Spectral AI, Inc.

Good afternoon, and welcome to the Spectral AI fourth quarter and full year 2023 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Devin Sullivan, Managing Director of the Equity Group. Please go ahead.

Thank you, Gary, and good afternoon, everyone. Thank you for joining us for Spectral AI's 2023 Fourth Quarter and Full Year Financial Results Conference Call. Our speakers for today will be Pete Carlson, Chief Executive Officer, and Vince Capone, the company's Chief Financial Officer. Before we begin, I'd like to remind everyone that during this call, certain statements may be made that constitute forward-looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995, including statements regarding the company's strategy, plans, objectives, initiatives, and financial outlook. When used during these discussions, the words estimates, projected, expects, anticipates, forecast, plans, intends, believes, seeks, may, will, should, future, propose, and variations of these words or similar expressions or the negative version of such words or expressions are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance conditions or results and involve a number of known and unknown risks, uncertainties, assumptions, and other important factors, many of which are outside the company's control, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. As such, investors are cautioned not to place undue reliance on any forward-looking statements. Investors should carefully consider the foregoing factors and the other risks and uncertainties described in the risk factors section of the company's filings with the SEC, including its registration statements and other documents filed by the company. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. With that said, I'd now like to turn the call over to Pete Carlson, Spectral AI's Chief Executive Officer. Pete, please go ahead.

Thank you, Devin, and good afternoon, everyone. We appreciate you joining us today for our Financial Results Conference Call. For some of you, this may be the first time hearing from me as CEO of the company, and I'd like to take a moment to provide some background. I joined Spectral AI this year as CFO in early January and was appointed CEO on February 29th. Most recently, I served as CFO of Memetics Group, a company focused on managing the treatment of chronic and hard to heal wounds, including diabetic foot ulcers. One of the key attributes that attracted me to spectral AI, especially given my experiences on the wound treatment side of the equation of a medics is my belief that the accurate and immediate wound care assessment provided by our deep view system can deliver more efficient and more effective healthcare that reaches across the healthcare ecosystem from patients to clinicians, to institutions, and of course to payers. For a combination of proprietary image capture hardware and software, a clinical database that now includes more than 340 billion clinically validated data points, and an ever-learning artificial intelligence algorithm, our DeepView system provides an accurate and immediate yes or no answer as to whether a wound will heal on its own or requires advanced medical intervention. For the best of our understanding, there's currently no existing diagnostic tool for burns that uses the breadth of light spectrum employed by DeepView and that can produce a validated, immediate, and predictive assessment. For burn wounds, DeepView has a clinically validated accuracy of 92%. What does all this mean? For the burn patient, This means reduced pain and suffering, a faster and more appropriate treatment plan, and reduced risk from complications such as infection that may arise from an inaccurate or delayed diagnosis. For clinicians, DeepView supports an immediate and informed treatment decision, allowing them to act in the best interest of their patient quickly and with a high level of confidence. This is an important point when you consider that there are fewer than 250 burn specialists in the entire country. These individuals, despite years of training, have less than a 75% accuracy rate in determining whether a burn will heal on its own or require medical intervention. For institutions, DeepView promotes a quality of care and ground level efficiencies in allocating precious healthcare resources. There are approximately 125 burn centers in the United States, which by definition makes them a limited resource, and they scattered one at that. Most burn injuries present at local emergency departments where physicians with no burn training have a diagnostic accuracy rate of about 50% equivalent to a coin flip. BPU can place specialist burn expertise in the hands of all healthcare professionals, regardless of rural or urban locations of the institution. Finally, for payers, DeepView provides objective coverage support and eliminates unnecessary procedures while justifying clinician-driven decisions to treat patients sooner using the assistance provided by our technology. One example. Research indicates a typical stay in a burn center is eight days. We believe that the use of DeepView can reduce that stay by as much as three days, a reduction of 37.5%. For diabetic foot ulcers, or DFUs, our largest market opportunity, similar benefits apply. Like our burn application, as far as we know, there is no diagnostic tool to assess DFUs, which are complex, have a nonlinear healing trajectory, and can often result in amputation. The standard of care for DFUs, which are often chronic in nature, is typically a four-week wait and see approach using standard of care as outlined by PEARS before the use of advanced wound care therapy such as bioengineered skin substitutes is provided. From our perspective, that's four weeks too long And we believe the use of DeepView by clinicians can result in appropriate treatment commencing upon the first presentation of the wound. That takes us to where we are in the process of developing and commercializing the DeepView platform. I use the word platform deliberately because of the inherent flexibility of the technology. As discussed, our current focus is burn and DFUs. However, we believe that the platform can, over time, support multiple clinical indications. Our goal remains for the DeepView system to become part of the clinical treatment flow at emergency departments, hospitals, burn centers, and clinics for both diabetic foot ulcers and burn wounds. We have a well-defined business focus for 2024 and beyond to continue our research, development, and clinical activities while also driving DeepView from the clinical environment to commercialization. I am pleased to say the team has made good progress along a number of fronts. I'll touch on a few of these. For burn, in September 2023, we were awarded the largest contract in our history from the U.S. government, Project BioShield, valued up to $150 million. This multi-year, non-dilutive contract includes an initial award of $54.9 million to fund continued research and development activities through the first quarter of 2026, leading to submission to the FDA of an application for de novo approval. This award brings total non-dilutive support from the U.S. government to develop our burn indication to approximately $250 million. In January, 2024, we commenced enrollment for a pivotal study initiated in December to validate the deep view system for burn, which is expected to be the final clinical trial before seeking FDA approval. This study is conducted in burn centers and emergency departments with an enrollment target of 240 subjects in both adult and pediatric patients. In February, we received UKCA authorization to commence sales of our DeepView system for burn in the United Kingdom. We deployed our first burn device in March and expect to commence generating commercial revenues in the second half of 2024. This is a great milestone for the company and a significant validation of our technology. In March, we received a new contract valued at $500,000 from the U.S. government that provides additional support for the development of the handheld version of our DeepView system called DeepView Snapshot M. This new award brings total external, non-dilutive support for the DeepView Snapshot M to more than $6 million. Now let me discuss our regulatory filing outlook. We continue to advance work under our current US government contracts for our GPU system burn indication and plan to submit regulatory filings for the approval of this indication in the US in 2025. We are pursuing the commercialization of our GPU system for the assessment of DFU in the US and the UK and expect to submit regulatory filings for the approval of this indication in both countries later this year. Given the expected timeframes associated with each of these filings, we would expect to be generating commercial revenues across four platforms, burn in the U.S. and U.K., and diabetic foot ulcer in the U.S. and U.K. by 2026. I want to briefly discuss some recent announcements. As you know, one of the most valuable assets Spectral controls is our intellectual property or IP, which our team has developed over the years. We have 20 allowed U.S. and international patents and 34 pending U.S. and international patents. Additionally, the useful life on our key patent protection of our core concepts exceeds 14 years. Earlier this month, we announced the formation of a wholly owned subsidiary called Spectral IP that will focus on developing or acquiring IP applicable to the broader artificial intelligence ecosystem, specifically within healthcare. We have received a $1 million investment from an affiliate of our largest shareholder, who is also a globally recognized IP industry leader. We believe that Spectral IP has the potential to add value to our shareholders by unlocking applications within our own IP library and through acquisitions, strategic partnerships, and collaborations with AI technology providers, healthcare institutions, and research organizations. One final point that Vince will highlight in his remarks is our improved financial position. including last week's announcements about our capital raise with a long-only investor. This additional capital supports the strategic imperatives I have discussed, including our commercialization efforts. With that, I will turn things over to our newly named Chief Financial Officer, Vince Capone.