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SPECTRAL MEDICAL INC.
Symbol EDT
Shares Issued 281,245,539
Close 2024-08-08 C$ 0.60
Market Cap C$ 168,747,323
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ORIGINAL: Spectral Medical Announces Second Quarter Results and Provides Corporate Update

2024-08-09 08:00 ET - News Release

Tigris Trial Enrollment Reaches 126 Patients

Strengthened Balance Sheet with Expected Funds to Complete Tigris Trial Enrollment

TORONTO, Aug. 09, 2024 (GLOBE NEWSWIRE) -- Spectral Medical Inc. (“Spectral” or the “Company”) (TSX: EDT), a late-stage theranostic company advancing therapeutic options for sepsis and septic shock, today announced its financial results for the second quarter ended June 30, 2024, and provided a corporate update.

Spectral has continued its significant progress throughout the second quarter of 2024 both clinically and operationally and year-to-date enrolled 45 patients for a total of 126 patients out of the 150 total patients target. The Company is focused on the final push to fully enroll and finish the Tigris trial and believes that the continued onboarding of new Tigris sites since the fourth quarter of 2023 could further accelerate enrollment and allow Spectral to rapidly reach the 150-patients target, bringing the Company closer to FDA submission and potential FDA approval. In parallel to its clinical trial, the Company continues to work closely with its commercialization partner, Baxter.

Dr. John Kellum, Chief Medical Officer of Spectral Medical, stated, “We continue to witness robust enrollment activity in 2024, with record enrollment rates since the beginning of the year. Tigris is gathering momentum as we enter the final months of the trial. We have a very strong group of sites and very dedicated investigators, and the excitement level has never been higher. Our clinical team is focused on trial site support with activities to ensure that our Tigris sites have the support and resources to enroll patients as efficiently as possible. We are committed alongside our trial sites to advancing Tigris and believe PMX, if ultimately approved, will play a major role in reducing the tragic rates of mortality caused by sepsis.”

“I am pleased with the increased level of activity across the Company and the resultant ramp up of patient enrollment. The potential to sustain our current pace of enrollment could see us rapidly advance the trial towards completion in the late 2024 timeframe,” said Chris Seto, Chief Executive Officer of Spectral. “Additionally, with the receipt of gross proceeds of approximately $11 million since the beginning of April, we have secured funding to finalize Tigris enrollment.”

Corporate Highlights During & Subsequent to Second Quarter 2024

Tigris Trial and Regulatory Program

  • Patient Enrollment
    Total of 126 patients randomized to date out of the 150 total patients to be enrolled in the Tigris trial.
    • Accelerated enrollment experienced in the second quarter and 2024 to date, with 45 patients enrolled so far – represents the most robust enrollment rates since the start of the Tigris trial.
    • Record monthly enrollment with nine patients enrolled in June, followed equally with nine patients enrolled in July.
  • Tigris Sites
    Currently 23 Tigris sites onboarded, with the onboarding of the Thomas Jefferson University, which is an experienced, high-quality site from the EUPHRATES trial.
    • Spectral clinical team focused on trial site management activities to ensure that Tigris sites have the support and resources to enroll patients as efficiently as possible.
  • Timing
    The Company continues to focus on finalizing the Tigris trial within the reasonably shortest timelines. Based on the current rate of enrollment, Tigris could be completed as early as December 2024.

PMX Commercialization

  • Baxter Partnership Activities
    In anticipation of a positive Tigris trial outcome, the Company has been working closely with Baxter on post-approval marketing plans for PMX commercialization. This includes developing product branding, pricing and roll-out plans with numerous Baxter departments, including marketing, regulatory, clinical and reimbursement. Baxter has communicated its intention to undertake a broad marketing campaign on day one of FDA approval for PMX.
  • Prismax Sub-study
    The Company is also working with Baxter on a sub-study to obtain FDA clearance for hemoperfusion for Baxter’s Prismax device. The Prismax, with its leading installed base in ICUs throughout the U.S., is anticipated to be the primary ICU device utilized for PMX treatments on commercial launch.

Funding

  • Bought Deal Private Placement Convertible Notes
    On May 30, 2024, Spectral received USD $6,232 in convertible notes payable (the “Notes”) upon the completion of its private placement. 6,232 Notes were issued and have a face value of USD$1,000 per Note, bearing interest of 9% and are due May 1, 2028 (the “maturity date”). Holders of the notes may convert all or any portion of the Notes into common shares of the Company in integral multiples of USD $1,000 principal amount at any time prior to the maturity date. The Notes are convertible into approximately 16,359,000 Common Shares representing a conversion price of approximately CAD$0.52 per share subject to certain anti-dilution and make whole fundamental change adjustments.
  • Exercise of Anti-Dilution Pre-emptive Rights
    On July 19, 2024 the Company completed an additional non-brokered offering of US$1 million of 9% convertible notes of the Company (the “Notes”) at a price of US$1,000 per convertible note due on May 1, 2028 (the “Offering”). The Notes were sold to one of the Company’s largest shareholders pursuant to the exercise of their anti-dilution pre-emptive rights relating to the closing of the offering of the approximately CAD$8.5 million offering of Notes that was completed on May 30, 2024.
  • Share Warrant Exercise / Expired Warrants
    Subsequent to the second quarter end 207,500 share warrants were exercised for gross proceeds of approximately $102,250. These warrants were issued in conjunction with the Company’s July 27, 2021 and November 2, 2022 unit offerings.

    On July 29, 2024, 10,982,500 share warrants expired. These expired share warrants were issued in conjunction with the Company’s approximately $10 million unit offering which closed on July 27, 2021. As at the time of this MD&A, the Company has 7,775,464 share warrants outstanding.
  • Stock Option Exercise
    1,799,460 stock options were exercised in the second quarter for gross proceeds of approximately $606,000. Almost all of the stock options exercised were held by the board and management of the Company, including Spectral’s CEO (Mr. Chris Seto), Board Chairman (Dr. Paul Walker), Director (Mr. William Stevens) and now former Director (Mr. Anthony Bihl).

Addition to Spectral Board of Directors

  • On June 7, 2024, the Company announced that it had appointed Mr. Cristiano Franzi to its Board of Directors. Mr. Franzi is a seasoned global healthcare executive and board director with a 30-year track record at leading global Med-Tech companies. As Regional President for businesses of up to $4 billion in size at Solventum, Baxter, Medtronic, and Covidien, Mr. Franzi has proven his ability to deliver value by developing compelling visions, identifying new market opportunities, and articulating clear growth strategies while streamlining operations and implementing highly disciplined business models.

Change of Auditors

  • On July 11, 2024, the Company announced that MNP has been appointed as the auditors of the Company following the decision by PricewaterhouseCoopers LLP (“PWC”) to resign as the auditor of Spectral. The PWC resignation was not the result of any disagreement between the Company and PWC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.

Financial Review

Revenue for the three-months ended June 30, 2024 was $471,000 compared to $306,000 for the same three-month period last year, representing an increase of $165,000 or 54%. Revenue for the six-months ended June 30, 2024, was $1,139,000 and $836,000 for the same period last year, representing an increase of $303,000 or 36%. Royalty revenue for the three-months ended June 30, 2024 was NIL and NIL for the same period the prior year. Royalty revenue for the six-months ended June 30, 2024 was $135,000 compared to $126,000 for the same six-month period last year. This is due to an increase in usage of the Company’s IP from one customer. Product Revenue for the three-months ended June 30, 2024 was $218,000 compared to $139,000 for the same three-month period last year, representing an increase of $79,000 or 56%. Product revenue for the six-months ended June 30, 2024 was $567,000 and $376,000, representing an increase of $191,000 or 51%.

Operating expenses for the three-months ended June 30, 2024, were $4,873,000, compared to $4,594,000 for the same period in the prior year, an increase of $279,000, or 6%. Interest expense increased by $418,000 due to convertible notes payable issued on September 7, 2023 and May 30, 2024. Also, an increase in the raw material and consumables used, and foreign exchange loss.

Operating expenses for the six-months ended June 30, 2023, were $9,698,000 compared to $6,219,000 for the same period in the prior year, an increase of $3,479,000 or 56%. The change is primarily due to an increase in foreign exchange loss of $781,000, interest expense increase of $711,000, fair value adjustment derivative liability increase of $455,000 and amortization expense increase of $516,000. All these increases are due to the funding received during September 2023 and May 2024. In addition, share-based compensation expense increased by $295,000. Lastly, consulting and professional fees increased by $270,000 due to increased site and patient fees related to the Tigris trial.

Clinical development and regulatory program costs were $1,413,000 for the three-months ended June 30, 2024 compared to $1,563,000 for the same period in the prior year. For the six-months ended June 30, 2024, clinical development costs were $2,377,000 compared to $1,994,000 for the corresponding period the prior year. A significant portion of clinical trial and regulatory costs consists of consulting and professional fees paid to contract research organizations, clinical sites, and other clinical and regulatory consultants. The increase in costs reflects increased activity with respect to the initialization of clinical sites and the randomization of patients into the Tigris clinical trial.

Loss for the three-months ended June 30, 2024 was $4,402,000, $(0.02) per share compared to a loss of $4,239,000, $(0.02) per share for the same period in the prior year. The increased loss of $163,000 was due to increased operating expenses, partially offset by a reduction in loss from discontinued operations of $49,000 related to the reduction in Dialco operating expenses.

Loss for the six-months ended June 30, 2024 was $8,562,000, $(0.03) per share, compared to a loss of $5,377,000, $(0.02) per share, for the same period in the prior year. The increased loss of $3,185,000 was due to operating expenses, partially offset by a reduction in loss from discontinued operations of $3,000 related to the reduction in Dialco operating expenses.

The Company concluded the second quarter of 2024 with cash of $7,536,000 compared to $2,952,000 of cash on hand as of December 31, 2023.

The total number of common shares outstanding for the Company was 281,245,539 at June 30, 2024.

About Spectral 

Spectral is a Phase 3 company seeking U.S. FDA approval for its unique product for the treatment of patients with septic shock, Toraymyxin™ (“PMX”). PMX is a therapeutic hemoperfusion device that removes endotoxin, which can cause sepsis, from the bloodstream and is guided by the Company’s Endotoxin Activity Assay (EAA™), the only FDA cleared diagnostic for the risk of developing sepsis.

PMX is approved for therapeutic use in Japan and Europe and has been used safely and effectively on more than 340,000 patients to date. In March 2009, Spectral obtained the exclusive development and commercial rights in the U.S. for PMX, and in November 2010, signed an exclusive distribution agreement for this product in Canada. In July 2022, the U.S. FDA granted Breakthrough Device Designation for PMX for the treatment of endotoxic septic shock. Approximately 330,000 patients are diagnosed with septic shock in North America each year.

The Tigris Trial is a confirmatory study of PMX in addition to standard care vs standard care alone and is designed as a 2:1 randomized trial of 150 patients using Bayesian statistics. Endotoxic septic shock is a malignant form of sepsis https://www.youtube.com/watch?v=6RANrHHi9L8.

The trial methods are detailed in “Bayesian methods: a potential path forward for sepsis trials”.

Spectral is listed on the Toronto Stock Exchange under the symbol EDT. For more information, please visit www.spectraldx.com.

Forward-looking statement

Informationinthisnewsreleasethatisnotcurrentorhistoricalfactualinformationmayconstituteforward-looking information within the meaning of securities laws. Implicit in this information, particularly in respect of the future outlook of Spectral and anticipated events or results, are assumptions based on beliefs of Spectral's senior managementaswellasinformationcurrentlyavailabletoit.Whiletheseassumptionswereconsideredreasonable by Spectral at the time of preparation, they may prove to be incorrect. Readers are cautioned that actual results aresubjecttoanumberofrisksanduncertainties,includingtheavailabilityoffundsandresourcestopursueR&D projects, the successful and timely completion of clinical studies, the ability of Spectral to take advantage of business opportunities in the biomedical industry, the granting of necessary approvals by regulatory authorities as well as general economic, market and business conditions, and could differ materially from what is currently expected.

The TSX has not reviewed and does not accept responsibility for the adequacy or accuracy of this statement.

For further information, please contact:

Ali Mahdavi Chris Seto
Capital Markets & Investor Relations CEO
Spinnaker Capital Markets Inc. Spectral Medical Inc.
416-962-3300  
am@spinnakercmi.com cseto@spectraldx.com


Spectral Medical Inc.
Condensed Interim Consolidated Statements of Financial Position
In CAD (000s), except for share and per share data
(Unaudited)
       
   June 30, December 31,  
Notes 2024 2023 
  $ $ 
Assets    
Current assets    
Cash  7,536 2,952 
Trade and other receivables  352 186 
Inventories  272 366 
Prepayments and other assets  932 621 
   9,092 4,125 
Non-current assets    
Right-of-use-asset  505 567 
Property and equipment  294 326 
Intangible asset  184 193 
Total assets  10,075 5,211 
Liabilities    
Current liabilities    
Trade and other payables  2,784 2,820 
Current portion of contract liabilities6 525 727 
Current portion of lease liability  125 121 
Notes payable7 334 264 
Derivative Liability7 11,266 6,310 
   15,034 10,242 
Non-current liability    
Lease liability  436 500 
Non-current portion of contract liabilities6 5,291 3,342 
Notes payable7 12,157 7,676 
Total liabilities  32,918 21,760 
Shareholders' (deficiency) equity9   
Share capital  88,501 87,061 
Contributed surplus  8,916 8,916 
Share-based compensation  11,091 10,385 
Warrants  2,648 2,526 
Deficit  (133,999)(125,437)
Total shareholders' (deficiency) equity  (22,843)(16,549)
Total liabilities and shareholders' (deficiency) equity  10,075 5,211 


Spectral Medical Inc.
Condensed Interim Consolidated Statements of Loss and Comprehensive Loss
In CAD (000s), except for share and per share data
(Unaudited)
         
    Revised   Revised  
   (Refer Note 15)  (Refer Note 15) 
Notes Three months ended June 30, 2024 Three months ended June 30, 2023 Six-months ended June 30, 2024 Six-months ended June 30, 2023 
   $ $  $ 
Revenue6 471 306 1,139 836 
Expenses      
Raw materials and consumables used  388 281 667 418 
Salaries and benefits13 1,023 976 2,023 1,932 
Consulting and professional fees  1,445 1,472 2,370 2,100 
Regulatory and investor relations  126 196 301 304 
Travel and entertainment  195 99 271 183 
Facilities and communication  143 81 263 164 
Insurance  105 100 210 187 
Depreciation and amortization  549 103 680 164 
Interest expense7 668 250 1,208 497 
Foreign exchange loss  65 (201)529 (252)
Share-based compensation9 1,079 987 1,256 961 
Other expense  - (51)(12)(79)
Net loss on joint arrangement5 - 78 - 163 
Fair value adjustment derivative liabilities7 (913)223 (68)(523)
   4,873 4,594 9,698 6,219 
Loss and comprehensive loss for the period from continuing operations  (4,402)(4,288)(8,559)(5,383)
Loss (gain) from discontinued operations5 - 49 (3)6 
Loss and comprehensive loss for the period  (4,402)(4,239)(8,562)(5,377)
Basic and diluted loss from continuing operations per common share10 (0.02)(0.02)(0.03)(0.02)
Basic and diluted loss from discontinued operations per common share10 0.00 0.00 (0.00)0.00 
Basic and diluted loss per common share10 (0.02)(0.02)(0.03)(0.02)
Weighted average number of common shares outstanding - basic and diluted10 280,049,434
 278,556,560 279,539,697 278,552,206 


Spectral Medical Inc.
Condensed Interim Consolidated Statements of Changes in Shareholders’ Deficiency
In CAD (000s)
(Unaudited)
 
 Notes
Number of Shares Share Capital
 Contributed surplus
 Share-based compensation
 Warrants
 Deficit
 Total Shareholders’ (deficiency) equity 
       
    $ $ $ $ $ $ 
Balance January 1, 2023 278,547,804 87,050 8,773 8,908 2,490 (109,775)(2,554)
RSU released928,457 11 - (11)- - - 
Loss and comprehensive loss for the period - - - - - (5,377)(5,377)
Share-based compensation - - - 961 - - 961 
Revised (Refer note 15) Balance, June 30, 2023 278,576,261 87,061 8,773 9,858 2,490 (115,152)(6,970)
Warrants issued - - - - 179 - 179 
Warrants expired - - 143 - (143)- - 
Loss and comprehensive loss for the period - - - - - (10,285)(10,285)
Share-based compensation - - - 527 - - 527 
Balance December 31, 2023 278,576,261 87,061 8,916 10,385 2,526 (125,437)(16,549
)
Balance January 1, 2024 278,576,261 87,061 8,916 10,385 2,526 (125,437)(16,549)
Warrants exercised 750,000 463 - - (90)- 373 
Warrants issued - (212)  - 212 - - 
Share Options Exercised 1,867,627 1,163 - (524)- - 639 
RSU released 51,651 26 - (26)- - - 
Loss and comprehensive loss for the period - - - - - (8,562)(8,562)
Share-based compensation - - - 1,256 - - 1,256 
Balance June 30, 2024 281,245,539 88,501 8,916 11,091 2,648 (133,999)(22,843)


Spectral Medical Inc.
Condensed Interim Consolidated Statements of Cash Flows
In CAD (000s)
(Unaudited)
 
   Revised 
   (Refer note 15) 
  six months six months 
 Notesended June 30,  ended June 30, 
  2024 2023 
Cash flow provided by (used in)   
Operating activities   
Loss for the period (8,562)(5,377)
Adjustments for:   
Depreciation on right-of-use asset 62 47 
Depreciation on property and equipment 56 53 
Amortization of intangible asset 9 15 
Amortization of deferred financing fee 554 49 
Unrealized foreign exchange gain/loss 537 (194)
Interest expense on lease liability 17 19 
Accreted interest on notes payable 1,191 478 
Share-based compensation expense 1,256 961 
Net loss on joint venture arrangement - 163 
Fair value adjustment derivative liabilities (68)(523)
Changes in items of working capital:   
Trade and other receivables (166)314 
Inventories 94 52 
Prepayments and other assets (311)(866)
Trade and other payables (36)(446)
Contract liabilities 1,747 (333)
Net cash used in operating activities (3,620)(5,588)
Investing activities   
Purchase of property and equipment (24)(7)
Net cash used in investing activities (24)(7)
Financing activities   
Financing charges paid (722)- 
Interest expense paid (518)(235)
Lease liability payments (76)(63)
Proceeds from share options exercised 639 - 
Proceeds from share warrants exercised 373 - 
Proceed from 9% convertible notes issued 8,532 - 
Net cash provided by financing activities 8,228 (298)
Change in cash 4,584 (5,893)
Cash, beginning of period 2,952 8,414 
Cash, end of period 7,536 2,521 

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