SPECTRAL AI, INC. FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2026
Spectral AI, Inc. reported its quarterly financial results for the period ended March 31, 2026. The company’s unaudited condensed consolidated balance sheet as of March 31, 2026, showed total assets of $[amount], total liabilities of $[amount], and total stockholders’ deficit of $[amount]. The company’s unaudited condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2026, reported a net loss of $[amount] and a comprehensive loss of $[amount]. The company’s unaudited condensed consolidated statements of cash flows for the three months ended March 31, 2026, showed a net cash used in operating activities of $[amount], a net cash provided by investing activities of $[amount], and a net cash used in financing activities of $[amount]. The company’s management’s discussion and analysis of financial condition and results of operations highlights the company’s financial performance and provides an overview of the company’s business and industry trends.
Overview
We are an artificial intelligence (“AI”) company focused on predictive medical diagnostics. We operate in one segment and are currently devoting substantially all of our efforts towards research and development of our DeepView System, an internally developed multi-spectral imaging (“MSI”) device that has previously received FDA breakthrough device designation (“BDD”) status for an earlier version.
We have not generated any product revenue to date, but have received substantial support from the U.S. government for our DeepView System’s application for burn wounds, particularly from the Biomedical Advanced Research and Development Authority (“BARDA”). Since 2013, we have received approximately $281.9 million in funding awards from government contracts, primarily from BARDA.
In September 2023, we executed our third contract with BARDA for a multi-year Project BioShield (“PBS”) agreement, valued at up to approximately $150.0 million. This contract funding is non-dilutive to our shareholders and validates the important nature of our mission and technology.
Once commercialized, we anticipate that the DeepView System will have two revenue streams - a SaMD (software as a medical device) model, and an imaging device component. The SaMD model will feature a software licensing fee that includes maintenance, image hosting, and access to algorithm updates. The proprietary imaging device accesses artificial intelligence algorithms and is a universal platform to house multiple clinical applications.
Business Combination
On September 12, 2023, following completion of the Business Combination, the Company began trading its shares on the Nasdaq Global Market under the symbols “MDAI” and “MDAIW”.
Key Operating and Financial Metrics
We regularly review key operating and financial metrics to evaluate our business, measure our performance, identify trends, and make strategic decisions. These include:
| Metric | Q1 2026 | Q1 2025 | Change |
|---|---|---|---|
| Research and development revenue | $3,991 | $6,707 | $(2,716) |
| Gross profit | $2,027 | $3,168 | $(1,141) |
| Gross margin | 50.8% | 47.2% | 3.6% |
| Operating loss | $(1,971) | $(896) | $(1,075) |
| Net income (loss) | $(3,412) | $2,897 | $(6,309) |
| Adjusted EBITDA | $(1,758) | $(694) | $(1,064) |
Research and Development Revenue
Research and development revenue reflects the revenue generated from the research, testing and development of our DeepView System as utilized in connection with our burn indication. This revenue is primarily from our BARDA, MTEC, and DHA contracts.
Gross Profit and Gross Margin
Gross profit is research and development revenue less cost of revenue, and gross margin is the ratio of gross profit to revenue. These metrics allow us to understand our financial performance and efficiency, and will be important as we begin commercialization.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP measure that excludes income taxes, depreciation, net interest, stock compensation, transaction costs, and other non-operating expenses. It provides an additional way to evaluate our operating performance.
Key Factors that May Influence Future Results
Our financial results may not be comparable period-to-period due to several factors, including:
Revenue Sources: As a pre-commercialization company, we currently generate revenue almost exclusively from U.S. government contracts, which may be inconsistent in timing and amount.
Gross Margin: When we begin commercial sales, we may need to price the DeepView System lower to accelerate adoption, which could negatively impact revenue and gross margins.
Managing Supply Chain: We rely on contract manufacturers and suppliers, and disruptions or delays could impact our ability to grow.
Components of Consolidated Statements of Operations
Research and Development Revenue Our primary source of revenue is research and development revenue from government contracts, particularly the BARDA contract. Revenue is recognized based on the achievement of performance obligations.
Cost of Revenue Cost of revenue consists primarily of direct and indirect costs associated with the research and development expenses for our government contracts.
Gross Profit Gross profit is affected by the reimbursement rates under our government contracts, which include a fixed fee component.
Operating Costs and Expenses Operating expenses consist of general and administrative costs, as well as non-revenue generating research and development expenses.
Other Income (Expense) Other income and expense includes net interest, financing costs, changes in fair value of warrants and notes payable, and foreign exchange gains/losses.
Results of Operations
Research and development revenue decreased 40.5% in Q1 2026 compared to Q1 2025, reflecting a decrease in completed work under the BARDA contract as it progressed. Cost of revenue decreased 44.5% due to the lower development activity. Gross margin improved to 50.8% from 47.2% due to a decreased concentration of direct labor.
General and administrative expense decreased 1.6% in Q1 2026, as lower financing-related costs offset an increase in non-revenue R&D activities.
Other expense increased by $5.3 million, primarily due to a $5.3 million increase in the change in fair value of warrant liability.
Non-GAAP Financial Measures
We use Adjusted EBITDA, a non-GAAP metric, to measure performance. Adjusted EBITDA excludes income taxes, depreciation, net interest, stock compensation, transaction costs, and other non-operating expenses.
Liquidity and Capital Resources
As of March 31, 2026, we had $11.7 million in cash and $8.4 million in debt outstanding. In March 2026, we received a $31.7 million contract modification from BARDA, which included a no-cost extension and accelerated funding.
Based on our current operating plan and available funding sources, including the BARDA contract, we believe we have sufficient working capital to fund operations for at least one year beyond the release date of the financial statements. However, changing circumstances could cause us to consume capital faster than expected, and we may need to raise additional capital on favorable terms to execute our business plans.
