SPECTRAL ANNOUNCES FIRST QUARTER RESULTS

TORONTO, May 12 /CNW/ - Spectral Diagnostics Inc., (TSX:SDI), a Phase III company developing the first theranostic treatment for patients with septic shock, today announced its financial results for the first quarter ended March 31, 2011.

First Quarter Highlights:

  • Jointly announced with Medwell Capital Corp., ("Medwell"), (TSX-V:MWC), a non-brokered arrangement whereby Medwell and a consortium of buyers purchased, in private transactions, 12,449,501 common shares and 962,500 common share purchase warrants of Spectral from GrowthWorks Canadian Fund Ltd., representing 15.6% of the issued and outstanding shares. Medwell now owns approximately 45% of the outstanding common shares of Spectral;

  • Continued to effectively manage its U.S. pivotal trial for Toraymyxin, a therapeutic hemoperfusion device that removes endotoxin from the bloodstream. The EUPHRATES trial is targeted to enrol approximately 360 patients at 15 sites in the U.S. over a period of 24 to 30 months, with interim results expected at the midpoint of the trial by the end of the first half of 2012;

  • Subsequent to quarter end, announced that all 15 carefully chosen clinical sites for the EUPHRATES trial are screening patients and enrolment in the Company's Phase III sepsis trial is underway;

  • Concluded the reporting period with $13.6 million in cash and short term investments.

"We continued to execute on all aspects of our unique Phase III clinical trial, the EUPHRATES trial, in the first quarter of this year," said Dr. Paul Walker, President and CEO of Spectral. "In addition, we solidified our investor base during the reporting period. We believe we have laid a strong foundation and look forward to the continued successful implementation of our EUPHRATES trial."

Financial Review

The first quarter ended March 31, 2011 was the Company's first reporting period under International Financial Reporting Standards (IFRS). As anticipated and disclosed in the fourth quarter of 2010, the transition to IFRS had no material impact on Spectral's financial results.

Revenues for the three months ended March 31, 2011 were $622,000 compared to $825,000 for the same period in 2010. Revenues were lower in the first quarter of 2011 compared to the same period in 2010 due primarily to the impact of certain expired distribution contracts which are now in the process of renegotiation.

Operating expenses were consistent year over year, with the exception of employee benefits, which expense category included $126 of stock option expense in the first quarter of 2011 compared to $792 in the same period last year. In addition, management services fees paid to Medwell were $125,000 higher in the quarter as a result of increased management activities in clinical trial oversight and investor relations.

For the three-months ended March 31, 2011, the Company reported a loss of $1,458,000 ($0.02 per share) compared to $1,940,000 ($0.05 per share) for the corresponding period in 2010. The first quarter loss in 2011 was $482 lower than in the same period a year ago due to the lower stock option expense, offset by higher management service fees.

Cash and short term investments on hand at March 31, 2011 were $13.6 million compared with $15.3 million at December 31, 2010. The cash was used to fund operations and for working capital purposes.

The total number of shares outstanding for the Company was 80,550,061 as at March 31, 2011.

About Spectral Diagnostics

Spectral is a Phase III company seeking U.S. FDA approval for its lead theranostics product for the treatment of septic shock. Toraymyxin is a therapeutic hemoperfusion device that removes endotoxin, which can cause sepsis, from the bloodstream. Directed by the Company's Endotoxin Activity Assay (EAA™), the only FDA cleared diagnostic for the risk of developing sepsis, Spectral's EUPHRATES trial is the world's first theranostics trial in the area of sepsis.

Toraymyxin has been approved for therapeutic use in 18 countries, and has been used safely and effectively in more than 80,000 patients to date. In March, 2009, Spectral obtained the exclusive development and commercial rights in the U.S. for Toraymyxin, and in November, 2010, signed an exclusive distribution agreement for this product in Canada. More than 250,000 patients are diagnosed with severe sepsis and septic shock in North America each year, representing a greater than $1 billion market opportunity for Spectral. Spectral is listed on the Toronto Stock Exchange under the symbol SDI. For more information please visit www.spectraldx.com.

Forward-looking statement

Information in this news release that is not current or historical factual information may constitute forwardlooking 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

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Spectral Diagnostics Inc.
Condensed Interim Statement of Financial Position
(unaudited)

                           
                           
(in thousands of Canadian dollars)                          


          March 31,
2011
$
    December 31,
2010
$
      January 1,
2010
$
                           
Assets
Current assets
Cash and cash equivalents
Short-term investment
Trade and other receivables
Inventories
Prepayments
         

8,547
5,021
642
176
136
   

10,311
5,021
595
209
31
     

2,944
-
792
123
45
            14,522     16,167       3,904
Non-current assets
Property, plant and equipment
Intangible assets
         
498
478
   
526
602
     
457
588
            976     1,128       1,045
                           
Total assets           15,498     17,295       4,949
                           
Liabilities
Current liabilities
Trade and other payables
Current portion of convertible notes payable
Deferred revenue
         

882
-
76
   

1,322
-
101
     

1,088
2,336
104
Total liabilities           958     1,423       3,528
                           
Equity
Share capital
Contributed surplus
Other equity reserves
Deficit
         
17,538
3,696
8,159
(14,853)
   
17,538
3,696
8,033
(13,395)
     
2,524
3,696
2,098
(6,897)
            14,540     15,872       1,421
                           
Total liabilities and equity           15,498     17,295       4,949
                         

Spectral Diagnostics Inc.
Condensed Interim Statement of Loss and Comprehensive Loss
For the three months ended March 31, 2011 and 2010
(unaudited)

                 
                 
(in thousands of Canadian dollars, except for share and per share data)                




2011
$



2010
$
Revenue       622       825
                 
Other income       27       2
                 
Expenses
Changes in inventories of finished goods and work in progress
Raw materials and consumables used
Employee benefits
Consulting and professional fees
Management services
Regulatory and investor relations
Travel and entertainment
Depreciation and amortization
Foreign exchange loss
Other expenses
     
63
50
740
453
375
76
110
157
7
92
     
119
39
1,348
439
250
79
144
155
39
114
        2,123       2,726
                 
Operating loss       (1,474)       (1,899)
                 
Interest on convertible notes payable
Investment income
      -
16
      41
-
                 
Loss and comprehensive loss for the period       (1,458)       (1,940)
                 
Basic and diluted loss per common share       (0.02)       (0.05)
                 
Weighted average number of common shares outstanding       80,550,061       40,793,181


Spectral Diagnostics Inc.
Condensed Interim Statement of Changes in Equity
(unaudited)

                                               
                                               
(in thousands of Canadian dollars, except number of shares)
 
        Issued capital       Contributed
surplus
    Other equity
reserves
      Deficit       Total equity
        Number       $       $     $       $       $
Balance, January 1, 2010
Private placement
Settlement of convertible notes payable
Stock options exercised
Loss and comprehensive loss for the period
Share-based compensation
      24,118,424
48,750,000
2,890,625
50,000

      2,524
12,465
1,156
25

      3,696




    2,098
5,143



792
      (6,897)



(1,940)
      1,421
17,608
1,156
25
(1,940)
792
Balance, March 31, 2010
Settlement of convertible notes payable
Stock options exercised
Loss and comprehensive loss for the period
      75,809,049
4,648,512
92,500
      16,170
1,344
24
      3,696


    8,033


      (8,837)


(4,558)
      19,062
1,344
24
(4,558)
Balance, December 31, 2010
Loss and comprehensive loss for the period
Share-based compensation
      80,550,061

      17,538

      3,696

    8,033

126
      (13,395)
(1,458)
      15,872
(1,458)
126
Balance, March 31, 2011       80,550,061       17,538       3,696     8,159       (14,853)       14,540
                                               

Spectral Diagnostics Inc.
Condensed Interim Statement of Cash Flows
For the three months ended March 31, 2011 and 2010
(unaudited)

                                   
                                   
(in thousands of Canadian dollars)                                  
                      2011
$
          2010
$
Cash flow provided by (used in)                                  
                                   
Operating activities
Loss and comprehensive loss for the period
Adjustments for:
                    (1,458)
          (1,940)
  Depreciation on property, plant, and equipment
Amortization of intangible assets
Instrumentation usage
Share-based compensation
Interest on convertible notes payable
                    33
124
20
126
-
          37
118
18
792
41
Changes in items of working capital :                                  
  Trade and other receivables
Inventories
Prepayments
Trade and other payables
Deferred revenue
                    (47)
33
(105)
(440)
(25)
          42
(118)
(88)
(207)
(27)
Net cash generated from operating activities                     (1,759)           (1,350)
                                   
Investing activities
Property, plant and equipment expenditures
                   
(5)
         
(23)
Net cash generated from financing activities                     (5)           (23)
                                   
Financing activities
Private placement
Stock options exercised
                   
-
-
         
17,608
25
Net cash generated from financing activities                     -           17,633
                                   
(Decrease) increase in cash and cash equivalents                     (1,764)           16,260
Cash and cash equivalents, beginning of period                     10,311           2,944
Cash and cash equivalents, end of period                     8,547           19,204
                     

SOURCE Spectral Diagnostics Inc.

For further information:

Anthony Businskas
Executive Vice President and CFO
416-626-3233 ext. 2200

         
  Adam Peeler
Investor Relations
TMX Equicom
416-815-0700 ext. 225
apeeler@equicomgroup.com

 

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Spectral Diagnostics Inc.

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