Spectral AI Announces 2024 Second Quarter Financial Results

Rhea-AI Summary

Spectral AI (NASDAQ: MDAI) reported Q2 2024 financial results, highlighting $7.5 million in Research & Development Revenue, a 76% increase from Q2 2023. The company's U.S. Burn Pivotal Study has exceeded 85% enrollment, paving the way for FDA submission in early 2025. Spectral AI maintains a cash position of $6.9 million and is on track to generate its first commercial revenues in the U.K. later this year.

Key developments include:
- Progress in handheld burn wound diagnostic technology
- Collaboration with PolyNovo for Australian market entry
- Addition to Russell Microcap® Index
- Deployment of five DeepView Burn devices in the U.K.

The company reiterates its FY 2024 revenue guidance of approximately $28.0 million.

Positive

• Research & Development Revenue increased 76% to $7.5 million in Q2 2024
• U.S. Burn Pivotal Study enrollment exceeds 85%, nearing completion
• Cash position improved to $6.9 million from $4.8 million at end of 2023
• Gross margin improved to 44.3% from 42.1% in Q2 2023
• Operating loss narrowed to $(2.4) million from $(3.0) million
• Net loss per share decreased to $(0.16) from $(0.23) in Q2 2023
• Added to Russell Microcap® Index effective July 1, 2024
• Patent portfolio increased by 30% to 26 granted patents

Negative

• General & administrative expenses increased to $5.8 million from $4.8 million in Q2 2023
• Net loss of $(2.9) million in Q2 2024, although improved from $(3.1) million in Q2 2023

Financial Analyst

Spectral AI's Q2 2024 results show promising growth, with R&D revenue up 76% to $7.5 million. The improved gross margin of 44.3% and narrowed operating loss to $(2.4) million indicate better cost management. However, the company still faces challenges with a net loss of $(2.9) million.

The cash position of $6.9 million is a concern, considering the ongoing R&D and clinical trial expenses. The reiterated revenue guidance of $28.0 million for FY 2024 suggests confidence in continued growth, but investors should monitor cash burn closely.

The imminent completion of the U.S. Burn Pivotal Study and potential FDA submission in early 2025 are critical milestones that could significantly impact the company's future prospects and valuation.

Medical Research Analyst

The 85% enrollment completion in the U.S. Burn Pivotal Study is a significant milestone for Spectral AI. This large-scale burn study will be important for validating the DeepView AI-Burn algorithm and obtaining FDA approval. The planned De Novo classification request in Q2 2025 could potentially fast-track the regulatory process.

The development of the DeepView SnapShot® M for battlefield burn assessment demonstrates the versatility of the DeepView™ System platform. This expansion into military applications could open up new revenue streams and partnerships.

The collaboration with PolyNovo and entry into the Australian market through the Special Access Scheme shows promising international expansion potential for the DeepView Burn system.

Tech Expert

Spectral AI's focus on AI-driven medical diagnostics positions it well in the growing field of AI healthcare. The 30% increase in granted patents to 26, along with 38 pending applications, strengthens their intellectual property portfolio and potential competitive advantage.

The development of both cart-based and handheld diagnostic tools demonstrates adaptability to different healthcare settings. The DeepView SnapShot® M, in particular, could be a game-changer for rapid triage in military scenarios.

The deployment of five DeepView Burn devices in the U.K. is a important step for real-world data collection, which could further enhance their AI algorithm. This iterative improvement process is essential for maintaining a leading edge in AI-driven diagnostics.

Second Quarter Revenue Totals $7.5 Million

Total Enrollment Exceeds 85% for Burn Center Pivotal U.S. Clinical Trial

Q2 2024 Overview

• Research & Development Revenue of $7.5 Million
• Cash Position of $6.9 Million
• On Track to Generate First Commercial Revenues in the U.K. Later this Year
• Burn Pivotal Study Nearing Completion Paving the Way for U.S. FDA Submission in Early 2025
• Announced Collaboration with PolyNovo Ltd. Providing Introduction to Australian Market
• Continued Progress in Handheld Burn Wound Diagnostic Technology
• Added to Russell Microcap^® Index effective July 1, 2024
  

DALLAS, Aug. 12, 2024 (GLOBE NEWSWIRE) -- Spectral AI, Inc. (Nasdaq: MDAI) (“Spectral AI” or the “Company”), an artificial intelligence (AI) company focused on medical diagnostics for faster and more accurate treatment decisions in wound care, today announced financial results for the second quarter ended June 30, 2024 (“Q2 2024”) and provided an update on its ongoing business activities.

“This is one of the most exciting and consequential periods in our history, and I am proud to see the teams advancing our proprietary, AI-driven DeepView™ System for burn indication (“DeepView AI- Burn”) along multiple fronts, including clinical, developmental and commercial,” said Peter M. Carlson, CEO of Spectral AI. “The upcoming completion of enrollment at burn centers for our U.S. Burn Pivotal Study, continued development of both our cart-based device and the handheld diagnostic tool, and anticipation of our first commercial revenues in the U.K. later this year validate our vison and reinforce our strategic imperatives.”

CLINCIAL TRIAL UPDATES

• Patient enrollment for the 2024 U.S. Burn Pivotal Study continues to progress well at burn centers, where total enrollment now exceeds 85%. This pivotal study, which is designed to validate the AI-driven algorithm of DeepView AI-Burn, will be the final clinical trial before the Company seeks regulatory approval in 2025 and is one of the largest burn studies ever conducted in the United States.
• Building on this momentum, the Company will pursue a De Novo classification from the U.S. Food and Drug Administration (“FDA”) for DeepView AI-Burn for use in burn centers and expects to submit the request in the second quarter of 2025. A subsequent 510k application will be made for the use of DeepView AI-Burn in emergency departments after receiving approval for use in burn centers.
• The Company paused patient enrollment for the U.S. DFU Clinical Validation Study at 475 subjects, having achieved sufficient enrollment for development of a robust DFU data set. Management is assessing the insights of this study while focusing on the burn indication, where the opportunity for near-term market penetration is the greatest.
  

SELECT BUSINESS HIGHLIGHTS

Product Deployment and Market Development

• Deployed a total of five DeepView Burn devices at facilities across the U.K. in connection with the February 2024 receipt of UKCA Authorization. These deployments will increase familiarity of the device in advance of commercialization later this year and provide real-word data that enhances the AI-algorithm.
• Continued to make progress in the development of DeepView SnapShot® M, a handheld diagnostic tool targeted for use in battlefield burn assessment that is based on the DeepView™ System platform. DeepView SnapShot® M is designed to be an integral part of the triage process by providing a quick and accurate wound assessment so that those with more severe burn injuries can be prioritized for treatment and evacuation. A poster presentation highlighting DeepView SnapShot® M is scheduled for the 2024 Military Health System Research Symposium (MHSRS) being held August 26-29, 2024.
• Signed a Memorandum of Understanding with PolyNovo Limited to support the Company’s application to the Australian Special Access Scheme to allow for the deployment of two DeepView Burn systems at the Royal Adelaide Hospital and The Alfred Hospital in Melbourne.
  

Corporate

• Received the final $2.5 million principal advance under its existing standby equity purchase agreement.
• Added to the Russell Microcap^® Index effective July 1, 2024.
• Continued to strengthen and protect its proprietary DeepView™ System wound assessment platform via a 30% increase in the Company’s patent portfolio to 26 granted patents from 20. The Company also announced an additional 38 pending patent applications worldwide.
  

Q2 2024 FINANCIAL RESULTS OVERVIEW
All comparisons are to the second quarter ended June 30, 2023 (“Q2 2023”) unless otherwise stated.

Research & Development Revenue ¹
Research & Development Revenue for Q2 2024 rose 76% to $7.5 million from $4.3 million, primarily reflecting an increased level of activity under the Company’s Project BioShield (PBS) contract with BARDA for the advanced development of the DeepView™ System.

Gross Margin
Gross margin for Q2 2024 improved to 44.3% from 42.1%, due to a higher reimbursement rate under the BARDA PBS Contract as compared to the rate associated with the now completed BARDA Burn II contract.

General & Administrative Expense
General & administrative expenses in Q2 2024 rose to $5.8 million, or 77% of revenues, from $4.8 million, or 112% of revenues.

Operating Loss
Operating loss narrowed to $(2.4) million from $(3.0) million.

Net Loss
Net loss for Q2 2024 narrowed to $(2.9) million, or $(0.16) per share, as compared to a net loss of $(3.1) million, or $(0.23) per share.

Financial Condition
As of June 30, 2024, cash was $6.9 million as compared to $4.8 million at December 31, 2023. Cash at June 30, 2024 included $0.9 million in cash in the Company’s newly formed wholly-owned subsidiary Spectral IP, Inc.

2024 Guidance
The Company reiterates its revenue guidance of approximately $28.0 million for FY 2024. Financial guidance for FY 2024 does not reflect contributions from the sale of the DeepView™ System for burn in the U.K. that is expected to begin in Q4 2024 or any additional material financial contributions that may result from the commercialization of our DeepView™ System.

________________________
_{¹Research and Development Revenue consisted primarily of funding from the Biomedical Advanced Research and Development Authority (BARDA), part of the Administration for Strategic Preparedness and Response (ASPR) within the U.S. Department of Health and Human Services.}

CONFERENCE CALL

The Company will host a conference call today at 5:00 pm Eastern Time to discuss these results.

Investors interested in participating in the live call can dial:

• 833-630-1956 – U.S.
• 412-317-1837 – International

A simultaneous webcast of the call may be accessed online from the Events & Presentations section of the Investor Relations page of the Company’s website at https://investors.spectral-ai.com/news-events/events.

About Spectral AI
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 patients with burns and diabetic foot ulcers. The Company is working to revolutionize the management of wound care by “Seeing the Unknown^®” with its DeepView™ System.  The DeepView™ System is a predictive device that offers clinicians an objective and immediate assessment of a wound’s healing potential prior to treatment or other medical intervention. With algorithm-driven results and a goal to change the current standard of care, the DeepView™ System is expected to provide faster and more accurate treatment insight towards value care by improving patient outcomes and reducing healthcare costs. For more information about the DeepView™ System, visit www.spectral-ai.com. 

Forward Looking Statements 
Certain statements made in this release are “forward looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995, including statements regarding the Company’s strategy, plans, objectives, initiatives and financial outlook. When used in this press release, the words “estimates,” “projected,” “expects,” “anticipates,” “forecasts,” “plans,” “intends,” “believes,” “seeks,” “may,” “will,” “should,” “future,” “propose” and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements. 

These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside Company’s control, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. As such, readers are cautioned not to place undue reliance on any forward-looking statements. 

Investors should carefully consider the foregoing factors and the other risks and uncertainties described in the “Risk Factors” sections of the Company’s filings with the SEC, including the Registration Statement and the other documents filed by the Company. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. 

Investors: 
The Equity Group 
Devin Sullivan 
Managing Director 
dsullivan@equityny.com 

Conor Rodriguez 
Analyst 
crodriguez@equityny.com

Spectral AI, Inc. Unaudited Condensed Consolidated Balance Sheets (in thousands, except share and per share data)
		June 30,				December 31,
		2024				2023
Assets
Current assets:
Cash		$	6,877			$	4,790
Accounts receivable, net			2,295				2,346
Inventory			267				230
Deferred offering costs			-				283
Prepaid expenses			1,249				1,452
Other current assets			973				801
Total current assets			11,661				9,902
Non-current assets:
Property and equipment, net			7				12
Right-of-use assets			2,229				778
Total Assets		$	13,897			$	10,692
Commitments and contingencies (Note 8)
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable		$	2,403			$	2,683
Accrued expenses			2,733				4,300
Deferred revenue			1,315				2,311
Lease liabilities, short-term			224				853
Notes payable			-				436
Notes payable - at fair value			7,001				-
Notes payable - related party			1,000				-
Warrant liabilities			1,450				1,818
Total current liabilities			16,126				12,401
Lease liabilities, long-term			2,036				-
Total Liabilities			18,162				12,401
Stockholders’ Deficit
Preferred stock ($0.0001 par value); 1,000,000 shares authorized; no shares issued and outstanding as of June 30, 2024 and December 31, 2023			-				-
Common stock ($0.0001 par value); 80,000,000 shares authorized; 17,606,367 and 16,294,935 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively			2				2
Additional paid-in capital			34,580				31,065
Accumulated other comprehensive income			10				12
Accumulated deficit			(38,857	)			(32,788	)
Total Stockholders’ Deficit			(4,265	)			(1,709	)
Total Liabilities and Stockholders’ Deficit		$	13,897			$	10,692

The accompanying notes are an integral part of these condensed consolidated financial statements

Spectral AI, Inc. Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands, except share and per share data)
		Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Research and development revenue		$	7,478			$	4,251			$	13,804			$	9,329
Cost of revenue			(4,164	)			(2,460	)			(7,545	)			(5,357	)
Gross profit			3,314				1,791				6,259				3,972
Operating costs and expenses:
General and administrative			5,756				4,782				10,844				9,861
Total operating costs and expenses			5,756				4,782				10,844				9,861
Operating loss			(2,442	)			(2,991	)			(4,585	)			(5,889	)
Other income (expense):
Net interest (expense) income			(6	)			42				8				86
Borrowing related costs			(699	)			-				(975	)			-
Change in fair value of warrant liability			348				(81	)			368				(65	)
Change in fair value of notes payable			(167	)			-				(101	)				-
Foreign exchange transaction (loss) gain, net			(9	)			-				(25	)			13
Other income (expenses), including transactions costs			180				-				(668	)			(738	)
Total other expense, net			(353	)			(39	)			(1,393	)			(704	)
Loss before income taxes			(2,795	)			(3,030	)			(5,978	)			(6,593	)
Income tax provision			(69	)			(40	)			(91	)			(86	)
Net loss		$	(2,864	)		$	(3,070	)		$	(6,069	)		$	(6,679	)
Net loss per share of common stock
Basic and Diluted		$	(0.16	)		$	(0.23	)		$	(0.36	)		$	(0.51	)
Weighted average common shares outstanding
Basic and Diluted			17,598,357				13,210,320				17,079,328				13,200,515
Other comprehensive income (loss):
Foreign currency translation adjustments		$	-			$	2			$	(2	)		$	3
Total comprehensive loss		$	(2,864	)		$	(3,068	)		$	(6,071	)		$	(6,676	)

The accompanying notes are an integral part of these condensed consolidated financial statements

Spectral AI, Inc. Unaudited Condensed Consolidated Statements of Cash Flows (in thousands, except share and per share data)
		Six Months Ended June 30,
		2024				2023
Cash flows from operating activities:
Net loss		$	(6,069	)		$	(6,679	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense			5				5
Stock-based compensation			685				696
Amortization of right-of-use assets			320				350
Change in fair value of warrant liabilities			(368	)			65
Change in fair value of notes payable			101				-
Costs from issuance of common stock			372				-
Changes in operating assets and liabilities:
Accounts receivable			51				774
Inventory			(37	)			-
Unbilled revenue			-				527
Prepaid expenses			203				(11	)
Other assets			(172	)			(322	)
Accounts payable			(206	)			(752	)
Accrued expenses			(1,567	)			(405	)
Deferred revenue			(996	)			509
Lease liabilities			(364	)			(284	)
Net cash used in operating activities			(8,042	)			(5,527	)
Cash flows from financing activities:
Proceeds from issuance of common stock			2,667				-
Proceeds from notes payable			9,200				-
Proceeds from notes payable - related party			1,000				-
Payments of deferred offering costs			-				(306	)
Payments for notes payable			(2,736	)			(175	)
Stock option exercises			-				-
Net cash provided by (used in) financing activities			10,131				(481	)
Effect of exchange rate changes on cash			(2	)			-
Net increase (decrease) in cash			2,087				(6,008	)
Cash, beginning of period			4,790				14,174
Cash, end of period		$	6,877			$	8,166
Supplemental cash flow information:
Cash paid for interest		$	-			$	(3	)
Cash paid for taxes		$	-			$	-
Noncash operating and financing activities disclosure:
Recognition of Right-of-use assets and related lease liabilities upon lease amendment		$	1,771			$	483
Unpaid deferred offering costs		$	-			$	818
Broker receivable for stock option exercises		$	-			$	6

FAQ

What was Spectral AI's (MDAI) Research & Development Revenue for Q2 2024?

Spectral AI's Research & Development Revenue for Q2 2024 was $7.5 million, a 76% increase from $4.3 million in Q2 2023.

What is the enrollment status of Spectral AI's (MDAI) U.S. Burn Pivotal Study?

The enrollment for Spectral AI's U.S. Burn Pivotal Study has exceeded 85% as of Q2 2024.

When does Spectral AI (MDAI) expect to submit its DeepView AI-Burn for FDA approval?

Spectral AI expects to submit a De Novo classification request to the FDA for DeepView AI-Burn in the second quarter of 2025.

What is Spectral AI's (MDAI) revenue guidance for FY 2024?

Spectral AI reiterates its revenue guidance of approximately $28.0 million for FY 2024.

How many DeepView Burn devices has Spectral AI (MDAI) deployed in the UK?

Spectral AI has deployed a total of five DeepView Burn devices at facilities across the U.K. as of Q2 2024.