Spectral AI (MDAI) risk factors, FY2024 10-K

Other

1. 01Remediation Plan for Material Weaknesses
2. 02Based on this assessment, our management concluded that, as of December 31, 2024, our internal control over financial reporting was not effective at the reasonable assurance level, due to the material weakness outlined above
3. 03Changes in Internal Control over Financial Reporting
4. 04Item 10. Directors, Executive Officers and Corporate Governance
5. 05As an “emerging growth company” as defined in the JOBS Act, we are not required to include a Compensation Discussion and Analysis section and have opted to comply with the scaled disclosure requirements applicable to emerging growth companies
6. 06of Certain Beneficial Owners and Management and Related Stockholder Matters
7. 07Item 13. Certain Relationships and Related Transactions, and Director Independence
8. 08Item 14. Principal Accountant Fees and Services
9. 09Item 15. Exhibits, Financial Statement Schedules
10. 10Opinion on the Consolidated Financial Statements
11. 11Total current assets 10,122 9,902
12. 12Liabilities and Stockholders’ Equity (Deficit)
13. 13Gross profit 13,274 7,880
14. 14Operating loss (6,582 ) (12,984 )
15. 15Basic and Diluted 17,934,218 14,087,586
16. 16Net loss $ (15,315 ) $ (20,854 )
17. 17Issuance of shares for borrowing related costs 1,143
18. 18Net cash used in operating activities (9,199 ) (13,240 )
19. 19Cash paid for taxes $ 11 $ 114
20. 20In March 2024, the Company received an additional $0.5 million award from the Defense Health Agency to further the development related to the DHA Agreement
21. 21The Company’s consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) or an Accounting Standards Update (“ASU”)
22. 22(v) Legacy Spectral’s operations comprise the ongoing operations of Spectral AI
23. 23Principles of Consolidation
24. 24The Company has one operating segment. The accounting policies of the Company’s single operating and reportable segment are the same as those described in the summary of significant accounting policies
25. 25Accounts receivable represent amounts due from US government agencies pursuant to research and development contracts associated with the Company’s DeepView® System
26. 26Concentrations of Credit Risk
27. 27Property and Equipment, Net
28. 28Leasehold improvements Shorter of remaining lease term or useful life
29. 29Impairment of Long-Lived Assets
30. 30Research and Development Revenue
31. 31The Company generates research and development revenue, primarily from the contracts with BARDA and MTEC. Each contract for BARDA and MTEC has a single performance obligation
32. 32Research and Development Expense
33. 33Net Loss per Share of Common Stock
34. 34Comprehensive Income (Loss)
35. 35Recently Adopted Accounting Standards
36. 36Recently Issued Accounting Standards
37. 37As discussed in Note 1, on September 11, 2023, the Company consummated the Business Combination, with Legacy Spectral surviving the merger as a wholly-owned subsidiary of the Company
38. 38Upon the Closing, the Company issued 33,333 shares of Company Common Stock, with a fair value of $0.2 million, to settle an assumed liability to the Sponsor as a payment for an administrative fee
39. 394. FAIR VALUE MEASUREMENTS
40. 40There were no transfers between Level 1, 2 or 3 during the years ended December 31, 2024 and 2023
41. 41Balance - December 31, 2024 $ 41
42. 42Valuation of short-term notes payable – Yorkville
43. 43Balance as of December 31, 2024 2,365
44. 44Valuation of forward options in B. Riley ELOC and Yorkville SEPA
45. 455. RESEARCH AND DEVELOPMENT REVENUE
46. 46Total revenue $ 29,581 $ 18,056
47. 47Yorkville Convertible Notes
48. 48During 2023, the Company entered into a lease for office space in the United Kingdom for annual payments of $0.1 million under a lease that expired in March 2024. The lease was renewed in March 2024, however the Company has excluded this lease from the tables below as the term is twelve months
49. 49Weighted average discount rate 8.5 % 8.5 %
50. 50Variable lease cost is primarily attributable to amounts paid to lessors for utility charges, parking, and property taxes under an office space lease
51. 5111. STOCK-BASED COMPENSATION
52. 522018 Long Term Incentive Plan
53. 532022 Long Term Incentive Plan
54. 542023 Long Term Incentive Plan
55. 55Nonvested as of December 31, 2024 169,401 $ 1.73
56. 56Options vested and exercisable as of December 31, 2024 2,941,842 $ 1.87 5.5 3,285
57. 57The Company recorded stock-based compensation expense for stock options, RSUs, and restricted stock awards of $1.03 million for the year ended December 31, 2024 and $1.2 million for the year ended December 31, 2023 in general and administrative expenses in the consolidated statements of operations
58. 58Components of Income Tax Expense/(Benefit)
59. 59Total provision for income taxes $ 271 $ 10
60. 60Total deferred income tax assets 6,661 4,512
61. 61Valuation Allowance Considerations
62. 62Section 174 Capitalization
63. 63Basic and diluted net loss per common share attributable to common stockholders are the same for the years ended December 31, 2024 and 2023, since the inclusion of all potential shares of common stock outstanding would have been anti-dilutive due to the Company’s net loss
64. 6414. RELATED PARTY TRANSACTIONS
65. 65Exhibit Number Description
66. 663.2** Amended and Restated Bylaws of Spectral AI, Inc. (incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the SEC on September 15, 2023)
67. 674.3** Amended and Restated Registration Rights & Lock-up Agreement (incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the SEC on September 15, 2023)
68. 6810.1** Form of Indemnification Agreement (incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the SEC on September 15, 2023)
69. 6910.8** Sponsor Letter Agreement, dated April 11, 2023, by and among Rosecliff Acquisition I Sponsor LLC, Spectral MD Holdings, Ltd., and Rosecliff Acquisition Corp I (incorporated by reference to Annex F of the Registration Statement on Form S-4 (File No. 333-271566))
70. 70104 Cover Page Interactive Data File