Spectral announces 2007 financial results



    TORONTO, March 7 /CNW/ - Spectral Diagnostics Inc. (TSX:SDI) today
announced its operational highlights and financial results for the fiscal year
ended December 31, 2007.
    "Spectral's priority is the commercialization of its EAA(TM) Endotoxin
Activity Assay, the only FDA cleared assay for the measurement of endotoxin.
Endotoxemia is a systemic response to bacterial toxins that can rapidly lead
to organ dysfunction, septic shock and ultimately death. Healthcare
professionals have become much more aware of endotoxemia over the last several
years, and many of the emerging therapies for sepsis now advancing though
clinical trials target endotoxin," said Dr. Paul Walker, President and CEO of
Spectral Diagnostics. "The growing awareness of endotoxemia, and the
increasing number of therapies being developed for this indication, position
us well to drive adoption of the EAA(TM), which can be used to identify
patients, enable therapeutics and monitor treatment."

    
    Highlights from 2007:

    -  Entered into an exclusive agreement in November 2007 with Toray
       Medical Co. Ltd. to distribute Spectral's EAA(TM) Endotoxin Activity
       Assay in Japan. Toray Medical will market and sell the EAA(TM) in
       conjunction with its Toraymyxin blood purification device, which
       removes endotoxin from the bloodstream. Toray Medical will also
       distribute the EAA(TM) diagnostic as a stand-alone product.

    -  Launched the EAA(TM) in Germany in September 2007 through A. Menarini
       Diagnostics Deutschland, building on a distribution agreement signed
       in May 2007 which covers Germany and includes an option to extend the
       arrangement to the rest of Europe.

    -  Expanded its EAA(TM) product distribution agreement in Italy with its
       partner Estor, SpA in May 2007. The expanded agreement is aimed at
       increasing the number of hospitals in Italy utilizing the EAA(TM)
       assay, particularly in combination with the Toraymyxin blood
       purification device.

    -  Entered into a non-exclusive license and material supply agreement in
       November 2007 with Bio-Rad Pasteur S.A., a leader in the manufacturing
       and distribution of products for the life science research and
       clinical diagnostics markets. Spectral will provide Bio-Rad with its
       proprietary single chain Troponin I reagents, which are now being sold
       by five major international reagent supply and instrumentation
       companies.

    -  Upgraded manufacturing facilities to be self sufficient for the
       manufacture of its EAA(TM) product and its proprietary reagent
       products.
    

    Financial Review

    The financial statements apply to the year ended December 31, 2007 and
the nine months ended December 31, 2006.
    For the year ended December 31, 2007, the Company reported sales of
$2,993,000 compared to $2,169,000 for the nine month period in 2006. Sales in
2007 were primarily comprised of the Company's EAA(TM) product and its
Troponin I reagents. On an annualized basis there was a marginal increase in
sales levels, however, three significant EAA(TM) distribution agreements were
signed in the last half of 2007 that management anticipates will positively
affect revenues going forward.
    Operating expenses of $3,915,000 were closely managed in 2007 and
remained consistent with spending levels for the nine months ended December
31, 2006, reflecting the Company's low cost operating structure.
    The Company reported a Fiscal 2007 loss of $1,666,000 ($0.07 per share)
compared to net income of $3,730,000 ($0.16 per share) for the nine months
ended December 31, 2006. Net Income for the nine month period last year
included a one time gain of $5,363,000 ($0.23 cents per share) on the
settlement of certain convertible notes payable.
    At December 31, 2007, the Company had cash and short-term investments
totaling $4,927,000, compared to $6,002,000 as at December 31, 2006.
    The total number of shares outstanding for the Company was 24,118,424 as
at March 6, 2008.

    Notice of Annual General Meeting

    Spectral will hold its Annual General Meeting of Shareholders at 4:00 PM
on May 13, 2008 at the offices of Stikeman, Elliott LLP, Suite 5300, 199 Bay
Street, Toronto, Ontario.

    About Spectral Diagnostics

    Spectral is a developer of innovative technologies for comprehensive
disease management. Spectral's lead product is its EAA(TM) Endotoxin Activity
Assay, the only FDA approved diagnostic for the measurement of endotoxin.
Spectral technologies provide accurate and timely information to clinicians
enabling the early initiation of appropriate and targeted therapy. 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.

    Summary financial statements attached:

    
    Spectral Diagnostics Inc.
    Balance Sheets
    -------------------------------------------------------------------------
    As at December 31, 2007 and 2006

    (in thousands of dollars)

                                                          2007          2006
                                                             $             $
    Assets

    Current assets
    Cash and cash equivalents                              638           945
    Short-term investments                               4,289         5,057
    Accounts receivable                                    677           762
    Inventories                                            249           155
    Prepaid expenses                                        55           130
                                                    -------------------------

                                                         5,908         7,049

    Property, plant and equipment, net                     379           235

    Commercial instruments, net                            164            29

    Purchased technology and trademarks, net             1,529         2,022
                                                    -------------------------

                                                         7,980         9,335
                                                    -------------------------
                                                    -------------------------

    Liabilities

    Current liabilities
    Accounts payable and accrued liabilities               379           504

    Deferred revenue                                       150             -

    Convertible note payable                             2,008         1,843
                                                    -------------------------

                                                         2,537         2,347
                                                    -------------------------

    Shareholders' Equity

    Common shares                                        2,524         2,520

    Other equity                                         5,606         5,489

    Deficit                                             (2,687)       (1,021)
                                                    -------------------------

                                                         5,443         6,988
                                                    -------------------------

                                                         7,980         9,335
                                                    -------------------------
                                                    -------------------------


    Spectral Diagnostics Inc.
    Statements of Operations, Comprehensive (Loss) Income and Deficit
    -------------------------------------------------------------------------

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

                                                          Year   Nine months
                                                         ended         ended
                                                      December      December
                                                      31, 2007      31, 2006
                                                             $             $

    Sales                                                2,993         2,169

    Cost of sales                                          803           583
                                                    -------------------------

    Gross margin                                         2,190         1,586
                                                    -------------------------

    Operating expenses
    Selling, general and administrative                  3,167         2,395
    Amortization                                           588           580
    Foreign exchange loss                                  102            34
    Stock-based compensation                               117           358
    Research and product development,
     net of tax credits                                    (59)         (239)
                                                    -------------------------

                                                         3,915         3,128
                                                    -------------------------

    Loss before the following                           (1,725)       (1,542)

    Interest expense on convertible notes payable         (165)         (288)

    Other net interest income                              224           197

    Gain on settlement of convertible
     notes payable                                           -         5,363
                                                    -------------------------

    Net (loss) income and comprehensive (loss)
     income for the period                              (1,666)        3,730

    Deficit - Beginning of period                       (1,021)     (103,671)

    Restatement of capital                                   -        98,920
                                                    -------------------------

    Deficit - End of period                             (2,687)       (1,021)
                                                    -------------------------
                                                    -------------------------

    Basic (loss) earnings per common share               (0.07)         0.16
                                                    -------------------------
                                                    -------------------------

    Diluted (loss) earnings per common share             (0.07)         0.14
                                                    -------------------------
                                                    -------------------------

    Weighted average number of common
     shares outstanding                             24,117,333    22,874,694
                                                    -------------------------
                                                    -------------------------


    Spectral Diagnostics Inc.
    Statements of Cash Flows
    -------------------------------------------------------------------------

    (in thousands of dollars)

                                                         Year    Nine months
                                                        ended          ended
                                                     December       December
                                                     31, 2007       31, 2006
                                                            $              $
    Cash provided by (used in)

    Operating activities
    Net (loss) income and comprehensive (loss)
     income for the period                             (1,666)         3,730
    Items not affecting cash
      Amortization                                        588            580
      Amortization of commercial instruments
       included in cost of sales                           11             12
      Loss on disposal of property, plant
       and equipment                                       46              -
      Write off of purchased technology
       and trademarks                                      66              -
      Stock-based compensation expense                    117            358
      Interest on convertible notes payable               165            288
      Gain on settlement of convertible
       notes payable                                        -         (5,363)
    Changes in non-cash working capital                   (59)          (664)
                                                    -------------------------

                                                         (732)        (1,059)
                                                    -------------------------

    Investing activities
    Purchase of property, plant and equipment            (280)          (157)
    Purchase of technology and trademarks                 (44)           (22)
    Purchase of commercial instruments                   (173)          (113)
    Decrease (increase) in short-term investments         768         (1,707)
    Deferred revenue                                      150              -
                                                    -------------------------

                                                          421         (1,999)
                                                    -------------------------

    Financing activities
    Issuance of common shares                               4              -
                                                    -------------------------

    Decrease in cash and cash equivalents
     during the period                                   (307)        (3,058)

    Cash and cash equivalents
     - Beginning of period                                945          4,003
                                                    -------------------------

    Cash and cash equivalents - End of period             638            945
                                                    -------------------------
                                                    -------------------------

    Non-cash investing and financing activities
    Settlement of existing convertible
     notes payable                                          -         (9,801)
    Issuance of new convertible note payable                -          1,761
    Issuance of common shares on settlement
     of convertible notes payable                           -          1,994
    Issuance of warrants on settlement
     of convertible notes payable                           -            168
    

    %SEDAR: 00002006E




For further information:

For further information: Dr. Paul Walker, President & CEO, (416)
626-3233 ex. 2100; James Smith, Investor Relations, (416) 815-0700 ext. 229,
jsmith@equicomgroup.com

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