Spectrum Signal Processing Inc.

Spectrum Signal Processing Inc.

March 20, 2007 13:00 ET

Spectrum Signal Processing Restates 2004 and 2005 U.S. GAAP Financial Results for Non-Cash Charges

BURNABY, BRITISH COLUMBIA--(CCNMatthews - March 20, 2007) - Spectrum Signal Processing Inc. (TSX:SSY)(NASDAQ:SSPI) today announced the restatement of its financial results for its fiscal years ended December 31, 2004 and 2005. This restatement pertains to U.S. generally accepted accounting principles ("GAAP") only and does not impact the Company's financial results in accordance with Canadian GAAP. These are non-cash charges that do not impact the Company's operations or cash flows.

The restatement results from a recent interpretation by U.S. regulatory authorities of the U.S. GAAP contained in the Statement of Financial Accounting Standards ("SFAS") 133, Accounting for Derivative Instruments and Hedging Activities. The interpretation under U.S. GAAP requires that, when a Company's share purchase warrants have an exercise price denominated in a currency other than the Company's functional currency, those share purchase warrants be classified as liabilities at their fair value with any changes in fair value being included in the calculation of net earnings. In these circumstances, the Company would record a gain or loss in each period when the fair value of the share purchase warrants decreases or increases.

As a result of this interpretation, the Company will include a restatement of comparative figures in its U.S. GAAP financial statements for the year ended December 31, 2006.

The effect of the restatement is an increase to the Company's 2004 net loss of $1,483,000 and a decrease to the Company's 2005 net loss of $792,000. For the year ended December 31, 2006, the Company will also include a gain of $27,000 related to the change in fair value of Canadian dollar denominated share purchase warrants during the period. As of December 31, 2006 all but 207,931 of the Canadian dollar denominated share purchase warrants have been exercised or have expired. The remaining outstanding share purchase warrants have an estimated fair market value of $11,000, as calculated using the Black-Scholes option-pricing model, and are recorded as a current liability on the Company's balance sheet. If the share purchase warrants are exercised, the fair value of the warrants at the date of exercise will be reclassified to stockholders' equity. As of December 31, 2006, the cumulative effect of the issuance and exercise of the Canadian dollar denominated share purchase warrants is an increase to share capital, warrants and additional paid-in capital of $653,000.

"This restatement relates to non-cash charges that do not impact Spectrum's operations or cash flows," stated Brent Flichel, Spectrum's President and Chief Executive Officer. "The U.S. regulatory authorities have recently provided their interpretation of some complex accounting rules affecting our previously reported financial results. In our effort to provide transparent financial reporting, we are providing this restatement information to the markets today."

(All currency amounts are in U.S. dollars unless stated otherwise)


Spectrum Signal Processing Inc. (TSX:SSY)(NASDAQ:SSPI) is a leading supplier of software defined platforms for defense electronics applications. Spectrum's products and services are optimized for military communications, public safety, signals intelligence, surveillance, electronic warfare and satellite communications applications. Spectrum's integrated, application-ready products provide its customers with compelling time-to-market and performance advantages while mitigating program risk and cost parameters. Spectrum Signal Processing (USA) Inc., based in Columbia, MD, provides application engineering services and modified commercial-off-the-shelf platforms to the US Government, its allies and its prime contractors. More information on Spectrum and its flexComm™ product line is available at www.spectrumsignal.com.


The statements by the Company's management and the above statements contained in this Business Outlook are forward-looking statements that involve a number of risks and uncertainties. In addition to factors discussed above, among other factors that could cause actual results to differ materially are the following: viability of business strategy, liquidity and capital resources, variability of quarterly and annual operating results, contract performance, risks and uncertainties associated with defense related contracts, reliance on significant customers, technological change, risk of the design-in process, competition, reliance on key personnel, inflation and foreign currency fluctuations, potential undetected errors, audit firm risk, dependence on third party suppliers, export controls, intellectual property rights, share-based compensation, contract manufacturing, environmental and safety regulations, reliance on third party distributors, international operations and markets, uncertainty of current economic and political conditions, availability of licenses, corporate governance and public disclosure regulations, reliance on information technology systems and networks and the ability to obtain adequate insurance coverage. Readers are referred to Spectrum's assumptions and other risk factors set out in the most current Annual Report filed on Form 20-F with the Securities and Exchange Commission and with the British Columbia Securities Commission. The Company wishes to caution readers not to place undue reliance upon any such forward-looking statements, which reflect management's best effort to provide guidance based on all known conditions on the date the statements are made. The Company may or may not update these forward-looking statements in the future.

flexComm is a trademark of Spectrum Signal Processing Inc. Other product and company names mentioned may be trademarks and/or registered trademarks of their respective holders.

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