Adaltis Announces Second Quarter Financial Results

Restructuring of operations in Europe completed

MONTREAL, QUEBEC–(EMWNews – Aug. 14, 2008) – Adaltis Inc. (TSX:ADS), an international in vitro diagnostic (IVD) company, today reported its second quarter 2008 financial results.

Financial Highlights:

Financial highlights discussed below are presented for continuing operations, unless mentioned otherwise.

– Revenue for the quarter ended June 30, 2008, for continuing operations, was $5.6 million, a decrease of $1.3 million compared to $6.9 million for the same period in 2007. The revenue shortfall is primarily attributable to reduced Eclectica^TM sales following our voluntary decision taken in 2007 to temporarily suspend its rollout in order to incorporate improvements to this system. We expect to re-launch the improved Eclectica^TM in key markets in September, 2008, and remain confident about its commercial prospects.

– Total costs and expenses for continuing operations were $9.8 million in the second quarter compared to $12.4 million in the second quarter of 2007, a decrease of $2.6 million, or 21.0%. The decrease in cost and expenses is partially attributable to the restructuring of our operations in Europe and to cost control efforts.

– Net loss from continuing operations for the quarter was $5.8 million compared to a loss of $6.0 million, an improvement of $0.2 million.

– Net loss for the quarter was $7.0 million, or $0.09 on a basic and diluted per share basis compared to a loss of $6.0 million, or $0.10 on a basic and diluted per share basis for the same period in 2007.

“Adaltis, consistent with its strategy to focus on China and emerging markets, has now substantially completed its reorganization plan, announced in March, which revolves around four basic objectives: strengthening of the global management team in China; significant reduction in the cost of European and Canadian operations; continued investment, cost optimization and validation of key product lines specifically designed for emerging markets needs, such as Eclectica^TM and infectious diseases products; and reduction in debt in connection with the disposal of European Operations.

We have, in particular, disposed of the bulk of our European operations and proceeded with a streamlining of our cost structure both in Europe and in Canada. We expect to see the full benefit of this restructuring by the fourth quarter of 2008. We have continued the consolidation of our operations in China. We are also actively looking at financing alternatives to continue supporting our business plan. These steps are all essential to reach our objective to create a growing and profitable China-based IVD company.” said Mr. Pierre Larochelle, President and Chief Executive Officer.

Mr. Larochelle also provided an update on Eclectica^TM, a system targeting small and medium size laboratories. “We have completed the internal validation process aiming at validating the various improvements introduced to improve the reliability and performance of Eclectica^TM, and are now finalizing the external validation process in collaboration with key customers. Based on these results we are planning to re-launch Eclectica^TM in September 2008″.

Mr. Larochelle concluded that “Adaltis is now a smaller and leaner organization focused on key target markets and on its objective to become a China-based provider of high quality, low cost in vitro diagnostic systems, uniquely positioned to compete in China and other key emerging markets.”

Operational highlights

In line with our strategy to focus on China and emerging markets and our decision to accelerate the consolidation of our operations in China, we have achieved the following specific operational milestones during and subsequent to the second quarter of 2008:

– Following the sale of certain of the assets of its European business announced on May 8, 2008, the Company implemented the plan leading to a reduction of close to 50% of its workforce in Italy. The remaining team in Europe is now dedicated to the core activities of the Company, more specifically Eclectica^TM and supporting sales activities outside of Asia.

– Consistent with our strategy to focus on higher margin IVD products, we implemented the streamlining of our operations pertaining to the sale of lower margin products in China, which are now considered by the Company as discontinued operations. The resources of the Company in China are now fully dedicated to the sale of infectious disease microplate products and Eclectica^TM.

– In connection with the upcoming relaunch of Eclectica^TM, expected in September 2008, we implemented an extensive internal validation of Eclectica^TM and are now finalizing the external validation with selected end-users.

– Initiated the process leading to the transfer of the manufacturing of the Nexgen Four analyzer to China.

– Won multiple tenders in the Middle East for certain of our high quality infectious disease products.

Financing Highlights:

On July 26, 2008, following the disposal of certain assets of our European business which closed in May 2008, we financed the portion, secured by a bank letter of guarantee, of the $3.4 million amount due by the purchaser on September 30, 2008, from a Canadian bank for net proceeds of $2.9 million.

On July 24, 2008, in the context of the disposal of certain assets of our European business closed in May 2008, we agreed with an Italian bank to decrease our credit line capacity from $8.0 million (Euro 5 million) to $1.3 million (Euro 0.8 million), retaining only the financing capacity necessary to finance our international accounts receivable. As a result of this borrowing capacity decrease, the cash collateral securing this credit line was decreased from $4.4 million (Euro 2.8 million) to $0.8 million (Euro 0.5 million).

On July 3, 2008, we accepted a conditional offer from a Canadian Bank to enter into a new credit facility which will provide access to $9.5 million of liquidity for an initial term of three years and will be extendable for additional one-year periods to a maximum of four renewals. This credit facility will bear interest at the bank’s Prime rate less 1%, will be secured by our Third Party ABCP and will replace the previous facility with the same Canadian Bank secured by the same assets. Conditions of this new facility and details of these holdings of Third Party ABCP are described further below, as well as in “Note 6” to the Financial Statements and in “Critical Accounting Estimates” in the Management’s Discussion and Analysis.

On May 21, 2008, we closed a rights offering under which Adaltis raised an aggregate of $12,598,952 through the issuance of a total of 40,309,226 common shares at a price of $0.32 per share. In accordance with the terms of the stand-by purchase agreement entered into by Adaltis with Power Technology Investment Corporation (“PTIC”), a subsidiary of Power Corporation of Canada, and TNG Capital Inc. (“TNG”), PTIC and TNG subscribed for 27,000,000 and 4,250,000 common shares of the offering, respectively, at a cost of $8,640,000 and $1,360,000, respectively. In consideration for entering into the stand-by purchase agreement, each of PTIC and TNG received a fee from Adaltis payable by the issuance of an additional 810,000 common shares of Adaltis to PTIC and 127,500 common shares to TNG, at no additional cost.

Financial Results:

Revenue (including sales, rental income, royalties and other revenue)

Revenue for the three months ended June 30, 2008, was $5.6 million compared to $6.9 million in 2007, a decrease of $1.3 million or 18.8%. The decrease was attributable to lower sales of Eclectica^TM stemming from our decision, taken in the third quarter of 2007, to delay our rollout of Eclectica^TM until the second half of the year as well as a $0.2 million negative impact of foreign exchange fluctuations.

Revenue for the six months ended June 30, 2008, was $10.2 million compared to $12.3 million in 2007, a decrease of $2.1 million or 17.1%. The decrease was attributable to lower sales of Eclectica^TM and other infectious disease products and comes from our decision to delay our rollout of Eclectica^TM until the second half of the year as well as a $0.6 million from the negative impact of foreign exchange fluctuations.

Cost of Sales and Rental Income

For the three-month period ended June 30, 2008, cost of sales and rental income was $4.7 million compared to $6.2 million in 2007, a decrease of $1.5 million, or 24.2%. The decrease was due to the reduction in sales as well as positive impacts from cost reductions in Italy.

For the six-month period ended June 30, 2008, cost of sales and rental income was $7.6 million compared to $11.4 million in 2007, a decrease of $3.8 million, or 33.3%. The decrease was due to the reduction in sales as well as a $1.2 million positive from the reversal of a write-down to net realization value when there is a subsequent increase in the value of inventory as required by the implementation of CICA standard Section 3031 as at January 1, 2008 as well as positive impacts from cost reductions in Italy.

Selling and Administrative Expenses

Selling and administrative expenses were $4.1 million for the three-month period ending June 30, 2008, a decrease of $0.8 million, or 16.3% compared to the same period in 2007. The decrease was partially due to the reversal of a provision for employee benefits, no longer required of $0.6 million, $0.3 million in savings in North America and Europe and $0.1 million due to the impact of foreign exchange fluctuations. This was partially offset by $0.2 million of higher amortization costs primarily due to the commencement of amortization of our ERP system in China.

Selling and administrative expenses were $9.0 million for the six-month period ending June 30, 2008, a decrease of $0.3 million, or 3.2% compared to the same period in 2007. The decrease was partially due to the reversal of a provision for employee benefits, no longer required of $0.6 million, $0.5 million in savings in North America and Europe and $0.3 million due to the impact of foreign exchange fluctuations. This was partially offset by $0.4 million of higher amortization costs primarily due to the commencement of amortization of our ERP system in China, higher pension expenses of $0.5 million, and $0.2 million due to higher recruiting costs as we invest in our China infrastructure.

Research and Development Expenses

Research and development expenses were $1.0 million for the three-month period ending June 30, 2008 compared to $1.3 million for the same period in 2007, a decrease of $0.3 million or 23.1%. The decrease was due to less reliance on consultants for $0.1 million and $0.2 million from cost savings in Canada.

Research and development expenses were $1.9 million for the six-month period ending June 30, 2008 compared to $2.5 million for the same period in 2007, a decrease of $0.6 million or 24.0%. The decrease was due to less reliance on consultants for $0.3 million and $0.3 million from cost savings in Canada.

Financial Expenses

Financial expenses were $0.6 and $1.3 million for the three and six-month periods ending June 30, 2008, approximately the same as the same period last year.

Stock-based Compensation

Stock-based compensation expense, a non-cash item, was $0.1 million for the three-month period ended June 30, 2008 compared to $0.2 million in the same period last year.

For the six-month periods ended June 30, 2008 and 2007, stock-based compensation expense was $0.2 million and $0.5 million respectively.

Foreign Exchange Loss (Gain)

The foreign exchange loss for the three-month and six-month periods ended June 30, 2008 was a gain of $0.3 million and a loss of $2.1 million respectively compared to a gain of $0.5 million, and a gain of $0.7 million for the three and six-month periods last year. The foreign exchange loss was primarily due to the strengthening of foreign currencies versus the Canadian dollar in the first quarter, primarily as it relates to translating our net monetary assets and liabilities at current rates.

Loss in Investment in Asset-Backed Commercial Paper

As described in “Critical accounting estimates” in the Management’s Discussion and Analysis, we have recognized an additional provision for losses of $0.6 million and $0.8 million respectively during the three and six-month periods ended June 30, 2008, with respect to our holdings in Third Party ABCP having a total nominal value of $9.5 million, for a total provision of $1.9 million (19.8% of the nominal value). This additional provision reflects the changes in the market conditions during the period and the changes to our model’s underlying assumptions. Our valuation is based on a discounted cash flow valuation technique performed on the restructured notes.

Write-down of intangible assets

The write-down of intangible assets is due to the impairment of the value of a license which is the result of new assumptions in the preparation of our discounted cashflow.

Income Taxes

For the three month period, income taxes are not material. For the six month period, income taxes resulted in a credit of $0.1 million in 2008 compared to a credit of $0. 2 million last year. The credit in 2007 is primarily due to the reversal of a portion of the future tax liability related to the Chinese subsidiaries following a change in the enacted income tax rates in China, while in 2008, the credit is the result of the reversal of both future tax liabilities related to the write-down of intangible assets and over accruals on prior years tax assessment.

Loss from Discontinued Operations

For the three month period ended June 30, 2008, losses from discontinued operations were $1.2 million compared to a loss of $0.1 million for the same period last year, an increase of $1.1 million. The increase in losses arises from write-downs of intangible assets, net of tax of $2.1 million and reduced profit from operations of $0.5 million, partially offset by the recording of the a gain on the sale of certain European assets of $1.4 million.

For the six-month period ended June 30, 2008, losses from discontinued operations were $2.9 million compared to a loss of $0.9 million for the same period last year, an increase of $2.0 million. The increase in losses arises from write downs of intangible assets, net of tax of $2.1 million and reduced profit form operations of $0.8 million, partially offset by the recording of the a gain on the sale of certain European assets of $0.9 million. The increase in losses from operations partially arises from adjustments to the value of inventory of $0.4 million.

Net Loss

For the reasons described above, for the three-month period ended June 30, 2008, we posted a net loss of $7.0 million or $0.09 on a basic and diluted per share basis compared to a loss of $6.0 million or $0.10 on a basic and diluted per share basis for the same period in 2007.

On a year-to-date basis, we posted a net loss of $16.2 million or $0.23 on a basic and diluted basis compared to a net loss of $12.7 million, or $0.23 on a basic and diluted per share basis for the same period in 2007.

For the three-month and six-month periods ended June 30, 2008 and 2007, an amount of $0.3 and $0.5 million has been recorded respectively as an increase to the equity component of convertible debentures in the consolidated statement of deficit. This amount was taken into consideration in determining basic and diluted per share data.

Outstanding Shares

The number of outstanding shares as at June 30, 2008, was 110,221,874 (69,912,648 as at December 31, 2007).

SELECTED FINANCIAL INFORMATION

(In thousands of Canadian dollars, except per share amounts)

                  Three month    Three month      Six month     Six month
                 period ended   period ended   period ended  period ended
                June 30, 2008  June 30, 2007  June 30, 2008 June 30, 2007

-------------------------------------------------------------------------
Revenue                 5,590          6,929         10,196        12,330
Loss before financial
 expenses, income
 taxes and selected
 items (1)             (4,165)        (5,510)        (8,348)      (10,916)
Net loss from
 continuing
 operations            (5,761)        (5,971)       (13,296)      (11,783)
Net loss from
 discontinued
 operations            (1,200)           (73)        (2,934)         (941)
Net loss               (6,961)        (6,044)       (16,230)      (12,724)
Loss per share for
 continuing
 operations             (0.08)         (0.10)         (0.19)        (0.21)
Loss per share for
 discontinued
 operations             (0.01)             -          (0.04)        (0.02)
Net loss per share      (0.09)         (0.10)         (0.23)        (0.23)
Cash loss per
 share (2)              (0.03)         (0.08)         (0.14)        (0.18)


                        June 30,   December 31,
                           2008           2007

----------------------------------------------
Cash and cash
 equivalents,
 investment in
 ABCP and restricted
 cash                    17,953         16,049
Total assets            117,935        128,158
Bank indebtedness        14,681         11,553
Total long-term debt
 (including current
 portion) (3)            18,666         18,260
Shareholders' equity     48,557         51,669

(1) Selected items include stock-based compensation expense, foreign 
    exchange loss (gain), write-down of intangibles and loss on investment 
    in Third Party ABCP.
(2) Cash loss per share is a non-GAAP measure calculated by adding back 
    amortization and stock-based compensation expense to the net loss in 
    computing the loss per share calculation.
(3) Includes liability component of convertible debentures.

Conference Call Notice

Adaltis will host a conference call to discuss its second quarter results on Thursday, August 14, 2008, at 9:00 a.m. ET. The dial-in number for the conference call is 1-888-300-0053 (Canada and United States) or 1-647-427-3420 (International) and the conference ID is 59682762. If you are unable to participate in the conference call, a replay will be available by audio webcast on Adaltis’ Web site (under “Investor Relations”) for 30 days.

2008 Second Quarter Financial Results Available

The complete financial statements, notes to financial statements, and Management’s Discussion and Analysis for the second quarter ended June 30, 2008, are available on the Company’s website – www.adaltis.com. These documents are also filed on SEDAR, and will be accessible from the SEDAR website at www.sedar.com.

Non-GAAP Measures

The Company reports its financial statements in accordance with GAAP. However, this document uses a non-GAAP performance measure: cash loss per share.

We believe this non-GAAP measure provides useful information to stakeholders regarding the Company’s financial condition and results of operations. Management believes cash loss per share is a pertinent measure of the Company’s performance considering the Company’s significant non cash expenses, such as amortization and stock-based compensation expenses. This non-GAAP financial measure does not have any standardized meaning prescribed by GAAP and is therefore unlikely to be comparable to similar measures presented by other issuers. It should be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance with GAAP.

About Adaltis

Adaltis is an international in vitro diagnostic company that develops, manufactures and markets diagnostic systems. It aims to leverage its experience in Europe to become a leading provider of in vitro diagnostic products in emerging markets, with a particular focus on China.

With the assistance of its two strategic shareholders, CITIC Pacific Limited (a large Hong Kong-based conglomerate) and Picchio Pharma Inc. (a joint venture healthcare investment firm owned by FMRC Family Trust (a trust of which Dr. Francesco Bellini is a beneficiary), and Power Technology Investment Corporation, a subsidiary of Power Corporation of Canada), Adaltis has completed building its manufacturing facility in Shanghai. Now operational, the production facility manufactures high-quality products in a low-cost GMP environment, in order to service existing markets in Europe, while providing a platform to penetrate the high-growth Chinese in vitro diagnostic market.

Adaltis is headquartered in Montreal, with offices in China, Hong Kong, Italy and Mexico.

Caution Concerning Forward-Looking Statements

Although not an exhaustive list, we caution you that certain statements made in this press release are likely to be considered forward-looking statements, including in particular our expectations regarding the improvements to and the re-launch and the commercial prospects of Eclectica^TM, the impact of the disposition of certain European assets and our continued streamlining efforts in Europe and elsewhere, the ongoing discussions regarding Financing alternatives, the success of our transfer of certain product manufacturing and the registration of our products in China, the short and long-term implications and the value of our holdings of asset-backed commercial paper, and any statements concerning the successful development, market penetration and sales of our products.

The Company cautions that, by their nature, forward-looking statements involve risk and uncertainty and the Company’s actual actions or results could differ materially from those expressed or implied in such forward-looking statements. Important factors that could cause such differences include any problems related to obtaining regulatory registrations, affecting our ability to achieve our strategy in China and other emerging markets, the successful and timely completion of our ongoing research and development efforts in particular related to Eclectica^TM, the launch of new products, the uncertainties of market factors and regulatory processes to which our business is subject, and the successful completion of the restructuring of the asset-backed commercial paper market.

The forward-looking statements contained in this press release represent the expectations of Adaltis Inc. and its subsidiaries as at the date hereof and accordingly are subject to change after such date. However, Adaltis Inc. and its subsidiaries expressly disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

For additional information with respect to the risks and uncertainties and other factors that could cause the results or events predicted in these forward-looking statements to differ materially from actual results or events, please refer to the Annual Information Form of the Company filed with the Canadian securities commissions.