Spectral Announces Fourth Quarter and Fiscal 2020 Results and Corporate Update

TORONTO, March 26, 2021 (GLOBE NEWSWIRE) — Spectral Medical Inc. (“Spectral” or the “Company”) (TSX: EDT), a late stage theranostic company advancing therapeutic options for sepsis and septic shock, as well as commercializing a new proprietary platform targeting the renal replacement therapy market through its wholly-owned subsidiary Dialco Medical Inc. (“Dialco”), today announced its financial results for the fourth quarter and for the year ended December 31, 2020 and provided a corporate update.

Financial Review

Revenue for the three months ended December 31, 2020 was $535,000 compared to $746,000 for the same three month period last year. Revenue for the year ended December 31, 2020 was $2,101,000 compared to $2,868,000 for the prior year, representing a decrease of $767,000, or 27%. The majority of the decrease is due to the timing of orders for product revenue and the non-recurring technology transfer revenue. This was mitigated by an increase in royalty revenue, and revenue from the exclusive distribution agreement with Baxter International Inc. (“Baxter”).

For the quarter ended December 31, 2020, the Company reported operating costs of $2,682,000 compared to $2,160,000 for the corresponding period in 2019. Operating costs for the year ended December 31, 2020 amounted to $11,199,000 compared to $7,728,000 in 2019. Approximately half of the increase relates to non-recurring fees payable to a financial advisory services firm incurred in the first quarter of 2020, relating to a legacy financial advisory agreement. In addition, the Company continues to ramp up activity for its clinical development and regulatory program; it incurred approximately $275,000 in professional fees in connection with a withdrawn prospectus offering in early March 2020, a general increase in transactional activity that require legal services, and quarterly reviews performed by the Company’s auditors.

The Company continues to maintain a low cost operating structure for its base business operations. The Company anticipates its operating costs to increase throughout 2021 as Spectral’s Tigris trial enrollment is expected to increase significantly, combined with incremental costs associated with Dialco’s upcoming usability trial for DIMI and the increase in field resources for the marketing and commercialization activities of its RRT devices.

Loss for the quarter ended December 31, 2020 was $2,147,000 ($0.009 per share) compared a loss of $1,414,000 ($0.006 per share) for the same quarter last year. For the year ended December 31, 2020, the Company reported a loss of $9,098,000 ($0.04 per share), compared to a loss of $4,860,000 ($0.02 per share), for the year ended December 31, 2019.

The Company concluded the 2020 year with cash of $5,807,000 compared to $1,435,000 cash on hand as of December 31, 2019.

The total number of common shares outstanding for the Company was 236,755,745 as at December 31, 2020.

Corporate Highlights During & Subsequent to Fourth Quarter and Fiscal Year Ended December 31, 2020

Tigris Trial and Regulatory Program

Tigris trial patient enrollment and new trial site onboarding continue to be negatively impacted by the COVID-19 pandemic, with most trial site ICUs diverting their research resources and focus to conducting trials and treating COVID-19 positive patients since March 2020. While some Tigris sites have remained open to enrollment throughout the pandemic, enrollment patient accrual has been low. 

  • Patient Enrollment

    15 patients have been randomized to-date. While current enrollment is below pre-pandemic expectations, the Company continues to be pleased by the early results from the Tigris trial. While the existing randomized patient sample size is limited, the mortality outcome data to date is inline with the Company’s Euphrates post-hoc experience.

  • Clinical Trial Sites

    The Tigris trial currently has 11 sites initiated, with room to expand to 15 sites. At the Company’s December Virtual Investor Day, the Company expected that 15 sites would be initiated by the end of the first quarter, 2021. The Company’s efforts to finalize new site start-up procedures have been postponed due to the COVID-19 pandemic, resulting in projected initiation of all 15 sites by the end of the third quarter, 2021.

    The Company’s clinical team is in regular communication with trial site principal investigators and clinical staff. Based on these discussions, the Company anticipates a return to normalized recruitment activity levels, with all 11 sites indicating active screening status by early June.

  • Timing

    The Company continues to focus on finalizing the Tigris trial within the reasonably shortest timelines. Despite the hurdles presented by the COVID-19 pandemic, the Company continues to drive for completion of the trial and approval in H1 2022.

Dialco

  • DIMI Usability Trial
    On February 23, 2021, Dialco was granted Investigational Device Exemption (“IDE”) authorization by the United States Food and Drug Administration (“FDA”) to conduct a usability trial to demonstrate the safety and efficacy of DIMI for performing hemodialysis in the home environment. The approved IDE usability trial is expected to enroll 35 patients and is designed to evaluate the safety and efficacy of DIMI in the home setting by analyzing delivered dialysis dose and potential adverse events occurring during six weeks of use at home compared to six weeks of use in the hospital setting on the same patients. Dialco anticipates finalizing its RFP process to select its contract research organization (“CRO”) partner to run the trial shortly, as well as identifying and evaluating clinical sites that will participate in the trial. The usability trial is the final regulatory step towards FDA clearance for in-home use of DIMI.
  • Infomed Agreement Update
    Dialco is in late-stage renewal negotiations for the DIMI device, and anticipates finalizing a long-term licensing agreement in the coming days.
  • Health Canada DIMI Approval Update
    Dialco had previously submitted an application to Health Canada in the second quarter of 2020 for in-home use approval for its DIMI device. The Company anticipates that Health Canada approval is imminent.
  • SAMI Commercialization
    Throughout 2020, Dialco initiated clinical evaluations of SAMI at the University of Michigan in Ann Arbor and the Scarborough General Hospital (“SGH”) in Toronto. In the first quarter of 2021, SGH committed to the purchase of three SAMI units after a successful clinical evaluation of the SAMI device. Although the SGH purchase is limited in overall value, this transaction has qualified Dialco to become a Plexxus supplier of renal replacement devices. Plexxus is a leading health care supply chain organization, which delivers purchasing services to hospital networks throughout Ontario. 
  • MDSAP Certification
    On November 24, 2020, Dialco received its Medical Device Single Audit Program (“MDSAP”) certification for “the design, manufacture, installation and service of equipment for extracorporeal blood purification and its related disposal” under ISO 13485 for Canada and the United States. MDSAP is the highest quality and regulatory standard in the medical device industry, and validates both Spectral’s and Dialco’s commitment to maintaining the highest quality assurance standards within the medical device industry. Additionally, MDSAP certification is a Health Canada mandated requirement to sell medical devices in Canada, which is an important component to Dialco’s commercialization rollout plans.

Warrant Exercise
Subsequent to the year end, 2,114,999 warrants were exercised at a price of $0.45 per warrant. Accordingly, the Company received proceeds of $952,000. The Company issued share purchase warrants in connection with its financing that closed on April 23, 2018, which entitled each holder the right to purchase one common share of the Company at an exercise price of $0.45 per share for a three-year period ending April 20, 2021 (“April 2018 Warrants”). A total of 5,357,332, warrants (or $2,411,000) exercisable at a price of $0.45 remain outstanding. The Company anticipates all of the April 2018 Warrants will be exercised based on solicitation of the warrant holders.

Spectral Transition of Senior Leadership Team
In March 2021, the Company announced the appointment of Chris Seto as Chief Executive Officer (effective April 1, 2021), and the appointment of Dr. John Kellum as Chief Medical Officer. Mr. Seto brings over 25 years of capital markets and financial management experience and will focus the Company on achieving regulatory milestones and product commercialization. Dr. Kellum is considered one of the world’s foremost experts on blood purification and acute kidney injury (AKI), and he will be integral in driving the Tigris trial to a successful completion and help guide the commercial rollout of Dialco’s SAMI and DIMI platforms targeting both the acute and chronic renal dialysis therapy markets. Dr. Paul Walker will remain on the Board of Directors, and will support Dr. Kellum’s leadership of the Tigris trial.

U.S. Listing Update
The Company continues to prepare for a potential listing on a senior U.S. exchange. While management and the Board believe a senior U.S. listing aligns with the goals of the business and its stakeholders, timing is still to be determined.

About Spectral

Spectral is a Phase III 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 has been approved for therapeutic use in Japan and Europe, and has been used safely and effectively on more than 300,000 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. Approximately 330,000 patients are diagnosed with severe sepsis and septic shock in North America each year.

Spectral, through its wholly owned subsidiary, Dialco Medical Inc. (“Dialco”), is also commercializing a new proprietary platform, “SAMI”, targeting the renal replacement therapy (“RRT”) market. Dialco is also seeking regulatory approval for “DIMI” which is based on the same RRT platform, but will be intended for home hemodialysis use. “DIMI” recently received its FDA 510k clearance for use in hospital and clinical settings.

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

Forward-looking statement

Information in this news release that is not current or historical factual information may constitute forward-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 management as well as information currently available to it. While these assumptions were considered reasonable by Spectral at the time of preparation, they may prove to be incorrect. Readers are cautioned that actual results are subject to a number of risks and uncertainties, including the availability of funds and resources to pursue R&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:

Dr. Paul Walker
President and CEO
Spectral Medical Inc.
416-626-3233 ext. 2100
[email protected]
Mr. Chris Seto
COO & CFO
Spectral Medical Inc.
416-626-3233 ext. 2004
[email protected]
Mr. Ali Mahdavi
Capital Markets & Investor Relations
416-962-3300
[email protected]

David Waldman/Natalya Rudman
US Investor Relations
Crescendo Communications, LLC
212-671-1020
[email protected]
   


Spectral Medical Inc.
Consolidated Statements of Financial Position

(in thousands of Canadian dollars)

  December 31
2020
    December 31
2019
 
  $     $  
       
Assets      
Current assets      
Cash 5,807     1,435  
Trade and other receivables 260     271  
Inventories 348     276  
Prepayments and other assets 389     155  
Contract assets     519  
  6,804     2,656  
Non-current assets      
Right-of-use-asset 625     719  
Property and equipment 488     368  
Intangible asset 246     263  
Total assets 8,163     4,006  
       
Liabilities      
Current liabilities      
Trade and other payables 2,141     1,002  
Current portion of contract liabilities 676      
Current portion of lease liability 85     77  
  2,902     1,079  
Non-current liability      
Lease liability 582     667  
Non-current portion of contract liabilities 5,348      
Total liabilities 8,832     1,746  
       
Shareholders’ (deficiency) equity      
Share capital 71,870     66,837  
Contributed surplus 7,981     7,981  
Share-based compensation 6,771     6,183  
Warrants 2,418     1,870  
Deficit (89,709 )   (80,611 )
Total shareholders’ (deficiency) equity (669 )   2,260  
       
Total liabilities and shareholders’
  (deficiency) equity
8,163     4,006  

Spectral Medical Inc.
Consolidated Statements of Loss and Comprehensive Loss
For the years ended December 31, 2020 and 2019

(in thousands of Canadian dollars, except for share and per share data)

  2020     2019  
  $     $  
       
Revenue 2,101     2,868  
       
Expenses      
Changes in inventories of finished goods and work-in-process 127     291  
Raw materials and consumables used 501     359  
Salaries and benefits 4,750     3,826  
Consulting and professional fees 4,064     1,499  
Regulatory and investor relations 541     514  
Travel and entertainment 146     326  
Facilities and communication 361     300  
Insurance 248     238  
Depreciation and amortization 304     278  
Interest expense on lease liability 32     36  
Foreign exchange (gain) loss (7 )   114  
Other expense (income) 148     (60 )
(Gain) loss on disposal of property and equipment (16 )   7  
  11,199     7,728  
       
Loss and comprehensive loss for the year (9,098 )   (4,860 )
       
Basic and diluted loss per common share (0.04 )   (0.02 )
       
Weighted average number of common shares
      outstanding – basic and diluted
232,502,463     225,731,215  


Spectral Medical Inc.
Consolidated Statements of Changes in Shareholders’ (Deficiency) Equity
For the years ended December 31, 2020 and 2019

(in thousands of Canadian dollars)

      Issued capital Contributed
surplus

Share-based
compensation

Warrants Deficit   Total
Shareholders’
(deficiency)
equity

 
  Number $ $ $ $ $   $
 
Balance, January 1, 2019 225,591,183 66,646 7,981 5,564   1,930   (75,751 ) 6,370  
Share options exercised 10,500 7 (3 )     4  
Warrants exercised 275,000 184   (60 )   124  
Loss and comprehensive loss for the year     (4,860 ) (4,860 )
Share-based compensation 622       622  
Balance, December 31, 2019 225,876,683 66,837 7,981 6,183   1,870   (80,611 ) 2,260  
Public offering 8,500,000 3,526   788     4,314  
Share options exercised 1,279,062 772 (292 )     480  
Warrants exercised 1,100,000 735   (240 )   495  
Loss and comprehensive loss for the year     (9,098 ) (9,098 )
Share-based compensation 880       880  
Balance, December 31, 2020 236,755,745 71,870 7,981 6,771   2,418   (89,709 ) (669 )


Spectral Medical Inc.
Consolidated Statements of Cash Flows
For the years ended December 31, 2020 and 2019

(in thousands of Canadian dollars)

  2020     2019  
  $     $  
Cash flow provided by (used in)      
       
Operating activities      
Loss and comprehensive loss for the year (9,098 )   (4,860 )
Adjustments for:      
Depreciation on right-of-use asset 94     94  
Depreciation on property and equipment 193     163  
Amortization of intangible asset 17     21  
Interest expense on lease liability 32     36  
Unrealized foreign exchange loss on cash 187     57  
Share-based compensation 880     622  
(Gain) loss on disposal of property and equipment (16 )   7  
Changes in items of working capital:      
Trade and other receivables 11     1,162  
Inventories (72 )   (79 )
Prepayments and other assets (234 )   37  
Contract asset 519     (393 )
Trade and other payables 1,139     502  
Contract liabilities 6,024     (107 )
Net cash used in operating activities (324 )   (2,738 )
       
Investing activities      
Proceeds on disposal of property and equipment 18      
Property and equipment expenditures (315 )   (161 )
Net cash used in investing activities (297 )   (161 )
       
Financing activities      
Proceeds from public offering 5,100      
Transaction costs paid (786 )    
Lease liability payments (109 )   (105 )
Share options exercised 480     4  
Warrants exercised 495     124  
Net cash provided by financing activities 5,180     23  
       
Increase (decrease) in cash 4,559     (2,876 )
Effects of exchange rate changes on cash (187 )   (57 )
Cash, beginning of year 1,435     4,368  
Cash, end of year 5,807     1,435  

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