0001213900-23-086995 | 10-Q | XBRL Viewer

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Net Loss Per Common Share (Details) - Schedule of Computation of Net Loss Per Common Share - shares	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Schedule of Computation of Net Loss Per Common Share [Abstract]
Common stock options	4,519,195	4,418,871
Common stock warrants	8,507,311	73,978
Unvested restricted stock units	58,197
Unvested restricted stock		54,566
Potentially dilutive securities	13,084,703	4,547,415

Subsequent Events	9 Months Ended
Sep. 30, 2023
Subsequent Events [Abstract]
SUBSEQUENT EVENTS	15. SUBSEQUENT EVENTS During October 2023, the Company filed a Form S-1 to register 8,433,231 shares of Company Common Stock issuable upon exercise of the Public Warrants and 10,069,748 shares of Company Common Stock (the “Registration”). In conjunction with the Registration, the Company issued 566,667 shares of Company Common Stock for the Committed Stock. In November 2023, in connection with the Business Combination, the Company’s Board of Directors adopted the 2023 Long Term Incentive Plan (the “2023 Plan”) which permits granting of incentive stock options, non-qualified stock options, restricted stock awards, restricted stock units, stock appreciation rights, bonus awards, dividend equivalents and other cash-based or stock-based awards to employees and non-employees. Pursuant to the 2023 Plan, 8,000,000 shares of common stock were authorized for issuance under the 2023 Plan. The awards issued under the Legacy Spectral’s 2018 Plan and the 2022 Plan will be rolled into the 2023 Plan.

Subsequent Events

9 Months Ended

Sep. 30, 2023

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

15. SUBSEQUENT EVENTS

During October 2023, the Company filed a Form S-1 to register 8,433,231 shares of Company Common Stock issuable upon exercise of the Public Warrants and 10,069,748 shares of Company Common Stock (the “Registration”). In conjunction with the Registration, the Company issued 566,667 shares of Company Common Stock for the Committed Stock.

In November 2023, in connection with the Business Combination, the Company’s Board of Directors adopted the 2023 Long Term Incentive Plan (the “2023 Plan”) which permits granting of incentive stock options, non-qualified stock options, restricted stock awards, restricted stock units, stock appreciation rights, bonus awards, dividend equivalents and other cash-based or stock-based awards to employees and non-employees. Pursuant to the 2023 Plan, 8,000,000 shares of common stock were authorized for issuance under the 2023 Plan. The awards issued under the Legacy Spectral’s 2018 Plan and the 2022 Plan will be rolled into the 2023 Plan.

Stock-Based Compensation (Details) - Schedule of Black Scholes Option Pricing Model	9 Months Ended
	Sep. 30, 2023 $ / shares
Schedule Of Black Scholes Option Pricing Model Abstract
Exercise price (per share) (in Dollars per share)	$ 4.68
Expected term (years)	6 years
Volatility (annual)	72.00%
Risk-free rate	3.60%
Dividend yield (per share)	0.00%

Notes Payable

9 Months Ended

Sep. 30, 2023

Notes Payable [Abstract]

NOTES PAYABLE

7. NOTES PAYABLE

Insurance Note

The Company entered into financing arrangements for a portion of its insurance premiums, as follows (in thousands):

						Principal Repayments				Outstanding Balance
						Nine Months Ended September 30,				September 30,		December 31,
	Amount Financed		Interest Rate			2023		2022		2023		2022

New 2023 Insurance Note	$	632		8.6	%	$	-	$	-	$	632	$	-
2023 Insurance Note		151		9.7	%		113		-		-		-
2022 Insurance Note		376		6.7	%		175		67		-		175
2021 Insurance Note		474		5.7	%		-		160		-		-
						$	288	$	227	$	632	$	175

In September 2023, in connection with the Business Combination, the Company cancelled the 2023 Insurance Note and replaced it with the New 2023 Insurance Note. Accordingly, the Company reversed the unpaid balance of approximately $38,000 from notes payable and prepaid expenses.

The Company determined that the carrying amounts of all of the insurance notes approximate fair value due to the short-term nature of borrowings and current market rates of interest.

PPP Loan

On April 13, 2020, the Company entered into a promissory note with JPMorgan Chase Bank, N.A., as lender, pursuant to the Paycheck Protection Program (“PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) for $768,575 (the “PPP Loan”). The PPP Loan, which matured on April 13, 2022 and bears interest at 1% per annum. Beginning on September 13, 2021, the Company was required to make equal monthly payments of principal and interest until the loan maturity on April 13, 2022. The PPP Loan was subject to customary terms for payment defaults and breaches of representations and warranties. The Company did not request the PPP Loan to be forgiven. During the nine months ended September 30, 2022, the Company repaid the remaining $0.4 million of principal and interest for the PPP Loan. There was no outstanding balance for the PPP Loan as of December 31, 2022.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
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-Name Accounting Standards Codification
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
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+ Details

Fair Value Measurements (Details) - Schedule of Changes in Level 3 Liabilities Measured at Fair Value - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2023	Jun. 30, 2023	Mar. 31, 2023	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022
Schedule Of Changes In Level3 Liabilities Measured At Fair Value Abstract
Balance beginning	$ 194	$ 113	$ 129	$ 158	$ 120	$ 186
Change in fair value	(141)	81	(16)	(22)	38	(66)
Balance ending	$ 53	$ 194	$ 113	$ 136	$ 158	$ 120

Accrued Expenses

9 Months Ended

Sep. 30, 2023

Accrued Expenses [Abstract]

ACCRUED EXPENSES

6. ACCRUED EXPENSES

Accrued expenses consist of the following as of September 30, 2023 and December 31, 2022 (in thousands):

	September 30,		December 31,
	2023		2022
Salary and wages	$	1,403	$	1,135
Transaction costs		1,000		-
Operating expenses		619		736
Benefits		803		650
Taxes		158		110
Total accrued expenses	$	3,983	$	2,631

Unaudited Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Cash flows from operating activities:
Net income (loss)	$ (17,308)	$ (1,173)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense	7	6
Stock-based compensation	975	874
Amortization of right-of-use assets	530	377
Issuance of shares for transaction costs	1,800
Commitment to issue shares for transaction costs	2,550
Change in fair value of warrant liabilities	(1,004)	(50)
Changes in operating assets and liabilities:
Accounts receivable	982	(317)
Inventory	(220)
Unbilled revenue	491	(1,502)
Prepaid expenses	(469)	753
Other assets	(197)	(188)
Accounts payable	(554)	886
Accrued expenses	1,225	(76)
Deferred revenue	795
Lease liabilities	(468)	(453)
Net cash used in operating activities	(10,865)	(863)
Cash flows from financing activities:
Proceeds from issuance of common stock for Equity Raise	3,351
Cash received in Business Combination	660
Payments for notes payable	(288)	(651)
Stock option exercises	316
Net cash provided by (used in) financing activities	4,039	(651)
Net decrease in cash	(6,826)	(1,514)
Cash	14,174	16,121
Cash	7,348	14,607
Supplemental cash flow information:
Cash paid for interest	6	19
Cash paid for taxes	114	53
Noncash operating and financing activities disclosure:
Recognition of Right-of-use assets and related lease liabilities upon adoption of ASC 842		624
Recognition of Right-of-use assets and related lease liabilities upon lease amendment	483
Issuance of common stock for net liabilities upon Business Combination	3,034
Prepaid asset acquired, net of cancellation, for debt and accounts payable	955	376
Issuance of common stock to settle accounts payable	$ 150

Stockholders’ Equity

9 Months Ended

Sep. 30, 2023

Stockholders’ Deficit [Abstract]

STOCKHOLDERS’ EQUITY

10. STOCKHOLDERS’ EQUITY

In conjunction of the Closing, the Company’s certificate of incorporation was amended and restated to authorize the issuance of 80,000,000 shares of Company Common Stock, $0.0001 par value and 1,000,000 shares of preferred stock, $0.0001 par value (the “Company Preferred Stock”).

- Definition

The entire disclosure for equity.

+ References

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+ Details

Organization, Nature of Business and Liquidity (Details) - USD ($)		1 Months Ended	9 Months Ended
	Feb. 17, 2021	Apr. 30, 2023	Sep. 30, 2023	Dec. 31, 2022
Organization, Nature of Business and Liquidity (Details) [Line Items]
Common stock, par value (in Dollars per share)			$ 0.0001	$ 0.0001
Common Stock exchange ratio price (in Dollars per share)			$ 10.31
Multi-year contract			$ 149,000,000
Clearance amount			55,000,000
Received amount		$ 4,000
Cash			7,300,000	$ 14,200,000
Accumulated deficit			(29,242,000)	(11,934,000)
Additional funding amount			149,000,000
Aggregated funding options			250,000,000
Potential fund			$ 101,000,000
Private Placement [Member]
Organization, Nature of Business and Liquidity (Details) [Line Items]
Sale of warrant (in Shares)	8,433,333
Public Share [Member]
Organization, Nature of Business and Liquidity (Details) [Line Items]
Common stock shares issued (in Shares)			280,485
Common stock, par value (in Dollars per share)			$ 0.0001
Class A Common Stock [Member]
Organization, Nature of Business and Liquidity (Details) [Line Items]
Common stock shares issued (in Shares)			280,485
Common stock, par value (in Dollars per share)			$ 0.0001
Class B Common Stock [Member]
Organization, Nature of Business and Liquidity (Details) [Line Items]
Common stock shares issued (in Shares)			6,325,000
Common stock, par value (in Dollars per share)			$ 0.0001
Biomedical Advanced Research and Development Authority [Member]
Organization, Nature of Business and Liquidity (Details) [Line Items]
Accumulated deficit			$ (29,200,000)	$ (11,900,000)
Rosecliff [Member]
Organization, Nature of Business and Liquidity (Details) [Line Items]
Received amount		$ 4,000,000
BARDA contracts [Member]
Organization, Nature of Business and Liquidity (Details) [Line Items]
Multi-year contract			55,000,000
BARDA contracts [Member] \| Rosecliff [Member]
Organization, Nature of Business and Liquidity (Details) [Line Items]
Received amount			$ 99,000,000
Sponsor [Member]
Organization, Nature of Business and Liquidity (Details) [Line Items]
Common stock shares issued (in Shares)			5,445,000
Letter Agreement [Member]
Organization, Nature of Business and Liquidity (Details) [Line Items]
Common stock shares issued (in Shares)			880,000
Legacy Spectral Common Stock [Member]
Organization, Nature of Business and Liquidity (Details) [Line Items]
Common stock shares issued (in Shares)			7,679,198
Issuance of private palcement			$ 3,400,000
Common stock excess shares outstanding (in Shares)			145,380,871
Common stock exange ratio shares (in Shares)			14,094,450
Common Stock exchange ratio price (in Dollars per share)			$ 10.31
Common stock excess shares issued (in Shares)			145,380,871
Legacy Spectral Common Stock [Member] \| Common Stock [Member]
Organization, Nature of Business and Liquidity (Details) [Line Items]
Common stock, par value (in Dollars per share)			$ 0.001

Fair Value Measurements

9 Months Ended

Sep. 30, 2023

Fair Value Measurements [Abstract]

FAIR VALUE MEASUREMENTS

4. FAIR VALUE MEASUREMENTS

The following table presents information about the Company’s financial liabilities that are measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022, by level within the fair value hierarchy (in thousands):

	Fair value measured as of September 30, 2023
			Quoted prices		Significant other		Significant
	Fair value at September 30, 2023		in active markets (Level 1)		observable inputs (Level 2)		unobservable inputs (Level 3)
Warrant liabilities	$	1,149	$	1,096	$	-	$	53

	Fair value measured as of December 31, 2023
			Quoted prices		Significant other		Significant
	Fair value at December 31, 2023		in active markets (Level 1)		observable inputs (Level 2)		unobservable inputs (Level 3)
Warrant liabilities	$	129	$	-	$	-	$	129

There were no transfers between Level 1, 2 or 3 during the three and nine months ended September 30, 2023 and 2022.

Fair values of cash, accounts receivable, accounts payable, accrued expenses and short-term debt are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments. The fair value of the Public Warrants, which trade in active markets, is based on quoted market prices and classified in Level 1 of the fair value hierarchy. The Angel Warrants are classified within Level 3 of the fair value hierarchy because their fair values are based on significant inputs that are unobservable in the market.

The following table presents changes in Level 3 liabilities measured at fair value for the three and nine months ended September 30, 2023 and 2022 (in thousands):

Balance - January 1, 2023	$	129
Change in fair value		(16	)
Balance - March 31, 2023	$	113
Change in fair value		81
Balance - June 30, 2023	$	194
Change in fair value		(141	)
Balance - September 30, 2023	$	53

Balance - January 1, 2022	$	186
Change in fair value		(66	)
Balance - March 31, 2022	$	120
Change in fair value		38
Balance - June 30, 2022	$	158
Change in fair value		(22	)
Balance - September 30, 2022	$	136

Both observable and unobservable inputs were used to determine the fair value of warrants that the Company has classified within the Level 3 category. Unrealized gains and losses associated with liabilities within the Level 3 category include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long- dated volatilities) inputs.

The following table provides quantitative information regarding Level 3 fair value measurements inputs at their measurement:

	September 30,			December 31,
	2023			2022

Strike price (per share)	$	7.60		$	7.60
Contractual term (years)		3.7			4.5
Volatility (annual)		70.0	%		72.6	%
Risk-free rate		4.5	%		4.0	%
Dividend yield (per share)		0.0	%		0.0	%

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity - USD ($) $ in Thousands	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Total
Balance	$ 135	$ 22,640	$ (9,022)	$ 13,753
Balance (in Shares)	135,034,564
Retroactive application of recapitalization	$ (134)	134
Retroactive application of recapitalization (in Shares)	(121,937,160)
Balance after effect of Business Combination at Dec. 31, 2021	$ 1	22,774	(9,022)	13,753
Balance after effect of Business Combination (in Shares) at Dec. 31, 2021	13,097,404
Stock-based compensation		333		333
Stock-based compensation (in Shares)	18,186
Net loss			(528)	(528)
Balance at Mar. 31, 2022	$ 1	23,107	(9,550)	13,558
Balance (in Shares) at Mar. 31, 2022	13,115,590
Balance after effect of Business Combination at Dec. 31, 2021	$ 1	22,774	(9,022)	13,753
Balance after effect of Business Combination (in Shares) at Dec. 31, 2021	13,097,404
Net loss				(1,173)
Balance at Sep. 30, 2022	$ 1	23,648	(10,195)	13,454
Balance (in Shares) at Sep. 30, 2022	13,145,900
Balance after effect of Business Combination at Mar. 31, 2022	$ 1	23,107	(9,550)	13,558
Balance after effect of Business Combination (in Shares) at Mar. 31, 2022	13,115,590
Stock-based compensation		294		294
Stock-based compensation (in Shares)	18,186
Net loss			(265)	(265)
Balance at Jun. 30, 2022	$ 1	23,401	(9,815)	13,587
Balance (in Shares) at Jun. 30, 2022	13,133,776
Stock-based compensation		247		247
Stock-based compensation (in Shares)	12,124
Net loss			(380)	(380)
Balance at Sep. 30, 2022	$ 1	23,648	(10,195)	13,454
Balance (in Shares) at Sep. 30, 2022	13,145,900
Balance	$ 135	23,795	(11,934)	11,996
Balance (in Shares)	135,409,564
Retroactive application of recapitalization	$ (134)	134
Retroactive application of recapitalization (in Shares)	(122,282,092)
Balance after effect of Business Combination at Dec. 31, 2022	$ 1	23,929	(11,934)	11,996
Balance after effect of Business Combination (in Shares) at Dec. 31, 2022	13,127,472
Stock-based compensation		300		300
Stock-based compensation (in Shares)	54,558
Stock option exercises
Stock option exercises (in Shares)	10,129
Net loss			(3,609)	(3,609)
Balance at Mar. 31, 2023	$ 1	24,229	(15,543)	8,687
Balance (in Shares) at Mar. 31, 2023	13,192,159
Balance after effect of Business Combination at Dec. 31, 2022	$ 1	23,929	(11,934)	$ 11,996
Balance after effect of Business Combination (in Shares) at Dec. 31, 2022	13,127,472
Stock option exercises (in Shares)				126,247
Net loss				$ (17,308)
Balance at Sep. 30, 2023	$ 2	30,696	(29,242)	1,456
Balance (in Shares) at Sep. 30, 2023	15,688,268
Balance after effect of Business Combination at Mar. 31, 2023	$ 1	24,229	(15,543)	8,687
Balance after effect of Business Combination (in Shares) at Mar. 31, 2023	13,192,159
Stock-based compensation		396		396
Stock-based compensation (in Shares)	12,124
Stock option exercises		6		6
Stock option exercises (in Shares)	5,819
Net loss			(3,070)	(3,070)
Balance at Jun. 30, 2023	$ 1	24,631	(18,613)	6,019
Balance (in Shares) at Jun. 30, 2023	13,210,102
Issuance of common stock upon Business Combination	$ 1	(2,375)		(2,374)
Issuance of common stock upon Business Combination (in Shares)	1,160,485
Issuance of common stock to settle accounts payable		150		150
Issuance of common stock to settle accounts payable (in Shares)	33,333
Issuance of shares for transaction costs		1,800		1,800
Issuance of shares for transaction costs (in Shares)	400,000
Commitment to issue shares for transaction costs		2,550		2,550
Private placement equity issuance		3,351		3,351
Private placement equity issuance (in Shares)	744,667
Stock-based compensation		279		279
Stock option exercises		310		310
Stock option exercises (in Shares)	139,681
Net loss			(10,629)	(10,629)
Balance at Sep. 30, 2023	$ 2	$ 30,696	$ (29,242)	$ 1,456
Balance (in Shares) at Sep. 30, 2023	15,688,268

Equity Issuance and Recapitalization (Tables)

9 Months Ended

Sep. 30, 2023

Equity Issuance and Recapitalization [Abstract]

Schedule of Recapitalization

The following table provides the elements of the Business Combination and reconciles these elements to the condensed consolidated statements of stockholders’ equity and the condensed consolidated statements of cash flows for the nine months ended September 30, 2023:

Cash	$	660
Other current assets		127
Accounts payable		(860	)
Accrued expenses		(277	)
Warrant liabilities		(2,024	)
Net assets assumed in exchange for common stock		(2,374	)
Less: Cash		(660	)
Non-cash net assets assumed in exchange for common stock	$	(3,034	)

Leases (Details) - Schedule of Non-Cancelable Operating Lease $ in Thousands	Sep. 30, 2023 USD ($)
Schedule Of Non Cancelable Operating Lease Abstract
Three months ending December 31, 2023	$ 208
Year ending December 31, 2024	894
Total	1,102
Less: imputed interest	(61)
Operating lease liabilities	$ 1,041

Organization, Nature of Business and Liquidity

9 Months Ended

Sep. 30, 2023

Organization, Nature of Business and Liquidity [Abstract]

ORGANIZATION, NATURE OF BUSINESS AND LIQUIDITY

1. ORGANIZATION, NATURE OF BUSINESS AND LIQUIDITY

Business Combination

Spectral AI, Inc., a Delaware corporation formerly known as Rosecliff Acquisition Corp I (“Spectral AI” or the “Company”) 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 (the “Business Combination Agreement”) 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 Acquisition Corp I 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 (the “Private Warrants”) 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 Capital Market (“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.

Nature of Operations

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 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 $149 million. This multi-year contract includes an initial award of nearly $55 million to support the clinical validation and FDA clearance of DeepView® for commercial marketing and distribution purposes. The Company is also completing the second contract with BARDA, referred to as BARDA Burn II, which was signed in July 2019 and is due to be completed in July 2024. Under this contract, the Company expects to further the DeepView System design, develop the AI algorithm, and take the necessary steps to obtain FDA approval for its DeepView GEN 3 System.

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 project is for the development of a handheld device for 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.

The Company operates in one segment.

Liquidity

As of September 30, 2023 and December 31, 2022, the Company had approximately $7.3 million and $14.2 million, respectively, in cash, and an accumulated deficit of $29.2 million and $11.9 million, respectively. The Company has historically funded its operations through the issuance of notes and the sale of preferred stock and common stock. Together with the new PBS BARDA Contract, executed in September 2023, for a total value of up to $149 million, the Company’s total potential support from BARDA is nearly $250 million if all future options are executed. The base phase of the PBS BARDA Contract, valued at $55 million, was exercised concurrently with the contract award in September 2023. To date, for the 2013 and 2019 BARDA contracts, the Company has committed funding of $101 million of which the Company has received $99 million. In April, 2023, we received a $4.0 million grant under the MTEC Agreement. See Research and Development Revenue below. With the PBS BARDA Contract and the MTEC Agreement, the Company believes it will have sufficient working capital to fund operations for at least one year beyond the release date of the condensed consolidated financial statements.

Fair Value Measurements (Details) - Schedule of Financial Liabilities that are Measured at Fair Value on a Recurring Basis - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Fair Value Measurements (Details) - Schedule of Financial Liabilities that are Measured at Fair Value on a Recurring Basis [Line Items]
Warrant liabilities	$ 1,149	$ 129
Quoted prices in active markets (Level 1) [Member]
Fair Value Measurements (Details) - Schedule of Financial Liabilities that are Measured at Fair Value on a Recurring Basis [Line Items]
Warrant liabilities	1,096
Significant other observable inputs (Level 2) [Member]
Fair Value Measurements (Details) - Schedule of Financial Liabilities that are Measured at Fair Value on a Recurring Basis [Line Items]
Warrant liabilities
Significant unobservable inputs (Level 3) [Member]
Fair Value Measurements (Details) - Schedule of Financial Liabilities that are Measured at Fair Value on a Recurring Basis [Line Items]
Warrant liabilities	$ 53	$ 129

Accrued Expenses (Details) - Schedule of Accrued Expenses - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2023	Dec. 31, 2022
Schedule Of Accrued Expenses Abstract
Salary and wages	$ 1,403	$ 1,135
Transaction costs	1,000
Operating expenses	619	736
Benefits	803	650
Taxes	158	110
Total accrued expenses	$ 3,983	$ 2,631

Leases

9 Months Ended

Sep. 30, 2023

Leases [Abstract]

LEASES

9. LEASES

The Company leases office space for its principal office in Dallas, Texas, which was extended during 2022 to expire in May 2024. This lease was extended again in 2023 to expire in December 2024. During 2022, the Company entered into a lease for office space in the United Kingdom under a lease that expired in May 2023.

During 2023, the Company entered into a lease for office space in the United Kingdom for annual payments of $0.1 million under a lease that expires in March 2024. The lease has been excluded from the tables below as the term is twelve months.

The following table summarizes quantitative information about the Company’s operating leases for the three and nine months ended September 30, 2023 and 2022 (dollars in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Operating cash flows from operating leases	$	208		$	159		$	536		$	472
Right-of-use assets exchanged for operating lease liabilities	$	-		$	-		$	483		$	624
Weighted average remaining lease term (in years)		1.3			0.4			1.3			0.4
Weighted average discount rate		8.5	%		6.7	%		8.5	%		6.7	%

The following table provides the components of the Company’s lease cost included in general and administrative expense in the condensed consolidated statement of operations (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Operating leases
Operating lease cost	$	205	$	132	$	597	$	396
Variable lease cost		92		45		256		78
Operating lease expense		297		177		853		474
Short-term lease rent expense		41		-		69		-
Total rent expense	$	338	$	177	$	922	$	474

Variable lease cost is primarily attributable to amounts paid to lessors for utility charges, parking and property taxes under an office space lease.

As of September 30, 2023, future minimum payments under the non-cancelable operating leases under ASC 842 were as follows (in thousands):

Three months ending December 31, 2023	$	208
Year ending December 31, 2024		894
Total		1,102
Less: imputed interest		(61	)
Operating lease liabilities	$	1,041

Stock-Based Compensation (Details) - Schedule of Stock Options Activity - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2023
Schedule Of Stock Options Activity Abstract
Stock Options, Outstanding Beginning Balance	3,503,790
Weighted Average Exercise Price, Outstanding Beginning Balance	$ 2.06
Weighted Average Remaining Contractual Life, Outstanding Beginning Balance	7 years 3 months 18 days
Aggregate Intrinsic Value, Outstanding Beginning Balance	$ 6,831
Stock Options, Options granted	253,250
Weighted Average Exercise Price, Options granted	$ 4.68
Stock Options, Options forfeited	(15,844)
Weighted Average Exercise Price,Options forfeited	$ 3.68
Stock Options, Options cancelled	(20,368)
Weighted Average Exercise Price, Options cancelled	$ 1.95
Stock Options, Options exercised	(126,247)
Weighted Average Exercise Price, Options exercised	$ 2.16
Stock Options, Outstanding Ending Balance	3,594,581
Weighted Average Exercise Price, Outstanding Ending Balance	$ 2.22
Weighted Average Remaining Contractual Life, Outstanding Ending Balance	6 years 9 months 18 days
Aggregate Intrinsic Value, Outstanding Ending Balance	$ 2,823
Stock Options, Options vested and exercisable	2,847,580
Weighted Average Exercise Price, Options vested and exercisable	$ 1.74
Weighted Average Remaining Contractual Life, Options vested and exercisable	6 years 3 months 18 days
Aggregate Intrinsic Value, Options vested and exercisable	$ 2,752

Leases (Details) - Schedule of General and Administrative Expense - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Operating leases
Operating lease cost	$ 205	$ 132	$ 597	$ 396
Variable lease cost	92	45	256	78
Operating lease expense	297	177	853	474
Short-term lease rent expense	41		69
Total rent expense	$ 338	$ 177	$ 922	$ 474

Notes Payable (Tables)

9 Months Ended

Sep. 30, 2023

Notes Payable [Abstract]

Schedule of Financing Arrangements for a Portion of Its Insurance Premiums

The Company entered into financing arrangements for a portion of its insurance premiums, as follows (in thousands):

						Principal Repayments				Outstanding Balance
						Nine Months Ended September 30,				September 30,		December 31,
	Amount Financed		Interest Rate			2023		2022		2023		2022

New 2023 Insurance Note	$	632		8.6	%	$	-	$	-	$	632	$	-
2023 Insurance Note		151		9.7	%		113		-		-		-
2022 Insurance Note		376		6.7	%		175		67		-		175
2021 Insurance Note		474		5.7	%		-		160		-		-
						$	288	$	227	$	632	$	175

Unaudited Condensed Consolidated Statements of Operations (Parentheticals) - $ / shares	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Income Statement [Abstract]
Net loss per share of common stock diluted	$ (0.77)	$ (0.03)	$ (1.29)	$ (0.09)
Weighted average shares outstanding , diluted	13,822,990	13,145,834	13,410,287	13,127,825

- Definition

The amount of net income (loss) for the period available to each share of common stock or common unit outstanding during the reporting period and to each share or unit that would have been outstanding assuming the issuance of common shares or units for all dilutive potential common shares or units outstanding during the reporting period.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 250
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 3
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483443/250-10-50-3

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 260
-SubTopic 10
-Name Accounting Standards Codification
-Section 55
-Paragraph 15
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482635/260-10-55-15

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 815
-SubTopic 40
-Name Accounting Standards Codification
-Section 65
-Paragraph 1
-Subparagraph (e)(4)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480175/815-40-65-1

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 815
-SubTopic 40
-Name Accounting Standards Codification
-Section 65
-Paragraph 1
-Subparagraph (f)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480175/815-40-65-1

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 250
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 11
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483443/250-10-50-11

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 250
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 11
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483443/250-10-50-11

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 250
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 7
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483443/250-10-50-7

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 260
-SubTopic 10
-Name Accounting Standards Codification
-Section 45
-Paragraph 2
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482689/260-10-45-2

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 260
-SubTopic 10
-Name Accounting Standards Codification
-Section 45
-Paragraph 60B
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482689/260-10-45-60B

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 250
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 4
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483443/250-10-50-4

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 260
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482662/260-10-50-1

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Topic 220
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 2
-Subparagraph (SX 210.5-03(25))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483621/220-10-S99-2

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Topic 942
-SubTopic 220
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.9-04(27))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483589/942-220-S99-1

Reference 14: http://www.xbrl.org/2003/role/disclosureRef
-Topic 944
-SubTopic 220
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.7-04(23))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483586/944-220-S99-1

Reference 15: http://www.xbrl.org/2003/role/exampleRef
-Topic 260
-SubTopic 10
-Name Accounting Standards Codification
-Section 55
-Paragraph 52
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482635/260-10-55-52

Reference 16: http://www.xbrl.org/2003/role/disclosureRef
-Topic 260
-SubTopic 10
-Name Accounting Standards Codification
-Section 45
-Paragraph 7
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482689/260-10-45-7

+ Details

Stock-Based Compensation (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2018	Dec. 31, 2022
Stock-Based Compensation (Details) [Line Items]
Unrecognized stock-based compensation (in Dollars)	$ 0.2		$ 0.2
Weighted average period			1 year 2 months 12 days
Stock options, options granted			253,250
Investor Options outstanding	3,594,581		3,594,581			3,503,790
Investor Options exercised			126,247
Investor Options are outstanding	58,197		58,197
Exercise price (in Dollars per share)	$ 2.22		$ 2.22			$ 2.06
2018 Long Term Incentive Plan [Member]
Stock-Based Compensation (Details) [Line Items]
Common stock ,authorized issuance	3,720,089		3,720,089
Stock remain available for issuance	47,036		47,036
Weighted average period			1 year 1 month 6 days
Stock options, options granted					973,803
Investor Options outstanding						939,024
Investor Options exercised			34,779
Exercise price (in Dollars per share)	$ 2.06		$ 2.06
Purchase shares	20,369		20,369
Grant date fair value (in Dollars per share)			$ 2.17
2022 Long Term Incentive Plan [Member]
Stock-Based Compensation (Details) [Line Items]
Common stock ,authorized issuance	1,939,864		1,939,864
Stock remain available for issuance	1,792,918		1,792,918
Legacy Spectral [Member]
Stock-Based Compensation (Details) [Line Items]
Purchase common stock			46,592,862
Parent Company [Member]
Stock-Based Compensation (Details) [Line Items]
Purchase common stock			4,519,191
Parent Company [Member] \| 2018 Long Term Incentive Plan [Member]
Stock-Based Compensation (Details) [Line Items]
Price per share (in Dollars per share)	$ 1.96		$ 1.96
General and Administrative Expense [Member]
Stock-Based Compensation (Details) [Line Items]
Stock-based compensation expense (in Dollars)		$ 0.2		$ 0.9
Warrant [Member] \| Legacy Spectral [Member]
Stock-Based Compensation (Details) [Line Items]
Purchase common stock			762,712
Warrant [Member] \| Parent Company [Member]
Stock-Based Compensation (Details) [Line Items]
Purchase common stock			73,978
Restricted Stock Units (RSUs) [Member]
Stock-Based Compensation (Details) [Line Items]
Stock-based compensation expense (in Dollars)	$ 0.3		$ 1.0
Restricted Stock Units (RSUs) [Member] \| Legacy Spectral [Member]
Stock-Based Compensation (Details) [Line Items]
RSUs			600,000
Restricted Stock Units (RSUs) [Member] \| Parent Company [Member]
Stock-Based Compensation (Details) [Line Items]
RSUs			58,196
Share-Based Payment Arrangement [Member]
Stock-Based Compensation (Details) [Line Items]
Unrecognized stock-based compensation (in Dollars)	$ 1.5		$ 1.5
Share-Based Payment Arrangement [Member] \| 2018 Long Term Incentive Plan [Member]
Stock-Based Compensation (Details) [Line Items]
Investor Options are outstanding	904,245		904,245

Unaudited Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Current assets:
Cash	$ 7,348	$ 14,174
Accounts receivable, net	1,312	2,294
Inventory	220
Unbilled revenue	127	618
Prepaid expenses	1,755	331
Other current assets	594	270
Total current assets	11,356	17,687
Non-current assets:
Property and equipment, net	14	21
Right-of-use assets	961	1,008
Total Assets	12,331	18,716
Commitments and contingencies (Note 8)
Current liabilities:
Accounts payable	3,275	2,759
Accrued expenses	3,983	2,631
Deferred revenue	795
Lease liabilities, short-term	813	680
Notes payable	632	175
Warrant liabilities	1,149	129
Total current liabilities	10,647	6,374
Lease liabilities, long-term	228	346
Total Liabilities	10,875	6,720
Stockholders’ Equity
Preferred stock ($0.0001 par value); 1,000,000 shares authorized; no shares issued and outstanding as of September 30, 2023 and December 31, 2022
Common stock ($0.0001 par value); 80,000,000 shares authorized; 15,688,268 and 13,127,472 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively	2	1
Additional paid-in capital	30,696	23,929
Accumulated deficit	(29,242)	(11,934)
Total stockholders’ equity	1,456	11,996
Total Liabilities and Stockholders’ Equity	$ 12,331	$ 18,716

Equity Issuance and Recapitalization (Details)	9 Months Ended
Equity Issuance and Recapitalization (Details)	Sep. 30, 2023 USD ($) shares
Equity Issuance and Recapitalization (Details) [Line Items]
Business combination, net liabilities	$ 2,400,000
Business combination, issued	33,333
transaction costs	7,600,000
Accounts payable	1,400,000
Accrued expenses	1,000,000
Business Combination, Acquired Receivable, Fair Value	$ 1,800,000
Shares Held in Employee Stock Option Plan, Committed-to-be-Released (in Shares) \| shares	566,667
Business Combination, Consideration Transferred, Liabilities Incurred	$ 700,000
Agreement obligation amount	$ 1,300,000
Agreement term	2 years
Legacy Spectral [Member]
Equity Issuance and Recapitalization (Details) [Line Items]
Business combination, issued	$ 400,000
transaction costs	800,000
Registration Rights Agreements [Member]
Equity Issuance and Recapitalization (Details) [Line Items]
Agreement obligation amount	$ 3,000,000
Commited of shares issued (in Shares) \| shares	400,000
Series of Individually Immaterial Business Acquisitions [Member]
Equity Issuance and Recapitalization (Details) [Line Items]
Business combination, fair value	$ 200,000
Legacy Spectral [Member]
Equity Issuance and Recapitalization (Details) [Line Items]
Business combination, fair value	$ 2,600,000

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		15 Months Ended
Income Taxes (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023
Income Taxes (Details) [Line Items]
Income tax expense benefit	$ (54)	$ 85	$ 32	$ 91
Effective tax rate	0.50%		0.20%	8.40%	28.80%
income tax provision [Member]
Income Taxes (Details) [Line Items]
Income tax expense benefit	$ 54,000		$ 32,000	$ 91,000	$ 85,000

- Definition

Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.

+ References + Details

Stockholders’ Equity (Details) - $ / shares	Sep. 30, 2023	Dec. 31, 2022
Stockholders’ Deficit [Abstract]
Common stock, shares authorized	80,000,000	80,000,000
Common stock par value	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock par value	$ 0.0001	$ 0.0001

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2023

Summary of Significant Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Company’s condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”).

The Business Combination was accounted for as a reverse recapitalization in accordance with GAAP. Legacy Spectral was determined as the accounting acquirer and the Company as the acquired company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination is treated as the equivalent of a capital transaction in which Legacy Spectral issued stock for the net assets of the Company. Upon the Closing, the net assets of the Company are stated at fair value, with no goodwill or other intangible assets recorded. See Note 3.

Legacy Spectral was determined to be the accounting acquiror based on evaluation of the following facts and circumstances:

(i)

Legacy Spectral’s former shareholders have a majority of the voting power of Spectral AI;

(ii)

Legacy Spectral’s senior management comprises all of the senior management of Spectral AI;

(iii)

Legacy Spectral selected five of the six directors for the Board of Directors of Spectral AI;

(iv)

Legacy Spectral’s relative size of assets and operations compared to Rosecliff; and

(v)

Legacy Spectral’s operations comprise the ongoing operations of Spectral AI.

All historical financial information presented in the unaudited condensed consolidated financial statements represents the accounts of Legacy Spectral at their historical values as if Legacy Spectral is the predecessor to the Company. The unaudited condensed consolidated financial statements following the Closing reflect the results of the combined entity’s operations.

All issued and outstanding shares of Legacy Spectral Common Stock and warrants, stock options, restricted stock units (“RSUs”) and restricted stock awards (“RSAs”) of Legacy Spectral and the per share amounts contained in the unaudited condensed consolidated financial statements for the periods presented prior to the Closing have been retroactively restated to reflect the Exchange Ratio (as defined in Note 3).

Unaudited Interim Condensed Financial Statements

The accompanying condensed consolidated balance sheet as of September 30, 2023, the condensed consolidated statements of operations and stockholders’ equity for the three and nine months ended September 30, 2023 and 2022, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2023 and 2022 are unaudited. The interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in management’s opinion, include all adjustments consisting of normal recurring adjustments necessary for the fair statement of the Company’s financial position as of September 30, 2023 and its results of operations and cash flows for the three and nine months ended September 30, 2023 and 2022. The results of operations for the three and nine months ended September 30, 2023 and 2022 are not necessarily indicative of the results to be expected for the full fiscal year or any other period.

These interim condensed consolidated financial statements should be read in conjunction with Legacy Spectral’s annual consolidated financial statements for the year ended December 31, 2022 included in the Company’s Form S-4/A filed with the Securities and Exchange Commission (“SEC”) on August 11, 2023.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Spectral MD Holdings LLC, Spectral MD Inc. and Spectral MD UK Ltd. (“Spectral MD UK”). Significant inter-company transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of these condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The Company bases its estimates and judgments on historical experience and on various other assumptions that it believes are reasonable under the circumstances. The amounts of assets and liabilities reported in the Company’s balance sheets and the amounts of expenses reported for each of the periods presented are affected by estimates and assumptions, which are used for, but not limited to, revenue recognition, warrant liabilities, stock-based compensation expense, stock issued for transaction costs, the net realizable value of inventory, right-of-use assets and income tax valuation allowances. Actual results could differ from these estimates.

Cash

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. All cash is held in US financial institutions.

Accounts Receivable, Net and Unbilled Revenue

Accounts receivable represent amounts due from US government agencies pursuant to research and development contracts associated with the Company’s DeepView® Wound Imaging System.

The Company evaluates the collectability of its receivables based on a variety of factors, including the length of time the receivables are past due, the financial health of its customers and historical experience. Based upon the review of these factors, the Company recorded no allowance for doubtful accounts as of September 30, 2023 and December 31, 2022.

The Company records unbilled revenue when revenue is recognized prior to billing customers.

Concentrations of Credit Risk

Financial instruments which potentially subject the Company to credit risk consist principally of cash and accounts receivable. Primarily all cash is held in US financial institutions which, at times, exceed federally insured limits. The Company has not recognized any losses from credit risks on such accounts. The Company believes it is not exposed to significant credit risk on cash.

Additional credit risk is related to the Company’s concentration of receivables. As of September 30, 2023 and December 31, 2022, receivables were concentrated from one customer (which is a US. government agency) representing 87% and 96% of total net receivables, respectively. No allowance for doubtful accounts were recorded as of September 30, 2023 and December 31, 2022.

One customer (which is a U.S. government agency) accounted for 89% and 94% for the three and nine months ended September 30, 2023, respectively, and 98% for each of the three and nine months ended September 30, 2022 of the recognized research and development revenue.

Inventory

Inventory is comprised of finished goods, purchased from a third-party manufacturer, and is stated at the lower of cost (average cost) or net realizable value. For the three and nine months ended September 30, 2023, the Company did not have write-downs for obsolete inventory.

Fair Value

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Assets and liabilities that are measured at fair value are reported using a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

	Level 1 -	Unadjusted quoted prices in active markets that are assessable at the measurement date for identical, unrestricted assets or liabilities.
	Level 2 -	Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
	Level 3 -	Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

Foreign Currency

The reporting currency for the condensed consolidated financial statements of the Company is the US dollar. The functional currency of the Company and its wholly owned subsidiaries Spectral MD Holdings LLC and Spectral MD, Inc. is the US dollar. The functional currency of Spectral MD UK is its local currency, the British pound. The assets and liabilities of Spectral MD UK are translated into US. dollars at exchange rates in effect at the end of each reporting period, and the revenues and expenses are translated at average exchange rates in effect during the applicable period. Translation adjustments are included in accumulated other comprehensive income as a component of stockholders’ equity. As of September 30, 2023 and December 31, 2022, the Company’s translation adjustments are not material.

Monetary assets and liabilities denominated in currencies other than the functional currency are translated at exchange rates in effect at the balance sheet date. Resulting unrealized gains and losses are included in other income (expense), net in the condensed consolidated statements of operations. For the three and nine months ended September 30, 2023 the Company recorded approximately $24,000 and $11,000, respectively, of net foreign exchange transaction losses. For the three and nine months ended September 30, 2022, the Company recorded approximately $0.1 million and $0.3 million, respectively, of net foreign exchange transaction losses primarily related to the Company’s bank account denominated in British Pounds and accounts payable denominated in British Pounds.

Leases

The Company accounts for its leases under ASC 842, Leases. Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases. Operating leases are recorded in the condensed consolidated balance sheets as both a right-of-use asset and a lease liability, calculated by discounting fixed lease payments at the rate implicit in the lease or the Company’s incremental borrowing rate factoring the term of the lease. The incremental borrowing rate used by the Company is an estimate of the interest rate the Company would incur to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease. Because the Company does not generally borrow on a collateralized basis, it uses the interest rate it pays on its noncollateralized borrowings as an input to deriving an appropriate incremental borrowing rate, adjusted for the amount of lease payments, the lease term and the effect on that rate of designating specific collateral with a value equal to the unpaid lease payments for that lease. Lease liabilities are increased by interest and reduced by payments each period, and the right-of-use asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the right-of-use asset results in straight-line rent expense over the lease term. Variable lease expenses are recorded when incurred. In calculating the right-of-use assets and lease liabilities, the Company has elected to combine lease and non-lease components. The Company excludes short-term leases having initial terms of 12 months or less from the requirement to capitalize right-of-use assets and liabilities as an accounting policy election.

During the three and nine months ended September 30, 2023 and 2022, the Company did not have any financing leases.

Warrant Liabilities

On September 11, 2023, in conjunction with the Business Combination, the Company assumed the Public Warrants which have an exercise price of $11.50 per share, are exercisable 30 days after the Business Combination and expire five years after the Business Combination or upon redemption. The Company may redeem the Public Warrants if the Company’s common stock equals or exceeds $18.00 per share for 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the holders of Public Warrants. As of September 30, 2023, there are 8,433,333 Public Warrants Outstanding.

In September 2021, Legacy Spectral issued 73,978 warrants, with a strike price of $7.60 and a five-year life, to SP Angel Corporate Finance LLP (“SP Angel”), who acted as nominated adviser and broker to the Company for the purposes of the AIM Rules (“Angel Warrants”). In conjunction with the Business Combination, the Angel Warrants were converted into warrants to purchase Company Common Stock based on the Exchange Ratio. As of September 30, 2023, there are 73,978 warrants to purchase Company Common Stock outstanding.

The Company accounts for its Public Warrants and the Angel Warrants as derivative liabilities in accordance with ASC 815, Derivatives and Hedging (“ASC 815”). Accordingly, the Company recognizes the instruments as liabilities at fair value, determined using the closing price of the observable market quote in an active market (the NASDAQ) for the Public Warrants and the Black-Scholes option-pricing model for the Angel Warrants, and adjusts the instruments to fair value at the end of each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, redeemed or expired, and any change in fair value is recognized in the Company’s condensed consolidated statements of operations within other income (expense).

Research and Development Revenue

The Company recognizes revenue when the Company’s customers obtain control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services by analyzing the following five steps: (1) identify the contract with a customer(s); (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the Company satisfies a performance obligation.

The Company generates research and development revenue, primarily from the contracts with BARDA and MTEC. Each contract for BARDA and MTEC has a single performance obligation.

The contracts with BARDA are cost-plus-fee contracts associated with development of certain product candidates. Revenues from these reimbursable contracts are recognized as costs are incurred, generally based on allowable costs incurred during the period, plus any recognizable earned fee.

The MTEC Agreement provides for installment payments after the completion of milestone events. The installment payments are considered variable consideration as the entitlement depends on successful completion of research, however, the payments are not constrained from inclusion in the transaction price as it not probable that a significant reversal of cumulative revenue will be reversed when the underlying uncertainty is resolved. Revenue for the MTEC Agreement is recognized over time based upon the cost-to-cost measure of progress, using this input method to measure progress as the customer has the benefit of access to the development research under these projects and therefore benefits from the Company’s performance incrementally as research and development activities occur under each project. The Company measures progress of performance by comparing the actual costs incurred to-date to the total estimated cost of the project. The Company will adjust the measure of progress at the end of each reporting period and reflect any changes to the estimated cost of the project on a prospective basis.

The Company elected the practical expedient not to adjust the transaction price for the effects of a significant financing component as the period between performance (satisfaction of a performance obligation) and payment is one year or less. Payments from customers are generally received within 30 days of when the invoice is sent.

The Company records deferred revenue when the customers have been billed prior to recognizing revenue.

Research and Development Expense

The Company expenses research and development costs as incurred. These expenses include salaries for research and development personnel, consulting fees, product development, pre-clinical studies, clinical trial costs, and other fees and costs related to the development of the technology. For the three months ended September 30, 2023 and 2022, research and development expense was $3.6 million and $4.3 million, respectively, of which $2.0 million and $3.8 million, respectively, is related to the BARDA and MTEC contracts and included in cost of revenue and $1.6 million and $0.5 million, respectively, is included in general and administrative expenses. For the nine months ended September 30, 2023 and 2022, research and development expense was $11.3 million and $12.2 million, respectively, of which $7.3 million and $10.9 million, respectively, is related to the BARDA and MTEC contracts and included in cost of revenue and $4.0 million and $1.3 million, respectively, is included in general and administrative expenses.

Stock-Based Compensation

The Company accounts for all stock-based payments to employees and non-employees, including grants of stock options, RSUs, RSAs and stock options with non-market performance conditions (“PSOs”) based on their respective grant date fair values. The Company estimates the fair value of stock option grants and PSOs using the Black-Scholes option pricing model. The RSUs and RSAs are valued based on the fair value of the Company’s common stock on the date of grant. The assumptions used in calculating the fair value of the Company’s stock and stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. The Company expenses stock-based compensation related to stock options, RSUs and RSAs over the requisite service period. As the PSOs have performance conditions, compensation expense is recognized for each award if and when the Company’s management deems it probable that the performance conditions will be satisfied. Forfeitures are recorded as they occur. Compensation previously recorded for unvested equity awards that are forfeited is reversed upon forfeiture. The Company expenses stock-based compensation to employees over the requisite service period, on a straight-line basis, based on the estimated grant-date fair value of the awards.

Income Taxes

Income taxes are recorded in accordance with ASC 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the condensed consolidated financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. The Company has no uncertain tax positions as of September 30, 2023 and December 31, 2022 that qualify for either recognition or disclosure in the condensed consolidated financial statements under this guidance.

The Company’s policy is to classify assessments, if any, for tax related interest as interest expense and penalties as general and administrative expenses in the condensed consolidated statements of operations. The Company did not have any interest and penalties during the three and nine months ended September 30, 2023 and 2022 and did not have any interest or penalties accrued as of September 30, 2023.

Comprehensive Loss

Comprehensive loss is equal to net loss as presented in the condensed consolidated statements of operations, as the Company did not have any material other comprehensive income or loss for the periods presented.

Net Loss per Share of Common Stock

Basic net loss share of common stock is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share of common stock adjusts basic earnings per share for the potentially dilutive impact of unvested restricted stock, stock options and warrants. Securities having an anti-dilutive effect on diluted net earnings per share are excluded from the calculation. The dilutive effect of the unvested restricted stock and stock options is calculated using the treasury stock method. For warrants that are liability-classified, during periods when the impact is dilutive, the Company assumes share settlement of the instruments as of the beginning of the reporting period and adjusts the numerator to remove the change in fair value of the warrant liability and adjusts the denominator to include the dilutive shares calculated using the treasury stock method.

Recently Adopted Accounting Standards

In September 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments - Credit Losses, which was subsequently amended by ASU 2018-19 and ASU 2019-10. This standard requires the measurement of expected credit losses for financial instruments carried at amortized cost held at the reporting date based on historical experience, current conditions and reasonable forecasts. The updated guidance also amends the current other-than-temporary impairment model for available-for-sale debt securities by requiring the recognition of impairments relating to credit losses through an allowance account and limits the amount of credit loss to the difference between a security’s amortized cost basis and its fair value. In addition, the length of time a security has been in an unrealized loss position will no longer impact the determination of whether a credit loss exists. The main objective of this ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The Company adopted this standard on January 1, 2023, with no impact on its condensed consolidated financial statements and related disclosures.

In September 2022, the FASB issued ASU 2022-03, ASC Subtopic 820, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The FASB is issuing this update (1) to clarify the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, (2) to amend a related illustrative example, and (3) to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. The amendments in this update are effective for the Company on January 1, 2025. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. The Company is still evaluating the impact of this pronouncement on the condensed consolidated financial statements.

Stock-Based Compensation (Details) - Schedule of RSAs Activities	9 Months Ended
	Sep. 30, 2023 $ / shares shares
Schedule Of Rsas Activities Abstract
Number of Shares, Nonvested, beginning balance \| shares	30,318
Weighted Average Grant Date Fair Value per Share,Nonvested beginning balance \| $ / shares	$ 1.07
Number of Shares,Vested \| shares	(30,318)
Weighted Average Grant Date Fair Value per Share, Vested \| $ / shares	$ 1.07
Number of Shares, Nonvested ending balance \| shares
Weighted Average Grant Date Fair Value per Share, Nonvested ending balance \| $ / shares

Research and Development Revenue

9 Months Ended

Sep. 30, 2023

Research and Development Revenue [Abstract]

RESEARCH AND DEVELOPMENT REVENUE

5. RESEARCH AND DEVELOPMENT REVENUE

For the three and nine months ended September 30, 2023 and 2022, the Company’s revenues disaggregated by the major sources was as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
BARDA	$	3,055	$	6,903	$	12,018	$	18,866
Other U.S governmental authorities		385		135		751		406
Total revenue	$	3,440	$	7,038	$	12,769	$	19,272

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 9
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-9

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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-Name Accounting Standards Codification
-Section 50
-Paragraph 10
-Publisher FASB
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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-Name Accounting Standards Codification
-Section 50
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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Reference 5: http://www.xbrl.org/2003/role/disclosureRef
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Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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-Section 50
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Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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-Section 50
-Paragraph 12
-Subparagraph (e)
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Subparagraph (b)(2)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-13

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Name Accounting Standards Codification
-Topic 606
-Publisher FASB
-URI https://asc.fasb.org//606/tableOfContent

+ Details

Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2023

Stock-Based Compensation [Abstract]

Schedule of RSUs Activities

The RSAs generally vest over four years. A summary of RSA activities for the nine months ended September 30, 2023 are presented below:

	Number of Shares			Weighted Average Grant Date Fair Value per Share US$
Nonvested as of January 1, 2023		30,318		$	1.07
Vested		(30,318	)	$	1.07
Nonvested as of September 30, 2023		-		$	-

Schedule of RSUs Activities

The RSUs generally vest over three years. A summary of RSU activities for the nine months ended September 30, 2023 are presented below:

	Number of Shares		Weighted Average Grant Date Fair Value per Share US$
Nonvested as of January 1, 2023		-	$	-
Granted		58,197	$	4.65
Nonvested as of September 30, 2023		58,197	$	4.65

Schedule of Black Scholes Option Pricing Model

In applying the Black Scholes option pricing model, the Company used the following assumptions for stock options granted in the nine months ended September 30, 2023:

	Nine Months Ended September 30, 2023
Exercise price (per share)	$	4.68
Expected term (years)		6.0
Volatility (annual)		72	%
Risk-free rate		3.6	%
Dividend yield (per share)		0	%

Schedule of Stock Options Activity

A summary of stock options activity for the nine months ended September 30, 2023 is presented below:

	*Stock Options*			Weighted Average Exercise Price US$		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2023		3,503,790		$	2.06		7.3	$	6,831
Options granted		253,250		$	4.68
Options forfeited		(15,844	)	$	3.68
Options cancelled		(20,368	)	$	1.95
Options exercised		(126,247	)	$	2.16
Outstanding as of September 30, 2023		3,594,581		$	2.22		6.8	$	2,823
Options vested and exercisable as of September 30, 2023		2,847,580		$	1.74		6.3	$	2,752

Notes Payable (Details) - Schedule of Financing Arrangements for a Portion of Its Insurance Premiums - USD ($) $ in Thousands	9 Months Ended		12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Schedule of Financing Arrangements for a Portion of Its Insurance Premiums [Line Items]
Principal Repayments, Insurance Note	$ 288	$ 227
Outstanding Balance, Insurance Note	632		$ 175
New 2023 Insurance Note [Member]
Schedule of Financing Arrangements for a Portion of Its Insurance Premiums [Line Items]
Amount Financed, Insurance Note	$ 632
Interest Rate, Insurance Note	8.60%
Principal Repayments, Insurance Note
Outstanding Balance, Insurance Note	632
2023 Insurance Note [Member]
Schedule of Financing Arrangements for a Portion of Its Insurance Premiums [Line Items]
Amount Financed, Insurance Note	$ 151
Interest Rate, Insurance Note	9.70%
Principal Repayments, Insurance Note	$ 113
Outstanding Balance, Insurance Note
2022 Insurance Note [Member]
Schedule of Financing Arrangements for a Portion of Its Insurance Premiums [Line Items]
Amount Financed, Insurance Note	$ 376
Interest Rate, Insurance Note	6.70%
Principal Repayments, Insurance Note	$ 175	67
Outstanding Balance, Insurance Note			175
2021 Insurance Note [Member]
Schedule of Financing Arrangements for a Portion of Its Insurance Premiums [Line Items]
Amount Financed, Insurance Note	$ 474
Interest Rate, Insurance Note	5.70%
Principal Repayments, Insurance Note		$ 160
Outstanding Balance, Insurance Note

Stock-Based Compensation

9 Months Ended

Sep. 30, 2023

Stock-Based Compensation [Abstract]

STOCK-BASED COMPENSATION

11. STOCK-BASED COMPENSATION

Each option and warrant to purchase common stock of Legacy Spectral was converted into an option and warrant, respectively, to purchase Spectral AI’s common stock based on the Exchange Ratio, with corresponding adjustments to the exercise price. Accordingly, the options and warrants to purchase 46,592,862 and 762,712, respectively, shares of the common stock of Legacy Spectral were converted into options and warrants to purchase 4,519,191 and 73,978, respectively, shares of Spectral AI’s common stock. Legacy Spectral’s 600,000 RSUs were converted into 58,196 Spectral AI RSUs, based on the Exchange Ratio.

2018 Long Term Incentive Plan

On July 24, 2018, Legacy Spectral’s Board of Directors adopted the 2018 Long Term Incentive Plan (the “2018 Plan”) which permits granting of incentive stock options (they must meet all statutory requirements), non-qualified stock options, stock appreciation rights, restricted stock, stock units, performance shares, performance units, incentive bonus awards, and other cash-based or stock-based awards. Pursuant to the 2018 Plan, stock options must expire within 10 years and must be granted with exercise prices of no less than the fair value of the common stock on the grant date, as determined by Legacy Spectral’s Board of Directors. As of September 30, 2023, 3,720,089 shares of common stock were authorized for issuance under the 2018 Plan, of which 47,036 remain available for issuance. See Note 15.

2022 Long Term Incentive Plan

On September 27, 2022, Legacy Spectral’s stockholders approved the adoption of the 2022 Long Term Incentive Plan (the “2022 Plan”) which permits granting of incentive stock options (they must meet all statutory requirements), non-qualified stock options, stock appreciation rights, restricted stock, stock units, performance shares, performance units, incentive bonus awards, and other cash-based or stock-based awards. Pursuant to the 2022 Plan, stock options must expire within 10 years and must be granted with exercise prices of no less than the fair value of the common stock on the grant date, as determined by Legacy Spectral’s Board of Directors. As of September 30, 2023, 1,939,864 shares of common stock were authorized for issuance under the 2022 Plan, of which 1,792,918 remain available for issuance. See Note 15.

Restricted Stock Awards

The RSAs generally vest over four years. A summary of RSA activities for the nine months ended September 30, 2023 are presented below:

	Number of Shares			Weighted Average Grant Date Fair Value per Share US$
Nonvested as of January 1, 2023		30,318		$	1.07
Vested		(30,318	)	$	1.07
Nonvested as of September 30, 2023		-		$	-

Restricted Stock Units

The RSUs generally vest over three years. A summary of RSU activities for the nine months ended September 30, 2023 are presented below:

	Number of Shares		Weighted Average Grant Date Fair Value per Share US$
Nonvested as of January 1, 2023		-	$	-
Granted		58,197	$	4.65
Nonvested as of September 30, 2023		58,197	$	4.65

Stock Options

The fair value of each employee and non-employee stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. Legacy Spectral’s stock became publicly traded on July 22, 2021 on the AIM, and lacks company-specific historical and implied volatility information. Therefore, Legacy Spectral estimated its expected stock volatility based on the historical volatility of a publicly traded set of peer companies. Due to the lack of historical exercise history, the expected term of the Legacy Spectral’s stock options for employees has been determined utilizing the simplified method by taking an average of the vesting periods and the original contractual terms for each award. The expected term of stock options granted to non-employees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the US. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is zero based on the fact that Legacy Spectral has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

In applying the Black Scholes option pricing model, the Company used the following assumptions for stock options granted in the nine months ended September 30, 2023:

	Nine Months Ended September 30, 2023
Exercise price (per share)	$	4.68
Expected term (years)		6.0
Volatility (annual)		72	%
Risk-free rate		3.6	%
Dividend yield (per share)		0	%

A summary of stock options activity for the nine months ended September 30, 2023 is presented below:

	*Stock Options*			Weighted Average Exercise Price US$		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2023		3,503,790		$	2.06		7.3	$	6,831
Options granted		253,250		$	4.68
Options forfeited		(15,844	)	$	3.68
Options cancelled		(20,368	)	$	1.95
Options exercised		(126,247	)	$	2.16
Outstanding as of September 30, 2023		3,594,581		$	2.22		6.8	$	2,823
Options vested and exercisable as of September 30, 2023		2,847,580		$	1.74		6.3	$	2,752

The Company recorded stock-based compensation expense for stock options, RSUs and restricted stock awards of $0.3 million and $1.0 million for the three and nine months ended September 30, 2023, respectively, and $0.2 million and $0.9 million for the three and nine months ended September 30, 2022, respectively, in general and administrative expenses in the condensed consolidated statements of operations.

As of September 30, 2023, there was approximately $1.5 million and $0.2 million of unrecognized stock-based compensation related to stock option grants and restricted stock unit grants, respectively, that will be amortized over a weighted average period of 1.1 years and 1.2 years, respectively.

During the year ended December 31, 2018, the Company granted of 973,803 stock options to investors (the “Investor Options”) that were approved by the Board of Directors outside of the 2018 Plan, of which 939,024 Investor Options were outstanding as of December 31, 2022. During September 30, 2023, 34,779 of the Investor Options were exercised and the remaining 904,245 Investor Options are outstanding and will expire in November 2023. The Investor Options have an exercise price of $2.06 per share. As of September 30, 2023, there is no unrecognized stock-based compensation expense related to the Investor Options.

As of September 30, 2023, the Company has outstanding stock options, issued to an investor, to purchase 20,369 shares of the Company’s common stock (the “ASC 815 Options”) at a price of $1.96 per share that expire in December 2023. The ASC 815 Options have a grant date fair value of $2.17 per share and are equity-classified stock options in accordance with ASC 815.

Net Loss Per Common Share (Tables)

9 Months Ended

Sep. 30, 2023

Net Loss Per Common Share [Abstract]

Schedule of Computation of Net Loss Per Common Share

The table below summarizes potentially dilutive securities that were excluded from the computation of net loss per common share as of the periods presented because including them would be anti-dilutive.

	2023		2022

Common stock options		4,519,195		4,418,871
Common stock warrants		8,507,311		73,978
Unvested restricted stock units		58,197		-
Unvested restricted stock		-		54,566
Potentially dilutive securities		13,084,703		4,547,415

Accrued Expenses (Tables)

9 Months Ended

Sep. 30, 2023

Accrued Expenses [Abstract]

Schedule of Accrued Expenses

Accrued expenses consist of the following as of September 30, 2023 and December 31, 2022 (in thousands):

	September 30,		December 31,
	2023		2022
Salary and wages	$	1,403	$	1,135
Transaction costs		1,000		-
Operating expenses		619		736
Benefits		803		650
Taxes		158		110
Total accrued expenses	$	3,983	$	2,631

Summary of Significant Accounting Policies (Details) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022	Sep. 11, 2023	Sep. 30, 2021
Summary of Significant Accounting Policies (Details) [Line Items]
Other income expense	$ 24,000		$ 11,000
Foreign exchange transaction loss		$ 100,000		$ 300,000
Warrants price per share (in Dollars per share)						$ 11.5
Public warrants outstanding (in Shares)	8,507,311	73,978	8,507,311	73,978
Cost of revenue	$ 1,968,000	$ 3,811,000	$ 7,325,000	$ 10,943,000
Public Warrants [Member]
Summary of Significant Accounting Policies (Details) [Line Items]
Public warrants outstanding (in Shares)	8,433,333		8,433,333
Public Warrants [Member]
Summary of Significant Accounting Policies (Details) [Line Items]
Exceeds per share (in Dollars per share)	$ 18		$ 18
Warrant [Member]
Summary of Significant Accounting Policies (Details) [Line Items]
Public warrants outstanding (in Shares)	73,978		73,978
Issued shares (in Shares)							73,978
Price per share (in Dollars per share)							$ 7.6
One Customer [Member] \| Accounts Receivable [Member] \| Customer Concentration Risk [Member]
Summary of Significant Accounting Policies (Details) [Line Items]
Net receivables percentage			87.00%
One Customer [Member] \| Revenue Benchmark [Member] \| Customer Concentration Risk [Member]
Summary of Significant Accounting Policies (Details) [Line Items]
Net receivables percentage					96.00%
One Customer [Member] \| Research and Development Revenue [Member] \| Customer Concentration Risk [Member]
Summary of Significant Accounting Policies (Details) [Line Items]
Net receivables percentage	89.00%	98.00%	94.00%	98.00%
Biomedical Advanced Research and Development Authority [Member]
Summary of Significant Accounting Policies (Details) [Line Items]
Research and development expense	$ 3,600,000	$ 4,300,000	$ 11,300,000	$ 12,200,000
Cost of revenue	2,000,000	3,800,000	7,300,000	10,900,000
General and administrative expenses	$ 1,600,000	$ 500,000	$ 4,000,000
Medical Technology Enterprise Consortium [Member]
Summary of Significant Accounting Policies (Details) [Line Items]
General and administrative expenses				$ 1.3

Unaudited Condensed Consolidated Balance Sheets (Parentheticals) - $ / shares	Sep. 30, 2023	Dec. 31, 2022
Statement of Financial Position [Abstract]
Preferred stock par value (in Dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value (in Dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized	80,000,000	80,000,000
Common stock, shares issued	15,688,268	13,127,472
Common stock, shares outstanding	15,688,268	13,127,472

Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2023

Fair Value Measurements [Abstract]

Schedule of Financial Liabilities that are Measured at Fair Value on a Recurring Basis

	Fair value measured as of September 30, 2023
			Quoted prices		Significant other		Significant
	Fair value at September 30, 2023		in active markets (Level 1)		observable inputs (Level 2)		unobservable inputs (Level 3)
Warrant liabilities	$	1,149	$	1,096	$	-	$	53

	Fair value measured as of December 31, 2023
			Quoted prices		Significant other		Significant
	Fair value at December 31, 2023		in active markets (Level 1)		observable inputs (Level 2)		unobservable inputs (Level 3)
Warrant liabilities	$	129	$	-	$	-	$	129

Schedule of Changes in Level 3 Liabilities Measured at Fair Value

The following table presents changes in Level 3 liabilities measured at fair value for the three and nine months ended September 30, 2023 and 2022 (in thousands):

Balance - January 1, 2023	$	129
Change in fair value		(16	)
Balance - March 31, 2023	$	113
Change in fair value		81
Balance - June 30, 2023	$	194
Change in fair value		(141	)
Balance - September 30, 2023	$	53

Balance - January 1, 2022	$	186
Change in fair value		(66	)
Balance - March 31, 2022	$	120
Change in fair value		38
Balance - June 30, 2022	$	158
Change in fair value		(22	)
Balance - September 30, 2022	$	136

Schedule of Quantitative Information Regarding Level 3 Fair Value Measurements Inputs

The following table provides quantitative information regarding Level 3 fair value measurements inputs at their measurement:

	September 30,			December 31,
	2023			2022

Strike price (per share)	$	7.60		$	7.60
Contractual term (years)		3.7			4.5
Volatility (annual)		70.0	%		72.6	%
Risk-free rate		4.5	%		4.0	%
Dividend yield (per share)		0.0	%		0.0	%

Equity Issuance and Recapitalization (Details) - Schedule of Recapitalization	Sep. 30, 2023 USD ($)
Schedule Of Recapitalization Abstract
Cash	$ 660
Other current assets	127
Accounts payable	(860)
Accrued expenses	(277)
Warrant liabilities	(2,024)
Net assets assumed in exchange for common stock	(2,374)
Less: Cash	(660)
Non-cash net assets assumed in exchange for common stock	$ (3,034)

Related Party Transactions

9 Months Ended

Sep. 30, 2023

RELATED PARTY TRANSACTIONS

14. RELATED PARTY TRANSACTIONS

For the three and nine months ended September 30, 2023 and 2022, the Company did not have any transactions with related parties.

- Definition

The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480990/946-20-50-2

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 5
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480990/946-20-50-5

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 6
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480990/946-20-50-6

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 235
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481062/946-235-50-2

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 235
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (e)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481062/946-235-50-2

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483326/850-10-50-1

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 220
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.6-07(2)(g)(3))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483575/946-220-S99-1

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 220
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.6-07(2)(c))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483575/946-220-S99-1

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 220
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.6-07(2)(e))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483575/946-220-S99-1

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//850/tableOfContent

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 6
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483326/850-10-50-6

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483326/850-10-50-1

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483326/850-10-50-1

+ Details

Leases (Details)	Sep. 30, 2023 USD ($)
Leases [Abstract]
Lease Incentive Receivable, Current	$ 100

Research and Development Revenue (Tables)

9 Months Ended

Sep. 30, 2023

Research and Development Revenue [Abstract]

Schedule of Research and Development Revenue

For the three and nine months ended September 30, 2023 and 2022, the Company’s revenues disaggregated by the major sources was as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
BARDA	$	3,055	$	6,903	$	12,018	$	18,866
Other U.S governmental authorities		385		135		751		406
Total revenue	$	3,440	$	7,038	$	12,769	$	19,272

Commitments and Contingencies

9 Months Ended

Sep. 30, 2023

Commitments and Contingencies [Abstract]

COMMITMENTS AND CONTINGENCIES

8. COMMITMENTS AND CONTINGENCIES

Legal Matters

The Company is not a party to any material legal proceedings and is not aware of any pending or threatened claims. From time to time, the Company may be subject to various legal proceedings and claims that arise in the ordinary course of its business activities.

Net Loss Per Common Share

9 Months Ended

Sep. 30, 2023

Net Loss Per Common Share [Abstract]

NET LOSS PER COMMON SHARE

13. NET LOSS PER COMMON SHARE

Basic and diluted net loss per common share attributable to common stockholders are the same for the three and nine months ended September 30, 2023 and 2022, since the inclusion of all potential shares of common stock outstanding would have been anti-dilutive due to the Company’s net loss.

	2023		2022

Common stock options		4,519,195		4,418,871
Common stock warrants		8,507,311		73,978
Unvested restricted stock units		58,197		-
Unvested restricted stock		-		54,566
Potentially dilutive securities		13,084,703		4,547,415

Leases (Details) - Schedule of Operating Lease - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Schedule Of Operating Lease Abstract
Operating cash flows from operating leases	$ 208	$ 159	$ 536	$ 472
Right-of-use assets exchanged for operating lease liabilities			$ 483	$ 624
Weighted average remaining lease term (in years)	1 year 3 months 18 days	4 months 24 days	1 year 3 months 18 days	4 months 24 days
Weighted average discount rate	8.50%	6.70%	8.50%	6.70%

Equity Issuance and Recapitalization

9 Months Ended

Sep. 30, 2023

Equity Issuance and Recapitalization [Abstract]

EQUITY ISSUANCE AND RECAPITALIZATION

3. RECAPITALIZATION

As discussed in Note 1, on September 11, 2023, the Company consummated the Business Combination, with Legacy Spectral surviving the merger as a wholly-owned subsidiary of the Company.

On the date of the Business Combination, the Company recorded net liabilities of $2.4 million, with an offsetting decrease to additional paid-in capital. The following table provides the elements of the Business Combination and reconciles these elements to the condensed consolidated statements of stockholders’ equity and the condensed consolidated statements of cash flows for the nine months ended September 30, 2023:

Cash	$	660
Other current assets		127
Accounts payable		(860	)
Accrued expenses		(277	)
Warrant liabilities		(2,024	)
Net assets assumed in exchange for common stock		(2,374	)
Less: Cash		(660	)
Non-cash net assets assumed in exchange for common stock	$	(3,034	)

Upon the Closing, the Company issued 33,333 shares of Company Common Stock, with a fair value of $0.2 million, to settle an assumed liability to the Sponsor as a payment for an administrative fee.

The Company recorded transaction costs, consisting of legal, accounting and other professional services incurred by Legacy Spectral related to the Business Combination, of $7.6 million (the “Transaction Costs”), in other income (expense) in the condensed consolidated statement of operations for the three and nine months ended September 30, 2023 and no costs were capitalized. As of September 30, 2023, $1.4 million and $1.0 million of the Transaction Costs are included accounts payable and accrued expenses, respectively. The remaining $5.2 million of Transaction Costs included $0.8 million in cash paid for transaction costs, the issuance of 400,000 shares of Company Common Stock with a fair value of $1.8 million and the commitment to issue 566,667 shares of Company Common Stock with an aggregate fair value of $2.6 million (the “Committed Stock”). See Note 15.

The commitments to issue shares in exchange for Committed Stock obligation is equity-classified in accordance with ASC 815 as they are freestanding contracts that will be settled in shares of Company Common Stock. Accordingly, the Company recorded the Committed Stock obligations based on the fair value of the Company Common Stock upon the Closing and will not remeasure this obligation at any reporting dates or upon issuance of the shares.

Prior to the Business Combination the Company incurred $0.7 million of transaction costs, included in other income (expense) in the condensed consolidated statement of operations for the nine months ended September 30, 2023, for professional services incurred by Legacy Spectral that were related to potential business combinations that did not occur.

Registration Rights Agreements

In accordance with the agreement with one of the Company’s underwriters, for 166,667 shares of Committed Stock, the Company was required to file a registration statement with the SEC within 45 days of the Closing. The Company is required to use its commercially reasonable efforts to cause such registration to become effective, and in any event if such registration statement does not become effective, the Company has 30 days to cure such default or will be required to pay the obligation with $1.3 million of cash. In accordance with ASC 825, Financial Instruments, the Company has a registration right obligation, however, in accordance with ASC 450, Contingencies (“ASC 450”), the obligation is not probable as the Company has several options to provide registration rights pursuant to the agreement and thus no liability has been recorded.

In addition, the Company has an obligation to register 400,000 shares of Committed Stock pursuant to an effective registration statement with the SEC within 30 days of the Closing. The Company is required to use its best efforts to cause such registration to become effective within 45 days if the registration statement is not reviewed by the SEC and 60 days if the registration statement is reviewed by the SEC. If the registration statement is not effective by the specified time period or if the Company does not maintain effectiveness of the registration statement for two years, the Company has to pay the obligation with $3.0 million of cash. In accordance with ASC 825, Financial Instruments, the Company has a registration right obligation, however, in accordance with ASC 450 the obligation is not probable as the Company has several options to provide registration rights pursuant to the agreement and thus no liability has been recorded.

Fair Value Measurements (Details) - Schedule of Quantitative Information Regarding Level 3 Fair Value Measurements Inputs - Level 3 [Member] - $ / shares	9 Months Ended	12 Months Ended
	Sep. 30, 2023	Dec. 31, 2022
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Strike price (per share) (in Dollars per share)	$ 7.6	$ 7.6
Contractual term (years)	3 years 8 months 12 days	4 years 6 months
Volatility (annual)	70.00%	72.60%
Risk-free rate	4.50%	4.00%
Dividend yield (per share)	0.00%	0.00%

Subsequent Events (Details) - shares	Nov. 30, 2023	Oct. 31, 2023	Sep. 30, 2023	Dec. 31, 2022
Subsequent Events (Details) [Line Items]
Shares issued			15,688,268	13,127,472
Excess stock authorized	8,000,000
Subsequent Event [Member]
Subsequent Events (Details) [Line Items]
Shares issued		10,069,748
Subsequent Event [Member] \| Common Stock [Member]
Subsequent Events (Details) [Line Items]
Shares issued		566,667
Public Warrants [Member] \| Subsequent Event [Member]
Subsequent Events (Details) [Line Items]
Shares issued		8,433,231

Document And Entity Information - shares	9 Months Ended
Document And Entity Information - shares	Sep. 30, 2023	Nov. 09, 2023
Document Information Line Items
Entity Registrant Name	SPECTRAL AI, INC.
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		16,254,935
Amendment Flag	false
Entity Central Index Key	0001833498
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Document Period End Date	Sep. 30, 2023
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q3
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Shell Company	true
Entity Ex Transition Period	false
Document Quarterly Report	true
Document Transition Report	false
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	85-3987148
Entity Address, Address Line One	2515 McKinney Avenue
Entity Address, City or Town	Suite 1000Dallas
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	75201
City Area Code	(972)
Local Phone Number	499-4934
Entity Interactive Data Current	Yes
Entity File Number	00-0000000
Common Stock, par value $0.0001 per share
Document Information Line Items
Trading Symbol	MDAI
Title of 12(b) Security	Common Stock, par value $0.0001 per share
Security Exchange Name	NASDAQ
Redeemable warrants, each whole warrant exercisable for one share of Class A common stock at an exercise price of $11.50
Document Information Line Items
Trading Symbol	MDAIW
Title of 12(b) Security	Redeemable warrants, each whole warrant exercisable for one share of Class A common stock at an exercise price of $11.50
Security Exchange Name	NASDAQ

Leases (Tables)

9 Months Ended

Sep. 30, 2023

Leases [Abstract]

Schedule of Operating Lease

The following table summarizes quantitative information about the Company’s operating leases for the three and nine months ended September 30, 2023 and 2022 (dollars in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Operating cash flows from operating leases	$	208		$	159		$	536		$	472
Right-of-use assets exchanged for operating lease liabilities	$	-		$	-		$	483		$	624
Weighted average remaining lease term (in years)		1.3			0.4			1.3			0.4
Weighted average discount rate		8.5	%		6.7	%		8.5	%		6.7	%

Schedule of General and Administrative Expense

The following table provides the components of the Company’s lease cost included in general and administrative expense in the condensed consolidated statement of operations (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Operating leases
Operating lease cost	$	205	$	132	$	597	$	396
Variable lease cost		92		45		256		78
Operating lease expense		297		177		853		474
Short-term lease rent expense		41		-		69		-
Total rent expense	$	338	$	177	$	922	$	474

Schedule of Non-Cancelable Operating Lease

As of September 30, 2023, future minimum payments under the non-cancelable operating leases under ASC 842 were as follows (in thousands):

Three months ending December 31, 2023	$	208
Year ending December 31, 2024		894
Total		1,102
Less: imputed interest		(61	)
Operating lease liabilities	$	1,041

Research and Development Revenue (Details) - Schedule of Research and Development Revenue - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Disaggregation of Revenue [Line Items]
Total revenue	$ 3,440	$ 7,038	$ 12,769	$ 19,272
BARDA [Member]
Disaggregation of Revenue [Line Items]
Total revenue	3,055	6,903	12,018	18,866
Other U.S Governmental Authorities [Member]
Disaggregation of Revenue [Line Items]
Total revenue	$ 385	$ 135	$ 751	$ 406

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

+ References + Details

- Definition

Amount of revenue recognized from goods sold, services rendered, insurance premiums, or other activities that constitute an earning process. Includes, but is not limited to, investment and interest income before deduction of interest expense when recognized as a component of revenue, and sales and trading gain (loss).

+ References

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+ Details

Income Taxes

9 Months Ended

Sep. 30, 2023

Income Taxes [Abstract]

INCOME TAXES

12. INCOME TAXES

The Company recorded an income tax benefit of approximately $54,000 for the three months ended September 30, 2023 and an income tax provision of approximately $32,000 for the nine months ended September 30, 2023, and $85,000 and $91,000 for the three and nine months ended September 30, 2022, respectively. The effective tax rate was (0.5%) and 0.2% for the three and nine months ended September 30, 2023, respectively, and 28.8% and 8.4% for the three and nine months ended September 30, 2022, respectively.

The tax provision for interim periods is determined using an estimate of the Company’s annual effective tax rate, adjusted for discrete items arising in that quarter. The Company’s effective tax rate differs from the U.S. statutory tax rate in the three and nine months ended September 30, 2023 primarily due to changes in valuation allowances on deferred tax assets as it is more likely than not that the Company’s deferred tax assets will not be realized.

The Company evaluates its tax positions on a quarterly basis and revises its estimate accordingly.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

Accounting Policies, by Policy (Policies)

9 Months Ended

Sep. 30, 2023

Summary of Significant Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

Legacy Spectral was determined to be the accounting acquiror based on evaluation of the following facts and circumstances:

(i)

Legacy Spectral’s former shareholders have a majority of the voting power of Spectral AI;

(ii)

Legacy Spectral’s senior management comprises all of the senior management of Spectral AI;

(iii)

Legacy Spectral selected five of the six directors for the Board of Directors of Spectral AI;

(iv)

Legacy Spectral’s relative size of assets and operations compared to Rosecliff; and

(v)

Legacy Spectral’s operations comprise the ongoing operations of Spectral AI.

Unaudited Interim Condensed Financial Statements

Unaudited Interim Condensed Financial Statements

Principles of Consolidation

Principles of Consolidation

Use of Estimates

Use of Estimates

Cash

Cash

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. All cash is held in US financial institutions.

Accounts Receivable, Net and Unbilled Revenue

Accounts Receivable, Net and Unbilled Revenue

Accounts receivable represent amounts due from US government agencies pursuant to research and development contracts associated with the Company’s DeepView® Wound Imaging System.

The Company records unbilled revenue when revenue is recognized prior to billing customers.

Concentrations of Credit Risk

Concentrations of Credit Risk

Inventory

Inventory

Fair Value

Fair Value

	Level 1 -	Unadjusted quoted prices in active markets that are assessable at the measurement date for identical, unrestricted assets or liabilities.
	Level 2 -	Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
	Level 3 -	Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

Foreign Currency

Foreign Currency

Leases

Leases

During the three and nine months ended September 30, 2023 and 2022, the Company did not have any financing leases.

Warrant Liabilities

Warrant Liabilities

Research and Development Revenue

Research and Development Revenue

The Company generates research and development revenue, primarily from the contracts with BARDA and MTEC. Each contract for BARDA and MTEC has a single performance obligation.

The Company records deferred revenue when the customers have been billed prior to recognizing revenue.

Research and Development Expense

Research and Development Expense

Stock-Based Compensation

Stock-Based Compensation

Income Taxes

Income Taxes

Comprehensive Loss

Comprehensive Loss

Net Loss per Share of Common Stock

Net Loss per Share of Common Stock

Recently Adopted Accounting Standards

Recently Adopted Accounting Standards

Notes Payable (Details) - USD ($)	9 Months Ended
Notes Payable (Details) - USD ($)	Sep. 30, 2022	Sep. 30, 2023	Apr. 13, 2022	Apr. 13, 2020
Notes Payable [Abstract]
Notes payable		$ 38,000
Loan				$ 768,575
Bears interest			1.00%
Principal and interest	$ 400,000

Stock-Based Compensation (Details) - Schedule of RSUs Activities	9 Months Ended
	Sep. 30, 2023 $ / shares shares
Schedule Of Rsus Activities Abstract
Number of Shares, Nonvested beginning balance \| shares
Weighted Average Grant Date Fair Value per Share, Nonvested beginning balance \| $ / shares
Number of Shares, Granted \| shares	58,197
Weighted Average Grant Date Fair Value per Share, Granted \| $ / shares	$ 4.65
Number of Shares, Nonvested ending balance \| shares	58,197
Weighted Average Grant Date Fair Value per Share, Nonvested ending balance \| $ / shares	$ 4.65

Unaudited Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Income Statement [Abstract]
Research and development revenue	$ 3,440	$ 7,038	$ 12,769	$ 19,272
Cost of revenue	(1,968)	(3,811)	(7,325)	(10,943)
Gross profit	1,472	3,227	5,444	8,329
Operating costs and expenses:
General and administrative	5,638	3,478	15,499	9,207
Total operating costs and expenses	5,638	3,478	15,499	9,207
Operating loss	(4,166)	(251)	(10,055)	(878)
Other income (expense):
Net interest income	42	2	128	1
Change in fair value of warrant liability	1,069	22	1,004	50
Foreign exchange transaction loss, net	(24)	(51)	(11)	(255)
Transaction costs	(7,604)		(8,342)
Other expense		(17)
Total other expense, net	(6,517)	(44)	(7,221)	(204)
Loss before income taxes	(10,683)	(295)	(17,276)	(1,082)
Income tax benefit (provision)	54	(85)	(32)	(91)
Net loss	$ (10,629)	$ (380)	$ (17,308)	$ (1,173)
Net loss per share of common stock
Net loss per share of common stock basic (in Dollars per share)	$ (0.77)	$ (0.03)	$ (1.29)	$ (0.09)
Weighted average common shares outstanding
Weighted average shares outstanding , basic (in Shares)	13,822,990	13,145,834	13,410,287	13,127,825