• 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

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.

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