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development and regulatory program; it incurred approximately $275,000 in professional fees in connection with a withdrawn prospectus offering in early March 2020, a general increase in transactional activity that require legal services, and quarterly reviews performed by the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 [e-mail]

Mr. Chris Seto COO & CFO Spectral Medical Inc. 416-626-3233 ext. 2004 [e-mail]

Mr. Ali Mahdavi Capital Markets & Investor Relations 416-962-3300 [e-mail]

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

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