MEDTOX Scientific Announces Third Quarter Results

Net Income Increases 31 Percent


ST. PAUL, Minn., Oct. 16, 2007 (PRIME NEWSWIRE) -- MEDTOX Scientific, Inc. (Nasdaq:MTOX) announced today results for the third quarter ended September 30, 2007.



 -- Revenues increased $2,039,000 to $20,759,000, or 11%

 -- Consolidated gross margin remained at 46%

 -- Operating margin increased to 15% from 14%

 -- Net income increased $463,000 to $1,939,000, or 31%

For the three-month period ended September 30, 2007, revenues increased to $20,759,000 compared to $18,720,000 from the prior-year period. Operating income increased to $3,050,000 compared to $2,646,000 from the prior-year period. The Company recorded net income of $1,939,000, or $0.22 per diluted share, compared to net income of $1,476,000, or $0.17 per diluted share, or a 31% increase in net income from the comparable period last year.

For the nine-month period ended September 30, 2007, revenues increased to $60,561,000 compared to $52,469,000, or 15%, from the prior-year period. Operating income increased to $8,130,000 compared to $6,521,000, from the comparable period last year. Net income increased to $5,255,000, or $0.59 per diluted share, compared to net income of $3,512,000, or $0.40 per diluted share, or an increase of 50% in net income from the comparable period last year.

Consolidated revenue growth for the quarter was consistent with our annualized growth rates since 2003. Both product sales at 26% and DAU (drugs-of-abuse laboratory) at 13% showed strong growth in the quarter. Specialty Laboratory Services revenues were down 3% in the quarter compared to the same quarter last year. This reduction was attributable to lower revenues in our higher margin Clinical Trial Services (CTS) portion of the Specialty Lab. As the Company has consistently stated, CTS is project oriented and may demonstrate a pattern of variability in quarter to quarter comparisons. In the current quarter, a number of scheduled projects were moved by sponsors into Q4 2007 and Q1 2008. The trend for our clinical lab is positive year-to-date and our current expectation is that it will remain positive through year-end.

Overall, expenses for the quarter were in line with expectations. Total selling, general and administrative expenses for the quarter were 28% of revenues, down from 29% of revenues for the same period last year. Research and development expenses increased 3.5% to $599,000 for the quarter from $579,000 in the comparable period last year.

MEDTOX will hold a teleconference to discuss third quarter 2007 results today at 9:30 a.m. Central Time (10:30 a.m. Eastern). Dialing (888) 230-5944 a few minutes prior to the scheduled start time on October 16 will access a listen-only broadcast of the teleconference. International callers may access the call by dialing (913) 981-5542. Callers should ask for the MEDTOX quarterly conference call, hosted by Dick Braun, president and CEO of MEDTOX. A simultaneous webcast of the conference call will be available on the MEDTOX website in the "investors" section at www.medtox.com. An audio replay of the conference call will be available through October 23 at (888) 203-1112 conference ID #1001784. International callers may access the replay at (719) 457-0820 with the same conference ID #1001784.

MEDTOX Scientific, Inc., headquartered in St. Paul, Minn., is a provider of high quality specialized laboratory testing services and on-site/point-of-collection devices. The company also supports customers with complete logistics, data and program management services. MEDTOX is a leader in providing esoteric laboratory testing services to hospitals and laboratories nationwide. This includes both central laboratory and bio-analytical testing for pharmaceutical clinical trials. MEDTOX develops and manufactures diagnostic devices for quick and economical on-site/point-of-collection analysis for drugs-of-abuse, therapeutic drugs and biological and agricultural toxins and provides employment drug screening and occupational health testing. For more information see www.medtox.com.

The MEDTOX Scientific, Inc. logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=3264

Note: Forward-looking statements contained in this press release are made under the Private Securities Reform Act of 1995. Actual results may differ due to a number of factors including a change in the employment pattern of client companies, the ability of MEDTOX to acquire new business, and changes in the competitive environment. Further discussions of factors that may cause such results to differ are identified in the Company's 2006 Annual Report on Form 10-K.



                         MEDTOX SCIENTIFIC, INC.
                CONSOLIDATED STATEMENTS OF OPERATIONS
           (In thousands, except share and per share data)
                            (Unaudited)

                       Three Months Ended        Nine Months Ended
                          September 30,            September 30,
                        2007        2006         2007         2006
                        -----       -----        -----        -----

 REVENUES:
  Laboratory 
   services          $   15,723  $   14,725  $   46,499  $   40,540
  Product sales           5,036       3,995      14,062      11,929
                     ----------  ----------  ----------  ----------
                         20,759      18,720      60,561      52,469

 COST OF REVENUES:
  Cost of services        9,322       8,555      27,431      24,364
  Cost of sales           1,936       1,525       5,310       4,585
                     ----------  ----------  ----------  ----------
                         11,258      10,080      32,741      28,949
                     ----------  ----------  ----------  ----------


 GROSS PROFIT             9,501       8,640      27,820      23,520

 OPERATING EXPENSES:
  Selling, general 
   and administrative     5,852       5,415      17,726      15,429
  Research and 
   development              599         579       1,964       1,570
                     ----------  ----------  ----------  ----------
                          6,451       5,994      19,690      16,999
                     ----------  ----------  ----------  ----------

 INCOME FROM 
  OPERATIONS              3,050       2,646       8,130       6,521

 OTHER EXPENSE:
  Interest expense          (42)        (99)       (139)       (372)
  Other expense, net       (136)       (143)       (280)       (429)
                     ----------  ----------  ----------  ----------
                           (178)       (242)       (419)       (801)
                     ----------  ----------  ----------  ----------

 INCOME BEFORE INCOME
  TAX EXPENSE             2,872       2,404       7,711       5,720

 INCOME TAX EXPENSE        (933)       (928)     (2,456)     (2,208)
                     ----------  ----------  ----------  ----------

 NET INCOME          $    1,939  $    1,476  $    5,255  $    3,512
                     ==========  ==========  ==========  ==========

 BASIC EARNINGS PER 
  COMMON SHARE       $     0.23  $     0.18  $     0.63  $     0.43
                     ==========  ==========  ==========  ==========


 DILUTED EARNINGS 
  PER COMMON SHARE   $     0.22  $     0.17  $     0.59  $     0.40
                     ==========  ==========  ==========  ==========


 WEIGHTED AVERAGE 
  NUMBER OF SHARES 
  OUTSTANDING:
    Basic             8,397,882   8,178,489   8,286,551   8,161,176
    Diluted           9,010,490   8,802,279   8,891,581   8,775,285


                          MEDTOX SCIENTIFIC, INC.
                   CONDENSED CONSOLIDATED BALANCE SHEETS
                             (In thousands)
                              (Unaudited)

                                             September 30,   December 31,
                                                 2007           2006
                                              ---------      ---------
 ASSETS
  Cash and cash equivalents                   $   2,003      $   1,261
  Accounts receivable, net                       15,350         11,067
  Inventories                                     3,518          3,538
  Other current assets                            2,266          2,841
                                              ---------      ---------
   Total current assets                          23,137         18,707

   Building, equipment and improvements, net     24,106         19,572

   Other assets                                  19,566         21,595
                                              ---------      ---------
    Total assets                              $  66,809      $  59,874
                                              =========      =========

 LIABILITIES AND STOCKHOLDERS' EQUITY

    Current liabilities                       $  11,774      $   8,892

    Long-term obligations                         2,816          3,038

    Stockholders' equity                         52,219         47,944
                                              ---------      ---------
     Total liabilities and stockholders'
      equity                                  $  66,809      $  59,874
                                              =========      =========


            

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