Correspondence 0001213900-23-052250 from Spectral AI, Inc. (MDAI)
Spectral AI, Inc.
Date: June 27, 2023 · CIK: 0001833498 · Accession: 0001213900-23-052250
AI Filing Summary & Sentiment
Referenced dates: May 26, 2023
Letter
VIA EDGAR United States Securities and Exchange Commission Division of Corporation Finance Office of Trade & Services Re: Rosecliff Acquisition Corp I Registration Statement on Form S-4 Filed May 2, 2023 CIK No. 0001833498
Dear Mr. Fay:
On behalf of our client, Rosecliff Acquisition Corp I, a Delaware corporation (the “Company”), we are writing to submit the Company’s responses to the comments of the staff of the Division of Corporation Finance of the United States Securities and Exchange Commission (the “Staff”) contained in the Staff’s letter dated May 26, 2023 (the “Comment Letter”), with respect to the above-referenced draft registration statement on Form S-4 submitted on May 2, 2023 (the “Original Registration Statement”).
The Company has publicly filed via EDGAR its Registration Statement on Form S-4 (the “Registration Statement”), which reflects the Company’s responses to the comments received by the Staff and certain updated information. For ease of reference, each comment contained in the Comment Letter is printed below in bold and is followed by the Company’s response. Capitalized terms used but not defined herein have the meanings set forth in the Registration Statement.
Registration Statement on Form S-4, Filed May 2, 2023
Questions and Answers
Does the RCLF Board Have Interests in the Business Combination that Differ..., page 14
1. We note that you state that “the RCLF Board was aware of and considered these interests, among other matters, in approving the Business Combination Agreement and the Business Combination and in determining to recommend that the Business Combination Agreement and Business Combination be approved by the RCLF stockholders.” Please revise to clarify how the Board considered those conflicts in negotiating and recommending the business combination.
Response: In response to the Staff’s comment, the Company has revised its disclosure on pages 18 and 94 of the Registration Statement.
United States Securities and Exchange Commission
June 27, 2023
Page 2
2. On page 16 you state that “RCLF’s officers and directors and their affiliates are entitled to reimbursement of out-of-pocket expenses incurred by them in connection with certain activities on RCLF’s behalf.” Please revise to state the current value of out-of-pocket expenses for which the sponsor and its affiliates are awaiting reimbursement. Provide similar disclosure for the company’s officers and directors, if material.
Response: In response to the Staff’s comment, the Company has revised its disclosure on pages 17, 36, 93 and 249 of the Registration Statement.
Summary, page 24
3. We note your statement on page 27 that Spectral is “nearing commercialization for its DeepView System.” Please revise to state that approval or clearance from the FDA and comparable regulatory bodies may never be obtained.
Response: In response to the Staff’s comment, the Company has revised its disclosure on pages 32 and 244 in the Registration Statement to indicate that Spectral’s approval or clearance from the FDA and comparable regulatory bodies cannot be guaranteed and may take longer than expected.
4. We note the placeholders on page 26 for the organizational structure before and after the transaction. Ensure you include charts that show the potential impact of redemptions on the per share value of the shares owned by non-redeeming shareholders by including a sensitivity analysis showing a range of redemption scenarios, including minimum, maximum and interim redemption levels.
Response: In response to the Staff’s comment, the Company has revised its disclosure on page 31 of the Registration Statement to include a sensitivity analysis showing the potential impact of redemptions on the per share value of the shares owned by non-redeeming shareholders, based on a no redemption, interim redemption and full redemption scenario.
5. We note that under the table on page 39 it says that “[t]he levels of ownership interest described in the table above assume: (a) each RCLF public stockholder exercises redemption rights with respect to its shares for a pro rata portion of the funds in RCLF’s trust account....” However, footnote (1) to the table says “[a]ssumes no redemptions by RCLF Public stockholders.” Please reconcile these statements or advise.
Response: In response to the Staff’s comment, the Company has revised its disclosure on pages 13 and 44 of the Registration Statement.
Summary Risk Factors, page 41
6.
Please limit your summary of risk factors to no more than two pages. Refer to Item 105 of Regulation S-K.
Response: In response to the Staff’s comment, the Company has revised its summary of risk factors.
Risk Factors, page 50
7. With a view toward disclosure, please tell us whether your sponsor is, is controlled by, has any members who are, or has substantial ties with, a non-U.S. person. Please also tell us whether anyone or any entity associated with or otherwise involved in the transaction, is, is controlled by, or has substantial ties with a non-U.S. person. If so, please revise your filing to include risk factor disclosure that addresses how this fact could impact your ability to complete your initial business combination. For instance, discuss the risk to investors that you may not be able to complete an initial business combination with a target company should the transaction be subject to review by a U.S. government entity, such as the Committee on Foreign Investment in the United States (CFIUS), or ultimately prohibited. Further, disclose that the time necessary for government review of the transaction or a decision to prohibit the transaction could prevent you from completing an initial business combination and require you to liquidate. Disclose the consequences of liquidation to investors, such as the losses of the investment opportunity in a target company, any price appreciation in the combined company, and the warrants, which would expire worthless.
Response: In response to the Staff’s comment, the Company has revised its disclosure on page 104 of the Registration Statement.
United States Securities and Exchange Commission
June 27, 2023
Page 3
The Proposed Charter will provide that the Court of Chancery of the State of Delaware..., page 104
8. We note your risk factors and discussions relating to the company’s exclusive forum provision. Please revise throughout when discussing this provision to include the risk that costs to investors to bring a claim within the forum may be increased.
Response: In response to the Staff’s comment, the Company has revised its disclosure on pages 109 and 114 of the Registration Statement to include the risk that, as a result of the exclusive forum provision included in the Proposed Charter and the Warrant Agreement, costs to investors to bring a claim within the forum may be increased.
Unaudited Pro Forma Condensed Combined Financial Information, page 113
9. Please clarify whether the 17,458,716 shares assuming maximum redemptions on pages 117 and 120 is correct or whether the amounts should be 17,000,000 shares. In addition, please clarify whether the total shares outstanding in the table on page 115 under both scenarios should include the Class B shares in the amount of 750,000.
Response: The Company has revised its disclosure beginning on page 117 of the Registration Statement to provide pro forma information as of March 31, 2023. The revised pro forma financial information reflects 17,000,000 shares assuming maximum redemptions and 880,000 Class B shares.
10. Please revise your disclosure to include a tabular calculation of the net tangible assets under both the no additional redemptions and maximum redemptions scenarios. Also describe any impact to this business combination if the net tangible assets are below $5,000,001.
Response: The Company has revised its disclosure beginning on page 117 of the Registration Statement to provide pro forma information as of March 31, 2023. In response to the Staff’s comment, the Company has included a tabular calculation of the net tangible assets under both the no additional redemptions and maximum redemptions scenarios. The Company notes, in response to the Staff’s comment, that on December 21, 2022, the Company held a special meeting at which the Company’s stockholders approved an amendment to the Company’s Certificate of Incorporation to eliminate from the Certificate of Incorporation the limitation that the Company may not redeem public shares to the extent that such redemption would result in the Company having net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) of less than $5,000,001 (the “Redemption Limitation”) in order to allow the Company to redeem shares of Class A Common Stock irrespective of whether such redemption would exceed the Redemption Limitation. As such, there will be no impact to the business combination in the net tangible assets are below $5,000,001.
Information about RCLF, page 147
11. We note that Article VIII of the Second Amended and Restated Certificate of Incorporation of Rosecliff Acquisition Corp I provides that the Court of Chancery of the State of Delaware is the exclusive forum for most types of claims. It also reads that “[u]nless the Corporation consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullest extent permitted by applicable law, be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.... Notwithstanding the foregoing, the foregoing provisions of this Article VIII shall not apply to claims seeking to enforce any liability or duty created by the Exchange Act, or any other claim for which the U.S. federal courts have exclusive jurisdiction.” However, on page 282 there is no mention of whether the general provision requiring the Court of Chancery of the State of Delaware as the exclusive forum applies to any complaint asserting a cause of action arising under the Securities Act and on page 277 there is no mention of whether that provision applies to any complaint asserting a cause of action arising under the Securities Act or Exchange Act. Please conform your descriptions of the exclusive forum provision in the proxy statement/prospectus to Article VIII of the Second Amended and Restated Certificate of Incorporation of Rosecliff Acquisition Corp I.
Response: In response to the Staff’s comment, the Company has revised its disclosure on pages 292 and 298 of the Registration Statement.
United States Securities and Exchange Commission
June 27, 2023
Page 4
Management of RCLF
Conflicts of Interest, page 156
12. We note that certain shareholders agreed to waive their redemption rights. Please describe any consideration provided in exchange for this agreement.
Response: In response to the Staff’s comment, the Company has revised its disclosure on page 166 of the Registration Statement.
RCLF Management’s Discussion and Analysis of Financial Condition and Results of Operations Contractual Obligations, page 161
13. It appears that underwriting fees remain constant and are not adjusted based on redemptions. We also note on page 161 that you anticipate the deferred fee payable to the underwriters will be waived prior to the completion of the business combination. Revise to disclose the effective underwriting fee on a percentage basis for shares at each redemption level presented in your sensitivity analysis related to dilution assuming the underwriting fee remains payable. Please also disclose under what circumstances the underwriting fee may be waived.
Response: In response to the Staff’s comment, the Company has revised its disclosure on pages 13 and 169 of the Registration Statement.
Information About Spectral
Overview, page 165
14. We note that you maintain a “proprietary database of more than 263 billion pixels” and that elsewhere, such as in your summary on page 27, you refer to the pixels as “data points.” We further note that “DeepView’s proprietary optics can extract millions of data points or AI model features from [a] raw image.” Please revise to explain, earlier in the document, that the “data points” are pixels within an image and that a single image may contain millions of pixels or “data points,” if true.
Response: In response to the Staff’s comment, the Company has revised its disclosure on page 32 and elsewhere in the Registration Statement to clarify that the data points are pixels within an image and that a single image may contain millions of pixels.
15. You discuss, here and throughout, “current physician accuracy,” “published literature,” and general physician practice techniques and preferences. Please revise to provide disclosure supporting the underlying data or practices discussed, specifying whether each of your comparison statements are from head-to-head trials. We note that you disclose that at least some are from head-to-head trials. You further compare these references to the accuracy and time saving ability of your DeepView systems. For example, we note your statement on page 165: “DeepView’s current accuracy for burn wounds is 92% for adults and 88% for pediatrics, compared with current physician accuracy of 50% to 70%, respectively, at best.” We also note your statement on page 179 where you state that your device “produce[s] reliable and reasonable assessment[s] for clinicians....” Please revise these and all similar statements in your proxy statement/prospectus that state or imply that your device in development is effective as these determinations are solely within the authority of the FDA and comparable regulatory bodies. We do not object to the presentation of objective data resulting from your trials without conclusions related to efficacy.
Response: In response to the Staff’s comment, the Company has revised its disclosure throughout the registration statement to clarify that Spectral’s data are from head-to-head trials and have removed any statements that may imply that the DeepView System is effective.
United States Securities and Exchange Commission
June 27, 2023
Page 5
16. You state that you plan to “further the DeepView System design, develop the AI algorithm, and take the necessary steps to obtain FDA approval for [y]our DeepView GEN 3 System.” Here, and throughout the document when referring to future regulatory approvals, please include a statement acknowledging that FDA, or other regulatory agency, foreign or domestic, approval is not guaranteed and may take longer than planned. This includes editing figure 2 on page 170 and removing the FDA clearance date of 2025 from the table on page 174. To the extent the data shown in figure 2 on page 170 are only the milestones under your BARDA contract, revise to clarify this in the chart. Further, when discussing future validation or clinical studies, as on page 168, please balance the disclosure by stating that the results of such studies are not guaranteed.
Response: In
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CORRESP
1
filename1.htm
Skadden,
Arps, Slate, Meagher & Flom llp
300 South Grand Avenue
Los Angeles, California 90071-3144
________
TEL: (213) 687-5000
FAX: (213) 687-5600
www.skadden.com
FIRM/AFFILIATE
OFFICES
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BOSTON
CHICAGO
HOUSTON
LOS ANGELES
PALO ALTO
WASHINGTON, D.C.
WILMINGTON
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June 27, 2023
VIA EDGAR
United States Securities and Exchange Commission
Division of Corporation Finance
Office of Trade & Services
100 F Street, NE
Washington, D.C. 20549
BEIJING
BRUSSELS
FRANKFURT
HONG KONG
LONDON
MUNICH
PARIS
SÃO PAULO
SEOUL
SHANGHAI
SINGAPORE
TOKYO
TORONTO
Attn:
Michael Fay
Terence O’Brien
Benjamin Richie
Margaret Schwartz
Re:
Rosecliff Acquisition Corp I
Registration Statement on Form S-4
Filed May 2, 2023
CIK No. 0001833498
Dear Mr. Fay:
On behalf of our client, Rosecliff
Acquisition Corp I, a Delaware corporation (the “Company”), we are writing to submit the Company’s responses
to the comments of the staff of the Division of Corporation Finance of the United States Securities and Exchange Commission (the “Staff”)
contained in the Staff’s letter dated May 26, 2023 (the “Comment Letter”), with respect to the above-referenced
draft registration statement on Form S-4 submitted on May 2, 2023 (the “Original Registration Statement”).
The Company has publicly filed
via EDGAR its Registration Statement on Form S-4 (the “Registration Statement”), which reflects the Company’s
responses to the comments received by the Staff and certain updated information. For ease of reference, each comment contained in the
Comment Letter is printed below in bold and is followed by the Company’s response. Capitalized terms used but not defined herein
have the meanings set forth in the Registration Statement.
Registration Statement on Form S-4, Filed May
2, 2023
Questions and Answers
Does the RCLF Board Have Interests in the Business
Combination that Differ..., page 14
1.
We note that you state that “the RCLF Board was aware of and considered these interests, among other matters, in approving the Business Combination Agreement and the Business Combination and in determining to recommend that the Business Combination Agreement and Business Combination be approved by the RCLF stockholders.” Please revise to clarify how the Board considered those conflicts in negotiating and recommending the business combination.
Response: In response to the Staff’s
comment, the Company has revised its disclosure on pages 18 and 94 of the Registration Statement.
United States Securities and Exchange Commission
June 27, 2023
Page 2
2.
On page 16 you state that “RCLF’s officers and directors and their affiliates are entitled to reimbursement of out-of-pocket expenses incurred by them in connection with certain activities on RCLF’s behalf.” Please revise to state the current value of out-of-pocket expenses for which the sponsor and its affiliates are awaiting reimbursement. Provide similar disclosure for the company’s officers and directors, if material.
Response: In response to the Staff’s
comment, the Company has revised its disclosure on pages 17, 36, 93 and 249 of the Registration Statement.
Summary, page 24
3.
We note your statement on page 27 that Spectral is “nearing commercialization for its DeepView System.” Please revise to state that approval or clearance from the FDA and comparable regulatory bodies may never be obtained.
Response: In response to the Staff’s
comment, the Company has revised its disclosure on pages 32 and 244 in the Registration Statement to indicate that Spectral’s
approval or clearance from the FDA and comparable regulatory bodies cannot be guaranteed and may take longer than expected.
4.
We note the placeholders on page 26 for the organizational structure before and after the transaction. Ensure you include charts that show the potential impact of redemptions on the per share value of the shares owned by non-redeeming shareholders by including a sensitivity analysis showing a range of redemption scenarios, including minimum, maximum and interim redemption levels.
Response: In response to the Staff’s
comment, the Company has revised its disclosure on page 31 of the Registration Statement to include a sensitivity analysis showing
the potential impact of redemptions on the per share value of the shares owned by non-redeeming shareholders, based on a no redemption,
interim redemption and full redemption scenario.
5.
We note that under the table on page 39 it says that “[t]he levels of ownership interest described in the table above assume: (a) each RCLF public stockholder exercises redemption rights with respect to its shares for a pro rata portion of the funds in RCLF’s trust account....” However, footnote (1) to the table says “[a]ssumes no redemptions by RCLF Public stockholders.” Please reconcile these statements or advise.
Response: In response to the Staff’s
comment, the Company has revised its disclosure on pages 13 and 44 of the Registration Statement.
Summary Risk Factors, page 41
6.
Please limit your summary of risk factors
to no more than two pages. Refer to Item 105 of Regulation S-K.
Response: In response to the Staff’s
comment, the Company has revised its summary of risk factors.
Risk Factors, page 50
7.
With a view toward disclosure, please tell us whether your sponsor is, is controlled by, has any members who are, or has substantial ties with, a non-U.S. person. Please also tell us whether anyone or any entity associated with or otherwise involved in the transaction, is, is controlled by, or has substantial ties with a non-U.S. person. If so, please revise your filing to include risk factor disclosure that addresses how this fact could impact your ability to complete your initial business combination. For instance, discuss the risk to investors that you may not be able to complete an initial business combination with a target company should the transaction be subject to review by a U.S. government entity, such as the Committee on Foreign Investment in the United States (CFIUS), or ultimately prohibited. Further, disclose that the time necessary for government review of the transaction or a decision to prohibit the transaction could prevent you from completing an initial business combination and require you to liquidate. Disclose the consequences of liquidation to investors, such as the losses of the investment opportunity in a target company, any price appreciation in the combined company, and the warrants, which would expire worthless.
Response: In response to the Staff’s
comment, the Company has revised its disclosure on page 104 of the Registration Statement.
United States Securities and Exchange Commission
June 27, 2023
Page 3
The Proposed Charter will provide that the
Court of Chancery of the State of Delaware..., page 104
8.
We note your risk factors and discussions relating to the company’s exclusive forum provision. Please revise throughout when discussing this provision to include the risk that costs to investors to bring a claim within the forum may be increased.
Response: In response to the Staff’s
comment, the Company has revised its disclosure on pages 109 and 114 of the Registration Statement to include the risk that, as a
result of the exclusive forum provision included in the Proposed Charter and the Warrant Agreement, costs to investors to bring a claim
within the forum may be increased.
Unaudited Pro Forma Condensed Combined Financial
Information, page 113
9.
Please clarify whether the 17,458,716 shares assuming maximum redemptions on pages 117 and 120 is correct or whether the amounts should be 17,000,000 shares. In addition, please clarify whether the total shares outstanding in the table on page 115 under both scenarios should include the Class B shares in the amount of 750,000.
Response: The Company has revised
its disclosure beginning on page 117 of the Registration Statement to provide pro forma information as of March 31, 2023. The revised
pro forma financial information reflects 17,000,000 shares assuming maximum redemptions and 880,000 Class B shares.
10.
Please revise your disclosure to include a tabular calculation of the net tangible assets under both the no additional redemptions and maximum redemptions scenarios. Also describe any impact to this business combination if the net tangible assets are below $5,000,001.
Response: The Company has revised
its disclosure beginning on page 117 of the Registration Statement to provide pro forma information as of March 31, 2023. In response
to the Staff’s comment, the Company has included a tabular calculation of the net tangible assets under both the no additional
redemptions and maximum redemptions scenarios. The Company notes, in response to the Staff’s comment, that on December 21, 2022,
the Company held a special meeting at which the Company’s stockholders approved an amendment to the Company’s Certificate
of Incorporation to eliminate from the Certificate of Incorporation the limitation that the Company may not redeem public shares to the
extent that such redemption would result in the Company having net tangible assets (as determined in accordance with Rule 3a51-1(g)(1)
of the Exchange Act) of less than $5,000,001 (the “Redemption Limitation”) in order to allow the Company to redeem shares
of Class A Common Stock irrespective of whether such redemption would exceed the Redemption Limitation. As such, there will be no impact
to the business combination in the net tangible assets are below $5,000,001.
Information about RCLF, page 147
11.
We note that Article VIII of the Second Amended and Restated Certificate of Incorporation of Rosecliff Acquisition Corp I provides that the Court of Chancery of the State of Delaware is the exclusive forum for most types of claims. It also reads that “[u]nless the Corporation consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullest extent permitted by applicable law, be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.... Notwithstanding the foregoing, the foregoing provisions of this Article VIII shall not apply to claims seeking to enforce any liability or duty created by the Exchange Act, or any other claim for which the U.S. federal courts have exclusive jurisdiction.” However, on page 282 there is no mention of whether the general provision requiring the Court of Chancery of the State of Delaware as the exclusive forum applies to any complaint asserting a cause of action arising under the Securities Act and on page 277 there is no mention of whether that provision applies to any complaint asserting a cause of action arising under the Securities Act or Exchange Act. Please conform your descriptions of the exclusive forum provision in the proxy statement/prospectus to Article VIII of the Second Amended and Restated Certificate of Incorporation of Rosecliff Acquisition Corp I.
Response: In response to the Staff’s
comment, the Company has revised its disclosure on pages 292 and 298 of the Registration Statement.
United States Securities and Exchange Commission
June 27, 2023
Page 4
Management of RCLF
Conflicts of Interest, page 156
12.
We note that certain shareholders agreed to waive their redemption rights. Please describe any consideration provided in exchange for this agreement.
Response: In response to the Staff’s
comment, the Company has revised its disclosure on page 166 of the Registration Statement.
RCLF Management’s Discussion and Analysis
of Financial Condition and Results of Operations Contractual Obligations, page 161
13.
It appears that underwriting fees remain constant and are not adjusted based on redemptions. We also note on page 161 that you anticipate the deferred fee payable to the underwriters will be waived prior to the completion of the business combination. Revise to disclose the effective underwriting fee on a percentage basis for shares at each redemption level presented in your sensitivity analysis related to dilution assuming the underwriting fee remains payable. Please also disclose under what circumstances the underwriting fee may be waived.
Response: In response to the Staff’s
comment, the Company has revised its disclosure on pages 13 and 169 of the Registration Statement.
Information About Spectral
Overview, page 165
14.
We note that you maintain a “proprietary database of more than 263 billion pixels” and that elsewhere, such as in your summary on page 27, you refer to the pixels as “data points.” We further note that “DeepView’s proprietary optics can extract millions of data points or AI model features from [a] raw image.” Please revise to explain, earlier in the document, that the “data points” are pixels within an image and that a single image may contain millions of pixels or “data points,” if true.
Response: In response to the Staff’s
comment, the Company has revised its disclosure on page 32 and elsewhere in the Registration Statement to clarify that the data points
are pixels within an image and that a single image may contain millions of pixels.
15.
You discuss, here and throughout, “current physician accuracy,” “published literature,” and general physician practice techniques and preferences. Please revise to provide disclosure supporting the underlying data or practices discussed, specifying whether each of your comparison statements are from head-to-head trials. We note that you disclose that at least some are from head-to-head trials. You further compare these references to the accuracy and time saving ability of your DeepView systems. For example, we note your statement on page 165: “DeepView’s current accuracy for burn wounds is 92% for adults and 88% for pediatrics, compared with current physician accuracy of 50% to 70%, respectively, at best.” We also note your statement on page 179 where you state that your device “produce[s] reliable and reasonable assessment[s] for clinicians....” Please revise these and all similar statements in your proxy statement/prospectus that state or imply that your device in development is effective as these determinations are solely within the authority of the FDA and comparable regulatory bodies. We do not object to the presentation of objective data resulting from your trials without conclusions related to efficacy.
Response: In response to the Staff’s
comment, the Company has revised its disclosure throughout the registration statement to clarify that Spectral’s data are from
head-to-head trials and have removed any statements that may imply that the DeepView System is effective.
United States Securities and Exchange Commission
June 27, 2023
Page 5
16.
You state that you plan to “further the DeepView System design, develop the AI algorithm, and take the necessary steps to obtain FDA approval for [y]our DeepView GEN 3 System.” Here, and throughout the document when referring to future regulatory approvals, please include a statement acknowledging that FDA, or other regulatory agency, foreign or domestic, approval is not guaranteed and may take longer than planned. This includes editing figure 2 on page 170 and removing the FDA clearance date of 2025 from the table on page 174. To the extent the data shown in figure 2 on page 170 are only the milestones under your BARDA contract, revise to clarify this in the chart. Further, when discussing future validation or clinical studies, as on page 168, please balance the disclosure by stating that the results of such studies are not guaranteed.
Response: In