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ROSECLIFF ACQU(RCLF) - 2024 Q2 - Quarterly Report
RCLFROSECLIFF ACQU(RCLF)2024-08-12 20:00

Funding and Government Contracts - The company has received approximately 280.2millioninfundingawardsfromgovernmentcontractssince2013,primarilyfromBARDA,whichaccountsfor280.2 million in funding awards from government contracts since 2013, primarily from BARDA, which accounts for 272.9 million[132]. - The company executed a multi-year Project BioShield agreement with BARDA in September 2023, valued at up to approximately 150.0million,includinganinitialawardofnearly150.0 million, including an initial award of nearly 54.9 million[133]. - The Company secured a multi-year PBS BARDA Contract valued at approximately 150.0million,withaninitialawardofnearly150.0 million, with an initial award of nearly 54.9 million for clinical validation and FDA clearance of DeepView[174]. - The Company received a 4.0milliongrantundertheMTECAgreementfordevelopingahandheldversionoftheDeepViewSystem,expectedtobecompletedbyApril2025[175].FinancialPerformance−ResearchanddevelopmentrevenueforthethreemonthsendedJune30,2024,was4.0 million grant under the MTEC Agreement for developing a handheld version of the DeepView System, expected to be completed by April 2025[175]. Financial Performance - Research and development revenue for the three months ended June 30, 2024, was 7.5 million, compared to 4.3millionforthesameperiodin2023,representinga76.54.3 million for the same period in 2023, representing a 76.5% increase[141]. - Gross profit for the three months ended June 30, 2024, was 3.3 million, with a gross margin of 44.3%, compared to a gross profit of 1.8millionandagrossmarginof42.11.8 million and a gross margin of 42.1% in 2023[141]. - The company reported an operating loss of 2.4 million for the three months ended June 30, 2024, an improvement from a loss of 3.0millioninthesameperiodof2023[141].−Thecompanyreportedanetlossof3.0 million in the same period of 2023[141]. - The company reported a net loss of 2.9 million for the three months ended June 30, 2024, compared to a net loss of 3.1millionin2023;forthesixmonths,thenetlosswas3.1 million in 2023; for the six months, the net loss was 6.1 million, down from 6.7millionin2023[154].−AdjustedEBITDAforthethreemonthsendedJune30,2024,was6.7 million in 2023[154]. - Adjusted EBITDA for the three months ended June 30, 2024, was (2.0) million, an improvement from (2.6)millionin2023;forthesixmonths,itwas(2.6) million in 2023; for the six months, it was (3.9) million, compared to (5.2)millionin2023[169].−Generalandadministrativeexpensesincreasedto(5.2) million in 2023[169]. - General and administrative expenses increased to 5.8 million for the three months ended June 30, 2024, a 20.4% rise from 4.8millionin2023;forthesixmonths,expenseswere4.8 million in 2023; for the six months, expenses were 10.8 million, up 10.0% from 9.9millionin2023[159].−Cashusedinoperatingactivitiesincreasedbyapproximately9.9 million in 2023[159]. - Cash used in operating activities increased by approximately 2.5 million for the six months ended June 30, 2024, totaling 8.0millioncomparedto8.0 million compared to 5.5 million in the same period of 2023[178][179]. - Net cash provided by financing activities increased by approximately 10.6millionforthesixmonthsendedJune30,2024,totaling10.6 million for the six months ended June 30, 2024, totaling 10.1 million compared to a net cash used of 0.5millionin2023[180].−Thecompanyhadapproximately0.5 million in 2023[180]. - The company had approximately 6.9 million in cash as of June 30, 2024, with notes payable of 8.0millionandnolong−termdebt[170].ProductDevelopmentandCommercialization−Thecompanyhasnotgeneratedanyproductrevenuetodate,focusingonresearchanddevelopmentfortheDeepViewSystem[132].−TheDeepViewSystemisexpectedtobegincommercializationactivitiesintheUKinthesecondhalfof2024followingthereceiptoftheUKCAmark[129].−ThecompanyanticipatestworevenuestreamsfromtheDeepViewSystem:asoftwareasamedicaldevicemodelandanimagingdevicecomponent[135].InflationandEconomicRisks−Recentinflationhasincreasedthecostofresearchanddevelopmentaswellasoperatingcosts[198].−Significantinflationarypressuresmayadverselyaffectthecompany′sabilitytomaintaincurrentlevelsofgrossmargin[198].−Thecompanymayfacechallengesinmanagingselling,general,andadministrativeexpensesduetoinflation[198].−Inabilitytorespondquicklytoinflationcouldharmthecompany′scashflowsandoperationalresultsinthefuture[198].CorporateStructureandSubsidiaries−ThebusinesscombinationwithRosecliffAcquisitionCorpIwascompletedonSeptember11,2023,resultinginthecompanybeingrenamedSpectralAI,Inc.[136].−TheCompanyformedanewsubsidiary,SpectralIP,toacquireAIintellectualproperty,receivinga8.0 million and no long-term debt[170]. Product Development and Commercialization - The company has not generated any product revenue to date, focusing on research and development for the DeepView System[132]. - The DeepView System is expected to begin commercialization activities in the UK in the second half of 2024 following the receipt of the UKCA mark[129]. - The company anticipates two revenue streams from the DeepView System: a software as a medical device model and an imaging device component[135]. Inflation and Economic Risks - Recent inflation has increased the cost of research and development as well as operating costs[198]. - Significant inflationary pressures may adversely affect the company's ability to maintain current levels of gross margin[198]. - The company may face challenges in managing selling, general, and administrative expenses due to inflation[198]. - Inability to respond quickly to inflation could harm the company's cash flows and operational results in the future[198]. Corporate Structure and Subsidiaries - The business combination with Rosecliff Acquisition Corp I was completed on September 11, 2023, resulting in the company being renamed Spectral AI, Inc.[136]. - The Company formed a new subsidiary, Spectral IP, to acquire AI intellectual property, receiving a 1.0 million investment from an affiliate of its largest shareholder[183]. Risk Factors - The company is highly dependent on U.S. governmental contract awards for revenue, which may lead to inconsistencies in operating results[146]. - The company is exposed to credit risk, with a significant portion of research and development revenue coming from a single U.S. government agency[197]. - The change in fair value of warrant liability increased by $0.4 million for the three and six months ended June 30, 2024, reflecting changes in the fair value of the Public Warrants issued in September 2023[163].