UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2025
Or
☐TRANSITION REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
To
Commission File No. 001-40058
SPECTRAL AI, INC.
(Exact name of registrant as specified in its
charter)
(Address of Principal Executive Offices) (Zip Code)
(972)499-4934
(Registrant’s telephone number, including
area code)
Securities registered pursuant to Section 12(b)
of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common stock, par value $0.0001 per share MDAI The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g)
of the Act:
None
Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
☒ No ☐
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☒
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. ☐
If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s
executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒
The aggregate market value of the registrant’s
common stock held by non-affiliates of the registrant was approximately $72.0 million based on the closing sales price on the Nasdaq Stock
Market LLC on June 30, 2025, the last business day of the registrant’s most recently completed second fiscal quarter.
As of March 23, 2026, there were 31,823,895 shares
of Common Stock, $0.0001 par value per share, issued and outstanding.
SPECTRAL AI, INC.
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2025
TABLE OF CONTENTS
Page
Part I.
Item 1. Business 1
Item 1.A. Risk Factors. 9
Item 1.B. Unresolved Staff Comments. 53
Item 1.C. Cybersecurity 53
Item 2. Properties 54
Item 3. Legal Proceedings 54
Item 4. Mine Safety Disclosures 54
Part II.
Item 6. [Reserved] 56
Item 7.A. Quantitative and Qualitative Disclosures about Market Risk 69
Item 8. Financial Statements and Supplementary Data 69
Item 9.A. Controls and Procedures. 69
Item 9.B. Other Information. 70
Item 9.C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspection. 70
Part III.
Item 10. Directors, Executive Officers and Corporate Governance 71
Item 11. Executive Compensation 71
Item 14. Principal Accountant Fees and Services 71
Part IV.
Item 15. Exhibits, Financial Statement Schedules F-1
i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
AND RISK FACTOR SUMMARY
This Annual Report on Form
10-K contains statements that are forward-looking and as such are not historical facts. This includes, without limitation, statements
under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our
financial position, business strategy and the plans and objectives of management for future operations. These statements constitute projections,
forecasts and forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words “anticipate,”
“believe,” “continue,” “could,” “estimate,” “expect,” “intends,”
“may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,”
“should,” “will,” “would” and similar expressions may identify forward-looking statements, but the
absence of these words does not mean that a statement is not forward-looking.
The forward-looking statements
contained in this Annual Report on Form 10-K are based on our current expectations and beliefs concerning future developments and their
potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These
forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may
cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These
risks and uncertainties include, but are not limited to, the following risks, uncertainties and other factors:
ii
iii
● The price of our Common Stock and Warrants may be volatile.
Should one or more of these
risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from
those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
iv
PART I.
References in this Annual Report on Form 10-K
(this “Annual Report”) to “we,” “us,” “our” or the “Company” are to Spectral
AI, Inc., a Delaware corporation. References to our “management” or our “management team” refer to our officers
and directors.
Item 1. Business Overview.
We are an AI company focused
on predictive medical diagnostics. Our DeepView System uses proprietary AI algorithms to distinguish between fully damaged, partially
damaged and healthy human tissue characters invisible to the naked eye, at the initial time point of wound presentation. The DeepView
System delivers a binary prediction on the wound’s capacity to heal or not-heal by a specified time point in the future. Our DeepView
System’s output is specifically engineered to assist the health care professional in making a more accurate, timely and informed
decision regarding the treatment of the patient’s wounds. Our focus is on our burn indication.
We were notified that our
DeepView System, comprised of the multispectral imaging (“MSI”) component integrated with the predictive AI-Burn®
software component, received United Kingdom Conformity Assessed (UKCA) marking for use in the United Kingdom for burn indications on February
22, 2024. The UKCA marking registration was fully completed on March 7, 2024. In 2026, we hope that our full DeepView System may achieve
Class II medical device designation with the United States Food and Drug Administration (FDA) via the De Novo application the Company
submitted in June of 2025. Subject to our receipt of additional necessary market authorization, our business will have two revenue streams,
a SaaS (software as a service) model component predicated on utilizing the regulatory method, a SaMD (software as a medical device) regulatory
framework, and the imaging device component. The SaaS component will feature a software licensing fee that includes maintenance, image
hosting, and access to algorithmic updates. The proprietary imaging device acquires the images for the AI algorithms and is a universal
platform to house multiple clinical indications including burn wound healing analysis and other tissue indication assessments. Pricing
for these components will be evaluated and strategically set per country and site-of-service for heightened customer adoption.
The MSI technology, which
comprises one part of the DeepView System, consists of patented proprietary multi-spectral optics and sensors, capturing injured tissue
images ranging from near UV lights, through the human visible wavelengths, into the near infrared range (NIR). The broad wavelength ranges
go beyond what the human eyes can see and capture what medical professionals cannot observe with their naked eyes. This wide range of
wavelength images contain wound tissue physiology and captures the viability of various biomarkers within the skin and from the injured
tissue spectral signatures. The imaging technology extracts appropriate clinical data and processes the image data to provide the injured
tissue spectral signatures to the AI model and algorithms. The AI algorithm classifies various severities of the injuries as (i) full
damaged (non-healing), or (ii) healthy tissue (healing) and displays a comparison of the original image next to an image with a color
overlay of the non-healing portions of the wound. The image acquisition takes 0.2 seconds, and all image processing and AI model classification
takes approximately 20 to 25 seconds. Our DeepView System’s proprietary optics can extract millions of pixels of data or AI model
features from each group of raw images. This information is then used to advance the algorithm optimization, which is trained and tested
against a proprietary and clinically validated database of over 340 billion pixels of image data. The DeepView-AI Burns®
software is used with the DeepView SnapShot® imaging device, and it is intended to be used as an adjunctive tool to aid
health care providers in the assessment of burn wound healing potential by differentiating non-healing from healing tissue within an image.
Below at Figure 1 is an example
of the DeepView System technological process.
Figure 1 — DeepView Imaging technology
1
To our knowledge, there are
no comparable digital wound healing predictive medical diagnostic products that provide clinicians with an objective and immediate assessment
of a wound’s future healing potential that benefit from the application of AI. Currently, healthcare professionals rely on
their experience and subjective assessments to determine if wounds, such as burn injuries, will heal (a) under routine care after a period
of time, typically several weeks, or (b) following the application of advanced wound care products and procedures including surgical interventions.
Our DeepView System allows health care professionals to make a “Day One” assessment of a wound’s healing potential over
time.
We have received substantial
financial support from the U.S. government for our DeepView System’s application for burn wounds, including from agencies such
as BARDA, which is part of the Department of Health and Human Services (“HHS”) Office of the Assistant Secretary for Preparedness
and Response (“ASPR”) in the United States, established to aid in securing the United States from chemical, biological,
radiological, and nuclear threats, as well as from pandemic influenza and emerging infectious diseases. We have also received funding
from the National Science Foundation (“NSF”), National Institute of Health (“NIH”) and the Defense Health Agency
(“DHA”) an agency within the Department of Defense (“DoD”). Since 2013, we have been awarded approximately $282.5 million
in funding from government contracts, substantially all of which is from BARDA, which accounts for $272.9 million. This has allowed
us to develop our technology and further our clinical trials. On September 27, 2023, the Company executed a new contract with BARDA,
providing the Company with additional funding of up to $150.0 million, including an initial award of approximately $54.9 million
to support the clinical validation and application for FDA De Novo status of our DeepView AI-Burn software. The contract also includes
options, similar to our prior BARDA contracts, with an additional total value of approximately $95.1 million which can be exercised
for additional product development, procurement and the expanded deployment of DeepView Systems at emergency rooms, trauma and burn centers.
These deployments will also enable the Company to conduct health economic and outcome research to support the broader clinical adoption
of the DeepView System. This grant funding is non-dilutive to our stockholders, and we believe it validates the important nature of our
mission and technology.
Subject to our receipt of
the necessary regulatory market authorizations, we intend to initially sell the DeepView System throughout the United States and
the UK for its burn indication. Given our receipt of the UKCA authorization for our burn indication we anticipate initial sales in UK
to begin in 2026. The sales channel for our burn indication will be supported by existing and future governmental contracts, primarily
from agencies such as BARDA and the DHA. In the United States, there are approximately 140 burn centers, 700 trauma centers and 5,400
federal and community hospitals with Emergency Rooms where burn patients are most likely to visit upon injuries. The DeepView System provides
a quick clinical diagnostic tool to the attending health care professional. It can be used to quickly assess the healing potential for
burn wounds so decisions regarding whether patients need routine care or should be transferred to trauma centers or burn centers for advanced
care and accurate surgical planning can be made in a much more timely manner. In the burn centers, the DeepView System provides an advanced
assessment of the non-healing areas of a burn. Therefore, we plan to target our sales efforts to these facilities through highly-trained
technical sales support staff that we plan to hire given the nature of DeepView as a truly disruptive AI driven predictive assistance
tool. For the DeepView System’s burn application and following receipt of any future contract awards, we plan to partner with the
U.S. governmental agency sponsors to implement the distribution of our DeepView System throughout the United States into key
regions to support the United States’ mass casualty countermeasure directives, with the goal of making our country better prepared
for mass casualty events and saving scarce healthcare resources.
As noted above, subject to
our receipt of the necessary regulatory market authorizations, our business is expected to have two revenue streams, a SaaS model component
predicated on utilizing the regulatory method, SaMD regulatory framework, and an imaging device component. The SaaS component will feature
a software licensing fee that includes maintenance, image hosting, and access to algorithmic updates. The capital sale component will
be competitively priced for acceptance into burn centers, independent practices, hospitals and clinics.
Furthermore, we would expect
to leverage results from the U.S. studies for a simultaneous conformity assessment procedure in the EU to obtain the CE marking of
conformity (“CE Mark”), and we would expect to commence post-market studies in the UK. Subject to our receipt of the necessary
regulatory market authorization, we would expect to initiate commercialization in the United States during 2026, in accordance with
the projected timeline for our BARDA contract.
Burn Indication
As part of the validation
study for our De Novo submission to the FDA, the Company has completed the enrollment of 164 patients, including 49 pediatric subjects. In
the validation study, the DeepView System has (a) shown superiority in sensitivity and, (b) with respect to specificity, met the
non-inferiority margin when compared to clinician assessment. These findings were corroborated by the AI model’s cross-validation
analysis in identifying non-healing burn regions. These results represent a significant improvement above the diagnostic accuracy
of burn physicians when assessing the same population. 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 both adult
and pediatric burn patients.
2
Our
proprietary and clinically validated database for burns is comprised of over 340 billion pixels of image data. This database presents
both a significant barrier to entry to would-be competitors in wound care healing assessment, and a potential additional commercial opportunity
for us to develop further in the future.
Other DeepView Programs in Development
Funding from the U.S. government
has also allowed us to develop additional “Horizon” indication uses of our DeepView System, including DeepView Snapshot M,
DeepView AI 3-D wound measurement technology, and other indications. We believe that our DeepView System’s use in emergency rooms,
trauma and burn centers and other would care facilities should be expanded to provide greater utility of the DeepView System in such settings.
DeepView SnapShot® M
In addition to our DeepView
System, our primary additional technology is the DeepView SnapShot M, a fully handheld, portable, and wireless diagnostic tool based on
the DeepView System’s AI platform. The DeepView SnapShot M provides a potential enhanced and expanded use for the U.S. government
and emergency care, first responders and potentially home health care professionals. On June 23, 2021, we were awarded a two-year,
$1.1 million, Sequential Phase II STTR contract by the DHA within the U.S. Department of Defense. This funding enables
us to research and develop the DeepView SnapShot M product primarily for military and combat settings. In April 2023, we were awarded
a $4.0 million grant from the Medical Technology Enterprise Consortium (“MTEC”), a 501I(3) biomedical technology
consortium working in partnership with the Department of Defense, to develop our DeepView SnapShot M device in a Phase III feasibility
and commercialization study. 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 September 2024, we received an additional $0.9 million from MTEC for further development
of the handheld device. In December 2025, the MTEC contract was amended to provide a no-cost extension to run through June 2026. In March
2024, we received an additional $0.5 million award from the Defense Health Agency to further this development. These grants, along with
prior awards from DHA, bring our funding total for our DeepView SnapShot M to over $7.2 million. The funding will be used to support military
battlefield burn diagnostic evaluations using DeepView SnapShot M.
3-D Wound Measurement Technology
We are also developing three-dimensional
(3D) software-based wound measurement technology for integration into our DeepView System. This technology is designed to deliver rapid,
accurate wound assessment by generating a three-dimensional representation of burn tissue, enabling high spatial precision in burn area
measurement without the use of externally placed reference markers — an advantage over certain existing technologies that rely on
such markers and may be limited in their ability to accurately assess burn area.
Our 3D wound measurement
technology calculates the percentage of total body surface area affected by burns (%TBSA) by automatically segmenting the burn area, applying
established body surface area estimation formulas, and producing a quantitative measurement output. In addition to improving %TBSA accuracy,
the technology is designed to enhance our multispectral imaging (MSI)-based capability to differentiate non-healing areas within large
burns, enabling more targeted and precise treatment decisions. Development of this technology is supported in part by financial funding
from the Biomedical Advanced Research and Development Authority (BARDA).
Business Focus and Milestones
Our current focus is to fulfill
our contractual obligations and meet milestones under our BARDA PBS contract (described in further detail below); and to pursue other
indications for the commercialization of the DeepView System in the UK, United States and EU. Our near-term goals related to the
BARDA PBS contract are to deliver on the current phase of the contract (Phase 1a), and to complete the remaining phases of the BARDA
PBS contract. Completion of these contractual phases support our long-term goal of entering a federal procurement contract with BARDA.
3
We submitted a De Novo application
to the FDA for market authorization of the burn application in June, 2025. In 2023, we received our ISO 13485:2016 certification for Medical
Devices. Our certification audits were completed in the first quarter of 2024 and the third quarter of 2025, without any exceptions. In
March 2024, Spectral completed its UKCA Mark registration for the full DeepView System for our burn indication.
DeepView in Practice
DeepView is a predictive
analytics platform that combines AI algorithms and MSI imaging for an assessment of wound healing potential. It is non-invasive, non-radiation,
non-laser and does not require the use of injectable dye. This integration can be characterized into four distinct components: DeepView
imaging, data extraction, AI model building and AI wound healing potential assessment. The DeepView AI®- Burn software
is used with the DeepView SnapShot® imaging device, and it is intended to be used as an adjunctive tool to aid health care
providers in the assessment of burn wound healing potential by differentiating non-healing from healing burned tissue within an image.
Figure 2 — Illustration of DeepView’s
binary decision assist output where the colored region marks the predicted non-healing portion of the wound.
The DeepView System is designed
to assist clinicians in making accurate, timely, and informed decisions regarding the treatment of the patient’s wound. DeepView
provides physicians with an immediate assessment of a burn wound’s healing potential with a binary outcome determination. The DeepView
System has (a) shown superiority in sensitivity and, (b) with respect to specificity, met the non-inferiority margin when compared
to clinician assessment. These findings were corroborated by the AI model’s cross-validation analysis in identifying non-healing
burn regions. These results represent a significant improvement above the diagnostic accuracy of burn physicians when assessing the
same population. 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 both adult and pediatric burn patients.
4
See the table below for an
analysis of the current DeepView System’s benefits to patient care:
Burn
Current Time to Decision 21 Days
DeepView Time to Decision Day 1
DeepView Estimated Cost savings ~$24,000 per stay
Key Strengths
We believe the following
key strengths will help us to maintain and grow our business going forward:
Market Leading Technology
We have developed proprietary
AI algorithms and imaging technology to assist clinicians to make more accurate and efficient treatment decisions in managing patient’s
wounds. This technology is the result of 13 years of research and development, thousands of hours of user feedback, and most
importantly, the continual commitment to ensuring that the output from DeepView answers a clinical question that is to meaningful physicians.
We own and control the entirety of our data pipeline. We only rely images and data that the DeepView System collects in a controlled clinical
environment and do not rely on stock images or databases for our algorithms. All optical technology has been developed in-house and is
specifically engineered to collect this imaging data. In September 2025, we were named to TIME’s World’s Top HealthTech Companies
2025 list. A current image of our cart-based DeepView System appears below in Figure 3.
Figure 3 — DeepView System
Unmet Clinical Need
The biggest unmet need for
clinicians treating burn wounds is the lack of a diagnostic tool that provides an objective wound healing determination on “Day
One.” The current standard of care treatment pathway for these wounds can be generally characterized by a subjective initial assessment
from the physician followed by multiple weeks of clinical observation to assess whether or not the wound responded to treatment.
Burn wounds are primarily staged by their penetration depth into the skin and involvement of tissues below the skin in severe cases. Burn
wounds are diagnosed by expert clinical opinion without the aid of objective diagnostic tools that provide a wound healing prediction.
Furthermore, the current methods of diagnosis rely on a “wait and see” approach that result in prolonged hospital stays and
costly delays in the delivery of definitive treatment. Our goal is to eliminate these costly delays between initial screening and the
delivery of a definitive treatment using AI algorithms applied to our proprietary multispectral wound images.
Significant Market Opportunity
Geography— DeepView
has the potential to service a large total addressable market. We estimate that there are over 57,000 sites of clinical care in which
the technology could be placed in the United States and over 20,000 sites across the UK and EU. For all geographies, these sites
include both acute inpatient hospitals and outpatient sites of care, which include physician offices. As we expand from the United States
into the UK and EU, we will consider follow-on markets for commercial expansion, including the Middle East, among others.
5
Pipeline Applications— Though
we are currently focused on the burn application for DeepView, there are other pipeline applications that we are considering for future
commercialization. As noted above, we have already received U.S. government funding for the development of our DeepView SnapShot
M fully handheld device for use in combat, military and home health care uses. In connection with our BARDA contract, we are working on
expanding the usage of the DeepView System to incorporate a wound and burn measurement diagnostic tool for clinicians. We have also
explored the technology’s potential for the assessment of in-patient soft tissue indications, wound bed preparedness, critical limb
ischemia, level of lower limb amputation selection, post-operative perfusion assessment for peripheral interventions, and additional military
applications. For all future pipeline applications, we believe that the foundational technology would remain constant, in that we will
leverage our data analytics algorithms to improve predictive analyses. With any new application, we would need to conduct one or more
clinical studies to collect enough patient data to appropriately support algorithm development for each new application. These new algorithms
could easily be uploaded to existing devices in the future. From a U.S. regulatory perspective, we believe that these follow-on applications
would all follow a 510(k) clearance process although, in some cases, we may need to follow the De Novo classification or premarket
approval pathway if we are not able to identify a predicate, or if use of the device for a new indication is classified as a Class III
device.
Existing and future revenue base from long
term U.S. Government Contracts — BARDA
On September 27, 2023,
the Company executed a new contract with BARDA, providing the Company with additional funding of up to $150.0 million, including
an initial award of approximately $54.9 million to support the clinical validation and application to the FDA for De Novo status
of our DeepView System. This includes the distribution of up to 30 DeepView Systems in various emergency rooms and burn centers to support
the clinical validation study. The contract also includes options, similar to our prior BARDA contracts, with an additional total value
of approximately $95.1 million which can be exercised for additional product development, procurement and the expanded deployment
of DeepView Systems at emergency rooms, trauma and burn centers. These deployments will enable the Company to conduct health economic
and outcome research to support the broader clinical adoption of the DeepView System. This grant funding is non-dilutive to our stockholders,
and we believe it validates the important nature of our mission and technology.
Significant Wound Data Repository from Artificial
Neural Network
Over 340 billion pixels
of proprietary image data have been acquired and utilized for the deep learning algorithms training. This presents a significant barrier
to entry to would-be competitors in wound care healing assessments. The data collection to clinical output, the flow, quality and control
of the data pipeline is managed entirely by us. Our DeepView System uses deep learning on its wound data repository to recognize patterns
and correlations of injured tissue spectral signatures to produce reliable and reasonable assessment for clinicians to make accurate and
faster treatment decisions. We believe that our strategic partnerships with various leading medical institutions and healthcare providers
in the United States and Europe will enable us to access high quality image data and build the world’s leading wound biopsy
tissue database. Our AI algorithms are designed and trained to the clinical “ground truth” that has been verified and vetted
by various U.S. government agencies and leading clinicians in their respective fields. They are currently being reviewed, but have
not yet been cleared by FDA.
Strategic Partnerships
We have developed strategic
partnerships with multiple clinical and academic partners. In the United States, we are currently engaged with leading research hospitals
that are enrolling subjects for our Burn AI training study and are engaged with external consultants to continue to develop our commercialization
strategy. In the EU and UK, we have partnered with key opinion leaders to provide us with greater knowledge in the wound care sector.
In July 2024, we entered into a memorandum of understanding with PolyNovo, Ltd. to assist in the expansion of our DeepView System throughout
Australia by utilizing the Australian Special Access Scheme. As of December 31, 2025, the Company was accepted into the Special Access
Scheme with and has delivered devices to three hospitals in Melbourne, Perth and Sydney. Our partnerships with these institutions provide
us with the opportunity to collaborate with leading wound care providers to develop effective early stage wound assessment technology.
We utilize these strategic partnerships to support the ongoing clinical validation studies we are using to develop our algorithmic model.
Each of our clinical study/trials include certain protocol requirements to ensure a uniform testing process for our technology.
6
Proven Experienced Management Team
Our board of directors and
senior management team have significant experience in the technology and healthcare sectors, with a track record of successful entrepreneurship,
operational acumen, strategic relationships and the ability to understand and navigate the complexities of healthcare. Our directors also
bring significant expertise from previous public company experience along with financial, governance and technical oversight.
Respected Advisory Board
We have established an Advisory
Board composed of industry experts and opinion leaders that will raise our profile. Its members provide us with external, industry-specific
perspectives and technical support.
Competition
To our knowledge, no other
predictive wound-healing diagnostic imaging technology is available to clinicians who treat wounds. DeepView’s competitive advantage
is that it is the only AI-enabled wound imaging technology that translates raw physiological data/images into an output that is directly
correlated to predictive wound healing.
Several companies have developed
wound imaging systems for wounds; however, these systems incorporate technology such as spatial frequency domain imaging, thermal imaging,
photographic documentation, hyperspectral imaging, and near-infrared imaging that provide physiologic data to the physician. Ultimately,
this physiologic data appears only to provide an indirect linkage to wound healing and does not display a binary result of “healing
vs. non-healing.” Furthermore, the majority of systems in the wound care space are merely documentation tools that record measurements
of the wound for health record purposes and still rely upon subjective clinician opinion for treatment decisions. The advent of a novel
technology such as the DeepView System not only has the potential to disrupt the therapeutic pathway within the wound care market, but
also to create a new diagnostic market for wound care that did not exist previously for clinics and physicians, subject to successful
development of the device and FDA marketing authorization. As noted above, although our previous DeepView Systems received 510(k) clearance,
and we have received FDA Breakthrough Device Designation clearance for our DeepView System, there can be no assurance that we will be
able to obtain market authorization in the US, UK or EU, especially as the Company seeks a De Novo clearance with the FDA.
Commercialization and Revenue Strategy
We intend to pursue the complete
development of our DeepView System and, if commercialization authorization is obtained from the FDA, to commercialize it on our own, or
potentially with a partner, in the United States and other regions including the UK and Australia. We intend to continue to expand
our sales and marketing teams and to hire appropriate additional staffing to build the necessary infrastructure and capabilities over
time for the United States, and abroad. Our sales efforts will begin in the regions where our devices are currently being used and
in concert with the terms of our existing BARDA contract. We expect to continue to expand our sales and marketing teams as we expand our
commercialization efforts in the near future.
United States
Subject to our receipt of
the necessary regulatory marketing authorization, we intend to market our DeepView System using internal and third-party resources to
inpatient and outpatient sites of care throughout the United States. As noted above, subject to our receipt of the necessary regulatory
marketing authorization, our business is expected to have two revenue streams, a SaaS (software as a service) model component predicated
on utilizing the regulatory method, SaMD (software as a medical device), and an imaging device component. The SaaS component will feature
a software licensing fee that includes maintenance, image hosting, and access to algorithm updates. The capital sale component will be
competitively priced for acceptance into independent practices and clinics.
7
Given our receipt of the
UKCA mark for our burn indication, commercial sales are expected to commence in 2026 for the burn indication in the UK. In the United
States, the Company will continue to perform under its new BARDA contract with respect to the burn indication and will receive significant
governmental funding prior to the expected receipt of FDA clearance of the DeepView System in the first half of 2026.
Reimbursement
We
expect to utilize our post-market clinical evidence and health economic impact analysis to submit to NHS for reimbursement for its Burn
indication in the United Kingdom. Upon more market penetration, we will apply for NICE certification. In the United States, we expect
the DeepView System will be used in both inpatient and outpatient sites of service. The process of reimbursement varies greatly between
the two. The DeepView burn indication will be used both in EDs and Burn Centers. As clinical evidence is developed and utilization increases
over the next several years, we plan to apply for CPTÒcodes.
Adoption
We view our DeepView technology
as disruptive by nature and there will be those who will be slow to adopt it. This emphasizes the importance of having the right strategic
partnerships, institutions, and physician key opinion leaders as early adopters. We plan to engage in relationships that can act as key
opinion leaders to share their experience on why they adopted the DeepView technology. The adoption will be supported by a team of field
clinical educators and digital marketing campaigns.
Manufacturing Arrangements
We currently outsource all
our manufacturing to a contract manufacturer. Cobalt Product Solutions (“Cobalt”), located in Plano, Texas, is involved with
manufacturing the current generation DeepView System and we anticipate that they will continue to do so for the foreseeable future.
In addition to Cobalt, we
partner with several other highly specialized contract manufacturers in the areas of optics, technology design, and electronics. We employ
experienced regulatory and quality control personnel to ensure that our manufacturing processes and quality management systems comply
with FDA and EU regulations and standards. As we expand into the European market, we will most likely consider manufacturing devices in
the EU in preparation for commercialization. We do not have any plans to develop our own manufacturing facility currently.
Intellectual Property
We strive to protect and
enhance the proprietary technologies that we believe are important to our business by seeking patents to cover our technology. We also
rely on trade secrets to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent
protection.
Our technology is protected
with issued and/or allowed patents across nine families of active patents:
● Burn/Wound Classification on MSI and photoplethysmography (“PPG”);
● Tissue classification on MSI and PPG;
● Amputation site analysis on MSI, ML and healthcare matrix;
● High-precision, multi-aperture, MSI snapshot imaging;
● Wound assessment based on MSI;
● Burn/histology assessment based on MSI and ML;
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● High-precision, single-aperture MSI snapshot imaging; and
● Topological characterization and assessment of tissues using MSI and ML
As of December 31, 2025 we
had 13 issued and allowed U.S. patents with 5 U.S. patent applications pending. We have 21 issued and allowed international
patents with 23 foreign and international patent applications pending.
In addition, we support the
development of our brand and product offerings through trademark protection at the United States Patent and Trademark Office. As
of December 31, 2025, we maintain a portfolio of 47 trademarks and 11 trademark applications pending relating to our DeepView System product
offerings. Our trademarks and pending trademark applications are spread over nine jurisdictions mostly in the UK the EU and China. 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. We will continue to look to
protect our intellectual property in the United States, UK and the EU as those are the first commercial markets for our products
and rely on third party experts to assist in doing this.
Facilities
Our corporate headquarters
is located in Dallas, Texas, where we occupy approximately 11,000 square feet of space under a lease agreement. In April 2024, the Company
executed an extension of its existing lease agreement for our corporate headquarters which expires on February 29, 2028.
Human Capital Resources and Employees
We employ a growing and highly
skilled employee base, including our sales force, and promote a culture of innovation to continuously iterate and enhance our products,
systems and commercial footprint. Our human capital objectives include, as applicable, identifying, recruiting, retaining, incentivizing
and integrating our existing and additional employees.
We continued to expand our
workforce in 2024 as we continue to build a focused and highly-skilled team. At December 31, 2025 had 65 full-time employees in the United States
and UK. In 2026, we anticipate new hires will be made in all areas, in particular in operations, sales, marketing, and government contracts.
This will further enable us to meet our commercialization, marketing, technology, IP, clinical and regulatory goals in 2026 and beyond.
We have designed and implemented
our cash and stock compensation programs to attract, motivate, and retain our employees. We regularly review our compensation structure
to ensure that we remain competitive, reward top performance, and ensure internal equity, while maintaining proper fiscal governance.
Our compensation packages are designed based on market benchmarks. We offer robust benefits package including health (medical, dental
and vision) insurance, paid time off, paid parental leave, a retirement plan and life and disability coverage.
Available Information
Our internet address is www.spectral-ai.com.
Our website and the information contained therein or linked thereto are not part of this Annual Report. We make available free of charge
through our internet website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements,
registration statements and amendments to those reports filed or furnished pursuant to the Exchange Act as soon as reasonably practicable
after we electronically file such material with, or furnish them to the SEC. The SEC maintains a website that contains reports, proxy
statements and other information regarding issuers that file electronically with the SEC. These materials may be obtained electronically
by accessing the SEC’s website at www.sec.gov.
Item 1.A. Risk Factors.
Investing in our securities
involves risks. Before you make a decision to buy our securities, in addition to the risks and uncertainties discussed above under “Cautionary
Note Regarding Forward-Looking Statements,” you should carefully consider the specific risks set forth herein. If any of these
risks actually occur, it may materially harm our business, financial condition, liquidity and results of operations. As a result, the
market price of our securities could decline, and you could lose all or part of your investment. Additionally, the risks and uncertainties
described in this prospectus or any prospectus supplement are not the only risks and uncertainties that we face. We may face additional
risks and uncertainties that are not presently known to us, or that we currently deem immaterial, which may also impair our business,
prospects, financial condition or operating results. 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.
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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 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. 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.
On September 27, 2023,
the Company executed a new contract with BARDA, providing the Company with additional funding of up to $150.0 million, including
an initial award of approximately $54.9 million to support the clinical validation and FDA clearance of our DeepView System. The
Company will utilize its existing cash balance and the initial award from BARDA for its near-term liquidity and operating needs. 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.
We do not know whether or
when we will become profitable. Our ability to generate revenue and achieve profitability will depend upon our ability, alone or with
others, to complete the development of our DeepView System, including receipt of the necessary regulatory clearances, approvals, or classifications
and thereafter to successfully commercialize our DeepView System. We may be unable to achieve these goals. We may also encounter unforeseen
expenses, difficulties, complications, delays and other known and unknown factors and risks frequently experienced by medical device companies
in rapidly evolving fields. In addition, the Company’s ability to develop its DeepView System for multiple indications requires
research and development costs that may exceed the Company’s current cash balance. The Company may need to seek additional equity
or debt investments to meet its projected operating costs for the timely development of the DeepView System. To the extent additional
capital is necessary, there are no assurances that we will be able to raise additional capital on favorable terms or at all, and therefore
we may not be able to execute our business plan. In addition, as a U.S. public company, we incur significant legal, accounting and
other expenses. Accordingly, we expect to continue to incur significant operating losses for the foreseeable future and we cannot assure
you that we will achieve profitability in the future or that, if we do become profitable, we will sustain profitability. Our failure to
achieve and sustain profitability in the future will make it more difficult to finance the capital requirements needed to operate our
business and accomplish our strategic objectives, which would have a material adverse effect on our business, financial condition and
results of operations, and cause the market price of our common stock to decline.
We are devoting a significant portion of
our efforts towards research and development of our DeepView System.
Our business, prospects,
results of operations and financial condition depend upon our ability, alone or with others, to complete the development of our DeepView
System, including receipt of the necessary regulatory clearances, approvals, or classifications and thereafter to successfully commercialize
our DeepView System. In addition, though we are currently focused on the burn application for DeepView, there are other pipeline applications
that we are considering for future commercialization. However, we may be unable to achieve these goals. Approval or clearance from the
FDA and comparable regulatory bodies may never be obtained. We also may encounter unforeseen expenses, difficulties, complications, delays
and other known and unknown factors and risks frequently experienced by medical device companies in rapidly evolving fields. 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.
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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 ability
to achieve these depends on numerous factors, including the factors described in this “Risk Factors” section, many
of which may not be within our control. Our inability to achieve our milestones and timelines could have a material adverse impact on
our business, prospects, results of operations and financial condition.
We depend on government funding, which if
lost or reduced, could have a material adverse effect on our research and development activities and our ability to commercialize our
DeepView technology. Our largest contract is with BARDA and is the largest single source of revenue for us. Our BARDA contract is not
guaranteed to be extended.
We have not made any commercial
sales of our DeepView System. We receive almost all of our revenue from fees and costs payable by BARDA, and to a lesser extent the Defense
Health Agency (“DHA”) of the United States Department of Defense. We currently have agreements with each of BARDA and
the DHA to support continued development of the next generation of our DeepView technology. While we believe we have very good working
relationships with BARDA and DHA, the loss of one or both of our contracts with BARDA and DHA would have an adverse impact on our business,
prospects, results of operations and financial condition. While we expect diversification of customers in future years, assuming
we are able to obtain the necessary regulatory clearances, approvals, De Novo classifications, or certifications (each of which cannot
be guaranteed and may take longer than planned) to commercialize our product, for the time being we are substantially dependent on funding
from BARDA and DHA.
Our BARDA contract is the
largest single source of revenue for us. On September 27, 2023, the Company executed a new contract with BARDA, providing the Company
with additional funding of up to $150.0 million, including an initial award of approximately $54.9 million to support the clinical
validation and FDA clearance of our DeepView System, in place of the prior contract Option 2 award which was approximately $21.9 million.
The contract also includes options, similar to our prior BARDA contracts, with an additional total value of approximately $95.1 million
which can be exercised for additional product development, procurement and the expanded deployment of DeepView Systems at emergency rooms,
trauma and burn centers. While we currently have no reason to believe that we will fail to achieve these contract milestones and decision
gates or that these further options will not be exercised, and while the BARDA contract has been renewed or extended historically, there
is no guarantee that the BARDA contract will be renewed or extended in the future, and there are no assurances that we will achieve the
contract milestones and decision gates on a timely basis, or at all. As the BARDA contract is significant to us and is our largest single
source of revenue, a decision by BARDA not to exercise further options would have a material adverse impact on our business, prospects,
results of operations and financial condition.
Under the terms of the BARDA
contract, the U.S. government has the right to terminate the contract for convenience or to terminate for default if we fail to meet
our obligations as set forth in the contract. While the government has a right to terminate the BARDA contract for convenience, we believe
that the government generally does not terminate funding awards unless there is reason, such as the funding contract becomes too costly,
the agency seeks to avoid a dispute with another branch of government, or the agency decides to restructure its contractual arrangements
and perform work in-house. We believe it is unlikely that BARDA will terminate its contract with us. However, there can be no guarantee
that the BARDA contract will not be terminated.
If BARDA were to terminate
its contract with us, we may be entitled to settlement costs for payment for work already performed, but not yet paid, including costs
incurred in anticipation of performance, and costs arising from termination and settling the termination, for example. 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. 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. Department of Defense, which is paid to us monthly, as well as a STTR Phase I
and initial Phase II contract from the DHA.
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Though the Company has no
reason to believe that it will not be offered a Phase III contract, and while DHA contracts have been renewed or extended historically,
there is no guarantee that the contract will be extended after the current period or that we will be offered a Phase III contract.
As this contract is a key contract for the Company, non-extension of the contract, or a failure to enter into a new contract, could have
a material adverse impact on the Company’s business, prospects, results of operations and financial condition. Under the terms of
the DHA contract, the U.S. government has the right to terminate the contract for convenience or to terminate for default if we fail
to meet our obligations as set forth in the contract.