TORONTO, June 12 /CNW/ - Spectral Diagnostics Inc. (TSX: SDI), a developer of innovative rapid diagnostic technologies, today announced that it has signed an agreement with security holders of IDx Inc. to settle $10 million of outstanding convertible notes payable. Under the terms of the settlement arrangement, the Company will issue 4,251,258 common shares of Spectral and a $2.5 million non-interest bearing, unsecured, convertible note payable due December 31, 2010, as complete settlement of all obligations related to the debt. In addition, the existing 500,000 Spectral warrants exercisable at $3.00 per common share until November 3, 2008, will be cancelled and 500,000 new warrants at an exercise price of $0.47 per common share, expiring June, 2011, will be issued. The transaction is scheduled to close by the end of June, 2006. Upon closing, the Company will recognize an accounting gain on settlement of debt of approximately $5 million. "This is a good outcome for both Spectral and the IDx security holders", stated Anthony Businskas, Executive Vice-President and CFO of Spectral. "Our balance sheet will be significantly improved and any uncertainty around the resolution of the IDx debt obligation will be removed. The Company will now focus its energies on the development and active commercialization of its existing products, as evidenced by its recent arrangements with Somagen Diagnostics Inc. and Toray Medical Co., Ltd.", added Mr. Businskas. 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. Current products include Spectral's rapid West Nile Virus (WNV) assay and its FDA approved rapid diagnostic for sepsis (the EAA(TM) Assay), as well as a range of other biological reagents. Spectral's common shares are listed on The Toronto Stock Exchange: SDI. Information in this news release that is not current or historically factual information may constitute forward-looking information within the meaning of securities laws. Implicit in this information, 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. %SEDAR: 00002006E