Executive Summary [Q4 & FY 2024 Performance Highlights](index=1&type=section&id=Q4%20%26%20FY%202024%20Performance%20Highlights) Spectral AI announced its Q4 and FY 2024 financial results, highlighting $30 million in Research & Development revenue for the full year and successful outcomes from its US Burn Validation Study, positioning the company for regulatory submission of its DeepView System in the US - Spectral AI reported **$30 million in Research & Development Revenue** for the full year 2024[1](index=1&type=chunk) - The company achieved successful results from its US Burn Validation Study[1](index=1&type=chunk) - Spectral AI is on track for regulatory submission in the US for its DeepView System[1](index=1&type=chunk) [CEO Commentary & Strategic Outlook](index=1&type=section&id=CEO%20Commentary%20%26%20Strategic%20Outlook) Dr. J. Michael DiMaio, Chairman of the Board, emphasized the company's significant achievements in 2024, driven by the BARDA PBS contract and progress towards commercialization of the AI-Driven DeepView System, with a strategic focus on transitioning to commercialization and expecting first product revenue in H2 2025 - The company expects to realize its **first commercial product revenue in the second half of 2025**[2](index=2&type=chunk) - Spectral AI aims to generate commercial revenue across **four DeepView System platforms** covering burn and other indications within the next three years[2](index=2&type=chunk) - The company plans to submit regulatory filings for the DeepView System burn indication in the US in the **first half of 2025**[3](index=3&type=chunk) 2024-2025 Select Business Highlights [Government Funding & Contracts](index=2&type=section&id=Government%20Funding%20%26%20Contracts) Spectral AI continued to advance under its BARDA PBS contract, valued at up to $150.0 million, with an initial award of $54.9 million for development activities through Q1 2026, and secured additional grants for the development of its handheld DeepView SnapShot M system - The BARDA PBS contract is valued at **up to $150.0 million**, with an initial award of approximately **$54.9 million**[4](index=4&type=chunk) - Received a new contract valued at **$500,000** from the Defense Health Agency for DeepView SnapShot M development in March 2024[9](index=9&type=chunk) - Received an additional **$900,000 grant** from MTEC for DeepView SnapShot M, bringing the total award to **$4.9 million**[9](index=9&type=chunk) [DeepView System Clinical Progress](index=2&type=section&id=DeepView%20System%20Clinical%20Progress) The company announced successful results from its Burn Validation Study in March 2025, demonstrating superior performance of the DeepView System in assessing wound healing compared to burn physicians, with enrollment for the study completed in September 2024 [Burn Validation Study Results](index=2&type=section&id=Burn%20Validation%20Study%20Results) The DeepView System demonstrated superior performance in identifying non-healing tissue compared to clinical judgment, with plans for FDA submission by Q2 2025 - DeepView System demonstrated statistically significant improvement for sensitivity in identifying non-healing tissue compared to burn physicians[5](index=5&type=chunk) Burn Validation Study Performance Metrics | Metric | DeepView System | Clinical Judgment Annotation (CJA) | | :-------------------------------- | :-------------- | :--------------------------------- | | Image-wise sensitivity (non-healing) | 86.6% | 40.8% | | Pixel-wise sensitivity (non-healing) | 81.9% | 38.8% | | Dice Score (pixel-wise evaluation) | 68.5% | 39.2% | | Image-wise specificity (non-healing) | 61.2% | 79.1% | - The company plans to submit these results to the FDA by the **end of Q2 2025** and hopes for De Novo Classification Request grant in **early 2026**[5](index=5&type=chunk) [Clinical Trial Enrollment](index=2&type=section&id=Clinical%20Trial%20Enrollment) Enrollment for the Burn Validation Study, including pediatric patients, was successfully completed in late 2024 and early 2025 - Completed enrollment in the Burn Validation Study in **September 2024**, involving **160 adult and pediatric patients** at **14 burn centers**[9](index=9&type=chunk) - Completed pediatric enrollment at US emergency departments for the Burn Validation Study in **January 2025**[9](index=9&type=chunk) [Product Development](index=2&type=section&id=Product%20Development) Spectral AI continued the development of its handheld DeepView SnapShot M system, securing additional funding from the Defense Health Agency and MTEC - Received a new contract valued at **$500,000** from the Defense Health Agency for the development of the handheld DeepView SnapShot M[9](index=9&type=chunk) - Received an additional grant of approximately **$900,000** from MTEC for DeepView SnapShot M, bringing the total award to **$4.9 million**[9](index=9&type=chunk) [Corporate & Financial Developments](index=3&type=section&id=Corporate%20%26%20Financial%20Developments) Spectral AI formed Spectral IP Inc. in March 2024, with plans to spin it off into an independent publicly-traded company by the end of Q2 2025, repriced its publicly-traded common share purchase warrants, regained full compliance with Nasdaq listing rules, and completed an equity financing and long-term debt transaction in March 2025, raising an initial $11.2 million - Formed Spectral IP Inc. in March 2024, a dedicated intellectual property subsidiary, with an intention to spin it off into an independent publicly-traded company by the **end of Q2 2025**[16](index=16&type=chunk) - Repriced **8,433,333 publicly-traded common share purchase warrants** from **$11.50 to $2.75 per share** in November 2024[16](index=16&type=chunk) - Regained full compliance with Nasdaq listing rules by meeting minimum market capitalization requirements in **December 2024**[16](index=16&type=chunk) - Completed an equity financing and long-term debt transaction in March 2025, raising an initial **$11.2 million** (**$8.5M debt, $2.7M equity**), with total funding available **up to $25.0 million**[16](index=16&type=chunk) 2024 Financial Results Overview [Research & Development Revenue](index=3&type=section&id=Research%20%26%20Development%20Revenue) Research & Development revenue significantly increased in Q4 and FY 2024, primarily driven by expanded work on the BARDA PBS contract Research & Development Revenue (in thousands) | Period | 2024 (in thousands) | 2023 (in thousands) | Change (YoY) | | :----- | :------------------ | :------------------ | :----------- | | Q4 | $7,604 | $5,287 | +43.8% | | FY | $29,581 | $18,056 | +63.8% | - The increase in revenue was primarily due to increased overall percentage of work on the BARDA PBS contract[11](index=11&type=chunk)[12](index=12&type=chunk) - Research and Development Revenue primarily consisted of funding from BARDA[15](index=15&type=chunk) [Gross Margin](index=3&type=section&id=Gross%20Margin) Gross margin for Q4 2024 slightly decreased due to a smaller proportion of direct labor on the BARDA PBS contract, but improved for the full year 2024, reflecting the higher reimbursement rate of the new BARDA PBS contract compared to the prior BARDA Burn II contract Gross Margin | Period | 2024 | 2023 | | :----- | :--- | :--- | | Q4 | 44.0% | 46.1% | | FY | 44.9% | 43.6% | - Q4 2024 gross margin decreased primarily due to a smaller percentage of direct labor as a proportion of total work on the BARDA PBS contract[13](index=13&type=chunk) - FY 2024 gross margin improved due to the expansion of work under the BARDA PBS contract, which carries a higher reimbursement rate[13](index=13&type=chunk) [Operating Expenses](index=3&type=section&id=Operating%20Expenses) General & administrative expenses decreased in both Q4 and FY 2024, primarily due to reduced spending on legal and accounting consultants and less overall spending in non-revenue generating R&D activities Operating Expenses (in thousands) | Period | 2024 (in thousands) | 2023 (in thousands) | Change (YoY) | | :----- | :------------------ | :------------------ | :----------- | | Q4 | $4,459 | $5,365 | -16.9% | | FY | $19,856 | $20,864 | -4.9% | - The decrease in Q4 2024 G&A expenses represented reduced spending on legal and accounting consultants[14](index=14&type=chunk) - The decrease for FY 2024 was a result of less overall spending in non-revenue generating R&D activities[14](index=14&type=chunk) [Net Loss & EPS](index=4&type=section&id=Net%20Loss%20%26%20EPS) Spectral AI reported an increased net loss in Q4 2024 but a reduced net loss for the full year 2024, with FY 2024 net loss including significant charges related to warrant liabilities and borrowing expenses, while FY 2023 included substantial costs from its business combination Net Loss and EPS (in thousands, except per share data) | Period | Net Loss 2024 (in thousands) | Net Loss 2023 (in thousands) | EPS 2024 | EPS 2023 | | :----- | :--------------------------- | :--------------------------- | :------- | :------- | | Q4 | $(7,742) | $(3,546) | $(0.41) | $(0.22) | | FY | $(15,315) | $(20,854) | $(0.85) | $(1.48) | - FY 2024 net loss included **$4.6 million of charges** for the change in fair value of warrant liabilities and **$2.9 million of borrowing related expenses**[18](index=18&type=chunk) - FY 2023 net loss included **$8.3 million in costs** associated with its financing operations relating to its business combination[18](index=18&type=chunk) [Cash Position & 2025 Revenue Guidance](index=4&type=section&id=Cash%20Position%20%26%202025%20Revenue%20Guidance) As of December 31, 2024, cash stood at $5.2 million, with the company significantly enhancing its financial position in Q1 2025 by securing $8.5 million in long-term debt and $2.7 million in equity financing, and forecasting approximately $21.5 million in revenue for FY 2025 Cash Position (in thousands) | Metric | As of Dec 31, 2024 (in thousands) | | :----- | :-------------------------------- | | Cash | $5,157 | - Received proceeds of **$8.5 million** via a long-term debt financing and approximately **$2.7 million** via equity issuances in Q1 2025[22](index=22&type=chunk) - The company is forecasting revenue of approximately **$21.5 million** for FY 2025[20](index=20&type=chunk) [Conference Call Details](index=4&type=section&id=Conference%20Call%20Details) The company provided details for its conference call held on March 27, 2025, to discuss the financial results, with webcast access available via its Investor Relations page - The company hosted a conference call on **March 27, 2025, at 5:00 pm Eastern Time** to discuss the results[21](index=21&type=chunk) - Access to the webcast is available via the Investor Relations page of the company's website[21](index=21&type=chunk) [About Spectral AI](index=5&type=section&id=About%20Spectral%20AI) Spectral AI, Inc. is a Dallas-based predictive AI company specializing in medical diagnostics for wound care, with its DeepView System offering objective and immediate assessment of wound healing potential - Spectral AI, Inc. is a Dallas-based predictive AI company focused on medical diagnostics for faster and more accurate treatment decisions in wound care, with initial applications involving burn patients[24](index=24&type=chunk) - The company's DeepView System is a predictive device offering objective and immediate assessment of a wound's healing potential[24](index=24&type=chunk) [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) This section outlines the nature of forward-looking statements within the release, cautioning readers about inherent risks and uncertainties that could cause actual results to differ materially - The release contains 'forward-looking statements' regarding the company's strategy, plans, objectives, initiatives, and financial outlook, as defined by the Private Securities Litigation Reform Act of 1995[25](index=25&type=chunk) - Readers are cautioned not to place undue reliance on these statements, as they involve known and unknown risks, uncertainties, and assumptions that could cause actual results to differ materially[26](index=26&type=chunk) - Investors should review 'Risk Factors' sections in SEC filings for more details on potential risks and uncertainties[27](index=27&type=chunk) [Investor Contact](index=5&type=section&id=Investor%20Contact) Contact information for investor relations is provided for David Kugelman at Atlanta Capital Partners LLC - Contact information for investor relations is provided for David Kugelman at Atlanta Capital Partners LLC[28](index=28&type=chunk) Condensed Consolidated Financial Statements [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows an increase in total assets and total liabilities from December 31, 2023, to December 31, 2024, resulting in a larger stockholders' deficit Condensed Consolidated Balance Sheets (in thousands) | (in thousands) | Dec 31, 2024 | Dec 31, 2023 | | :----------------------------------- | :----------- | :----------- | | **Assets** | | | | Total current assets | $10,122 | $9,902 | | Total Assets | $12,095 | $10,692 | | **Liabilities** | | | | Total current liabilities | $17,644 | $12,401 | | Total Liabilities | $19,346 | $12,401 | | **Stockholders' Equity (Deficit)** | | | | Total Stockholders' Equity (Deficit) | $(7,251) | $(1,709) | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The statements of operations show significant growth in Research and development revenue for both Q4 and FY 2024, with the net loss increasing in Q4 2024 but decreasing for the full year, influenced by various other income/expense items including changes in fair value of warrant liabilities and borrowing-related costs Condensed Consolidated Statements of Operations (in thousands, except per share data) | (in thousands, except per share data) | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 | | :------------------------------------ | :------ | :------ | :------ | :------ | | Research and development revenue | $7,604 | $5,287 | $29,581 | $18,056 | | Gross profit | $3,348 | $2,436 | $13,274 | $7,880 | | Operating loss | $(1,111) | $(2,929) | $(6,582) | $(12,984) | | Total other expense, net | $(6,488) | $(638) | $(8,462) | $(7,859) | | Net loss | $(7,742) | $(3,546) | $(15,315) | $(20,854) | | Net loss per share (Basic and Diluted)| $(0.41) | $(0.22) | $(0.85) | $(1.48) | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash flows from operating activities showed a net cash outflow, though reduced in 2024 compared to 2023, while cash flows from financing activities provided a significant net inflow in 2024, primarily from proceeds from common stock issuance and notes payable, leading to a net increase in cash for the year Condensed Consolidated Statements of Cash Flows (in thousands) | (in thousands) | FY 2024 | FY 2023 | | :------------------------------------ | :------ | :------ | | Net cash used in operating activities | $(9,198) | $(13,240) | | Net cash provided by financing activities | $9,575 | $3,844 | | Net decrease in cash | $367 | $(9,384) | | Cash, end of period | $5,157 | $4,790 |

Financial Data and Key Metrics Changes - Research and development revenue for Q1 2025 rose 6% to $6,700,000 from $6,300,000 in Q1 2024, reflecting increased activity under the BARDA Project BioShield contract [12] - Gross margin increased to 47.2% from 46.6% in the same period last year due to a higher concentration of direct labor [12] - General and administrative expenses decreased significantly from $5,100,000 in Q1 2024 to $4,100,000 in Q1 2025, primarily due to a focus on the BARDA contract and cost-cutting measures [12] - Operating loss for Q1 2025 was $896,000 compared to a net loss of $2,100,000 in Q1 2024 [13] - Net income for Q1 2025 was $2,900,000, a significant improvement from a net loss of $3,200,000 in the previous year [13] - Cash and cash equivalents totaled $14,100,000 as of March 31, 2025, up from $5,200,000 on December 31, 2024 [14] Business Line Data and Key Metrics Changes - The company is focused on advancing the DeepView system and preparing for FDA submission, which is expected by the end of Q2 2025 [5][8] - The burn validation study, one of the largest burn trials in the U.S., utilized over 340 billion clinically validated data points and demonstrated superior performance of the DeepView technology [6][7] Market Data and Key Metrics Changes - The company reiterated its revenue guidance for 2025 at approximately $21,500,000, which does not include contributions from sales of the DeepView system in the UK or Australia [14] Company Strategy and Development Direction - The company is transitioning from a research-focused organization to a commercial entity with a well-defined business focus for 2025 and beyond [4] - The company aims to leverage its relationship with BARDA and continue developing the DeepView system while also advancing the DeepView Snapshot M for military applications [9][41] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the revenue guidance and the progress made towards the FDA submission, highlighting a strong start to the year [18][19] - The company is actively working to de-risk the FDA submission process through extensive pre-submission meetings and collaboration with BARDA [22][23] Other Important Information - The company completed a debt financing agreement of up to $15,000,000, with an initial drawdown of $8,500,000, and raised approximately $2,700,000 in equity financing [8] - The healthcare intellectual property subsidiary, Spectral IP, is in the SEC registration process for its initial public offering [10] Q&A Session Summary Question: Guidance on revenue expectations - Management indicated that the revenue guidance of $21,500,000 seems reasonable, with potential for restating guidance if performance continues to exceed expectations [18][19] Question: Preparation for FDA submission - Management highlighted a strong relationship with BARDA and over 10 pre-submission meetings with the FDA, expressing confidence in the submission process [22][23] Question: General administrative expenses outlook - Management anticipates general and administrative expenses to remain consistent with Q1 results, focusing on operational efficiencies [32] Question: Development of Snapshot M and military applications - Management confirmed ongoing work on the Snapshot M device and emphasized the importance of the FDA submission for the DeepView system [38][41] Question: Future relationships with the Department of Defense - Management acknowledged the long-term nature of developing relationships with the DoD and expressed optimism about future contracts [50][51]

Financial Data and Key Metrics Changes - Research and development revenue for Q1 2025 rose 6% to $6,700,000 from $6,300,000 in Q1 2024, reflecting increased activity under the BARDA Project BioShield contract [12] - Gross margin increased to 47.2% from 46.6% in Q1 2024 due to a higher concentration of direct labor as a component of revenue [12] - General and administrative expenses decreased significantly from $5,100,000 in Q1 2024 to $4,100,000 in Q1 2025, primarily due to a focus on the BARDA contract and cost-cutting measures [12] - Operating loss for Q1 2025 was $896,000 compared to a net loss of $2,100,000 in Q1 2024 [13] - The company reported net income of $2,900,000 in Q1 2025, a significant improvement from a net loss of $3,200,000 in the same quarter last year [13] - Cash and cash equivalents totaled $14,100,000 as of March 31, 2025, up from $5,200,000 on December 31, 2024 [14] Business Line Data and Key Metrics Changes - The company is focused on advancing its DeepView technology and preparing for FDA submission, which is a key milestone for its product line [5][6] - The DeepView Snapshot M handheld device is in development, with two prototypes successfully assembled [9] Market Data and Key Metrics Changes - The company reiterated its revenue guidance for 2025 at approximately $21,500,000, which does not include contributions from sales of the DeepView system in the UK or Australia [14] Company Strategy and Development Direction - The company is transitioning from a research-focused organization to a commercial entity with a well-defined business focus for 2025 and beyond [4] - The primary goal is to achieve FDA de novo classification submission by the end of Q2 2025, which is critical for future growth [5] - The company is also developing its healthcare intellectual property subsidiary, Spectral IP, which is in the SEC registration process for an initial public offering [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the revenue guidance and noted that the first quarter's strong performance reflects efforts to focus on the FDA submission [18][19] - The company has had over 10 pre-submission meetings with the FDA, which have been constructive and supportive [22][23] - Management is optimistic about the prospects for growth and development, emphasizing the importance of the BARDA partnership [40][41] Other Important Information - The company completed a debt financing agreement of up to $15,000,000, with an initial drawdown of $8,500,000, and raised approximately $2,700,000 in equity financing [7][8] - The burn validation study results, which utilized over 340 billion clinically validated data points, demonstrated the effectiveness of the DeepView technology [6] Q&A Session Summary Question: Guidance on revenue expectations - Management indicated that the revenue guidance of $21,500,000 seems reasonable, although they may restate it if performance continues to exceed expectations [18][19] Question: Preparation for FDA submission - Management highlighted a strong relationship with BARDA and noted that they have been working closely with the FDA to de-risk the submission process [22][23] Question: General administrative expenses outlook - Management anticipates general and administrative expenses to remain consistent with Q1 results, focusing on operational efficiencies [32][33] Question: Development of Snapshot M device - Management confirmed that while they are focused on the FDA submission, they are also advancing the development of the Snapshot M device for military use [38][41] Question: Future relationships with the DoD - Management acknowledged the importance of developing relationships with the DoD and emphasized ongoing efforts to improve the Snapshot M device [49][50]

Core Insights - Spectral AI, Inc. reported financial results for Q1 2025, highlighting progress in its strategic plan and ongoing efforts towards FDA De Novo submission by mid-2025 [1][2] - The company completed a significant Burn Validation Study, demonstrating the effectiveness of its DeepView™ System in predicting burn wound healing potential [2][3] Financial Performance - Research & Development Revenue increased by 6.0% to $6.7 million in Q1 2025 from $6.3 million in Q1 2024, driven by heightened activity under the BARDA contract [5] - Gross margin improved to 47.2% in Q1 2025 from 46.6% in Q1 2024, attributed to a higher concentration of direct labor reimbursement under the BARDA contract [6] - General & Administrative expenses decreased to $4.1 million in Q1 2025 from $5.1 million in Q1 2024, reflecting a focused effort on the BARDA contract [10] - The company reported a net income of $2.9 million in Q1 2025, a significant turnaround from a net loss of $(3.2) million in Q1 2024, primarily due to changes in the fair value of warrant liabilities [12] Capital Structure and Financing - Cash reserves improved to $14.1 million as of March 31, 2025, up from $5.2 million at the end of 2024 [13] - The company secured a debt financing agreement of up to $15.0 million, with an initial drawdown of $8.5 million in March 2025, alongside raising $2.7 million in equity financing [9][13] - The company satisfied all obligations related to its SEPA in February 2025 [14] Business Highlights - The Burn Validation Study, one of the largest burn trials in the U.S., involved 164 patients, including 115 adults and 49 pediatric patients [3] - The DeepView™ System aims to revolutionize wound care management by providing objective assessments of burn wounds, potentially improving patient outcomes and reducing healthcare costs [17] Guidance - The company reiterated its revenue guidance of approximately $21.5 million for FY 2025, excluding contributions from the DeepView™ System sales [15]

Core Viewpoint - Spectral AI, Inc. is set to report its financial results for Q1 2025 on May 13, 2025, and will host a conference call to discuss these results [1] Company Overview - Spectral AI, Inc. is a Dallas-based predictive AI company focused on medical diagnostics, particularly in wound care, with initial applications for burn patients [3] - The company is developing the DeepView System, which utilizes multi-spectral imaging and AI algorithms to predict burn healing potential, aiming to provide clinicians with objective assessments prior to treatment [3] - The DeepView System is designed to improve patient outcomes and reduce healthcare costs by offering fast and accurate treatment insights, with the goal of exceeding current standards of care [3]

Core Insights - Spectral AI, Inc. successfully participated in the American Burn Association annual meeting, showcasing its AI-driven DeepView System for predicting burn healing potential [1][2] - The DeepView System demonstrated over 95% accuracy in predicting healing potential within 21 days, as reported by Leslie Tan from Newcastle Burns Centre [2] - The company engaged with clinicians through presentations and interactions, generating excitement for the DeepView System's future commercial launch [2] Company Overview - Spectral AI is a Dallas-based predictive AI company focused on medical diagnostics, particularly in wound care for burn patients [3] - The DeepView System aims to provide objective assessments of burn wounds' healing potential, improving patient outcomes and reducing healthcare costs [3] - The technology is currently being utilized in several NHS hospitals in the UK, with Newcastle Burn Centre being the first to conduct an independent evaluation of the system [2][3]

Regulatory Approvals and Compliance - The DeepView System has received UKCA marking for burn indications, with full registration completed on March 7, 2024, and anticipates FDA Class II designation via De Novo application[17]. - The DeepView System requires significant costs for obtaining market authorization and De Novo classification, with no guarantee of approval[92]. - In the U.S., the company must receive 510(k) clearance or PMA approval before marketing new medical devices, which can be prohibitively time-consuming and expensive[93]. - Compliance with EU Medical Devices Regulation is necessary to affix the CE mark, which is essential for selling in EU member states[94]. - Post-Brexit, the UK has its own Medical Devices Regulations, which may diverge from EU regulations, affecting market access[95]. - The regulatory review process for the DeepView technology is expensive and uncertain, with no guarantee of obtaining necessary approvals[91]. - Regulatory authorities can delay or deny clearance for various reasons, affecting the ability to generate revenue from the DeepView System[98]. - The company must comply with various healthcare laws and regulations, including the U.S. federal Anti-Kickback Statute, which could limit financial arrangements with healthcare providers[124]. - The federal civil False Claims Act imposes significant penalties for knowingly presenting false claims for payment, which could lead to substantial financial exposure for the company[125]. - Non-compliance with regulatory requirements could result in delays or refusals in obtaining necessary clearances or certifications for the DeepView System[120]. - The company is subject to strict regulations regarding the promotion of off-label uses, which could lead to significant government fines if violated[122]. - The company may need to obtain new clearances or approvals for corrected devices after addressing product deficiencies, potentially delaying market re-entry[120]. - Legislative and regulatory changes in the U.S. healthcare system could negatively impact the demand and reimbursement for the DeepView System, affecting future revenues and profitability[127]. - The company cannot predict the impact of future healthcare policy changes, which may increase costs and disrupt commercialization efforts[128]. - The evolving regulatory framework for AI technology may impose new compliance costs and operational challenges, adversely affecting the company's financial condition[145]. - Any failure to comply with AI-related regulations could lead to significant legal costs and negative publicity, impacting the company's operations[146]. - The company must adhere to FDA requirements and healthcare fraud laws, with potential penalties for non-compliance that could harm its business[147]. Financial Performance and Funding - The company has secured approximately $281.5 million in government funding since 2013, with $272.9 million from BARDA, and a new contract with BARDA provides up to $150 million, including an initial award of $54.9 million[22]. - For the year ended December 31, 2024, the company incurred a net loss of $15.3 million, compared to a net loss of $20.9 million for the year ended December 31, 2023[72]. - The company has an accumulated deficit of approximately $48.1 million as of December 31, 2024[72]. - The BARDA contract is the largest single source of revenue for the company, and the previous contract option was approximately $21.9 million[78]. - The company received $12.5 million in prepaid advances from Yorkville in the form of convertible promissory notes in 2024[84]. - The company expects its cash and cash equivalents, along with remaining funding, to be sufficient to meet capital requirements for at least the next 12 months[85]. - The company may need to seek additional capital to fund operations and product development, with no assurance of favorable terms[86][87]. Product Development and Market Strategy - The company plans to initiate commercialization in the U.S. in 2026 and submit for FDA review of the burn application in 2025[27]. - The DeepView System provides a "Day One" assessment of wound healing potential, significantly reducing the time to decision from 21 days to immediate[41]. - The company aims to expand the DeepView System's applications to diabetic foot ulcers and other indications, leveraging government funding for development[31]. - The company has completed enrollment of 164 patients in its validation study for burn indications, with additional studies involving 413 patients across multiple sites[28][39]. - The DeepView System is expected to generate revenue through a SaaS model and a capital sale component, with a software licensing fee for maintenance and access to algorithm updates[55]. - The company plans to apply for reimbursement from NHS for its burn indication in the UK and intends to apply for CPT codes in the U.S. as clinical evidence develops[57]. - The total addressable market for DeepView is estimated to include over 57,000 clinical care sites in the U.S. and over 20,000 sites across the UK and EU, with potential expansion into the Middle East[44]. - The company anticipates commercial sales for the burn indication in the UK to commence in 2025, following the receipt of the UKCA mark[56]. Intellectual Property and Competitive Advantage - The company has 12 issued and allowed U.S. patents and 18 issued and allowed international patents, with 29 foreign and international patent applications pending[63]. - The DeepView System is the only AI-enabled wound imaging technology that provides a predictive wound healing output, differentiating it from existing systems that rely on subjective clinician opinion[52]. - The company has acquired approximately 340 billion pixels of proprietary image data for deep learning algorithm training, creating a significant barrier to entry for competitors in wound care healing assessments[48]. - The company’s ability to maintain and protect its intellectual property is crucial for its competitive position, as failure to do so could allow competitors to develop similar products[209][210]. - The ability to obtain and maintain valid patents is uncertain due to potential challenges from unauthorized parties and the complexity of patent laws[215]. - Patent applications may not result in issued patents, and existing patents may not provide adequate protection against competitors[216]. - The strength of patent rights is subject to legal and factual uncertainties, which can lead to litigation and affect business objectives[216]. - Third parties may challenge the validity and enforceability of patents, potentially resulting in narrowed or invalidated patents[216]. - The issuance of a patent does not guarantee the right to practice the patented invention, as third parties may hold blocking patents[216]. - Litigation may be necessary to defend against infringement claims or to enforce patent rights, which could lead to significant legal costs[217]. - Competitors may seek approval to market similar products, necessitating the defense of patents through lawsuits[217]. - Even valid patents may not provide sufficient protection against competing products or processes[217]. Operational Risks and Challenges - The company relies on third-party manufacturers, exposing it to risks related to product quality and compliance with regulatory standards[130]. - The company is dependent on senior management and key personnel, and their loss could negatively impact business prospects[183]. - The company may encounter difficulties in managing growth, which could disrupt operations and increase net losses[186]. - The company faces risks related to international expansion, including regulatory, operational, and financial challenges, which could adversely affect its business and financial condition[207][208]. - The company’s insurance coverage may be insufficient for liabilities incurred from cyber-attacks or data breaches, potentially impacting its financial condition and operations[197][201]. - Cyber-attacks pose a risk to the company's information technology systems, which could adversely affect business operations and financial condition[191]. - The company may face challenges in accurately forecasting demand for the DeepView System, impacting inventory management and financial results[181]. - The company plans to warrant each DeepView System against defects and provide supplemental services, which may increase operating expenses if warranty claims are high[175]. - The company is focused on maintaining strong product performance and reliability to achieve profitability objectives[176]. - Regular inspections of the contract manufacturer are conducted to ensure compliance with quality standards, but future pandemics could hinder these efforts[132]. Market Acceptance and Competition - The commercial success of the DeepView System will depend on market acceptance by clinicians, with risks of slow market development adversely affecting business results[149]. - The company aims to establish strong relationships with leading U.S. hospitals to promote the DeepView System, leveraging validation studies across the U.S. and EU[151]. - If clinicians do not adopt the DeepView System, it will impair the company's growth strategy and negatively affect financial condition and results of operations[152]. - The company has no prior experience in marketing and selling the DeepView System, which may hinder its ability to grow sales and brand awareness[153]. - Establishing a sales and marketing infrastructure for the DeepView System will involve significant time and expense, potentially leading to higher fixed costs compared to competitors[154]. - The company's ability to achieve broader market acceptance will depend on effective sales, marketing, and educational efforts, which require significant resource allocation[155]. - If third-party payors do not provide adequate coverage and reimbursement for the DeepView System, it will negatively impact sales and business prospects[157]. - The company faces competition from larger, established firms with greater resources, which may hinder market penetration[162]. - The DeepView System is currently the only AI-enabled wound imaging technology, and continued innovation is critical to maintaining competitive advantage[166]. Strategic Partnerships and Workforce - The company has developed strategic partnerships with leading research hospitals and institutions in the U.S. and EU to support clinical validation studies and algorithm development[49]. - The company has developed strategic partnerships with multiple clinical and academic partners to access diverse wound data inputs, which is critical for improving its DeepView algorithms[204]. - The company employs a growing workforce, with 78 full-time employees as of December 31, 2024, and plans to hire additional staff in operations, sales, marketing, and government contracts in 2025[67]. - As of March 25, 2025, the company had 76 employees and expects to significantly increase this number over the next several years[186].

Financial Data and Key Metrics Changes - Research and development revenue for Q4 2024 was $7.6 million, up from $5.3 million in the prior year, reflecting increased work under the BARDA PBS contract [28] - Full year 2024 R&D revenue reached $29.6 million, a 63.5% increase from $18.1 million in 2023, marking the highest revenue in the company's history [30] - Gross margin for Q4 2024 declined to 44% from 46.1% in the prior year, while full year gross margin rose to 44.9% from 43.6% [30][31] - General and administrative expenses decreased to $4.6 million in Q4 2024 from $5.4 million in the prior year, and full year expenses were $19.9 million compared to $20.9 million in 2023 [30][32] - Cash and cash equivalents totaled $5.2 million as of December 31, 2024, with a current cash position exceeding $14 million following long-term debt financing [33] Business Line Data and Key Metrics Changes - The DeepView system demonstrated exceptional performance in a burn validation study, significantly outperforming clinical judgment in sensitivity, Dice score, and specificity [12][14] - The DeepView system's sensitivity was 86.6%, compared to 40.8% for clinicians, while the Dice score was 68.5% versus 39.2% for burn physicians [13][14] Market Data and Key Metrics Changes - The company has successfully deployed three DeepView systems in Australia at leading hospitals, enhancing its presence in the U.K. and Australia [20] - The response from burn specialists in the U.K. and Australia has been exceptionally positive, indicating strong enthusiasm for the technology [17] Company Strategy and Development Direction - The company aims to submit results to the FDA by the end of Q2 2025, seeking De Novo classification in 2026 [15] - A dedicated intellectual property subsidiary, Spectral IP, was formed to monetize IP assets, with plans to spin off into an independent publicly traded company [24][26] - The company is focused on improving operational efficiencies and concentrating on the DeepView system as part of the BARDA PBS contract [34] Management's Comments on Operating Environment and Future Outlook - Management anticipates a slight revenue decline in 2025 as the company prepares for FDA submission, with expectations for a ramp-up in 2026 [58] - The company has a sound financial foundation to pursue strategic objectives and bring the DeepView system to commercialization [35] Other Important Information - The development of the SnapShot M, a portable diagnostic tool, is supported by over $7 million in government funding, with military deployment anticipated in 2027 [23] - The company is gathering real-world clinical data to strengthen its case for FDA submission and support global commercialization strategies [16] Q&A Session Summary Question: Plans for commercialization and staffing - Management plans to precondition the market with studies and mobilize a sales force as they anticipate FDA clearance [42][43] Question: Revenue guidance for 2025 - Management expects a step back in revenue for 2025 as they position for FDA submission, with a focus on additional developments for quick commercialization post-clearance [58] Question: FDA submission requirements - The submission will include a comprehensive package with multiple sections, reviewed by BARDA before submission to the FDA [60][61] Question: Additional deployments in Australia and the U.K. - No additional units are planned for deployment; focus will be on training and gathering feedback from existing sites [72] Question: Timeline for pediatric study data - The pediatric study data is merged with adult data, and preliminary processing has been completed [84][86] Question: Development milestones for SnapShot M - Preliminary feedback from military testing is being incorporated, with completion expected in 2025 [88] Question: Learnings from U.K. deployments - Positive feedback has been received, and the company anticipates sharing data at upcoming scientific meetings [92][93]

Financial Data and Key Metrics Changes - Research and development revenue for Q4 2024 was $7.6 million, up from $5.3 million in the prior year, reflecting increased work under the BARDA PBS contract [19] - Full year 2024 R&D revenue reached $29.6 million, a 63.5% increase from $18.1 million in 2023, marking the highest revenue in the company's history [21] - Gross margin for Q4 2024 declined to 44% from 46.1% in the prior year, primarily due to a smaller percentage of direct labor on the BARDA PBS contract [20] - General and administrative expenses decreased to $4.6 million in Q4 2024 from $5.4 million in the prior year [21] - Cash and cash equivalents as of December 31, 2024, totaled $5.2 million, with a current cash position exceeding $14 million following long-term debt financing [22][24] Business Line Data and Key Metrics Changes - The DeepView system demonstrated exceptional performance in a burn validation study, achieving 86.6% sensitivity compared to 40.8% from clinicians [10] - The DICE score for the AI algorithm reached 68.5%, significantly outperforming the 39.2% from burn physicians [10] - The company plans to submit results to the FDA by the end of Q2 2025, seeking de novo classification in 2026 [11] Market Data and Key Metrics Changes - The company has successfully deployed three DFU systems in Australia at leading hospitals, enhancing its presence in the UK and Australia [14] - The response to the DeepView system in the UK and Australia has been exceptional, with strong enthusiasm from medical specialists [13] Company Strategy and Development Direction - The company is focused on advancing its DeepView technology for wound and burn assessment, with a commitment to commercialization following FDA clearance [6][11] - A dedicated intellectual property subsidiary, Spectral IP, was formed to monetize IP assets, with plans to spin off into an independent publicly traded company [17][18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's growth prospects and the successful execution of its strategic objectives [26] - The company anticipates a revenue forecast of approximately $21.5 million for fiscal year 2025, reflecting a step back in revenue as it prepares for FDA submission [25][43] Other Important Information - The company has reduced monthly operating losses from $4.6 million in the first half of 2024 to approximately $2 million in the second half [23] - The company has satisfied approximately $10.1 million of its short-term debt, enhancing its financial foundation [24] Q&A Session Summary Question: Plans for commercialization and staffing - The company plans to precondition the market with studies and mobilize a sales force as it anticipates FDA clearance [30] Question: Revenue guidance for 2025 - The company expects a slight revenue decrease in 2025 as it positions for FDA submission, with a ramp-up anticipated in 2026 [42][43] Question: Details on the FDA submission process - The submission will include a comprehensive package reviewed by BARDA before submission to the FDA [45][46] Question: DICE score significance and FDA perspective - The DICE score is crucial for evaluating segmentation tasks and provides a balanced view of the model's performance [50][51] Question: Future deployments in Australia and the UK - The company does not plan to expand the number of units but will focus on deeper utilization and feedback from existing sites [53] Question: Timeline for pediatric study data - The pediatric study data is merged with adult data, and preliminary processing has been completed [58][63] Question: Development milestones for DPU Snapshot M - The company is gathering feedback from military users and plans to submit further applications in 2026 [64] Question: Learnings from the UK deployment - Positive feedback has been received, and the company anticipates sharing data at upcoming scientific meetings [70]

Financial Data and Key Metrics Changes - Research and development revenue for Q4 2024 was $7.6 million, up from $5.3 million in the prior year, reflecting increased work under the BARDA PBS contract [20] - Full year 2024 R&D revenue reached $29.6 million, a 63.5% increase from $18.1 million in 2023, marking the highest revenue in the company's history [22] - Gross margin for Q4 2024 declined to 44% from 46.1% in the prior year, primarily due to a smaller percentage of direct labor on the BARDA PBS contract [21] - Full year gross margin rose to 44.9% from 43.6% in the prior year, driven by a higher reimbursement rate under the current BARDA PBS contract [22] - General and administrative expenses decreased to $4.6 million in Q4 2024 from $5.4 million in the prior year [21] Business Line Data and Key Metrics Changes - The DeepView system demonstrated exceptional performance in predicting burn healing potential, significantly outperforming clinical judgment in sensitivity, DICE score, and specificity [10][11] - The company plans to submit results to the FDA by the end of Q2 2025, seeking de novo classification in 2026 [12] Market Data and Key Metrics Changes - The response to the DeepView system in the UK and Australia has been exceptional, with strong enthusiasm from medical specialists [14] - Three DeepView systems have been successfully deployed in leading hospitals in Australia, enhancing the company's presence in the region [15] Company Strategy and Development Direction - The company is focused on advancing its DeepView technology for wound and burn assessment, with key milestones in regulatory pathways and clinical validation [8] - Plans include gathering real-world clinical feedback across multiple continents to support FDA submissions and commercialization strategies [13] - The formation of Spectral IP aims to monetize intellectual property assets within healthcare and AI sectors, with a planned spin-off into an independent publicly traded company [18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's progress and the potential for growth, emphasizing a focus on finance, focus, and finish [27] - The company anticipates a revenue forecast of approximately $21.5 million for fiscal year 2025, with expectations of a step back in revenue as it prepares for FDA submission [26][45] Other Important Information - The company has received over $7 million in government funding for the development of the Snapshot M diagnostic tool, which is expected to be ready for military deployment in 2027 [16] - Total monthly operating losses were reduced from $4.6 million in the first half of 2024 to approximately $2 million in the second half [25] Q&A Session Summary Question: Plans for commercialization and staffing - The company plans to precondition the market with studies and mobilize a sales force as they anticipate FDA clearance for commercialization [31][32] Question: Revenue guidance for 2025 - The company expects a slight decrease in revenue for 2025 as it positions for FDA submission, with a ramp-up anticipated in 2026 [44][45] Question: FDA submission requirements - The submission will include a comprehensive package with multiple sections, all reviewed by BARDA before submission to the FDA [46][47] Question: DICE score significance - The DICE score is crucial for evaluating segmentation tasks and is important for FDA assessments, balancing precision and recall [51][52] Question: Future deployments in Australia and the UK - The company does not plan to expand the number of units but will focus on deeper utilization and feedback from existing sites [53][54] Question: Pediatric study timeline - Data from the pediatric study is merged with adult data, and the company feels confident in the representative sample for FDA submission [62] Question: Development milestones for Snapshot M - The company is incorporating preliminary feedback from military assessments and plans to submit further applications in 2026 [63][64] Question: Learnings from UK deployments - Positive feedback has been received from UK users, and the company anticipates sharing data at upcoming scientific meetings [67][68]