REG - Spectral MD Holdings - Business Combination Agreement

Spectral MD HoldingsAnnouncement

11/04/2023 07:00

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RNS Number : 7210V  Spectral MD Holdings, Ltd.  11 April 2023

Spectral MD Holdings, Ltd.

    ("Spectral MD" or the "Company")
 

 

Spectral MD Holdings, Ltd., an FDA Breakthrough Designated company focused on
Artificial Intelligence driven Medical Diagnostic Solutions, to be Listed on
Nasdaq Through Business Combination with Rosecliff Acquisition Corp I

 

·    Spectral MD is an Artificial Intelligence (AI) company focused on
predictive medical diagnostics. The Company's FDA Breakthrough Designated
DeepView AI Wound Diagnostics platform ("DeepView") uses proprietary
algorithms to predict wound healing

·    The proposed Transaction values Spectral MD at an estimated
enterprise value of $170 million, equivalent to approximately 101p per share,
a significant premium to Spectral MD's current AIM share price. All valuations
included in this press release assume that there are no redemptions in the
Transaction

·    Net proceeds of the proposed Transaction (as defined below) will be
used to accelerate readiness for material potential federal contracts, to
enhance Spectral MD's efforts for broad commercialization opportunities in the
U.S., EU and U.K., including both burn and diabetic foot ulcer (DFU)
indications, 3-D wound size measurement, digital wound assessment, and to
accelerate the development of additional pipeline clinical applications

·    Spectral MD believes there will be a significant U.S. federal
procurement contract for the commercialization of DeepView, having previously
been awarded over $125 million of non-dilutive contracts from the U.S.
government through federal mass casualty countermeasure programs to develop
DeepView for the healing assessment of burns

·    The proposed Transaction is expected to be completed in Q3 2023,
subject to, among other things, the approval by Rosecliff stockholders and
Spectral MD shareholders and the satisfaction or waiver of other customary
closing conditions

 

LONDON, U.K. AND DALLAS, TX, U.S. - Spectral MD Holdings, Ltd. (AIM: SMD), an
AI company focused on medical diagnostics for faster and more accurate
treatment decisions in wound care, announces it has entered into a business
combination agreement to combine (the "Transaction") with Rosecliff
Acquisition Corp I ("Rosecliff", Nasdaq: RCLF), a special purpose acquisition
company listed on Nasdaq (the "Combined Company"). Upon completion of the
Transaction, the Combined Company expects to operate under the expected name
Spectral AI and to be listed on Nasdaq under the symbol MDAI. Following the
completion of the proposed transaction, the Combined Company will operate
under the same management team, led by founder and Chief Executive Officer
Wensheng Fan with current Spectral MD shareholders rolling 100% of their
equity into the Transaction.

 

The proposed Transaction is expected to provide the Combined Company with
improved access to new sources of capital, accelerate readiness for material
potential U.S. federal procurement contracts, and enhance company efforts for
broad commercialization opportunities of its AI Wound Diagnostics Technology
in the U.S., EU and U.K., including both burn and DFU indications, 3-D wound
measurement, and digital wound assessment.

 

Wensheng Fan, Chief Executive Officer of Spectral MD, said: "This transaction
is an excellent strategic move for Spectral MD. For the past 10 years, the
Spectral MD team and our key partners have been developing cutting edge AI
solutions that have demonstrated tremendous promise and are now on the cusp of
delivering for healthcare providers and patients. Spectral MD solves an unmet
need in healthcare that goes far beyond current solutions by leveraging
relevant AI technology to enhance the diagnostic accuracy of the healthcare
provider, improve patient outcomes and significantly lower costs. The Nasdaq
listing will ensure we are well positioned to capitalize on U.S. federal
procurement contracts, our planned FDA and CE mark submissions in 2023 and
2024, and our commercialization roadmap for burn, DFU, 3-D wound size
measurement, as well as support the advancement of additional pipeline
clinical applications. I am excited to be working with the Rosecliff team in
executing our vision of transforming patient care and improving clinical
outcomes."

 

Mike Murphy, Chief Executive Officer of Rosecliff, said: "Great companies and
great opportunities transcend current market conditions. The Rosecliff team
has done its work and we believe Spectral MD to be a leading AI-driven and
disruptive healthcare platform. We believe that Wensheng and his team have
developed difficult-to-duplicate predictive analytics technology designed to
transform treatment protocols, drive superior results for wound care
management, and lower healthcare costs, all while managing a deep pipeline of
additional AI-platform indications focused on delivering further benefits to
consumers and value for investors. Rosecliff believes the near-term and
long-term prospects for Spectral MD are exceptional and we are excited to be
partnering with Spectral MD and provide the company with a new source of
capital, and increased exposure, to ensure it can deliver on its growth,
regulatory and commercialization initiatives."

 

Spectral MD Highlights

 

·    Proprietary AI Wound Diagnostics Platform: Spectral MD with its AI
enabled FDA Breakthrough Designated DeepView platform, uses proprietary AI to
assess if a wound will heal to better inform healthcare providers on next-step
treatment protocols

·    Significant U.S. Government Support: The Company has received over
$125 million of non-dilutive government contracts from multiple federal
agencies to develop its DeepView AI Wound Diagnostics Technology for burn
wound healing assessment, including under the U.S. federal mass casualty
countermeasures program, providing a strong foundation for the development of
additional pipeline clinical applications

·    Substantial Pipeline of Clinical Applications: Initially targeting
burn wounds, DFU, and 3-D wound size measurement, DeepView has an extensive
pipeline of potential clinical applications in AI-driven digital wound
assessment. This includes venous leg ulcer, critical limb ischemia,
amputation, cosmetics, and other digitally guided therapeutic opportunities

·    Significant Barriers to Entry: Spectral MD's AI model is trained and
tested against a growing proprietary and clinically validated database of 263
billion data points only available to DeepView users, developed over more than
eight years of clinical studies across the U.S. and Europe. The Company
believes this is a significant barrier to entry for potential competitors and
reflects the depth and utility of the Company's IP portfolio

·    Experienced Proven Leadership: Spectral MD is led by founder and CEO
Wensheng Fan, along with a leadership team with significant medical,
artificial intelligence, data analytics and manufacturing experience,
providing a strong foundation for governmental and commercial success

·    Commercialization Potential: Spectral MD is nearing commercialization
for DeepView(Ò) with planned FDA, CE and UKCA submissions for burn and DFU
indications. Submission for UKCA Mark is anticipated for burn in 2023 and DFU
in 2024, submission for U.S. FDA is expected for DFU in 2024 and burn in 2025,
and submission for CE Mark for EU is expected for DFU in 2024 and burn in
2025. The Company responded to a U.S. Federal Sources Sought Notice in
February 2023 regarding a material potential U.S. federal procurement contract
for the burn indication.

 

Transaction Overview

 

·    The proposed Transaction is expected to deliver gross proceeds to
Spectral MD in excess of $20 million (assuming no redemptions). This includes
approximately $4.5 million held in Rosecliff's trust (assuming no redemptions)
and an expected private placement investment of no less than $15 million. The
Transaction is not subject to any minimum cash condition and neither (a)
minimum cash in trust or (b) any minimum PIPE financing is a condition to
closing

·    The proposed Transaction values Spectral MD at an estimated
enterprise value of $170 million, equivalent to approximately 101p per share
on the AIM market (assuming no redemptions)

·    The proposed Transaction was unanimously approved by the boards of
directors of both parties and is supported by irrevocable proxies and voting
agreements of existing shareholders of Spectral MD holding greater than 50% of
the outstanding shares

·    The proposed Transaction is expected to be completed in Q3 2023,
subject to, among other things, the approval by Rosecliff stockholders and
Spectral MD shareholders and the satisfaction or waiver of other customary
closing conditions. The newly listed entity Spectral AI will maintain its
headquarters at the current office of Spectral MD in Dallas, Texas along with
current operations in the U.K. and clinical testing in the U.K. and EU

·    As part of the proposed Transaction, Spectral MD intends to cancel
the admission of its common stock to trading on the AIM market of the London
Stock Exchange (the "Delisting"), subject to shareholder approval. Following
the Delisting, all public trading of securities of the Company are expected to
take place on Nasdaq

·    Rosecliff's current stockholders currently hold 8.4 million warrants,
exercisable at $11.50 per share, which could provide up to an additional $97
million of cash to the Company depending on the Company's stock price
following closing of the Transaction

·    Certain of Rosecliff's expenses relating to the Transaction are
capped at $3.25 million

 

Whereas the Company's board of directors (the "Spectral Board") is confident
the proposed Transaction will be consummated on a timely basis, there can be
no assurances that the proposed Transaction will be completed on the expected
timeframe or at all and there can be no certainty in this regard.

 

Spectral MD Advisors

 

Reed Smith LLP is serving as a legal advisor to Spectral MD. S.P. Angel
Corporate Finance LLP is acting as nominated adviser and broker in connection
with the Transaction.

 

Rosecliff Advisors

 

Skadden, Arps, Slate, Meagher & Flom LLP is serving as a legal advisor to
Rosecliff.

 

About Spectral
MD

 

Spectral MD is a predictive AI company focused on medical diagnostics for
faster and more accurate treatment decisions in wound care for burn, DFU, and
future clinical applications. At Spectral MD, we are a dedicated team of
forward-thinkers striving to revolutionize the management of wound care by
"Seeing the Unknown"® with our DeepView(®) Wound Diagnostics System. The
Company's DeepView® platform is the only predictive diagnostic device that
offers clinicians an objective and immediate assessment of a wound's healing
potential prior to treatment or other medical intervention. With
algorithm-driven results that substantially exceed the current standard of
care, Spectral MD's diagnostic platform is expected to provide faster and more
accurate treatment insight, significantly improving patient care and clinical
outcomes. For more information, visit the Company at: www.spectralmd.com

 

About Rosecliff Acquisition Corp I

 

Rosecliff is a blank check company 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.
Its principals possess public and private market investing experience and
operational knowledge to bring value added benefits to Spectral MD. The
Rosecliff team has substantial experience investing in rapidly growing and
disruptive technologies across the financial, consumer, healthcare and
software industries, as well as a long-term track record in creatively
structuring transactions to unlock and maximize value.

 

Additional Information and Where to Find It

 

This press release is provided for informational purposes only and contains
information with respect to a proposed business combination among Spectral MD,
Rosecliff, Ghost Merger Sub I Inc., a wholly-owned subsidiary of Rosecliff,
and Ghost Merger Sub II LLC, a wholly-owned subsidiary of Rosecliff. In
connection with the proposed Transaction, Rosecliff intends to file with the
U.S. Securities and Exchange Commission (the "SEC") a registration statement
on Form S-4, which will include a proxy statement to be sent to Rosecliff
stockholders and a prospectus for the registration of Rosecliff securities in
connection with the proposed Transaction (as amended from time to time, the
"Registration Statement"). A full description of the proposed Transaction is
expected to be provided in the Registration Statement filed by Rosecliff with
the SEC. Rosecliff's stockholders, investors and other interested persons are
advised to read, when available, the Registration Statement as well as other
documents filed with the SEC, as these documents will contain important
information about Rosecliff, Spectral MD, and the proposed Transaction. If and
when the Registration Statement is declared effective by the SEC, the proxy
statement/prospectus and other relevant documents for the proposed Transaction
will be mailed to stockholders of Rosecliff as of a record date to be
established for voting on the proposed Transaction. Rosecliff investors and
stockholders will also be able to obtain copies of the proxy
statement/prospectus and other documents filed with the SEC, without charge,
once available, at the SEC's website at www.sec.gov.

 

Participants in the Solicitation

 

Rosecliff, Spectral MD and certain of their respective directors, executive
officers, other members of management and employees may, under SEC rules, be
deemed participants in the solicitation of proxies from Rosecliff's
stockholders with respect to the proposed Transaction. Investors and security
holders may obtain more detailed information regarding the names and interests
in the proposed Transaction of Rosecliff's directors and officers in
Rosecliff's filings with the SEC, including, when filed with the SEC, the
preliminary proxy statement and the amendments thereto, the definitive proxy
statement, and other documents filed with the SEC. Such information with
respect to Spectral MD's directors and executive officers will also be
included in the proxy statement.

 

No Offer or Solicitation

 

This press release and the information contained herein do not constitute (i)
(a) a solicitation of a proxy, consent or authorization with respect to any
securities or in respect of the proposed Transaction or (b) an offer to sell
or the solicitation of an offer to buy any security, commodity or instrument
or related derivative, nor shall there be any sale of securities in any
jurisdiction in which the offer, solicitation or sale would be unlawful prior
to the registration or qualification under the securities laws of any such
jurisdiction or (ii) an offer or commitment to lend, syndicate or arrange a
financing, underwrite or purchase or act as an agent or advisor or in any
other capacity with respect to any transaction, or commit capital, or to
participate in any trading strategies. No offer of securities in the United
States or to or for the account or benefit of U.S. persons (as defined in
Regulation S under the U.S. Securities Act) shall be made except by means of a
prospectus meeting the requirements of Section 10 of the Securities Act, or an
exemption therefrom. Investors should consult with their counsel as to the
applicable requirements for a purchaser to avail itself of any exemption under
the Securities Act.

 

Forward Looking Statements

This press release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. This includes, without
limitation, all statements regarding (i) the proposed Transaction, including
statements regarding anticipated timing of the proposed Transaction, (ii)
redemptions, (iii) valuation of the proposed Transaction, (iv) the closing of
the proposed Transaction, (v) the ability to regain compliance with Nasdaq
Capital Market listing requirements and to maintain listing, or for the
Combined Company to be listed, on the Nasdaq Capital Market, (vi) Rosecliff
and Spectral MD's managements' expectations and expected synergies of the
proposed Transaction and the Combined Company, (vii) the use of proceeds from
the proposed Transaction, (viii) potential government contracts, and (ix)
expected beneficial outcomes and synergies of the proposed Transaction.
Generally, statements that are not historical facts, including statements
concerning our possible or assumed future actions, business strategies, events
or results of operations, are forward-looking statements. These statements may
be preceded by, followed by or include the words "believes," "estimates,"
"expects," "projects," "forecasts," "may," "will," "should," "seeks," "plans,"
"scheduled," "anticipates" or "intends" or similar expressions. Such
forward-looking statements involve risks and uncertainties that may cause
actual events, results or performance to differ materially from those
indicated by such statements. These forward-looking statements are expressed
in good faith, and Rosecliff and Spectral MD believe there is a reasonable
basis for them. However, there can be no assurance that the events, results or
trends identified in these forward-looking statements will occur or be
achieved. Forward-looking statements speak only as of the date they are made,
and neither Rosecliff nor Spectral MD is under any obligation, and expressly
disclaim any obligation, to update, alter or otherwise revise any
forward-looking statement, whether as a result of new information, future
events or otherwise, except as required by law.

Forward-looking statements are inherently subject to risks, uncertainties and
assumptions. In addition to risk factors previously disclosed in Rosecliff's
reports filed with the SEC and those identified elsewhere in this press
release, the following factors, among others, could cause actual results to
differ materially from forward-looking statements or historical performance:
(i) expectations regarding Spectral MD's strategies and future financial
performance, including its future business plans or objectives, prospective
performance and opportunities and competitors, revenues, products and
services, pricing, operating expenses, market trends, liquidity, cash flows
and uses of cash, capital expenditures, and Spectral MD's ability to invest in
growth initiatives and pursue acquisition opportunities; (ii) the risk that
the proposed Transaction may not be completed in a timely manner at all, which
may adversely affect the price of Rosecliff's securities; (iii) the failure to
satisfy the conditions to the consummation of the proposed Transaction,
including the adoption of the business combination agreement by the
stockholders of Rosecliff and the shareholders of Spectral MD, and the receipt
of certain governmental and regulatory approvals; (iv) the lack of third
party valuation in determining whether or not to pursue the proposed
Transaction; (v) the ability to regain compliance with Nasdaq Capital Market
listing requirements and to maintain listing, or for the Combined Company to
be listed, on the Nasdaq Capital Market; (vi) the occurrence of any event,
change or other circumstances that could give rise to the termination of the
business combination agreement; (vii) the outcome of any legal proceedings
that may be instituted against Rosecliff or Spectral MD following announcement
of the proposed Transaction; (viii) the inability to complete the proposed
Transaction due to, among other things, the failure to obtain Rosecliff
stockholder approval on the expected terms and schedule and the risk that
regulatory approvals required for the proposed Transaction are not obtained or
are obtained subject to conditions that are not anticipated; (ix) the risk
that the proposed Transaction may not be completed by Rosecliff's business
combination deadline and the potential failure to obtain an extension of the
business combination deadline; (x) the effect of the announcement or pendency
of the proposed Transaction on Spectral MD's business relationships, operating
results, and business generally; (xi) volatility in the price of Rosecliff's
securities due to a variety of factors, including changes in the competitive
and regulated industries in which Rosecliff plans to operate or Spectral MD
operates, variations in operating performance across competitors, changes in
laws and regulations affecting Rosecliff's or Spectral MD's business, Spectral
MD's inability to implement its business plan or meet or exceed its financial
projections and changes in the combined capital structure; (xii) Rosecliff's
ability to raise capital as needed; (xiii) the ability to implement business
plans, forecasts, and other expectations after the completion of the proposed
Transaction and identify and realize additional opportunities; (xiv) the risk
that the announcement and consummation of the proposed Transaction disrupts
Spectral MD's current operations and future plans; (xv) the ability to
recognize the anticipated benefits of the proposed Transaction;
(xvi) unexpected costs related to the proposed Transaction; (xvii) the
amount of any redemptions by existing holders of the Rosecliff common stock
being greater than expected; (xviii) limited liquidity and trading of
Rosecliff's securities; (xix) geopolitical risk and changes in applicable
laws or regulations; (xxi) the possibility that Rosecliff and/or Spectral MD
may be adversely affected by other economic, business, and/or competitive
factors; (xxii) operational risk; and (xxiii) changes in general economic
conditions, including as a result of the COVID-19 pandemic. The foregoing list
of factors is not exhaustive. You should carefully consider the foregoing
factors and the other risks and uncertainties described in the "Risk Factors"
sections of the Rosecliff's Annual Report on Form 10-K, Quarterly Reports on
Form 10-Q, and the other documents filed by Rosecliff from time to time with
the SEC. 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.

 

Any financial projections in this press release (including the enterprise
value being attributed to Spectral MD in the proposed Transaction or the
post-transaction enterprise value) are forward-looking statements that are
based on assumptions that are inherently subject to significant uncertainties
and contingencies, many of which are beyond Rosecliff's and Spectral MD's
control. While all projections are necessarily speculative, Rosecliff and
Spectral MD believe that the preparation of prospective financial information
involves increasingly higher levels of uncertainty the further out the
projection extends from the date of preparation. The assumptions and estimates
underlying the projected results are inherently uncertain and are subject to a
wide variety of significant business, economic and competitive risks and
uncertainties that could cause actual results to differ materially from those
contained in the projections. The inclusion of projections in this
communication should not be regarded as an indication that Rosecliff and
Spectral MD, or their representatives, considered or consider the projections
to be a reliable prediction of future events. Annualized, pro forma, projected
and estimated numbers are used for illustrative purpose only, are not
forecasts and may not reflect actual results.

 

Readers are cautioned not to put undue reliance on forward-looking statements,
and neither Rosecliff nor Spectral MD assumes any obligation and do not intend
to update or revise these forward-looking statements, whether as a result of
new information, future events, or otherwise, except as required by securities
and other applicable laws. Neither Rosecliff nor Spectral MC gives any
assurance that it will achieve its expectations.

 

Special Information for U.K. Shareholders

 

Reasons for the AIM Delisting

 

The Company's Board has resolved, subject to shareholder approval, to
implement the AIM Delisting for the following reasons:

 

·    Delisting from AIM would remove certain complexities and duplication
that comes with administering two listing regimes. For example, by simplifying
shareholder communications and compliance with regulatory requirements and by
reducing associated costs and demand for internal resources.

 

·    The Board expects that a Nasdaq-only listing will attract the
appropriate investor base and investment style, maximizing the Company's
ability to access deeper pools of capital and therefore strengthens its
position to accelerate the commercialization of its AI Wound Diagnostics
Technology via U.S. and European regulatory approvals and a potential U.S.
federal procurement contract.

 

·    Existing AIM investors will be able to own, trade, and transfer
shares of the Combined Company following the Transaction.

 

Accordingly, the Board believes that it is in the best interests of the
Company and its shareholders as a whole to cancel the admission of the
Company's common stock to trading on AIM.

 

Effect of the AIM Delisting

 

If the Resolution is passed by the Company's shareholders and the Transaction
is finalized, they will no longer be able to buy and sell common stock on AIM
after the Delisting.

 

 

Following the AIM Delisting taking effect, the Company will comply with all
regulatory requirements for the Nasdaq listing, including all applicable rules
and regulations of the SEC. The Company will no longer be subject to the AIM
Rules for Companies or be required to retain the services of an independent
nominated adviser. The Company will also no longer be required to comply with
the continuing obligations set out in the Disclosure Guidance and Transparency
Rules (the "DTRs") of the Financial Conduct Authority (the "FCA") or, provided
the Company's securities remain outside the scope of the regulation, U.K. MAR.
In addition, the Company and its shareholders will no longer be subject to the
provisions of the DTRs relating to the disclosure of changes in significant
shareholdings in the Company.

 

Information for Holders of Spectral MD Common Stock

 

Shareholders who continue to hold common stock following the Delisting will
continue to be notified in writing of the availability of key documents on the
Company's website, including publication of annual reports and annual general
meeting documentation as well as obtaining additional information annual
reports and other periodic reports being available on the SEC website
www.sec.gov.

 

For further information please contact

 

 Spectral MD Holdings, Ltd.                               IR@spectralmd.com (mailto:IR@spectralmd.com)
 Vince Capone

 SP Angel Corporate Finance LLP (NOMAD and Joint Broker for Spectral MD)                        Tel: +44 (0)20 3470 0470
 Stuart Gledhill / Harry Davies-Ball (Corporate Finance)

 Vadim Alexandre / Rob Rees (Sales & Broking)

 The Equity Group Inc. (US Investor Relations)            dsullivan@equityny.com (mailto:dsullivan@equityny.com)
 Devin Sullivan                                           Tel: 212-836-9608

 Walbrook PR Ltd (UK Media & Investor Relations)          spectralMD@walbrookpr.com (mailto:spectralMD@walbrookpr.com)
 Paul McManus / Louis Ashe-Jepson /Alice Woodings         Tel: +44 (0)20 7933 8780

 

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