued at December 31, 2012 at U.S. $6.00 per warrant.

8

Novadaq Technologies Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS PERIODS ENDED JUNE 30, 2013

(Unaudited)

(expressed in U.S. dollars except as otherwise indicated)

For the three month period ended June 30, 2013, 60,331 warrants were exercised from the February 2010 issuance at an exercise price of $3.00 CDN. As at June 30, 2013, the warrants were revalued at U.S. $10.63 per warrant utilizing the following assumptions: volatility rate of 46%; risk-free interest rate of 0.89%; expected life of 1.64 years; and an exchange rate of 0.9513.

5. INTEREST-BEARING LOANS AND BORROWINGS

		June 30, 2013		December 31, 2012
	Maturity	$		$
Interest-bearing loans and borrowings
Repayable government assistance	31/03/2015		113,429		221,094

On February 18, 2009, the Company completed a private placement in the amount of $5,150,000 of senior, unsecured, convertible debentures maturing on February 18, 2014 [the “Debentures”]. Fairfax Financial Holdings Limited and certain of its subsidiaries subscribed for $5,000,000 and certain members of management of the Company subscribed for $150,000. The Debentures are convertible, at the option of the holder, at any time prior to maturity, into common shares of the Company at a conversion price of CDN $2.33 [U.S. $1.87] per share, subject to anti-dilution adjustments.

The Debentures bear an interest rate of 5% per annum on the full amount, payable in arrears, in equal, semi-annual instalments, in cash, or at the option of the Company, in additional debentures. The effective interest rate is 9.9%. On maturity of the Debentures, the Company has the option of repaying the principal in cash or in common shares at a conversion rate equal to 95% of the weighted average trading price of the common shares on the Toronto Stock Exchange for the 20 trading days preceding the maturity date. In the event a Fundamental Change occurs [defined as the occurrence of a “Change of Control” or a “Termination of Trading”] following the original issuance of the Debentures, it may result in the Company repurchasing the Debentures at 110% of the Debenture amount, plus accrued and unpaid interest, subject to repurchasing terms in the Debenture Agreement.

On December 31, 2009, the Company and debenture holders executed the First Amending Agreement to the original Debenture Agreement permitting flexible interest rate revisions. The Company exercised its right to issue payment in kind [“PIK”] debentures for $153,478 in lieu of six months’ cash interest payment due on December 31, 2009. The PIK debentures are convertible into common shares of the Company with a conversion price of CDN $2.62 [U.S. $2.23] per share. All other terms are subject to the terms of the original Debenture Agreement. The effective interest rate is 6.6%.

The Debentures are required to be classified in their liability and equity components as determined by their fair values. The Company determined the liability component by discounting the Debentures of February 18, 2009 using a rate of 16.5% based on an assessment of similar companies in the marketplace. Similarly, the PIK debentures of December 31, 2009 were discounted utilizing a rate of 13.1%.

In March 2013, Fairfax Financial Holdings Limited exercised their right to convert debentures with principal value of $5,149,009 in exchange for 2,772,151 common shares of the Company in accordance with the terms of the Debentures (note 8). A director of the Company is also a director of Fairfax Financial Holdings Ltd.

9

Novadaq Technologies Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS PERIODS ENDED JUNE 30, 2013

(Unaudited)

(expressed in U.S. dollars except as otherwise indicated)

In May 2013, two management members exercised their right to convert debt of $71,323 in exchange for 37,961 common shares of the Company in accordance with the terms of the Debentures. As at June 30, 2013, the principal value of the Debentures was nil.

6. MARKETING AND DISTRIBUTION AGREEMENTS

LifeCell™ Corporation and Kinetics Concepts Inc.

On September 1, 2010, the Company entered into afive-year agreement with LifeCell, providing exclusive rights to market and distribute the Company’s SPY imaging system in the fields of plastic reconstructive, gastrointestinal and head and neck surgery in North America. Under the terms of the agreement, the Company received $5,000,000, including $1,000,000 from KCI, for which KCI received 281,653 shares of the Company’s common stock at a price of CDN $3.75 per share. Under the agreement, the Company shares on-going revenues from LifeCell’s sales to end customers related to the SPY imaging system and the disposable products required to perform the SPY imaging procedure, net of contracted minimum pricing retained by the Company upon initial shipments to LifeCell. LifeCell will provide market development and commercialization activities, including professional education, clinical support, reimbursement and sales distribution for the SPY imaging system. The Company will continue to be responsible for research and development, manufacturing and field service.

On November 29, 2011, the Company, LifeCell™ Corporation [“LifeCell”] and LifeCell’s parent company, Kinetics Concepts Inc. [“KCI”], signed separate and exclusivemulti-year marketing and sales distribution alliance agreements for the commercialization of the Company’s SPY imaging system for additional surgical and wound care applications in North American and certain other markets. As part of the agreements, the Company received $3,000,000 upon executing the LifeCell agreements and will receive further unrelated milestone payments. These unrelated milestone payments will consist of $1,000,000 for delivery of a newly designed wound care device for KCI to use in clinical studies and a further $1,000,000 upon delivery of the first commercial sale or rental of a wound care device. Additionally, KCI or its affiliates, including LifeCell, will pay the Company $1,000,000 upon the first commercial sale or rental of a SPY device in Japan and will also pay the Company $1,000,000 for the first commercial sale or rental of a SPY device in the Middle East, Europe or Africa. Under the agreements, the Company will share on-going revenues from LifeCell’s and KCI’s sales to end customers related to the SPY imaging system and the disposable products required to perform the SPY imaging procedure, net of contracted minimum pricing retained by the Company upon initial shipments to LifeCell or KCI. LifeCell and KCI will provide sales and marketing and distribution activities to the end customer. The Company will continue to be responsible for research and development, manufacturing and field service.

On March 12, 2013, Novadaq and KCI mutually agreed to terminate the two agreements signed with KCI, the parent company, on November 29, 2011 while the two agreements signed with LifeCell on November 29, 2011 remained materially intact. Under the terms of the termination agreements, Novadaq and KCI provided each other with full mutual releases from the Distribution Agreements, except for provisions relating to confidentiality. Neither party will compensate the other in connection with the termination. The termination of the KCI agreements did not affect the deferred license revenue as the funds received related to agreements entered into with LifeCell in September 2010 and November 2011.

10

Novadaq Technologies Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS PERIODS ENDED JUNE 30, 2013

(Unaudited)

(expressed in U.S. dollars except as otherwise indicated)

As at June 30, 2013, the Company’s deferred license revenue of $3,941,666 [December 31, 2012 - $4,591,666] represents the current and long-term portions of the deferred partnership fee revenue for the LifeCell agreements.

MAQUET Cardiovascular, LLC

On January 3, 2012, the Company entered into an agreement with MAQUET Cardiovascular, LLC [“MAQUET”], naming MAQUET as the exclusive United States distributor of the Company’s CO2 Heart Laser™ System TMR and the procedure kits required to perform the TMR procedure. The agreement provides for a revenue sharing formula with respect to the sales and marketing services being provided by MAQUET and the Company supplying and supporting the products.

7. STOCK-BASED COMPENSATION PLANS

On March 29, 2005, the Company established an amended stock option plan [the “Plan”] for the employees, directors, senior officers and consultants of the Company and any affiliate of the Company which governs all options issued under its previously existing stock option plans and future option grants made under the Plan. On May 15, 2008, the shareholders at the annual and special meeting approved the “Second Amended and Restated Stock Option Plan”, which was an amendment to the Plan.

Under the Plan, options to purchase common shares of the Company may be granted by the Board of Directors. Options granted under the Plan will have an exercise price of not less than the volume-weighted average trading price of the common shares for the five trading days preceding the date on which the options are granted. The maximum aggregate number of common shares which may be subject to options under the Plan is 10% of the common shares of the Company outstanding from time to time.

Options granted under the Plan will generally vest over a three-year period and may be exercised in whole or in part at any time as follows: 33% on or after the first anniversary of the grant date, 67% on or after the second anniversary of the grant date and 100% on or after the third anniversary of the grant date. Options expire on the tenth anniversary of the grant date. Any options not exercised prior to the expiry date will become null and void. In connection with certain change of control transactions, including a take-over bid, merger or other structured acquisition, the Board of Directors may accelerate the vesting date of all unvested options such that all optionees will be entitled to exercise their full allocation of options and in certain circumstances, where such optionee’s employment is terminated in connection with such transaction, such accelerated vesting will be automatic. Options granted under the Plan will terminate on the earlier of the expiration of the option or 180 days following the death of the optionee or termination of the optionee’s employment because of permanent disability, as a result of termination of the optionee’s employment because of retirement of an optionee or as a result of such optionee ceasing to be a director, or 30 days following termination of an optionee.

Thestock-based compensation cost that has been recognized for the three month period ended June 30, 2013 and included in the respective function line in the interim consolidated statements of loss and comprehensive loss is $816,858 [three month period ended June 30, 2012 - $362,136].

11

Novadaq Technologies Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS PERIODS ENDED JUNE 30, 2013

(Unaudited)

(expressed in U.S. dollars except as otherwise indicated)

A summary of the options outstanding as at June 30, 2013 and December 31, 2012 under the Plan are presented below:

	June 30, 2013					December 31, 2012
	Number outstanding			Weighted average exercise price		Number outstanding			Weighted average exercise price
	#			$		#			$
Options outstanding, beginning of period		3,066,295			3.98		2,589,211			3.18
Options granted		786,500			13.83		518,250			6.77
Options exercised		(657,101	)		2.39		(24,363	)		2.79
Option cancelled		(27,981	)		2.66		(7,303	)		2.62
Options forfeited		(1,000	)		6.47		(9,500	)		5.05
Options outstanding, end of period		3,166,713			6.77		3,066,295			3.98
Options exercisable, end of period		1,870,179			3.98		2,192,098			3.35

The Company uses the Black-Scholes option pricing model to determine the fair value of options. On May 22, 2013, the Company issued 676,500 options under the Plan to employees. For the three months period ended June 30, 2013, the Company used the following assumptions to determine the fair value of the options granted: weighted average volatility rate of 51%, expected dividend yield of nil, weighted average expected life of 4 years, weighted average interest rate of 1.60% and an exchange rate of 0.9678 for employees; weighted average volatility rate of 70%, expected dividend yield of nil, weighted average expected life of 7.7 years, weighted average interest rate of 2.27% and an exchange rate of 0.9678 for board of directors; and weighted average volatility rate of 74%, expected dividend yield of nil, weighted average expected life of 6.8 years, weighted average interest rate of 2.16% and an exchange rate of 0.9678 for management.

The expected life of the share options is based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the options is indicative of future trends, which may also not necessarily be the actual outcome.

There have been no modifications to the Plan during the periods presented in the interim condensed consolidated financial statements.

12

Novadaq Technologies Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS PERIODS ENDED JUNE 30, 2013

(Unaudited)

(expressed in U.S. dollars except as otherwise indicated)

8. FAIR VALUE OF FINANCIAL INSTRUMENTS

[a] Fair value

Set out below is a comparison by class of the carrying amounts and fair value of the Company’s financial instruments that are carried in the consolidated financial statements:

	June 30, 2013				December 31, 2012
	Carrying amount		Fair value		Carrying amount		Fair value
	$		$		$		$
Financial assets
Held-for-trading
Cash and cash equivalents		88,520,580		88,520,580		38,954,181		38,954,181
Loans and receivables
Accounts receivable		6,793,633		6,793,633		4,056,954		4,056,954
		95,314,213		95,314,213		43,011,135		43,011,135
Financial liabilities
Derivative financial liabilities at fair value through profit or loss
Shareholder warrants		20,629,447		20,629,447		13,002,930		13,002,930
Other financial liabilities
Convertible debentures		—		—		4,656,746		4,656,746
Repayable government assistance		113,429		113,429		221,094		221,094
Accounts payable and accrued liabilities and provisions		4,992,338		4,992,338		3,492,589		3,492,589
		25,735,214		25,735,214		21,373,359		21,373,359

The fair values of the financial assets and liabilities are shown at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The following methods and assumptions were used to estimate the fair values:

• Cash and cash equivalents, accounts receivable, repayable government assistance, accounts payable and accrued liabilities and provisions approximate their carrying amounts largely due to the short-term maturities of these instruments.

• Convertible debentures are evaluated by the Company based on parameters such as interest rates and the risk characteristics of the instrument.

• The fair value of the warrants is estimated using theBlack-Scholes option pricing model incorporating various inputs including the underlying price volatility and discount rate (note 4).

13

Novadaq Technologies Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS PERIODS ENDED JUNE 30, 2013

(Unaudited)

(expressed in U.S. dollars except as otherwise indicated)

[b] Fair value hierarchy

The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

• Level 1 - Inputs to the valuation methodology are quoted prices [unadjusted] for identical assets or liabilities in active markets.

• Level 2 - Inputs to valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

• Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The fair value hierarchy of financial instruments measured at fair value on the consolidated statements of financial position is as follows:

	June 30, 2013						December 31, 2012
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
	$		$		$		$		$		$
Financial assets
Cash and cash equivalents		88,520,580		—		—		38,954,181		—		—
Financial liabilities
Shareholder warrants		—		20,629,447		—		—		13,002,930		—

During the reporting periods, there were no transfers between Level 1 and Level 2 fair value measurements.

14

Novadaq Technologies Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS PERIODS ENDED JUNE 30, 2013

(Unaudited)

(expressed in U.S. dollars except as otherwise indicated)

9. SHARE CAPITAL

The Company has authorized share capital as follows: common shares - unlimited, no par value; preference shares – unlimited, no par value, issuable in one or more series.

Issued and outstanding

	Common shares
	#		$
Balance at December 31, 2012		40,226,243		139,946,563
Exercise of broker warrants pursuant to private placement		14,099		23,052
Exercise of stock options		24,242		76,110
Exercise of warrants		86,336		909,270
Exercise of convertible debenture		2,772,151		6,194,625
Balance at March 31, 2013		43,123,071		147,149,620
Public offering		4,485,000		54,674,930
Exercise of stock options		632,859		2,479,198
Exercise of warrants		122,553		1,665,039
Exercise of convertible debenture		37,961		85,530
Balance at June 30, 2013		48,401,444		206,054,317

On May 1, 2013, the Company announced that it had completed the closing of its public offering of 4,485,000 common shares at a price of $12.90 per share. Gross proceeds from the offering were approximately $57,856,500 million resulting in cash proceeds of $54,674,930, net of transaction costs. The shares of the Company are registered with the SEC and listed on the NASDAQ in addition to the TSX.

10. LOSS PER SHARE

Basic loss per share amounts are calculated by dividing net loss for the period attributable to common share holders of the parent by the weighted average number of common shares outstanding during the period. Diluted loss per share amounts are calculated by dividing the net loss attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

The following reflects the net loss and comprehensive loss and weighted average number of shares data used in the basic and diluted loss per share computations:

	For the three months ended						For the six months ended
	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012
Loss and comprehensive loss attributable to shareholders for basic and diluted loss per share	($	9,737,916	)	($	1,400,533	)	($	12,670,196	)	($	6,145,416	)
Weighted average number of shares for basic and diluted loss per share		46,338,887			39,149,954			43,140,192			35,968,326

15

Novadaq Technologies Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS PERIODS ENDED JUNE 30, 2013

(Unaudited)

(expressed in U.S. dollars except as otherwise indicated)

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of issuance of these interim condensed consolidated financial statements.

11. SEGMENTED INFORMATION

Revenue by region is as follows:

	For the three months ended				For the six months ended
	June 30,  2013 $		June 30,  2012 $		June 30,  2013 $		June 30,  2012 $
United States & Mexico		7,784,104		5,030,226		15,042,407		9,684,000
Asia		7,000		361,279		27,140		474,880
Europe including Middle East		306,845		—		306,845		—
Total		8,097,949		5,391,505		15,376,392		10,158,880

Property and equipment, net is as follows:

	June 30, 2013		December 31, 2012
	$		$
Canada		3,561,592		2,419,062
United States		8,609,035		8,298,599
Total		12,170,627		10,717,661

12. Subsequent event

On July 31, 2013, the Company announced that it has acquired all the intellectual property and assets associated with the TRAPPER Surgical Imaging System and the Disposable Probe from Digirad Corporation (NASDAQ: DRAD). The Company will pay to Digirad, an upfront consideration of $2,000,000 and up to $1,000,000 in deferred contingent payments based on the achievement of specific regulatory and commercial milestones. A royalty on sales will be paid for a period of five years.

16