Rosetta Genomics Reports Second Quarter 2010 Financial Results

Use of Non-GAAP Financial Measures

This press release contains certain non-GAAP financial measures. A “non-GAAP financial measure” refers to a numerical measure of historical or future financial performance, financial position, or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP in the financial statements. In this release, Rosetta provides non-GAAP net loss and non-GAAP net loss per share data as additional information relating to its operating results. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net loss or net loss per share prepared in accordance with GAAP.

Pursuant to the requirements of Regulation G promulgated by the SEC, the Company has provided a reconciliation of each non-GAAP financial measure used in this earnings release and related conference call or webcast to the most directly comparable financial measure prepared in accordance with GAAP. This reconciliation is presented in a table below under the heading “Reconciliation of GAAP to Non-GAAP Consolidated Statement of Operation.” Investors are encouraged to review these reconciliations to ensure they have a thorough understanding of the reported non-GAAP financial measures and their most directly comparable GAAP financial measures.

Management uses these non-GAAP measures for internal reporting and forecasting purposes. The Company has provided these non-GAAP financial measures in addition to GAAP financial results because it believes that these non-GAAP financial measures provide useful information to certain investors and financial analysts for comparison across accounting periods not influenced by certain non-cash items that are not used by management when evaluating the Company's historical and prospective financial performance.

[Tables to follow]

CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
			June 30,										December 31,
				2010					2009					2009
			Unaudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents			$	2,903				$	5,984				$	3,329
Restricted cash				993					1,178					1,076
Short-term bank deposits				1,144					8,326					3,143
Marketable securities				2,649					1,194					2,756
Trade receivables, net				131					31					72
Other accounts receivable and prepaid expenses				551					736					557
Total current assets				8,371					17,449					10,933
SEVERANCE PAY FUND				103					75					92
PROPERTY AND EQUIPMENT, NET				1,376					1,275					1,216
LONG-TERM ACCOUNTS RECEIVABLES				260					606					502
Total long term assets				1,739					1,956					1,810
Total assets			$	10,110				$	19,405				$	12,743
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Short-term bank loan, current maturities of capital lease and of long-term bank loan				108					94					125
Trade payables				849					983					654
Other accounts payable and accruals				1,495					1,390					1,526
Total current liabilities				2,452					2,467					2,305
LONG-TERM LIABILITIES:
Long-term bank loan and capital lease				2					70					46
Convertible loan				-					1,500					1,500
Deferred revenue				1,928					1,928					1,928
Accrued severance pay				135					107					122
Total Long-term Liabilities				2,065					3,605					3,596
EQUITY:
Rosetta Genomics Shareholders equity:
Share capital:				39					32					32
Additional paid-in capital				74,485					67,295					68,174
Other comprehensive income				2					-					96
Deficit accumulated during the development stage				(69,662	)				(53,994	)				(61,460	)
Total Rosetta Genomics shareholders’ equity				4,864					13,333					6,842
Non-controlling interest				729					-					-
Total Equity			$	5,593				$	13,333				$	6,842
Total liabilities and shareholders’ equity			$	10,110				$	19,405				$	12,743

CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands (except share and per share data)
			Three months ended									Six months ended
			June 30,									June 30,
				2010					2009				2010					2009
			Unaudited									Unaudited
Revenues			$	70				$	14			$	97				$	31
Cost of revenues:				140					167				298					305
Gross loss				70					153				201					274
Operating expenses:
Research and development, net				1,941					1,432				3,561					3,117
Marketing and business development				1,569					1,435				2,745					2,299
General and administrative				854					749				1,583					1,499
Total operating expenses				4,364					3,616				7,889					6,915
Operating loss				4,434					3,769				8,090					7,189
Financial expenses(income) net				(9	)				30				(50	)				18
Net loss				4,425					3,799				8,040					7,207
Attributable to non controlling interest				(198	)				-				(219	)				-
Net loss attributable to Rosetta Genomics before discontinued operation				4,227					3,799				7,821					7,207
Net loss attributable to Rosetta Genomics from discontinued operation				381					1,621				381					1,832
Net loss attributable to Rosetta Genomics after discontinued operation			$	4,608				$	5,420			$	8,202				$	9,039
Basic and diluted net loss per Ordinary share of continuing operation attributable to Rosetta Genomics' shareholders			$	0.25				$	0.28			$	0.48				$	0.56
Basic and diluted net loss per Ordinary share of discontinuing operation attributable to Rosetta Genomics' shareholders			$	0.02				$	0.12			$	0.02				$	0.14
Basic and diluted net loss per Ordinary share attributable to Rosetta Genomics' shareholders			$	0.27				$	0.40			$	0.50				$	0.70
Weighted average number of Ordinary shares used to computed basic and diluted net loss per Ordinary share				16,778,127					13,581,036				16,508,281					12,880,557

RECONCILIATION OF GAAP TO NON-GAAP CONSOLIDATED STATEMENT OF OPERATION:
				Six Months ended										Three Months ended
				June 30,										June 30,
					2010					2009					2010						2009
GAAP net loss as reported				$	7,821				$	7,207				$	4,227					$	3,799
NON-GAAP Adjustment:
Expenses reported for stock-based compensation
Cost of revenues					(3	)				-					(3	)					-
Research and development, net					(302	)				(164	)				(234	)					(88	)
Marketing and business development					(524	)				(162	)				(446	)					(60	)
General and administrative					(288	)				(219	)				(215	)					(120	)
Total Adjustment					(1,117	)				(545	)				(898	)					(268	)
NON-GAAP net loss					6,704					6,662					3,329						3,531
NON-GAAP Basic net loss (income) per Ordinary share				$	0.41				$	0.52				$	0.20					$	0.26

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