Spectral Medical Inc. Announces Proposed Public Offering of Units and Private Placement of Notes

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES TORONTO, Oct. 05, 2022 (GLOBE NEWSWIRE) — Spectral Medical Inc. (TSX: EDT) (“Spectral” or the “Company”) is pleased to announce the launch of a proposed prospectus offering of units (the “Unit Offering”) of the Company (the “Units”) and private placement (the “Note Offering” and collectively with the Unit Offering, the “Offering”) of convertible senior notes (the “Notes”) of at least C$8.5 million. The Offering will be conducted by Paradigm Capital Inc. (“Paradigm” or the “Agent”) on a “best efforts” agency basis. Each Unit will consist of one common share of the Company (a “Common Share”) and one-half (½) of one Common Share purchase warrant of the Company (each whole Common Share purchase warrant, a “Warrant”), with each Warrant entitling the holder thereof to acquire one Common Share for a period of 36 months following the closing of the Offering. The Notes will have a face value of US$1,000 per Note, bear interest of 7% and are due in 2026 (“Maturity Date”). Holders of the Notes may convert all or any portion of the Notes in integral multiples of US$1,000 principal amount at any time prior to the Maturity Date. The Notes shall be convertible into Common Shares of the company at a conversion price equal to a 30% premium to the price allocated to the Common Shares underlying the Units, subject to customary anti-dilution adjustments. The Company intends to complete a portion of the Note Offering with an existing strategic commercial partner of the Company and potentially Pinnacle Island L.P., pursuant to which the strategic commercial partner has agreed to purchase US$2.5 million in Notes. Closing of the Note Offering is conditional on closing of the Unit Offering, finalizing a securities purchase agreement and other customary conditions of closing for a transaction of this nature. The Company has also agreed to grant the Agent an over-allotment option (the “Over-Allotment Option”) to offer for sale up to an additional number of Units equal to 15% of the Offering, to cover over-allotments, if any, and for market stabilization purposes. The Over-Allotment Option will be exercisable in whole or in part, at the sole discretion of the Agent, at any time, and from time to time, for a period of 30 days from and including the closing date of the Offering and shall be exercisable for additional Units, Warrants, Notes and/or Common Shares (or any combination thereof). The Company intends to use the net proceeds from the Offering for its Phase III registration trial (Tigris) for its PMX (as defined below) treatment for endotoxemic septic shock and for general corporate and working capital purposes. The Unit Offering will be conducted by way of preliminary short-form prospectus (the “Prospectus”) in each of the provinces of Canada, other than Québec (collectively, the “Jurisdictions”). It is expected that the Company and the Agent will enter into a definitive agency agreement with respect to the Offering. The Units may also be offered (i) in the United States on a private placement basis pursuant to applicable exemptions from the registration requirements of the United States Securities Act of 1933, as amended (the “U.S. Securities Act”) and applicable U.S. state securities laws and (ii) outside Canada and the United States on a basis which does not require the qualification or registration of any of the Company’s securities under domestic or foreign securities laws. The Notes will be offered on a “best efforts” private placement basis: (i) to “accredited investors” pursuant to available exemptions under National Instrument 45-106 – Prospectus Exemptions in all provinces and territories of Canada; (ii) to “accredited investors” in the United States pursuant to applicable exemptions from the registration requirements of the U.S. Securities Act and applicable U.S. state securities laws; and (iii) in other jurisdictions outside of Canada and the United States as may be mutually agreed upon by the Agent and the Company. The closing of the Offering will be subject to certain customary conditions, including but not limited to, the receipt of all necessary approvals, including the approval of the Toronto Stock Exchange (the “TSX”) applicable securities regulatory authorities. The Prospectus contains important information relating to the Unit Offering, is still subject to completion or amendment and there will not be any sale or any acceptance of an offer to buy the Units until a receipt for the final short form prospectus relating to the Unit Offering has been issued. A copy of the Prospectus will be available under the Company’s profile on SEDAR at www.sedar.com. This press release does not constitute an offer to sell or a solicitation of an offer to buy the Units and/or the Notes in any jurisdiction, nor will there be any offer or sale of the Units and/or the Notes in any jurisdiction in which such offer, solicitation or sale would be unlawful. The Units and the Notes have not and will not be registered under the U.S. Securities Act or any U.S. state securities laws, and therefore will not be offered or sold within the United States except pursuant to applicable exemptions from the registration requirements of the U.S. Securities Act and applicable state securities laws. Dialco Update The Company is also providing an update on the operations of its wholly-owned subsidiary Dialco Medical Inc. (“Dialco”). Dialco has extended its DIMI license agreement with Infomed SA until November 30, 2022 as the parties evaluate strategic options for advancing DIMI through its trial and to commercialization. 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 endotoxemic septic shock. Approximately 330,000 patients are diagnosed with septic shock in North America each year. Spectral, through its wholly owned subsidiary, Dialco Medical Inc., is also commercializing a new set of proprietary platforms addressing renal replacement therapy (RRT) across the dialysis spectrum. SAMI is targeting the acute RRT market, while DIMI is targeting the chronic RRT market. Dialco is currently pursuing regulatory approval for U.S. in-home use of DIMI, which is based on the same RRT platform as SAMI, but will be intended for home hemodialysis use. DIMI recently received its FDA 510k clearance for use in hospital and clinical settings, and obtained its Health Canada license for use within Canadian hospitals, clinics and in home. Spectral is listed on the TSX 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. Risks and other factors that could cause actual results or events to differ materially from current expectations with respect to the Offering include, but are not limited to, the risk of unforeseen delays in the completion of the Offering whether as a result of market conditions or otherwise, the failure of the Company to obtain the requisite regulatory approvals for the Offering and the inability of the Company to satisfy all conditions to the completion of the Offering (if at all). There can be no assurance that the Offering will be completed. Actual results could differ materially from what is currently expected, and readers are cautioned not to place undue reliance on these forward-looking statements. Except as required by law, the Company disclaims any obligation to update or revise any forward-looking statements. Reference is also made to the other risks and uncertainties that may affect the Company which are more fully described in Spectral’s Annual Information Form dated March 23, 2022, the Prospectus and other filings of Spectral with the securities regulatory authorities which are available at www.sedar.com. The TSX has not reviewed and does not accept responsibility for the adequacy or accuracy of this statement For further information, please contact: Chris SetoCEOSpectral Medical Inc.416-626-3233 [email protected] Ali MahdaviCapital Markets & Investor RelationsSpinnaker Capital Markets [email protected] David Waldman/Natalya RudmanUS Investor RelationsCrescendo Communications, [email protected]