Spectral Announces Third Quarter Results

TORONTO, Nov. 14, 2018 (GLOBE NEWSWIRE) — Spectral Medical Inc., (TSX: EDT), a Phase III company developing the first treatment for patients with septic shock guided by a companion diagnostic, today announced its unaudited financial results for the third quarter ended September 30, 2018.

Financial Review

Revenue for the three-months ended September 30, 2018 was $579,000 compared to $820,000 for the same period in the preceding year. For the nine-months ended September 30, 2018 revenues were $1,976,000 compared to $2,785,000 in the nine-months ended September 30, 2017.

Royalty revenue from one customer has decreased from $1,264 (US$966) to $168 (US$130) for the first nine-months of 2018, due to the expiry of certain patents. As a result, the Company entered into a technology transfer agreement (the “Agreement”) whereby it transferred certain technology and related materials to this customer. The Agreement will generate approximately $2,000 in additional revenue over 2018 and 2019, upon the fulfillment of four milestones. On November 5, 2018, the Company completed its first milestone under the Agreement and is entitled to receive payment of US$271. As all royalty revenue contracts related to the Company’s biological reagents will expire by the end of 2019, the Company intends to negotiate similar agreements over the next several months. In addition to technology transfers, the Company will increase the unit price of its reagents to offset the loss in royalty revenue.

Operating costs for the quarter ended September 30, 2018 amounted to $1,288,000 compared to $1,677,000 in 2017. Operating costs for the nine-months ended September 30, 2018 were $4,909,000, a decrease of $876,000 from $5,785,000 for the first nine months of 2017. Most of the Company’s expenses are incurred in its Phase III clinical trial and regulatory program and will vary depending on the timing and determination of the regulatory path forward. Apart from clinical trial and regulatory activities, the Company continues to maintain a low cost operating structure for its base business operations.

For the three-months ended September 30, 2018, the Company reported a loss of $709,000 ($0.003 per Share) compared to a loss of $857,000 ($0.004 per Share) for the three-months ended September 30, 2017. The loss for the nine-months ended September 30, 2018 was $2,933,000 ($0.013 per Share) compared to $3,000,000 ($0.014 per Share) for the same nine-month period in the prior year.

The Company concluded the third quarter of 2018 with cash on hand of $4,567,000 compared to $1,449,000 as of December 31, 2017.

The total number of shares outstanding for the Company was 225,591,183 as at September 30, 2018.

Regulatory update

The Company continues its dialogue with the U.S. FDA concerning the planning of the TIGRIS trial and anticipates that an agreement could be reached in calendar year 2018 as to the clinical trial protocol and the Statistical Analysis Plan.

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 150,000 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 350,000 patients are diagnosed with severe sepsis and septic shock in North America each year. 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:

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

Spectral Medical Inc.
Condensed Interim Consolidated Statements of Financial Position
(Unaudited)
 
(in thousands of Canadian dollars)
  September 30
2018
  December 31
2017
  January 01
2017
 
      Restated   Restated  
  $   $   $  
       
Assets      
Current assets      
Cash 4,567   1,449   5,080  
Trade and other receivables 504   881   642  
Inventories 289   191   244  
Prepayments and other assets 193   73   166  
Contract asset 126      
  5,679   2,594   6,132  
Non-current assets      
Property and equipment 454   570   634  
Intangible asset 290   309   334  
       
Total assets 6,423   3,473   7,100  
       
Liabilities      
Current liabilities      
Trade and other payables 441   612   1,112  
Contract liability 29   3   6  
Total liabilities 470   615   1,118  
       
Equity      
Share capital 66,646   63,225   63,084  
Contributed surplus 7,981   7,849   7,849  
Share-based compensation 5,591   4,914   4,103  
Warrants 1,930   132   132  
Deficit (76,195 ) (73,262 ) (69,186 )
Total equity 5,953   2,858   5,982  
       
Total liabilities and equity 6,423   3,473   7,100  

Spectral Medical Inc.
Condensed Interim Consolidated Statements of Loss and Comprehensive Loss
For the nine-months ended September 30, 2018 and 2017
(Unaudited)
(in thousands of Canadian dollars, except for share and per share data)
  Three-months ended
  Nine-months ended
 
  2018   2017   2018   2017  
    Restated     Restated  
    $      $  
         
Revenue 579   820   1,976   2,785  
         
Expenses        
Changes in inventories of finished goods and work-in-process 13   78   69   204  
Inventory write-down     38    
Raw materials and consumables used 82   56   207   167  
Salaries and benefits 619   748   2,523   2,632  
Consulting and professional fees 266   406   962   1,610  
Product development     66   50  
Regulatory and investor relations 80   59   360   220  
Travel and entertainment 16   81   78   226  
Depreciation and amortization 57   56   176   168  
Foreign exchange (gain) loss 12   39   (10 ) 73  
Other expenses 143   154   440   435  
  1,288   1,677   4,909   5,785  
         
Loss and comprehensive loss for the period (709 ) (857 ) (2,933 ) (3,000 )
         
Basic and diluted loss per Share (0.003 ) (0.004 ) (0.013 ) (0.014 )
         
Weighted average number of Shares outstanding 225,591,183   207,446,674   218,346,659   207,288,352  

Spectral Medical Inc.
Condensed Interim Consolidated Statements of Changes in Equity
For the nine-months ended September 30, 2018 and 2017
(Unaudited)
 
(in thousands of Canadian dollars)
  Issued capital Contributed
surplus
Share-based
compensation
  Warrants   Deficit   Total equity  
  Number $ $ $   $   $   $  
Balance, January 1, 2017 207,165,587 63,084 7,849 4,103   132   (69,346 ) 5,822  
Change in accounting policies     160   160  
Restated equity, January 1, 2017 207,165,587 63,084 7,849 4,103   132   (69,186 ) 5,982  
Share options exercised 283,750 137 (56 )     81  
Loss and comprehensive loss for the period, restated     (3,000 ) (3,000 )
Share-based compensation 433       433  
Balance, September 30, 2017 207,449,337 63,221 7,849 4,480   132   (72,186 ) 3,496  
Share options exercised 9,685 4 (1 )     3  
Loss and comprehensive loss for the period, restated     (1,076 ) (1,076 )
Share-based compensation   435       435  
Balance, December 31, 2017 207,459,022 63,225 7,849 4,914   132   (73,262 ) 2,858  
               
Balance, January 1, 2018 207,459,022 63,225 7,849 4,914   132   (73,262 ) 2,858  
Private placement 17,694,661 3,267   1,930     5,197  
Share options exercised 437,500 154 (63 )     91  
Warrant expiry 132   (132 )    
Loss and comprehensive loss for the period     (2,933 ) (2,933 )
Share-based compensation 740       740  
Balance, September 30, 2018 225,591,183 66,646 7,981 5,591   1,930   (76,195 ) 5,953  

Spectral Medical Inc.
Condensed Interim Consolidated Statements of Cash Flows
For the nine-months ended September 30, 2018 and 2017
(Unaudited)
 
(in thousands of Canadian dollars)
  2018   2017  
      Restated  
  $   $  
Cash flow provided by (used in)    
     
Operating activities    
Loss and comprehensive loss for the period (2,933 ) (3,000 )
Adjustments for:    
Depreciation on property and equipment 157   149  
Amortization of intangible asset 19   19  
Share-based compensation 740   433  
Gain on disposal of property and equipment   (4 )
Changes in items of working capital :    
Trade and other receivables 377   (97 )
Inventories (98 ) 22  
Prepayments and other assets (120 ) (7 )
Contract asset (126 )  
Trade and other payables (171 ) (328 )
Contract liability 26   (2 )
Net cash used in operating activities (2,129 ) (2,815 )
     
Investing activities    
Purchase of property and equipment (41 ) (90 )
Proceeds on disposal of property and equipment   15  
Net cash used in investing activities (41 ) (75 )
     
Financing activities    
Proceeds from private placement 5,308    
Transaction costs paid (111 )  
Proceeds from Share options exercised 91   81  
Net cash provided by financing activities 5,288   81  
     
Increase (decrease) in cash 3,118   (2,809 )
     
Cash, beginning of period 1,449   5,080  
Cash, end of period 4,567   2,271