Spectral reports second quarter results



    TORONTO, Aug. 9 /CNW/ - Spectral Diagnostics Inc. ("Spectral") today
reported a loss of $379,000 (1 cent per share) for the quarter ended June 30,
2007 compared to net income of $4,751,000 (23 cents per share) for the same
period last year. The prior period earnings included a one time gain of
$5,444,000 (27 cents per share) on the settlement of certain convertible notes
payable.
    For the six months ended June 30, 2007, the Company recorded a loss of
$586,000 (2 cents per share), compared to net income of $5,138,000 (26 cents
per share) last year. In addition to the aforementioned gain on settlement of
convertible notes payable, last year's six month net income also included a
gain of $2,385,000 (12 cents per share) on the sale of the Company's rapid
cardiac business in the first quarter. Excluding these two unusual gains, the
six month operating loss for the prior year was $2,691,000 (13 cents per
share). On the same comparative basis, the loss from operations was reduced by
11 cents per share in the first half of 2007.
    Sales of $738 in the second quarter were consistent with sales levels for
the same period last year. Sales for the six months ended June 30, 2007 were
$1,579,000 compared to $1,754,000 in the same prior year period. Prior year's
sales included $252,000 of rapid cardiac test revenues related to the business
that was sold effective February 6, 2006.
    "Product sales remained relatively consistent in the second quarter and
we maintained our low cost operating structure," stated Mr. Anthony Businskas,
Executive Vice President and CFO of Spectral. "The commercial contracts that
were concluded for our EAA(TM) and RapidWN(TM) products are substantial and
provide a solid foundation for future sales growth", added Mr. Businskas.

    Spectral is a developer of innovative technologies for 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 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'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 - unaudited
    Six months ended June 30, 2007
    (in thousands of Canadian dollars)


    Spectral Diagnostics Inc.
    Consolidated Balance Sheets - unaudited
    -------------------------------------------------------------------------

    (in thousands of Canadian dollars)

                                                        June 30  December 31
                                                           2007         2006
                                                              $            $
    Assets

    Current assets
    Cash and cash equivalents                                17          945
    Short-term investments                                5,159        5,057
    Accounts receivable                                     824          762
    Inventories                                             353          183
    Prepaid expenses                                        191          130
                                                    -------------------------
                                                          6,544        7,077

    Deferred charges                                        169           70

    Property, plant and equipment                           165          166

    Purchased technology and trademarks                   1,831        2,022
                                                    -------------------------
                                                          8,709        9,335
                                                    -------------------------
                                                    -------------------------

    Liabilities

    Current liabilities  Bank indebtedness                   35            -
    Accounts payable and accrued liabilities                311          504
                                                    -------------------------
                                                            346          504

    Convertible notes payable                             1,926        1,843
                                                    -------------------------
                                                          2,272        2,347
                                                    -------------------------

    Shareholders' Equity

    Common shares                                         2,524        2,520

    Other equity                                          5,520        5,489

    Deficit                                              (1,607)      (1,021)
                                                    -------------------------
                                                          6,437        6,988
                                                    -------------------------
                                                          8,709        9,335
                                                    -------------------------
                                                    -------------------------



    Spectral Diagnostics Inc.
    Consolidated Statements of Operations,
    Comprehensive Loss and Deficit - unaudited
    For the six months ended June 30, 2007 and 2006
    -------------------------------------------------------------------------

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


                            3 Months Ended June 30    6 Months Ended June 30
                                 2007         2006         2007         2006
                                    $            $            $            $


    Sales                         738          747        1,579        1,754

    Cost of sales                 167          250          392          688
                          ------------------------- -------------------------
    Gross margin                  571          497        1,187        1,066
                          ------------------------- -------------------------

    Operating expenses
    Selling, general and
     administrative               763          737        1,576        2,563
    Amortization                  137          200          273          490
    Foreign exchange loss          63           41           54          113
    Stock-based
     compensation                   2           11           31          (26)
    Research and product
     development, net of
     tax credits                    -           44         (125)         235
                          ------------------------- -------------------------
                                  965        1,033        1,809        3,375
                          ------------------------- -------------------------

    Loss from operations         (394)        (536)        (622)      (2,309)

    Interest expense on
     convertible notes
     payable                      (41)        (205)         (83)        (439)

    Investment  income             56           48          119           57

    Gain on settlement
     of convertible
     notes payable                  -        5,444            -        5,444
    Gain on sale of rapid
     cardiac business               -            -            -        2,385
                          ------------------------- -------------------------
    Net income and
     comprehensive income
     (Loss and
     comprehensive loss)
     for the period              (379)       4,751         (586)       5,138

    Deficit - Beginning
     of period                 (1,228)    (103,671)      (1,021)    (104,058)

                          ------------------------- -------------------------
    Deficit - End of
     period                    (1,607)     (98,920)      (1,607)     (98,920)
                          ------------------------- -------------------------
                          ------------------------- -------------------------
    Basic earnings (loss)
     per common share           (0.01)        0.23        (0.02)        0.26
                          ------------------------- -------------------------
                          ------------------------- -------------------------
    Diluted earnings
    (loss) per common
     share                      (0.01)        0.21        (0.02)        0.23
                          ------------------------- -------------------------
                          ------------------------- -------------------------

    Weighted average
     number of common
     shares outstanding    24,118,424   20,374,054   24,116,225   20,118,530
                          ------------------------- -------------------------
                          ------------------------- -------------------------




    Spectral Diagnostics Inc.
    Consolidated Statements of Cash Flows - unaudited
    For the six months ended June 30, 2007 and 2006
    -------------------------------------------------------------------------

    (in thousands of Canadian dollars)

                                    3 Months Ended            6 Months Ended
                                           June 30                   June 30
                                 2007         2006         2007         2006
                                    $            $            $            $

    Cash provided by
     (used in)

    Operating activities
    Net income and
     comprehensive income
     (Loss and
     comprehensive loss)
     for the period              (379)       4,751         (586)       5,138
    Items not affecting
     cash
      Amortization                137          200          273          490
      Stock-based
       compensation
       expense                      2           11           31          (26)
      Accrued interest on
       convertible notes
       payable                     41          205           83          439
      Unrealized gain on
       short-term
       investments                 (7)           -           (7)           -
      Gain on settlement
       of convertible
       notes payable                -       (5,444)           -       (5,444)
      Gain on sale of
       rapid cardiac
       business                     -            -            -       (2,385)
    Changes in non-cash
     working capital               55         (564)        (486)        (649)
                          ------------------------- -------------------------
                                 (150)        (841)        (692)      (2,437)
                          ------------------------- -------------------------

    Financing activities
    Bank indebtedness              35            -           35         (859)
    Issuance of common
     shares                         -            -            4            -
    Restricted cash                 -            -            -          447
                          ------------------------- -------------------------
                                   35            -           39         (412)
                          ------------------------- -------------------------

    Investing activities
    Increase in deferred
     charges                     (231)         (77)         (99)        (120)
    Purchase of property,
     plant and equipment          (23)         (52)         (37)         (65)
    Purchase of technology
     and trademarks                 -            -          (44)           -
    Increase in short-term
     investments                  (32)           -          (95)           -
    Proceeds on sale of
     short-term
     investments                    -        3,350            -        3,350
    Proceeds on sale of
     rapid cardiac
     business                       -            -            -        5,650
                          ------------------------- -------------------------
                                 (286)       3,221         (275)       8,815
                          ------------------------- -------------------------

    Increase (decrease) in
     cash and cash
     equivalents during
     the period                  (401)       2,380         (928)       5,966
                          ------------------------- -------------------------

    Cash and cash
     equivalents -
     Beginning of period          418        4,003          945          417
                          ------------------------- -------------------------

    Cash and cash
     equivalents - End
     of period                     17        6,383           17        6,383
                          ------------------------- -------------------------

    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: Spectral Diagnostics Inc., Mr. Anthony
Businskas, Executive Vice President & CFO, (416) 626-3233 ex. 2200

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