Transcend Announces Adjustment to 2007 Income Tax Benefits - No Effect on 2007 Pre-Tax...

Transcend Announces Adjustment to 2007 Income Tax Benefits - No Effect on 2007 Pre-Tax Operating Results; Conference Call Scheduled

ATLANTA--(Business Wire)--
TRANSCEND SERVICES, INC. (NASDAQ:TRCR) announced that it will
defer previously reported tax benefits related to stock option
exercises for the year ended December 31, 2007. In addition, the
Company should have recorded the tax impact of warrants exercised
during 2007. The tax benefits from both of these groups of
equity-based transactions will be deferred and will increase
stockholders' equity once all net operating losses are utilized;
however, there will be a reduction in the reported income tax benefit
for the year ended December 31, 2007. The result of the above tax
deductions is an anticipated increase in net operating loss
carryforwards available to offset future taxable income, from $13.3
million to $15.8 million. Accordingly, the Company will restate
previously reported financial results for the year ended December 31,
2007 to appropriately account for the income tax benefits and to
recognize additional tax deductions. The Company intends to file a
Form 10-K/A restating its financial statements for this period as soon
as practicable to reflect these changes.

It is anticipated that the restatement will not affect pre-tax
operating results or net cash flow from operations for 2007.
Additionally, due to its improving profitability, the Company
previously determined and maintains its previously reported position
that it is more likely than not that it will utilize the net operating
loss carryforwards in the future. Accordingly, the Company believes
that the reversal of the valuation allowance remains appropriate.

We had previously reported an income tax benefit of $5,264,000 for
the year ended December 31, 2007, resulting primarily from the
reversal of the Company's deferred tax asset valuation allowance. The
anticipated restatement reduces the income tax benefit for the year
ended December 31, 2007 by $980,000 to $4,284,000, resulting in a
decrease in the Company's net income for the year ended December 31,
2007 from $11,479,000, as originally reported, to $10,499,000.
However, this $980,000 will be recorded as an increase in
stockholders' equity after the net operating loss carryforwards are
utilized. Additionally, as a result of recognizing tax deductions
associated with the exercise of warrants in 2007, the amount of net
operating loss carryforwards available to offset future taxable income
is expected to increase from $13.3 million to 15.8 million.

A conference call to discuss the restatement is scheduled for
April 11, 2008 at 8:30 Eastern time. To participate in the conference
call, please dial (800) 815-8193 (the US/Canada dial-in number) or
(706) 643-2724 (the international dial-in number), enter the
conference identification number 43100060 and, if asked, identify the
conference name as Transcend Services and the leader name as Larry
Gerdes. A replay of the conference call will be available by dialing
(800) 642-1687 (US/Canada) or (706) 645-9291 (international) and
entering the conference identification number 43100060 from two hours
after the completion time of the conference call until midnight on
April 24, 2008.

About Transcend Services, Inc.

Transcend believes that accurate, reliable and timely
transcription creates the foundation for the patient medical record.
To this end, the Company has created Internet-based,
speech-recognition enabled, voice-to-text systems that allow its
skilled medical language specialists to securely and quickly produce
the highest quality medical documents. The Company's wide range of
transcription and editing services encompass everything needed to
securely receive, type, edit, format and distribute electronic copies
of physician-dictated medical documents, from overflow projects to
complete transcription outsourcing.

For more information, visit http://www.transcendservices.com.

This report contains forward-looking statements within the safe
harbor provisions of the Private Securities Litigation Report Act of
1995. All statements other than those that are purely historical are
forward-looking statements. Words such as "expect," "anticipate,"
"believe," "estimate," "intend," "plan," "potential" and similar
expressions also identify forward-looking statements. Forward-looking
statements include statements regarding expected materiality or
significance, the quantitative effects of the restatement, and any
anticipated conclusions of the company, the Audit Committee or
management.

Because these forward-looking statements involve risks and
uncertainties, there are important factors that could cause our actual
results, as well as our expectations regarding materiality or
significance, the restatement's quantitative effects, the
effectiveness of our disclosure controls and procedures, and our
deficiencies in internal control over financial reporting to differ
materially from those in the forward-looking statements. These factors
include the risk that additional information may arise from the final
conclusion of the investigation, the preparation of our restated
financial statements or other subsequent events that would require us
to make additional adjustments, as well as inherent limitations in
internal controls over financial reporting.

For a discussion of a variety of risk factors affecting our
business and prospects, see "Item 1A -- Risk Factors" in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2007, as
supplemented by Current Reports on Form 8-K that have been filed since
then.

Transcend Services, Inc.
Larry Gerdes, 678-808-0600 (CEO)
larry.gerdes@trcr.com
or
Lance Cornell, 678-808-0600 (CFO)
lance.cornell@trcr.com

Copyright Business Wire 2008