Filed Pursuant to Rule 424(b)(5)
Registration No. 333-282681
PROSPECTUS SUPPLEMENT
(To Prospectus dated October 31, 2024)
270,900 shares
Spectral AI, Inc.
Common Stock
We are offering in a
registered direct offering to certain existing investors in the United Kingdom (the “Investors”) 270,900 shares (the
“Shares”) of our common stock, $0.0001 par value per share (our “Common Stock”), at an offering price of
$1.66. This offering is part of the existing offering relating to our prospectus dated October 31, 2024. Investors have an option (the “Option”) to purchase additional Shares up to the lesser of (i) $5,000,000 in
aggregate proceeds or (ii) the remaining available capacity based on one-third of our public float pursuant to General Instruction
I.B.6 of Form S-3 (as described herein). In the event the Option is exercised, the price of any Shares sold shall be the lesser (x)
the closing price of our Common Stock on the previous trading day or (y) the 5-day volume-weighted average price of our Common
Stock. Each of the securities offered to the Investors will be issued pursuant to this prospectus supplement, the accompanying base
prospectus, and a securities purchase agreement, dated December 6, 2024, by and among us and the Investors (the “Securities
Purchase Agreement”).
We have engaged SP Angel Corporate
Finance LLP (the “placement agent”) to act as our exclusive placement agent in connection with this offering. The placement
agent has agreed to use its reasonable best efforts to arrange for the sale of the securities offered by this prospectus. The placement
agent is not purchasing or selling any of the securities we are offering, and the placement agent is not required to arrange the purchase
or sale of any specific number or dollar amount of securities. We have agreed to pay placement agent fees to the placement agent as set
forth in the table below, which assumes that we sell all of the securities offered by this prospectus. See “Plan of Distribution”
on page S-12 of this prospectus for more information regarding these arrangements.
Our Common Stock is traded
on The Nasdaq Capital Market (“Nasdaq”) under the symbol “MDAI.” On December 6, 2024 the closing price for our
Common Stock, as reported on Nasdaq, was $2.09 per share.
As of December 4, 2024,
the aggregate market value of our outstanding Common Stock held by non-affiliates, or public float, was approximately $26.1 million,
based on 20,753,698 shares of outstanding Common Stock, of which approximately 8,242,396 shares were held by affiliates, and a price
of $2.09 per share, which was the price at which our Common Stock was last sold on Nasdaq on December 6, 2024. We have not sold any
securities pursuant to General Instruction I.B.6 of Form S-3 during the prior 12-calendar month period that ends on and includes the
date of this prospectus supplement (excluding this offering and the offering on November 20, 2024). Accordingly, based on the
foregoing, we are currently eligible under General Instruction I.B.6 of Form S-3 to offer and sell shares of our Common Stock having
an aggregate offering price of up to approximately $8.5 million. Pursuant to General Instruction I.B.6 of Form S-3, in no event will
we sell securities in a public primary offering with a value exceeding one-third of our public float in any 12-month period so long
as our public float remains below $75.0 million.
Investing in our common
stock involves a high degree of risk. See “Risk Factors” on page S-5 of this prospectus supplement and the accompanying base
prospectus, as well as the risk factors incorporated by reference into this prospectus supplement and accompanying base prospectus for
a discussion of the factors you should carefully consider before deciding to purchase these securities.
Neither the Securities
and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus
supplement or accompanying base prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
| |
Per Share of Common Stock | | |
Total | |
Public offering price | |
$ | 1.66 | | |
$ | 449,694 | |
Placement agent fees(1) | |
$ | 0.12 | | |
$ | 31,478 | |
Proceeds to us, before expenses | |
$ | 1.54 | | |
$ | 418,215 | |
(1) |
We have agreed to reimburse the placement agents for certain of their offering-related expenses. See “Plan of Distribution” for additional information regarding placement agent fees and estimated expenses. |
The delivery to purchasers of the securities offered
and sold in this offering is expected to be made on or about December 9, 2024, subject to satisfaction of certain customary closing conditions.
The date of this prospectus supplement is December
9, 2024
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PROSPECTUS
ABOUT THIS PROSPECTUS SUPPLEMENT
This prospectus supplement
and the accompanying base prospectus are part of a registration statement on Form S-3 (File No. 333-282681) that we filed with the Securities
and Exchange Commission (the “SEC”) on October 16, 2024, and that was declared effective by the SEC on October 31, 2024 using
a “shelf” registration process. This document is in two parts. The first part is this prospectus supplement, which describes
the specific terms of this offering and also adds to and updates information contained in the accompanying base prospectus and the documents
incorporated by reference herein. The second part, the accompanying base prospectus, provides more general information, some of which
may not apply to this offering. Generally, when we refer to this prospectus, we are referring to both the prospectus supplement and the
accompanying base prospectus combined. To the extent there is a conflict between the information contained in this prospectus supplement
and the information contained in the accompanying base prospectus or any document incorporated by reference therein filed prior to the
date of this prospectus supplement, you should rely on the information in this prospectus supplement. If any statement in one of these
documents is inconsistent with a statement in another document having a later date—for example, a document incorporated by reference
in the accompanying base prospectus—the statement in the document having the later date modifies or supersedes the earlier statement.
We further note that the representations,
warranties and covenants made by us in any agreement that is filed as an exhibit to any document that is incorporated by reference herein
were made solely for the benefit of the parties to such agreement, including, in some cases, for the purpose of allocating risk among
the parties to such agreements, and should not be deemed to be a representation, warranty or covenant to you. Moreover, such representations,
warranties or covenants were accurate only as of the date when made. Accordingly, such representations, warranties and covenants should
not be relied on as accurately representing the current state of our affairs.
You should rely only on the
information contained in this prospectus supplement or the accompanying base prospectus or incorporated by reference herein or therein.
We have not authorized, and the placement agent has not authorized, anyone to provide you with information that is different. The information
contained in this prospectus supplement or the accompanying base prospectus or incorporated by reference herein or therein is accurate
only as of the respective dates thereof, regardless of the time of delivery of this prospectus supplement and the accompanying base prospectus
or of any sale of our securities.
This prospectus supplement
and the accompanying base prospectus contain summaries of certain provisions contained in some of the documents described herein, but
reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual
documents. Copies of some of the documents referred to herein have been filed, will be filed or will be incorporated herein by reference
as exhibits to the registration statement, and you may obtain copies of those documents as described below in the section entitled “Where
You Can Find More Information.”
It is important for you to
read and consider all information contained in this prospectus supplement and the accompanying base prospectus, including the documents
incorporated by reference herein and therein, in making your investment decision. You should also read and consider the information in
the documents to which we have referred you in the sections entitled “Where You Can Find More Information” and “Incorporation
of Certain Information By Reference” in this prospectus supplement and in the accompanying base prospectus, respectively.
This prospectus supplement
and the accompanying base prospectus contain and incorporate by reference market data and industry statistics and forecasts that are based
on independent industry publications and other publicly-available information. Although we believe these sources are reliable, we do not
guarantee the accuracy or completeness of this information and we have not independently verified this information. Although we are not
aware of any misstatements regarding the market and industry data presented in this prospectus supplement, accompanying base prospectus
or the documents incorporated herein by reference, these estimates involve risks and uncertainties and are subject to change based on
various factors, including those discussed in the section entitled “Risk Factors” in this prospectus supplement and the accompanying
base prospectus, and under similar headings in the other documents that are incorporated by reference herein and therein. Accordingly,
investors should not place undue reliance on this information.
We are offering to sell, and
seeking offers to buy, the securities offered by this prospectus supplement only in jurisdictions where offers and sales are permitted.
The distribution of this prospectus supplement and the accompanying base prospectus and the offering of the securities offered by this
prospectus supplement in certain jurisdictions may be restricted by law. Persons outside the United States who come into possession of
this prospectus supplement and the accompanying base prospectus must inform themselves about, and observe any restrictions relating to,
the offering of the securities and the distribution of this prospectus supplement and the accompanying base prospectus outside the United
States. This prospectus supplement and the accompanying base prospectus do not constitute, and may not be used in connection with, an
offer to sell, or a solicitation of an offer to buy, any securities offered by this prospectus supplement and the accompanying base prospectus
by any person in any jurisdiction in which it is unlawful for such person to make such an offer or solicitation.
Unless the context otherwise
indicates, references in this prospectus to, “Spectral,” “the Company,” “we,” “our,” or
“us” mean Spectral AI, Inc., a Delaware corporation.
PROSPECTUS SUPPLEMENT SUMMARY
This summary highlights
certain information about us and certain information contained elsewhere in this prospectus supplement, in the accompanying base prospectus
and in the documents incorporated by reference herein and therein. This summary is not complete and does not contain all of the information
that you should consider before making an investment decision. For a more complete understanding of the Company, you should read and
consider carefully the more detailed information included in this prospectus supplement and the accompanying base prospectus, including
the factors described under the heading “Risk Factors,” on page S-5 of this prospectus supplement, the “Risk Factors”
section beginning on page 4 of the accompanying base prospectus as well as the information incorporated herein and therein by reference,
before making an investment decision.
Overview of the Company
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 wounds 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 physician in making a more accurate, timely and informed decision regarding the treatment
of the patient’s wounds. Our focus from 2013 through 2021 was on the burn indication. In 2022, we expanded our focus to include
the DFU indication.
Spectral
AI is devoting substantially all of its efforts towards research and development of its DeepView® Wound Imaging System,
currently focused on burn wounds and diabetic foot ulcer (“DFU”) indications, specifically engineered to allow physicians
to make a more accurate, timely and informed decision for treatment options. The Company has not generated any product revenue to date.
The Company currently generates revenue from contract development and research services by providing such services to governmental agencies,
primarily to the Biomedical Advanced Research and Development Authority (“BARDA”) and under a contract with the Medical Technology
Enterprise Consortium (“MTEC”).
In September 2023, the Company
executed its third contract with BARDA for a multi-year Project BioShield (“PBS”) contract, valued at up to approximately
$150.0 million (the “PBS BARDA Contract”). 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.
Under this contract, the Company furthered the DeepView System design, developed the AI algorithm, and took steps to obtain FDA approval.
In
April 2023, the Company received a $4.0 million grant from MTEC for a project that is expected to be completed by April 2025 (the “MTEC
Agreement”). 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. 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. In September 2024, the Company received an additional $800,000 from MTEC for the further development of the handheld
device.
On March 7, 2024, the Company
formed a new wholly-owned subsidiary, Spectral IP, Inc., a Delaware corporation (“Spectral IP”), to be utilized to advance
artificial intelligence intellectual property with a specific emphasis on healthcare. On March 19, 2024, Spectral IP entered into a promissory
note with SIM Tech Licensing, LLC, an affiliate of the Company (“SIM Tech”), in the principal amount of $1,000,000 (the “Promissory
Note”). The Promissory Note accrued interest at 8% per annum, and was payable upon the earliest to occur of (a) March 18, 2025,
(b) a Liquidation Event (as such term is defined in the Promissory Note) or upon an Event of Default (as such term is defined in the Promissory
Note).
On August 28, 2024, SIM Tech
assigned the Promissory Note to IP Protocol, LLC (“IP Protocol”), an affiliated entity through common ownership, in which
IP Protocol received all of the rights of SIM Tech with respect to the Promissory Note. On October 1, 2024, the Promissory Note was amended
to (i) reduce the annual interest rate from 8% to 4%, (ii) extend the term of the Promissory Note through the second anniversary of the
issuance date, March 18, 2026, (iii) include a conversion feature at the option of either IP Protocol or the Company to convert the then
outstanding principal and accrued but unpaid interest into shares of the Company at any time (into such number of shares calculated by
taking a five percent (5.00%) discount to the closing price of the Company’s common stock on the day prior to the date of notice
to the Company of the exercise of the conversion right) and at maturity, respectively, and (iv) provide for registration rights of any
shares of the Company issued in satisfaction of the outstanding obligations.
IP Protocol or the Company
has the right to provide notice (the “Notice”) to the other party, to convert the outstanding principal and accrued but unpaid
interest (the “Total Outstanding Obligations”) into shares of the Company calculated by dividing the conversion amount of
the Total Outstanding Obligations by the “Share Price.” The Share Price shall equal that number calculated by taking a five
percent (5.0%) discount to the closing price of common stock of the Company on the day prior to the date the Notice is delivered to the
Company.
Corporate History
Spectral AI, Inc., a Delaware
corporation formerly known as Rosecliff Acquisition Corp I (“Rosecliff”) was formed as a blank check company on November 17,
2020. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization
or similar business combination with one or more businesses.
On September 11, 2023, the
Company consummated a business combination (the “Business Combination”), pursuant to the business combination agreement dated
April 11, 2023 by and among the Company, Ghost Merger Sub I, a Delaware Corporation, Ghost Merger Sub II, a Delaware corporation and Spectral
MD Holdings, Ltd., a Delaware corporation incorporated on March 9, 2009 and headquartered in Dallas, Texas (“Legacy Spectral”).
Upon closing of the Business Combination (the “Closing”), in sequential order: (a) Ghost Merger Sub I merged with and into
the Legacy Spectral, with Legacy Spectral continuing as the surviving company as a wholly owned subsidiary of the Company (the “Spectral
Merger”) and then, (b) Legacy Spectral merged with and into Ghost Merger Sub II (renamed Spectral MD Holdings LLC) (the “SPAC
Merger”, together with the Spectral Merger (the “Business Combination”)), with Ghost Merger Sub II surviving the SPAC
Merger as a direct wholly-owned subsidiary of the Company. See Note 3. Upon the Closing, the Company changed its name from Rosecliff to
Spectral AI, Inc.
In conjunction with the Business
Combination, the Company cancelled the redeemable warrants that it issued to Rosecliff Acquisition Sponsor I LLC, a Delaware limited liability
company (the “Sponsor”), in a private placement in connection with the Company’s initial public offering on February
17, 2021 (the “Initial Public Offering”) at Closing, but the 8,433,333 redeemable warrants issued to the public in the Initial
Public Offering (the “Public Warrants”) remain outstanding.
Prior
to the Business Combination, Rosecliff had 280,485 shares of Class A common stock, par value
$0.0001 per share, issued and outstanding and held by public shareholders (the “Public Shares”) and 6,325,000 shares of Class
B common stock, par value $0.0001 per share, issued and outstanding and held by the Sponsor (the “Sponsor Shares”). Upon the
Closing, 5,445,000 of the Sponsor Shares were forfeited, in accordance with a letter agreement with the Sponsor, and the remaining 880,000
Sponsor Shares and 280,485 Public Shares, no longer designated Class A and Class B, were included in shares of the Company’s common
stock, par value $0.0001 per share (the “Company Common Stock”).
Prior to the Business Combination,
Legacy Spectral’s shares of common stock, par value $0.001 per share (“Legacy Spectral Common Stock”) were listed on
the AIM market on the London Stock Exchange (delisted on September 7, 2023). In September 2023,
prior to the Closing, Legacy Spectral issued 7,679,198 shares of Legacy Spectral Common Stock to certain investors in a private placement,
in exchange for $3.4 million (the “Equity Raise”). Upon the Closing, all of Legacy
Spectral’s issued and outstanding 145,380,871 shares of Legacy Spectral Common Stock, including the shares from the Equity Raise,
were exchanged for 14,094,450 shares of Company Common Stock at an exchange ratio of 10.31 (the “Exchange Ratio”), meaning
that the Company issued one share of Company Common Stock in exchange for 10.31 shares of Legacy Spectral Common Stock.
On
September 12, 2023, the Company began trading the Company Common Stock and the Public Warrants on the Nasdaq under the symbols “MDAI”
and “MDAIW”, respectively. Prior to the Business Combination, the Company’s shares of Company Common Stock and
Public Warrants were listed on the Nasdaq under the symbols “RCLF” and “RCLFW”, respectively.
Implications of Being
an Emerging Growth Company and Smaller Reporting Company
We
are an emerging growth company, as defined in the JOBS Act. The JOBS Act provides that an emerging growth company can take advantage of
an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company
to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected to
use the extended transition period under the JOBS Act for the adoption of certain accounting standards until the earlier of the date we
(i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided
in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply more promptly with new or revised
accounting pronouncements as of public company effective dates.
In
addition, as an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise
applicable generally to public companies. 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” in the base prospectus; |
| ● | 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; and |
| ● | exemptions
from the requirements of holding non-binding advisory votes on executive compensation or golden parachute arrangements. |
We
may take advantage of these provisions until the last day of the fiscal year ending after the fifth anniversary of the Company’s
initial public offering or such earlier time that we no longer qualify as an emerging growth company. We will cease to qualify as an emerging
growth company on the date that is the earliest of: (i) December 31, 2026; (ii) the last day of the fiscal year in which we have more
than $1.235 billion in total annual gross revenues; (iii) the date on which we are deemed to be a “large accelerated filer”
under the rules of the SEC, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as
of the prior June 30th and we have been a public company for at least 12 months and have filed one annual report on Form 10-K; or (iv)
the date on which we have issued more than $1.0 billion of non-convertible debt over the prior three-year period. We may choose to take
advantage of some but not all of these reduced reporting burdens. Accordingly, the information contained herein may be different than
you might obtain from other public companies in which you hold equity interests.
We are also a “smaller
reporting company.” If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue
to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller
reporting company, we may choose to present only the two most recent fiscal years of audited consolidated financial statements in our
Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations
regarding executive compensation.
Recent Developments
In September 2024, we received
a letter with a draft Particulars of a Complaint from Stifel Nicolaus Europe Limited (“Stifel”) in which Stifel contends that
the Company owes Stifel approximately $2,550,000 pursuant to a previous engagement letter entered into with Stifel on November 15, 2021
(the “Engagement Letter”). Stifel alleges that the Engagement Letter entitles them to a percentage of the value of the Company’s
Business Combination with Rosecliff. The Company further believes that we have substantial factual, legal and contractual defenses to
the claims presented and will vigorously contest the claims, if ultimately brought. The Company also believes it has meritorious claims
it is entitled to assert against Stifel and one or more of its representatives. However, the results of litigation are inherently unpredictable
and the possibility exists that the ultimate resolution of this matter could result in a material effect on our financial position, results
of operations or liquidity.
Corporate Information
Our principal executive office
is located at 2515 McKinney Avenue, Suite 1000, Dallas, TX 75201, and our phone number is (972) 499-4934.
THE OFFERING
Common Stock offered by us |
|
270,900 shares of our Common Stock. |
|
|
|
Public Offering Price |
|
$1.66 per share of our Common Stock. |
|
|
|
Common Stock outstanding following this Offering |
|
20,844,598shares of our Common Stock. |
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Use of Proceeds |
|
We estimate that our net proceeds from this offering
will be approximately $408,000, after deducting the placement agent fees and estimated offering expenses payable by us.
We intend to use the net proceeds from this offering
for working capital and general corporate purposes. See “Use of Proceeds” for a more complete description of the intended
use of proceeds from this offering. |
|
|
|
Dividend Policy |
|
We have never declared or paid cash dividends on our Common Stock and do not anticipate paying any cash dividends in the foreseeable future but intend to retain our capital resources for reinvestment in our business. |
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Trading Market and Ticker Symbol for Common Stock |
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Our Common Stock is listed on Nasdaq under the symbol “MDAI.” |
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Risk Factors |
|
Investing in our securities involves a high degree of risk. For a discussion of factors to consider before deciding to invest in our Common Stock, you should carefully review and consider the “Risk Factors” section beginning on page S-5 of this prospectus supplement and in the documents incorporated by reference in this prospectus supplement. |
The number of shares of
our Common Stock to be outstanding immediately after this offering is based on 20,753,698 shares of our Common Stock issued and
outstanding as of December 6, 2024, and excludes:
| ● | 3,925,016
shares of our Common Stock issuable upon the exercise of outstanding stock options at a weighted average exercise price of $1.75 per
share; |
| ● | 8,433,333
shares of our Common Stock issuable upon the exercise of outstanding warrants at a weighted average exercise price of $11.50 per share;
and |
| ● | 569,400
shares of our Common Stock issuable upon vesting of restricted stock units issued under our equity incentive plan. |
Unless otherwise indicated,
this prospectus supplement reflects and assumes no exercise of outstanding options or warrants.
RISK FACTORS
Investing in our securities
involves a high degree of risk. Before deciding whether to invest in our securities, you should consider carefully the risks and uncertainties
discussed under the sections titled “Risk Factors” contained in our most recent Annual Report on Form 10-K and in any subsequently
filed Quarterly Report on Form 10-Q, as well as any amendments thereto reflected in our subsequent filings with the SEC, which are incorporated
by reference into this prospectus supplement, together with other information in this prospectus supplement, the documents incorporated
by reference herein, and any prospectus supplement and any free writing prospectus that we may authorize. Please also read carefully the
section titled “Cautionary Note Regarding Forward-Looking Statements.” Additional risks and uncertainties not presently known
to us, or that we currently deem immaterial, may also adversely affect our business. In addition, past financial performance may not be
a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods.
Risks Related to this Offering
You may experience immediate and substantial
dilution in the net tangible book value per share of our Common Stock you purchase in the offering.
The offering price per share
in this offering may exceed the pro forma net tangible book value per share of our Common Stock outstanding prior to this offering. After
giving effect to the sale by us of the Shares at a price of $1.66 per Share, and after placement agent fees and estimated offering expenses
payable by us, you will experience immediate increase in valuation of 0.1% per share, representing the difference between our pro forma
as adjusted net tangible book value per share as of September 30, 2024 after giving effect to this offering and the assumed offering
price. The exercise of outstanding warrants and stock options may also result in further dilution of your investment. See the section
entitled “Dilution” on page S-11 below for a more detailed illustration of the dilution you may incur if you participate
in this offering.
Our management will have broad discretion
as to the use of the proceeds from this offering, and may not use the proceeds effectively.
Our management will have broad
discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that may not improve our business,
financial condition or results of operations or enhance the value of our common stock. Our failure to apply these funds effectively could
have a material adverse effect on our business and cause the price of our common stock to decline.
Resales of our common stock in the public
market following this offering may cause the trading price to fall.
The resale of a substantial
number of shares of Common Stock could depress the trading price of our Common Stock. This offering of new shares of our Common Stock
could result in resales of our Common Stock by our current stockholders concerned about the potential dilution of their holdings. If our
stockholders sell substantial amounts of our Common Stock in the public market following the offering contemplated by this prospectus
supplement, the trading price of our Common Stock could fall.
Our stock price has been and may continue
to be volatile.
Our Common Stock has a relatively
low trading volume and the market price has been, and is likely to continue to be, volatile. The variance in our stock price makes it
difficult to forecast the stock price at which an investor may be able to buy or sell shares of our Common Stock. The market price for
our Common Stock could be subject to fluctuations as a result of factors that are out of our control, such as:
| ● | actual
or anticipated variations in our results of operations; |
| ● | general
conditions and trends in the medical industry; |
| ● | redemption
demands on institutional funds that hold our Common Stock; and |
| ● | general
economic, political and market conditions. |
We may, in the future, issue additional
common stock, which would reduce investors’ percent of ownership and may dilute our share value.
As of September 30, 2024,
our Articles of Incorporation, as amended, authorize the issuance of 80,000,000 shares of Common Stock, and we had 18,513,073 shares of
our Common Stock issued and outstanding. The future issuance of Common Stock may result in substantial dilution in the percentage of our
Common Stock held by our then existing stockholders. We may value any Common Stock in the future on an arbitrary basis. The issuance of
Common Stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held
by our investors, might have an adverse effect on any trading market for our Common Stock and could impair our ability to raise capital
in the future through the sale of equity securities.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents
incorporated by reference herein contain forward-looking statements within the meaning of Section 27A of the Securities Act, and Section
21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Any statements about our expectations, beliefs,
plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are
often, but are not always, made through the use of words or phrases such as “anticipate,” “believe,” “contemplate,”
“continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,”
“potential,” “predict,” “project,” “seek,” “should,” “target,”
“will,” “would,” and similar expressions, or the negative of these terms, or similar expressions. Accordingly,
these statements involve estimates, assumptions and uncertainties which could cause actual results to differ materially from those expressed
in them. Any forward-looking statements are qualified in their entirety by reference to the factors discussed throughout this prospectus,
and in particular those factors referenced in the section entitled “Risk Factors.”
The forward-looking statements
contained in this prospectus 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:
| ● | We
have incurred significant losses since inception and may not be able to achieve significant revenues or profitability. |
| ● | We
are devoting substantially all of our efforts towards research and development of our DeepView System. |
| ● | 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 the Biomedical Advanced Research and Development
Authority (“BARDA”) and is the largest single source of revenue for us. Our BARDA contract is not guaranteed to be completed
or extended. |
| ● | The
regulatory review process is expensive, time-consuming, and uncertain and we may be unable to obtain clearance, approval, De Novo classification,
or certification for our DeepView technology. |
| ● | 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
may experience significant delays in completing clinical trials, which could prevent or significantly delay our targeted product launch
timeframe and impair our viability and business plan. |
| ● | 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. |
| ● | Disruptions
at the FDA and foreign regulatory agencies caused by funding shortages or global health concerns could hinder their ability to hire and
retain key leadership and other personnel, or otherwise prevent new products and services from being developed or commercialized in a
timely manner, which could negatively impact our business. |
| ● | The
ongoing labor shortage may limit our ability or the investigators’ ability to find and retain medical staff that are needed to
conduct the clinical studies. |
|
● |
Modifications to our DeepView System may require new clearances, approvals, De Novo classifications, certifications, or new or amended certifications, and may require us to cease marketing or to recall the modified device until clearances, approvals, De Novo classifications, or the relevant certifications are obtained. |
|
● |
Quality problems and product liability claims could lead to recalls or safety alerts, reputational harm, adverse verdicts or costly settlements, and could have a material adverse effect on our business, results of operations, financial condition, and cash flows. |
|
● |
We must comply with anti-kickback, fraud and abuse, false claims, transparency, and other healthcare laws and regulations. |
|
● |
If our manufacturers fail to comply with the regulatory quality system regulations or any applicable equivalent regulations, our proposed operations could be interrupted, and our operating results would suffer. |
|
● |
Actual or perceived failure to comply with data protection, privacy and security laws, regulations, standards and other requirements could negatively affect our business, financial condition or results of operations. |
|
● |
As the regulatory framework for AI technology evolves, our business, financial condition and results of operation may be adversely affected. |
|
● |
If we are unable to establish sales, marketing and distribution capabilities either on our own or in collaboration with third parties, we may not be successful in commercializing our DeepView System, if approved. |
|
● |
We may not be able to achieve or maintain satisfactory pricing and margins for our DeepView technology. |
|
● |
We will depend upon third-party suppliers, including contract manufacturers and single and sole source suppliers, making us vulnerable to supply shortages and price fluctuations that could negatively affect our business, financial condition and results of operations. |
|
● |
We may encounter difficulties in managing our growth, which could disrupt our operations. |
|
● |
The use of artificial intelligence, including machine learning, in our analytics platforms may result in reputational harm or liability. |
|
● |
Product liability suits, whether or not meritorious, could be brought against us due to an alleged defective product or for the misuse of our DeepView System. These suits could result in expensive and time-consuming litigation, payment of substantial damages, and an increase in our insurance rates. |
|
● |
The success of our algorithms depends on our significant repository of proprietary data. |
|
● |
Changes in patent law or its interpretation could diminish the value of patents in general, thereby impairing our ability to protect our existing and future products. |
|
● |
Our patent rights and other intellectual property may be subject to priority, ownership or inventorship disputes, interferences, and similar proceedings and we may not be able to enforce our intellectual property rights throughout the world. |
|
● |
Nasdaq may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions. |
|
● |
We will incur increased costs as a result of operating as a public company, and the Company’s management will be required to devote substantial time to new compliance and investor relations initiatives. |
|
● |
The price of our common stock may be volatile. |
|
● |
Changes in laws, regulations or rules, or a failure to comply with any laws, regulations or rules, may adversely affect our business, investments and results of operations. |
|
● |
If we fail to maintain proper and effective internal controls over financial reporting, our ability to produce accurate and timely financial statements could be impaired, investors may lose confidence in our financial reporting and the trading price of our common stock may decline. |
|
● |
Certain existing stockholders purchased, or may purchase, securities in the Company at a price below the current trading price of such securities and may experience a positive rate of return based on the current trading price. Future investors in the Company may not experience a similar rate of return. |
|
● |
Warrants may become exercisable for common stock, which would increase the number of shares eligible for resale in the public market and result in dilution to our stockholders. |
We have included important
factors in the cautionary statements included in this prospectus and the documents we incorporate by reference herein and therein, particularly
in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and in the “Risk
Factors” section of our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2024, that we believe could cause
actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not
reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make. No forward-looking
statement is a guarantee of future performance.
You should read this prospectus,
the applicable prospectus supplement, any related free-writing prospectus, and the documents incorporated by reference herein and therein
completely and with the understanding that our actual future results, levels of activity, performance and events and circumstances may
be materially different from what we expect. The forward-looking statements contained or incorporated by reference in the base prospectus,
this prospectus supplement or any other prospectus supplement herein and therein represent our views as of the date of this prospectus
supplement and are expressly qualified in their entirety by this cautionary statement. We anticipate that subsequent events and developments
will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we
have no current intention of doing so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking
statements as representing our views as of any date subsequent to the date of this prospectus.
USE OF PROCEEDS
We estimate that the net proceeds
from the sale of our Common Stock and Pre-Funded Warrants in this offering will be approximately $408,000, after deducting placement agent
fees and estimated offering expenses payable by us. We intend to use the net proceeds from this offering for working capital and general
corporate purposes.
This expected use of the net
proceeds from this offering and our existing cash represents our intentions based upon our current plans, financial condition and business
conditions. The amount, timing and nature of specific expenditures of net proceeds from this offering will depend on a number of factors,
including the timing, scope, progress and results of our development efforts and the timing and progress of any collaboration efforts.
As of the date of this prospectus supplement, we cannot specify with certainty all of the particular uses of the proceeds from this offering.
Accordingly, we will retain broad discretion over the use of such proceeds.
Pending our use of the net
proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation investments, including short-term,
investment-grade, interest-bearing instruments, and government securities.
DIVIDEND POLICY
We have never declared or paid
dividends on our Common Stock and we do not anticipate paying any cash dividends on our Common Stock in the foreseeable future. Payment
of cash dividends, if any, in the future will be at the discretion of our board of directors and will depend on applicable law and then-existing
conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and
other factors our board of directors may deem relevant. We currently intend to retain all available funds and any future earnings to fund
the development and growth of our business.
DILUTION
If you invest in this offering,
your ownership interest will be diluted to the extent of the difference between the public offering price per share and the as adjusted
net tangible book value per share after giving effect to this offering. We calculate net tangible book value per share by dividing the
net tangible book value, which is tangible assets less total liabilities, by the number of outstanding shares of our Common Stock. Dilution
represents the difference between the portion of the amount per share paid by purchasers of shares in this offering and the as adjusted
net tangible book value per share of our Common Stock immediately after giving effect to this offering. Our net tangible book value as
of September 30, 2024 was approximately $19.6 million, or $1.06 per share of Common Stock.
Assuming exercise of the Pre-Funded
Warrants, after giving effect to the sale of our Common Stock at a price of $1.66 per share, the last reported sale price of our Common
Stock on Nasdaq on December 4, 2024, and after deducting estimated aggregate offering expenses payable by us, our net tangible book value
as of September 30, 2024 would have been approximately $20.1 million, or $1.06 per share of Common Stock. This represents no increase
in the net tangible book value per share to our existing stockholders and no immediate increase in net tangible book value to new investors.
The following table illustrates
this per share dilution:
Assumed offering price per share | |
| | | |
$ | 1.66 | |
Net tangible book value per share as of September 30, 2024 | |
$ | 1.06 | | |
| | |
Increase per share attributable to this offering | |
$ | 0.60 | | |
| | |
As adjusted net tangible book value per share as of September 30, 2024, after giving effect to this offering | |
| | | |
$ | 20,104,355 | |
Increase per share to new investors purchasing shares in this offering | |
| | | |
| 0.1 | % |
The above table is based on
18,513,073 shares of our Common Stock outstanding as of September 30, 2024, and excludes:
|
● |
3,786,191 shares of our Common Stock issuable upon the exercise of outstanding stock options at a weighted average exercise price of $1.79 per share; |
|
● |
8,433,333 shares of our Common Stock issuable upon the exercise of outstanding and exercisable warrants at a weighted average exercise price of $11.50 per share. (See “Risk Factors – You may experience future dilution as a result of future equity offerings or if we issue shares subject to options, warrants, stock awards or other arrangements.”); and |
|
● |
469,400 shares of our Common Stock issuable upon vesting of restricted stock units issued under our equity incentive plan. |
Except as otherwise indicated,
all information in this prospectus supplement assumes no exercise of the outstanding options or warrants described above. To the extent
that any of these outstanding warrants or options are exercised at prices per share below the public offering price per share in this
offering or we issue additional shares under our equity incentive plans at prices below the public offering price per share in this offering,
you may experience further dilution. In addition, to the extent that we raise additional capital by issuing equity or convertible debt
securities, your ownership will be further diluted.
PLAN OF DISTRIBUTION
We have engaged SP Angel Corporate Finance LLP,
or the placement agent, to act as our exclusive placement agent to solicit offers to purchase the Shares offered by this prospectus supplement.
The placement agent is not purchasing or selling any such securities, nor is it required to arrange for the purchase and sale of any specific
number or dollar amount of such securities, other than to use its “reasonable best efforts” to arrange for the sale of such
securities by us. Therefore, we may not sell all of the Shares being offered. The terms of this offering are subject to market conditions
and negotiations between us, the placement agent and prospective investors. The placement agent will have no authority to bind us by virtue
of their placement agency agreement. The placement agent may retain sub-agents and selected dealers in connection with this offering.
Investors purchasing securities offered hereby
will have the option to execute a securities purchase agreement with us. Investors who do not enter into a securities purchase agreement
shall rely solely on this prospectus supplement in connection with the purchase of our securities in this offering. In addition to rights
and remedies available to all purchasers in this offering under federal securities and state law, the purchasers which enter into a securities
purchase agreement will also be able to bring claims of breach of contract against us.
Delivery of the shares of our Common Stock offered
hereby is expected to occur on or about December 9, 2024, subject to satisfaction of certain customary closing conditions.
Fees and Expenses
The following table shows the per share price
and total cash fees we will pay to the placement agent in connection with the sale of the securities pursuant to this prospectus supplement.
| |
Per Share of Common Stock | | |
Total | |
Public offering price | |
$ | 1.66 | | |
$ | 449,694 | |
Placement agent fees(1) | |
$ | 0.12 | | |
$ | 31,478 | |
Proceeds to us, before expenses | |
$ | 1.54 | | |
$ | 418,215 | |
We have agreed to pay a non-accountable expense
allowance to the placement agent equal to 7% of the gross proceeds received in this offering.
The out-of-pocket accountable expenses that will
be paid by us to the placement agent in connection with this offering, and will be reimbursed to us to the extent not actually incurred
in compliance with Rule 5110(g)(4)(A) of the Financial Industry Regulatory Authority (“FINRA”).
We will pay the placement agent commissions for
its services in acting as our sales agent in the sale of our Common Stock. The placement agent will be entitled to compensation at a fixed
commission rate of 7% of the gross proceeds from the sale of our Common Stock on our behalf. We have agreed to reimburse the placement
agent for their reasonable and documented out-of-pocket expenses (including but not limited to the reasonable and documented fees and
expenses of its legal counsel).
We estimate that the total expenses for commencement
of this offering, excluding compensation payable to placement agent and certain expenses reimbursable to the placement agent, will be
approximately $10,000. The remaining sales proceeds, after deducting any expenses payable by us and any transaction fees imposed by any
governmental, regulatory, or self-regulatory organization in connection with the sales, will equal our net proceeds for the sale of such
Common Stock.
Because there are no minimum sale requirements
as a condition to this offering, the actual total public offering price, commissions and net proceeds to us, if any, are not determinable
at this time. The actual dollar amount and shares of our Common Stock we sell through this prospectus supplement will be dependent, among
other things, on market conditions and our capital raising requirements.
Regulation M Compliance
The placement agent may be deemed to be an underwriter
within the meaning of Section 2(a)(11) of the Securities Act, and any commissions received by it and any profit realized on the sale of
our securities offered hereby by it while acting as principal might be deemed to be underwriting discounts or commissions under the Securities
Act. The placement agent will be required to comply with the requirements of the Securities Act and the Exchange Act, including, without
limitation, Rule 10b-5 and Regulation M under the Exchange Act. These rules and regulations may limit the timing of purchases and sales
of our securities by the placement agent. Under these rules and regulations, the placement agent may not (i) engage in any stabilization
activity in connection with our securities; and (ii) bid for or purchase any of our securities or attempt to induce any person to purchase
any of our securities, other than as permitted under the Exchange Act, until they have completed their participation in the distribution.
Indemnification
We have agreed to indemnify the placement agent
against certain liabilities, including liabilities under the Securities Act and liabilities arising from breaches of representations and
warranties contained in our placement agency agreement with the placement agent. We have also agreed to contribute to payments the placement
agent may be required to make in respect of such liabilities.
Nasdaq Capital Market Listing
Our Common Stock is listed on Nasdaq under the
symbol “MDAI.”
Other
From time to time, the placement agent and/or
their affiliates may in the future provide, various investment banking and other financial services for us for which they may receive
customary fees. In the course of their businesses, the placement agent and their affiliates may actively trade our securities or loans
for their own account or for the accounts of customers, and, accordingly, the placement agent and their affiliates may at any time hold
long or short positions in such securities or loans.
LEGAL MATTERS
The validity of the shares
Common Stock offered hereby will be passed upon for us by Reed Smith LLP.
EXPERTS
The consolidated financial
statements of Spectral AI, Inc. as of December 31, 2023 and 2022 and for each of the years in the two-year period ended December 31, 2023,
have been incorporated by reference herein in reliance upon the report of KPMG LLP, independent registered public accounting firm, incorporated
by reference herein, and upon the authority of said firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus supplement
and accompanying base prospectus is part of the registration statement on Form S-3 we filed with the SEC under the Securities Act and
does not contain all the information set forth in the registration statement. Whenever a reference is made in this prospectus supplement
or the accompanying base prospectus to any of our contracts, agreements or other documents, the reference may not be complete and you
should refer to the exhibits that are a part of the registration statement or the exhibits to the reports or other documents incorporated
by reference into this prospectus supplement for a copy of such contract, agreement or other document. Because we are subject to the information
and reporting requirements of the Exchange Act, we file annual, quarterly and current reports, proxy statements and other information
with the SEC. Our SEC filings are available to the public over the internet at the SEC’s website at http://www.sec.gov.
These documents are also available,
free of charge, through the Investors section of our website, which is located at https://investors.spectral-ai.com/. The reference to
our website in this prospectus is an inactive textual reference only and is not a hyperlink. The contents of our website are not part
of this prospectus, and you should not consider the contents of our website in making an investment decision with respect to our securities.
This prospectus does not contain all of the information set forth in the registration statement. You can obtain a copy of the registration
statement for free at www.sec.gov.
We have not incorporated by
reference into this prospectus the information on our website, and you should not consider it to be a part of this prospectus.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to “incorporate
by reference” the information we have filed with it, which means that we can disclose important information to you by referring
you to those documents. The information we incorporate by reference is an important part of this prospectus, and later information that
we file with the SEC will automatically update and supersede this information. We specifically are incorporating by reference the following
documents filed with the SEC (excluding those portions of any Current Report on Form 8-K that are furnished and not deemed “filed”
pursuant to the General Instructions of Form 8-K):
|
● |
our
Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on March 29, 2024; |
|
|
|
|
● |
our
Quarterly Report on Form
10-Q for the fiscal quarter ended March 31, 2024, filed with the SEC on May 9, 2024, the Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 2024, filed with the SEC on August 12, 2024, and the Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 2024, filed with the SEC on November 6, 2024; |
|
|
|
|
● |
our
Current Reports on Form 8-K filed with the SEC on February
2, 2024, February
5,2024, February 12,
2024, February 13,
2024, February 22,
2024, March 1, 2024, March
22, 2024, March 29,
2024, April 1, 2024, April
2, 2024, May 16, 2024, June
5, 2024, June 24,
2024, July 15, 2024, August
13, 2024 and October 15, 2024 (other than any portions thereof deemed furnished and not filed);
|
|
● |
our
Definitive Proxy Statement on Schedule 14A, filed with the SEC on April 4, 2024 (but only with respect to information required by
Part III of our Annual Report on Form 10-K for the year ended December 31, 2023, which information updated and superseded information
included in Part III of our Annual Report on Form 10-K for the year ended December 31, 2023); and
|
|
● |
the
description of our Common Stock contained in our Form 10-K, filed with the Commission on March 29, 2024, and any amendment or
report filed with the Commission for purposes of updating such description. |
All reports and definitive
proxy or information statements subsequently filed after the date of this initial registration statement and prior to effectiveness of
this registration statement by the Company pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, but excluding information
furnished to, rather than filed with, the SEC, shall be deemed to be incorporated by reference herein and to be a part hereof from the
date such documents are filed.
Any statement contained herein
or in any document incorporated or deemed to be incorporated by reference shall be deemed to be modified or superseded for purposes of
the registration statement of which this prospectus forms a part to the extent that a statement contained in any other subsequently filed
document which also is or is deemed to be incorporated by reference modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed to constitute a part of the registration statement of which this prospectus forms a part, except as
so modified or superseded.
You should rely only on the
information incorporated by reference or provided in this prospectus. We have not authorized anyone else to provide you with different
information. You should not assume that the information in this prospectus is accurate as of any date other than the date of this prospectus
or the date of the documents incorporated by reference in this prospectus.
We will provide without charge
to each person to whom a copy of this prospectus is delivered, upon written or oral request, a copy of any or all of the information that
has been incorporated by reference in this prospectus but not delivered with this prospectus (other than an exhibit to these filings,
unless we have specifically incorporated that exhibit by reference in this prospectus). Any such request should be addressed to us at:
Spectral AI, Inc.
Attn: Vincent S. Capone, Esq.
Chief Financial Officer & General Counsel
2515 McKinney Ave, Suite 1000
Dallas, TX 75201
972-499-4934
You may also access the documents
incorporated by reference in this prospectus through our website at https://investors.spectral-ai.com/. Except for the specific incorporated
documents listed above, no information available on or through our website shall be deemed to be incorporated in this prospectus or the
registration statement of which it forms a part.
Prospectus
Up
to $50,000,000 of Common Stock
From
time to time, we may offer and sell, in one or more offerings, in amounts, at prices and on terms that we will determine at the time
of such offering, up to $50,000,000 in shares of our common stock, par value $0.0001 (“common stock”). A portion of the proceeds
may be used to repay a promissory note issued by our wholly-owned subsidiary, Spectral IP, Inc., to SIM Tech Licensing LLC on March 18,
2024, in the principal amount of $1,000,000 (the “Spectral IP Note”). See “Use of Proceeds” for a description
of the Spectral IP Note.
This
prospectus describes the general terms of these securities and the general manner in which we will offer the securities. We will provide
specific terms of any offering in a supplement to this prospectus. Any prospectus supplement may also add, update, or change information
contained in this prospectus.
You
should carefully read this prospectus and the applicable prospectus supplement as well as the documents incorporated or deemed to be
incorporated by reference in this prospectus before you purchase any of the securities offered hereby. You should also read the documents
we refer to in the “Where You Can Find More Information” section of this prospectus for information on us and our financial
statements.
These
securities may be offered and sold in the same offering or in separate offerings; to or through underwriters, dealers, and agents; or
directly to purchasers. The names of any underwriters, dealers, or agents involved in the sale of our securities, their compensation
and any over-allotment options held by them will be described in the applicable prospectus supplement. See “Plan of Distribution.”
Our common stock is listed on The Nasdaq Capital
Market (the “Nasdaq”) under the symbol “MDAI.” On September 27, 2024, the last reported sale price of our common
stock was $1.21 per share as reported on the Nasdaq. We recommend that you obtain current market quotations for our common stock prior
to making an investment decision. We will provide information in any applicable prospectus supplement regarding any listing of securities
other than shares of our common stock on any securities exchange. This prospectus may not be used to sell our securities unless it is
accompanied by a prospectus supplement.
We
are an “emerging growth company” and a “smaller reporting company” under applicable federal securities laws and
will be subject to reduced reporting requirements. This prospectus complies with the requirements that apply to an issuer that is an
emerging growth company.
As of October 15, 2024, the aggregate market
value of our outstanding common stock held by non-affiliates, or the public float, was approximately $13,059,556, which was calculated
based on 10,364,727 shares of our outstanding common stock held by non-affiliates and a price of $1.26 per share, the last reported sale
price for our common stock on October 15, 2024. As of the date of this prospectus, we have not offered or sold any securities pursuant
to General Instruction I.B.6 of Form S-3 during the 12 calendar months prior to, and including, the date of this prospectus. Pursuant
to General Instruction I.B.6. of Form S-3, in no event will we offer securities registered on this registration statement in a public
primary offering with a value exceeding more than one-third of our public float (the market value of our common stock held by our non-affiliates)
in any 12-month period so long as our public float remains below $75.0 million.
You
should carefully read this prospectus, any prospectus supplement relating to any specific offering of securities, and all information
incorporated by reference herein and therein.
Investing
in our securities involves a high degree of risk. These risks are discussed in this prospectus under “Risk Factors” beginning
on page 4 and in the documents incorporated by reference in this prospectus.
Neither
the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of these
securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The
date of this prospectus is , 2024
TABLE
OF CONTENTS
ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement on Form S-3 that we filed with the SEC using a “shelf” registration process.
Under this shelf process, we may, from time to time, offer and sell up to $50,000,000 in shares of our common stock as described in this
prospectus in one or more offerings.
This
prospectus provides you with a general description of the securities we may offer. Each time we sell securities, we will provide a prospectus
supplement that will contain specific information about the terms of that offering. The prospectus supplement may also add to, update
or change information contained in the prospectus and, accordingly, to the extent inconsistent, information in this prospectus is superseded
by the information in the prospectus supplement. We may also authorize one or more free writing prospectuses to be provided to you that
may contain material information relating to the offering.
The
prospectus supplement to be attached to the front of this prospectus may describe, as applicable: the terms of the securities offered;
the public offering price; the price paid for the securities; net proceeds; and the other specific terms related to the offering of the
securities.
You
should only rely on the information contained or incorporated by reference in this prospectus and any prospectus supplement or issuer
free writing prospectus relating to a particular offering. No person has been authorized to give any information or make any representations
in connection with this offering other than those contained or incorporated by reference in this prospectus, any accompanying prospectus
supplement and any related issuer free writing prospectus in connection with the offering described herein and therein, and, if given
or made, such information or representations must not be relied upon as having been authorized by us. Neither this prospectus nor any
prospectus supplement nor any related issuer free writing prospectus shall constitute an offer to sell or a solicitation of an offer
to buy offered securities in any jurisdiction in which it is unlawful for such person to make such an offering or solicitation. This
prospectus does not contain all of the information included in the registration statement. For a more complete understanding of the offering
of the securities, you should refer to the registration statement, including its exhibits.
You
should read the entire prospectus and any prospectus supplement and any related issuer free writing prospectus, as well as the documents
incorporated by reference into this prospectus or any prospectus supplement or any related issuer free writing prospectus, together with
the additional information described under “Where You Can Find More Information,” before making an investment decision. You
should also carefully consider, among other things, the matters discussed in the section entitled “Risk Factors” herein.
Neither the delivery of this prospectus or any prospectus supplement or any issuer free writing prospectus nor any sale made hereunder
shall under any circumstances imply that the information contained or incorporated by reference herein or in any prospectus supplement
or issuer free writing prospectus is correct as of any date subsequent to the date hereof or of such prospectus supplement or issuer
free writing prospectus, as applicable. You should assume that the information appearing in this prospectus, any prospectus supplement
or any document incorporated by reference is accurate only as of the date of the applicable documents, regardless of the time of delivery
of this prospectus or any sale of securities. Our business, financial condition, results of operations and prospects may have changed
since that date.
This
prospectus contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our
control. See “Risk Factors” and “Cautionary Statement Regarding Forward Looking Statements” appearing in this
prospectus and in the documents we file with the SEC that are incorporated by reference into this prospectus.
CAUTIONARY
STATEMENT REGARDING FORWARD LOOKING STATEMENTS
This
prospectus and the documents incorporated by reference herein contain forward-looking statements within the meaning of Section 27A of
the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Any statements
about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking.
These statements are often, but are not always, made through the use of words or phrases such as “anticipate,” “believe,”
“contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,”
“may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,”
“target,” “will,” “would,” and similar expressions, or the negative of these terms, or similar expressions.
Accordingly, these statements involve estimates, assumptions and uncertainties which could cause actual results to differ materially
from those expressed in them. Any forward-looking statements are qualified in their entirety by reference to the factors discussed throughout
this prospectus, and in particular those factors referenced in the section entitled “Risk Factors.”
The
forward-looking statements contained in this prospectus 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:
|
● |
We have incurred significant
losses since inception and may not be able to achieve significant revenues or profitability. |
|
● |
We are devoting substantially
all of our efforts towards research and development of our DeepView System. |
|
● |
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 the Biomedical Advanced Research and Development Authority
(“BARDA”) and is the largest single source of revenue for us. Our BARDA contract is not guaranteed to be completed or
extended. |
|
● |
The
regulatory review process is expensive, time-consuming, and uncertain and we may be unable to obtain clearance, approval, De Novo
classification, or certification for our DeepView technology.
|
|
● |
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. |
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We may experience significant
delays in completing clinical trials, which could prevent or significantly delay our targeted product launch timeframe and impair
our viability and business plan. |
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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. |
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Disruptions at the FDA
and foreign regulatory agencies caused by funding shortages or global health concerns could hinder their ability to hire and retain
key leadership and other personnel, or otherwise prevent new products and services from being developed or commercialized in a timely
manner, which could negatively impact our business. |
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The ongoing labor shortage
may limit our ability or the investigators’ ability to find and retain medical staff that are needed to conduct the clinical
studies. |
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Modifications to our DeepView
System may require new clearances, approvals, De Novo classifications, certifications, or new or amended certifications, and may
require us to cease marketing or to recall the modified device until clearances, approvals, De Novo classifications, or the relevant
certifications are obtained. |
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Quality problems and product
liability claims could lead to recalls or safety alerts, reputational harm, adverse verdicts or costly settlements, and could have
a material adverse effect on our business, results of operations, financial condition, and cash flows. |
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We must comply with anti-kickback,
fraud and abuse, false claims, transparency, and other healthcare laws and regulations. |
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If our manufacturers fail
to comply with the regulatory quality system regulations or any applicable equivalent regulations, our proposed operations could
be interrupted, and our operating results would suffer. |
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Actual
or perceived failure to comply with data protection, privacy and security laws, regulations, standards and other requirements could
negatively affect our business, financial condition or results of operations. |
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As the
regulatory framework for AI technology evolves, our business, financial condition and results of operation may be adversely affected. |
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If we
are unable to establish sales, marketing and distribution capabilities either on our own or in collaboration with third parties,
we may not be successful in commercializing our DeepView System, if approved. |
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We may
not be able to achieve or maintain satisfactory pricing and margins for our DeepView technology. |
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We will
depend upon third-party suppliers, including contract manufacturers and single and sole source suppliers, making us vulnerable to
supply shortages and price fluctuations that could negatively affect our business, financial condition and results of operations. |
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We may
encounter difficulties in managing our growth, which could disrupt our operations. |
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The use
of artificial intelligence, including machine learning, in our analytics platforms may result in reputational harm or liability. |
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Product
liability suits, whether or not meritorious, could be brought against us due to an alleged defective product or for the misuse of
our DeepView System. These suits could result in expensive and time-consuming litigation, payment of substantial damages, and an
increase in our insurance rates. |
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The success
of our algorithms depends on our significant repository of proprietary data. |
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Changes
in patent law or its interpretation could diminish the value of patents in general, thereby impairing our ability to protect our
existing and future products. |
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Our patent
rights and other intellectual property may be subject to priority, ownership or inventorship disputes, interferences, and similar
proceedings and we may not be able to enforce our intellectual property rights throughout the world. |
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Nasdaq
may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities
and subject us to additional trading restrictions. |
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We will
incur increased costs as a result of operating as a public company, and the Company’s management will be required to devote
substantial time to new compliance and investor relations initiatives. |
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The price
of our common stock may be volatile. |
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Changes
in laws, regulations or rules, or a failure to comply with any laws, regulations or rules, may adversely affect our business, investments
and results of operations. |
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If we
fail to maintain proper and effective internal controls over financial reporting, our ability to produce accurate and timely financial
statements could be impaired, investors may lose confidence in our financial reporting and the trading price of our common stock
may decline. |
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Certain
existing stockholders purchased, or may purchase, securities in the Company at a price below the current trading price of such securities
and may experience a positive rate of return based on the current trading price. Future investors in the Company may not experience
a similar rate of return. |
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Warrants
may become exercisable for common stock, which would increase the number of shares eligible for resale in the public market and result
in dilution to our stockholders. |
We
have included important factors in the cautionary statements included in this prospectus and the documents we incorporate by reference
herein and therein, particularly in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended
December 31, 2023 and in the “Risk Factors” section of our Quarterly Report on Form 10-Q for the fiscal quarter ended June
30, 2024, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make.
Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures
or investments we may make. No forward-looking statement is a guarantee of future performance.
You
should read this prospectus, the applicable prospectus supplement, any related free-writing prospectus, and the documents incorporated
by reference herein and therein completely and with the understanding that our actual future results, levels of activity, performance
and events and circumstances may be materially different from what we expect. The forward-looking statements contained or incorporated
by reference in this prospectus or any prospectus supplement herein and therein represent our views as of the date of this prospectus
are expressly qualified in their entirety by this cautionary statement. We anticipate that subsequent events and developments will cause
our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current
intention of doing so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements
as representing our views as of any date subsequent to the date of this prospectus.
ABOUT
SPECTRAL AI, INC.
Unless
the context otherwise requires, references to the “Company,” “Spectral,” “we,” “us,”
“our” and similar terms refer to Spectral AI, Inc. and its subsidiaries.
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 wounds 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 physician in making a more accurate, timely and informed
decision regarding the treatment of the patient’s wounds. Our focus from 2013 through 2021 was on the burn indication. In 2022,
we expanded our focus to include the DFU indication.
Spectral
AI is devoting substantially all of its efforts towards research and development of its DeepView® Wound Imaging System,
currently focused on burn wounds and diabetic foot ulcer (“DFU”) indications, specifically engineered to allow physicians
to make a more accurate, timely and informed decision for treatment options. The Company has not generated any product revenue to date.
The Company currently generates revenue from contract development and research services by providing such services to governmental agencies,
primarily to the Biomedical Advanced Research and Development Authority (“BARDA”) and under a contract with the Medical Technology
Enterprise Consortium (“MTEC”).
In
September 2023, the Company executed its third contract with BARDA for a multi-year Project BioShield (“PBS”) contract, valued
at up to approximately $150.0 million (the “PBS BARDA Contract”). 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. Under this contract, the Company furthered the DeepView System design, developed the AI algorithm, and
took steps to obtain FDA approval.
In
April 2023, the Company received a $4.0 million grant from MTEC for a project that is expected to be completed by April 2025 (the
“MTEC Agreement”). 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. 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. In September 2024, the Company received an additional $800,000 from MTEC for the further development of the handheld
device.
On
March 7, 2024, the Company formed a new wholly-owned subsidiary, Spectral IP, Inc., a Delaware corporation (“Spectral IP”),
to be utilized to advance artificial intelligence intellectual property with a specific emphasis on healthcare. On March 19, 2024, the
Company announced that Spectral IP received a $1.0 million investment from an affiliate of its largest shareholder for the development
of its artificial intelligence intellectual property portfolio. The investment is structured as a note payable with a one-year maturity,
an interest rate of 8%, and requiring earlier prepayment if the Company spins off Spectral IP to the Company’s shareholders or
if Spectral IP is sold to a third party.
Corporate
Information
Spectral AI, Inc., a Delaware
corporation formerly known as Rosecliff Acquisition Corp I (“Rosecliff”) was formed as a blank check company on November 17,
2020. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization
or similar business combination with one or more businesses.
On September 11, 2023, the
Company consummated a business combination (the “Business Combination”), pursuant to the business combination agreement dated
April 11, 2023 by and among the Company, Ghost Merger Sub I, a Delaware Corporation, Ghost Merger Sub II, a Delaware corporation and Spectral
MD Holdings, Ltd., a Delaware corporation incorporated on March 9, 2009 and headquartered in Dallas, Texas (“Legacy Spectral”).
Upon closing of the Business Combination (the “Closing”), in sequential order: (a) Ghost Merger Sub I merged with and into
the Legacy Spectral, with Legacy Spectral continuing as the surviving company as a wholly owned subsidiary of the Company (the “Spectral
Merger”) and then, (b) Legacy Spectral merged with and into Ghost Merger Sub II (renamed Spectral MD Holdings LLC) (the “SPAC
Merger”, together with the Spectral Merger (the “Business Combination”)), with Ghost Merger Sub II surviving the SPAC
Merger as a direct wholly-owned subsidiary of the Company. See Note 3. Upon the Closing, the Company changed its name from Rosecliff to
Spectral AI, Inc.
In
conjunction with the Business Combination, the Company cancelled the redeemable warrants that it issued to Rosecliff Acquisition Sponsor
I LLC, a Delaware limited liability company (the “Sponsor”), in a private placement in connection with the Company’s
initial public offering on February 17, 2021 (the “Initial Public Offering”) at Closing, but the 8,433,333 redeemable warrants
issued to the public in the Initial Public Offering (the “Public Warrants”) remain outstanding.
Prior
to the Business Combination, Rosecliff had 280,485 shares of Class A common stock, par value
$0.0001 per share, issued and outstanding and held by public shareholders (the “Public Shares”) and 6,325,000 shares of Class
B common stock, par value $0.0001 per share, issued and outstanding and held by the Sponsor (the “Sponsor Shares”). Upon the
Closing, 5,445,000 of the Sponsor Shares were forfeited, in accordance with a letter agreement with the Sponsor, and the remaining 880,000
Sponsor Shares and 280,485 Public Shares, no longer designated Class A and Class B, were included in shares of the Company’s common
stock, par value $0.0001 per share (the “Company Common Stock”).
Prior
to the Business Combination, Legacy Spectral’s shares of common stock, par value $0.001 per share (“Legacy Spectral Common
Stock”) were listed on the AIM market on the London Stock Exchange (delisted on September 7, 2023). In
September 2023, prior to the Closing, Legacy Spectral issued 7,679,198 shares of Legacy Spectral Common Stock to certain investors
in a private placement, in exchange for $3.4 million (the “Equity Raise”). Upon the Closing, all
of Legacy Spectral’s issued and outstanding 145,380,871 shares of Legacy Spectral Common Stock, including the shares
from the Equity Raise, were exchanged for 14,094,450 shares of Company Common Stock at an exchange ratio of 10.31 (the “Exchange
Ratio”), meaning that the Company issued one share of Company Common Stock in exchange for 10.31 shares of Legacy Spectral Common
Stock.
On
September 12, 2023, the Company began trading the Company Common Stock and the Public Warrants on the Nasdaq under the symbols “MDAI”
and “MDAIW”, respectively. Prior to the Business
Combination, the Company’s shares of Company Common Stock and Public Warrants were listed on the Nasdaq under the symbols “RCLF”
and “RCLFW”, respectively.
Implications
of Being an Emerging Growth Company and Smaller Reporting Company
We
are an emerging growth company, as defined in the JOBS Act. The JOBS Act provides that an emerging growth company can take advantage
of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company
to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected
to use the extended transition period under the JOBS Act for the adoption of certain accounting standards until the earlier of the date
we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period
provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply more promptly with new
or revised accounting pronouncements as of public company effective dates.
In
addition, as an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise
applicable generally to public companies. These provisions include:
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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” in this prospectus; |
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an exception
from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended; |
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reduced
disclosure about our executive compensation arrangements in our periodic reports, proxy statements and registration statements; |
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exemptions
from the requirements of holding non-binding advisory votes on executive compensation or golden parachute arrangements; and |
We
may take advantage of these provisions until the last day of the fiscal year ending after the fifth anniversary of the Company’s
initial public offering or such earlier time that we no longer qualify as an emerging growth company. We will cease to qualify as an
emerging growth company on the date that is the earliest of: (i) December 31, 2026; (ii) the last day of the fiscal year in which we
have more than $1.235 billion in total annual gross revenues; (iii) the date on which we are deemed to be a “large accelerated
filer” under the rules of the SEC, which means the market value of our common stock that is held by non-affiliates exceeds $700.0
million as of the prior June 30th and we have been a public company for at least 12 months and have filed one annual report on Form 10-K;
or (iv) the date on which we have issued more than $1.0 billion of non-convertible debt over the prior three-year period. We may choose
to take advantage of some but not all of these reduced reporting burdens. Accordingly, the information contained herein may be different
than you might obtain from other public companies in which you hold equity interests.
We
are also a “smaller reporting company.” If we are a smaller reporting company at the time we cease to be an emerging growth
company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies.
Specifically, as a smaller reporting company, we may choose to present only the two most recent fiscal years of audited consolidated
financial statements in our Annual Report and, similar to emerging growth companies, smaller reporting companies have reduced disclosure
obligations regarding executive compensation.
Recent Developments
In September 2024, we received a letter with a
draft Particulars of a Complaint from Stifel Nicolaus Europe Limited (“Stifel”) in which Stifel contends that the Company
owes Stifel approximately $2,550,000 pursuant to a previous engagement letter entered into with Stifel on November 15, 2021 (the “Engagement
Letter”). Stifel alleges that the Engagement Letter entitles them to a percentage of the value of the Company’s Business Combination
with Rosecliff. The Company further believes that we have substantial factual, legal and contractual defenses to the claims presented
and will vigorously contest the claims, if ultimately brought. The Company also believes it has meritorious claims it is entitled to assert
against Stifel and one or more of its representatives. However, the results of litigation are inherently unpredictable and the possibility
exists that the ultimate resolution of this matter could result in a material effect on our financial position, results of operations
or liquidity.
RISK
FACTORS
Investing
in our securities involves a high degree of risk. In addition to the other information contained in this prospectus and in the documents
we incorporate by reference, you should carefully consider the specific factors discussed under the heading “Risk Factors”
in the applicable prospectus supplement, together with all of the other information contained or incorporated by reference in the prospectus
supplement or appearing or incorporated by reference in this prospectus. You should also consider the risks, uncertainties and assumptions
discussed under Item 1A, “Risk Factors,” in our most recent Annual Report on Form 10-K or any updates in our Quarterly Reports
on Form 10-Q, together with all other information appearing in or incorporated by reference into this prospectus or the applicable prospectus
supplement, before deciding whether to purchase any securities being offered. The risks and uncertainties discussed in the foregoing
are not the only ones facing us. Additional risks and uncertainties not presently known to us, or that we currently see as immaterial,
may also harm our business. Past financial performance may not be a reliable indicator of future performance, and historical trends should
not be used to anticipate results or trends in future periods. If any of these risks occur, our business, business prospects, financial
condition or results of operations could be seriously harmed. This could cause the trading price of our common stock to decline, resulting
in a loss of all or part of your investment. Please also read carefully the section above entitled “Cautionary Statement Regarding
Forward-Looking Statements.”
USE
OF PROCEEDS
Unless
otherwise indicated to the contrary in an accompanying prospectus supplement or post-effective amendment, we will use the net proceeds
from the sale of the securities covered by this prospectus for general corporate purposes, which may include, among other things, purchase
of miners, repayment or refinancing of debt or funding acquisitions, capital expenditures or working capital.
Any
specific allocation of the net proceeds of an offering of securities to a specific purpose will be determined at the time of such offering
and will be described in the related prospectus supplement.
We
cannot assure you that we will receive any proceeds in connection with securities which may be offered pursuant to this prospectus. Unless
otherwise indicated in the applicable prospectus supplement, we will use the net proceeds from the sale of the securities covered by
this prospectus to repay the Spectral IP Note or for general corporate purposes, which may include working capital, including research
and development, expansion of our business, strategic transactions and other general corporate purposes. We have not determined the amounts
we plan to spend on any of the areas listed above or the timing of these expenditures. As a result, our management will have broad discretion
to allocate the net proceeds, if any, we receive in connection with securities offered pursuant to this prospectus for any purpose. Pending
application of the net proceeds as described above, we may initially invest the net proceeds in investment-grade, interest-bearing securities
such as money market funds, certificates of deposit, or direct or guaranteed obligations of the U.S. government, hold as cash or apply
them to the reduction of short-term indebtedness.
A
portion of the proceeds may be used to satisfy the Spectral IP Note in the principal amount of $1,000,000. The Spectral IP Note currently
bears interest at a rate equal to eight percent (8%) per annum and shall be due and payable in full on the earliest of March 18, 2025,
or a Liquidation Event (as defined in the Spectral IP Note). The Spectral IP Note allows prepayment at any time without premium or penalty.
DESCRIPTION
OF CAPITAL STOCK
The
following description sets forth certain material terms and provisions of our securities that we may offer under this prospectus but
is not complete. This description also summarizes relevant provisions of Delaware General Corporation Law (the “DGCL”). The
following summary does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the applicable
provisions of the DGCL, our Charter and our Bylaws, copies of which are incorporated by reference as an exhibit to our Annual Report
on Form 10-K. In addition, you should be aware that the summary below does not give full effect to the terms of the provisions of statutory
or common law, and we encourage you to read our Charter, our Bylaws, and the applicable provisions of Delaware law for additional information.
The Charter authorizes the
issuance of 81,000,000 shares of capital stock of the Company, consisting of (i) 80,000,000 shares of common stock, and (ii) 1,000,000
shares of preferred stock, par value $0.0001 per share (the “preferred stock”). As of September 27, 2024, there were 18,513,073
shares of our common stock issued and outstanding and no shares of preferred stock issued and outstanding. The authorized and unissued
shares of common stock and the authorized and undesignated shares of preferred stock are available for issuance without further action
by our stockholders, unless such action is required by applicable law or the rules of any stock exchange on which our securities may be
listed. Unless approval of our stockholders is so required, our board of directors does not intend to seek stockholder approval for the
issuance and sale of our common stock or preferred stock.
Common
Stock
Holders
of our common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and have no cumulative
voting rights. Holders of our common stock are entitled to receive ratably dividends as may be declared by our board of directors out
of funds legally available for that purpose, subject to any preferential dividend or other rights of any then outstanding preferred stock.
We have never paid cash dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable future but intend
to retain our capital resources for reinvestment in our business. Any future disposition of dividends will be at the discretion of our
board of directors and will depend upon, among other things, our future earnings, operating and financial condition, capital requirements,
and other factors.
Holders
of our common stock do not have preemptive or conversion rights or other subscription rights. On the liquidation, dissolution, distribution
of assets or winding up of the Company, each holder of common stock will be entitled, pro rata on a per share basis, to all assets of
the Company of whatever kind available for distribution to the holders of common stock, subject to the designations, preferences, limitations,
restrictions and relative rights of any preferred stock then outstanding. The rights, preferences and privileges of holders of common
stock are subject to and may be adversely affected by the rights of the holders of shares of any series of our preferred stock that we
may designate and issue in the future.
Holders
of common stock are entitled to cast one vote per share of common stock on all matters to be voted on by stockholders. Holders of common
stock will vote together as a single class, and an action will be approved by stockholders if the number of votes cast in favor of the
action exceeds the number of votes cast in opposition to the action, while directors will be elected by a plurality of the votes cast.
Holders of common stock are not entitled to cumulate their votes in the election of directors. When a quorum is present at any meeting,
any matter other than the election of directors to be voted upon by the stockholders at such meeting will be decided by a majority vote
of the holders of shares of capital stock present or represented at the meeting and voting affirmatively or negatively on such matter.
At all meetings of stockholders for the election of directors at which a quorum is present, a plurality of the votes cast will be sufficient
to elect such directors.
Anti-Takeover
Effects of Certain Provisions of the DGCL, our Charter and Bylaws
Section 203
of the DGCL affords us certain protections, such as prohibiting us from engaging in any business combination with any stockholder for
a period of three years following the time that such stockholder (the “interested stockholder”) came to own at least
15% of our outstanding voting stock (the “acquisition”), except if:
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board of directors approved the acquisition prior to its consummation; |
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interested stockholder owned at least 85% of the outstanding voting stock upon consummation of the acquisition; or |
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business combination is approved by our board of directors, and by a two-thirds vote of the other stockholders in a meeting. |
Generally,
a “business combination” includes any merger, consolidation, asset or stock sale, or certain other transactions resulting
in a financial benefit to the interested stockholder. Subject to certain exceptions, an “interested stockholder” is a person
who, together with that person’s affiliates and associates, owns, or within the previous three years owned, 15% or more of
our voting stock.
Under
certain circumstances, these anti-takeover provisions will make it more difficult for a person who would be an “interested stockholder”
to effect various business combinations with us for a three-year period. This may encourage companies interested in acquiring us to negotiate
in advance with our board of directors because the stockholder approval requirement would be avoided if our board of directors approves
the acquisition that results in the stockholder becoming an interested stockholder.
This
may also have the effect of preventing changes in our board of directors and may make it more difficult to accomplish transactions that
stockholders may otherwise deem to be in their best interests.
Exclusive
Forum
The
Charter provides that, unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the
State of Delaware (the “Chancery Court”) shall be the sole and exclusive forum for any stockholder (including a beneficial
owner) to bring: (i) any derivative action or proceeding brought on the Company’s behalf; (ii) any action, suit or proceeding
asserting a claim of breach of fiduciary duty owed by any current or former director, officer or other employee, agent or stockholder
of the Company to the Company or its 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, the Charter
or the 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, and, if such action is filed in a court other than the
Chancery Court (a “Foreign Action”) by any stockholder (including any beneficial owner), to the fullest extent permitted
by law, such stockholder shall be deemed to have consented to (a) the personal jurisdiction of the Chancery Court in connection
with any action brought in any such court; and (b) having service of process made upon such stockholder in any such action by service
upon such stockholder’s counsel in the Foreign Action as agent for such stockholder.
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 Securities and Exchange Act for claims seeking to enforce any liability
or duty created by the Securities and 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.
Potential
Effects of Authorized but Unissued Stock
The
Charter provides that certain shares of authorized but unissued common stock and preferred stock will be available for future issuances
without stockholder approval and could be utilized for a variety of corporate purposes, including future public offerings, to raise additional
capital, or to facilitate acquisitions. The existence of authorized but unissued and unreserved common stock and preferred stock could
make more difficult or discourage an attempt to obtain control of the Company by means of a proxy contest, tender offer, merger, or otherwise.
Limitations
of Director Liability and Indemnification of Directors, Officers and Employees
The
DGCL authorizes corporations to limit or eliminate the personal liability of directors or officers of corporations and their stockholders
for monetary damages for breaches of directors’ or officers’ fiduciary duties, subject to certain exceptions. The Charter
includes a provision that eliminates the personal liability of directors or officers for monetary damages for any breach of fiduciary
duty as a director or officer except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL
as the same exists or may hereafter be amended.
The
Bylaws provide that the Company must indemnify and hold harmless the directors and officers of the Company to the fullest extent authorized
by the DGCL. The Company may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee
or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust enterprise or non-profit entity against any liability asserted against him or her and incurred by him
or her in any such capacity, or arising out of his or her status as such, whether or not the Company would have the power to indemnify
him or her against such liability under the provisions of the DGCL.
The
limitation of liability, advancement and indemnification provisions in the Charter and Bylaws may discourage stockholders from bringing
lawsuits against directors or officers for breach of their fiduciary duties. These provisions also may have the effect of reducing the
likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit
the Company and its stockholders. In addition, your investment may be adversely affected to the extent the Company pays the costs of
settlement and damage awards against directors and officers pursuant to these indemnification provisions.
Listing
Our
Common Stock is listed on Nasdaq under the symbol “MDAI”.
Transfer
Agent and Registrar
The
Transfer Agent and Registrar for our common stock is Continental Stock Transfer & Trust Co.
PLAN
OF DISTRIBUTION
We
may sell the securities offered pursuant to this prospectus from time to time in one or more transactions, including, without limitation:
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or through underwriters or initial purchasers; |
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through
broker-dealers (acting as agent or principal); |
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through
agents; |
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directly
by us to one or more purchasers (including our affiliates and stockholders), through a specific bidding or auction process, a rights
offering or otherwise; |
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through
a combination of any such methods of sale; or |
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through
any other methods described in a prospectus supplement or free writing prospectus. |
In
addition, we may enter into derivative or hedging transactions with third parties, or sell securities not covered by this prospectus
to third parties in privately negotiated transactions. In connection with such a transaction, the third parties may sell securities covered
by and pursuant to this prospectus and any accompanying prospectus supplement. If so, the third party may use securities borrowed from
us or others to settle such sales and may use securities received from us to close out any related short positions. We may also loan
or pledge securities covered by this prospectus and any accompanying prospectus supplement to third parties, who may sell the loaned
securities or, in an event of default in the case of a pledge, sell the pledged securities pursuant to this prospectus and any accompanying
prospectus supplement.
The
distribution of securities may be effected, from time to time, in one or more transactions, including:
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transactions (which may involve crosses) and transactions on the Nasdaq or any other organized market where the securities may be
traded; |
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purchases
by a broker-dealer as principal and resale by the broker-dealer for its own account pursuant to a prospectus supplement or free writing
prospectus; |
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ordinary
brokerage transactions and transactions in which a broker-dealer solicits purchasers; |
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sales
“at the market” to or through a market maker or into an existing trading market, on an exchange or otherwise; and |
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sales
in other ways not involving market makers or established trading markets, including direct sales to purchasers. |
The
applicable prospectus supplement or free writing prospectus will describe the terms of the offering of the securities, including:
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the
name or names of any underwriters, if, and if required, any dealers or agents; |
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the
terms of the offering; |
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the
purchase price of the securities and the proceeds we will receive from the sale; |
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the
delayed delivery arrangements; |
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any
underwriting discounts and other items constituting underwriters’ compensation; |
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any
discounts or concessions allowed or re-allowed or paid to dealers; and |
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any
securities exchange or market on which the securities may be listed or traded. |
We
may distribute the securities from time to time in one or more transactions at:
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a
fixed price or prices, which may be changed; |
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market
prices prevailing at the time of sale; |
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prices
related to such prevailing market prices; or |
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negotiated
prices. |
If
underwriters are used in an offering, only underwriters named in the prospectus supplement are underwriters of the securities offered
by the prospectus supplement.
If
underwriters are used in an offering, we will execute an underwriting agreement with such underwriters and will specify the name of each
underwriter and the terms of the transaction (including any underwriting discounts and other terms constituting compensation of the underwriters
and any dealers) in a prospectus supplement. The securities may be offered to the public either through underwriting syndicates represented
by managing underwriters or directly by one or more investment banking firms or others, as designated. If an underwriting syndicate is
used, the managing underwriter(s) will be specified on the cover of the prospectus supplement. If underwriters are used in the sale,
the offered securities will be acquired by the underwriters for their own accounts and may be resold from time to time in one or more
transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale.
Any public offering price and any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time.
Unless otherwise set forth in the prospectus supplement, the obligations of the underwriters to purchase the offered securities will
be subject to conditions precedent, and the underwriters will be obligated to purchase all of the offered securities, if any are purchased.
We
may grant to the underwriters options to purchase additional securities to cover over-allotments, if any, at the public offering price,
with additional underwriting commissions or discounts, as may be set forth in a related prospectus supplement. The terms of any over-allotment
option will be set forth in the prospectus supplement for those securities.
If
we use a dealer in the sale of the securities being offered pursuant to this prospectus or any prospectus supplement, we will sell the
securities to the dealer, as principal. The dealer may then resell the securities to the public at varying prices to be determined by
the dealer at the time of resale. The names of the dealers and the terms of the transaction will be specified in a prospectus supplement.
We
may sell the securities directly or through agents we designate from time to time. We will name any agent involved in the offering and
sale of securities and we will describe any commissions we will pay the agent in the prospectus supplement. Unless the prospectus supplement
states otherwise, any agent will act on a best-efforts basis for the period of its appointment.
We
may authorize agents or underwriters to solicit offers by institutional investors to purchase securities from us at the public offering
price set forth in the prospectus supplement pursuant to delayed delivery contracts providing for payment and delivery on a specified
date in the future. We will describe the conditions of these contracts and the commissions we must pay for solicitation of these contracts
in the prospectus supplement.
In
connection with the sale of the securities, underwriters, dealers or agents may receive compensation from us or from purchasers of the
securities for whom they act as agents, in the form of discounts, concessions or commissions. Underwriters may sell the securities to
or through dealers, and those dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters
or commissions from the purchasers for whom they may act as agents. Underwriters, dealers and agents that participate in the distribution
of the securities, and any institutional investors or others that purchase securities directly for the purpose of resale or distribution,
may be deemed to be underwriters, and any discounts or commissions received by them from us and any profit on the resale of the common
stock by them may be deemed to be underwriting discounts and commissions under the Securities Act of 1933, as amended.
We
may provide agents, underwriters and other purchasers with indemnification against particular civil liabilities, including liabilities
under the Securities Act of 1933, as amended, or contribution with respect to payments that the agents, underwriters or other purchasers
may make with respect to such liabilities. Agents and underwriters may engage in transactions with, or perform services for, us in the
ordinary course of business.
To
facilitate the public offering of a series of securities, persons participating in the offering may engage in transactions that stabilize,
maintain, or otherwise affect the market price of the securities. This may include over-allotments or short sales of the securities,
which involves the sale by persons participating in the offering of more securities than have been sold to them by us. In addition, those
persons may stabilize or maintain the price of the securities by bidding for or purchasing securities in the open market or by imposing
penalty bids, whereby selling concessions allowed to underwriters or dealers participating in any such offering may be reclaimed if securities
sold by them are repurchased in connection with stabilization transactions. The effect of these transactions may be to stabilize or maintain
the market price of the securities at a level above that which might otherwise prevail in the open market. Such transactions, if commenced,
may be discontinued at any time. We make no representation or prediction as to the direction or magnitude of any effect that the transactions
described above, if implemented, may have on the price of our securities.
Unless
otherwise specified in the applicable prospectus supplement, any common stock sold pursuant to a prospectus supplement will be eligible
for listing on the Nasdaq, subject to official notice of issuance. Any underwriters to whom securities are sold by us for public offering
and sale may make a market in the securities, but such underwriters will not be obligated to do so and may discontinue any market making
at any time without notice.
In
order to comply with the securities laws of some states, if applicable, the securities offered pursuant to this prospectus will be sold
in those states only through registered or licensed brokers or dealers. In addition, in some states securities may not be sold unless
they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement
is available and complied with.
LEGAL
MATTERS
Unless
otherwise specified in the applicable prospectus supplement, the validity of the securities offered by this prospectus will be passed
upon for us by Reed Smith LLP. If legal matters in connection with offerings made by this prospectus are passed on by counsel for the
underwriters, dealers or agents, if any, that counsel will be named in the applicable prospectus supplement.
EXPERTS
The
consolidated financial statements of Spectral AI, Inc. as of December 31, 2023 and 2022 and for each of the years in the two-year period
ended December 31, 2023, have been incorporated by reference herein in reliance upon the report of KPMG LLP, independent registered public
accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.
WHERE
YOU CAN FIND MORE INFORMATION
We
are subject to the informational requirements of the Exchange Act, and in accordance therewith file annual, quarterly and current reports,
proxy statements and other information with the SEC. The SEC maintains an internet website at www.sec.gov that contains periodic and
current reports, proxy and information statements and other information regarding registrants that are filed electronically with the
SEC.
These
documents are also available, free of charge, through the Investors section of our website, which is located at https://investors.spectral-ai.com/.
We
have filed with the SEC a registration statement under the Securities Act of 1933, as amended, relating to the offering of these securities.
The registration statement, including the attached exhibits, contains additional relevant information about us and the securities. This
prospectus does not contain all of the information set forth in the registration statement. You can obtain a copy of the registration
statement for free at www.sec.gov. The registration statement and the documents referred to below under “Incorporation of Documents
by Reference” are also available on our website, https://investors.spectral-ai.com/. The reference to our website in this prospectus
is an inactive textual reference only and is not a hyperlink. The contents of our website are not part of this prospectus, and you should
not consider the contents of our website in making an investment decision with respect to our securities.
We
have not incorporated by reference into this prospectus the information on our website, and you should not consider it to be a part of
this prospectus.
INCORPORATION
OF DOCUMENTS BY REFERENCE
The
SEC allows us to “incorporate by reference” the information we have filed with it, which means that we can disclose important
information to you by referring you to those documents. The information we incorporate by reference is an important part of this prospectus,
and later information that we file with the SEC will automatically update and supersede this information. We specifically are incorporating
by reference the following documents filed with the SEC (excluding those portions of any Current Report on Form 8-K that are furnished
and not deemed “filed” pursuant to the General Instructions of Form 8-K):
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our
Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on March 29, 2024; |
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our
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2024, filed with the SEC on May 9, 2024, and Quarterly Report
on Form 10-Q for the fiscal quarter ended June 30, 2024, filed with the SEC on August 12, 2024; |
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our
Current Reports on Form 8-K filed with the SEC on February
2, 2024, February
5,2024, February 12,
2024, February 13,
2024, February 22,
2024, March 1, 2024, March
22, 2024, March 29,
2024, April 1, 2024, April
2, 2024, May 16, 2024, June
5, 2024, June 24,
2024, July 15, 2024, August
13, 2024 and October 15, 2024 (other than any portions thereof deemed furnished and not filed);
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our
Definitive Proxy Statement on Schedule 14A, filed with the SEC on April 4, 2024 (but only with respect to information required by
Part III of our Annual Report on Form 10-K for the year ended December 31, 2023, which information updated and superseded information
included in Part III of our Annual Report on Form 10-K for the year ended December 31, 2023); and
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the
description of our common stock contained in our Form 10-K, filed with the Commission on March 29, 2024, and any amendment or
report filed with the Commission for purposes of updating such description. |
All
reports and definitive proxy or information statements subsequently filed after the date of this initial registration statement and prior
to effectiveness of this registration statement by the Company pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, but
excluding information furnished to, rather than filed with, the SEC, shall be deemed to be incorporated by reference herein and to be
a part hereof from the date such documents are filed.
Any
statement contained herein or in any document incorporated or deemed to be incorporated by reference shall be deemed to be modified or
superseded for purposes of the registration statement of which this prospectus forms a part to the extent that a statement contained
in any other subsequently filed document which also is or is deemed to be incorporated by reference modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed to constitute a part of the registration statement of which this prospectus
forms a part, except as so modified or superseded.
You
should rely only on the information incorporated by reference or provided in this prospectus. We have not authorized anyone else to provide
you with different information. You should not assume that the information in this prospectus is accurate as of any date other than the
date of this prospectus or the date of the documents incorporated by reference in this prospectus.
We
will provide without charge to each person to whom a copy of this prospectus is delivered, upon written or oral request, a copy of any
or all of the information that has been incorporated by reference in this prospectus but not delivered with this prospectus (other than
an exhibit to these filings, unless we have specifically incorporated that exhibit by reference in this prospectus). Any such request
should be addressed to us at:
Spectral
AI, Inc.
Attn:
Vincent S. Capone, Esq.
Chief
Financial Officer & General Counsel
2515
McKinney Ave, Suite 1000
Dallas,
TX 75201
972-499-4934
You
may also access the documents incorporated by reference in this prospectus through our website at https://investors.spectral-ai.com/.
Except for the specific incorporated documents listed above, no information available on or through our website shall be deemed to be
incorporated in this prospectus or the registration statement of which it forms a part.
14
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