Spectral Diagnostics Reports Results For The Second Quarter Ended September 30, 2005

TORONTO, Nov. 9 /PRNewswire-FirstCall/ - Spectral Diagnostics Inc. , a developer of rapid diagnostic technologies, reported a consolidated loss for the three months ended September 30, 2005 of $1.5 million ($0.08 cents per share), compared to a loss of $1.9 million ($0.11 cents per share) for the same period last year. The consolidated loss for the six months ended September 30, 2005 was $3.2 million, or $0.17 cents per share, compared to $3.3 million, or $0.19 cents per share, last year.

Sales for the quarter of $2.3 million were slightly lower than last year’s second quarter sales of $2.5 million. For the first six months of Fiscal 2006 sales were $4.6 million, compared to $5.3 million in the prior year. Last year’s revenues for the six month period included approximately $0.5 million of instrument sales to launch the EAA(TM) early adopter program. The continuing strength of the Canadian dollar negatively impacted current year’s sales by approximately $0.3 million. During the second quarter, the Company continued to closely manage its operating expenses. For the six months ended September 30, 2005 operating expenses before net research and development costs were $0.3 million lower than last year.

“Although sales were somewhat lower than in the prior year, we experienced a significant increase in sales activity towards the end of the quarter, particularly in the United States market. This trend is expected to continue into the third quarter,” stated Dr. Paul Walker, President & C.E.O. “For the first time in the last twelve months, the Company achieved quarter over quarter sales growth for its Cardiac products. The anticipated sales increase and our cost containment measures should allow us to meet our Fiscal 2006 objective of achieving positive cash flows from our commercial operations. In addition, placements of the EAA(TM) assay system in major institutions continue to grow,” added Dr. Paul Walker.

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. The Company’s products include rapid format tests measuring markers of myocardial infarction (Cardiac STATus), and rapid diagnostics for sepsis (the Endotoxin Activity Assay). Spectral manufactures all of its products. Spectral’s common shares are listed on The Toronto Stock Exchange: SDI.

These consolidated financial statements are not complete as they exclude accompanying notes, which are an integral part of the financial statements. More specifically, they exclude the note on the Company’s financial situation and going concern. The complete audited consolidated financial statements for the years ended March 31, 2005 and 2004, the second quarter ended September 30, 2004, as well as additional information and the Management’s Discussion and Analysis of financial condition and results of operations, are filed with the relevant securities regulatory authorities and are available on the Spectral website at www.spectraldx.com, and on SEDAR at www.sedar.com.

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 completion of the proposed offering, 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 Balance Sheets - unaudited As at September 30, 2005 and March 31, 2005 ------------------------------------------------------------------------- (in thousands of Canadian dollars) September 30, March 31, 2005 2005 $ $ Assets Current assets Cash and cash equivalents 606 1,694 Accounts receivable 2,882 2,760 Inventories 1,455 1,351 Prepaid expenses 177 359 ----------- ----------- 4,976 6,164 Restricted cash 647 2,013 Capital assets 1,086 1,158 Purchased technology and trademarks 3,021 3,327 Deferred financing costs 658 804 Goodwill 2,114 2,114 ----------- ----------- 12,646 15,580 ----------- ----------- ----------- ----------- Liabilities Current liabilities Bank indebtedness 675 929 Accounts payable and accrued liabilities 988 1,582 ----------- ----------- 1,663 2,511 Convertible notes and interest payable 8,822 7,742 ----------- ----------- 9,885 10,253 ----------- ----------- Shareholders’ Equity Common shares 99,446 99,446 Other equity 4,966 4,897 Deficit (102,251) (99,016) ----------- ----------- 2,161 5,327 ----------- ----------- 12,646 15,580 ----------- ----------- ----------- ----------- Going concern Spectral Diagnostics Inc. Consolidated Statements of Operations and Deficit - unaudited For the three and six month periods ended September 30, 2005 and 2004 ------------------------------------------------------------------------- (in thousands of Canadian dollars, except share and per share data) 3 Months Ended 6 Months Ended September 30 September 30 2005 2004 2005 2004 $ $ $ $ Sales 2,265 2,486 4,558 5,335 Cost of Sales 1,059 1,003 2,140 2,225 ----------- ----------- ----------- ----------- Gross Margin 1,206 1,483 2,418 3,110 ----------- ----------- ----------- ----------- Operating expenses Sales and marketing 1,115 1,184 2,140 2,510 General and administrative 861 726 1,559 1,443 Depreciation and amortization 342 350 700 703 Foreign exchange loss 119 85 79 67 Stock-based compensation 35 145 69 211 Research and product development 496 575 914 1,082 Government assistance (807) - (932) (200) ----------- ----------- ----------- ----------- 2,161 3,065 4,529 5,816 ----------- ----------- ----------- ----------- Loss before the following (955) (1,582) (2,111) (2,706) Interest expense on convertible notes (540) (300) (1,080) (600) Other net interest income (expense) (46) (3) (44) 22 ----------- ----------- ----------- ----------- Loss for the period (1,541) (1,885) (3,235) (3,284) Deficit - Beginning of period (100,710) (93,057) (99,016) (91,658) ----------- ----------- ----------- ----------- Deficit - End of period (102,251) (94,942) (102,251) (94,942) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Basic and diluted loss per common share (0.08) (0.11) (0.17) (0.19) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Weighted average number of common shares outstanding 19,860,168 17,119,145 19,860,168 17,119,145 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Going concern Spectral Diagnostics Inc. Consolidated Statements of Cash Flows - unaudited For the three and six month periods ended September 30, 2005 and 2004 ------------------------------------------------------------------------- (in thousands of Canadian dollars) 3 Months Ended 6 Months Ended September 30 September 30 2005 2004 2005 2004 $ $ $ $ Cash provided by (used in) Operating activities Loss for the period (1,541) (1,885) (3,235) (3,284) Items not affecting cash Depreciation and amortization 342 350 700 703 Stock-based compensation expense 35 145 69 211 Accrued interest on convertible notes payable 540 300 1,080 600 Changes in non-cash working capital (11) (416) (638) (880) ----------- ----------- ----------- ----------- (635) (1,506) (2,024) (2,650) ----------- ----------- ----------- ----------- Financing activities Bank indebtedness (220) 320 (254) (10) Restricted cash 657 1,081 1,366 1,655 Net cash proceeds on issuance of common shares - 20 - 87 ----------- ----------- ----------- ----------- 437 1,421 1,112 1,732 Investing activities Purchase of capital assets (107) (112) (176) (298) ----------- ----------- ----------- ----------- Decrease in cash and cash equivalents during the period (305) (197) (1,088) (1,216) ----------- ----------- ----------- ----------- Cash and cash equivalents - Beginning of period 911 1,051 1,694 2,070 ----------- ----------- ----------- ----------- Cash and cash equivalents - End of period 606 854 606 854 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Going concern

Spectral Diagnostics Inc.

CONTACT: At: Spectral Diagnostics Inc., Dr. Paul Walker, Chief ExecutiveOfficer, (416) 626-3233

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