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 26, 2025, there were at least 1,600 holders of record of
25,317,196 shares of our Common Stock and 15 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
In 2024, we awarded options
and restricted stock units 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.
2018 Long Term Incentive Plan
On July 24, 2018, Legacy
Spectral’s Board of Directors adopted the 2018 Long Term Incentive Plan (the “2018 Plan”) which permitted granting
of incentive stock options (which must meet all statutory requirements), 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. In May
2024, all awards outstanding under the 2018 Plan were replaced with corresponding awards to be issued pursuant to the 2023 Plan, as discussed
below, and no new grants will be made under the 2018 Plan.
2022 Long Term Incentive Plan
On September 27, 2022, Legacy
Spectral’s stockholders approved the adoption of the 2022 Long Term Incentive Plan (the “2022 Plan”) which permitted
granting of incentive stock options (they must meet all statutory requirements), 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.
In May 2024, all awards outstanding under the 2022 Plan were replaced with corresponding awards to be issued pursuant to the 2023 Plan,
as discussed below, and no new grants will be made under the 2022 Plan.
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2023 Long Term Incentive Plan
On May 14, 2024, the Company’s shareholders approved the adoption
of the 2023 Long Term Incentive Plan (the “2023 Plan”) which permits granting of incentive stock options (they must meet all
statutory requirements), 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. The options, restricted stock units and other securities issued
pursuant to the 2018 Plan and 2022 Plan have been replaced with a corresponding award to be issued pursuant to the 2023 Plan. No new grants
will be made under the 2022 Plan and the 2018 Plan and all outstanding grants under the 2018 Plan and 2022 Plan will be assumed by the
2023 Plan. The maximum aggregate number of shares that may be issued under the Plan shall not exceed 8,000,000. The Board of Directors
may increase the number of shares in the Plan by adding additional shares on January 1st of each year for a period of up to ten years,
commencing on January 1, 2024 and ending on (and including) January 1, 2033, in an amount equal to the lesser of (i) five percent (5%)
of the total number of shares of stock outstanding on December 31st of the preceding calendar year, and (ii) an amount determined by the
Board of Directors. No new shares were added to the Plan in 2025. Pursuant to the 2023 Plan, stock options must expire within 10 years
and must be granted with exercise prices of no less than the fair value of the common stock on the grant date, as determined by the Board
of Directors. As of December 31, 2024, under the 2023 Plan, 3,594,488 shares of common stock were issuable upon exercise of outstanding
options and 169,400 restricted stock units (“RSUs”) were issuable. Under the 2023 Plan, 4,236,113 shares remain available
for issuance through grants of future options. RSUs awarded under the 2023 Plan for the purchase of common stock will vest based on continued
service which is generally three years or based on the achievement of market terms as set forth in the individual awards. The grant date
fair value of the award will be recognized as compensation expense over the requisite service period. The fair value of the RSUs is estimated
on the date of grant based on the fair value of the Company’s common stock. The 2023 Plan provides that the Compensation Committee
shall determine the vesting conditions of awards granted under the 2023 Plan, and the Compensation Committee has, from time-to-time, approved
vesting schedules for certain awards that deviate from the vesting conditions described in the previous sentence.
Performance Graph
The performance graph has
been omitted as permitted under rules applicable to smaller reporting companies.
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. While the Convertible Notes were outstanding, Yorkville was able to issue share purchase notices, as described in the SEPA.
In connection with the SEPA, and subject to the conditions set forth
therein, Yorkville had previously 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 was 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 Company received $4,600,000 in cash, net of the 8% original issue discount. On May 14, 2024, the shareholders voted to approve the
reservation and issuance of shares to Yorkville if needed to exceed the beneficial ownership limitation and the second Pre-Paid Advance
was disbursed on May 16, 2024 in the amount of $4,600,000, which was the $5,000,000 second Pre-Paid Advance net of $400,000 of the 8%
original issue discount, with a fixed conversion price of $2.03. The third Pre-Paid Advance was disbursed on July 17, 2024 in the principal
amount of $2,300,000, which is the $2,500,000 third Pre-Paid Advance net of the $200,000 of the 8% original issue discount, 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 was12 months after the issuance date of
such Convertible Note.
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Beginning on the forty-fifth (45th) day following the issuance date
of the 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, plus (ii) a payment premium of 7% of such Installment Principal Amount, and (iii) accrued and unpaid
interest hereunder as of each Installment Date, if any. In October 2024, the Company and Yorkville agreed to amend the Installment Dates
and the allocation of installment amounts to be paid pursuant to the Pre-Paid Advances, such that the outstanding balance of the Pre-Paid
Advances was paid in full on February 17, 2025. As of December 31, 2024, $7,768,508 of the outstanding balance of the Pre-Paid Advances
was paid in cash and $2,400,000 has been paid in shares of the Company issued under the SEPA. The Company still has access to the remaining
funds under the SEPA. The 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. The Company paid no interest relating to the Convertible Notes.
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”). We have previously raised $2.7 million
from share issuances under the B. Riley Transaction. The Company maintained the right to raise up to $3,000,000 of shares of its Common
Stock from the B. Riley transaction upon execution of the SEPA with Yorkville.
Use of Proceeds
There has been no material
change in the planned use of the proceeds from the B. Riley transaction or the Yorkville SEPA, as is described in the Company’s
final prospectuses related to the B. Riley Transaction (Registration No. 333-276406), as filed with the SEC on January 2, 2024, and the
Yorkville Transaction (Registration No. 333-278610), 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] .
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