Spectral announces first quarter financial results

TORONTO, May 14 /CNW/ - Spectral Diagnostics Inc. (TSX:SDI) today announced its operational highlights and financial results for the first quarter ended March 31, 2010.

"During the first quarter we continued to focus on preparations for the initiation of our US pivotal trial for Toraymyxin(TM), a therapeutic hemoperfusion device that removes endotoxin from the bloodstream. Toraymyxin(TM) has the potential to fulfill an unmet need for the approximately 250,000 patients that develop severe sepsis or septic shock in the US each year. In combination with our EAA(TM) diagnostic, this would be the first theranostic treatment for sepsis," said Dr. Paul Walker, President and CEO of Spectral. "With the cash resources now in place and our recent Investigational Device Exemption ("IDE") approval from the FDA, we are planning to start the trial in the first half of this year."

Highlights:

    
    -   IDE approved by the US FDA on February 26, 2010.
    -   Completed private placement for $19.5 million on March 2, 2010.
    -   Appointed Mr. Kevin Giese, President, CEO and Director of BioMS
        Medical and Mr. Laine Woollard, QC, Senior Legal Counsel of TEC
        Edmonton, to the Company's Board of Directors.
    -   Presentations on the role of endotoxin in health and disease, and of
        the utility of Spectral's EAA(TM) assay, were made by twelve thought
        leaders in the field of sepsis at the 8th Annual World Congress on
        Trauma, Shock, Inflammation and Sepsis in Munich, Germany that was
        held from March 9-13, 2010.
    

Financial Review

For the three-months ended March 31, 2010, Spectral reported sales of $748,000 compared to $842,000 for the corresponding period in 2009. First quarter sales were consistent year over year but were negatively impacted by the foreign exchange effect of the strengthening Canadian dollar versus the US and Euro currencies.

Selling, general and administrative expenses for the quarter ended March 31, 2010 were $1,492,000 compared to $891,000 for the corresponding period in 2009. The increase is attributable primarily to incremental consulting and regulatory costs of $298,000 related to the commercialization of Toraymyxin(TM) as the Company completed its IDE and prepared to initiate the US pivotal trial. In addition, the first quarter expenses in 2010 included $250,000 of fees paid to BioMS Medical pursuant to a three year services agreement that became effective January 1, 2010. Other operating expenses, that support the existing business, have not increased substantially year over year.

For the three-months ended March 31, 2010, the Company reported a loss of $1,943,000, or ($0.05) per share, compared to a loss of $404,000 or ($0.02) per share for the corresponding period in 2009. The first quarter loss in 2010 included the aforementioned expenses, totalling $548,000 and $792,000 of stock based compensation expense related to the issue of stock options to directors, officers and employees, as approved by shareholders, on closing of the financing.

Cash on hand at March 31, 2010 was $19,204,000 compared with $2,944,000 at December 31, 2009. The increase was attributable to net proceeds from the financing that closed on March 2, 2010.

The total number of shares outstanding for the Company was 75,809,049 as at March 31, 2010.

Notice of Annual General Meeting

Spectral will hold its Annual General Meeting of Shareholders at 4:00 PM on May 20, 2010 at the offices of Stikeman, Elliott LLP, Suite 5300, 199 Bay Street, Toronto, Ontario.

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 March 31, 2010 and December 31, 2009
    -------------------------------------------------------------------------

    (in thousands of dollars)

                                                           2010         2009
                                                              $            $
    Assets

    Current assets
    Cash                                                 19,204        2,944
    Accounts receivable                                     714          781
    Inventories                                             242          123
    Prepaid expenses                                        133           45
                                                   --------------------------

                                                         20,293        3,893

    Property, plant and equipment                           443          457

    Commercial instruments                                   76           94

    Purchased technology and trademarks                     470          588
                                                   --------------------------

                                                         21,282        5,032
                                                   --------------------------
                                                   --------------------------

    Liabilities

    Current liabilities
    Accounts payable and accrued liabilities                845        1,077
    Current portion of convertible notes payable          1,271        2,336
                                                   --------------------------
                                                          2,116        3,413

    Deferred revenue                                        221          254
                                                   --------------------------

                                                          2,337        3,667
                                                   --------------------------

    Shareholders' Equity

    Common shares                                        21,255        2,524

    Other equity                                          6,586        5,794

    Deficit                                              (8,896)      (6,953)
                                                   --------------------------

                                                         18,945        1,365
                                                   --------------------------

                                                         21,282        5,032
                                                   --------------------------
                                                   --------------------------



    Spectral Diagnostics Inc.
    Statements of Operations, Comprehensive Loss and Deficit - unaudited
    For the three months ended March 31, 2010 and 2009
    -------------------------------------------------------------------------

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


                                                           2010         2009
                                                              $            $

    Sales                                                   748          842

    Cost of sales                                           164          184
                                                   --------------------------

    Gross margin                                            584          658
                                                   --------------------------

    Operating expenses
    Selling, general and administrative                   1,492          891
    Amortization                                            155          164
    Foreign currency exchange loss (gain)                    39          (32)
    Stock-based compensation                                792            -
    Research and product development, net of tax
     credits                                                 16           20
                                                   --------------------------

                                                          2,494        1,043
                                                   --------------------------

    Loss before the following                            (1,910)        (385)

    Interest on convertible notes payable                   (35)         (41)

    Other net investment income                               2           22
                                                   --------------------------


    Loss and comprehensive loss for the period           (1,943)        (404)

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


    Deficit - End of period                              (8,896)      (4,593)
                                                   --------------------------
                                                   --------------------------

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

    Weighted average number of common shares
     outstanding                                     40,793,181   24,118,424
                                                   --------------------------
                                                   --------------------------


    Spectral Diagnostics Inc.
    Statements of Cash Flows - unaudited
    For the three months ended March 31, 2010 and 2009
    -------------------------------------------------------------------------

    (in thousands of dollars)


                                                           2010         2009
                                                              $            $

    Cash provided by (used in)

    Operating activities
    Loss and comprehensive loss for the period           (1,943)        (404)
    Items not affecting cash
      Amortization                                          155          164
      Amortization of commercial instruments included
       in cost of sales                                      32           21
      Stock-based compensation expense                      792            -
      Interest on convertible notes payable                  35           41
    Changes in non-cash working capital                  (1,472)        (383)
                                                   --------------------------

                                                         (2,401)        (561)
                                                   --------------------------
    Investing activities
    Purchase of property, plant and equipment               (23)          (3)
    Purchase of commercial instruments                      (14)         (22)
    Increase in short-term investments                        -          (37)
    Decrease in deferred revenue                            (33)         (43)
                                                   --------------------------

                                                            (70)        (105)
                                                   --------------------------

    Financing activities
    Bank indebtedness                                         -          385
    Proceeds on issue of private placement               17,608            -
    Proceeds on exercise of stock options                    23            -
    Settlement of convertible notes payable               1,100            -
                                                   --------------------------
                                                         18,731          385

    Increase (decrease) in cash during the period        16,260         (281)

    Cash - Beginning of period                            2,944          297
                                                   --------------------------

    Cash - End of period                                 19,204           16
                                                   --------------------------
                                                   --------------------------

    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

SOURCE Spectral Diagnostics Inc.

For further information: 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

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