Spectral AI, Inc.

Previous wording

We are an AI company focused on predictive medical diagnostics. We operate in one segment. Currently, we are devoting substantially all of our efforts towards research and development of our DeepView System, an internally developed multi-spectral imaging (“MSI”) device that has FDA breakthrough device designation (“BDD”) status. Given our recent receipt of the UKCA mark for burn indication on our DeepView System, we expect to begin commercialization activities in the United Kingdom in 2025. Our DeepView System uses proprietary algorithms to distinguish between damaged and healthy human tissue invisible to the naked eye, providing “Day One” healing assessments. DeepView’s output is specifically engineered to allow the physician to make a more accurate, timely and informed decision regarding the treatment of the patient’s wound. Our focus has been on the burn indication.

Current wording

We are an AI company focused on predictive medical diagnostics. We operate in one segment. Currently, we are devoting substantially all our efforts towards research and development of our DeepView System, an internally developed multi-spectral imaging (“MSI”) device that has previously received FDA breakthrough device designation (“BDD”) status. Our DeepView System uses proprietary algorithms to distinguish between damaged and healthy human tissue invisible to the naked eye, providing “Day One” healing assessments. DeepView’s output is specifically engineered to allow the physician to make a more accurate, timely and informed decision regarding the treatment of the patient’s wound. Our focus has been on the burn indication.

Previous wording

We have received substantial support from the U.S. government for our DeepView System’s application for burn wounds from BARDA, which is part of the Department of Health and Human Services Office of the Assistant Secretary for Preparedness and Response in the United States, established to aid in securing the United States from chemical, biological, radiological, and nuclear threats, as well as from pandemic influenza and emerging infectious diseases. We have also received funding from the National Science Foundation, the National Institute of Health and the Defense Health Agency (“DHA”), an agency within the Department of Defense. On September 27, 2023, the Company executed a new contract with BARDA, providing the Company with additional funding of up to $150.0 million, including an initial award of approximately $54.9 million to support the clinical validation and for FDA De Novo submission of our DeepView AI – Burn software. This will include the distribution of up to 30 DeepView Systems in various emergency rooms and burn centers to support the clinical validation study. The contract also includes options, similar to our prior BARDA contracts, with an additional total value of approximately $95.1 million which can be exercised for additional product development, procurement and the expanded deployment of DeepView Systems at emergency rooms, trauma and burn centers. These deployments will enable the Company to conduct health economic and outcome research to support the broader clinical adoption of the DeepView System.

Current wording

We have received substantial support from the U.S. government for our DeepView System’s application for burn wounds from BARDA, which is part of the Department of Health and Human Services Office of the Assistant Secretary for Preparedness and Response in the United States, established to aid in securing the United States from chemical, biological, radiological, and nuclear threats, as well as from pandemic influenza and emerging infectious diseases. We have also received funding from the National Science Foundation, the National Institute of Health and the Defense Health Agency (“DHA”), an agency within the Department of Defense. On September 27, 2023, the Company executed a new contract with BARDA, providing the Company with additional funding of up to $150.0 million, including an initial award of approximately $54.9 million to support the clinical validation study, include the distribution of up to 30 DeepView Systems in various emergency rooms and burn centers to support the study and for the Company’s FDA De Novo submission of our DeepView AI – Burn software, which was completed on June 30, 2025. The contract also includes options, similar to our prior BARDA contracts, with an additional total value of approximately $95.1 million which can be exercised for additional product development, procurement and the expanded deployment of DeepView Systems at emergency rooms, trauma and burn centers. These deployments will enable the Company to conduct health economic and outcome research to support the broader clinical adoption of the DeepView System.

Previous wording

We regularly review a number of metrics, including the following key operating and financial metrics, to evaluate our business, measure our performance, identify trends in our business, prepare financial projections and make strategic decisions. We believe the operating and financial metrics presented are useful in evaluating our operating performance, as they are similar to measures by our public competitors and are regularly used by security analysts, institutional investors, and other interested parties in analyzing operating performance and prospects. Adjusted EBITDA is a non-GAAP measure, as it is not a financial measure calculated in accordance with GAAP and should not be considered as a substitute for net income (loss), calculated in accordance with GAAP. See “Non-GAAP Financial Measures” for additional information on adopted non-GAAP financial measures and a reconciliation of these non-GAAP measures to the most comparable GAAP measures.

Current wording

We regularly review a number of metrics, including the following key operating and financial metrics, to evaluate our business, measure our performance, identify trends in our business, prepare financial projections and make strategic decisions. We believe the operating and financial metrics presented are useful in evaluating our operating performance, as they are similar to measures by our public competitors and are regularly used by security analysts, institutional investors, and other interested parties in analyzing operating performance and prospects. Adjusted EBITDA is a non-GAAP measure, as it is not a financial measure calculated in accordance with GAAP and should not be considered as a substitute for net loss, calculated in accordance with GAAP. See “Non-GAAP Financial Measures” for additional information on adopted non-GAAP financial measures and a reconciliation of these non-GAAP measures to the most comparable GAAP measures.

Previous wording

Comparison of Three Months Ended March 31, 2025 and 2024

Current wording

Comparison of Three and Six Months Ended June 30, 2025 and 2024

Previous wording

The following table summarizes these metrics for the years ended March 31, 2025 and 2024 (in thousands):

Current wording

The following table summarizes these metrics for the three and six months ended June 30, 2025 and 2024 (in thousands):

Previous wording

We define adjusted earnings before interest, tax, depreciation and amortization (“Adjusted EBITDA”) as net income (loss) excluding income taxes, depreciation of property and equipment, net interest income, stock compensation, transaction costs and any non-operating financial income and expense. See “Non-GAAP Financial Measures” for a reconciliation of GAAP net income (loss) to Adjusted EBITDA.

Current wording

We define adjusted earnings before interest, tax, depreciation and amortization (“Adjusted EBITDA”) as net loss excluding income taxes, depreciation of property and equipment, net interest income, stock compensation, transaction costs and any non-operating financial income and expense. See “Non-GAAP Financial Measures” for a reconciliation of GAAP net loss to Adjusted EBITDA.

Previous wording

The following table summarizes our results of operations for the three months ended March 31, 2025 and 2024 (in thousands):

Current wording

The following table summarizes our results of operations for the three and six months ended June 30, 2025 and 2024 (in thousands):

Previous wording

Research and development revenue was $6.7 million, for the three months ended March 31, 2025, an increase of 6.0% compared to the comparable period in 2024, reflecting more activity as we completed work under the BARDA PBS contract.

Current wording

Research and development revenue was $5.1 million and $11.8 million for the three and six months ended June 30, 2025, respectively, a decrease of 32.3% and 14.7%, respectively, compared to the comparable periods in 2024, reflecting less activity as we completed work under the PBS BARDA Contract.

Previous wording

For the three months ended March 31, 2025 and 2024, the Company’s revenues disaggregated by the major sources was as follows (in thousands):

Current wording

For the three and six months ended June 30, 2025 and 2024, the Company’s revenues disaggregated by the major sources was as follows (in thousands):

Previous wording

Cost of revenue for the three months ended March 31, 2025 was $3.5 million, an increase of 4.7% compared to the comparable period in 2024, due to increased activity to fulfill our U.S. governmental contracts, consistent with increased research and development revenue.

Current wording

Cost of revenue for the three and six months ended June 30, 2025 was $2.8 million and $6.3 million, respectively, an decrease of 33.4% and 16.3%, respectively, compared to the comparable periods in 2024, due to decreased activity to fulfill our U.S. governmental contracts, consistent with decreased research and development revenue.

Previous wording

General and administrative expense was $4.1 million, for the three months ended March 31, 2025, a decrease of 20.1% as compared to the comparable period in 2024. Non-revenue generating research and development activities, primarily related to salaries and related costs and consulting fees, have decreased by approximately $1.1 million for the three months ended March 31, 2025 compared to the comparable period in 2024 offset by an increase of approximately $1.1 million related to other administrative expenses for the three months ended March 31, 2025 compared to the comparable period in 2024.

Current wording

General and administrative expense was $4.4 million and $8.5 million, for the three and six months ended June 30, 2025, respectively, a decrease of 23.3% and 21.8% respectively, as compared to the comparable period in 2024. Non-revenue generating research and development activities, primarily related to salaries and related costs and consulting fees, have decreased by approximately $3.9 million and $5.0 million for the three and six months ended June 30, 2025 compared to the comparable period in 2024 offset by an increase of approximately $1.5 million and $2.7 million, related to other administrative expenses for the three and six months ended June 30, 2025, respectively, compared to the comparable period in 2024. Additionally, the Company incurred less put option and premium expense for financing transactions in the current year.

Previous wording

Net interest (expense) income for the three months ended March 31, 2025 primarily relates to costs related to the financing relating to the Company’s insurance policies.

Current wording

Net interest (expense) income for the three and six months ended June 30, 2025 primarily relates to costs related to the financing relating to the Company’s insurance policies.

Previous wording

Change in fair value of warrant liability increased by approximately $4.2 million for the three months ended March 31, 2025 as compared to the comparable period in 2024. The increase reflects changes in the fair value of the Company’s Public Warrants for the three-month period ended March 31, 2025. The Company repriced the Public Warrants in November 2024 to an exercise price of $2.75 from $11.50 per share. The Company’s public warrants are classified as liabilities and remeasured to fair value at each reporting period, with changes recognized in net income (loss). As a result, fluctuations in the warrant price may cause significant non-cash gains or losses, leading to volatility in reported net income.

Current wording

Change in fair value of warrant liability decreased by approximately $5.8 million and $1.6 million for the three and six months ended June 30, 2025 as compared to the comparable period in 2024. The increase reflects changes in the fair value of the Company’s Public Warrants for the three-month and six-month period ended June 30, 2025. The Company repriced the Public Warrants in November 2024 to an exercise price of $2.75 from $11.50 per share. The Company’s Public Warrants are classified as liabilities and remeasured to fair value at each reporting period, with changes recognized in net loss. As a result, fluctuations in the warrant price may cause significant non-cash gains or losses, leading to volatility in reported net loss.

Previous wording

Foreign exchange transaction loss for three months ended March 31, 2025 is immaterial due to lower balances in our deposit accounts and accounts payable denominated in British pound sterling and less fluctuation in the exchange rate between the U.S. dollar and the British pound sterling. Foreign exchange transaction loss for the three months ended March 31, 2024 relates to the increased exchange rate between the U.S. dollar and the British pound sterling for our deposit accounts that are denominated in British pound sterling. In addition, this amount includes costs associated with buying British pound sterling for payment of our employees and vendors in the UK.

Current wording

Foreign exchange transaction loss for three and six months ended June 30, 2025 are immaterial due to lower balances in our deposit accounts and accounts payable denominated in British pound sterling and less fluctuation in the exchange rate between the U.S. dollar and the British pound sterling. Foreign exchange transaction loss for the three and six months ended June 30, 2024 relates to the increased exchange rate between the U.S. dollar and the British pound sterling for our deposit accounts that are denominated in British pound sterling. In addition, this amount includes costs associated with buying British pound sterling for payment of our employees and vendors in the UK.

Previous wording

We define Adjusted EBITDA as net income (loss) excluding income taxes, depreciation of property and equipment, net interest income, stock compensation, transaction costs and any non-operating financial income and expense.

Current wording

We define Adjusted EBITDA as net loss excluding income taxes, depreciation of property and equipment, net interest income, stock compensation, transaction costs and any non-operating financial income and expense.

Previous wording

As of March 31, 2025 we had approximately $14.1 million in cash, notes payable of $8.7 million, and no other long-term debt. We had an accumulated deficit of approximately $45.3 million.

Current wording

As of June 30, 2025 we had approximately $10.5 million in cash, notes payable of $7.7 million, and no other long-term debt. We had an accumulated deficit of approximately $53.3 million.

Previous wording

The new PBS BARDA Contract, executed in September 2023, has a total value of up to approximately $150.0 million if all future options are executed. The base phase of the PBS BARDA Contract, valued at $54.9 million, was exercised concurrently with the contract award in September 2023. To date, our total potential support from BARDA is nearly $272.9 million for our 2013, 2019, and 2023 awards. In April 2023, we received a $4.0 million grant under the MTEC Agreement. In August 2024, the MTEC award was increased to $4.9 million and is currently intended to run through December 2025 with funding dependent on various milestones. See “Research and Development Revenue” above. With the PBS BARDA Contract, the B. Riley Committed Equity Facility Agreement (“CEF Agreement”), funding available through the ELOC, funding available through the SEPA, and the Avenue Financing (as described below) 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.

Current wording

The new PBS BARDA Contract, executed in September 2023, has a total value of up to approximately $150.0 million if all future options are executed. The base phase of the PBS BARDA Contract, valued at $54.9 million, was exercised concurrently with the contract award in September 2023. To date, our total potential support from BARDA is nearly $272.9 million for our 2013, 2019, and 2023 awards. In April 2023, we received a $4.0 million grant under the MTEC Agreement. In August 2024, the MTEC award was increased to $4.9 million and is currently intended to run through December 2025 with funding dependent on various milestones. See “Research and Development Revenue” above. With the PBS BARDA Contract and funding available through the Avenue Financing (as described below), 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.

Previous wording

The loans under the LSA mature on March 1, 2028, with an interest-only payment period of no less than 15 months, which can be extended to 24 months upon the achievement of certain milestones prior to the end of such 15 month period as described in the Tranche 2 Milestone Date (as defined in the Supplement). The Tranche 2 Commitment (as defined in the Supplement) includes an additional $6.5 million in debt financing and is contingent upon, among other things, (i) U.S. Food and Drug Administration’s clearance of the Company’s DeepView System and (ii) an additional $7.0 million equity raise to be completed by the Company.

Current wording

The loans under the LSA mature on March 1, 2028, with an interest-only payment period of no less than 15 months, which can be extended to 24 months upon the achievement of certain milestones prior to the end of such 15 month period as described in the Tranche 2 Milestone Date (as defined in the Supplement). The Tranche 2 Commitment (as defined in the Supplement) includes an additional $6.5 million in debt financing and is contingent upon, among other things, (i) U.S. Food and Drug Administration’s (FDA) clearance of the Company’s DeepView System and (ii) an additional $7.0 million equity raise to be completed by the Company.

Previous wording

The Avenue Financing also includes warrant coverage equal to 8.5% of the total funding commitment from Avenue, with an exercise price equal to the lower of (i) average of the daily volume weighted average price of Common Stock as reported for each of five (5) consecutive trading days, determined as of the end of the trading on the last trading day before the date of issuance, which was $1.66 and (ii) the lowest price per share paid to the Company by cash investors for Common Stock issued in any sale of Common Stock in a bona-fide equity raising that closes at any time commencing from March 21, 2025 through (but excluding) December 31, 2025.

Current wording

The Avenue Financing also included warrant coverage equal to 8.5% of the total funding commitment from Avenue, with an exercise price equal to the lower of (i) average of the daily volume weighted average price of Common Stock as reported for each of five (5) consecutive trading days, determined as of the end of the trading on the last trading day before the date of issuance, which was $1.66 and (ii) the lowest price per share paid to the Company by cash investors for Common Stock issued in any sale of Common Stock in a bona-fide equity raising that closes at any time commencing from March 21, 2025 through (but excluding) December 31, 2025.

Previous wording

The following table summarizes our cash flows for the three months ended March 31, 2025 and 2024 (in thousands):

Current wording

The following table summarizes our cash flows for the six months ended June 30, 2025 and 2024 (in thousands):

Previous wording

Net cash used in operating activities decreased by approximately $1.2 million for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, primarily driven by decreased staffing levels and consulting costs and expenses resulting from the change in focus to DeepView Burn.

Current wording

Net cash used in operating activities increased by approximately $3.2 million for the six months ended June 30, 2025, as compared to the six months ended June 30, 2024, primarily driven by decreased staffing levels and consulting costs and expenses resulting from the change in focus to DeepView Burn.

Previous wording

Net cash provided by financing activities increased to approximately $10.3 million for the three months ended March 31, 2025 as compared to $8.0 million for the three months ended March 31, 2024. This was primarily attributable to proceeds from the Avenue Financing of $8.5 million and the attendant equity raise of $2.7 million partially offset by the loan repayments on the Yorkville debt facility.

Current wording

Net cash provided by financing activities increased to approximately $10.2 million for the six months ended June 30, 2025 as compared to $10.1 million for the six months ended June 30, 2024. This was primarily attributable to proceeds from the Avenue Financing of $8.5 million and the attendant equity raise of $2.7 million partially offset by the loan repayments on the Yorkville debt facility.

Previous wording

The loans under the LSA mature on March 1, 2028, with an interest-only payment period of no less than 15 months, which can be extended to 24 months upon the achievement of certain milestones prior to the end of such 15 month period as described in the Tranche 2 Milestone Date (as defined in the Supplement). The Tranche 2 Commitment (as defined in the Supplement) includes an additional $6.5 million in debt financing and is contingent upon, among other things, (i) U.S. Food and Drug Administration’s clearance of the Company’s DeepView System and (ii) an additional $7.0 million equity raise to be completed by the Company.

Current wording

The loans under the LSA mature on March 1, 2028, with an interest-only payment period of no less than 15 months, which can be extended to 24 months upon the achievement of certain milestones prior to the end of such 15 month period as described in the Tranche 2 Milestone Date (as defined in the Supplement). The Tranche 2 Commitment (as defined in the Supplement) includes an additional $6.5 million in debt financing and is contingent upon, among other things, (i) U.S. FD A’s clearance of the Company’s DeepView System and (ii) an additional $7.0 million equity raise to be completed by the Company.

Previous wording

Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies” in our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on March 31, 2025. During the three months ended March 31, 2025, there were no material changes to our critical accounting policies from those previously disclosed.

Current wording

Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies” in our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on March 31, 2025. During the six months ended June 30, 2025, there were no material changes to our critical accounting policies from those previously disclosed.

Previous wording

We maintain a large amount of our assets in cash. Our cash is held primarily in cash deposits. The fair value of our cash would not be significantly affected by either an increase or decrease in interest rates due mainly to the short-term nature of these instruments. Additionally, changes to interest rates will impact on the cost of any future borrowings. With respect to our current borrowings, the interest rates on the notes are Prime plus 5.25%. Changes in prevailing interest rates could have a material impact on our results of operations.

Current wording

We maintain a large amount of our assets in cash. Our cash is held primarily in cash deposits. The fair value of our cash would not be significantly affected by either an increase or decrease in interest rates due mainly to the short-term nature of these instruments. Additionally, changes to interest rates will impact on the cost of any future borrowings. With respect to our current borrowings, the interest rates on the notes are Prime plus 5%. Changes in prevailing interest rates could have a material impact on our results of operations.