PreMD Reports Fiscal 2007 Results(dation of subcontract manufacturers ...),Health

for the skin cholesterol kits and the second-generation color reader,

as well as for general product improvements;

- An increase of $37,000 in stock-based compensation, a non-cash

expense, due to the vesting of options granted in prior years; and

- Minor changes in other development costs during the period.

General and administration expenses amounted to $3,213,000 compared with $3,025,000 in 2006, an increase of $188,000. The variance primarily reflects:

- An expense of nil in 2007 compared to $175,000 in 2006 for payments

to amend the ColorectAlert License Agreement;

- An increase of $25,000 in distribution expenses (nil in 2006) related

to the third-party warehouse expenses for storage of inventory;

- An increase of $178,000 in performance-based compensation expense

resulting from achievement of milestones;

- A loss of $125,000 related to disposal of obsolete fixed assets

related to skin cholesterol clinical trials;

- An increase of $57,000 in professional fees for legal, audit and

consulting fees related to business development (including

negotiation of the AstraZeneca agreement); and

- An increase of $17,000 in stock-based compensation for options and

stock grants for administrative personnel and consultants resulting

in a non-cash expense of $401,000 compared with $384,000 in 2006; and

- Minor changes in other general and administration costs during the

period.

Interest on convertible debentures (issued on August 30, 2005) amounted to $663,000 in 2007 compared to $678,000 in 2006. The debentures bear interest at an annual rate of 7%, payable quarterly in either cash or stock. In 2007, $543,000 of the interest expense was paid in stock, rather than cash, compared with $281,000 in 2006. Imputed interest of $1,002,000 (
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