Revenue and Financial Performance - The company has not generated any product revenue to date, relying on contract development and research services for revenue [99]. - Research and development revenue for Q3 2025 was $3.79 million, a decrease of 53.7% from $8.17 million in Q3 2024 [105]. - Gross profit for Q3 2025 was $1.62 million, with a gross margin of 42.7%, compared to a gross profit of $3.67 million and a gross margin of 44.9% in Q3 2024 [105]. - The company reported a net loss of $3.55 million for Q3 2025, compared to a net loss of $1.50 million in Q3 2024, reflecting an increase in losses [118]. - Adjusted EBITDA for Q3 2025 was $(3.05) million, compared to $(0.71) million in Q3 2024, indicating a worsening financial performance [105]. - Research and development revenue decreased to $3.8 million for the three months ended September 30, 2025, a decline of 53.6% compared to the same period in 2024 [119]. - For the nine months ended September 30, 2025, research and development revenue was $15.6 million, down 29.2% from $21.98 million in 2024 [120]. - Cost of revenue for the three months ended September 30, 2025, was $2.1 million, a decrease of 51.8% compared to $4.5 million in 2024 [121]. - Gross profit for the three months ended September 30, 2025, was $1.6 million, reflecting a 55.8% decrease from $3.67 million in 2024 [121]. - General and administrative expenses for Q3 2025 were $4.96 million, an increase from $4.55 million in Q3 2024 [118]. - General and administrative expense increased by 9.0% to $5.0 million for the three months ended September 30, 2025, compared to the same period in 2024 [123]. - The accumulated deficit as of September 30, 2025, was approximately $56.9 million [131]. Funding and Contracts - The company has received a new contract with BARDA, providing up to $150 million in funding, including an initial award of approximately $54.9 million [100]. - The new PBS BARDA Contract has a total value of up to approximately $150.0 million, with a base phase valued at $54.9 million already exercised [132]. - The company received a $4.9 million grant from MTEC, intended to support military battlefield burn evaluation through December 2025 [101]. - The Company has entered into a Loan and Security Agreement allowing it to borrow up to $15.0 million, with an initial drawdown of $8.5 million [133]. - The loans under the LSA mature on March 1, 2028, with an interest-only payment period of at least 15 months, extendable to 24 months upon achieving certain milestones [134]. - The Avenue Financing includes warrant coverage equal to 8.5% of the total funding commitment, with an exercise price based on the lower of $1.66 or the lowest price per share paid by cash investors [135]. - The Company raised an additional $2.7 million by selling 2,076,923 shares of Common Stock at an offering price of $1.30 per share [136]. - In October 2025, the Company issued 3.1 million shares of common stock at $1.90 per share, raising gross proceeds of $7.6 million [137]. - The Company has the ability to borrow an additional $6.5 million contingent upon FDA clearance of the DeepView System and a $7.0 million equity raise [134]. Cash Flow and Liquidity - The company had approximately $10.5 million in cash as of September 30, 2025, unchanged from the previous quarter [131]. - The company believes it will have sufficient working capital to fund operations for at least one year beyond the release date of the condensed consolidated financial statements [132]. - Net cash used in operating activities decreased by approximately $2.3 million to $(7,368) thousand for the nine months ended September 30, 2025, compared to $(9,668) thousand in 2024 [140]. - Net cash provided by financing activities increased to approximately $12.7 million for the nine months ended September 30, 2025, compared to $8.6 million in 2024, primarily due to proceeds from Avenue Financing [141]. Risks and Compliance - The Company has not recognized any losses from credit risks on cash accounts, which are primarily held in U.S. financial institutions [157]. - The Company is exposed to inflation risk, which may adversely affect its ability to maintain current levels of gross margin and operational results [160]. - The majority of the company's cash is held in U.S. financial institutions, occasionally exceeding federally insured limits, with no recognized losses from credit risks on such accounts [157]. - A significant portion of the company's research and development revenue and accounts receivable is concentrated with one customer, a U.S. government agency [158]. - The company is permitted to present only two years of audited consolidated financial statements, leading to reduced disclosures in financial condition discussions [159]. - The company has received an exception from compliance with auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act [159]. - The company faces inflationary pressures that could adversely affect its gross margin and selling, general, and administrative expenses [160]. - The inability to respond quickly to inflation may harm the company's cash flows and operational results in the future [160]. Clinical Development - A pivotal clinical study for the DeepView System has enrolled 267 patients, exceeding the target of 240 patients, with 42 pediatric patients included [98]. - The company anticipates two revenue streams from the DeepView System: a software as a medical device (SaMD) model and an imaging device component [102].

Financial Performance - Research & Development Revenue for Q2 2025 declined 32.0% to $5.1 million from $7.5 million due to reduced clinical trial costs[6] - Gross margin for Q2 2025 was 45.2%, slightly down from 46.6% in Q2 2024, attributed to higher non-reimbursed expenses[7] - The net loss for Q2 2025 was $(7.9) million, compared to a net loss of $(2.9) million in Q2 2024, primarily due to changes in the fair value of warrant liability[10] - The company reported a 16.4% reduction in net loss for the first six months of 2025 compared to the same period in 2024, reflecting better management of operating expenses[11] Expenses - General and administrative expenses in Q2 2025 were $4.4 million, down from $5.8 million, reflecting the company's focus on operational efficiencies[8] Cash and Assets - Cash improved to $10.5 million as of June 30, 2025, up from $5.2 million on December 31, 2024[12] - Total current assets increased to $14.0 million as of June 30, 2025, compared to $10.1 million in the prior year[20] Liabilities - Total liabilities as of June 30, 2025, were $25.2 million, up from $19.3 million in the previous year[20] Guidance and Milestones - The company reiterated its revenue guidance of approximately $21.5 million for FY 2025, excluding contributions from the DeepView™ System[13] - The company completed the submission of the De Novo application to the FDA in June 2025, a significant milestone for the DeepView System[4]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (MARK ONE) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: SPECTRAL AI, INC. (Exact Name of Registrant as Specified in Its Charter) (State or other jurisdiction of incorporation or organization) ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (MARK ONE) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2025 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: SPECTRAL AI, INC. (Exact Name of Registrant as Specified in Its Charter) (State or other jurisdiction of incorporation or organization ...

Financial Performance - Research & Development Revenue for FY 2024 was $29.6 million, a 63.5% increase from $18.1 million in FY 2023[12] - The net loss for FY 2024 was $(15.3) million, or $(0.85) per share, compared to a net loss of $(20.9) million, or $(1.48) per share, for FY 2023[17] - Gross profit for the year ended December 31, 2024, was $13,274,000, up 68% from $7,880,000 in 2023[31] - Operating loss decreased to $6,582,000 for the year ended December 31, 2024, compared to $12,984,000 in 2023, indicating improved operational efficiency[31] - Net loss for the year ended December 31, 2024, was $15,315,000, a reduction from $20,854,000 in 2023, reflecting a 27% improvement[31] - Basic and diluted net loss per share for 2024 was $0.85, down from $1.48 in 2023, showing a significant reduction in loss per share[31] - Total comprehensive loss for the year ended December 31, 2024, was $15,324,000, compared to $20,842,000 in 2023, reflecting a 27% decrease[31] - Cash used in operating activities for the year ended December 31, 2024, was $9,198,000, an improvement from $13,240,000 in 2023[33] - Net cash provided by financing activities in 2024 was $9,575,000, compared to $3,844,000 in 2023, indicating increased financing support[33] - The company ended 2024 with cash of $5,157,000, up from $4,790,000 at the beginning of the year[33] Revenue Projections - The Company expects to realize its first commercial product revenue in the second half of 2025, with a forecasted revenue of approximately $21.5 million for FY 2025[19] Research and Development - The Company has a multi-year, non-dilutive BARDA PBS contract valued at up to $150 million, with an initial award of approximately $54.9 million[4] - Research and development revenue for Q4 2024 was $7,604,000, a 44% increase from $5,287,000 in Q4 2023[31] - The Burn Validation Study involved 160 patients at 14 burn centers across the US, making it one of the largest burn studies conducted[9] - The Company plans to submit regulatory filings for the DeepView System for burns in the first half of 2025[3] Product Performance - The DeepView System achieved an image-wise sensitivity score of 86.6%, significantly outperforming burn physicians' clinical judgment annotation score of 40.8%[5] Contractual Agreements - The Company completed an equity financing and long-term debt transaction, raising $11.2 million to support its objectives[16] Margins - The gross margin for FY 2024 rose to 44.9% from 43.6%, reflecting the expansion of work under the BARDA PBS contract[13] Cash Position - As of December 31, 2024, cash was $5.2 million, with total current assets amounting to $10.1 million[29]

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]. - Compliance with EU Medical Devices Regulation is necessary for selling devices in EU member states, which includes meeting general safety and performance requirements[94]. - The UK is amending its Medical Devices Regulations post-Brexit, with new regulations expected to apply from July 2024, potentially leading to divergent requirements from the EU[105]. - The regulatory review process for the DeepView technology is expensive and uncertain, with potential delays in obtaining necessary approvals[91]. - The FDA's review times have fluctuated due to various factors, including government funding and global health concerns, which could affect the timely approval of new products[107]. - The FDA and other regulatory authorities may change policies that could prevent or delay the approval of the DeepView System[103]. - Ongoing regulation will continue to apply even after market authorization is granted, affecting the company's commercial operations[112]. - The DeepView System requires a De Novo classification due to its novel approach to wound healing prediction, which has not been previously classified by the FDA[117]. - If the DeepView System is found to cause adverse medical events, it could negatively affect its market authorization and lead to regulatory enforcement actions[118]. - The FDA has the authority to require product recalls if there are material deficiencies or unacceptable risks to health, which could impact the company's operations[119]. - Sales of the DeepView System outside the United States will be subject to varying foreign regulatory requirements, which can be expensive and time-consuming to comply with[116]. Financial Performance and Funding - Approximately $281.5 million in funding has been awarded from U.S. government contracts since 2013, with $272.9 million from BARDA, supporting technology development and clinical trials[22]. - A new BARDA contract executed on September 27, 2023, provides up to $150 million, including an initial award of $54.9 million for clinical validation and FDA application support[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, with a prior contract option valued at approximately $21.9 million being replaced by the new contract[78]. - The company has received $12.5 million in prepaid advances from Yorkville in the form of convertible promissory notes[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]. Product Development and Technology - The DeepView System's proprietary database contains approximately 340 billion pixels of image data as of December 31, 2024, enhancing algorithm optimization and competitive positioning[30]. - The company has completed enrollment of 164 patients in its validation study for burn indications, including 49 pediatric subjects[28]. - The DeepView System significantly improves sensitivity and specificity in assessing burn wounds compared to traditional physician assessments[29]. - The DeepView SnapShot M, a portable diagnostic tool, has received over $7.2 million in funding for development, primarily for military applications[32]. - The 3-D wound measurement technology is under development to provide accurate wound size measurements and will be integrated into the DeepView System[33]. - The DeepView System reduces decision time for burn wound assessments from 21 days to "Day One," with estimated cost savings of approximately $24,000 per hospital stay[41]. - The company has developed strategic partnerships with leading research hospitals and institutions in the U.S., UK, and Australia to support clinical validation studies and technology expansion[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]. Market Strategy and Commercialization - The company plans to initiate commercialization in the U.S. in 2026, with FDA review submission for the burn application expected in 2025[27]. - The company anticipates commercial sales for the burn indication in the UK to commence in 2025, following receipt of the UKCA mark[56]. - 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 DeepView System is expected to generate revenue through a SaaS model and a capital sale component, with a software licensing fee that includes maintenance and access to algorithm updates[55]. - The company plans to apply for NICE certification in the UK and CPT codes in the U.S. as clinical evidence develops and utilization increases over the next several years[57]. - 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]. - Third-party payor coverage and reimbursement are critical for the DeepView System's sales; lack of coverage could negatively impact business prospects[157]. Competition and Market Risks - The company faces significant competition from established manufacturers with greater resources, which may hinder market penetration[162]. - The DeepView System is the only AI-enabled wound imaging technology, but ongoing innovation is necessary to maintain competitive advantage[166]. - The company relies on third-party suppliers for critical components, making it vulnerable to supply shortages and price fluctuations[168]. - The company may encounter difficulties in managing growth, which could disrupt operations and increase net losses[186]. - The company’s proprietary AI algorithms and optical technology are key competitive advantages that must be maintained and protected to ensure ongoing success[210]. Legal and Compliance Risks - The company must comply with various healthcare laws, including the U.S. federal Anti-Kickback Statute, which could affect sales and marketing practices[124]. - Violations of the federal civil False Claims Act could result in significant penalties, including treble damages and mandatory penalties per false claim[125]. - The company may face substantial fines and imprisonment under the Eliminating Kickbacks in Recovery Act for improper financial arrangements related to healthcare services[125]. - The Physician Payments Sunshine Act requires the company to report certain payments and transfers of value to healthcare professionals, impacting compliance and operational practices[125]. - The company is exposed to significant risks related to compliance with foreign and state laws, which may complicate operations and lead to potential penalties[126]. - 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]. Operational Challenges - The company relies on third-party manufacturers for production, exposing it to risks related to product quality and compliance with regulatory standards[130]. - Regular inspections and quality checks are performed on the contract manufacturer to mitigate risks, but future pandemics could hinder these efforts[132]. - The company is dependent on senior management and key personnel, and their loss could adversely affect business operations[183]. - 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]. Intellectual Property - The company maintains 12 issued and allowed U.S. patents and 18 international patents, with 6 U.S. patent applications and 29 foreign applications pending, indicating a robust intellectual property portfolio[212]. - The company’s ability to protect its intellectual property is critical, as failure to do so could allow competitors to develop similar products, harming its market position[209]. - The ability to obtain and maintain valid patents is contingent on the differences between the company's inventions and prior art[215]. - Patent applications in the United States are typically not published until 18 months after filing, which may affect the company's ability to secure patent protection[215]. - Unauthorized parties may potentially obtain and use proprietary information despite the company's efforts to protect its rights[215]. - The issuance of a patent does not guarantee its inventorship, validity, or enforceability, and patents may be challenged in courts or patent offices[215]. - The company may face limitations in obtaining method patents outside the United States due to differing patent laws in foreign jurisdictions[215]. - Changes in patent laws or their interpretation could impact the company's ability to protect inventions and enforce intellectual property rights[215]. - The company cannot predict whether current patent applications will result in issued patents in any jurisdiction[215]. - The scope of issued patents may not provide sufficient protection against competitors or third parties[215].

Funding and Government Contracts - The company has received approximately $281.0 million in funding awards from government contracts since 2013, primarily from BARDA, which accounts for $272.9 million[139]. - In September 2023, the company executed a multi-year Project BioShield agreement with BARDA valued at up to approximately $150.0 million, including an initial award of nearly $54.9 million[140]. - The company has not generated any product revenue to date, relying heavily on government contracts for funding[139]. - The company received a $4.0 million grant under the MTEC Agreement, which was increased to $4.9 million, for the development of a handheld version of the DeepView® System[182]. Financial Performance - Research and development revenue for the three months ended September 30, 2024, was $8.173 million, compared to $3.440 million for the same period in 2023, representing a 138% increase[149]. - Gross profit for the nine months ended September 30, 2024, was $9.926 million, up from $5.444 million in the same period in 2023, indicating an 82% increase[149]. - The company reported a net loss of $1.504 million for the three months ended September 30, 2024, significantly improved from a net loss of $10.629 million in the same period in 2023[149]. - The net loss for Q3 2024 was $1.5 million, compared to a net loss of $10.6 million in Q3 2023, and for the nine months ended September 30, 2024, the net loss was $7.6 million, down from $17.3 million in the same period last year[162]. - Adjusted EBITDA for the three months ended September 30, 2024, was $(711) thousand, compared to $(3,885) thousand for the same period in 2023, indicating a significant improvement[176]. Revenue and Cost Analysis - Cost of revenue for Q3 2024 was $4.5 million, representing a 129.0% increase from $2.0 million in Q3 2023, and for the nine months ended September 30, 2024, it was $12.1 million, up 64.5% from $7.3 million in the same period last year[165]. - Gross profit for Q3 2024 was $3.7 million, a 149.1% increase from $1.5 million in Q3 2023, and for the nine months ended September 30, 2024, it was $9.9 million, up 83.3% from $5.4 million in the same period last year[165]. - The gross margin for the three months ended September 30, 2024, was 44.9%, compared to 42.8% for the same period in 2023[149]. - The gross margin for Q3 2024 was 46.3%, an increase of 3.5% compared to Q3 2023, and for the nine months ended September 30, 2024, it was 45.7%, up 3.1% from the same period last year[166]. Operational Developments - The company initiated a pivotal clinical study in December 2023, seeking enrollment of 240 patients, with 169 patients enrolled by the end of Q3 2024[137]. - The DeepView System is expected to begin commercialization activities in the United Kingdom in the second half of 2024 following the receipt of the UKCA mark[136]. - The business combination completed in September 2023 resulted in the company being renamed Spectral AI, Inc., and its shares began trading on Nasdaq under the symbol "MDAI"[144]. Cash Flow and Financing - As of September 30, 2024, the company had approximately $3.7 million in cash and an accumulated deficit of approximately $40.3 million[177]. - Net cash used in operating activities for the nine months ended September 30, 2024, was $(9,668) thousand, a decrease from $(10,865) thousand in the same period in 2023[184]. - Net cash provided by financing activities increased by approximately $4.5 million for the nine months ended September 30, 2024, compared to the same period in 2023[186]. - The company entered into a Common Stock Purchase Agreement allowing it to sell up to $10.0 million in newly issued shares[178]. - The Standby Equity Purchase Agreement with Yorkville allows the company to sell up to $30.0 million of its shares, with a total of $12.5 million in convertible promissory notes already advanced[179]. Expenses and Liabilities - General and administrative expenses decreased by 19.2% to $4.6 million in Q3 2024 from $5.6 million in Q3 2023, and for the nine months ended September 30, 2024, it was $15.4 million, a slight decrease of 0.7% from $15.5 million in the same period last year[167]. - Other income (expense) for Q3 2024 was a net expense of $581,000, compared to a net expense of $6.5 million in Q3 2023, and for the nine months ended September 30, 2024, it was a net expense of $2.0 million, down from $7.2 million in the same period last year[168]. - Borrowing related costs increased by $1.1 million for Q3 2024 compared to Q3 2023, and by $2.1 million for the nine months ended September 30, 2024, due to debt issuance costs related to the Yorkville Convertible Notes[169]. - The change in fair value of warrant liability decreased by $0.7 million for Q3 2024 compared to Q3 2023, reflecting changes in the fair value of the Public Warrants issued in September 2023[170]. Company Status and Market Conditions - The company qualifies as an emerging growth company until the earliest of December 31, 2026, or when total annual gross revenues exceed $1.235 billion[195]. - The company maintains a significant amount of assets in cash, primarily in cash deposits, which are not significantly affected by interest rate changes due to their short-term nature[199]. - Revenue is primarily denominated in U.S. dollars, while expenses are incurred mainly in the U.S. and UK currencies[200]. - A major concentration of credit risk exists as one customer, a U.S. government agency, represents the majority of research and development revenue and accounts receivable[202]. - Recent inflation has increased research and development and operating costs, potentially affecting gross margins and cash flows[203].

Funding and Government Contracts - The company has received approximately $280.2 million in funding awards from government contracts since 2013, primarily from BARDA, which accounts for $272.9 million[132]. - The company executed a multi-year Project BioShield agreement with BARDA in September 2023, valued at up to approximately $150.0 million, including an initial award of nearly $54.9 million[133]. - The Company secured a multi-year PBS BARDA Contract valued at approximately $150.0 million, with an initial award of nearly $54.9 million for clinical validation and FDA clearance of DeepView[174]. - The Company received a $4.0 million grant under the MTEC Agreement for developing a handheld version of the DeepView System, expected to be completed by April 2025[175]. Financial Performance - Research and development revenue for the three months ended June 30, 2024, was $7.5 million, compared to $4.3 million for the same period in 2023, representing a 76.5% increase[141]. - Gross profit for the three months ended June 30, 2024, was $3.3 million, with a gross margin of 44.3%, compared to a gross profit of $1.8 million and a gross margin of 42.1% in 2023[141]. - The company reported an operating loss of $2.4 million for the three months ended June 30, 2024, an improvement from a loss of $3.0 million in the same period of 2023[141]. - The company reported a net loss of $2.9 million for the three months ended June 30, 2024, compared to a net loss of $3.1 million in 2023; for the six months, the net loss was $6.1 million, down from $6.7 million in 2023[154]. - Adjusted EBITDA for the three months ended June 30, 2024, was $(2.0) million, an improvement from $(2.6) million in 2023; for the six months, it was $(3.9) million, compared to $(5.2) million in 2023[169]. - General and administrative expenses increased to $5.8 million for the three months ended June 30, 2024, a 20.4% rise from $4.8 million in 2023; for the six months, expenses were $10.8 million, up 10.0% from $9.9 million in 2023[159]. - Cash used in operating activities increased by approximately $2.5 million for the six months ended June 30, 2024, totaling $8.0 million compared to $5.5 million in the same period of 2023[178][179]. - Net cash provided by financing activities increased by approximately $10.6 million for the six months ended June 30, 2024, totaling $10.1 million compared to a net cash used of $0.5 million in 2023[180]. - The company had approximately $6.9 million in cash as of June 30, 2024, with notes payable of $8.0 million and no long-term debt[170]. Product Development and Commercialization - The company has not generated any product revenue to date, focusing on research and development for the DeepView System[132]. - The DeepView System is expected to begin commercialization activities in the UK in the second half of 2024 following the receipt of the UKCA mark[129]. - The company anticipates two revenue streams from the DeepView System: a software as a medical device model and an imaging device component[135]. Inflation and Economic Risks - Recent inflation has increased the cost of research and development as well as operating costs[198]. - Significant inflationary pressures may adversely affect the company's ability to maintain current levels of gross margin[198]. - The company may face challenges in managing selling, general, and administrative expenses due to inflation[198]. - Inability to respond quickly to inflation could harm the company's cash flows and operational results in the future[198]. Corporate Structure and Subsidiaries - The business combination with Rosecliff Acquisition Corp I was completed on September 11, 2023, resulting in the company being renamed Spectral AI, Inc.[136]. - The Company formed a new subsidiary, Spectral IP, to acquire AI intellectual property, receiving a $1.0 million investment from an affiliate of its largest shareholder[183]. Risk Factors - The company is highly dependent on U.S. governmental contract awards for revenue, which may lead to inconsistencies in operating results[146]. - The company is exposed to credit risk, with a significant portion of research and development revenue coming from a single U.S. government agency[197]. - The change in fair value of warrant liability increased by $0.4 million for the three and six months ended June 30, 2024, reflecting changes in the fair value of the Public Warrants issued in September 2023[163].

Funding and Contracts - The company has received approximately $280.2 million in funding awards from government contracts since 2013, with $272.9 million coming from BARDA[128]. - The company executed a multi-year Project BioShield agreement with BARDA in September 2023, valued at up to approximately $150.0 million, including an initial award of nearly $54.9 million[129]. - The PBS BARDA Contract, valued at up to $150.0 million, includes an initial award of nearly $54.9 million for the clinical validation and FDA clearance of the DeepView system[170]. - The company received a $4.0 million grant under the MTEC Agreement for developing a handheld version of the DeepView System, expected to be completed by April 2025[171]. Financial Performance - Research and development revenue for the three months ended March 31, 2024, was $6.3 million, an increase of $1.2 million from $5.1 million in the same period in 2023[138]. - Gross profit for the same period was $2.9 million, with a gross margin of 46.6%, up from 42.9% in 2023[138]. - The operating loss for the three months ended March 31, 2024, was $2.1 million, a decrease of $755,000 compared to a loss of $2.9 million in 2023[138]. - The net loss for the same period was $3.2 million, a reduction of $404,000 from a net loss of $3.6 million in 2023[138]. - Adjusted EBITDA for the three months ended March 31, 2024, was $(2.1) million, an improvement from $(2.6) million in 2023[165]. - Net cash used in operating activities decreased by approximately $1.1 million to $(2,680) thousand for the three months ended March 31, 2024, compared to $(3,755) thousand in the same period of 2023[175]. - Net cash provided by financing activities increased by approximately $8.2 million to $8,049 thousand for the three months ended March 31, 2024, compared to $(104) thousand in the same period of 2023[176]. Product Development and Commercialization - The company has not generated any product revenue to date, focusing on research and development for the DeepView System[128]. - The DeepView System is expected to begin commercialization in the UK in the second half of 2024 following the receipt of the UKCA mark[125]. - The company anticipates two revenue streams from the DeepView System: a software as a medical device model and an imaging device component[131]. Corporate Structure and Governance - The business combination completed in September 2023 resulted in the company being listed on the Nasdaq under the symbols "MDAI" and "MDAIW"[133]. - The Company formed a new subsidiary, Spectral IP, and received a $1.0 million investment for the development of its artificial intelligence intellectual property portfolio[180]. Capital and Financing - As of March 31, 2024, the company had approximately $10.2 million in cash and notes payable of $5.8 million, with no long-term debt[166]. - The company entered into a Common Stock Purchase Agreement with B. Riley to sell up to $10.0 million in newly issued shares and a Standby Equity Purchase Agreement with Yorkville to sell up to $30.0 million in shares[167][168]. - The Company entered into a SEPA allowing the sale of up to $30.0 million of its shares, with an initial Pre-Paid Advance of $5.0 million at a fixed conversion price of $3.16[178]. - The Insurance Note, entered into in September 2023, has an interest rate of 8.6% per annum, with a remaining balance of $0.2 million as of March 31, 2024[177]. Risks and Challenges - The Company is exposed to credit risk, with one U.S. government agency representing the majority of its research and development revenue and accounts receivable[194]. - Inflation has contributed to increased costs in research and development and operating expenses, potentially affecting gross margins and cash flows[195]. - The Company has not recognized any losses from credit risks on cash, which is primarily held in U.S. financial institutions[193]. - The Company maintains a large amount of cash, with fixed interest rates on current borrowings, making it less sensitive to interest rate changes[191]. - The Company is classified as an emerging growth company, allowing it to delay the adoption of certain accounting standards[185].

As filed with the Securities and Exchange Commission on April 10, 2024 Registration No. 333- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 __________________________________ Spectral AI, Inc. (Exact name of registrant as specified in its charter) __________________________________ | Delaware | 8731 | 85-3987148 | | --- | --- | --- | | (State or other jurisdiction of | (Primary Standard Industrial | (I.R.S. Employer | ...