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What changed in Spectral AI, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Spectral AI, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+269 added−290 removedSource: 10-K (2026-03-25) vs 10-K (2025-03-31)

Top changes in Spectral AI, Inc.'s 2025 10-K

269 paragraphs added · 290 removed · 199 edited across 4 sections

Item 1. Business

Business — how the company describes what it does

134 edited+26 added−34 removed516 unchanged
Biggest changeThe Charter provides that unless we consent in writing to the selection of an alternative forum, the Court of Chancery (the “Chancery Court”) of the State of Delaware (or, in the event that the Chancery Court does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for: (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action, suit or proceeding asserting a claim of breach of a fiduciary duty owed by any current or former director, officer or other employee, agent or stockholder of the Company to the Company or to the Company’s stockholders, (iii) any action, suit or proceeding asserting a claim against the Company, its current or former directors, officers, or employees, agents or stockholders arising pursuant to any provision of the DGCL or our Charter or Bylaws, or (iv) any action, suit or proceeding asserting a claim against the Company, its current or former directors, officers, or employees, agents or stockholders governed by the internal affairs doctrine.
Biggest changeThe Charter provides that unless we consent in writing to the selection of an alternative forum, the Court of Chancery (the “Chancery Court”) of the State of Delaware (or, in the event that the Chancery Court does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for: (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action, suit or proceeding asserting a claim of breach of a fiduciary duty owed by any current or former director, officer or other employee, agent or stockholder of the Company to the Company or to the Company’s stockholders, (iii) any action, suit or proceeding asserting a claim against the Company, its current or former directors, officers, or employees, agents or stockholders arising pursuant to any provision of the DGCL or our Charter or Bylaws, or (iv) any action, suit or proceeding asserting a claim against the Company, its current or former directors, officers, or employees, agents or stockholders governed by the internal affairs doctrine. 48 The exclusive forum provision set forth above does not apply to, and does not preclude or contract the scope of, either (i) exclusive federal jurisdiction pursuant to Section 27 of the Exchange Act for claims seeking to enforce any liability or duty created by the Exchange Act or the rules and regulations thereunder, or any other claim for which the U.S. federal courts have exclusive jurisdiction, or (ii) concurrent jurisdiction under Section 22 of the Securities Act for federal and state courts over all claims seeking to enforce any liability or duty created by the Securities Act or the rules and regulations thereunder.
If we fail to validly execute invention assignment agreements with our employees and contractors involved in the development of intellectual property or are unable to protect the confidentiality of our trade secrets and other proprietary information, the value of our products our business and competitive position may be harmed.
If we fail to validly execute invention assignment agreements with our employees and contractors involved in the development of intellectual property or are unable to protect the confidentiality of our trade secrets and other proprietary information, the value of our products, the value of our business and competitive position may be harmed.
Despite the protections we do place on our intellectual property or other confidential and proprietary rights, monitoring unauthorized use and disclosure of our intellectual property is difficult, and we do not know whether the steps we have taken to protect our intellectual property or other proprietary rights will be adequate.
Despite the protections we place on our intellectual property or other confidential and proprietary rights, monitoring unauthorized use and disclosure of our intellectual property is difficult, and we do not know whether the steps we have taken to protect our intellectual property or other proprietary rights will be adequate.
Cybersecurity Risk Management and Strategy The Company manages cybersecurity risk as part of our overall enterprise risk management strategy, which is overseen by the Audit Committee and the Board. The Company employs robust cybersecurity and data privacy programs to assess, identify and manage material risks from cybersecurity threats.
Risk Management and Strategy The Company manages cybersecurity risk as part of our overall enterprise risk management strategy, which is overseen by the Audit Committee and the Board. The Company employs robust cybersecurity and data privacy programs to assess, identify and manage material risks from cybersecurity threats.
There are also criminal penalties, including imprisonment and criminal fines, for making or presenting a false or fictitious or fraudulent claim or statement to the federal government; ● criminal healthcare statutes that were added by the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and its implementing regulations, which impose criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement, in connection with the delivery of, or payment for healthcare benefits, items or services by a healthcare benefit program, which includes both government and privately funded benefits programs; similar to the U.S. federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate them in order to have committed a violation; ● the Eliminating Kickbacks in Recovery Act (“EKRA”), 18 U.S.C. § 220, makes it a federal crime for anyone, with respect to services covered by a health care benefit program, to knowingly and willfully solicit or receive any remuneration in return for referring a patient or patronage to a recovery home, clinical treatment facility, or laboratory; or to pay or offer any remuneration to induce a referral of an individual to a recovery home, clinical treatment facility, or laboratory; or in exchange for an individual using the services of that recovery home, clinical treatment facility, or laboratory.
There are also criminal penalties, including imprisonment and criminal fines, for making or presenting a false or fictitious or fraudulent claim or statement to the federal government; 20 ● criminal healthcare statutes that were added by the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and its implementing regulations, which impose criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement, in connection with the delivery of, or payment for healthcare benefits, items or services by a healthcare benefit program, which includes both government and privately funded benefits programs; similar to the U.S. federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate them in order to have committed a violation; ● the Eliminating Kickbacks in Recovery Act (“EKRA”), 18 U.S.C. § 220, makes it a federal crime for anyone, with respect to services covered by a health care benefit program, to knowingly and willfully solicit or receive any remuneration in return for referring a patient or patronage to a recovery home, clinical treatment facility, or laboratory; or to pay or offer any remuneration to induce a referral of an individual to a recovery home, clinical treatment facility, or laboratory; or in exchange for an individual using the services of that recovery home, clinical treatment facility, or laboratory.
For example: ● others may be able to make products that are similar to our products or utilize similar technology but that are not covered by the claims of our patents or that incorporate certain technology in our products that is in the public domain; ● we, or our future licensors or collaborators, might not have been the first to make the inventions covered by the applicable issued patent or pending patent application that we own now or may own or license in the future; ● we, or our future licensors or collaborators, might not have been the first to file patent applications covering certain of our or their inventions; ● we, or our future licensors or collaborators, may fail to meet our obligations to the U.S. government regarding any future patents and patent applications funded by U.S. government grants, leading to the loss or unenforceability of patent rights; ● others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; ● it is possible that our patents or patent applications omit individuals who should be listed as inventors or include individuals that should not be listed as inventors, which may cause these patents or patents issuing from these patent applications to be held invalid or unenforceable; 49 ● claims of our patents or patent applications, if and when issued, may not cover our products or technologies or competitive products or technologies; ● the inventors of our patents or patent applications may become involved with competitors, develop products or processes that design around our patents, or become hostile to us or the patents or patent applications on which they are named as inventors; ● our competitors or other third parties might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; ● we have engaged in scientific collaborations in the past and will continue to do so in the future and our collaborators may develop adjacent or competing products that are outside the scope of our patents; ● we may not develop additional proprietary technologies that are patentable; ● the patents of others may harm our business; or ● we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third-party may subsequently file a patent covering such intellectual property.
For example: ● others may be able to make products that are similar to our products or utilize similar technology but that are not covered by the claims of our patents or that incorporate certain technology in our products that is in the public domain; ● we, or our future licensors or collaborators, might not have been the first to make the inventions covered by the applicable issued patent or pending patent application that we own now or may own or license in the future; ● we, or our future licensors or collaborators, might not have been the first to file patent applications covering certain of our or their inventions; ● we, or our future licensors or collaborators, may fail to meet our obligations to the U.S. government regarding any future patents and patent applications funded by U.S. government grants, leading to the loss or unenforceability of patent rights; ● others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; ● it is possible that our patents or patent applications omit individuals who should be listed as inventors or include individuals that should not be listed as inventors, which may cause these patents or patents issuing from these patent applications to be held invalid or unenforceable; ● claims of our patents or patent applications, if and when issued, may not cover our products or technologies or competitive products or technologies; ● the inventors of our patents or patent applications may become involved with competitors, develop products or processes that design around our patents, or become hostile to us or the patents or patent applications on which they are named as inventors; ● our competitors or other third parties might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; 47 ● we have engaged in scientific collaborations in the past and will continue to do so in the future and our collaborators may develop adjacent or competing products that are outside the scope of our patents; ● we may not develop additional proprietary technologies that are patentable; ● the patents of others may harm our business; or ● we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third-party may subsequently file a patent covering such intellectual property.
Misconduct by these persons could include intentional, reckless and/or negligent conduct or unauthorized activity that violates: ● FDA requirements, including those laws requiring the reporting of true, complete and accurate information to the FDA authorities, such as reporting of UADEs during clinical investigations; ● GCP that relate to clinical investigations, including financial disclosure, informed consent and protection of human subjects, and requirements that relate to investigational device exemptions; ● manufacturing standards, such as FDA’s Quality System Regulation (“QSR”) requirements; ● federal and state healthcare fraud and abuse laws and regulations; or ● laws that require the true, complete and accurate reporting of financial information or data.
Misconduct by these persons could include intentional, reckless and/or negligent conduct or unauthorized activity that violates: ● FDA requirements, including those laws requiring the reporting of true, complete and accurate information to the FDA authorities, such as reporting of UADEs during clinical investigations; 24 ● GCP that relate to clinical investigations, including financial disclosure, informed consent and protection of human subjects, and requirements that relate to investigational device exemptions; ● manufacturing standards, such as FDA’s Quality System Regulation (“QSR”) requirements; ● federal and state healthcare fraud and abuse laws and regulations; or ● laws that require the true, complete and accurate reporting of financial information or data.
Our practices may not in all cases meet all of the criteria for safe harbor protection from anti-kickback liability; 21 ● the U.S. federal civil False Claims Act, which prohibits any person from, among other things, knowingly presenting, or causing to be presented false or fraudulent claims for payment of government funds; knowingly making, using or causing to be made or used, a false record or statement material to an obligation to pay money to the government or knowingly and improperly avoiding, decreasing or concealing an obligation to pay money to the U.S. federal government.
Our practices may not in all cases meet all of the criteria for safe harbor protection from anti-kickback liability; ● the U.S. federal civil False Claims Act, which prohibits any person from, among other things, knowingly presenting, or causing to be presented false or fraudulent claims for payment of government funds; knowingly making, using or causing to be made or used, a false record or statement material to an obligation to pay money to the government or knowingly and improperly avoiding, decreasing or concealing an obligation to pay money to the U.S. federal government.
If this were to occur, we could face significant material adverse consequences, including: ● a limited availability of market quotations for our securities; ● reduced liquidity for our securities; ● a determination that our Common Stock are a “penny stock” which will require brokers trading in our Common Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; 50 ● a limited amount of news and analyst coverage; and ● a decreased ability to issue additional securities or obtain additional financing in the future.
If this were to occur, we could face significant material adverse consequences, including: ● limited availability of market quotations for our securities; ● reduced liquidity for our securities; ● a determination that our Common Stock are a “penny stock” which will require brokers trading in our Common Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; ● a limited amount of news and analyst coverage; and ● a decreased ability to issue additional securities or obtain additional financing in the future.
The research, design, testing, manufacturing, labeling, selling, marketing and distribution of medical devices are subject to extensive regulation by country-specific regulatory authorities, which regulations differ from country to country. There is no guarantee that our DeepView System or any future products will receive the requisite market authorization, approval, or De Novo classification for clinical testing, manufacturing, or marketing.
The research, design, testing, manufacturing, labeling, selling, marketing and distribution of medical devices are subject to extensive regulation by country-specific regulatory authorities, which regulations differ from country to country. 13 There is no guarantee that our DeepView System or any future products will receive the requisite market authorization, approval, or De Novo classification for clinical testing, manufacturing, or marketing.
The completion of any clinical trials of our DeepView System, or other studies that we may be required to undertake in the future, could be delayed, suspended or terminated for several reasons, including: ● we may fail to or be unable to conduct the clinical trials in accordance with regulatory requirements; ● selection and onboarding of clinical sites or a Contract Research Organization (“CRO”) may take longer than anticipated; ● sites participating in a clinical trial may drop out of the trial, which may require us to engage new sites for an expansion of the number of sites that are permitted to be involved in the trial; 15 ● patients may not enroll in, remain in or complete, clinical trials at the rates we expect; ● adverse events or unexpected developments may occur that affect the patients’ safety; ● supply issues may prevent us from continuing to use our investigational devices in clinical evaluations; and ● clinical investigators may not perform our clinical trials on our anticipated schedule or consistent with the clinical trial protocol and good clinical practices.
The completion of any clinical trials of our DeepView System, or other studies that we may be required to undertake in the future, could be delayed, suspended or terminated for several reasons, including: ● we may fail to or be unable to conduct the clinical trials in accordance with regulatory requirements; ● selection and onboarding of clinical sites or a Contract Research Organization (“CRO”) may take longer than anticipated; ● sites participating in a clinical trial may drop out of the trial, which may require us to engage new sites for an expansion of the number of sites that are permitted to be involved in the trial; ● patients may not enroll in, remain in or complete, clinical trials at the rates we expect; 14 ● adverse events or unexpected developments may occur that affect the patients’ safety; ● supply issues may prevent us from continuing to use our investigational devices in clinical evaluations; and ● clinical investigators may not perform our clinical trials on our anticipated schedule or consistent with the clinical trial protocol and good clinical practices.
Even if we have valid and enforceable patents, these patents still may not provide protection against competing products or processes sufficient to achieve our business objectives. 40 Our success will also depend, in part, on preserving our trade secrets, maintaining the security of our data and know-how, and obtaining and maintaining other intellectual property rights.
Even if we have valid and enforceable patents, these patents still may not provide protection against competing products or processes sufficient to achieve our business objectives. Our success will also depend, in part, on preserving our trade secrets, maintaining the security of our data and know-how, and obtaining and maintaining other intellectual property rights.
If our software or technologies, individually or collectively, do not function reliably or fail to meet clinician or payor expectations of performance or outcomes, then clinicians may stop using our products and payors could attempt to cancel their contracts with us. 34 Proprietary software development is time-consuming, expensive and complex, and may involve unforeseen difficulties.
If our software or technologies, individually or collectively, do not function reliably or fail to meet clinician or payor expectations of performance or outcomes, then clinicians may stop using our products and payors could attempt to cancel their contracts with us. Proprietary software development is time-consuming, expensive and complex, and may involve unforeseen difficulties.
To manage third-party risk, we maintain a third-party risk management program,which is designed to assess the security controls of our third parties. The assessment methodology is based on risk and relies on the data, access, connectivity, and criticality of the services that the third-party offers. 56 We maintain relationships with legal counsel to inform our cybersecurity and data privacy programs.
To manage third-party risk, we maintain a third-party risk management program, which is designed to assess the security controls of our third parties. The assessment methodology is based on risk and relies on the data, access, connectivity, and criticality of the services that the third-party offers. We maintain relationships with legal counsel to inform our cybersecurity and data privacy programs.
However, as the BARDA contract is critical to our business at this time, non-extension or termination of the BARDA contract would have a material adverse impact on our business, prospects, results of operations and financial condition. 12 We receive funding from a contract by the DHA within the U.S.
However, as the BARDA contract is critical to our business at this time, non-extension or termination of the BARDA contract would have a material adverse impact on our business, prospects, results of operations and financial condition. We receive funding from a contract by the DHA within the U.S.
If any of these events were to occur, our business, results of operations and financial condition could be materially adversely affected. 26 We must comply with environmental and occupational safety laws. Our research and development programs as well as our manufacturing operations involve the controlled use of hazardous materials.
If any of these events were to occur, our business, results of operations and financial condition could be materially adversely affected. We must comply with environmental and occupational safety laws. Our research and development programs as well as our manufacturing operations involve the controlled use of hazardous materials.
The Company believes that it has sufficient cash and revenue from its BARDA contract to support its operations until it is able to obtain equity or debt investments on terms acceptable to the Company to meet its expected operating cash-flow needs for its burn, DFU and other indication research and development.
The Company believes that it has sufficient cash and revenue from its BARDA contract to support its operations until it is able to obtain equity or debt investments on terms acceptable to the Company to meet its expected operating cash-flow needs for its burn and other indication research and development.
The following discussion should be read in conjunction with our financial statements and the financial statements of the Company and notes to the financial statements included herein. Risks Related to Our Financial Condition and Capital Requirements We have incurred significant losses since inception and may not be able to achieve significant revenues or profitability.
The following discussion should be read in conjunction with our financial statements and the financial statements of the Company and notes to the financial statements included herein. 9 Risks Related to Our Financial Condition and Capital Requirements We have incurred significant losses since inception and may not be able to achieve significant revenues or profitability.
We may not be able to hire or retain the necessary personnel to implement our business strategy. Our failure to hire and retain such personnel could impair our ability to develop new products and manage our business effectively. Our growth plans may place a significant strain on our management and operational, financial and personnel resources.
We may not be able to hire or retain the necessary personnel to implement our business strategy. Our failure to hire and retain such personnel could impair our ability to develop new products and manage our business effectively. 32 Our growth plans may place a significant strain on our management and operational, financial and personnel resources.
Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. 48 Moreover, some of our patents and patent applications in the future may be jointly owned with third parties.
Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. Moreover, some of our patents and patent applications in the future may be jointly owned with third parties.
The Charter provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
The Company’s Charter provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
Any inability to manage growth could delay the execution of our business plans or disrupt our operations. 33 We are highly dependent on our senior management, directors and key personnel, and our business could be harmed if we are unable to attract and retain personnel necessary for our success.
Any inability to manage growth could delay the execution of our business plans or disrupt our operations. We are highly dependent on our senior management, directors and key personnel, and our business could be harmed if we are unable to attract and retain personnel necessary for our success.
We perform periodic tabletop exercises annually to test our incident response procedures, identify gaps and improvement opportunities and exercise team preparedness. We recognize that third parties that provide services to the Company can be subject to cybersecurity incidents that could impact the Company.
We perform periodic tabletop exercises annually to test our incident response procedures, identify gaps and improvement opportunities and exercise team preparedness. 53 We recognize that third parties that provide services to the Company can be subject to cybersecurity incidents that could impact the Company.
In the event of such extensions, delays, suspensions or terminations, we may not be able to obtain market authorization, De Novo classification, certification or other required regulatory authorizations or certifications for, or successfully commercialize, our DeepView System on a timely basis, if at all, and our business, financial condition and results of operations may be adversely affected. 16 New legislation and regulations and legislative and regulatory reforms may make it more difficult and costly for us to obtain regulatory clearance, approval, De Novo classification, or certification of our DeepView System, or to manufacture, market and distribute our device after clearance, approval, or classification is obtained.
In the event of such extensions, delays, suspensions or terminations, we may not be able to obtain market authorization, De Novo classification, certification or other required regulatory authorizations or certifications for, or successfully commercialize, our DeepView System on a timely basis, if at all, and our business, financial condition and results of operations may be adversely affected. 15 New legislation and regulations and legislative and regulatory reforms may make it more difficult and costly for us to obtain regulatory clearance, approval, De Novo classification, or certification of our DeepView System, or to manufacture, market and distribute our device after clearance, approval, or classification is obtained.
If we fail to comply with our reporting obligations, the FDA or comparable regulatory authorities could act, including warning letters, untitled letters, administrative actions, criminal prosecution, imposition of civil monetary penalties, delay or termination of clinical investigations, revocation of our marketing authorizations, seizure of our products or delay in obtaining marketing authorizations or certifications for our product candidates. 19 The FDA and in certain cases, equivalent foreign regulatory bodies, have the authority to require the recall of products in the event of material deficiencies or defects in design or manufacture of a product or in the event that a product poses an unacceptable risk to health.
If we fail to comply with our reporting obligations, the FDA or comparable regulatory authorities could act, including warning letters, untitled letters, administrative actions, criminal prosecution, imposition of civil monetary penalties, delay or termination of clinical investigations, revocation of our marketing authorizations, seizure of our products or delay in obtaining marketing authorizations or certifications for our product candidates. 18 The FDA and in certain cases, equivalent foreign regulatory bodies, have the authority to require the recall of products in the event of material deficiencies or defects in design or manufacture of a product or in the event that a product poses an unacceptable risk to health.
Bribery Act of 2010 and comparable laws and regulations in other countries. 38 Any of these factors could significantly harm our future international expansion and operations and, consequently, have a material adverse effect on our business, financial condition and results of operations.
Bribery Act of 2010 and comparable laws and regulations in other countries. Any of these factors could significantly harm our future international expansion and operations and, consequently, have a material adverse effect on our business, financial condition and results of operations.
Sales of substantial numbers of such shares in the public market or the fact that such warrants may be exercised could adversely affect the market price of the Common Stock. Item 1.B. Unresolved Staff Comments. None. Item 1.C.
Sales of substantial numbers of such shares in the public market or the fact that such warrants may be exercised could adversely affect the market price of the Common Stock. Item 1.B. Unresolved Staff Comments. None. Item 1.C. Cybersecurity.
Our failure to receive the necessary approvals and clearances and to successfully commercialize our DeepView System would have a material adverse effect on our business, prospects, results of operations and financial condition. 11 Further, our business plan and pipeline depend on, and, as further described below, funding under many of our existing contracts depend on, and future contracts may also depend on, our ability to meet certain milestones or achieve certain timelines with our applications and indications.
Our failure to receive the necessary approvals and clearances and to successfully commercialize our DeepView System would have a material adverse effect on our business, prospects, results of operations and financial condition. 10 Further, our business plan and pipeline depend on, and, as further described below, funding under many of our existing contracts depend on, and future contracts may also depend on, our ability to meet certain milestones or achieve certain timelines with our applications and indications.
The FDA has also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed. 20 In addition, clinicians may misuse our products or use improper techniques if they are not adequately trained, potentially leading to misdiagnosis, injury, and an increased risk of product liability.
The FDA has also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed. 19 In addition, clinicians may misuse our products or use improper techniques if they are not adequately trained, potentially leading to misdiagnosis, injury, and an increased risk of product liability.
In addition, government funding of other government agencies that oversee clearances and approvals and that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. 17 Disruptions at these agencies and bodies may slow the time necessary for new devices to be reviewed and/or cleared, approved or certified, which would adversely affect our business.
In addition, government funding of other government agencies that oversee clearances and approvals and that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. 16 Disruptions at these agencies and bodies may slow the time necessary for new devices to be reviewed and/or cleared, approved or certified, which would adversely affect our business.
Consequently, we may be unable to prevent our proprietary technology from being exploited abroad, which could affect our ability to expand to international markets or require costly efforts to protect our technology. 46 To the extent our intellectual property or other proprietary information protection is incomplete, we are exposed to a greater risk of direct competition.
Consequently, we may be unable to prevent our proprietary technology from being exploited abroad, which could affect our ability to expand to international markets or require costly efforts to protect our technology. 44 To the extent our intellectual property or other proprietary information protection is incomplete, we are exposed to a greater risk of direct competition.
As of December 31, 2024, and through the date of this filing, we are not aware of any material cybersecurity incidents that have impacted the Company. We face risks of incidents, whether through cyber attacks or cyber intrusions through the Cloud, the Internet, phishing attempts, ransomware and other forms of malware, computer viruses, email attachments, extortion, and other scams.
As of December 31, 2025, and through the date of this filing, we are not aware of any material cybersecurity incidents that have impacted the Company. We face risks of incidents, whether through cyber-attacks or cyber intrusions through the Cloud, the Internet, phishing attempts, ransomware and other forms of malware, computer viruses, email attachments, extortion, and other scams.
Factors affecting the trading price of the Company’s securities may include: ● actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; ● changes in the market’s expectations about the Company’s operating results; ● success of competitors; ● the public’s reaction to our press releases, other public announcements and filings with the SEC, ● operating results failing to meet the expectations of securities analysts or investors in a particular period; ● changes in financial estimates and recommendations by securities analysts concerning the Company or the industry in which the Company operates in general; ● operating and stock price performance of other companies that investors deem comparable to the Company; ● ability to market new and enhanced products and services on a timely basis; ● changes in laws and regulations affecting our business; ● commencement of, or involvement in, litigation involving the Company; ● changes in the Company’s capital structure, such as future issuances of securities or the incurrence of additional debt; ● the volume of shares of the Company’s common stock available for public sale; ● any major change in the Company’s board or management; ● sales of substantial amounts of the Company’s common stock by our directors, executive officers or significant stockholders or the perception that such sales could occur; and ● general economic and political conditions such as recessions, changes in interest rates, changes in fuel prices, international currency fluctuations and acts of war or terrorism. 52 Broad market and industry factors may materially harm the market price of our securities irrespective of our operating performance.
Factors affecting the trading price of the Company’s securities may include: ● actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; ● changes in the market’s expectations about the Company’s operating results; ● success of competitors; ● the public’s reaction to our press releases, other public announcements and filings with the SEC, ● operating results failing to meet the expectations of securities analysts or investors in a particular period; ● changes in financial estimates and recommendations by securities analysts concerning the Company or the industry in which the Company operates in general; 49 ● operating and stock price performance of other companies that investors deem comparable to the Company; ● ability to market new and enhanced products and services on a timely basis; ● changes in laws and regulations affecting our business; ● commencement of, or involvement in, litigation involving the Company; ● changes in the Company’s capital structure, such as future issuances of securities or the incurrence of additional debt; ● the volume of shares of the Company’s Common Stock available for public sale; ● any major change in the Company’s board or management; ● sales of substantial amounts of the Company’s Common Stock by our directors, executive officers or significant stockholders or the perception that such sales could occur; and ● general economic and political conditions such as recessions, changes in interest rates, changes in fuel prices, international currency fluctuations and acts of war or terrorism.
Department of Defense, which enables us to research and develop a fully portable, handheld version of our DeepView System and has been extended through the second quarter of 2025. We were previously awarded a $1.1 million, Sequential Phase II STTR contract by the DHA within the U.S.
Department of Defense, which enables us to research and develop a fully portable, handheld version of our DeepView System and has been extended through the second quarter of 2026. We were previously awarded a $1.1 million, Sequential Phase II STTR contract by the DHA within the U.S.
We also have a duty to disclose to the USPTO any prior art known to us that may be material to the patentability of our patents. If we failed to submit any such material prior art, a court or administrative agency may deem one or more of our patents unenforceable. Additionally, certain of our patent applications relate to software inventions.
We also have a duty to disclose to the USPTO any prior art known to us that may be material to the patentability of our patents. If we fail to submit any such material prior art, a court or administrative agency may deem one or more of our patents unenforceable. Additionally, certain of our patent applications relate to software inventions.
Our future funding requirements will depend on many factors, including: ● the cost of our research and development activities; ● the scope, rate of progress and cost of our clinical studies; 13 ● the cost and timing of additional regulatory clearances, approvals, De Novo classifications, or certifications; ● the degree and rate of market acceptance of our DeepView System, assuming we receive the necessary regulatory clearances, approvals, De Novo classifications, or certifications (each of which cannot be guaranteed and may take longer than planned); ● the scope and timing of investment in our sales force and expansion of our commercial organization; ● the costs associated with manufacturing our DeepView System at increased production levels; ● the terms and timing of any collaborative, licensing and other arrangements that we may establish; ● the costs associated with any product recall that may occur; ● the costs of attaining, defending and enforcing our intellectual property rights; ● the emergence of competing new products or technologies or other adverse market developments; and ● the impact on our business from the global COVID-19 pandemic or any other pandemic, epidemic or outbreak of an infectious disease.
Our future funding requirements will depend on many factors, including: ● the cost of our research and development activities; ● the scope, rate of progress and cost of our clinical studies; 12 ● the cost and timing of additional regulatory clearances, approvals, De Novo classifications, or certifications; ● the degree and rate of market acceptance of our DeepView System, assuming we receive the necessary regulatory clearances, approvals, De Novo classifications, or certifications (each of which cannot be guaranteed and may take longer than planned); ● the scope and timing of investment in our sales force and expansion of our commercial organization; ● the costs associated with manufacturing our DeepView System at increased production levels; ● the terms and timing of any collaborative, licensing and other arrangements that we may establish; ● the costs associated with any product recall that may occur; ● the costs of attaining, defending and enforcing our intellectual property rights; ● the emergence of competing new products or technologies or other adverse market developments; and ● the impact on our business from any pandemic, epidemic or outbreak of an infectious disease.
Finally, our ability to protect and enforce our intellectual property rights may be adversely affected by unforeseen changes in foreign intellectual property laws. 47 If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.
Finally, our ability to protect and enforce our intellectual property rights may be adversely affected by unforeseen changes in foreign intellectual property laws. 45 If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.
We will continue to primarily focus on protecting our intellectual property in the United States, UK and the EU as those represent the first significant commercial markets for our products. We cannot assure you that our intellectual property position will not be challenged or that all patents for which we have applied will be granted.
We will continue to primarily focus on protecting our intellectual property in the United States, UK and the EU as those are the first commercial markets for our products. We cannot assure you that our intellectual property position will not be challenged or that all patents for which we have applied will be granted.
In addition, any testing by the Company conducted in connection with Section 404 of the Sarbanes-Oxley Act (“Section 404”) or any subsequent testing by the Company’s independent registered public accounting firm, may reveal deficiencies in the Company’s internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to the Company’s financial statements or identify other areas for further attention or improvement.
In addition, any testing by the Company conducted in connection with Section 404 (“Section 404”) of the Sarbanes-Oxley Act of 2002, as amended (“SOX”) or any subsequent testing by the Company’s independent registered public accounting firm, may reveal deficiencies in the Company’s internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to the Company’s financial statements or identify other areas for further attention or improvement.
Outstanding warrants to purchase an aggregate of 8,433,333 shares of Common Stock will become exercisable in accordance with the terms of the Warrant Agreement governing those securities. Each warrant originally entitled the registered holder to purchase one share of Common Stock at a price of $11.50 per full share.
Outstanding warrants to purchase an aggregate of 8,433,333 shares of Common Stock are exercisable in accordance with the terms of the Warrant Agreement governing those securities. Each warrant originally entitled the registered holder to purchase one share of Common Stock at a price of $11.50 per full share.
The ability of the FDA, foreign regulatory agencies and the notified body, to review and clear, approve, certify, or grant De Novo classifications for new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees and statutory, regulatory and policy changes.
The ability of the FDA, foreign regulatory agencies and the notified body, to review and clear, approve, certify, or grant De Novo classifications for new products can be affected by a variety of factors, including government budget, funding shortages, political climate and funding levels, government shutdowns, ability to hire and retain key personnel and accept the payment of user fees and statutory, regulatory and policy changes.
Beginning January 1, 2022, manufacturers will also be required to report payments and other transfers of value made during the prior calendar year to physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, and anesthesiology assistants; and 22 ● foreign and state laws and regulations, including state payment reporting, anti-kickback and false claims laws, that may apply to items or services reimbursed by any third-party payor, including private insurers; foreign and state laws that require medical device companies to comply with the medical device industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government and other national governments, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; and foreign and state laws and regulations that require drug and device manufacturers to report information related to payments and other transfers of value to dental practitioners and other healthcare providers or marketing expenditures, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
Beginning January 1, 2022, manufacturers will also be required to report payments and other transfers of value made during the prior calendar year to physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, and anesthesiology assistants; and ● foreign and state laws and regulations, including state payment reporting, anti-kickback and false claims laws, that may apply to items or services reimbursed by any third-party payor, including private insurers; foreign and state laws that require medical device companies to comply with the medical device industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government and other national governments, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; and foreign and state laws and regulations that require drug and device manufacturers to report information related to payments and other transfers of value to dental practitioners and other healthcare providers or marketing expenditures, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. 21 The scope and enforcement of these laws is substantial and subject to rapid change.
Under the terms of this agreement, MTEC will pay us a firm fixed fee based upon our achievement of certain milestones (such as development of the image technology in the handheld device, validation of the design and development of a handheld device from the current cart-based system, completion of verification testing builds, and development of commercialization plan) through April 5, 2025.
Under the terms of this agreement, MTEC will pay us a firm fixed fee based upon our achievement of certain milestones (such as development of the image technology in the handheld device, validation of the design and development of a handheld device from the current cart-based system, completion of verification testing builds, and development of commercialization plan).
Even if patents do successfully issue from our patent applications, third parties may challenge the validity, enforceability, or scope of such patents, which may result in such patents being narrowed, invalidated, or held unenforceable. Decisions by courts and governmental patent agencies may introduce uncertainty in the enforceability or scope of patents owned by or licensed to us.
Even if patents are successfully issued from our patent applications, third parties may challenge the validity, enforceability, or scope of such patents, which may result in such patents being narrowed, invalidated, or held unenforceable. Decisions by courts and governmental patent agencies may introduce uncertainty in the enforceability or scope of patents owned by or licensed to us.
Even if we can prove the effectiveness of our DeepView System through clinical trials, there may not be broad adoption and use of our device and clinicians may elect not to use our DeepView System for any number of reasons, including: ● lack of experience with our DeepView System and concerns that we are new to market; ● perceived liability risk generally associated with the use of our device; ● lack or perceived lack of (i) sufficient clinical evidence regarding our claims of superior diagnostic assessment and (ii) long-term data, supporting clinical benefits or the cost-effectiveness of our device over existing diagnostic alternatives; ● the failure of key opinion leaders to provide recommendations regarding our device, or to assure clinicians and healthcare payors of the benefits of our device as an attractive alternative to other diagnostic options; ● long-standing relationships with companies and distributors that sell other diagnostic products for wound care assessment; ● concerns over the capital investment required to purchase our DeepView System and perform the DeepView procedure; ● lack of availability of adequate third-party payor coverage or reimbursement; ● competitive response and negative selling efforts from providers of alternative technologies; ● failure to obtain favorable coverage decisions from payors, including, but not limited to, Medicare or Medicaid; and ● limitations or warnings contained in the labeling cleared or approved by the FDA, if approved, or approved or certified by other authorities or bodies. 27 We believe that educating notable industry key opinion leaders and clinicians about the merits and benefits of our DeepView System, including safety, performance, ease of use and efficiency will be critical for increasing the adoption of our device.
Even if we can prove the effectiveness of our DeepView System through clinical trials, there may not be broad adoption and use of our device and clinicians may elect not to use our DeepView System for any number of reasons, including: ● lack of experience with our DeepView System and concerns that we are new to the market; ● perceived liability risk generally associated with the use of our device; ● lack or perceived lack of (i) sufficient clinical evidence regarding our claims of superior diagnostic assessment and (ii) long-term data, supporting clinical benefits or the cost-effectiveness of our device over existing diagnostic alternatives; ● the failure of key opinion leaders to provide recommendations regarding our device, or to assure clinicians and healthcare payors of the benefits of our device as an attractive alternative to other diagnostic options; ● long-standing relationships with companies and distributors that sell other diagnostic products for wound care assessment; ● concerns over the capital investment required to purchase our DeepView System and perform the DeepView procedure; ● lack of availability of adequate third-party payor coverage or reimbursement; ● competitive response and negative selling efforts from providers of alternative technologies; ● failure to obtain favorable coverage decisions from payors, including, but not limited to, Medicare or Medicaid; and ● limitations or warnings contained in the labeling cleared or approved by the FDA, if approved, or approved or certified by other authorities or bodies.
As an emerging growth company, our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 until our annual report for any fiscal year following such date that we are no longer an emerging growth company.
As an emerging growth company or a non-accelerated filer, our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 until our annual report for any fiscal year following such date that we are no longer an emerging growth company.
We also expect to provide technical and other services beyond the warranty period pursuant to a supplemental service plan that we sell for our DeepView system.
We also expect to provide technical and other services beyond the warranty period pursuant to a supplemental service plan that we will sell with our DeepView System.
Though we have never undertaken this level of growth, our management team has instituted a long-term hiring plan with key dates that ensure the individual is hired and trained months before the strategy must be executed. Furthermore, our ability to implement our strategy requires effective planning and management control systems.
Though we have never undertaken this level of growth, our management, including our Human Resources Manager have instituted a long-term hiring plan with key dates that ensure the individual is hired and trained months before the strategy must be executed. Furthermore, our ability to implement our strategy requires effective planning and management control systems.
Therefore, our future growth and prospects will depend on our ability to manage this growth. We expect to significantly increase the size of our organization over the next several years. As a result, we may encounter difficulties in managing our growth, which could disrupt our operations and/or increase our net losses. As of March 25, 2025, we had 76 employees.
Therefore, our future growth and prospects will depend on our ability to manage this growth. We expect to significantly increase the size of our organization over the next several years. As a result, we may encounter difficulties in managing our growth, which could disrupt our operations and/or increase our net losses. As of December 31, 2025, we had 65 employees.
Based on our current operating plan, we believe that our cash and cash equivalents, together with the remaining funding available to us under the Purchase Agreement, the BARDA contract, the MTEC Agreement, and the Yorkville financing will be sufficient to meet our capital requirements and fund our operations through at least the next 12 months from the release date of the consolidated financial statements included in this annual report.
Based on our current operating plan, we believe that our cash and cash equivalents, together with the remaining funding available to us under the BARDA contract, the MTEC Agreement, the Avenue Financing, the Yorkville SEPA and other financings completed by the Company will be sufficient to meet our capital requirements and fund our operations through at least the next 12 months from the release date of the consolidated financial statements included in this annual report.
We had an accumulated deficit of approximately $48.1 million as of December 31, 2024. Our losses have resulted primarily from costs incurred in connection with our design, manufacturing and development activities, research and development activities, building our commercial infrastructure, legal, and general and administrative expenses associated with our operations.
We had an accumulated deficit of approximately $55.8 million as of December 31, 2025. Our losses have resulted primarily from costs incurred in connection with our design, manufacturing and development activities, research and development activities, building our commercial infrastructure, legal, and general and administrative expenses associated with our operations.
We believe we have the pre-eminent proprietary clinical wound database. The depth and quality of our proprietary data is critical to developing a leading wound assessment technology with demonstrated clinical need across burn and other indications with a positive impact on health economics and patient outcomes, while safeguarding patient data and privacy.
The depth and quality of our proprietary data is critical to developing a leading wound assessment technology with demonstrated clinical need across burn and other indications with a positive impact on health economics and patient outcomes, while safeguarding patient data and privacy.
In connection with the preparation of our consolidated financial statements for the year ended December 31, 2024, we identified a material weakness in our internal control over financial reporting related to deficiencies in our controls over the accounting for complex equity arrangements, financial statement close process and in the design and operation of internal controls involving accruals and unbilled revenue. 54 We have implemented, and are continuing to implement, measures designed to improve our internal control over financial reporting to remediate this material weakness.
In connection with the preparation of our consolidated financial statements for the year ended December 31, 2025, we identified material weaknesses in our internal control over financial reporting related to deficiencies in our controls over the accounting for complex equity arrangements, financial statement close process and in the design and operation of internal controls involving accruals and unbilled revenue. 51 We have implemented, and are continuing to implement, measures designed to improve our internal control over financial reporting to remediate these material weaknesses.
Furthermore, our third-party clinical trial investigators may be delayed in conducting our clinical trials for reasons outside of their control, including the COVID-19 pandemic, or another pandemic, epidemic or outbreak of an infectious disease.
Furthermore, our third-party clinical trial investigators may be delayed in conducting our clinical trials for reasons outside of their control, including any pandemic, epidemic or outbreak of an infectious disease.
In addition, third parties may assert infringement claims against our customers. These claims may require us to initiate or defend protracted and costly litigation on behalf of our customers or indemnify our customers for any costs associated with their own initiation or defense of infringement claims, regardless of the merits of these claims.
These claims may require us to initiate or defend protracted and costly litigation on behalf of our customers or indemnify our customers for any costs associated with their own initiation or defense of infringement claims, regardless of the merits of these claims.
If we are not able to complete our initial assessment of our internal controls and otherwise implement the requirements of Section 404 of SOX in a timely manner or with adequate compliance, our independent registered public accounting firm may not be able to certify as to the adequacy of our internal controls over financial reporting.
If we are not able to maintain the requirements of Section 404 of SOX in a timely manner or with adequate compliance, our independent registered public accounting firm may not be able to certify as to the adequacy of our internal controls over financial reporting.
Our competitors, many of which have substantially greater resources and have made substantial investments in patent portfolios, trade secrets, trademarks, and competing technologies, may have applied for or obtained, or may in the future apply for or obtain, patents or trademarks that will prevent, limit or otherwise interfere with our ability to make, use, sell, import, and/or export our products (or components thereof) or to use our technologies or our product names. 41 Third parties, including our competitors, may currently have patents or obtain patents in the future and claim that the manufacture, use or sale of our products infringes these patents.
Our competitors, many of which have substantially greater resources and have made substantial investments in patent portfolios, trade secrets, trademarks, and competing technologies, may have applied for or obtained, or may in the future apply for or obtain, patents or trademarks that will prevent, limit or otherwise interfere with our ability to make, use, sell, import, and/or export our products (or components thereof) or to use our technologies or our product names.
Product liability claims in excess of our insurance coverage would be paid out of cash reserves harming our financial condition and adversely affecting our results of operations. 36 To the extent that a claim or claims of a significant nature were made against us, we may be required to expend substantial management resources and litigation costs in defending such claim(s) and such claim(s), if successful, could reduce margins, harm our reputation in the market, and increase future insurance premiums, the occurrence of each of which could have an adverse impact on our business, prospects, results of operations and financial condition.
To the extent that a claim or claims of a significant nature were made against us, we may be required to expend substantial management resources and litigation costs in defending such claim(s) and such claim(s), if successful, could reduce margins, harm our reputation in the market, and increase future insurance premiums, the occurrence of each of which could have an adverse impact on our business, prospects, results of operations and financial condition.
If our third-party manufacturers do not respect our intellectual property and trade secrets and produce or sell competitive products using our designs or intellectual property, our business, financial condition, prospects and results of operation would be harmed.
Any of the foregoing could harm our business, financial condition and results of operations. 46 If our third-party manufacturers do not respect our intellectual property and trade secrets and produce or sell competitive products using our designs or intellectual property, our business, financial condition, prospects and results of operation would be harmed.
Alternatively, if a court were to find the choice of forum provision contained in the Charter to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations, and financial condition. 51 The failure of any bank in which we deposit our funds could have an adverse effect on our financial condition.
Alternatively, if a court were to find the choice of forum provision contained in the Charter to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations, and financial condition.
However, there are no assurances that we will achieve the contract milestones on a timely basis, or at all. Failure to receive the fee under the contract could have a material adverse impact on the Company’s business, prospects, results of operations and financial condition.
In December 2025, the MTEC contract was extended to run through June 2026. However, there are no assurances that we will achieve the contract milestones on a timely basis, or at all. Failure to receive the fee under the contract could have a material adverse impact on the Company’s business, prospects, results of operations and financial condition.
While our suppliers have generally met our demand for their products and services on a timely basis in the past, we cannot guarantee that they will in the future be able to meet our demand for such products and services, either because of acts of nature, the nature of our agreements with those suppliers or our relative importance to them as a customer, and our suppliers may decide in the future to discontinue or reduce the level of business they conduct with us.
While our suppliers have generally met our demand for their products and services on a timely basis in the past, we cannot guarantee that they will in the future be able to meet our demand for such products and services, either because of acts of nature, the nature of our agreements with those suppliers or our relative importance to them as a customer, and our suppliers may decide in the future to discontinue or reduce the level of business they conduct with us. 29 We have not been qualified or obtained necessary regulatory clearances for additional suppliers for most of these components, sub-assemblies and materials.
We have incurred substantial net losses since our inception. For the year ended December 31, 2024 and the year ended December 31, 2023, on a consolidated basis, we incurred a net loss of $15.3 million and $20.9 million, respectively, and on a consolidated basis our cash balance at December 31, 2024 was $5.2 million.
We have incurred substantial net losses since our inception. For the year ended December 31, 2025 and the year ended December 31, 2024, on a consolidated basis, we incurred a net loss of $7.5 million and $15.1 million, respectively, and on a consolidated basis our cash balance at December 31, 2025 was $15.4 million.
If we or our licensors are unsuccessful in any priority, validity (including any patent oppositions), ownership or inventorship disputes to which we or they are subject, we may lose valuable intellectual property rights through the loss of one or more of our patents, or such patent claims may be narrowed, invalidated, or held unenforceable, or through loss of exclusive ownership of or the exclusive right to use our owned or in-licensed patents.
Litigation may be necessary to defend against claims, and it may be necessary or we may desire to enter into a license to settle any such claim. 43 If we or our licensors are unsuccessful in any priority, validity (including any patent oppositions), ownership or inventorship disputes to which we or they are subject, we may lose valuable intellectual property rights through the loss of one or more of our patents, or such patent claims may be narrowed, invalidated, or held unenforceable, or through loss of exclusive ownership of or the exclusive right to use our owned or in-licensed patents.
Such theft could also lead to loss of intellectual property rights through our disclosure of our proprietary business information, and such loss may not be capable of remedying. We may also suffer reputational damage and loss of investor confidence.
Such theft could also lead to loss of intellectual property rights through our disclosure of our proprietary business information, and such loss may not be capable of remedying. We may also suffer reputational damage and loss of investor confidence. We could also be exposed to potential financial and reputational harm if we experience a cyber-attack.
We are exposed to the risk that our employees, collaborators, independent contractors and consultants may engage in fraudulent or other illegal activity with respect to our business.
Our employees, collaborators, independent contractors and consultants may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements. We are exposed to the risk that our employees, collaborators, independent contractors and consultants may engage in fraudulent or other illegal activity with respect to our business.
Our trademarks and pending trademark applications are spread over nine jurisdictions mostly in China, the UK and the EU. It is our intention to maintain these registrations indefinitely and to expand the number of jurisdictions in which we have registered trademarks as deemed necessary to protect our freedom to use the marks and/or block competitors in additional markets.
It is our intention to maintain these registrations indefinitely and to expand the number of jurisdictions in which we have registered trademarks as deemed necessary to protect our freedom to use the marks and/or block competitors in additional markets.
Any of the foregoing could result in a material adverse effect on our business, financial condition, prospects and results of operations. 45 We may be subject to claims that our employees, consultants, advisors, or contractors have misappropriated the intellectual property of a third party, including trade secrets or know-how, or are in breach of a non-competition or non-solicitation agreement with our competitors, and third parties may claim an ownership interest in intellectual property we regard as our own.
We may be subject to claims that our employees, consultants, advisors, or contractors have misappropriated the intellectual property of a third party, including trade secrets or know-how, or are in breach of a non-competition or non-solicitation agreement with our competitors, and third parties may claim an ownership interest in intellectual property we regard as our own.
In particular, Company is required to comply with certain SEC, Nasdaq and other legal or regulatory requirements. Compliance with, and monitoring of, applicable laws, regulations and rules may be difficult, time consuming and costly.
The Company is subject to laws, regulations and rules enacted by national, regional and local governments and the Nasdaq Stock Market. In particular, the Company is required to comply with certain SEC, Nasdaq and other legal or regulatory requirements. Compliance with, and monitoring of, applicable laws, regulations and rules may be difficult, time consuming and costly.
We have developed strategic partnerships with multiple clinical and academic partners in the United States and Europe. Through our strategic partnerships with multiple clinical and academic partners, we are able to access large, diverse and specific sets of wound data inputs to develop, validate and improve our DeepView algorithms efficiently and effectively.
Through our strategic partnerships with multiple clinical and academic partners, we are able to access large, diverse and specific sets of wound data inputs to develop, validate and improve our DeepView algorithms efficiently and effectively. We believe we have the pre-eminent proprietary clinical burn wound database.
Our technology is protected with issued and/or allowed patents across nine families of active patents: (i) Burn/Wound Classification on MSI and PPG; (ii) Tissue classification on MSI and PPG; (iii) Amputation site analysis on MSI, ML and healthcare matrix; (iv) DFU healing potential prediction and wound assessment on MSI, ML and healthcare matrix; (v) High-precision, multi-aperture, MSI snapshot imaging; (vi) Wound assessment based on MSI; (vii) Burn/histology assessment based on MSI and ML; (viii) High-precision, single-aperture MSI snapshot imaging; and (ix) Topological characterization and assessment of tissues using MSI and ML.
Any failure to obtain or maintain patent and other intellectual property protection with respect to our products could harm our business, financial condition and results of operations. 37 Our technology is protected with issued and/or allowed patents across nine families of active patents: (i) Burn/Wound Classification on MSI and PPG; (ii) Tissue classification on MSI and PPG; (iii) Amputation site analysis on MSI, ML and healthcare matrix; (iv) DFU healing potential prediction and wound assessment on MSI, ML and healthcare matrix; (v) High-precision, multi-aperture, MSI snapshot imaging; (vi) Wound assessment based on MSI; (vii) Burn/histology assessment based on MSI and ML; (viii) High-precision, single-aperture MSI snapshot imaging; and (ix) Topological characterization and assessment of tissues using MSI and ML.
Since patent applications in the United States and most other countries are confidential for a period of time after filing or until issuance, we cannot be certain that we were the first to file any patent application related to our products or invent any of the inventions claimed in our patents or patent applications. 44 The Leahy-Smith Act also includes a number of significant changes that affect the way patent applications will be prosecuted and also may affect patent litigation.
Since patent applications in the United States and most other countries are confidential for a period of time after filing or until issuance, we cannot be certain that we were the first to file any patent application related to our products or invent any of the inventions claimed in our patents or patent applications.
Any significant uninsured liability may require us to pay substantial amounts, which would negatively affect our business, financial condition and results of operations. The success of our algorithms depends on our significant repository of proprietary image data.
Any significant uninsured liability may require us to pay substantial amounts, which would negatively affect our business, financial condition and results of operations. The success of our algorithms depends on our significant repository of proprietary image data. Over 340 billion pixels of proprietary image data have been acquired and utilized for the deep learning algorithms training.
In addition, we may need the cooperation of any such joint owners in order to enforce such patents against third parties, and such cooperation may not be provided to us. Any of the foregoing could harm our business, financial condition and results of operations.
In addition, we may need the cooperation of any such joint owners in order to enforce such patents against third parties, and such cooperation may not be provided to us.
Although we enter into non-disclosure and confidentiality agreements with parties who have access to confidential or patentable aspects of our research and development output, such as our employees, corporate collaborators, outside scientific collaborators, suppliers, consultants, advisors and other third parties, any of these parties may breach such agreements and disclose such output before a patent application is filed, thereby jeopardizing our ability to seek and obtain patent protection. 39 We may choose not to seek patent protection for certain innovations and may choose not to pursue patent protection in certain jurisdictions, and under the laws of certain jurisdictions, patents or other intellectual property rights may be unavailable or limited in scope.
Although we enter into non-disclosure and confidentiality agreements with parties who have access to confidential or patentable aspects of our research and development output, such as our employees, corporate collaborators, outside scientific collaborators, suppliers, consultants, advisors and other third parties, any of these parties may breach such agreements and disclose such output before a patent application is filed, thereby jeopardizing our ability to seek and obtain patent protection.
If our products do not perform, or are perceived to not have performed, as expected or favorably in comparison to competitive products, our operating results, reputation, and business will suffer, including due to the costs associated with replacing products and decreased demand for our product offering. 32 Any of the foregoing could have a material adverse effect on our business, financial condition, prospects and results of operations.
If our products do not perform, or are perceived to not have performed, as expected or favorably in comparison to competitive products, our operating results, reputation, and business will suffer, including due to the costs associated with replacing products and decreased demand for our product offering.
If we do not obtain necessary licenses, we may not be able to redesign our products to avoid infringement, and as such may need to stop selling the infringing products, which would have a significant adverse impact on our business, financial condition, prospects and results of operations. 42 Similarly, interference, derivation, cancellation, and opposition proceedings provoked by third parties or brought by the U.S.
If we do not obtain necessary licenses, we may not be able to redesign our products to avoid infringement, and as such may need to stop selling the infringing products, which would have a significant adverse impact on our business, financial condition, prospects and results of operations.
Our dependence on third parties subjects us to a number of risks that could impact our ability to manufacture our products and harm our business, including: ● interruption of supply resulting from modifications to, or discontinuation of, a third party’s operations; ● delays in product shipments resulting from uncorrected defects or errors, reliability issues or a third party’s failure to produce components that consistently meet our quality specifications; ● price fluctuations due to a lack of long-term supply arrangements with our third parties for key components; ● inability to obtain adequate supply or services in a timely manner or on commercially reasonable terms; ● difficulty identifying and qualifying alternative third parties for the supply of components of our products in a timely manner; ● inability of third parties to comply with applicable provisions of the FDA’s QSR or other applicable laws or regulations enforced by the FDA, state, local and global regulatory authorities; 31 ● inability to ensure the quality of products manufactured by third parties; ● shipping and manufacture delays and interruptions caused by the ongoing COVID-19 crisis that we are not able to address, prepare for, or prevent; ● production delays related to the evaluation and testing of products and services from alternative third parties and corresponding regulatory qualifications; ● trends towards consolidation within the medical device manufacturing supplier industry; and ● delays in delivery by our suppliers and service providers.
Our dependence on third parties subjects us to a number of risks that could impact our ability to manufacture our products and harm our business, including: ● interruption of supply resulting from modifications to, or discontinuation of, a third party’s operations; ● delays in product shipments resulting from uncorrected defects or errors, reliability issues or a third party’s failure to produce components that consistently meet our quality specifications; ● price fluctuations due to a lack of long-term supply arrangements with our third parties for key components; ● inability to obtain adequate supply or services in a timely manner or on commercially reasonable terms; ● difficulty identifying and qualifying alternative third parties for the supply of components of our products in a timely manner; ● inability of third parties to comply with applicable provisions of the FDA’s QSR or other applicable laws or regulations enforced by the FDA, state, local and global regulatory authorities; ● inability to ensure the quality of products manufactured by third parties; ● production delays related to the evaluation and testing of products and services from alternative third parties and corresponding regulatory qualifications; ● trends towards consolidation within the medical device manufacturing supplier industry; and ● delays in delivery by our suppliers and service providers. 30 In addition, quarantines, shelter-in-place and similar government orders resulting from any future pandemic, epidemic or other infectious disease outbreak, or the perception that such orders, shutdowns or other restrictions on the conduct of business operations could occur, could impact the suppliers upon which we rely, or the availability or cost of materials, which could disrupt the supply chain for our products.
As noted above, in November 2024, the Company reduced the exercise price from $11.50 per full share to $2.75 per full share. Pursuant to the Warrant Agreement, a holder of Warrants may exercise its Warrants only for a whole number of shares.
In November 2024, the Company reduced the exercise price from $11.50 per full share to $2.75 per full share. Pursuant to the Warrant Agreement, a holder of Warrants may exercise its Warrants only for a whole number of shares. This means that only a whole warrant may be exercised at any given time by a holder of Warrants.
If a regulatory agency determines that any of our marketing claims exceed the scope of permitted indications in a particular country, we may be subject to enforcement action and/or we may be required to cease making the challenged marketing claims, issue corrective communications, pay fines or stop selling products until the incorrect claims have been corrected.
If a regulatory agency determines that any of our marketing claims exceed the scope of permitted indications in a particular country, we may be subject to enforcement action and/or we may be required to cease making the challenged marketing claims, issue corrective communications, pay fines or stop selling products until the incorrect claims have been corrected. 17 Sales of our DeepView System outside the United States, if approved, will be subject to foreign regulatory requirements that vary widely from country to country, and such regulatory requirements have been changing and increasing in some countries.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeTo our knowledge, there is not any material legal proceeding threatened against any of our officers or directors in their corporate capacity. Item 4. Mine Safety Disclosures . None. 57 PART II.
Biggest changeTo our knowledge, there is not any material legal proceeding threatened against any of our officers or directors in their corporate capacity. Item 4. Mine Safety Disclosures . None. 54 PART II.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe options, restricted stock units and other securities issued pursuant to the 2018 Plan and 2022 Plan have been replaced with a corresponding award to be issued pursuant to the 2023 Plan.
Biggest changeThe options, restricted stock units and other securities issued pursuant to previous plans were replaced with a corresponding award to be issued pursuant to the 2023 Plan. The maximum aggregate number of shares that may be issued under the Plan shall not exceed 8,000,000.
Securities Authorized for Issuance Under Equity Compensation Plans In 2024, we awarded options and restricted stock units to key employees (including our named executive officers) for retention, engagement and bonus compensation awards.
Securities Authorized for Issuance Under Equity Compensation Plans In 2025, we awarded options and restricted stock units to key employees (including our named executive officers) for retention, engagement and bonus compensation awards.
The 2023 Plan provides that the Compensation Committee shall determine the vesting conditions of awards granted under the 2023 Plan, and the Compensation Committee has, from time-to-time, approved vesting schedules for certain awards that deviate from the vesting conditions described in the previous sentence.
The 2023 Plan provides that the Compensation Committee shall determine the vesting conditions of awards granted under the 2023 Plan, and the Compensation Committee has, from time-to-time, approved vesting schedules for certain awards that deviate from the vesting conditions described in the previous sentence. 55 Recent Sales of Unregistered Securities; Use of Proceeds from Registered Offerings Unregistered Securities None.
These awards are designed to align a portion of our named executive officers’ compensation with the interests of our existing stockholders and to build retention value by incentivizing our named executive officers to remain in our service. 2018 Long Term Incentive Plan On July 24, 2018, Legacy Spectral’s Board of Directors adopted the 2018 Long Term Incentive Plan (the “2018 Plan”) which permitted granting of incentive stock options (which must meet all statutory requirements), non-qualified stock options, stock appreciation rights, restricted stock, stock units, performance shares, performance units, incentive bonus awards, and other cash-based or stock-based awards.
These awards are designed to align a portion of our named executive officers’ compensation with the interests of our existing stockholders and to build retention value by incentivizing our named executive officers to remain in our service. 2023 Long Term Incentive Plan On May 14, 2024, the Company’s shareholders approved the adoption of the 2023 Long Term Incentive Plan (the “2023 Plan”) which permits granting of incentive stock options (they must meet all statutory requirements), non-qualified stock options, stock appreciation rights, restricted stock, stock units, performance shares, performance units, incentive bonus awards, and other cash-based or stock-based awards.
Holders As of March 26, 2025, there were at least 1,600 holders of record of 25,317,196 shares of our Common Stock and 15 holders of record of our redeemable warrants. Dividends We have not declared or paid any dividends on our capital stock to date.
Holders As of March 23, 2025, there were at least 8,000 holders of record of 31,823,895 shares of our Common Stock and at least 12 holders of record of our redeemable warrants. Dividends We have not declared or paid any dividends on our capital stock to date.
As of December 31, 2024, under the 2023 Plan, 3,594,488 shares of common stock were issuable upon exercise of outstanding options and 169,400 restricted stock units (“RSUs”) were issuable. Under the 2023 Plan, 4,236,113 shares remain available for issuance through grants of future options.
As of December 31, 2025, under the 2023 Plan, 3,857,136 shares of common stock were issuable upon exercise of outstanding options and 9,700 restricted stock units (“RSUs”) were issuable. Under the 2023 Plan, 3,730,684 shares remain available for issuance through grants of future options.
Removed
In May 2024, all awards outstanding under the 2018 Plan were replaced with corresponding awards to be issued pursuant to the 2023 Plan, as discussed below, and no new grants will be made under the 2018 Plan. 2022 Long Term Incentive Plan On September 27, 2022, Legacy Spectral’s stockholders approved the adoption of the 2022 Long Term Incentive Plan (the “2022 Plan”) which permitted granting of incentive stock options (they must meet all statutory requirements), non-qualified stock options, stock appreciation rights, restricted stock, stock units, performance shares, performance units, incentive bonus awards, and other cash-based or stock-based awards.
Removed
In May 2024, all awards outstanding under the 2022 Plan were replaced with corresponding awards to be issued pursuant to the 2023 Plan, as discussed below, and no new grants will be made under the 2022 Plan. 58 2023 Long Term Incentive Plan On May 14, 2024, the Company’s shareholders approved the adoption of the 2023 Long Term Incentive Plan (the “2023 Plan”) which permits granting of incentive stock options (they must meet all statutory requirements), non-qualified stock options, stock appreciation rights, restricted stock, stock units, performance shares, performance units, incentive bonus awards, and other cash-based or stock-based awards.
Removed
No new grants will be made under the 2022 Plan and the 2018 Plan and all outstanding grants under the 2018 Plan and 2022 Plan will be assumed by the 2023 Plan. The maximum aggregate number of shares that may be issued under the Plan shall not exceed 8,000,000.
Removed
Performance Graph The performance graph has been omitted as permitted under rules applicable to smaller reporting companies.
Removed
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Offerings Unregistered Securities Yorkville Standby Equity Purchase Agreement On March 20, 2024, the Company entered into the Standby Equity Purchase Agreement (“SEPA”) with YA II PN, LTD, a Cayman Islands exempt limited partnership (“Yorkville”) pursuant to which the Company has the right to sell to Yorkville up to $30,000,000 of its shares of Common Stock, subject to certain limitations and conditions set forth in the SEPA, from time to time during the term of the SEPA (such transaction, the “Yorkville Transaction”).
Removed
Sales of the shares of Common Stock to Yorkville under the SEPA, and the timing of any such sales, are at the Company’s option, and the Company is under no obligation to sell any shares of Common Stock to Yorkville under the SEPA.
Removed
While the Convertible Notes were outstanding, Yorkville was able to issue share purchase notices, as described in the SEPA.
Removed
In connection with the SEPA, and subject to the conditions set forth therein, Yorkville had previously agreed to advance to the Company, in the form of convertible promissory notes (the “Convertible Notes”), an aggregate principal amount of up to $12,500,000 million (the “Pre-Paid Advance”), which was paid in three tranches.
Removed
The first Pre-Paid Advance was disbursed on March 20, 2024 in the amount of $5,000,000 with a fixed conversion price of $3.16. The Company received $4,600,000 in cash, net of the 8% original issue discount.
Removed
On May 14, 2024, the shareholders voted to approve the reservation and issuance of shares to Yorkville if needed to exceed the beneficial ownership limitation and the second Pre-Paid Advance was disbursed on May 16, 2024 in the amount of $4,600,000, which was the $5,000,000 second Pre-Paid Advance net of $400,000 of the 8% original issue discount, with a fixed conversion price of $2.03.
Removed
The third Pre-Paid Advance was disbursed on July 17, 2024 in the principal amount of $2,300,000, which is the $2,500,000 third Pre-Paid Advance net of the $200,000 of the 8% original issue discount, with a fixed conversion price equal to 120% of the average VWAP during the three trading days immediately prior to the issuance of the note.
Removed
The purchase price for the Pre-Paid Advance is 92.0% of the principal amount of the Pre-Paid Advance. Interest shall accrue on the outstanding balance of any Pre-Paid Advance at an annual rate equal to 0%, subject to an increase to 18% upon an event of default as described in the Convertible Notes.
Removed
The maturity date of the Convertible Note issue in connection with each Pre-Paid Advance was12 months after the issuance date of such Convertible Note. 59 Beginning on the forty-fifth (45th) day following the issuance date of the Convertible Note issued in connection with the first Pre-Paid Advance, and continuing on the same day of each successive month thereafter, (each, an “Installment Date”), the Company shall repay a portion of the outstanding balance of the Pre-Paid Advance in an amount equal to (i) $1,750,000, plus (ii) a payment premium of 7% of such Installment Principal Amount, and (iii) accrued and unpaid interest hereunder as of each Installment Date, if any.
Removed
In October 2024, the Company and Yorkville agreed to amend the Installment Dates and the allocation of installment amounts to be paid pursuant to the Pre-Paid Advances, such that the outstanding balance of the Pre-Paid Advances was paid in full on February 17, 2025.
Removed
As of December 31, 2024, $7,768,508 of the outstanding balance of the Pre-Paid Advances was paid in cash and $2,400,000 has been paid in shares of the Company issued under the SEPA. The Company still has access to the remaining funds under the SEPA.
Removed
The sales of the shares of Common Stock to Yorkville under the SEPA, and the timing of any such sales, are at the Company’s option. The Company paid no interest relating to the Convertible Notes. B. Riley Committed Equity Facility On December 26, 2023, the Company entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with B.
Removed
Riley Principal Capital II, LLC (“B. Riley”), pursuant to which, upon the terms and subject to the satisfaction of the conditions contained in the Purchase Agreement, we have the right, in our sole discretion, to sell to B.
Removed
Riley up to $10,000,000 of shares of the Common Stock (subject to certain limitations contained in the Purchase Agreement), from time to time during the term of the Purchase Agreement through a Market Open Purchase or an Intraday Purchase on any Purchase Date (each term as defined in the Purchase Agreement).
Removed
Sales of Common Stock pursuant to the Purchase Agreement, and the timing of any sales, are solely at our option, and we are under no obligation to sell any securities to B. Riley under the Purchase Agreement (such transaction, the “B. Riley Transaction”). We have previously raised $2.7 million from share issuances under the B. Riley Transaction.
Removed
The Company maintained the right to raise up to $3,000,000 of shares of its Common Stock from the B. Riley transaction upon execution of the SEPA with Yorkville. Use of Proceeds There has been no material change in the planned use of the proceeds from the B.
Removed
Riley transaction or the Yorkville SEPA, as is described in the Company’s final prospectuses related to the B. Riley Transaction (Registration No. 333-276406), as filed with the SEC on January 2, 2024, and the Yorkville Transaction (Registration No. 333-278610), as filed with the SEC on February 1, 2024.
Removed
For a description of the use of the proceeds generated from the different financings, see “Item 1. Business.”

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResults of Operations The following table summarizes our results of operations for the years ended December 31, 2024 and 2023 (in thousands): Year Ended December 31, 2024 2023 Change Research and development revenue $ 29,581 $ 18,056 $ 11,525 Cost of revenue (16,307 ) (10,176 ) (6,131 ) Gross profit 13,274 7,880 5,394 Operating costs and expenses: General and administrative 19,856 20,864 (1,008 ) Total operating costs and expenses 19,856 20,864 (1,008 ) Operating loss (6,582 ) (12,984 ) 6,402 Other income (expense): Net interest income 14 172 (158 ) Borrowing related costs (2,965 ) - (2,965 ) Change in fair value of warrant liability (4,633 ) 335 (4,968 ) Change in fair value of notes payable (220 ) - (220 ) Foreign exchange transaction loss (43 ) (24 ) (19 ) Transaction costs (615 ) (8,342 ) 7,727 Total other expense, net (8,462 ) (7,859 ) (603 ) Loss before income taxes (15,044 ) (20,843 ) (5,799 ) Income tax provision (271 ) (11 ) (260 ) Net loss $ (15,315 ) $ (20,854 ) $ (5,539 ) Research and development revenue Year Ended December 31, Change in 2024 2023 $ % Research and development revenue $ 29,581 $ 18,056 $ 11,525 63.8 % 64 Research and development revenue was $29,581 for the year ended December 31, 2024, an increase of 63.8% compared to the comparable period in 2023, reflecting more activity as we completed work under the PBS BARDA Contract and in the awards and work performed under the Company’s other U.S. governmental contracts.
Biggest changeIn the event we are unable to mitigate the impact of delays and/or price increases in raw materials, electronic components and freight, it could delay the manufacturing and installation of our products, which would adversely impact our cash flows and results of operations, including revenue and gross margin. 59 Results of Operations The following table summarizes of our results of operations for the years ended December 31, 2025 and 2024 (in thousands): Year Ended December 31, 2025 2024 (1) Change Research and development revenue $ 19,650 $ 29,581 $ (9,931 ) Cost of revenue (10,725 ) (16,307 ) 5,582 Gross profit 8,925 13,274 (4,349 ) Operating costs and expenses: General and administrative 17,528 19,856 (2,328 ) Total operating costs and expenses 17,528 19,856 (2,328 ) Operating loss (8,603 ) (6,582 ) (2,021 ) Other income (expense): Net interest income (expense) (886 ) 14 (900 ) Financing related costs (1,051 ) (2,965 ) 1,914 Amortization of debt discount (455 ) - (455 ) Change in fair value of warrant liabilities 3,249 (4,633 ) 7,882 Change in fair value of notes payable 220 (220 ) 440 Foreign exchange transaction loss, net (34 ) (43 ) 9 Transaction costs - (615 ) 615 Total other income (expense), net 1,043 (8,462 ) 9,505 Loss before income taxes (7,560 ) (15,044 ) 7,484 Income tax provision (11 ) (114 ) 103 Net loss $ (7,571 ) $ (15,158 ) $ 7,587 (1) Reflects an adjustment of $157,000 to the income tax provision during the year ended December 31, 2024.
We have issued stock options, restricted stock awards and restricted stock units with time-based vesting conditions and record the expense for these awards using the ratable method. We have also issued restricted stock units that vest upon the achievement of certain market conditions.
We have issued stock options, restricted stock awards and restricted stock units with time-based vesting conditions and record the expense for these awards using the ratable method. We have also issued stock options and restricted stock units that vest upon the achievement of certain market conditions.
These provisions include: ● being permitted to present only two years of audited consolidated financial statements in addition to any required unaudited interim consolidated financial statements, with correspondingly reduced disclosure in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”; ● an exception from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended; ● reduced disclosure about our executive compensation arrangements in our periodic reports, proxy statements and registration statements; ● exemptions from the requirements of holding non-binding advisory votes on executive compensation or golden parachute arrangements; and 71 We may take advantage of these provisions until the last day of the fiscal year ending after the fifth anniversary of our initial public offering or such earlier time that we no longer qualify as an emerging growth company.
These provisions include: ● being permitted to present only two years of audited consolidated financial statements in addition to any required unaudited interim consolidated financial statements, with correspondingly reduced disclosure in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”; ● an exception from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended; ● reduced disclosure about our executive compensation arrangements in our periodic reports, proxy statements and registration statements; ● exemptions from the requirements of holding non-binding advisory votes on executive compensation or golden parachute arrangements; and 68 We may take advantage of these provisions until the last day of the fiscal year ending after the fifth anniversary of our initial public offering or such earlier time that we no longer qualify as an emerging growth company.
Pricing for these components will be evaluated and strategically set per country and site-of-service for heightened customer adoption. 61 Business Combination On September 12, 2023, following completion of the Business Combination, the Company began trading its shares of the Company Common Stock and the Public Warrants on the Nasdaq Global Market (the “Nasdaq”) under the symbols “MDAI” and “MDAIW”, respectively.
Pricing for these components will be evaluated and strategically set per country and site-of-service for heightened customer adoption. Business Combination On September 12, 2023, following completion of the Business Combination, the Company began trading its shares of the Company Common Stock and the Public Warrants on the Nasdaq Global Market (the “Nasdaq”) under the symbols “MDAI” and “MDAIW”, respectively.
Our cost of revenue is affected by the extent of research and development activities as well as expansion of work on other U.S. governmental projects and the expanded applications for our DeepView System. Gross Profit Gross profit may vary from period-to-period and is primarily affected by the current reimbursement rates under the BARDA contract and other U.S. governmental contract awards.
Our cost of revenue is affected by the extent of research and development activities as well as expansion of work on other U.S. governmental projects and the expanded applications for our DeepView System. 57 Gross Profit Gross profit may vary from period-to-period and is primarily affected by the current reimbursement rates under the BARDA contract and other U.S. governmental contract awards.
Our operating results may not be comparable between periods as the timing and amount of awards or procurements from the U.S. government may be inconsistent with the timing of prior awards and the phasing of the development study schedules may be different. Our revenues may continue to be almost exclusively dependent upon the terms of those awards. 63 Gross Margin.
Our operating results may not be comparable between periods as the timing and amount of awards or procurements from the U.S. government may be inconsistent with the timing of prior awards and the phasing of the development study schedules may be different. Our revenues may continue to be almost exclusively dependent upon the terms of those awards. Gross Margin.
This has allowed us to develop our technology and further our clinical trials. In September 2023, we executed our third contract with BARDA for a multi-year Project BioShield (“PBS”) agreement, valued at up to approximately $150.0 million (the “PBS BARDA Contract”).
This has allowed us to develop our technology and further our clinical trials. 56 In September 2023, we executed our third contract with BARDA for a multi-year Project BioShield (“PBS”) agreement, valued at up to approximately $150.0 million (the “PBS BARDA Contract”).
Our research and development revenue is affected by the amount of research and development that is expended each month with respect to our contract with BARDA and other U.S. governmental contract awards, such as our grant under the MTEC Agreement which we earn based on the achievement of milestones.
Our research and development revenue is affected by the amount of research and development that is expended each month with respect to our contract with BARDA and other U.S. governmental contract awards, such as our grant under the MTEC Agreement which we earn based on the achievement of milestones and performance milestones.
Foreign exchange transaction loss for the year ended December 31, 2024 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 year ended December 31, 2025 and 2024 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.
In November and December 2024, the Company issued 3,896,781 shares for gross proceeds of approximately $4.5 million to certain institutional investors through at-the market equity issuances, stock option exercises and the conversion of the Company’s wholly-owned subsidiary, Spectral IP, Inc. (“Spectral IP”), convertible promissory note into shares of the Company’s common stock.
In November and December 2024, the Company issued 3,896,781 shares for aggregate net proceeds of approximately $4.5 million to certain institutional investors through at-the market equity issuances, stock option exercises and the conversion of the Company’s wholly-owned subsidiary, Spectral IP, Inc. (“Spectral IP”), convertible promissory note into shares of the Company’s common stock.
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.
Given our receipt of the UKCA mark for burn indication on our DeepView System, we expect to begin commercialization activities in the United Kingdom in 2026. Our DeepView System uses proprietary algorithms to distinguish between damaged and healthy human tissue invisible to the naked eye, providing “Day One” healing assessments.
Our management uses these metrics to make strategic decisions, pricing decisions, identify areas for improvement, set targets for future performance and make informed decisions about how to allocate resources going forward.
Our management uses these metrics to make strategic decisions, pricing decisions, identifying areas for improvement, set targets for future performance and make informed decisions about how to allocate resources going forward.
We estimate the fair value of stock option awards granted using the Black-Scholes option-pricing model, which uses as inputs the fair value of our common stock and subjective assumptions we make, including the expected stock price volatility, the risk-free interest rate and expected dividends, and the contractual term as the expected term of the award.
We estimate the fair value of time-based vesting stock option awards granted using the Black-Scholes option-pricing model, which uses as inputs the fair value of our common stock and subjective assumptions we make, including the expected stock price volatility, the risk-free interest rate and expected dividends, and the contractual term as the expected term of the award.
See Note 11 to our audited consolidated financial statements included elsewhere in this Annual Report for information concerning certain of the specific assumptions we used in applying the Black-Scholes option pricing model to determine the estimated fair value of our stock options granted in the years ended December 31, 2024 and 2023.
See Note 10 to our audited consolidated financial statements included elsewhere in this Annual Report for information concerning certain of the specific assumptions we used in applying the Black-Scholes option pricing model and Monte Carlo simulation model to determine the estimated fair value of our stock options granted in the years ended December 31, 2025 and 2024.
Riley purchase agreement, net interest income, borrowing related costs related to the Yorkville convertible notes, including the 8% original issue discount and 7% repayment premium as may be applicable per each Pre-Paid Advance, change in fair value of notes payable, change in fair value of warrant liabilities, changes in fair value of derivatives, and foreign exchange transaction gains/losses.
Riley purchase agreement, net interest income, borrowing related costs related to the Yorkville convertible notes, including the 8% original issue discount per each Pre-Paid Advance, change in fair value of notes payable, change in fair value of warrant liabilities, changes in fair value of derivatives, and foreign exchange transaction gains/losses.
In addition, this amount includes costs associated with buying British pound sterling for payment of our employees and vendors in the UK. Other income (expenses), including transaction costs for the year ended December 31, 2024 primarily relate to legal, professional, and service fees incurred in connection with the Yorkville transaction and B. Riley purchase agreement.
In addition, these amounts includes costs associated with buying British pound sterling for payment of our employees and vendors in the UK. Other income (expenses), including transaction costs for the year ended December 31, 2024 primarily relating to non-recurring legal, professional, and service fees incurred in connection with the Yorkville transaction and B. Riley purchase agreement.
For the year ended December 31, 2023, we did not have any transactions with related parties. Off-Balance Sheet Arrangements During the periods presented, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.
There were no other related party transactions for the year ended December 31, 2025. Off-Balance Sheet Arrangements During the periods presented, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.
We periodically confirm the accuracy of the estimates with the service providers and make adjustments if necessary. 70 Determination of the Fair Value of Equity-Based Awards We measure stock options and other stock-based awards granted to directors, employees, and non-employees based on their fair value on the date of the grant and recognize the corresponding compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective award.
Determination of the Fair Value of Equity-Based Awards We measure stock options and other stock-based awards granted to directors, employees, and non-employees based on their fair value on the date of the grant and recognize the corresponding compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective award.
The lower net loss is a result of higher research and development revenue due to increased BARDA activity and lower non-operating transaction costs in the year ended December 31, 2024 compared to the year ended December 31, 2023.
The higher net loss is a result of reduced reimbursed research and development revenue based on lower BARDA activity and lower non-operating transaction costs in the year ended December 31, 2025 compared to the year ended December 31, 2024.
Cash Flows Provided by Financing Activities Net cash provided by financing activities increased approximately $5.7 million for the year ended December 31, 2024 compared to the year ended December 31, 2023.
Cash Flows Provided by Financing Activities Net cash provided by financing activities increased approximately $11.2 million for the year ended December 31, 2025 compared to the year ended December 31, 2024.
This multi-year contract includes an initial award of nearly $54.9 million to support the clinical validation and FDA clearance of DeepView® for commercial marketing and distribution purposes, which we expect to continue through the first quarter of 2026. This contract funding is non-dilutive to our shareholders, and we believe it validates the important nature of our mission and technology.
This multi-year contract includes an initial award of nearly $54.9 million to support the clinical validation and FDA clearance of our DeepView System for commercial marketing and distribution purposes, which we expect to continue through the first quarter of 2026.
We had an accumulated deficit of approximately $48.1 million. The Company incurred a net loss of $15.3 million during the year ended December 31, 2024 and had working capital (current assets less current liabilities) of approximately ($7.5) million as of December 31, 2024. Net cash used in operating activities was $9.1 million for the year ended December 31, 2024.
The Company incurred a net loss of $7.6 million during the year ended December 31, 2025 and had working capital (current assets less current liabilities) of approximately ($1.2) million as of December 31, 2025. Net cash used in operating activities was $9.9 million for the year ended December 31, 2025.
The Company may continue to conserve our working capital and to focus our efforts primarily on the burn indication. Changing circumstances could also cause us to consume capital significantly faster than we currently anticipate, and we may need to raise capital sooner or in greater amounts than currently expected because of circumstances beyond our control.
Changing circumstances could also cause us to consume capital significantly faster than we currently anticipate, and we may need to raise capital sooner or in greater amounts than currently expected because of circumstances beyond our control.
In addition, Adjusted EBITDA should not be construed as an indicator of our operating performance, liquidity or cash flows generated by operating, investing and financing activities, as there may be significant factors or trends that it fails to address.
In addition, Adjusted EBITDA should not be construed as an indicator of our operating performance, liquidity or cash flows generated by operating, investing and financing activities, as there may be significant factors or trends that it fails to address. 62 Because of their non-standardized definitions, non-GAAP measures (unlike GAAP measures) may not be comparable to the calculation of similar measures of other companies.
Research and Development Revenue We define research and development revenue as revenue generated from the research, testing and development of our DeepView System as utilized in connection with our burn indication. This research and development revenue reflects applied research and experimental development costs relating to our burn application as developed in connection with our BARDA, MTEC and DHA contracts.
This research and development revenue reflects applied research and experimental development costs relating to our burn application as developed in connection with our BARDA, MTEC and DHA contracts.
Change in fair value of notes payable decreased by approximately $0.2 million for the year ended December 31, 2024, as compared to the comparable period in 2023, which reflects the total change in the fair value of the Yorkville notes issued in 2024.
Change in fair value of notes payable increased by approximately $0.4 million for the year ended December 31, 2025, as compared to the comparable period in 2024, which reflects the change in fair value of the Yorkville convertible note accounted for under the fair value option.
Gross margin for the year ended December 31, 2024 was 44.9%, an increase from 43.6% as compared to the comparable period in 2023, due to more direct labor attributed to the PBS BARDA Contract as a component of the overall development activity and the higher reimbursement rate under the PBS BARDA Contract, executed in September 2023, than the rate in the BARDA Burn II contact.
Gross margin for the year ended December 31, 2025 was 45.4%, an increase from 44.9% as compared to the comparable period in 2024, due to slightly more direct labor attributed to the PBS BARDA Contract as a component of the overall development activity.
Cash Flows The following table summarizes our cash flows for the years ended December 31, 2024 and 2023 (in thousands): Year Ended December 31, 2024 2023 Net cash used in operating activities $ (9,199 ) $ (13,240 ) Net cash provided by financing activities 9,575 3,844 68 Cash Flows Used in Operating Activities Net cash used in operating activities decreased by approximately $4.0 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023 primarily driven by changes in operating liabilities including accrued expenses and deferred revenue, partially offset by a decrease in net loss.
Cash Flows The following table summarizes our cash flows for the years ended December 31, 2025 and 2024 (in thousands): Year Ended December 31, 2025 2024 Net cash used in operating activities $ (9,920 ) $ (9,199 ) Net cash provided by financing activities 20,120 9,575 Cash Flows Used in Operating Activities Net cash used in operating activities increased by approximately $1.4 million for the year ended December 31, 2025, as compared to the year ended December 31, 2024 primarily driven by changes in accounts receivable, prepaid expenses, operating liabilities including accrued expenses and deferred revenue.
Historic foreign exchange transaction loss primarily relates to changes in the exchange rate between the U.S. dollar and the British pound sterling for our deposit accounts that are denominated in British pound sterling.
Historic foreign exchange transaction loss primarily relates to changes in the 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 currency translation costs associated with purchasing British pound sterling for payment of our employees and vendors in the UK.
The risk-free interest rate is based on a U.S. treasury instrument whose term is consistent with the expected term of the stock options. The expected dividend yield is assumed to be zero as we have never paid dividends and do not have current plans to pay any dividends on our common stock.
The expected dividend yield is assumed to be zero as we have never paid dividends and do not have current plans to pay any dividends on our common stock.
We determine the fair value of restricted stock units that vest upon the achievement of certain market conditions using a Monte Carlo simulation model, which uses as inputs the fair value of our common stock and subjective assumptions we make, including the expected stock price volatility, the expected term of the award, the risk-free interest rate and expected dividends.
We determine the fair value of restricted stock units and stock options that vest upon the achievement of certain market conditions using a Monte Carlo simulation model, which uses as inputs the fair value of our common stock and subjective assumptions we make, including the expected stock price volatility, the expected term of the award, the risk-free interest rate and expected dividends. 66 Due to insufficient trade history of our common stock, in prior years we are unable to estimate the future volatility of our share price and instead estimate our expected volatility from the historical volatility of a representative group of publicly traded companies for which historical information is available.
General and Administrative Expense Year Ended December 31, Change in 2024 2023 $ % General and administrative expense $ 19,856 $ 20,864 $ (1,008 ) (4.8 )% General and administrative expense was $19.9 million, for the year ended December 31, 2024, a decrease of 4.8% as compared to the comparable period in 2023.
General and Administrative Expense Year Ended December 31, Change in 2025 2024 $ % General and administrative expense $ 17,528 $ 19,856 $ (2,328 ) (11.7 )% General and administrative expense was $17.5 million, for the year ended December 31, 2025, a decrease of 11.7% as compared to the comparable period in 2024.
This non-GAAP financial measure should be considered in addition to results prepared in accordance with GAAP and should not be considered as a substitute for, or superior to, GAAP results.
Non-GAAP Financial Measures We use Adjusted EBITDA as a non-GAAP metric when measuring performance, including when measuring current period results against prior periods’ Adjusted EBITDA. This non-GAAP financial measure should be considered in addition to results prepared in accordance with GAAP and should not be considered as a substitute for, or superior to, GAAP results.
In addition, this amount includes costs associated with currency translation costs associated with purchasing British pound sterling for payment of our employees and vendors in the UK. 62 Key Operating and Financial Metrics 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.
Key Operating and Financial Metrics 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.
Non-revenue generating research and development activities have decreased by approximately $2.1 million for the year ended December 31, 2024 compared to the comparable period in 2023 due to an overall increase in the percentage of work performed on the PBS BARDA Contract in 2024.
Non-revenue generating research and development activities have decreased by approximately $2.6 million for the year ended December 31, 2025 compared to the comparable period in 2024 offset by an increase of approximately $0.6 million related to other administrative expenses for the year ended December 31, 2025, compared to the comparable period in 2024.
The sales of the shares of Common Stock to Yorkville under the SEPA, and the timing of any such sales, are at the Company’s option. 69 Related Party Transactions On March 7, 2024, the Company formed a new wholly-owned subsidiary, Spectral IP, to be utilized to acquire artificial intelligent intellectual property with a specific emphasis on healthcare.
Related Party Transactions On March 7, 2024, the Company formed a new wholly-owned subsidiary, Spectral IP, to be utilized to acquire artificial intelligence intellectual property with a specific emphasis on healthcare.
In April 2023, the Company received a $4.0 million grant under the MTEC Agreement, which was increased to $4.9 million in August 2024 and is currently intended to run through December 2025. The MTEC Agreement is for the development of a handheld version of the DeepView® System which is to be used to support military battlefield burn evaluation.
In December 2025, the MTEC contract was extended to run through June 2026. The MTEC Agreement is for the development of a handheld version of the DeepView ® System which is to be used to support military battlefield burn evaluation.
In September 2023, the Company executed its third contract with BARDA for a multi-year PBS BARDA Contract, valued at up to approximately $150.0 million. This multi-year contract includes an initial award of nearly $54.9 million to support the clinical validation and FDA clearance of DeepView for commercial development and distribution purposes.
This multi-year contract includes an initial award of nearly $54.9 million to support the clinical validation and FDA clearance of DeepView® for commercial development and distribution purposes. The Company completed the second contract with BARDA, referred to as BARDA Burn II, which was signed in July 2019 and completed in November 2023.
Once commercialized, we anticipate that the DeepView System will have two revenue streams, a SaMD (software as a medical device) model, and an imaging device component. The SaMD model applies a SaaS (software as a service) treatment for the DeepView System which will feature a software licensing fee that includes maintenance, image hosting, and access to algorithm updates.
The SaMD model applies a SaaS (software as a service) treatment for the DeepView System which will feature a software licensing fee that includes maintenance, image hosting, and access to algorithm updates. The proprietary imaging device accesses artificial intelligence algorithms and is a universal platform to house multiple clinical applications.
The historical volatility is generally calculated based on a period of time commensurate with the expected term assumption. We use the simplified method to calculate the expected term for options granted to employees and directors, which is based on the average of the time-to-vesting and the contractual life of the options.
We use the simplified method to calculate the expected term for options granted to employees and directors, which is based on the average of the time-to-vesting and the contractual life of the options. We utilize this method as we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term.
Supplemental non-GAAP measures are presented solely to permit investors to more fully understand how Spectral AI’s management assesses underlying performance. 66 Adjusted EBITDA 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.
Adjusted EBITDA 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.
For the year ended December 31, 2024 and 2023, the Company’s revenues disaggregated by the major sources was as follows: Year Ended December 31, Change in 2024 2023 $ % BARDA $ 27,903 $ 17,027 $ 10,876 63.9 % Other U.S. governmental authorities 1,678 1,029 649 63.1 % Total research and development revenue $ 29,581 $ 18,056 $ 11,525 63.8 % Cost of Revenues and Gross Profit Year Ended December 31, Change in 2024 2023 $ % Cost of revenue $ 16,307 $ 10,176 $ 6,131 60.2 % Gross profit 13,274 7,880 5,394 68.5 % Gross margin 44.9 % 43.6 % Cost of revenue for the year ended December 31, 2024 was $16.3 million, an increase of 60.2% compared to the comparable period in 2023, due to increased development activity to fulfill our U.S. governmental contracts, consistent with increased research and development revenue.
Research and development revenue Year Ended December 31, Change in 2025 2024 $ % Research and development revenue $ 19,650 $ 29,581 $ (9,931 ) (33.6 )% Research and development revenue was $19,650, for the year ended December 31, 2025, a decrease of 33.6% compared to the comparable period in 2024, reflecting a decrease in the completed work under the PBS BARDA Contract as the contract progressed to the end of the base phase of such contract and consistent revenue in the awards and work performed under the Company’s other U.S. governmental contracts. 60 For the year ended December 31, 2025 and 2024, the Company’s revenues disaggregated by the major sources was as follows: Year Ended December 31, Change in 2025 2024 $ % BARDA $ 17,700 $ 27,903 $ (10,203 ) (36.6 )% Other U.S. governmental authorities 1,950 1,678 272 16.2 % Total research and development revenue $ 19,650 $ 29,581 $ (9,931 ) (33.6 )% Cost of Revenues and Gross Profit Year Ended December 31, Change in 2025 2024 $ % Cost of revenue $ 10,725 $ 16,307 $ (5,582 ) (34.2 )% Gross profit 8,925 13,274 (4,349 ) (32.8 )% Gross margin 45.4 % 44.9 % Cost of revenue for the year ended December 31, 2025 was $10.7 million, a decrease of 34.2% compared to the comparable period in 2024, due to decreased development activity to fulfill our U.S. governmental contracts, consistent with the decrease in research and development revenue.
The Company completed the second contract with BARDA, referred to as BARDA Burn II, which was signed in July 2019 and completed in November 2023. Under this contract, the Company furthered the DeepView System design, developed the AI algorithm, and took steps to obtain FDA approval.
Under this contract, the Company furthered the DeepView® System design, developed the AI algorithm, and took steps to obtain FDA approval.
The project has three phases, beginning with planning, design and testing; followed by development, design modification and buildout of the handheld device; and then the manufacturing of the handheld device. Based on our current operating plan, we believe that our cash and cash equivalents, together with the PBS BARDA Contract, the MTEC Agreement, the B.
The project has three phases, beginning with planning, design and testing; followed by development, design modification and buildout of the handheld device; and then the manufacturing of the handheld device.
Changes in the current equity markets may also limit our ability to utilize the B. Riley ELOC and Yorkville SEPA as currently structured.
Changes in the current equity markets may also limit our ability to utilize the Company’s resale registration statement pursuant to Form S-3 as currently structured.
The following table presents our Adjusted EBITDA for the years ended December 31, 2024 and 2023 (in thousands): Year Ended December 31, 2024 2023 Net loss $ (15,315 ) $ (20,854 ) Adjust: Depreciation expense 10 9 Provision for income taxes 271 11 Net interest expense (14 ) (172 ) EBITDA (15,048 ) (21,006 ) Additional adjustments: Stock-based compensation 1,032 1,243 Borrowing related costs 2,965 - Change in fair value of warrant liability 4,633 (335 ) Change in fair value of notes payable 220 - Foreign exchange transaction (gain) loss 43 24 Other (income) expenses, including transaction costs 615 8,342 Adjusted EBITDA $ (5,540 ) $ (11,732 ) Liquidity and Capital Resources Sources of Liquidity As of December 31, 2024, we had approximately $5.2 million in cash, notes payable of $2.8 million, and no long-term debt.
The following table presents our Adjusted EBITDA for the years ended December 31, 2025 and 2024 (in thousands): Year Ended December 31, 2025 2024 (1) Net loss $ (7,571 ) $ (15,158 ) Adjust: Depreciation expense 71 10 Provision for income taxes 11 114 Net interest expense (income) 886 (14 ) EBITDA (6,603 ) (15,048 ) Additional adjustments: Stock-based compensation 1,115 1,032 Financing related costs 1,051 2,965 Amortization of debt discount 455 - Change in fair value of warrant liabilities (3,249 ) 4,633 Change in fair value of notes payable (220 ) 220 Foreign exchange transaction loss, net 34 43 Other (income) expenses, including transaction costs - 615 Adjusted EBITDA $ (7,417 ) $ (5,540 ) (1) Reflects an adjustment of $157,000 to the income tax provision during the year ended December 31, 2024.
This expense also reflects the consistent headcount at the Company from the prior year. 65 Other income (expense) Year Ended December 31, Change in 2024 2023 $ Net interest income $ 14 $ 172 $ (158 ) Borrowing related costs (2,965 ) — (2,965 ) Change in fair value of warrant liabilities (4,633 ) 335 (4,968 ) Change in fair value of notes payable (220 ) — (220 ) Foreign exchange transaction loss, net (43 ) (24 ) (19 ) Other income (expenses), including transaction costs (615 ) (8,342 ) 7,727 Total other income (expense), net $ (8,462 ) $ (7,859 ) $ (603 ) Net interest income for the year ended December 31, 2024 primarily relates to cash interest received or (paid) by us from our deposit accounts.
This expense also reflects a decrease in the overall headcount at the Company from the prior year. 61 Other income (expense) Year Ended December 31, Change in 2025 2024 $ Net interest (expense) income $ (886 ) $ 14 $ (900 ) Financing related costs (1,051 ) (2,965 ) 1,914 Amortization of debt discount (455 ) - (455 ) Change in fair value of warrant liabilities 3,249 (4,633 ) 7,882 Change in fair value of notes payable 220 (220 ) 440 Foreign exchange transaction loss, net (34 ) (43 ) 9 Other expenses, including transaction costs - (615 ) 615 Total other income (expense), net $ 1,043 $ (8,462 ) $ 9,505 Net interest expense for the year ended December 31, 2025 primarily relates to interest expense associated with the Avenue Financing.
In 2023, other income (expense) consists of transaction costs related to the Business Combination, net interest income, change in fair value of warrant liabilities and foreign exchange transaction gain/losses.
Other Income (Expense) In 2025, other income (expense) consists of net interest expense, borrowing related costs related to the Avenue Financing, fees related to the Hudson Bay Financing, change in the fair value of warrant liability, and foreign exchange transaction gains/losses. In 2024, other income (expense) consists of fees incurred in connection with the Yorkville transaction and B.
Change in fair value of warrant liabilities decreased by approximately $5.0 million for the year ended December 31, 2024 as compared to the comparable period in 2023. The decrease reflects changes in the fair value of the Public Warrants, which were issued in September 2023 and repriced in December 2024.
Amortization of debt discount of $0.5 million for the year ended December 31, 2025 relates to amortization of the discount on the Avenue note payable. Change in fair value of warrant liabilities increased by approximately $7.9 million for the year ended December 31, 2025 as compared to the comparable period in 2024.
The sales of the shares of Common Stock to Yorkville under the SEPA, and the timing of any such sales, are at the Company’s option. We have historically funded our operations through the issuance of notes and the sale of common stock, along with payments under governmental contracts for research and development activity.
We have historically funded our operations through the issuance of notes and the sale of common stock, along with payments under governmental contracts for research and development activity. In September 2023, the Company executed its third contract with BARDA for a multi-year PBS BARDA Contract, valued at up to approximately $150.0 million.
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. In March 2024, we received an additional $0.5 million award from the DHA to further this development, for a total contract value of approximately $2.8 million.
In August 2024, the MTEC award was increased to $4.9 million and was extended to run through December 2025 with funding dependent on various milestones. In December 2025, the MTEC contract was extended to run through June 2026.
Borrowing related costs increased $3.0 million for the year ended December 31, 2024, as compared to the comparable period in 2023 due to debt issuance costs and payments of the discount and premium related to the Yorkville Convertible Notes that were expensed during fiscal year 2024.
Financing related costs decreased $1.9 million for the year ended December 31, 2025, as compared to the comparable period in 2024 primarily due to the elimination of the expenses relating to the Company’s prior financings that were expensed during fiscal year 2024.
Comparison of Years Ended December 31, 2024 and 2023 The following table summarizes these metrics for the years ended December 31, 2024 and 2023 (in thousands): Year Ended December 31, 2024 2023 Change Research and development revenue $ 29,581 $ 18,056 $ 11,525 Gross profit 13,274 7,880 5,394 Gross margin 44.9 % 43.6 % 1.2 % Operating loss (6,582 ) (12,984 ) 6,402 Net loss (15,315 ) (20,854 ) 5,539 Adjusted EBITDA (5,540 ) (11,732 ) 6,192 See “Non-GAAP Financial Measures” below for a reconciliation of net loss to Adjusted EBITDA.
Comparison of Years Ended December 31, 2025 and 2024 The following table summarizes these metrics for the years ended December 31, 2025 and 2024 (in thousands): Year Ended December 31, 2025 2024 (1) Change Research and development revenue $ 19,650 $ 29,581 $ (9,931 ) Gross profit 8,925 13,274 (4,349 ) Gross margin 45.4 % 44.9 % 0.5 % Operating loss (8,603 ) (6,582 ) (2,021 ) Net loss (7,571 ) (15,158 ) 7,587 Adjusted EBITDA (7,417 ) (5,540 ) (1,877 ) (1) Reflects an adjustment of $157,000 to the income tax provision during the year ended December 31, 2024.
We utilize this method as we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. For grants to non-employees, the relevant accounting literature allows entities to use the expected term to measure non-employee options or elect to use the contractual term as the expected term, on an award-by-award basis.
For grants to non-employees, the relevant accounting literature allows entities to use the expected term to measure non-employee options or elect to use the contractual term as the expected term, on an award-by-award basis. The risk-free interest rate is based on a U.S. treasury instrument whose term is consistent with the expected term of the stock options.
Riley ELOC, and the Yorkville Transaction, will be sufficient to fund operations for at least one year beyond the release date of these consolidated financial statements. We have based this determination on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.
We have based this determination on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. The Company may continue to conserve our working capital and to focus our efforts primarily on the burn indication.
We have conducted three large clinical studies with multiple sites across the United States, enrolling 413 burn patients, including 329 adult and 84 pediatric patients. Through these studies, we were able to quantify the burn assessment accuracy in patients undergoing both surgical and non-surgical treatment.
In addition to our validation study, we have conducted three large clinical studies with multiple sites across the United States, enrolling more than 400 patients, including adult and pediatric burn patients. We have not generated any product revenue to date.
This was primarily attributable to the proceeds of $2.7 million from the ELOC, proceeds of $13.1 received from the sale of the Company’s Common Stock and the principal amount of the notes payable from the Pre-Paid Advances under the SEPA, partially offset by $7.8 million of repayments of notes payable as compared to proceeds of $3.4 million from the issuance of Common Stock and operating cash received upon closing of the Business Combination of $0.7 million during the year ended December 31, 2023.
This was primarily attributable to $8.3 million of proceeds from the Avenue Financing and, $10.7 million of proceeds from the sale of the Company’s Common Stock and warrants, partially offset by $1.5 million of repayments of notes payable issued in 2024.
Because of their non-standardized definitions, non-GAAP measures (unlike GAAP measures) may not be comparable to the calculation of similar measures of other companies. We caution investors that non-GAAP financial information, by its nature, departs from traditional accounting conventions.
We caution investors that non-GAAP financial information, by its nature, departs from traditional accounting conventions. Supplemental non-GAAP measures are presented solely to permit investors to more fully understand how Spectral AI’s management assesses underlying performance.
Removed
In December 2023, we initiated a pivotal clinical study seeking enrollment of 240 patients, including 180 adult and 60 pediatric patients through multiple sites across the United States in both burn center and emergency departments.
Added
The Company has completed the enrollment of 164 patients, including 49 pediatric subjects, representing the full enrollment requirements in its validation study for the De Novo submission. In participants, the DeepView System has shown superiority in sensitivity and met non-inferiority margin in specificity compared to clinician assessment.
Removed
By the end of 2024, the Company had completed the enrollment of the pivotal clinical study with 267 patients, including 146 at burn centers, 121 at emergency departments across 22 sites across the United States.
Added
These findings were corroborated by the AI model’s cross-validation in identifying non-healing burn regions. This represents a significant improvement above the diagnostic accuracy of burn physicians assessing the same population.
Removed
As part of the total 267 patients enrolled, 42 pediatric patients were included from burn centers and another 42 pediatric patients were included from emergency departments. We have not generated any product revenue to date.
Added
This contract funding is non-dilutive to our shareholders, and we believe it validates the important nature of our mission and technology.
Removed
The proprietary imaging device accesses artificial intelligence algorithms and is a universal platform to house multiple clinical applications.
Added
In March 2024, we received an additional $0.5 million award from the DHA to further this development, for a total contract value of approximately $2.8 million. Once commercialized, we anticipate that the DeepView System will have two revenue streams, a SaMD (software as a medical device) model, and an imaging device component.
Removed
Other Income (Expense) In 2024, other income (expense) consists of fees incurred in connection with the Yorkville transaction and B.
Added
The Company recognizes revenue from the sale of its products in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”).
Removed
In the event we are unable to mitigate the impact of delays and/or price increases in raw materials, electronic components and freight, it could delay the manufacturing and installation of our products, which would adversely impact our cash flows and results of operations, including revenue and gross margin.
Added
The provisions of ASC 606 require the following steps to determine revenue recognition: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation.
Removed
The reduction was offset by an increase of approximately $1.1 million related to other administrative expenses for the year ended December 31, 2024, compared to the comparable period in 2023.
Added
The Company’s product revenue is recognized at a point in time when the performance obligation is satisfied by transferring control of the promised goods or services to a customer.
Removed
Foreign exchange transaction loss for the year ended December 31, 2023 relates to the decreased exchange rate between the U.S. dollar and the British pound sterling during 2023 for our deposit accounts that are denominated in British pound sterling.
Added
See further discussion in Note 1. See “Non-GAAP Financial Measures” below for a reconciliation of net loss to Adjusted EBITDA. 58 Research and Development Revenue We define research and development revenue as revenue generated from the research, testing and development of our DeepView System as utilized in connection with our burn indication.
Removed
Other income (expenses), including transaction costs for the year ended December 31, 2023 primarily relate to non-recurring legal, accounting, and consulting costs expended for the Business Combination. Non-GAAP Financial Measures We use Adjusted EBITDA as a non-GAAP metric when measuring performance, including when measuring current period results against prior periods’ Adjusted EBITDA.
Added
Change in fair value of warrant liabilities was an expense of $3.2 million for the year ended December 31, 2025, as compared to a benefit of ($4.6) million for same period in 2024. The changes reflect fluctuations in the fair value of the Company’s warrants during the year ended December 31, 2025.
Removed
On December 26, 2023, we entered into a Common Stock Purchase Agreement and related Registration Rights Agreement with B. Riley Principal Capital II, LLC (“B. Riley”). Upon the terms and subject to the satisfaction of the conditions set forth in the Common Stock Purchase Agreement, the Company has the right, in our sole discretion, to sell to B.
Added
The Company’s 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 of Public Warrants and fluctuations in the fair value of other outstanding warrants may cause significant non-cash gains or losses, leading to volatility in reported net loss.
Removed
Riley up to $10.0 million in aggregate gross purchase price of newly issued shares of the Company’s Common Stock (the “ELOC”). The Company maintained the right to raise up to $3,000,000 of shares of its Common Stock from the B.
Added
See further discussion in Note 1. Liquidity and Capital Resources Sources of Liquidity As of December 31, 2025, we had approximately $15.4 million in cash, notes payable of $8.4 million, of which $5.5 million represents long-term debt. We had an accumulated deficit of approximately $55.8 million.

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