MII Microislet

SAN DIEGO, Aug. 23 /PRNewswire-FirstCall/ -- MicroIslet Inc. (AMEX:MII) announced today that the company was unable to file its Form 10-QSB for the fiscal quarter ended June 30, 2005 by the extension deadline of August 22, 2005. On August 16, 2005, the company filed a Notification of Late Filing on Form 12b-25 stating that its quarterly report on Form 10-QSB for its second fiscal quarter ended June 30, 2005 could not be filed timely due to its continuing analysis of its accounting for certain warrants issued to service providers in 2004 in connection with the previously announced restatement of the company's financial statements for the year ended December 31, 2004. In addition, the company's independent registered public accounting firm has not concluded its quarterly review procedures. As soon as practicable following the completion of its ongoing analysis, the company will file with the SEC a quarterly report on Form 10-QSB for the period ended June 30, 2005. As previously disclosed in the company's quarterly reports for the periods ended March 31, 2004 and June 30, 2004, the company issued warrants to settle demands for payment made by certain parties who claimed to have rendered services in connection with a financing that closed in March 2004. In the previously issued financial statements, the fair value of these warrants had been charged against the proceeds of the financing. The company's management has now determined that the value of the warrants should have been recorded as a period expense in the first and second quarters of 2004 rather than as an offset against the proceeds of the financing. On June 23, 2005, the company's audit committee determined, in consultation with management, that as a result of the errors in the accounting treatment for these non-cash charges, a restatement of the financial statements for the fiscal year ended December 31, 2004 and the first quarter of 2005 is required. As a result, the previously issued financial statements for those periods, including the report of independent registered accountants thereon, and any related earnings releases, should no longer be relied upon. The restatement will involve changes to the company's balance sheets, statements of operations, statements of stockholders' equity and statements of cash flows as well as the footnotes thereto. The company plans to file an amended Form 10-KSB for the year ended December 31, 2004, which will present restated audited financial statements for the year ended December 31, 2004. The company also plans to file an amended Form 10-QSB for the quarter ended March 31, 2005, which will present restated unaudited financial statements for the three month periods ended March 31, 2004 and 2005. Based on the analysis performed to date, the company expects to report a net loss of approximately $1,930,000, or $0.05 per share, for the three months ended June 30, 2005, compared with a net loss of approximately $2,050,000 or $0.05 per share, for the same period in 2004, and a net loss of approximately $3,930,000 or $0.10 per share for the six months ended June 30, 2005, compared with a net loss of approximately $3,790,000 or $0.11 per share, for the same period in 2004. The company estimates that general and administrative expenses will be approximately $640,000 for the three months ended June 30, 2005 compared to approximately $1,610,000 for the same period in 2004, and decreased to approximately $1,280,000 for the six months ended June 30, 2005 compared to approximately $2,710,000 for the same period in 2004. The decreases were primarily due to lower investor relations expenses offset by an increase in legal expenses related to litigation brought against the company's wholly-owned subsidiary and the company's Chairman and Chief Executive Officer by Donald Gallego. The company estimates that research and development expenses increased to approximately $1,330,000 for the three months ended June 30, 2005 from approximately $460,000 for the same period in 2004, and increased to approximately $2,730,000 for the six months ended June 30, 2005 from approximately $1,110,000 for the same period in 2004. These increases were mainly due to an increase in headcount for lab personnel, costs related to the company's partnership with the Mayo Foundation, and materials and services relating to testing of the company's technology in animals. The anticipated results reflect the restated results for the 2004 periods discussed. For more information about the audit committee determination to restate the company's financial statements for the fiscal year ended December 31, 2004 and the first quarter of 2005, please see the company's Form 8-K filed June 28, 2005. About MicroIslet MicroIslet is a biotechnology company engaged in the research, development, and commercialization of patented technologies in the field of transplantation therapy for people with insulin-dependent diabetes. MicroIslet's patented islet transplantation technology includes methods for isolating, culturing, cryopreservation, and immuno-protection (microencapsulation) of islet cells. MicroIslet is working to develop and commercialize a first product, called MicroIslet-P(TM), a microencapsulated porcine islet cell suspension that will be used for transplantation in patients with insulin-dependent diabetes. Additional information about MicroIslet can be found at http://www.microislet.com/. "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: The statements set forth above include forward-looking statements concerning the company's strategies, plans, objectives and intentions. The company wishes to caution readers that actual results could differ materially from those suggested by the forward-looking statements due to a variety of estimates, risks and uncertainties, known and unknown. One of these risks is that the company's anticipated results for the three and six months ended June 30, 2005 could change depending on the results of the company's analysis of its accounting for certain warrants as discussed above, and completion of the quarterly review procedures by the company's independent registered public accounting firm. Other potential risks and uncertainties are detailed from time to time in the company's filings with the Securities and Exchange Commission. For further information, please contact: William G. Kachioff, Vice President, Finance and Chief Financial Officer of MicroIslet Inc., +1-858-657-0287, . DATASOURCE: MicroIslet Inc. CONTACT: William G. Kachioff, Vice President, Finance and Chief Financial Officer of MicroIslet Inc., +1-858-657-0287, Web site: http://www.microislet.com/

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