Item 5. Market for Registrant’s Common Equity
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities .
Market Information
Following the Business Combination,
our Common Stock began trading on Nasdaq on September 12, 2023. The shares of Common Stock and our redeemable warrants trade on Nasdaq
under the symbols “MDAI” and “MDAIW”, respectively.
Holders
As of March 25, 2024,
there were at least 4,893 holders of record of 17,466,871 shares of our Common Stock and 25 holders of record of our redeemable
warrants.
Dividends
We have not declared or paid any dividends
on our capital stock to date. We anticipate that we will retain all of our future earnings, if any, for use in the operation and expansion
of our business and do not anticipate paying cash dividends in the foreseeable future. Any future determination related to our dividend
policy will be made at the discretion of our board of directors after considering our business prospects, results of operations, financial
condition, cash requirements and availability, debt repayment obligations, capital expenditure needs, contractual restrictions, covenants
in the agreements governing current and future indebtedness, industry trends, the provisions of Delaware law affecting the payment of
dividends and distributions to stockholders and any other factors or considerations the Board deems relevant.
Securities Authorized for Issuance
Under Equity Compensation Plans
We previously maintained the Spectral
MD Holdings, Ltd. 2018 Long Term Incentive Plan (the “2018 Plan”), which provided for the discretionary grant of incentive
stock options, non-qualified stock options, stock appreciation rights, restricted stock, stock units, performance shares, performance
units, incentive bonus awards and other cash-based or stock-based awards to our eligible employees, directors and consultants, including
the named executive officers. 3,526,200 shares of our Common Stock are issuable upon the exercise of outstanding options under the 2018
Long Term Incentive Plan.
We also previously maintained
the Spectral MD Holdings, Ltd. 2022 Long Term Incentive Plan (the “2022 Plan”). The 2022 Plan provides for the discretionary
grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, stock units, performance shares,
performance units, incentive bonus awards and other cash-based or stock-based awards to our employees, directors and consultants. Under
the 2022 Long Term Incentive Plan, 88,749 shares of common stock are issuable upon the exercise of outstanding options and 58,197
RSUs are issuable. As of December 31, 2023, 1,792,918 shares remain available for issuance through grants of future options.
In 2023, we awarded options
to key employees (including our named executive officers) for retention, engagement and bonus compensation awards. These awards are designed
to align a portion of our named executive officers’ compensation with the interests of our existing stockholders and to build retention
value by incentivizing our named executive officers to remain in our service.
As part of the Business Combination Agreement,
the outstanding securities issuable under the 2018 Plan and 2022 Plan will be exchanged for shares of the Company’s 2023 Long-Term
Incentive Plan upon approval by the Company’s stockholders at the next annual meeting. Information related to this item will be
contained in our 2024 Proxy Statement under the heading “Proposal 2 – Ratification of the 2023 Long Term Incentive Plan.
Performance Graph
The performance graph has been omitted
as permitted under rules applicable to smaller reporting companies.
50
Recent Sales of Unregistered Securities;
Use of Proceeds from Registered Offerings
Unregistered Securities
Yorkville Standby Equity
Purchase Agreement
On March 20, 2024, the Company
entered into the Standby Equity Purchase Agreement (“SEPA”) with YA II PN, LTD, a Cayman Islands exempt limited partnership
(“Yorkville”) pursuant to which the Company has the right to sell to Yorkville up to $30,000,000 of its shares of Common Stock,
subject to certain limitations and conditions set forth in the SEPA, from time to time during the term of the SEPA (such transaction,
the “Yorkville Transaction”). Sales of the shares of Common Stock to Yorkville under the SEPA, and the timing of any such
sales, are at the Company’s option, and the Company is under no obligation to sell any shares of Common Stock to Yorkville under
the SEPA except in connection with notices that may be submitted by Yorkville, as described in the SEPA.
In connection with the SEPA, and subject to the conditions set forth
therein, Yorkville has agreed to advance to the Company in the form of convertible promissory notes (the “Convertible Notes”)
an aggregate principal amount of up to $12,500,000 million (the “Pre-Paid Advance”), which will be paid in three tranches.
The first Pre-Paid Advance was disbursed on March 20, 2024 in the amount of $5,000,000 with a fixed conversion price of $3.16, the second
Pre-Paid Advance shall be in a principal amount of $5,000,000 and advanced after the earlier of the registration statement registering
the resale of the shares of Common Stock issuable under the SEPA being declared effective and or shareholder approval to exceed the 19.99%
threshold of the aggregate number of shares of Common Stock issued pursuant to the SEPA (the “Exchange Cap”) with a fixed
conversion price equal to 120% of the average VWAP during the three trading days immediately prior to the issuance of the note (the “Second
Pre-Advance Closing”), and the third Pre-Paid Advance shall be in a principal amount of $2,500,000 and advanced sixty days following
the Second Pre-Advance Closing with a fixed conversion price equal to 120% of the average VWAP during the three trading days immediately
prior to the issuance of the note. The purchase price for the Pre-Paid Advance is 92.0% of the principal amount of the Pre-Paid Advance.
Interest shall accrue on the outstanding balance of any Pre-Paid Advance at an annual rate equal to 0%, subject to an increase to 18%
upon an event of default as described in the Convertible Notes. The maturity date of the Convertible Note issue in connection with each
Pre-Paid Advance will be 12 months after the issuance date of such Convertible Note.
Beginning on the forty-fifth
(45th) day following the issuance date of Convertible Note issued in connection with the first Pre-Paid Advance, and continuing on the
same day of each successive month thereafter, (each, an “Installment Date”), the Company shall repay a portion of the outstanding
balance of the Pre-Paid Advance in an amount equal to (i) $1,750,000, provided however, in respect of any Installment Date prior to the
closing of the second Pre-Paid Advance, $750,000 (the “Installment Principal Amount”), plus (ii) the a payment premium of
7% of such Installment Principal Amount, and (iii) accrued and unpaid interest hereunder as of each Installment Date.
B. Riley Committed Equity
Facility
On
December 26, 2023, the Company entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with B. Riley Principal
Capital II, LLC (“B. Riley”), pursuant to which, upon the terms and subject to the satisfaction of the conditions contained
in the Purchase Agreement, we have the right, in our sole discretion, to sell to B. Riley up to $10,000,000 of shares of the Common Stock
(subject to certain limitations contained in the Purchase Agreement), from time to time during the term of the Purchase Agreement through
a Market Open Purchase or an Intraday Purchase on any Purchase Date (each term as defined in the Purchase Agreement). Sales of Common
Stock pursuant to the Purchase Agreement, and the timing of any sales, are solely at our option, and we are under no obligation to sell
any securities to B. Riley under the Purchase Agreement (such transaction, the “B. Riley Transaction”).
Use of Proceeds
There has been no material change in the planned use of the proceeds
from the Business Combination, as is described in the Company’s final prospectus (Registration No. 333-275218), as filed with the
SEC on January 2, 2024. Additionally, there has been no material change in the planned use of proceeds from the B. Riley Transaction or
the Yorkville Transaction, as is described in the Company’s final prospectus (Registration No. 333-2764-6), as filed with the
SEC on February 1, 2024. For a description of the use of the proceeds generated from the different financings, see “Item 1. Business.”
Item 6. [Reserved] .