Spectral announces third quarter fiscal 2007 financial results



    TORONTO, Nov. 8 /CNW/ - Spectral Diagnostics Inc. (TSX:SDI) today
announced its financial results for the third quarter ended September 30,
2007.
    "Spectral is a company focused on the role that endotoxin plays in
disease processes. Our primary goal is to commercialize our core product, the
EAA(TM) Endotoxin Activity Assay, which is the only FDA cleared endotoxin
assay clinically indicated for the rapid diagnosis of sepsis," said Dr. Paul
Walker, President and CEO of Spectral Diagnostics. "In our third quarter, we
made outstanding progress on this path towards commercialization, resulting
from our participation at this year's International Sepsis Forum and the
completion of three key international distribution agreements for EAA(TM)."

    
    Highlights

    -   Solidified distribution agreements for EAA(TM) with industry leaders
        in three geographical territories: Menarini Diagnostics for Germany,
        Estor S.p.A for Italy and Toray Medical for Japan, with an option for
        expansion into other Asian countries.

    -   Toray Medical will combine the EAA(TM) for use with its therapeutic
        Toraymyxin for the treatment of sepsis.

    -   Co-sponsored key scientific session with Toray Medical entitled
        "Endotoxemia - Detection, Consequence and Intervention" at
        International Sepsis Forum 2007 highlighting the growing recognition
        of the role that endotoxin plays in the onset of sepsis.
    

    Financial Review

    For the three months ended September 30, 2007, Spectral reported sales of
$739,000, a ten per cent increase compared to $675,000 in sales for the
corresponding period in 2006. For the nine-month period ended September 30,
2007, the Company reported sales of $2,318,000 compared to $2,429,000 for the
same period in 2006. Sales for the nine-month period in 2006 included $252,000
of rapid cardiac test revenues related to the business that was sold to
Nanogen. Sales for the nine-month period ended September 30, 2007 are
primarily comprised of the Company's EAA(TM) product and its Troponin I
reagents.
    For the three months ended September 30, 2007, the Company reported a
loss of $382,000, or ($0.02) per share, compared with a loss of $431,000 or
($0.02) per share for the corresponding period in 2006, an improvement in
operating results of $49,000. For the nine months ended September 30, 2007,
the Company reported a loss of $968,000, or ($0.04) per share, compared with
net income of $4,707,000, or $0.22 per share for the same period in 2006. Net
Income for the nine months ended September 30, 2006 included a one time gain
of $2.4 million related to the Company's sale of its rapid cardiac test
business and a one time gain of $5.4 million on the settlement of certain
convertible notes payable. Excluding these gains, Spectral's current year
nine-month operating results reflected a $2.2 million improvement over the
same period in 2006.

    About Spectral Diagnostics

    Spectral is a developer of innovative technologies for comprehensive
disease management. Spectral technologies provide 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 sepsis (EAA(TM)) and its FDA approved rapid diagnostic for West
Nile Virus (RapidWN(TM)), as well as a range of other biological reagents.
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.
    Consolidated Financial Statements - unaudited
    Nine months ended September 30, 2007
    (in thousands of Canadian dollars)

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

                                                   September 30  December 31
                                                           2007         2006
                                                              $            $

    Assets

    Current assets
    Cash                                                      -          945
    Short-term investments                                5,213        5,057
    Accounts receivable                                     813          762
    Inventories                                             353          183
    Prepaid expenses                                         85          130
                                                     ------------------------
                                                          6,464        7,077

    Deferred charges                                        176           70

    Property, plant and equipment                           321          166

    Purchased technology and trademarks                   1,713        2,022
                                                     ------------------------
                                                          8,674        9,335
                                                     ------------------------
                                                     ------------------------

    Liabilities

    Current liabilities
    Bank indebtedness                                       349            -
    Accounts payable and accrued liabilities                304          504
                                                     ------------------------
                                                            653          504

    Convertible notes payable                             1,966        1,843
                                                     ------------------------
                                                          2,619        2,347
                                                     ------------------------

    Shareholders' Equity

    Common shares                                         2,524        2,520

    Other equity                                          5,520        5,489

    Deficit                                              (1,989)      (1,021)
                                                     ------------------------
                                                          6,055        6,988
                                                     ------------------------
                                                          8,674        9,335
                                                     ------------------------
                                                     ------------------------


    Spectral Diagnostics Inc.
    Consolidated Statements of Operations, Comprehensive Loss and Deficit -
    unaudited
    For the nine months ended September 30, 2007 and 2006
    -------------------------------------------------------------------------
    (in thousands of Canadian dollars, except share and per share data)

                                    3 Months Ended            9 Months Ended
                                      September 30              September 30

                                 2007         2006         2007         2006
                                    $            $            $            $

    Sales                         739          675        2,318        2,429

    Cost of sales                 181          235          555          927
                          -------------------------  ------------------------
    Gross margin                  558          440        1,763        1,502
                          -------------------------  ------------------------
    Operating expenses
    Selling, general and
     administrative               799          674        2,375        3,237
    Amortization                  134          207          426          693
    Foreign exchange loss          27            5           81          118
    Stock-based compensation        -           14           31          (12)
    Research and product
     development, net of
     tax credits                    -            2         (125)         237
                          -------------------------  ------------------------
                                  960          902        2,788        4,273
                          -------------------------  ------------------------
    Loss from operations         (402)        (462)      (1,025)      (2,771)

    Interest expense on
     convertible notes
     payable                      (41)         (37)        (123)        (476)

    Investment  income             61           68          180          125
    Gain on settlement
     of convertible
     notes payable                  -            -            -        5,444
    Gain on sale of rapid
     cardiac business               -            -            -        2,385
                          -------------------------  ------------------------
    Net income and
     comprehensive income
     (Loss and comprehensive
     loss) for the period        (382)        (431)        (968)       4,707

    Deficit - Beginning of
     period                    (1,607)    (103,671)      (1,021)    (104,058)

    Restatement of capital                  98,920                    98,920
                          -------------------------  ------------------------
    Deficit - End of period    (1,989)        (431)      (1,989)        (431)
                          -------------------------  ------------------------
                          -------------------------  ------------------------
    Basic earnings (loss)
     per common share           (0.02)       (0.02)       (0.04)        0.22
                          -------------------------  ------------------------
                          -------------------------  ------------------------
    Diluted earnings (loss)
     per common share           (0.02)       (0.02)       (0.04)        0.20
                          -------------------------  ------------------------
                          -------------------------  ------------------------
    Weighted average
     number of common
     shares outstanding    24,118,424   24,111,424   24,116,966   21,464,120
                          -------------------------  ------------------------
                          -------------------------  ------------------------



    Spectral Diagnostics Inc.
    Consolidated Statements of Cash Flows - unaudited
    For the nine months ended September 30, 2007 and 2006
    -------------------------------------------------------------------------
    (in thousands of Canadian dollars)

                                    3 Months Ended            9 Months Ended
                                      September 30              September 30

                                 2007         2006         2007         2006
                                    $            $            $            $
    Cash provided by
     (used in)

    Operating activities
    Net income and
     comprehensive income
     (Loss and comprehensive
     loss) for the period        (382)        (431)        (968)       4,707
    Items not affecting cash
    Amortization                  134          207          426          697
    Stock-based compensation
     expense                        -           14           31          (12)
    Accrued interest on
     convertible notes payable     41           37          123          476
    Unrealized gain on
     short-term investments         -            -           (7)           -
    Gain on settlement of
     convertible notes payable      -            -            -       (5,444)
    Gain on sale of rapid
     cardiac business               -            -            -       (2,385)
    Changes in non-cash
     working capital               93          (69)        (376)        (759)
                          -------------------------  ------------------------
                                 (114)        (242)        (771)      (2,720)
                          -------------------------  ------------------------

    Financing activities
    Bank indebtedness             314            -          349         (859)
    Issuance of common
     shares                         -            -            4            -
    Restricted cash                 -            -            -          447
                          -------------------------  ------------------------
                                  314            -          353         (412)
                          -------------------------  ------------------------

    Investing activities
    Increase in deferred
     charges                        -          (75)        (106)         (98)
    Purchase of property,
     plant and equipment         (163)         (30)        (228)        (151)
    Purchase of technology
     and trademarks                 -            -          (44)           -
    Increase in short-term
     investments                  (54)           -         (149)      (5,000)
    Proceeds on sale of
     short-term investments         -            -            -        3,350
    Proceeds on sale of
     rapid cardiac business         -            -            -        5,650
                          -------------------------  ------------------------
                                 (217)        (105)        (527)       3,751
                          -------------------------  ------------------------

    Increase (decrease) in
     cash during the period       (17)        (347)        (945)         619
                          -------------------------  ------------------------

    Cash - Beginning of
     period                        17        1,383          945          417
                          -------------------------  ------------------------

    Cash - End of period            -        1,036            -        1,036
                          -------------------------  ------------------------
                          -------------------------  ------------------------
    Non-cash financing
     activities

    Securities received on
     sale of rapid cardiac
     business (note 4)                                                 3,350
    Settlement of existing
     convertible notes payable                                        (9,801)
    Issuance of new
     convertible note payable                                          1,840
    Issuance of common
     shares on settlement of
     convertible notes payable                                         2,083
    Issuance of warrants on
     settlement of convertible
     notes payable                                                       280
    

    %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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