Spectral AI Raises up to $15 Million of Debt Financing and Strengthens Financial Position for U.S. Commercialization

Rhea-AI Summary

Spectral AI (NASDAQ: MDAI) has secured up to $15 million in debt financing from Avenue Venture Opportunities Fund II, with an initial draw of $8.5 million. The company also raised $2.7 million in equity financing from institutional and existing investors.

The financing agreement spans three years with an interest-only payment period of 15-24 months, depending on milestone achievement. A second financing tranche, contingent on FDA clearance of the DeepView System, includes an additional $6.5 million in debt and a $7.0 million equity raise.

The deal includes warrant coverage of 8.5% with an exercise price of $1.80 per share, and a six-month market standstill period. With total cash now exceeding $14 million, Spectral AI aims to accelerate the U.S. commercialization of its AI-driven DeepView System, designed to predict burn healing potential using multi-spectral imaging and AI algorithms.

Positive

• Secured substantial funding with $8.5M initial debt draw and $2.7M equity financing
• Strong cash position of over $14M to support commercialization
• Potential access to additional $6.5M in debt financing
• 15-24 month interest-only payment period provides financial flexibility
• Six-month market standstill prevents dilutive stock sales

Negative

• Additional equity raise of $7M required for second tranche
• Warrant coverage of 8.5% may lead to future dilution
• FDA clearance required to access second financing tranche
• Takes on debt obligations with interest payments

Insights

Financial Analyst

Spectral AI's $15M debt financing package represents a significant capital infusion for a company with just $35.8M market capitalization. The deal structure is notably shareholder-friendly with several strategic advantages:

The initial $8.5M drawdown coupled with $2.7M in equity financing immediately strengthens the balance sheet, bringing total cash to $14M+. This provides substantial runway for a micro-cap medical technology company approaching commercialization.

The financing terms are particularly favorable - a 15-month interest-only period (extendable to 24 months) minimizes near-term cash outflows during the critical commercial launch phase. The 6-month market standstill prevents dilutive financing activities, protecting current shareholders.

Most compelling is the second tranche structure - tying $6.5M additional debt to FDA clearance perfectly aligns capital deployment with milestone achievement. The $1.80 warrant exercise price (5.9% premium to current share price) signals investor confidence in near-term appreciation potential.

Avenue Capital's participation brings institutional validation beyond just capital. For a company at this pivotal pre-commercialization stage, removing financing uncertainty allows management to focus exclusively on product launch execution - precisely what's needed to maximize shareholder value.

Healthcare Technology Expert

Spectral AI's DeepView System represents a potentially transformative approach to burn wound assessment. The system combines multi-spectral imaging with AI algorithms to objectively predict healing potential - addressing a critical clinical challenge that has historically relied on subjective visual assessment.

This financing package is strategically timed to support U.S. commercialization efforts, suggesting the company is in final preparation stages for market entry. The staged financing approach with the second tranche contingent on FDA clearance creates a milestone-based capital structure that rewards regulatory success.

For burn care specialists, the DeepView technology could significantly impact treatment decisions by providing objective healing prediction. Early and accurate identification of wounds requiring surgical intervention versus those that will heal naturally could reduce unnecessary procedures, improve resource allocation, and potentially enhance patient outcomes.

Avenue Capital's statement highlighting the impressive clinical data suggests the technology has demonstrated compelling evidence of efficacy. The comment from their Senior Portfolio Manager that the system "will offer significant benefits to burn victims" indicates confidence in both regulatory approval and clinical adoption.

This financing positions Spectral AI to execute a comprehensive commercialization strategy - essential for successful medical technology market penetration, particularly for novel AI-driven diagnostic platforms in established clinical workflows.

DALLAS, March 24, 2025 (GLOBE NEWSWIRE) -- Spectral AI, Inc. (NASDAQ: MDAI) ("Spectral AI" or the "Company"), a leading developer of the AI-driven DeepView® System, which uses multi-spectral imaging and AI algorithms to predict burn healing potential, today announced the successful completion of a debt financing agreement of up to $15.0 million in funding from Avenue Venture Opportunities Fund II, L.P., a fund of Avenue Capital Group, with an initial draw down of $8.5 million. In connection with this debt financing, the Company also raised $2.7 million of equity financing from institutional as well as existing investors. With total cash on hand now of over $14 million and potential access to additional debt of $6.5 million, Spectral AI is able to accelerate its product commercialization efforts, including the upcoming U.S. launch of its DeepView System.

The term of the financing agreement is for three years, with an interest-only payment period of no less than 15 months, which can be extended to 24 months upon achieving the milestones laid out in the second financing tranche. The second financing tranche, which is contingent upon FDA clearance of the DeepView System, includes an additional $6.5 million in debt financing and a $7.0 million equity raise to be completed by the Company.    The financing also includes warrant coverage equal to 8.5% of the total funding commitment from Avenue Capital Group, with an exercise price of $1.80 per share.   As part of the financing, the Company has agreed to a market standstill with no additional stock sales by the Company for a period of at least six months. SP Angel Corporate Finance LLP acted as the sole placement agent for the participation of existing UK investors. Dominari Securities LLC acted as the sole placement agent for U.S. investors.

“This significant financing provides Spectral AI with the resources necessary to finalize our commercialization efforts and bring our cutting-edge DeepView System across the finish line to the U.S. market,” said Dr. J. Michael DiMaio, M.D., Chairman of the Board of Directors of Spectral AI. “We are excited to be working with Avenue Capital and expect the partnership to provide long-term benefits to the Company. This supports our efforts to bring our technology to market and transform the way healthcare providers predict burn wound healing potential and ultimately improve patient outcomes.”

“We have been impressed with the clinical data generated by Spectral AI’s DeepView System and we believe it will offer significant benefits to burn victims in the future,” said Chad Norman, Senior Portfolio Manager at Avenue Capital Group.

About Spectral AI

Spectral AI, Inc. is a Dallas-based predictive AI company focused on medical diagnostics for faster and more accurate treatment decisions in wound care, with initial applications involving patients with burns. The Company is working to revolutionize the management of wound care by “Seeing the Unknown®” with its DeepView® System. The DeepView® System is being developed as a predictive device to offer clinicians an objective and immediate assessment of a burn wound’s healing potential prior to treatment or other medical intervention. With algorithm-driven results and a goal of exceeding the current standard of care in the future, the DeepView® System is expected to provide fast and accurate treatment insight towards value care by improving patient outcomes and reducing healthcare costs. For more information about the DeepView® System, visit www.spectral-ai.com.

Forward-Looking Statements

Certain statements made in this release are “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 in this press release, the words “estimates,” “projected,” “expects,” “anticipates,” “forecasts,” “plans,” “intends,” “believes,” “seeks,” “may,” “will,” “should,” “future,” “propose” and variations of these words or similar expressions (or the negative versions 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 Company’s control, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. As such, readers 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” sections of the Company’s filings with the SEC, including the Registration Statement and the 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.

For Media and Investor Relations, please contact:

David Kugelman
Atlanta Capital Partners LLC
(866) 692-6847 Toll Free - U.S. & Canada
(404) 281-8556 Mobile and WhatsApp
Email: dk@atlcp.com

FAQ

How much total financing did Spectral AI (MDAI) secure in March 2024?

Spectral AI secured up to $15 million in debt financing and $2.7 million in equity financing, totaling $17.7 million, with potential for additional funding.

What are the terms of MDAI's debt financing agreement?

The agreement is for 3 years with 15-24 months interest-only payments, includes 8.5% warrant coverage at $1.80 per share, and a six-month market standstill period.

What conditions must MDAI meet for the second financing tranche?

MDAI must obtain FDA clearance for the DeepView System to access an additional $6.5 million in debt financing and complete a $7.0 million equity raise.

What is the purpose of Spectral AI's DeepView System?

The DeepView System uses multi-spectral imaging and AI algorithms to predict burn healing potential, aiming to transform healthcare providers' approach to burn wound assessment.