VSM MedTech Reports Results for Second Quarter Fisca
l 2005

Vancouver, Aug. 11: VSM MedTech Ltd. (TSX:VSM) today reported its financial results for the second quarter ended June 30, 2005.

Highlights for the second quarter of fiscal 2005:

Awarded two contracts to provide 275-channel CTF MEG(TM) systems to Aston University in Birmingham, UK and Cardiff University in Cardiff,  Wales;

Achieved 267% year-over-year increase in Vital Signs Monitoring revenue to $439,000;

Facilitated the first European MEG expert user group meeting at French National Institute of Health and Medical Research in Lyon, France.

Highlights for the first half of 2005:

Recorded revenue of $5.4 million;

Achieved $1 million (272%) year-over-year increase in Vital Signs Monitoring revenue.

Highlights subsequent to quarter end:

Awarded contract to provide a fetal MEG investigational device to Eberhard-Karls University of Tubingen, Germany;

Awarded upgrade contract to provide a 275-channel CTF MEG system to McGill University instead of the 151-channel configuration announced previously.

"The award of three new MEG contracts and one upgrade contract in June and July is demonstrative of the continued strengthening of our sales pipeline, as well as our leadership position in the MEG market," said Jack Price, President and Chief Executive Officer, VSM MedTech Ltd. "As we continue to expand our sales pipeline, we are focusing on building a sustainable competitive advantage by offering the highest value proposition in the industry to our customers. At the same time, our Vital Signs Monitoring business is benefiting from the success of our revitalized marketing strategy which focuses on specialized regional distributors."

Revenue for the second quarter of fiscal 2005 was $1.3 million compared with $2.3 million for the second quarter of fiscal 2004. Revenue from the MEG division accounted for $0.9 million of second quarter fiscal 2005 revenue compared with $2.2 million for the second quarter of fiscal 2004 as there were no MEG system installations completed in the 2005 period. Revenue for the second quarter of fiscal 2005 was generated primarily by MEG service and maintenance  agreements and research services. Revenue from the Vital Signs Monitoring division for the second quarter of fiscal 2005 increased to $439,000 from $120,000 for the corresponding period of 2004.

Gross margin for the second quarter of fiscal 2005 was ($79,000), relatively unchanged from  ($77,000) for the second quarter of fiscal 2004. Total operating expenses for the second quarter of fiscal 2005 decreased to $3.8 million from $5.0 million for the corresponding quarter of fiscal 2004. The decrease was partially attributable to lower general and administrative expenses resulting from the Company's initiatives to reduce costs throughout the organization in 2004, offset by higher research and development expenses related to key product design enhancements. Expenses for the second quarter of fiscal 2004 included a $746,000 contract loss provision and a $156,000 restructuring charge.

Consolidated net loss for the second quarter of fiscal 2005 was $3.8 million, or $0.09 per share, compared with a consolidated net loss of $4.9 million, or $0.11 per share, for the second quarter of fiscal 2004.

Revenue for the first six months of fiscal 2005 increased 68% to $5.4 million from $3.2 million for the first six months of 2004. Revenue from the MEG division accounted for $4.1 million of first half fiscal 2005 revenue, an increase of 42% from $2.9 million for first half fiscal 2004 revenue.

Revenue from the Vital Signs Monitoring division accounted for $1.4 million of first half fiscal 2005 revenue, an increase of 272% from $370,000 for the first half of fiscal 2004.

Gross margin for the first half of fiscal 2005 was $528,000 compared to negative ($332,000) for the first half of fiscal 2004.   Total operating expenses for the first half of fiscal 2005 decreased to $6.9 million from $9.5 million for the first half of fiscal 2004. The decrease was partially attributable to lower general and administrative expenses resulting from the Company's restructuring initiatives in 2004 offset by increases in research and development expenses and sales and marketing expenses. Expenses for the first half of fiscal 2004 included a $746,000

contract loss provision and a $1.3 million restructuring charge. Consolidated net loss for the first half of fiscal 2005 was $6.4 million, or $0.15 per share, compared with a consolidated net loss of $9.9 million, or $0.23 per share, for the first half of fiscal 2004.

Cash and cash equivalents at June 30, 2005 were $11.2 million compared with $15.3 million at December 31, 2004. Working capital at June 30, 2005 was $15.0 million compared with $21.3 million at December 31, 2004.

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