Spectral announces second quarter 2008 results



    TORONTO, Aug. 13 /CNW/ - Spectral Diagnostics Inc. (TSX: SDI) today
announced its financial results for the second quarter ended June 30, 2008.
    "The clinical and commercial adoption of our Endotoxin Activity Assay
(EAA(TM)) remains our primary focus. During the quarter we continued to
establish the value of our EAA(TM) diagnostic, both as a stand-alone product
and also in combination with therapeutics, through the expansion of our
collaboration agreement with Toray, the inclusion of EAA(TM) in a Phase III
study with a major international pharmaceutical company, and our prominence at
several important scientific conferences," said Dr. Paul Walker, President and
CEO of Spectral Diagnostics. "We believe this strategy will increase awareness
and uptake globally of our unique EAA(TM) product for the diagnosis, treatment
and monitoring of patients with endotoxemia."

    
    Highlights

    -   Selected by a major international pharmaceutical company to use
        EAA(TM) to measure endotoxin levels during the enrolment of patients
        in a Phase III sub study, part of a multinational clinical trial
        evaluating the safety and effectiveness of a treatment for severe
        sepsis

    -   Expanded collaboration agreement with Toray, gaining access to
        Toray's distributors in new geographic territories including China,
        India, Russia and Canada for the sales and promotion of EAA(TM) in
        combination with its Toraymyxin blood purification device and as a
        stand-alone product

    -   Data demonstrating the clinical utility of the EAA(TM) in combination
        with Toraymyxin was presented at the Practical Aspects of
        Extracorporeal Blood Purification in Intensive Care Medicine 6th
        Annual Conference held in Moscow, Russia in May

    -   Findings showing the clinical effectiveness of EAA(TM) to identify
        patients with elevated endotoxin levels and to guide endotoxin
        reducing strategies presented at a symposium entitled "Blood
        Purification in the Treatment of Sepsis," at the International Shock
        Congress in Cologne, Germany in June

    -   On June 30, the Company entered into a exclusive distribution
        agreement in Russia with BB Medical to market and sell EAA(TM)
        throughout the Russian Federation
    

    Financial Review

    Although EAA(TM) product sales increased more than 20% from the first
quarter and were 90% higher than for the first half of last year, this
improvement was not enough to offset a decline of $319,000 in royalty revenues
from licenses of the Company's Troponin I technology. For the six months ended
June 30, 2008, Spectral reported sales of $1,449,000, compared to sales of
$1,579,000 for the corresponding period in 2007, due entirely to the lower
royalties. Certain pre-established royalty plateaus were reached in 2007,
resulting in an estimated reduction of $600,000 in related revenues for 2008.
In future years, this temporary decrease will be offset as revenues from a new
license agreement, which was signed in late 2007, are realized.
    For the six months ended June 30, 2008, the Company reported a loss of
$867,000 or ($0.04) per share, compared with a loss of $586,000 or ($0.02) per
share for the corresponding period in 2007.The higher loss is attributable
solely to the reduction in royalties.
    Cash and short term investments at June 30, 2008 totalled $4,398,000.
Management expects that the Company will maintain a cash and short term
investment balance in excess of $4 million for the rest of the year.

    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. 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, 2008 and December 31, 2007
    -------------------------------------------------------------------------

    (in thousands of dollars)

                                                            2008        2007
                                                               $           $

    Assets

    Current assets
    Cash and cash equivalents                                  8         638
    Short-term investments                                 4,390       4,289
    Accounts receivable                                      809         677
    Inventories                                              214         249
    Prepaid expenses                                         118          55
                                                      -----------------------

                                                           5,539       5,908

    Property, plant and equipment                            436         379

    Commercial instruments                                   149         164

    Purchased technology and trademarks                    1,294       1,529
                                                      -----------------------

                                                           7,418       7,980
                                                      -----------------------
                                                      -----------------------

    Liabilities

    Current liabilities
    Bank indebtedness                                        195           -
    Accounts payable and accrued liabilities                 372         379

    Deferred revenue                                         142         150

    Convertible note payable                               2,090       2,008
                                                      -----------------------

                                                           2,799       2,537
                                                      -----------------------

    Shareholders' Equity

    Common shares                                          2,524       2,524

    Other equity                                           5,649       5,606

    Deficit                                               (3,554)     (2,687)
                                                      -----------------------

                                                           4,619       5,443
                                                      -----------------------

                                                           7,418       7,980
                                                      -----------------------
                                                      -----------------------



    Spectral Diagnostics Inc.
    Statements of Operations, Comprehensive Loss and Deficit - unaudited
    For the six months ended June 30, 2008 and 2007
    -------------------------------------------------------------------------
    (in thousands of dollars, except share and per share data)

                                      3 Months Ended          6 Months Ended
                                             June 30                 June 30

                                    2008        2007        2008        2007
                                       $           $           $           $

    Sales                            785         738       1,449       1,579

    Cost of sales                    189         157         389         379
                              ----------------------- -----------------------

    Gross margin                     596         581       1,060       1,200
                              ----------------------- -----------------------

    Operating expenses
    Selling, general and
     administrative                  774         763       1,566       1,576
    Amortization                     164         147         318         286
    Foreign exchange loss              7          63           2          54
    Stock-based compensation          22           2          43          31
    Research and product
     development, net of
     tax credits                      11           -          25        (125)
                              ----------------------- -----------------------

                                     978         975       1,954       1,822
                              ----------------------- -----------------------

    Loss before the following       (382)       (394)       (894)       (622)

    Interest expense on
     convertible notes payable       (41)        (41)        (82)        (83)

    Net interest income                4          56         109         119

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

    Loss and comprehensive
     loss for the period            (419)       (379)       (867)       (586)

    Deficit - Beginning
     of period                    (3,135)     (1,228)     (2,687)     (1,021)

                              ----------------------- -----------------------
    Deficit - End of period       (3,554)     (1,607)     (3,554)     (1,607)
                              ----------------------- -----------------------
                              ----------------------- -----------------------

    Basic and diluted loss
     per common share              (0.02)      (0.01)      (0.04)     (0.02)
                              ----------------------- -----------------------
                              ----------------------- -----------------------

    Weighted average number
     of common shares
     outstanding              24,118,424  24,118,424  24,118,424  24,116,225
                              ----------------------- -----------------------
                              ----------------------- -----------------------



    Spectral Diagnostics Inc.
    Statements of Cash Flows - unaudited
    For the six months ended June 30, 2008 and 2007
    -------------------------------------------------------------------------

    (in thousands of dollars)

                                      3 Months Ended          6 Months Ended
                                             June 30                 June 30
                                    2008        2007        2008        2007
                                       $           $           $           $

    Cash provided by (used in)

    Operating activities
    Loss and comprehensive for
     the period                     (419)       (379)       (867)       (586)
    Items not affecting cash
      Amortization                   164         147         318         286
      Amortization of commercial
       instruments included
       in cost of sales                7          (1)         12          29
      Stock-based compensation
       expense                        22           2          43          31
      Interest on convertible
       notes payable                  41          41          82          83
    Changes in non-cash
     working capital                   -         (76)       (167)       (497)
                              ----------------------- -----------------------
                                    (185)       (266)       (579)       (654)
                              ----------------------- -----------------------

    Financing activities
    Bank indebtedness                195          35         195          35
    Issuance of common shares          -           -           -           4
                              ----------------------- -----------------------
                                     195          35         195          39
                              ----------------------- -----------------------

    Investing activities
    Purchase of property,
     plant and equipment            (101)        (23)       (115)        (48)
    Purchase of commercial
     instruments                       -        (108)        (22)       (119)
    Purchase of technology
     and trademarks                    -           -           -         (44)
    Decrease (increase) in
     short-term investments            2         (39)       (101)       (102)
    Decrease in deferred revenue      (5)          -          (8)          -
                              ----------------------- -----------------------
                                    (104)       (170)       (246)       (313)
                              ----------------------- -----------------------

    Decrease in cash and cash
     equivalents during
     the period                      (94)       (401)       (630)       (928)
                              ----------------------- -----------------------

    Cash and cash equivalents
     - Beginning of period           102         418         638         945
                              ----------------------- -----------------------

    Cash and cash equivalents
     - End of period                   8          17           8          17
                              ----------------------- -----------------------
                              ----------------------- -----------------------
    

    %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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