Spectral Announces Financial Results



    TORONTO, March 8 /CNW/ - Spectral today reported net income of
$3.7 million, $0.16 per share, for the nine months ended December 31, 2006
compared to a loss of $4.6 million, $0.23 per share, for the year ended
March 31, 2006. The significant earnings improvement is attributable to the
Company's restructured operations pursuant to the sale of its unprofitable
rapid cardiac test business in February, 2006 and a substantial gain on
settlement of certain long-term debt obligations. Revenues for the nine month
period ended December 31, 2006 amounted to $2,169, reflecting the fact that
many of the new EAA(TM) instruments were placed in the last half of the fiscal
period and target test utilization levels had not yet been achieved. The
Company changed its fiscal year end to December 31 (previously March 31) to
more closely align its business cycle with that of its major customers and
suppliers.

    "During the last nine months the Company has completely realigned its
operations to focus on the commercialization of its core EAA(TM) and
RapidWN(TM) products," stated Mr. Anthony Businskas, Executive Vice President
and CFO of Spectral. "We have laid the foundation for revenue growth next year
through some significant commercial arrangements concluded in 2006 and we
anticipate gradual improvement in operating results as the year progresses,"
added Mr. Businskas.

    Spectral is a developer of innovative technologies for comprehensive
disease management. Spectral provides accurate and timely information to
clinicians enabling the early initiation of appropriate and targeted therapy.
Current products include Spectral's FDA approved rapid diagnostic for West
Nile Virus (RapidWN(TM)) and its FDA approved rapid diagnostic for sepsis
(EAA(TM)) as well as a range of other biological reagents. Spectral's common
shares are listed on The Toronto Stock Exchange under the symbol SDI.

    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.

    
                          Spectral Diagnostics Inc.

                      Consolidated Financial Statements
                     December 31, 2006 and March 31, 2006
                     (in thousands of Canadian dollars)



    Spectral Diagnostics Inc.
    Consolidated Balance Sheets
    -------------------------------------------------------------------------
    (in thousands of Canadian dollars)

                                                   December 31      March 31
                                                          2006          2006
                                                             $             $

    Assets

    Current assets
    Cash and cash equivalents                              945         4,003
    Short-term investments                               5,057         3,350
    Accounts receivable                                    762           877
    Inventories                                            253            43
    Prepaid expenses                                       130           250
                                                   --------------------------

                                                         7,147         8,523

    Property, plant and equipment                          166           170

    Purchased technology and trademarks, net             2,022         2,353

    Deferred financing costs, net                            -           512
                                                   --------------------------

                                                         9,335        11,558
                                                   --------------------------
                                                   --------------------------

    Liabilities

    Current liabilities
    Accounts payable and accrued liabilities               504         1,224
                                                   --------------------------

                                                           504         1,224

    Convertible notes payable                            1,843         9,596
                                                   --------------------------

                                                         2,347        10,820
                                                   --------------------------

    Shareholders' Equity

    Common shares                                        2,520        99,446

    Other equity                                         5,489         4,963

    Deficit                                             (1,021)     (103,671)
                                                   --------------------------

                                                         6,988           738
                                                   --------------------------

                                                         9,335        11,558
                                                   --------------------------
                                                   --------------------------



    Spectral Diagnostics Inc.
    Consolidated Statements of Operations and Deficit
    -------------------------------------------------------------------------
    (in thousands of Canadian dollars, except share and per share data)

                                                   Nine months
                                                         ended    Year ended
                                                   December 31      March 31
                                                          2006          2006
                                                             $             $

    Sales                                                2,169         7,272

    Cost of sales                                          570         3,446
                                                   --------------------------

    Gross margin                                         1,599         3,826

    Operating expenses
    Selling, general and administrative                  2,395         7,156
    Amortization                                           593         1,323
    Foreign exchange loss                                   34           227
    Stock-based compensation                               358            66
    Research and product development, net                 (239)          183
                                                   --------------------------

                                                         3,141         8,975
                                                   --------------------------

    Loss before the following                           (1,542)       (5,149)

    Interest expense on convertible notes
     payable                                              (288)       (1,854)

    Other net interest income (expense)                    197           (37)

    Gain on sale of rapid cardiac business                   -         2,385

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

    Net income (loss) for the period                     3,730        (4,655)

    Deficit - Beginning of period                     (103,671)      (99,016)

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

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

    Basic earnings (loss) per common share                0.16         (0.23)
                                                   --------------------------
                                                   --------------------------

    Diluted earnings (loss) per common share              0.14         (0.23)
                                                   --------------------------
                                                   --------------------------

    Weighted average number of common
     shares outstanding                             22,874,694    19,860,166
                                                   --------------------------
                                                   --------------------------


    Spectral Diagnostics Inc.
    Consolidated Statements of Cash Flows
    -------------------------------------------------------------------------
    (in thousands of Canadian dollars)

                                                   Nine months
                                                         ended    Year ended
                                                   December 31      March 31
                                                          2006          2006
                                                             $             $

    Cash provided by (used in)

    Operating activities
    Net income (loss) for the period                     3,730        (4,655)
    Items not affecting cash
      Amortization                                         593         1,323
      Stock-based compensation expense                     358            66
      Accrued interest on convertible
       notes payable                                       288         1,854
      Gain on sale of rapid cardiac business                 -        (2,385)
      Gain of settlement of convertible notes
       payable                                          (5,363)            -
    Changes in non-cash working capital                   (876)         (412)
                                                    -------------------------

                                                        (1,270)       (4,209)
                                                    -------------------------

    Investing activities
    Purchase of property, plant and equipment              (81)         (216)
    Proceeds on sale of rapid cardiac business               -         5,650
    Increase in short term investments                  (1,707)            -
                                                    -------------------------
                                                        (1,788)        5,434
                                                    -------------------------

    Financing activities
    Bank indebtedness                                        -          (929)
    Restricted cash                                          -         2,013
                                                    -------------------------

                                                             -         1,084
                                                    -------------------------

    (Decrease) increase in cash and cash
      equivalents during the period                     (3,058)        2,309

    Cash and cash equivalents - Beginning
     of period                                           4,003         1,694
                                                    -------------------------

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

    Non-cash investing activities
    Common shares received on sale of rapid
     cardiac business                                                  3,350
    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: At Spectral Diagnostics Inc.: Mr. Anthony
Businskas, Executive VP & CFO, (416) 626-3233 ex. 2200

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Spectral Diagnostics Inc.

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