Spectral AI announces 2023 Q4 and full year financial results

Spectral AI, Inc. announced financial results for the fourth quarter (“Q4 2023”) and full year (“FY 2023”) ended December 31, 2023 and provided an update on its ongoing business activities.

“Spectral AI achieved much in 2023, and our progress along multiple fronts has continued into 2024,” said Peter M. Carlson, Chief Executive Officer. “The team’s achievements to date, and those on the horizon, are the result of a 10-year record of success in delivering on a promise to develop and commercialize our proprietary AI-Driven DeepView™ System wound healing assessment platform, a technology that we believe can help change the standard of care while delivering value across the healthcare ecosystem. We expect to realize our first commercial product revenue in the second half of this year. Given the pace of our product development and clinical activities in the US and internationally, we believe that we are on the proper path to generate commercial revenue across four separate DeepView™ System platforms covering burn and diabetic foot ulcer (DFU) within the next three years.

“We have a well-defined business focus for 2024 based on the evolution of our DeepView™ System from clinical stage to commercialization. We will continue to advance our research and development work under current US Government contracts for our DeepView™ System burn indication and plan to submit regulatory filings for the approval of this indication in the US in the first half of 2025. We are pursuing the commercialization of our DeepView™ System for the assessment of DFU in the US and the UK, and expect to submit regulatory filings for the approval of this indication in the US and UK in 2024. Our recent financing agreements in combination with the multi-year, non-dilutive funding provided by our US Government contracts provides us with a sound financial foundation to pursue these objectives. “

2023-2024 Select business highlights
Government funding

• In September 2023, we were awarded the largest contract in our history from the US Government valued at up to $150.0 million. This multi-year, non-dilutive contract includes an initial award of approximately $54.9 million to fund development activities through Q1 2026 for our DeepView™ System for burn to submit a De Novo FDA application, and for government procurement of the device for distribution at various burn centers and emergency rooms across the United States.

First commercial product revenue

• In February 2024, we received UKCA Authorization to commence sales of our DeepView™ System for burn in the UK. We deployed our first burn device in March 2024 and expect to commence generating commercial revenues in the second half of 2024.

Regulatory

• In October 2023, our DeepView SnapShot^® wound imaging system received regulatory authorization in the UK and Class 1 medical device classification with the U.S. Food and Drug Administration (FDA).

Clinical trials

• In January 2023, we provided interim results for our DFU Clinical Study, which will be used in upcoming regulatory submissions in the UK and US.
• In December 2023, we initiated a pivotal study to validate our DeepView™ System for burn, which is expected to be the final clinical trial before seeking FDA approval. This study is being conducted in burn centers and emergency departments with an enrollment target of 240 subjects in both adult and pediatric patients.

Product development

• In March 2024, we received a new contract valued at $500,000 from the US Government that provides additional support for the development of the handheld version of our DeepView™ System called DeepView SnapShot^® M. This new award brings total support for the DeepView SnapShot^® M to more than $6 million.
• In August 2023, we received ISO 13485 certification for the manufacture and distribution of our DeepView™ System.

Corporate

• Successfully listed on Nasdaq in September 2023, elevating our profile among US investors and other stakeholders.
• Added significant strength and industry depth to our board of directors with the appointments of Deepak Sadagopan, MHCDS, Erich Spangenberg, Dr. J. Michael DiMaio, and to our management team with the additions of Peter M. Carlson and Prof. Paul Chadwick.
• Enhanced our access to capital by completing an equity financing and entering into a fixed price standby equity purchase agreement with a long-only investor that includes a $12.5 million prepaid advance.

2023 financial results overview
All comparisons to Q4 2023 and FY 2023 are to the comparable periods ended December 31, 2022, unless otherwise stated.

Research & development revenue
Research & Development Revenue for Q4 2023 was $5.3 million compared to $6.1 million, primarily due to the implementation of the new BARDA PBS contract, executed in September 2023.

For FY 2023, Research & Development revenue was $18.1 million compared to $25.4 million, reflecting a decrease in activity due to the completion of work under the BARDA Burn II contract, partially offset by the commencement of work under the new BARDA PBS contract.

Gross margin
Gross margin for Q4 2023 was 46.1% compared to 41.1%.

For FY 2023, gross margin rose to 43.6% from 42.7%. The improvement in gross margin for both periods reflected the commencement of work under the BARDA PBS contract, which carries a higher reimbursement rate than the prior BARDA Burn II contract.

General & administrative expense
General & administrative expenses in Q4 2023 were $5.4 million compared to $4.3 million.

For FY 2023, general & administrative expenses rose to $20.9 million from $13.5 million. The increase for both periods was the result of increased headcount required to support our organizational growth, and higher costs associated with an increase in non-revenue generating R&D activities.

Net loss
Net loss for Q4 2023 was $(3.5) million, or $(0.22) per share, compared to a net loss of $(1.7) million, or $(0.13) per share, for Q4 2022.

For FY 2023, the net loss was $(20.9) million, or $(1.48) per share, compared to a net loss of $(2.9) million, or $(0.22) per share, for FY 2022.

Net loss for the 2023 period included $8.3 million of non-recurring transaction costs associated with the consummation of the Company’s business combination that resulted in its Nasdaq listing; there were no such costs incurred in 2022.

Cash
As of December 31, 2023, cash was $4.8 million and the Company had no long-term debt.

During the first quarter of 2024, the Company enhanced its financial position, as follows:

• Received proceeds of $5.0 million via a fixed price prepaid advance and standby equity purchase agreement (SEPA) with a long-only investor with a fixed conversion price of $3.16 as part of a total advance of $12.5 million. The SEPA facility provides for financing of up to $30.0 million in total.

• Received proceeds of approximately $2.8 million via a committed equity facility that was entered into in December 2023 under which the Company is able to draw an additional $3.0 million prior to utilizing the SEPA facility.

2024 guidance
The Company is reiterating its revenue guidance of approximately $28.0 million for FY 2024. Financial guidance for FY 2024 does not reflect expected contributions from the sale of the DeepView™ System for burn in the UK beginning in the second half of 2024 or any additional material financial contributions that may result from the commercialization of our DeepView™ System.
MB Bureau