Spectral announces second quarter 2010 results

TORONTO, Aug. 12 /CNW/ - Spectral Diagnostics Inc., (TSX: SDI), a company focused on bringing to market a diagnostic and a therapeutic targeting severe sepsis, today announced its financial results for the second quarter ended June 30, 2010.

"During the second quarter we continued to implement our US pivotal trial for Toraymyxin(TM), a therapeutic hemoperfusion device that removes endotoxin from the bloodstream and is guided by our FDA cleared endotoxin activity assay, the EAA(TM). Activities during the quarter were focused on clinical site evaluation and qualification, with the objective of having all 15 sites enrolling patients in the second half of this year," said Dr. Paul Walker, President and CEO of Spectral. "We also continued to forge academic partnerships that leverage our knowledge and leadership in this field. As a result, additional clinical papers about significant findings in the area of endotoxin and its role in sepsis were published this quarter. This new data lends greater support to the Toraymyxin(TM) product and strengthens our confidence in the US pivotal trial."

Highlights:

-   Publication of an important new reference book on the subject of
        endotoxin entitled, "Endotoxemia and Endotoxin Shock: Disease,
        Diagnosis and Therapy." The publication contains a section that
        focuses entirely on extracorporeal therapies, such as Toraymyxin(TM),
        as well as chapters that demonstrate the utility of the EAA(TM) to
        identify patients who are endotoxemic and to monitor the effects of
        this therapy.
    -   Received the McMaster University Industry Partner of the Year Award,
        earned for Spectral's contribution to the discovery and development
        of aptamer technology for the diagnosis and treatment of sepsis.
    -   Completed evaluation and training of a number of centres
        participating in the Toraymyxin(TM) pivotal trial.

Financial Review

For the second quarter ended June 30, 2010, Spectral reported revenues of $678,000, compared to $776,000 for the corresponding period in 2009. For the six months ended June 30, 2010, revenues were $1,426,000 compared to $1,618,000 for the same 2009 period. EAA(TM) diagnostic sales and royalty revenues from the Company's proprietary Troponin I products were relatively consistent year over year. The lower sales in 2010, compared to 2009, were due primarily to the foreign exchange impact of a strengthening Canadian dollar versus the US and Euro currencies.

For the second quarter ended June 30, 2010, the Company reported a loss of $1,270,000 or ($0.02) per share, compared to a loss of $701,000 or ($0.03) per share for the corresponding period in 2009. For the six months ended June 30, 2010, the Company reported a loss of $3,213,000 or ($0.06) per share, compared to a loss of $1,105,000 or ($0.05) per share for the corresponding period in 2009. The year to date increase in the loss of $2,108 is attributable primarily to the increase in clinical trial costs related to IDE approval and to trial start-up ($704), service fees ($500) paid to Medwell Capital ("Medwell") (formerly BioMS Medical ("BioMS")), pursuant to a three year, $3 million service contract that became effective January 1, 2010, and the stock based compensation expense ($792) that arose on the issuance of 1,800,000 stock options in the first quarter of 2010. Operating expenses related to the existing business remained consistent with prior year levels.

Cash and cash equivalents as at June 30, 2010 totaled $17,336,000, compared to $2,944,000 as at December 31, 2009. The increase is due entirely to the net proceeds of the financing completed in the first quarter.

Total shares outstanding at June 30, 2010 amounted to 75,826,549 (June 30, 2009 - 24,118,424).

About Spectral Diagnostics

Spectral is a leader in the battle against sepsis. Spectral's lead product is its Endotoxin Activity Assay (EAA(TM)), the only FDA cleared assay for the measurement of endotoxin. With the growing awareness for the role of endotoxemia in sepsis and the increasing number of therapies being developed for this indication, Spectral is well-positioned to drive the adoption of the EAA(TM), which can be used to identify patients, enable therapeutics and monitor treatment. In March 2009, Spectral obtained the exclusive development and commercial rights in the U.S. for Toraymyxin(TM), a therapeutic for the treatment of sepsis that removes endotoxin from the bloodstream. Spectral will seek FDA approval for Toraymyxin(TM) and intends to commercialize the product together with EAA(TM). Spectral is listed on TSX under the symbol SDI.

Forward-looking statement

Information in this news release that is not current or historical factual information may constitute forward-looking information within the meaning of securities laws. Implicit in this information, particularly in respect of the future outlook of Spectral and anticipated events or results, are assumptions based on beliefs of Spectral's senior management as well as information currently available to it. While these assumptions were considered reasonable by Spectral at the time of preparation, they may prove to be incorrect. Readers are cautioned that actual results are subject to a number of risks and uncertainties, including the availability of funds and resources to pursue R&D projects, the successful and timely completion of clinical studies, the ability of Spectral to take advantage of business opportunities in the biomedical industry, the granting of necessary approvals by regulatory authorities as well as general economic, market and business conditions, and could differ materially from what is currently expected.

The TSX has not reviewed and does not accept responsibility for the adequacy or accuracy of this statement.

Spectral Diagnostics Inc.
    Balance Sheets - unaudited
    As at June 30, 2010 and December 31, 2009
    -------------------------------------------------------------------------

    (in thousands of dollars)

                                                            2010        2009
                                                               $           $
                                                      -----------------------
    Assets

    Current assets
    Cash and cash equivalents                             17,336       2,944
    Accounts receivable                                      687         781
    Inventories                                              340         123
    Prepaid expenses                                         110          45
                                                      -----------------------

                                                          18,473       3,893

    Property, plant and equipment                            437         457

    Commercial instruments                                    73          94

    Purchased technology and trademarks                      854         588
                                                      -----------------------

                                                          19,837       5,032
                                                      -----------------------
                                                      -----------------------

    Liabilities

    Current liabilities
    Accounts payable and accrued liabilities                 669       1,077
    Current portion of convertible notes payable           1,295       2,336
                                                      -----------------------
                                                           1,964       3,413

    Deferred revenue                                         189         254

                                                      -----------------------

                                                           2,153       3,667
                                                      -----------------------

    Shareholders' Equity

    Common shares                                         21,264       2,524

    Other equity                                           6,586       5,794

    Deficit                                              (10,166)     (6,953)
                                                      -----------------------

                                                          17,684       1,365
                                                      -----------------------

                                                          19,837       5,032
                                                      -----------------------
                                                      -----------------------



    Spectral Diagnostics Inc.
    Statements of Operations, Comprehensive Loss and Deficit - unaudited
    For the six months ended June 30, 2010 and 2009
    -------------------------------------------------------------------------
    (in thousands of dollars, except share and per share data)

                                      3 Months Ended          6 Months Ended
                                             June 30                 June 30

                                    2010        2009        2010        2009
                                       $           $           $           $

    Sales                            678         776       1,426       1,618

    Cost of sales                    155         166         319         350
                              ----------------------- -----------------------

    Gross margin                     523         610       1,107       1,268
                              ----------------------- -----------------------

    Operating expenses
    Selling, general and
     administrative                  763         763       1,661       1,554
    Clinical trial                   624         164         968         264
    Service fees                     250           -         500           -
    Amortization                     156         159         311         323
    Foreign exchange loss(gain)      (26)         84          13          52
    Stock-based compensation           -           -         792           -
    Research and product
     development, net of tax
     credits                           8          16          24          36
                              ----------------------- -----------------------

                                   1,775       1,186       4,269       2,229
                              ----------------------- -----------------------

    Loss before the following     (1,252)       (576)     (3,162)       (961)

    Interest on convertible
     notes payable                   (24)        (41)        (59)        (82)

    Other net investment
     income (loss)                     6         (84)          8         (62)

                              ----------------------- -----------------------

    Loss and comprehensive loss
     for the period               (1,270)       (701)     (3,213)     (1,105)

    Deficit - Beginning of
     period                       (8,896)     (4,593)     (6,953)     (4,189)

                              ----------------------- -----------------------
    Deficit - End of period      (10,166)     (5,294)    (10,166)     (5,294)
                              ----------------------- -----------------------
                              ----------------------- -----------------------

    Basic and diluted loss
     per common share              (0.02)      (0.03)      (0.06)      (0.05)
                              ----------------------- -----------------------
                              ----------------------- -----------------------

    Weighted average number
     of common shares
     outstanding              75,822,318  24,118,424  58,404,514  24,118,424
                              ----------------------- -----------------------
                              ----------------------- -----------------------



    Spectral Diagnostics Inc.
    Statements of  Cash Flows - unaudited
    For the six months ended June 30, 2010 and 2009
    -------------------------------------------------------------------------
    (in thousands of dollars)

                                      3 Months Ended          6 Months Ended
                                             June 30                 June 30
                                    2010        2009        2010        2009
                                       $           $           $           $

    Cash provided by (used in)

    Operating activities
    Loss and comprehensive
     loss for the period          (1,270)       (701)     (3,213)     (1,105)
    Items not affecting cash
      Amortization                   156         159         311         323
      Amortization of
       commercial instruments
       included in cost of
       sales                          16          22          48          43
      Stock-based compensation
       expense                         -           -         792           -
      Interest on convertible
       notes payable                  24          41          59          82
      Unrealized loss on
       short-term investments          -          91           -          91
    Changes in non-cash
     working capital                (224)        344      (1,696)        (39)
                              ----------------------- -----------------------
                                  (1,298)        (44)     (3,699)       (605)
                              ----------------------- -----------------------

    Financing activities
    Bank indebtedness                  -        (385)          -           -
    Proceeds on issue of
     private placement                 -           -      17,608           -
    Proceeds on exercise of
     stock options                     9           -          32           -
    Settlement of convertible
     notes payable                     -           -       1,100           -
                              ----------------------- -----------------------
                                       9        (385)     18.740           -
    Investing activities
      Purchase of property,
       plant and equipment           (32)        (51)        (55)        (54)
    Purchase of commercial
     instruments                     (13)         (3)        (27)        (25)
    Purchase of technology
     and trademarks                 (502)          -        (502)          -
    Decrease in short-term
     investments                       -       1,001           -         964
    Decrease in deferred
     revenue                         (32)        (43)        (65)        (86)
                              ----------------------- -----------------------
                                    (579)        904        (649)        799
                              ----------------------- -----------------------

    Increase (decrease) in
     cash and cash equivalents
     during the period            (1,868)        475      14,392         194
                              ----------------------- -----------------------

    Cash and cash equivalents -
     Beginning of period          19,204          16       2,944         297
                              ----------------------- -----------------------

    Cash and cash equivalents -
     End of period                17,336         491      17,336         491
                              ----------------------- -----------------------
                              ----------------------- -----------------------

    Non cash working capital
     and financing activities
    Decrease in current
     portion of convertible
     notes payable                     -           -      (1,100)          -
    Settlement of convertible
     notes payable                     -           -       1,100           -

%SEDAR: 00002006E

For further information: Dr. Paul Walker, President & CEO, 416-626-3233 ext. 2100; Casey Gurfinkel, Investor Relations, 416-815-0700 ext. 283, cgurfinkel@equicomgroup.com