PART I. FINANCIAL INFORMATION [Unaudited Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Unaudited Q1 2023 financial statements reveal increased revenue and expenses, alongside management's substantial doubt about the company's going concern ability Condensed Consolidated Balance Sheet (Unaudited) | Account | March 31, 2023 ($) | December 31, 2022 ($) | | :--- | :--- | :--- | | **Total Current Assets** | $20,078,211 | $26,537,849 | | **Total Assets** | **$42,226,225** | **$49,949,620** | | **Total Current Liabilities** | $17,457,902 | $17,359,844 | | **Total Liabilities** | $44,136,975 | $43,815,295 | | **Total Stockholders' (Deficit) Equity** | **($1,910,750)** | **$6,134,325** | | Cash and cash equivalents | $6,174,538 | $13,764,508 | | Accumulated deficit | ($56,866,949) | ($47,994,100) | Condensed Consolidated Statements of Operations (Unaudited) | Account | Three months ended March 31, 2023 ($) | Three months ended March 31, 2022 ($) | | :--- | :--- | :--- | | **Revenue** | **$9,672,045** | **$6,218,809** | | Total costs and expenses | $18,194,827 | $11,757,416 | | **Operating loss** | **($8,522,782)** | **($5,538,607)** | | **Net loss** | **($8,872,849)** | **($5,489,664)** | | Net loss per share, basic & fully diluted | ($0.42) | ($0.28) | Condensed Consolidated Statements of Cash Flows (Unaudited) | Cash Flow Activity | Three months ended March 31, 2023 ($) | Three months ended March 31, 2022 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | ($6,539,764) | ($3,327,712) | | Net cash provided by (used in) investing activities | $3,213 | ($494,370) | | Net cash provided by financing activities | $221 | $0 | | **Net decrease in cash, cash equivalents and restricted cash** | **($6,536,330)** | **($3,822,082)** | - The company operates through subsidiaries Marpai Health, Marpai Administrators, and Maestro, aiming to be a technology-driven 'Payer of the Future' for self-insured employers, with Marpai Captive commencing operations in Q1 2023[20](index=20&type=chunk) - The company has an accumulated deficit of **$56.9 million** and negative operating cash flows of **$6.5 million** in Q1 2023, leading management to express **substantial doubt about its ability to continue as a going concern**[29](index=29&type=chunk)[32](index=32&type=chunk) - Maestro was acquired on November 1, 2022, for a purchase price of **$19.9 million**, which will total **$22.1 million** by the April 1, 2024 payment date due to accrued interest[61](index=61&type=chunk) - A public offering on April 19, 2023, raised **$7.4 million** gross proceeds (**$6.4 million** net) from **7.4 million shares** at **$1.00 per share**, with **35%** of net proceeds used for Maestro acquisition debt repayment[105](index=105&type=chunk)[107](index=107&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion highlights Q1 2023 revenue growth from the Maestro acquisition, offset by increased expenses and operating losses, raising substantial doubt about going concern Comparison of Operations: Q1 2023 vs Q1 2022 | Metric | Q1 2023 ($) | Q1 2022 ($) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $9,672,045 | $6,218,809 | 55.5% | | Cost of Revenue | $6,408,801 | $4,546,795 | 41.0% | | General and administrative | $5,226,419 | $2,902,133 | 80.1% | | Sales and marketing | $2,179,117 | $1,559,116 | 39.8% | | Information technology | $2,186,809 | $1,134,273 | 92.8% | | Operating loss | ($8,522,782) | ($5,538,607) | 53.9% | | Net loss | ($8,872,849) | ($5,489,664) | 61.6% | - The **55.5% increase in revenue** was primarily due to the Maestro acquisition, which contributed **$5,037,425** in revenue, partially offset by a **$1,455,122** decline from a terminated client contract[119](index=119&type=chunk) - Increases in General & Administrative, Sales & Marketing, and Information Technology expenses were all primarily driven by the inclusion of Maestro's operations following its acquisition on November 1, 2022[124](index=124&type=chunk)[125](index=125&type=chunk)[126](index=126&type=chunk) - As of March 31, 2023, the company had **$6.2 million** in unrestricted cash and a working capital of **$2.6 million**, with a net loss of **$8.9 million** and negative operating cash flow of **$6.5 million** for the quarter, leading management to conclude there is **substantial doubt about the company's ability to continue as a going concern**[129](index=129&type=chunk)[133](index=133&type=chunk) - The company is seeking to raise additional funds through equity or debt securities, as failure to do so may force it to scale back operations or divest assets[132](index=132&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company identifies foreign exchange, interest rate, and inflation as primary market risks, none of which had a material impact on Q1 2023 financial statements - Foreign exchange risk exists due to operations in Israel with expenses denominated in New Israeli Shekel (NIS), though a hypothetical **10%** change in the NIS/USD exchange rate is not expected to have a material impact[142](index=142&type=chunk) - Interest rate risk on cash and cash equivalents (**$6.2 million** as of March 31, 2023) is not considered a significant risk by management[143](index=143&type=chunk) - Inflation is believed not to have had a material effect on the business, financial condition, or results of operations during the quarter[144](index=144&type=chunk) [Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, deemed the company's disclosure controls and procedures effective as of March 31, 2023, with no material changes to internal control over financial reporting during Q1 - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were **effective** as of the end of the fiscal quarter ended March 31, 2023[145](index=145&type=chunk) - No changes in internal control over financial reporting occurred during the first quarter of 2023 that materially affected, or are reasonably likely to materially affect, internal controls[148](index=148&type=chunk) PART II. OTHER INFORMATION [Unregistered Sales of Equity Securities and Use of Proceeds](index=26&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q1 2023, Marpai, Inc. issued 100,000 shares of common stock to service providers as compensation, claiming exemption from registration under Section 4(a)(2) of the Securities Act - In Q1 2023, the Company issued **100,000 shares** of common stock to service providers as compensation in lieu of cash[151](index=151&type=chunk) - The issuance was made under the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933[151](index=151&type=chunk) [Exhibits](index=26&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and Interactive Data Files (XBRL) - The report includes CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[152](index=152&type=chunk) - Interactive Data Files (Inline XBRL) are furnished as part of the filing[152](index=152&type=chunk) Signatures [Signatures](index=27&type=section&id=Signatures) The quarterly report was officially signed and authorized on May 10, 2023, by the Chief Executive Officer and Chief Financial Officer - The report was signed on May 10, 2023, by Edmundo Gonzalez (Chief Executive Officer) and Yoram Bibring (Chief Financial Officer)[157](index=157&type=chunk)

Marpai, Inc. (NASDAQ:MRAI) Q4 2023 Earnings Conference Call March 30, 2023 8:30 AM ET Company Participants Edmundo Gonzalez - Co-Founder & CEO Yoram Bibring - CFO Simon Li - Corporate VP & Co-Founder Conference Call Participants Allen Klee - Maxim Group Operator Good day, and thank you for standing by. Welcome to the Marpai Fourth Quarter and Full-Year 2022 Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to Simon Li, who is Vice President with Marpai. Please g ...

[PART I](index=5&type=section&id=PART%20I) [Business Overview](index=5&type=section&id=Item%201.%20Business) Marpai Inc. is a technology-driven healthcare payer utilizing AI and data analytics to reduce costs and improve outcomes for self-insured employers and their employees [Our Business](index=5&type=section&id=Our%20Business) Marpai is a technology-driven healthcare payer using AI and data analytics to lower healthcare costs and improve outcomes - Marpai is a technology-driven healthcare payer using AI and data analytics to lower healthcare costs and improve outcomes for self-insured employers, employees, and providers[14](index=14&type=chunk) - The company provides administrative services (TPA) to over **200 small and medium-sized clients**, serving over **73,000 members** in **44 states and D.C.**[14](index=14&type=chunk) - As of December 31, 2022, no single client represents more than **6.2% of annual revenue**[14](index=14&type=chunk) [Industry Trends in the Healthcare Payer](index=5&type=section&id=Industry%20Trends%20in%20the%20Healthcare%20Payer) U.S. healthcare expenditures are rising, driving self-insurance and the adoption of AI and value-based care models - U.S. healthcare expenditures grew from **5% of GDP in 1960 to 18.3% in 2021**, driving an increase in self-insured companies[18](index=18&type=chunk) - Advancements in AI and medical foundation models enable higher prediction accuracy for applications like identifying 'high cost bloomers' and forecasting patient risk[18](index=18&type=chunk) - Value-based care (VBC) is an increasingly popular reimbursement model, expected to grow from **40-45 million in 2022 to 70-80 million in 2027**[18](index=18&type=chunk) - Chronic diseases account for **75% of U.S. aggregate healthcare spending**, and waste (e.g., care coordination, delivery failure, pricing) can be up to **30% of medical spending**[17](index=17&type=chunk)[20](index=20&type=chunk) [Market Opportunities](index=7&type=section&id=Market%20Opportunities) Marpai estimates a total addressable market of up to $63 billion, driven by employer-sponsored self-funded health plans and new service offerings - Marpai estimates its total addressable market (TAM) to be up to **$63 billion**[22](index=22&type=chunk) - The total spending on healthcare via employer-sponsored self-funded health plans is estimated at **$1.4 trillion**, covering **65% of American workers**[21](index=21&type=chunk) - Recently acquired products from Maestro Health are expected to complement traditional administrative fees and enhance revenue per employee, driving TAM expansion[22](index=22&type=chunk) [Our Recent Acquisition of Maestro Health](index=7&type=section&id=Our%20Recent%20Acquisition%20of%20Maestro%20Health) Marpai acquired Maestro Health to integrate TPA services, clinical care management, and cost containment, enhancing revenue per member - Marpai acquired Maestro Health on **November 1, 2022**, integrating a similar TPA business serving over **60 clients and 20,000 employees**[23](index=23&type=chunk) - The acquisition brought in-house product lines including Clinical Care Management, Out of Network Claims Processing, and Pharmacy Cost Containment[24](index=24&type=chunk)[26](index=26&type=chunk) - These value-added services are expected to increase revenue per member and will be marketed to Marpai's existing and new client base[25](index=25&type=chunk) [Our Flagship Program – Marpai Cares](index=9&type=section&id=Our%20Flagship%20Program%20%E2%80%93%20Marpai%20Cares) Marpai Cares leverages AI and analytics to optimize self-funded health plans by identifying at-risk members and guiding them to high-value care - Marpai Cares aims to maximize self-funded health plan value by creating the healthiest member population within a client's budget, for a competitive administration fee[27](index=27&type=chunk) - The program uses AI and advanced analytics to analyze member data, identify at-risk 'cost bloomers,' connect members to clinical solutions, guide them to high-value providers, and promote preventive care[28](index=28&type=chunk)[30](index=30&type=chunk)[34](index=34&type=chunk) - The acquisition of Maestro Health brought in-house Clinical Care Management, complementing Marpai's approach to active care management for high-risk members[28](index=28&type=chunk)[29](index=29&type=chunk) [Our Products and Services](index=9&type=section&id=Our%20Products%20and%20Services) Marpai generates revenue from health plan administration, in-house ancillary services, and third-party vendor services, without bearing claims risk - Marpai's revenues are derived from Health Plan Administration Services, in-house ancillary services, and third-party vendor services[32](index=32&type=chunk) - Health Plan Administration includes designing plans, providing network access (Aetna, Cigna), member support, claims adjudication, health promotion, and sourcing stop-loss insurance[33](index=33&type=chunk)[43](index=43&type=chunk) - In-house ancillary services include Clinical Care Management (nurse-led guidance, **3x-9x ROI**), Repricing Insights (out-of-network claims negotiation, up to **60% savings**), Marpai PACCS (pharmacy cost containment, up to **75% savings**), and MarpaiRx (transparent pharmacy benefit management)[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk) - Marpai does not bear the financial risk for claims; this risk is borne by self-insured employers and stop-loss insurance companies[36](index=36&type=chunk) [Our Strategy](index=11&type=section&id=Our%20Strategy) Marpai's strategy focuses on client base growth through brokers, upselling ancillary services, and significant AI R&D for a value-based ecosystem - Marpai primarily distributes services through healthcare brokers and focuses on competitive bids to grow its client base[42](index=42&type=chunk)[46](index=46&type=chunk) - A key strategy post-Maestro Health acquisition is upselling ancillary services to existing and new customers[46](index=46&type=chunk) - Significant R&D investment is focused on AI to predict costly events, identify 'cost bloomers,' and create a value-based ecosystem by aggregating lives for best-in-class vendors[47](index=47&type=chunk)[48](index=48&type=chunk)[50](index=50&type=chunk) - The value-based ecosystem is expected to become commercial in **2023** and expand substantially in the coming years, generating revenue through participation in vendor fees[51](index=51&type=chunk) [Marpai Captive, Inc.](index=13&type=section&id=Marpai%20Captive%2C%20Inc.) Marpai Captive, Inc. was founded in March 2022 to engage in the captive insurance market, commencing operations in Q1 2023 - Marpai Captive, Inc. was founded in **March 2022** as a Delaware corporation[52](index=52&type=chunk) - It is intended to engage in the captive insurance market and commenced operations in the **first quarter of 2023**[52](index=52&type=chunk) [Marpai Health, Inc.](index=13&type=section&id=Marpai%20Health%2C%20Inc.) Marpai Health, Inc., with its Israeli R&D subsidiary, focuses on developing AI and healthcare technology to predict and prevent costly events - Marpai Health, Inc. was founded in **February 2019**, with its wholly owned Israeli subsidiary EYME Technologies, Ltd. (R&D center with **eight employees**)[53](index=53&type=chunk)[55](index=55&type=chunk) - Its focus is on developing and marketing AI and healthcare technology to analyze data and predict/prevent costly healthcare events[53](index=53&type=chunk) - Acquired a software system and big data analytics platform in **August 2019** for **$3.25 million** (cash, stock, convertible note)[54](index=54&type=chunk) [Marpai Administrators, LLC (formerly Continental Benefits LLC)](index=13&type=section&id=Marpai%20Administrators%2C%20LLC%20(formerly%20Continental%20Benefits%20LLC)) Marpai Administrators, founded in 2013, provides benefits outsourcing and TPA services, serving as Marpai Health's AI products design partner - Marpai Administrators was founded in **November 2013**, providing benefits outsourcing and TPA services supported by a customized technology platform and call center[58](index=58&type=chunk)[59](index=59&type=chunk) - It served as Marpai Health's AI products design partner since **December 2019**[60](index=60&type=chunk) - Acquired by Marpai, Inc. on **April 1, 2021**, as part of an integrated transaction, valued at **$8.5 million** on a cash-free and debt-free basis[60](index=60&type=chunk)[62](index=62&type=chunk)[64](index=64&type=chunk) [Marpai, Inc.'s Acquisition of Marpai Health and Marpai Administrators (formerly Continental Benefits)](index=15&type=section&id=Marpai%2C%20Inc.'s%20Acquisition%20of%20Marpai%20Health%20and%20Marpai%20Administrators%20(formerly%20Continental%20Benefits)) Marpai, Inc. acquired Marpai Health and Marpai Administrators in a tax-free reorganization on April 1, 2021, involving stock exchanges and liability agreements - On **April 1, 2021**, Marpai, Inc. acquired Marpai Health and Marpai Administrators in a tax-free reorganization[62](index=62&type=chunk)[63](index=63&type=chunk)[68](index=68&type=chunk) - The acquisition involved exchanging ownership interests for Marpai, Inc. Class A and Class B common stock, assuming options and warrants, and issuing new notes for outstanding convertible notes[65](index=65&type=chunk) - The seller (WellEnterprises USA, LLC and HillCour, Inc.) agreed to be exclusively responsible for certain pre-closing liabilities of Marpai Administrators[70](index=70&type=chunk) [Class B Conversion](index=19&type=section&id=Class%20B%20Conversion) Certain founding shareholders converted Class B common stock to Class A common stock on June 28, 2021, eliminating the authorized Class B stock - On **June 28, 2021**, certain founding shareholders converted **927,817 shares of Class B common stock** into **4,226,968 shares of Class A common stock**[73](index=73&type=chunk) - This conversion led to the elimination of the authorized Class B common stock[73](index=73&type=chunk) [Power of Attorney and Proxy](index=19&type=section&id=Power%20of%20Attorney%20and%20Proxy) The HillCour Founding Group granted the Grays Founding Group a proxy to vote Class A shares, maintaining equal voting power on key corporate matters - The HillCour Founding Group granted the Grays Founding Group the right to vote **1,560,237 Class A shares** on key corporate matters (e.g., board composition, asset sales, CEO replacement)[74](index=74&type=chunk) - The agreement aims to maintain equal voting power between the HillCour and Grays Founding Groups[74](index=74&type=chunk) - This Power of Attorney and Proxy is irrevocable under certain conditions, such as the consummation of an asset sale or acquisition, or if the Grays Founding Group's ownership falls below a specified threshold[75](index=75&type=chunk) [Directors and Executive Officers](index=20&type=section&id=Directors%20and%20Executive%20Officers) The board was fixed at seven members post-acquisition, including executives and independent directors, with a current management team in place - Following the Marpai Administrators acquisition, the board was fixed at **seven members**, including two former Marpai Health executives, four independent directors, and Damien Lamendola[76](index=76&type=chunk) - Current Management Team | Name | Combined Company Position(s) | Position(s) at Marpai Health | | :-------------- | :------------------------------------- | :------------------------------------ | | Edmundo Gonzalez | Chief Executive Officer, Secretary, and Director | Co-founder, CEO, and Director of Marpai Health | - Other key executive officers include Yoram Bibring (CFO), Gonen Antebi (COO), and Lutz Finger (President, Product and Development)[373](index=373&type=chunk)[374](index=374&type=chunk)[376](index=376&type=chunk) [Marpai Inc.'s acquisition of Maestro Health, LLC](index=20&type=section&id=Marpai%20Inc.'s%20acquisition%20of%20Maestro%20Health%2C%20LLC) Marpai acquired Maestro Health on November 1, 2022, for $19.9 million, integrating its TPA business with care management and cost containment solutions - Marpai acquired Maestro Health on **November 1, 2022**, for an aggregate purchase price of **$19.9 million**, payable by **April 1, 2024**, with interest, totaling **$22.1 million**[78](index=78&type=chunk)[80](index=80&type=chunk) - Maestro Health is a TPA offering an end-to-end health plan solution, integrating care management and cost containment[79](index=79&type=chunk) - Maestro Health's services include self-funded insurance administration, benefits administration, enrollment, ACA compliance, consumer directed health care account administration, medical management, consolidated billing, Out of Network Repricing Solution, and Rx Patient Assistance Program[84](index=84&type=chunk) [Government Regulation](index=22&type=section&id=Government%20Regulation) Marpai operates in a highly regulated healthcare industry, subject to extensive federal and state laws governing privacy, fraud, and TPA licensing - Marpai operates in a highly regulated healthcare industry, subject to extensive federal, state, and local laws, including health care reform (ACA), reimbursement policies, fraud and abuse laws, and privacy/data security laws[86](index=86&type=chunk)[88](index=88&type=chunk)[94](index=94&type=chunk)[102](index=102&type=chunk) - Key regulations include the federal Anti-Kickback Law, Stark Law, False Claims Act, and HIPAA/HITECH, which govern patient information and financial transactions[95](index=95&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk)[102](index=102&type=chunk) - Marpai believes its business does not involve the corporate practice of medicine or fee-splitting, as its call center staff provides general information, not medical advice, and it must maintain TPA licenses in all relevant states[108](index=108&type=chunk)[111](index=111&type=chunk) [Employees](index=26&type=section&id=Employees) As of December 31, 2022, Marpai had 303 full-time employees, with no labor agreements or union representation - As of **December 31, 2022**, Marpai had a total of **303 full-time employees**, with **15** located in Tel Aviv, Israel[112](index=112&type=chunk) - None of the employees are parties to any labor agreements or represented by a labor union[112](index=112&type=chunk) [Competition](index=27&type=section&id=Competition) Marpai faces intense competition from nearly 1,000 TPAs, large health insurers, and new technology-driven players in the healthcare market - Marpai operates in a highly competitive market, competing with almost **1,000 TPAs** and large health insurance companies like Aetna, Cigna, and United Healthcare[114](index=114&type=chunk)[115](index=115&type=chunk) - New technology-driven players such as Collective Health, Bind Health Insurance, Bright Health Group, Oscar Health, and Centivo also pursue similar strategies[115](index=115&type=chunk) - Marpai differentiates its solution through AI-enabled predictions that steer members to appropriate healthcare providers sooner, aiming to reduce long-term healthcare spending while improving quality[116](index=116&type=chunk) [Impact of COVID-19 and Macroeconomic Conditions](index=28&type=section&id=Impact%20of%20COVID-19%20and%20Macroeconomic%20Conditions) Marpai monitors COVID-19 and macroeconomic impacts, which could negatively affect employer participation, client payments, and strategic plans - Marpai monitors the effects of the COVID-19 pandemic and global macroeconomic environment, including inflationary pressures, supply chain disruptions, and geopolitical tensions[117](index=117&type=chunk) - Potential negative impacts include a decline in self-insured employers, reduced client willingness to pay for services, difficulties in timely payments, and disruptions to strategic plans and workforce[172](index=172&type=chunk)[173](index=173&type=chunk) [Available Information](index=28&type=section&id=Available%20Information) Additional company information, including SEC filings and corporate governance documents, is available on Marpai's investor relations website and the SEC's website - Additional information, including SEC filings (10-K, 10-Q, 8-K) and corporate governance documents (Code of Ethics, Board Committee Charters), is available on Marpai's investor relations website (www.marpaihealth.com) and the SEC's website (www.sec.gov)[118](index=118&type=chunk) [Risk Factors](index=28&type=section&id=Item%201A.%20Risk%20Factors) Investing in Marpai's Class A common stock involves high risk, including going concern doubts, integration challenges, AI reliance, high attrition, and regulatory complexities [Summary Risk Factors](index=28&type=section&id=Summary%20Risk%20Factors) Marpai faces going concern doubts, integration risks, AI inaccuracies, high customer attrition, intense competition, and geopolitical instability in Israel - The independent auditor's report contains an explanatory paragraph regarding substantial doubt about Marpai's ability to continue as a going concern due to operating losses and the need for additional capital[120](index=120&type=chunk) - Success depends on effectively integrating Marpai Health, Marpai Administrators, and Maestro Health, and managing the combined company[122](index=122&type=chunk) - Risks associated with AI include potential inaccuracies in the TopCare® program, leading to low customer satisfaction, and reputational harm or liability from flawed algorithms or biased data[122](index=122&type=chunk)[141](index=141&type=chunk)[143](index=143&type=chunk) - Marpai Administrators has a historically high annual customer attrition rate (**32.9% in 2022, 25.0% in 2021**), which could materially adversely affect financial conditions and operating results[136](index=136&type=chunk) - The company operates in a highly competitive market with nearly **1,000 TPAs** and large health insurance companies, and relies heavily on healthcare brokers as its principal sales channel[115](index=115&type=chunk)[150](index=150&type=chunk) - Geopolitical instability in Israel, where R&D facilities are located, may adversely affect operations and results[123](index=123&type=chunk)[177](index=177&type=chunk) [Risks Related to Managing and Growing Our TPA Business](index=32&type=section&id=Risks%20Related%20to%20Managing%20and%20Growing%20Our%20TPA%20Business) Marpai faces risks from limited AI program experience, capital needs, high customer attrition, talent acquisition, and data security breaches - Marpai has limited experience with its AI-powered TopCare® program, and initial results may not be indicative of future performance or cost savings[126](index=126&type=chunk)[142](index=142&type=chunk) - The company projects a need for additional capital to fund operations and investments; failure to raise funds could lead to scaling back operations or asset divestment[128](index=128&type=chunk)[130](index=130&type=chunk)[134](index=134&type=chunk) - High customer attrition rates (**32.9% in 2022**) and ongoing lawsuits pose significant threats to financial stability and growth[136](index=136&type=chunk)[137](index=137&type=chunk) - Success depends on continuous innovation and access to limited AI talent, especially in deep learning, to remain competitive[156](index=156&type=chunk)[159](index=159&type=chunk) - Security breaches or unauthorized access to client data could lead to litigation, reputational damage, and significant liabilities[163](index=163&type=chunk)[164](index=164&type=chunk) [Risk Related to the Company's Acquisition of Maestro Health, LLC](index=43&type=section&id=Risk%20Related%20to%20the%20Company's%20Acquisition%20of%20Maestro%20Health%2C%20LLC) Integrating Maestro Health poses risks of unexpected difficulties, higher costs, unknown liabilities, and inaccurate acquisition assumptions - Integrating Maestro's business may be more difficult, costly, or time-consuming than expected, potentially preventing the realization of anticipated benefits like cost savings and synergies[174](index=174&type=chunk) - Maestro may have unknown or contingent liabilities that were not discovered during due diligence, which could adversely affect Marpai's business and financial condition[175](index=175&type=chunk) - Assumptions made during the Maestro acquisition, such as expected revenue growth rates or operating costs, may prove materially inaccurate[176](index=176&type=chunk) [Risks Related to Managing Our Research and Development Operations in Israel](index=44&type=section&id=Risks%20Related%20to%20Managing%20Our%20Research%20and%20Development%20Operations%20in%20Israel) Geopolitical instability in Israel, workforce disruptions, currency fluctuations, and legal enforcement challenges pose risks to R&D operations - Political, economic, and military instability in Israel, where R&D facilities are located, may disrupt operations, hinder capital raising, and affect business relationships[177](index=177&type=chunk)[180](index=180&type=chunk) - The obligation of Israeli citizens to perform military service could lead to workforce disruptions[182](index=182&type=chunk) - Currency fluctuations (e.g., NIS/USD) and inflation can harm results, as a portion of operating expenses are incurred in NIS[183](index=183&type=chunk)[184](index=184&type=chunk) - Difficulties in enforcing Israeli employment contracts and U.S. judgments in Israel pose additional legal and financial risks[186](index=186&type=chunk)[188](index=188&type=chunk) [Risks Related to Protecting Our Technology and Intellectual Property](index=47&type=section&id=Risks%20Related%20to%20Protecting%20Our%20Technology%20and%20Intellectual%20Property) Reliance on third-party infrastructure, service interruptions, intellectual property infringement, and open-source software compliance pose significant technology risks - Reliance on third-party providers like Amazon Web Services for computing infrastructure and network connectivity creates risks of service disruptions, which could adversely affect business and subject Marpai to liability[194](index=194&type=chunk)[195](index=195&type=chunk)[196](index=196&type=chunk) - Any failure or interruption in Internet infrastructure, bandwidth providers, data center providers, or Marpai's own systems could expose the company to litigation, require issuing credits, and negatively impact relationships with members or clients[197](index=197&type=chunk)[199](index=199&type=chunk)[201](index=201&type=chunk) - Failure to protect intellectual property rights (patents, trade secrets) could impair the ability to protect proprietary technology and brand, especially against foreign piracy, and may lead to costly litigation or loss of competitive advantage[208](index=208&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk)[211](index=211&type=chunk) - Marpai may be sued by third parties for alleged infringement of their proprietary rights or misappropriation of intellectual property, leading to significant expenses, damages, or required re-engineering of its platform[213](index=213&type=chunk) - The use of open-source software in the TopCare® program carries risks; failure to comply with licenses could require public release of proprietary source code or other adverse impacts on the business[214](index=214&type=chunk)[215](index=215&type=chunk) [Risks Related to Conducting our Business Under a Complex and Evolving Set of Governmental Regulations](index=53&type=section&id=Risks%20Related%20to%20Conducting%20our%20Business%20Under%20a%20Complex%20and%20Evolving%20Set%20of%20Governmental%20Regulations) Marpai faces risks from complex healthcare regulations, non-compliance penalties, potential FDA medical device classification, and TPA licensing requirements - The healthcare industry's complex and evolving regulatory framework, including federal and state laws, can create unexpected liabilities, increase costs, and restrict operations[216](index=216&type=chunk)[217](index=217&type=chunk)[234](index=234&type=chunk) - Non-compliance with fraud and abuse laws (False Claims, Anti-Kickback, Stark Law) or health data privacy laws (HIPAA, HITECH, state laws) could result in significant civil/criminal penalties, reputational damage, and operational changes[217](index=217&type=chunk)[225](index=225&type=chunk)[226](index=226&type=chunk)[235](index=235&type=chunk)[236](index=236&type=chunk) - There is a risk that Marpai's AI software could be regulated as a medical device by the FDA, subjecting it to extensive requirements for registration, pre-market approval, and quality assurance[230](index=230&type=chunk)[231](index=231&type=chunk)[232](index=232&type=chunk) - Failure to maintain active TPA licenses in all required states or adapt to changes in Internet-related laws and regulations could materially adversely affect operations[242](index=242&type=chunk)[244](index=244&type=chunk)[245](index=245&type=chunk) [Unresolved Staff Comments](index=35&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) This item is not applicable to Marpai Inc. for the reporting period - Not Applicable[282](index=282&type=chunk) [Properties](index=35&type=section&id=Item%202.%20Properties) Marpai leases multiple office spaces across the U.S. and Israel, with total net lease expense of $1,117,193 for fiscal year 2022 - Marpai leases its principal executive and administrative offices in Tampa, Florida (**32,842 sq ft**), with a lease expiring in **November 2023**[283](index=283&type=chunk) - An additional **4,133 sq ft** corporate office space in Tel Aviv, Israel, houses the R&D team, with a lease expiring in **April 2024**[284](index=284&type=chunk) - Through the Maestro Health acquisition, Marpai acquired additional corporate office spaces in Charlotte, NC (**31,475 sq ft**, expiring **Aug 2030**), Chicago, IL (**5,820 sq ft**, expiring **Sep 2028**), and Southfield, MI (**10,019 sq ft**, expiring **Jul 2023**)[286](index=286&type=chunk)[287](index=287&type=chunk) - Net lease expense for the fiscal year ended December 31, 2022, amounted to **$1,117,193**[288](index=288&type=chunk) [Legal Proceedings](index=36&type=section&id=Item%203.%20Legal%20Proceedings) Marpai is subject to ordinary course litigation, with no current proceedings deemed material, though a CMS/Zelis litigation is under review - Marpai is subject to litigation in the ordinary course of its TPA business, but no current legal proceedings are considered material[290](index=290&type=chunk) - A CMS/Zelis litigation involves a complaint that Marpai Administrators uses a clearinghouse charging percentage-based fees for EFT transactions, potentially violating HIPAA[291](index=291&type=chunk) - CMS is investigating this industry-wide concern, and the complaint remains open but is not escalating or requiring additional information from Marpai Administrators at this time[292](index=292&type=chunk) [Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Marpai Inc. for the reporting period - Not applicable[293](index=293&type=chunk) [PART II](index=37&type=section&id=PART%20II) [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=37&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Marpai's common shares are listed on the Nasdaq Capital Market under the symbol MRAI. As of March 21, 2023, there were 21,412,580 common shares issued and outstanding, held by 40 record holders - Marpai's shares trade on the Nasdaq Capital Market under the symbol **MRAI**[296](index=296&type=chunk) - As of **March 21, 2023**, there were **21,412,580 common shares** issued and outstanding[297](index=297&type=chunk) - There were **40 holders of record** for common shares as of **March 21, 2023**[297](index=297&type=chunk) [Reserved](index=37&type=section&id=Item%206.%20Reserved) This item is reserved and contains no information - This item is reserved[298](index=298&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Marpai Inc. aims to be the 'Payer of the Future' by combining technology and TPA services, with recent acquisitions and captive operations enhancing capacity [Overview](index=38&type=section&id=Overview) Marpai Inc. combines technology and TPA services to lower healthcare costs, with recent acquisitions and captive operations expanding its capabilities - Marpai Inc. was formed to combine Marpai Health (technology) and Marpai Administrators (TPA services) to create the 'Payer of the Future,' leveraging technology to lower healthcare costs and improve outcomes[300](index=300&type=chunk)[301](index=301&type=chunk) - The acquisition of Maestro Health in **November 2022** increased capacity, and Marpai Captive commenced operations in **Q1 2023**[300](index=300&type=chunk)[301](index=301&type=chunk) - Marpai's call center staff provides general, non-medical information to comply with corporate practice of medicine laws, focusing on guiding members to lower-cost, high-quality providers for high-cost events[302](index=302&type=chunk)[303](index=303&type=chunk) - Integration of Marpai Administrators and Maestro Health is expected to be completed in **2023**[304](index=304&type=chunk) [Representation in the Financial Statements of Marpai, Inc.](index=39&type=section&id=Representation%20in%20the%20Financial%20Statements%20of%20Marpai%2C%20Inc.) Marpai Inc.'s consolidated financial statements include Marpai Health, Marpai Administrators (since April 2021), and Maestro Health (since November 2022) - Marpai Inc.'s consolidated financial statements include Marpai Health (and EYME) for all periods, Marpai Administrators since its acquisition on **April 1, 2021**, and Maestro Health since its acquisition on **November 1, 2022**[306](index=306&type=chunk) [Results of Operations – Comparison of the Years ended December 31, 2022 and 2021](index=39&type=section&id=Results%20of%20Operations%20%E2%80%93%20Comparison%20of%20the%20Years%20ended%20December%2031%2C%202022%20and%202021) Marpai experienced significant revenue growth and increased operating losses in 2022 due to acquisitions and higher expenses, while loss per share decreased - Financial Performance (Years Ended December 31) | Metric | 2022 ($) | 2021 ($) | Change ($) | Change (%) | | :---------------------------------------- | :------------ | :------------ | :------------ | :--------- | | Revenue | 24,341,874 | 14,226,794 | 10,115,080 | 71.1% | | Cost of revenue (exclusive of D&A) | 17,136,330 | 10,289,578 | 6,846,752 | 66.5% | | Research and development | 3,708,068 | 1,733,964 | 1,974,104 | 113.8% | | General and administrative | 12,318,529 | 8,055,572 | 4,262,957 | 52.9% | | Sales and marketing | 6,938,513 | 4,965,209 | 1,973,304 | 39.7% | | Information technology | 6,372,795 | 2,492,060 | 3,880,735 | 155.7% | | Facilities | 1,012,827 | 589,926 | 422,901 | 71.7% | | Loss on disposal of asset | 273,430 | — | 273,430 | 100% | | Depreciation and amortization | 3,538,237 | 1,961,733 | 1,576,504 | 80.4% | | Total Costs and Expenses | 51,298,729 | 30,088,042 | 21,210,687 | 70.5% | | Operating Loss | (26,956,855) | (15,861,248) | (11,095,607) | 70.0% | | Net Loss | (26,468,389) | (15,984,835) | (10,483,554) | 65.6% | | Net loss per share, basic and fully diluted | (1.31) | (1.59) | 0.28 | -17.6% | | Weighted average common shares | 20,239,837 | 10,076,494 | 10,163,343 | 100.9% | - Revenue increased by **71.1% ($10.1 million)** in **2022**, primarily due to the inclusion of Marpai Administrators' revenues (since **April 1, 2021**) and Maestro Health's revenues (since **November 1, 2022**)[308](index=308&type=chunk) - Total costs and expenses increased by **70.5% ($21.2 million)** in **2022**, driven by higher cost of revenue and significant increases across R&D, G&A, sales & marketing, and IT expenses due to acquisitions and increased personnel/platform costs[310](index=310&type=chunk)[313](index=313&type=chunk)[314](index=314&type=chunk)[315](index=315&type=chunk)[316](index=316&type=chunk)[317](index=317&type=chunk) - Net loss increased by **65.6% ($10.5 million)** in **2022**, while loss per share decreased by **17.6% ($0.28)** due to a substantial increase in the weighted average number of shares outstanding[319](index=319&type=chunk)[320](index=320&type=chunk) [Liquidity and Capital Resources](index=41&type=section&id=Liquidity%20and%20Capital%20Resources) Marpai faces substantial doubt about its going concern ability due to operating losses and capital needs, despite cash from the Maestro Health acquisition - Financial Position (as of December 31, 2022) | Metric | Amount | | :------------------------ | :------------- | | Accumulated Deficit | $(48.0) million | | Debt | $20.2 million | | Unrestricted Cash | $13.8 million | | Working Capital | $9.2 million | | Operating Losses (2022) | $(26.5) million | | Negative Cash Flow from Operations (2022) | $(35.2) million | - Marpai's liquidity condition raises substantial doubt about its ability to continue as a going concern through the next twelve months, as noted by management and the independent auditor[326](index=326&type=chunk)[500](index=500&type=chunk)[537](index=537&type=chunk) - The company has historically relied on proceeds from convertible notes, warrants, and its IPO to fund operations and expects to need additional capital through equity, debt, strategic partners, or asset sales[322](index=322&type=chunk)[324](index=324&type=chunk)[534](index=534&type=chunk)[535](index=535&type=chunk) - The Maestro Health acquisition brought **$15.79 million in cash reserves**, and its integration is expected to improve operating results over the next year[323](index=323&type=chunk) [Cash Flows](index=41&type=section&id=Cash%20Flows) Net cash used in operating activities significantly increased in 2022, while investing cash flow rose due to acquisitions, and financing cash flow decreased post-IPO - Cash Flow Summary (Years Ended December 31) | Activity | 2022 ($) | 2021 ($) | Change ($) | | :------------------------------------------------ | :------------ | :------------ | :------------ | | Net cash used in operating activities | (35,239,299) | (10,795,252) | (24,444,047) | | Net cash provided by investing activities | 32,422,576 | 9,643,740 | 22,778,836 | | Net cash provided by financing activities | 196 | 25,267,223 | (25,267,027) | | Net (decrease) increase in cash, cash equivalents and restricted cash | (2,816,527) | 24,115,711 | (26,932,238) | - Net cash used in operating activities increased significantly by **$24.4 million** in **2022**, driven by the net loss[329](index=329&type=chunk) - Net cash provided by investing activities increased by **$22.8 million** in **2022**, primarily due to cash and restricted cash acquired from the Maestro acquisition[330](index=330&type=chunk) - Net cash provided by financing activities decreased substantially by **$25.3 million** in **2022**, as **2021** included significant proceeds from the IPO, while **2022** only saw minor proceeds from option exercises[331](index=331&type=chunk) [Critical Accounting Estimates](index=42&type=section&id=Critical%20Accounting%20Estimates) Marpai's financial statements rely on critical accounting estimates for share-based compensation, capitalized software, goodwill, income taxes, and revenue recognition - Marpai's financial statements rely on critical accounting estimates for share-based compensation, capitalized software, goodwill, income taxes, and revenue recognition[332](index=332&type=chunk)[333](index=333&type=chunk)[540](index=540&type=chunk) - Internally developed software costs are capitalized during the development stage and amortized over **3-5 years**; goodwill is tested annually for impairment, with no impairment recorded in **2022 or 2021**[334](index=334&type=chunk)[335](index=335&type=chunk)[556](index=556&type=chunk)[557](index=557&type=chunk) - Income taxes are accounted for using an asset and liability approach, with a valuation allowance established based on the realizability of deferred tax assets; revenue is recognized over time based on fixed per-employee-per-month (PEPM) fees[336](index=336&type=chunk)[339](index=339&type=chunk)[559](index=559&type=chunk)[561](index=561&type=chunk) [Recently Issued and Adopted Accounting Pronouncements](index=43&type=section&id=Recently%20Issued%20and%20Adopted%20Accounting%20Pronouncements) Marpai adopted ASU 2020-06 with no material impact and is evaluating ASU 2021-08, while monitoring other pronouncements not expected to be material - Marpai adopted ASU 2020-06 (Convertible Instruments) in **2021** with no material impact, as all convertible debt was converted or repaid[588](index=588&type=chunk)[589](index=589&type=chunk) - The company is monitoring ASU 2020-04/2022-06 (Reference Rate Reform) and ASU 2022-04 (Supplier Finance Programs), neither of which is expected to have a material impact[590](index=590&type=chunk)[591](index=591&type=chunk) - Marpai is currently evaluating the impact of ASU 2021-08 (Accounting for Contract Assets and Contract Liabilities from Contracts with Customers) on its consolidated financial statements[592](index=592&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=44&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This item is not applicable to Marpai Inc. for the reporting period - Not applicable[350](index=350&type=chunk) [Financial Statements and Supplementary Data](index=44&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) Marpai's consolidated financial statements, including the balance sheets, statements of operations, changes in stockholders' equity, cash flows, and accompanying notes, along with the report of UHY LLP, its independent registered public accounting firm, are presented in this Annual Report - The consolidated financial statements and notes, along with the report of UHY LLP, are included in this Annual Report[351](index=351&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=44&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) Marpai Inc. reports no changes in or disagreements with its accountants on accounting and financial disclosure matters for the reporting period - None[352](index=352&type=chunk) [Controls and Procedures](index=44&type=section&id=Item%209A.%20Controls%20and%20Procedures) Marpai's management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of December 31, 2022. A previously identified material weakness in internal control over financial reporting, related to complex transactions and staffing, was remediated in 2022 through additional personnel and enhanced monitoring. As a smaller reporting company, Marpai's management report on internal control over financial reporting was not subject to attestation by its registered public accounting firm - Marpai's CEO and CFO concluded that disclosure controls and procedures were effective as of **December 31, 2022**[353](index=353&type=chunk)[356](index=356&type=chunk) - A previously identified material weakness in internal control over financial reporting, related to inadequate formal accounting policies for complex transactions and insufficient staffing, was remediated in **2022**[358](index=358&type=chunk)[359](index=359&type=chunk)[361](index=361&type=chunk) - Management's report on internal control over financial reporting was not subject to attestation by the registered public accounting firm, as permitted for a smaller reporting company[362](index=362&type=chunk) - No other material changes in internal control over financial reporting occurred during the **fourth quarter of fiscal year 2022**[363](index=363&type=chunk) [Other Information](index=45&type=section&id=Item%209B.%20Other%20Information) This item is not applicable to Marpai Inc. for the reporting period - Not applicable[364](index=364&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=45&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to Marpai Inc. for the reporting period - Not applicable[365](index=365&type=chunk) [PART III](index=46&type=section&id=PART%20III) [Directors, Executive Officers and Corporate Governance](index=46&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Marpai's leadership team includes Edmundo Gonzalez (CEO), Yoram Bibring (CFO), Gonen Antebi (COO), and Lutz Finger (President, Product and Development). The Board of Directors, with seven members and four independent directors, is chaired by Yaron Eitan. The company has an Audit Committee (chaired by Sagiv Shiv) and a Compensation Committee (chaired by Colleen DiClaudio), both operating under approved charters. An advisory board assists with AI and healthcare business opportunities. Marpai has a Code of Ethics and reports timely Section 16(a) filings [Directors and Executive Officers](index=46&type=section&id=Directors%20and%20Executive%20Officers) Marpai's leadership team comprises key executive officers and a board of directors, with no family relationships among them - Marpai Inc. Directors and Executive Officers | Name | Age | Position | Date First Elected or Appointed | | :-------------- | :-- | :--------------------------------- | :------------------------------ | | Edmundo Gonzalez | 49 | Chief Executive Officer, Secretary, and Director | April 1, 2021 | | Yoram Bibring | 65 | Chief Financial Officer | September 1, 2021 | | Gonen Antebi | 49 | Chief Operating Officer | February 1, 2023 | | Lutz Finger | 51 | President, Product and Development | February 28, 2022 | | Yaron Eitan | 65 | Chairman of the Board of Directors | April 1, 2021 | | Damien Lamendola | 66 | Director | April 1, 2021 | | Sagiv Shiv | 66 | Director | February 1, 2023 | | Mohsen Moazami | 62 | Director | March 30, 2022 | | Vincent Kane | 49 | Director | October 28, 2021 | | Colleen DiClaudio | 44 | Director | October 28, 2021 | - There are no family relationships between any of the directors or officers[390](index=390&type=chunk) [Business Experience](index=46&type=section&id=Business%20Experience) Key executives and directors bring extensive experience in technology, healthcare, finance, and deep learning to Marpai's leadership team - Edmundo Gonzalez (CEO) is a technology entrepreneur and investor with over **20 years of experience**, co-founder of Marpai Health and 340Basics Technologies[370](index=370&type=chunk)[371](index=371&type=chunk)[372](index=372&type=chunk) - Lutz Finger (President, Product and Development) previously led population health at Google Health and was Director of Product Analytics at Snap Inc., also a senior lecturer at Cornell University[376](index=376&type=chunk) - Yaron Eitan (Chairman) is a technology entrepreneur and investor with over **30 years of experience**, specializing in deep learning companies[377](index=377&type=chunk)[378](index=378&type=chunk)[379](index=379&type=chunk) - Damien Lamendola (Director) founded Marpai Administrators and leads strategic operations for multiple healthcare companies[380](index=380&type=chunk)[381](index=381&type=chunk) - Sagiv Shiv (Director) brings financial expertise and capital markets experience as Managing Director and Head of M&A and Advisory Services at Aldwych Capital Partners[388](index=388&type=chunk)[389](index=389&type=chunk) [Number and Terms of Office of Officers and Directors](index=50&type=section&id=Number%20and%20Terms%20of%20Office%20of%20Officers%20and%20Directors) Marpai's Board of Directors has seven members, with officers appointed at the Board's discretion rather than for fixed terms - Marpai's Board of Directors has **seven members**, with **four** deemed 'independent' under SEC and Nasdaq rules[391](index=391&type=chunk)[392](index=392&type=chunk) - Officers are appointed by the Board and serve at its discretion, rather than for specific terms of office[391](index=391&type=chunk) [Director Independence](index=50&type=section&id=Director%20Independence) A majority of Marpai's Board members are independent, as defined by Nasdaq and SEC rules, and hold separate meetings for independent directors - A majority of Marpai's Board is independent, as defined by Nasdaq's listing standards and applicable SEC rules[392](index=392&type=chunk) - Sagiv Shiv, Vincent Kane, Mohsen Moazami, and Colleen DiClaudio are identified as independent directors[392](index=392&type=chunk) - Independent directors hold regularly scheduled meetings at which only independent directors are present[392](index=392&type=chunk) [Committees of the Board](index=50&type=section&id=Committees%20of%20the%20Board) Marpai's Board has an Audit Committee and a Compensation Committee, both operating under approved charters to oversee financial and executive compensation matters - Marpai's Board has two standing committees: an Audit Committee and a Compensation Committee, both operating under approved charters[393](index=393&type=chunk) - The Audit Committee members are Sagiv Shiv (Chairman and financial expert), Colleen DiClaudio, and Vincent Kane, responsible for overseeing audits, compliance, and related party transactions[394](index=394&type=chunk)[395](index=395&type=chunk)[396](index=396&type=chunk) - The Compensation Committee members are Colleen DiClaudio (Chairman), Sagiv Shiv, and Vincent Kane, responsible for reviewing and approving executive compensation and implementing incentive plans[398](index=398&type=chunk)[400](index=400&type=chunk) [Director Nominations](index=50&type=section&id=Director%20Nominations) Marpai's Board, with a majority of independent directors, recommends nominees based on diverse qualifications, and stockholders can also propose candidates - Marpai does not have a standing nominating committee but intends to form one as required by law or Nasdaq rules; currently, a majority of independent directors recommend nominees[403](index=403&type=chunk) - The Board considers educational background, diversity of professional experience, business knowledge, integrity, professional reputation, independence, wisdom, and ability to represent stockholders when evaluating nominees[405](index=405&type=chunk) - Stockholders can recommend director candidates by following the procedures set forth in the company's bylaws[404](index=404&type=chunk) [Compensation Committee Interlocks and Insider Participation](index=50&type=section&id=Compensation%20Committee%20Interlocks%20and%20Insider%20Participation) None of Marpai's executive officers serve on the compensation committee of any entity with executives on Marpai's Board - None of Marpai's executive officers currently serve, or in the past year have served, as a member of the compensation committee of any entity that has one or more executive officers serving on Marpai's Board[406](index=406&type=chunk) [Advisory Board](index=50&type=section&id=Advisory%20Board) Marpai's advisory board assists management with AI and healthcare business opportunities and market strategies, receiving stock options but no cash compensation - Marpai's advisory board assists the management team with sourcing and evaluating AI and healthcare business opportunities and devising market strategies[407](index=407&type=chunk) - Advisors are reimbursed for out-of-pocket expenses and are eligible for stock option awards, but they do not receive cash compensation and have no fiduciary obligations to present business opportunities[407](index=407&type=chunk) - Key advisory board members include Michael Paas (life sciences), Winston Churchill (investor/venture capital), and Ariel Zamir (AI/deep learning)[408](index=408&type=chunk)[409](index=409&type=chunk)[412](index=412&type=chunk) [Code of Ethics](index=51&type=section&id=Code%20of%20Ethics) Marpai has adopted a Code of Ethics for directors, officers, and employees, with amendments or waivers disclosed via Form 8-K and the company website - Marpai has adopted a Code of Ethics applicable to its directors, officers, and employees, requiring the avoidance of conflicts of interest[413](index=413&type=chunk) - Any amendments to or waivers of certain provisions of the Code of Ethics will be disclosed in a Current Report on Form 8-K and on the company's website[413](index=413&type=chunk)[468](index=468&type=chunk) [Delinquent Section 16(a) Reports](index=51&type=section&id=Delinquent%20Section%2016(a)%20Reports) Marpai believes all Section 16(a) filings by its executive officers, directors, and beneficial owners were timely during the past fiscal year - Marpai believes that all Section 16(a) filings by its executive officers, directors, and **10% beneficial owners** were filed on a timely basis during the past fiscal year[415](index=415&type=chunk) [Executive Compensation](index=51&type=section&id=Item%2011.%20Executive%20Compensation) Marpai's executive compensation includes base salaries, potential bonuses, and significant equity awards for its named executive officers. Independent directors receive an annual fee. The company maintains a 401(k) plan with a company match and a 2021 Global Stock Incentive Plan for equity-based awards, which was expanded in 2022. Employment agreements detail specific compensation, equity vesting, and severance terms for key executives [Summary Compensation Table](index=51&type=section&id=Summary%20Compensation%20Table) Executive compensation for named officers includes salaries, bonuses, and substantial stock awards, with notable increases for new or transitioning roles - Named Executive Officer Compensation (Years Ended December 31) | Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | All Other Compensation ($) | Total ($) | | :-------------------------------------- | :--- | :--------- | :-------- | :--------------- | :------------------------- | :---------- | | Edmundo Gonzalez, CEO and Director | 2022 | 363,464 | — | 212,618 | — | 576,082 | | Edmundo Gonzalez, CEO and Director | 2021 | 218,139 | — | — | 69,667 | 287,806 | | Lutz Finger, President, Product and Development | 2022 | 275,002 | — | 1,494,231 | 450,001 | 2,219,234 | | Lutz Finger, President, Product and Development | 2021 | — | — | — | — | — | | Yoram Bibring, Chief Financial Officer | 2022 | 264,810 | 50,000 | 137,935 | — | 452,745 | | Yoram Bibring, Chief Financial Officer | 2021 | 76,500 | 50,000 | — | — | 126,500 | - Lutz Finger's **2022** compensation includes significant stock awards (**1,346,154 Restricted Stock Units** with a fair value of **$1.11 per share**) and a sign-on bonus[419](index=419&type=chunk)[442](index=442&type=chunk) - Edmundo Gonzalez's salary increased from **2021 to 2022**, reflecting his transition from consultant to Marpai employee on **April 1, 2022**[419](index=419&type=chunk)[430](index=430&type=chunk) [Director Compensation](index=51&type=section&id=Director%20Compensation) Independent directors receive an annual fee of $50,000, paid quarterly, and are reimbursed for reasonable travel and out-of-pocket expenses - Effective **March 30, 2022**, independent directors' compensation was set at an annual fee of **$50,000**, payable quarterly[418](index=418&type=chunk) - Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred for Board meetings[420](index=420&type=chunk) - No other director received or accrued compensation for services as a director in Fiscal Year **2022**, beyond the approved annual fee[421](index=421&type=chunk) [Benefit Plans](index=52&type=section&id=Benefit%20Plans) Marpai offers a 401(k) plan with a 5% company match for full-time employees but does not sponsor pension or deferred compensation plans - Marpai maintains a **401(k) plan** for full-time employees, allowing pre-tax deferrals up to statutory limits, with a **5% company contribution match**[422](index=422&type=chunk) - The company does not sponsor any qualified or non-qualified pension benefit plans, nor any non-qualified defined contribution or deferred compensation plans[423](index=423&type=chunk) [2021 Global Stock Incentive Plan](index=52&type=section&id=2021%20Global%20Stock%20Incentive%20Plan) The 2021 Global Stock Incentive Plan, amended in 2022, authorizes 7,803,421 shares for equity awards to employees, directors, and consultants - The **2021 Global Stock Incentive Plan** was approved in **May 2021** and amended in **May 2022** to increase the total number of shares available for awards to **7,803,421**[424](index=424&type=chunk)[425](index=425&type=chunk) - As of **December 31, 2022**, **3,935,368 stock options** and **1,427,404 RSUs** had been approved for grant under the plan, with specific vesting schedules extending through **2026**[426](index=426&type=chunk) - The plan allows for the grant of incentive stock options, restricted stocks, restricted stock units, and other equity-based awards to employees, directors, and consultants, and is set to expire in **May 2031**[424](index=424&type=chunk) [Director and Officer Liability Insurance](index=52&type=section&id=Director%20and%20Officer%20Liability%20Insurance) Marpai maintains director and officer liability insurance, including employment practices liability, to protect its leadership against lawsuits - Marpai maintains director and officer liability insurance to provide financial protection for its directors and officers against lawsuits related to their services[427](index=427&type=chunk) - The insurance also includes employment practices liability coverage for harassment and discrimination suits[427](index=427&type=chunk) [Employment Agreements](index=53&type=section&id=Employment%20Agreements) Employment agreements for key executives detail base salaries, potential bonuses, equity awards, and severance provisions based on their roles and tenure - Edmundo Gonzalez (CEO) has an at-will employment agreement with a base salary of **$350,000/year** and severance provisions based on tenure[430](index=430&type=chunk)[431](index=431&type=chunk) - Yoram Bibring (CFO) has an at-will agreement with a **$255,000/year** base salary, potential **50% annual bonus**, **125,000 stock options**, and severance of **6-12 months salary/bonus/benefits**[432](index=432&type=chunk)[433](index=433&type=chunk) - Gonen Antebi (COO) has a one-year renewable agreement with a **$325,000/year** base salary, up to **75% bonus**, **$50,000 sign-on bonus**, and options for **300,000 shares** (Initial Award) plus another **300,000** (Additional Award) if renewed[434](index=434&type=chunk)[435](index=435&type=chunk)[436](index=436&type=chunk)[437](index=437&type=chunk) - Lutz Finger (President, Product and Development) has an at-will agreement with a **$325,000/year** base salary, up to **50% bonus**, **$250,000 sign-on bonus** (cash/shares), and initial/additional grants of **$2,000,000 in Class A common stock**[442](index=442&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=55&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) As of March 28, 2023, Marpai's directors and executive officers collectively owned 50.5% of common shares, with Damien Lamendola as the largest beneficial owner - Beneficial Ownership (as of March 28, 2023) | Name of Beneficial Owner | Beneficial Number of Shares | Percentage Of Shares Beneficially Owned | | :------------------------------------------------ | :-------------------------- | :-------------------------------------- | | Edmundo Gonzalez | 1,849,128 | 8.4% | | Yaron Eitan | 1,267,478 | 5.8% | | Yoram Bibring | 87,389 | * | | Gonen Antebi | 92,361 | * | | Damien Lamendola | 6,970,255 | 31.9% | | Sagiv Shiv | — | — | | Colleen DiClaudio | 92,361 | * | | Lutz Finger | 1,339,087 | 6.1% | | Vincent Kane | 134,676 | * | | Mohsen Moazami | 126,388 | * | | All Directors and Executive Officers as a Group (10 Persons) | 11,959,123 | 50.5% | - The total number of common shares issued and outstanding as of **March 28, 2023**, was **21,412,580**[449](index=449&type=chunk) - Beneficial ownership includes shares subject to options, warrants, or rights to purchase/convertible within **60 days**[449](index=449&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=56&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Marpai has engaged in related party transactions, including acquisitions and financial support from entities tied to key directors and shareholders, and is a 'controlled company' [Purchase and Reorganization Agreement](index=56&type=section&id=Purchase%20and%20Reorganization%20Agreement) Marpai's 2021 acquisition of Marpai Health and Marpai Administrators involved key directors and shareholders, with Damien Lamendola becoming a majority beneficial owner - On **April 1, 2021**, Marpai acquired Marpai Health and Marpai Administrators, involving key directors and shareholders like Edmundo Gonzalez, Yaron Eitan, and Damien Lamendola[453](index=453&type=chunk) - Damien Lamendola, the indirect majority owner of WellEnterprises USA, LLC and HillCour, beneficially owns approximately **51.7%** of Marpai, Inc.'s outstanding capital stock post-conversion[453](index=453&type=chunk) [Power of Attorney and Proxy](index=56&type=section&id=Power%20of%20Attorney%20and%20Proxy) A proxy agreement grants significant voting control to founding groups, classifying Marpai as a 'controlled company' under Nasdaq rules - The HillCour Founding Group granted the Grays Founding Group a proxy to vote **1,560,237 Class A common shares** on critical corporate matters, aiming to maintain equal voting power between the two founding groups[454](index=454&type=chunk) - This agreement classifies Marpai as a 'controlled company' under Nasdaq rules, as the Co-Founders collectively hold over **70% of the voting power**[457](index=457&type=chunk) [Transition Services Agreement](index=57&type=section&id=Transition%20Services%20Agreement) Marpai entered a Transition Services Agreement with WellEnterprises and HillCour post-acquisition to provide administrative support to Marpai Administrators - On **April 1, 2021**, Marpai entered into a Transition Services Agreement with WellEnterprises, LLC and HillCour, LLC to provide transitional services to Marpai Administrators post-acquisition[458](index=458&type=chunk) - Services, including treasury and banking, were provided on a cost-incurred basis until **July 1, 2021**, with a total cost of **$18,000** for the year ended **December 31, 2021**[458](index=458&type=chunk)[647](index=647&type=chunk) [HillCour's Financial Support](index=57&type=section&id=HillCour's%20Financial%20Support) HillCour provided financial support to Marpai, including funding operating expenses and a $3 million promissory note with warrants - HillCour provided financial support letters to Marpai, Inc., agreeing to fund operating expenses if sufficient capital was not raised, with support extended to **September 2022**[459](index=459&type=chunk)[460](index=460&type=chunk)[461](index=461&type=chunk) - Marpai, Inc. issued a **$3,000,000 promissory note** to HillCour Investment Fund LLC on **July 29, 2021**, accruing **6% interest**, along with warrants to purchase **225,000 Class A common stock**[462](index=462&type=chunk) [Consulting Agreement](index=57&type=section&id=Consulting%20Agreement) Marpai Health had a consulting agreement with BrightMark Consulting for marketing services, which was terminated but services continued as needed - Marpai Health had a consulting agreement with BrightMark Consulting, LLC (whose CEO was a former Board member) for marketing and branding services[463](index=463&type=chunk) - The agreement was terminated in **March 2021**, with services continuing on an as-needed basis; total payments to BrightMark were **$2,309,000** as of **December 31, 2022**[463](index=463&type=chunk) [Consulting Fees](index=58&type=section&id=Consulting%20Fees) Marpai received consulting services from various shareholders and directors, including Edmundo Gonzalez and Yaron Eitan - Marpai received consulting services from various shareholders and directors, including Edmundo Gonzalez and Yaron Eitan[464](index=464&type=chunk) - Total consulting costs were approximately **$208,000 in 2022** and **$1,100,000 in 2021**[464](index=464&type=chunk) - Yaron Eitan received a monthly retainer of **$15,000**, which increased to **$22,750 per month** from **April 21, 2021**, until **March 31, 2022**[465](index=465&type=chunk) [Sublease](index=58&type=section&id=Sublease) Marpai had a sublease agreement with Emporus Technologies, an affiliate of Chairman Yaron Eitan, which ended on January 1, 2022 - Marpai had a sublease agreement with Emporus Technologies, Ltd., where Yaron Eitan (Chairman) serves as chairman[466](index=466&type=chunk) - The sublease ended on **January 1, 2022**, generating approximately **$69,000 in income** for the year ended **December 31, 2021**[466](index=466&type=chunk) [Policy for Approval of Related Party Transactions](index=58&type=section&id=Policy%20for%20Approval%20of%20Related%20Party%20Transactions) Marpai's Code of Ethics requires avoiding conflicts of interest, with the Audit Committee reviewing and approving related party transactions above specified thresholds - Marpai's Board adopted a Code of Ethics requiring the avoidance of conflicts of interest[467](index=467&type=chunk) - The Audit Committee reviews and approves related party transactions exceeding **$120,000 or 1% of average total assets**, with interested committee members abstaining from voting[469](index=469&type=chunk) [Principal Accountant Fees and Services](index=58&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Marpai paid its independent registered public accounting firm, UHY LLP, $326,800 in total fees for services in 2022, down from $443,170 in 2021. These fees covered audit, audit-related (401(k) plan), and tax services, all of which were pre-approved by the audit committee - Fees Paid to UHY LLP (Years Ended December 31) | Fee Type | 2022 ($) | 2021 ($) | | :----------------- | :------- | :------- | | Audit Fees | 263,250 | 443,170 | | Audit-Related Fees | 12,300 | None | | Tax Fees | 51,250 | None | | All Other Fees | None | None | | Total Fees | 326,800 | 443,170 | - Audit fees covered professional services for the annual consolidated financial statements audit and quarterly reviews[473](index=473&type=chunk) - Audit-related fees were for professional services in connection with the annual **401(k) plan audit**[474](index=474&type=chunk) - All services provided by the independent registered public accounting firm were pre-approved by the audit committee[476](index=476&type=chunk) [PART IV](index=60&type=section&id=PART%20IV) [Exhibit and Financial Statement Schedules](index=60&type=section&id=Item%2015.%20Exhibit%20and%20Financial%20Statement%20Schedules) This section lists all exhibits filed as part of the 10-K report, including various agreements (e.g., Equity Interest Purchase, Employment), corporate documents (Certificate of Incorporation, Bylaws), warrants, promissory notes, and certifications. It also includes the consolidated financial statements and XBRL data - The exhibits include Equity Interest Purchase and Reorganization Agreements, corporate governance documents (Certificate of Incorporation, Bylaws), and various financial instruments such as warrants and convertible promissory notes[480](index=480&type=chunk)[482](index=482&type=chunk)[484](index=484&type=chunk)[488](index=488&type=chunk) - Employment agreements, transition servic

Marpai, Inc. (OTCQX:MRAI) Q3 2022 Earnings Conference Call November 10, 2022 8:30 AM ET Company Participants Edmundo Gonzalez - Co-Founder, CEO, Secretary & Director Yoram Bibring - CFO Conference Call Participants Allen Klee - Maxim Group Operator Good day, and thank you for standing by. Welcome to the Marpai Second Quarter 2022 Earnings Conference Call in which management will also discuss the Maestro Health acquisition. [Operator Instructions]. I would now like to hand the conference over to Simon Lee, V ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents Marpai, Inc.'s unaudited condensed consolidated financial statements and management's discussion of financial condition and results of operations [Item 1. Unaudited Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section presents Marpai, Inc.'s unaudited condensed consolidated financial statements, highlighting significant decreases in assets and equity due to net losses and negative operating cash flows, with accompanying notes detailing key financial aspects and liquidity concerns [Condensed Consolidated Balance Sheets](index=3&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) The balance sheets show a significant decline in cash, total assets, and stockholders' equity, alongside an increased accumulated deficit | Metric | Sep 30, 2022 (Unaudited) | Dec 31, 2021 | Change | | :--------------------------------- | :----------------------- | :------------- | :----- | | Cash and cash equivalents | $4,747,951 | $19,183,044 | $(14,435,093) | | Total current assets | $10,345,059 | $26,992,007 | $(16,646,948) | | Total assets | $25,412,411 | $44,201,640 | $(18,789,229) | | Total current liabilities | $8,650,198 | $11,145,388 | $(2,495,190) | | Total liabilities | $11,424,646 | $14,493,228 | $(3,068,582) | | Accumulated deficit | $(39,460,016) | $(21,525,710) | $(17,934,306) | | Total stockholders' equity | $13,987,765 | $29,708,412 | $(15,720,647) | [Condensed Consolidated Statements of Operations](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) The statements of operations reveal significant increases in revenue and costs, leading to a substantial rise in operating and net losses for both the three and nine-month periods | Metric | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change | % Change | | :--------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :------- | | Revenue | $16,713,420 | $8,330,763 | $8,382,657 | 100.6% | | Cost of revenue | $12,323,770 | $6,063,679 | $6,260,091 | 103.2% | | Total costs and expenses | $34,730,415 | $18,442,689 | $16,287,726 | 88.3% | | Operating loss | $(18,016,995) | $(10,111,926) | $(7,905,069) | 78.2% | | Net loss | $(17,934,306) | $(10,256,167) | $(7,528,139) | 73.4% | | Net loss per share (basic & diluted) | $(0.90) | $(1.31) | $(0.22) | 16.8% | | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | Change | % Change | | :--------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :------- | | Revenue | $4,938,105 | $4,799,251 | $138,854 | 2.9% | | Cost of revenue | $3,625,415 | $3,343,196 | $282,219 | 8.4% | | Total costs and expenses | $10,752,561 | $9,535,008 | $1,217,553 | 12.8% | | Operating loss | $(5,814,456) | $(4,735,757) | $(1,078,699) | 22.8% | | Net loss | $(5,779,860) | $(4,792,579) | $(987,281) | 20.6% | | Net loss per share (basic & diluted) | $(0.28) | $(0.47) | $(0.19) | 40.4% | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20STOCKHOLDERS'%20EQUITY) These statements detail changes in equity components, showing a substantial decrease in total stockholders' equity primarily due to an increased accumulated deficit | Metric | Jan 1, 2022 | Sep 30, 2022 (Unaudited) | Change | | :--------------------------------- | :---------- | :----------------------- | :----- | | Common stock | $2,030 | $2,094 | $64 | | Additional paid-in capital | $51,232,092 | $53,445,687 | $2,213,595 | | Accumulated deficit | $(21,525,710) | $(39,460,016) | $(17,934,306) | | Total stockholders' equity | $29,708,412 | $13,987,765 | $(15,720,647) | - Share-based compensation for the nine months ended September 30, 2022, was **$2,182,696**, contributing to the increase in additional paid-in capital[14](index=14&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) The cash flow statements indicate a significant increase in cash used in operating activities and a shift from cash provided to cash used in investing activities | Metric | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change | | :----------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net cash used in operating activities | $(15,339,217) | $(5,526,568) | $(9,812,649) | | Net cash (used in) provided by investing activities | $(880,032) | $10,105,907 | $(10,985,939) | | Net cash provided by financing activities | $0 | $2,603,382 | $(2,603,382) | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(16,219,249) | $7,182,721 | $(23,401,970) | | Cash, cash equivalents and restricted cash at end of period | $9,714,394 | $9,000,653 | $713,741 | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) These notes provide crucial details on the company's formation, accounting policies, liquidity concerns, the Maestro Health acquisition, share-based compensation, tax rates, and the impact of recent legislation - Marpai, Inc. was formed in January 2021 to facilitate an IPO and carry on the business of Marpai Health and Continental Benefits (now Marpai Administrators), focusing on AI-driven healthcare administration for self-insured employers[19](index=19&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk) - The company has an accumulated deficit of **$39.5 million** and negative cash flows from operations of **$15.3 million** for the nine months ended September 30, 2022, raising substantial doubt about its ability to continue as a going concern, though management believes current liquid assets and the Maestro acquisition cash are sufficient through December 31, 2023[38](index=38&type=chunk)[41](index=41&type=chunk)[168](index=168&type=chunk)[173](index=173&type=chunk) - On November 1, 2022, the company closed the acquisition of Maestro Health, LLC, a third-party administrator, for a purchase price of **$19.9 million** (accruing to **$22.1 million** by April 1, 2024), with no cash payment until April 1, 2024, and Maestro bringing **$15.79 million** in free cash reserves[39](index=39&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk)[123](index=123&type=chunk)[171](index=171&type=chunk) - The company recognized **$2,432,758** in share-based compensation expense for the nine months ended September 30, 2022, and has **$1,474,384** of unrecognized stock compensation expense related to non-vested stock options[17](index=17&type=chunk)[86](index=86&type=chunk) - The effective tax rate was **0%** for the nine months ended September 30, 2022, primarily due to a full valuation allowance on deferred tax assets[112](index=112&type=chunk) - The Inflation Reduction Act of 2022, enacted on August 16, 2022, introduces changes to the U.S. corporate income tax system, including a **15% minimum tax** and a **1% excise tax** on stock repurchases, which the company is currently evaluating[116](index=116&type=chunk)[182](index=182&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's analysis of Marpai, Inc.'s financial condition and operational results, detailing the company's AI-driven healthcare mission, the Maestro Health acquisition, revenue and expense trends, liquidity, cash flow, and critical accounting policies [Overview](index=22&type=section&id=Overview) This overview outlines Marpai's mission to transform healthcare for self-insured employers through AI and technology, combining R&D with TPA services to lower costs and improve outcomes - Marpai's mission is to positively change healthcare for self-insured employers, employees, and providers by creating a "Payer of the Future" through AI and technology[130](index=130&type=chunk) - The company combines Marpai Health (AI-focused R&D in Israel) and Marpai Administrators (healthcare TPA services in the U.S.) to deliver technology-driven services that aim to lower healthcare costs and improve outcomes[132](index=132&type=chunk) - Marpai's AI-powered TopCare program, launched in January 2021, uses predictive analytics to identify members at risk of chronic conditions or high-cost events, guiding them to appropriate, cost-effective care[133](index=133&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk) [Maestro Health Acquisition](index=23&type=section&id=Maestro%20Health%20Acquisition) This section details Marpai's acquisition of Maestro Health, LLC, including the purchase price, payment terms, and the significant cash reserves brought by the acquired entity - Marpai acquired Maestro Health, LLC, a third-party administrator, on November 1, 2022[118](index=118&type=chunk)[119](index=119&type=chunk)[137](index=137&type=chunk) - The purchase price is **$19.9 million**, payable by April 1, 2024, accruing to **$22.1 million** with interest, with no cash payment due until April 1, 2024[123](index=123&type=chunk)[140](index=140&type=chunk) - Maestro Health brings **$15.79 million** in free cash reserves, which will be available to fund Marpai's operations post-closing[39](index=39&type=chunk)[171](index=171&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, detailing trends in revenues, cost of revenue, and various operating expenses for the reported periods [Revenues and Cost of Revenue](index=26&type=section&id=Revenues%20and%20Cost%20of%20Revenue) Revenue and cost of revenue both significantly increased for the nine-month period, driven by the inclusion of Marpai Administrators and a large new client | Metric | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change | % Change | | :----------------- | :-------------------------- | :-------------------------- | :-------------------------- | :------- | | Revenue | $16,713,420 | $8,330,763 | $8,382,657 | 100.6% | | Cost of revenue | $12,323,770 | $6,063,679 | $6,260,091 | 103.2% | - The increase in nine-month revenue was due to the inclusion of Marpai Administrators' revenues (approx. **$6.2 million**) and a large new client (approx. **$3.9 million**)[149](index=149&type=chunk) - The increase in nine-month cost of revenue was due to Marpai Administrators' costs (approx. **$4.5 million**) and a large new client (approx. **$2.9 million**)[152](index=152&type=chunk) [Research and Development Expenses](index=26&type=section&id=Research%20and%20Development%20Expenses) Research and development expenses significantly increased for the nine-month period, primarily due to higher consultant fees, decreased capitalized costs, and new personnel compensation | Metric | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :------- | | R&D Expenses | $2,684,014 | $1,118,191 | $1,565,823 | 140.0% | - Increase due to higher R&D consultants at EYME (approx. **$500,726**), a decrease in capitalized R&D costs (approx. **$393,578**), and compensation for a new President of Product and Development (approx. **$449,125**)[155](index=155&type=chunk) [General and Administrative Expenses](index=26&type=section&id=General%20and%20Administrative%20Expenses) General and administrative expenses rose for the nine-month period, driven by Marpai Administrators' expenses, increased staffing, and acquisition costs | Metric | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :------- | | G&A Expenses | $7,940,014 | $5,044,759 | $2,895,255 | 57.4% | - Nine-month increase due to Marpai Administrators' G&A expenses (approx. **$997,972**), increased general and administrative staffing compensation (approx. **$575,000**), and compensation for a new President of Product and Development (approx. **$449,125**)[158](index=158&type=chunk) - For the three months ended September 30, 2022, G&A expenses increased by **$488,096**, including **$150,569** in Maestro Health acquisition costs and **$195,162** in post-IPO liability insurance[157](index=157&type=chunk) [Sales and Marketing Expenses](index=27&type=section&id=Sales%20and%20Marketing%20Expenses) Sales and marketing expenses increased for the nine-month period due to Marpai Administrators' costs, product development, and trade shows, but decreased for the three-month period | Metric | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :------- | | S&M Expenses | $4,829,718 | $3,032,766 | $1,796,952 | 59.3% | - Nine-month increase due to Marpai Administrators' S&M expenses (approx. **$442,261**), product development team and platform costs (approx. **$600,000**), and trade show costs (approx. **$310,971**)[160](index=160&type=chunk) - Three-month decrease of **$535,167** due to reduction in trade conference costs (approx. **$283,200**) and other S&M expenses[159](index=159&type=chunk) [Information Technology Expenses](index=27&type=section&id=Information%20Technology%20Expenses) Information technology expenses significantly increased for the nine-month period, driven by Marpai Administrators' IT costs, increased staffing, and technology spending | Metric | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :------- | | IT Expenses | $3,862,142 | $1,501,354 | $2,360,788 | 157.2% | - Nine-month increase due to Marpai Administrators' IT expenses (approx. **$1,134,273**), increased IT staffing and tech spend (approx. **$621,000**), and compensation for a new President of Product and Development (approx. **$449,125**)[162](index=162&type=chunk) [Depreciation and Amortization](index=27&type=section&id=Depreciation%20and%20Amortization) Depreciation and amortization expenses nearly doubled for the nine-month period, primarily due to Marpai Administrators' expenses and increased software amortization | Metric | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :------- | | D&A Expenses | $2,443,856 | $1,223,207 | $1,220,649 | 99.8% | - Increase primarily due to Marpai Administrators' D&A expenses (approx. **$381,846**) and software amortization (approx. **$900,783**)[164](index=164&type=chunk) [Interest Expense, net](index=28&type=section&id=Interest%20Expense,%20net) Net interest expense significantly decreased for the nine-month period, primarily due to the repayment or conversion of all company debt in late 2021 | Metric | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :------- | | Interest Expense | $(7,415) | $(384,564) | $377,149 | (98.1)% | - The decrease in interest expense was due to the repayment or conversion of all company debt in Q4 2021[166](index=166&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's financial position, highlighting its accumulated deficit, cash balances, working capital, and management's assessment of sufficient funds post-acquisition - As of September 30, 2022, the company had an accumulated deficit of **$39.5 million**, unrestricted cash of **$4.7 million**, and working capital of **$1.7 million**[168](index=168&type=chunk) - For the nine months ended September 30, 2022, the company reported a net loss of **$17.9 million** and negative cash flows from operations of **$15.3 million**[168](index=168&type=chunk) - Management believes current liquid assets and **$15.79 million** cash from the Maestro Health acquisition are sufficient to fund operations and capital expenditures through at least December 31, 2023[171](index=171&type=chunk)[173](index=173&type=chunk) [Cash Flows](index=29&type=section&id=Cash%20Flows) This section analyzes the company's cash flow activities, detailing significant increases in cash used in operations and a shift in investing activities, with no financing activities in 2022 | Metric | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change | | :----------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net cash used in operating activities | $(15,339,217) | $(5,526,568) | $(9,812,649) | | Net cash (used in) provided by investing activities | $(880,032) | $10,105,907 | $(10,985,939) | | Net cash provided by financing activities | $0 | $2,603,382 | $(2,603,382) | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(16,219,249) | $7,182,721 | $(23,401,970) | - Net cash used in operating activities increased by **$9.8 million**, primarily due to the net loss of **$17.9 million**, partially offset by non-cash items and a decrease in net working capital[176](index=176&type=chunk) - Investing activities shifted from providing **$10.1 million** in 2021 (due to Continental Benefits acquisition cash) to using **$0.88 million** in 2022 (primarily for capitalized software)[177](index=177&type=chunk) - No financing activities occurred in 2022, compared to **$2.6 million** provided in 2021 from convertible notes and warrants[178](index=178&type=chunk) [Critical Accounting Policies and Estimates](index=29&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights the significant management judgments and estimates required for financial statement preparation, including share-based compensation, asset valuations, and income tax accruals - Preparation of financial statements requires significant management judgment and estimates for items such as share-based compensation, valuation of common stock and warrants, useful lives of internally developed software, fair values of acquired assets, goodwill, intangible assets, and income tax accruals[43](index=43&type=chunk)[179](index=179&type=chunk) [New Accounting Pronouncements](index=29&type=section&id=New%20Accounting%20Pronouncements) The company does not anticipate a material impact from recent accounting pronouncements but is evaluating the effects of the Inflation Reduction Act of 2022 - The company does not expect a material impact from recently issued accounting pronouncements[181](index=181&type=chunk) - The company is evaluating the potential effects of the Inflation Reduction Act of 2022 on its financial statements[182](index=182&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=30&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Marpai faces foreign exchange risk from Israeli operations and inflation's impact on labor costs, but neither, nor interest rate risk, is currently deemed material - The company faces foreign exchange risk from NIS-denominated expenses in Israel, but a hypothetical **10% change** in NIS/USD exchange rate is not considered material[183](index=183&type=chunk) - Interest rate risk is not viewed as significant given current cash and cash equivalents balances[184](index=184&type=chunk) - Inflation primarily impacts labor costs, but no material effect on business, financial condition, or results of operations was observed for the nine months ended September 30, 2022[185](index=185&type=chunk) [Item 4. Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's disclosure controls and procedures were ineffective as of September 30, 2022, due to a material weakness in internal control over financial reporting, stemming from inadequate policies, processes, and staffing, for which remediation measures are underway - Disclosure controls and procedures were not effective as of September 30, 2022, due to a material weakness in internal control over financial reporting[186](index=186&type=chunk) - The material weakness is related to inadequate formal accounting policies, processes, and controls for complex transactions, and insufficient staffing leading to a lack of appropriate segregation of duties[188](index=188&type=chunk) - Remediation plans include engaging additional accounting and financial reporting personnel, developing an accounting policy manual, and establishing effective monitoring and oversight controls for complex transactions[189](index=189&type=chunk) [PART II. OTHER INFORMATION](index=31&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information, including details on unregistered sales of equity securities and a list of exhibits filed with the report [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=31&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q3 2022, Marpai issued **7,500** common shares to service providers as compensation, exempt from registration under Section 4(a)(2) of the Securities Act - In Q3 2022, **7,500** shares of common stock were issued to service providers as compensation, exempt from registration under Section 4(a)(2) of the Securities Act[195](index=195&type=chunk) [Item 6. Exhibits](index=31&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the Maestro Health, LLC Purchase Agreement and CEO/CFO certification statements - Key exhibits include the Purchase Agreement for Maestro Health, LLC (Exhibit 10.1), and CEO/CFO certification statements (Exhibits 31.1, 31.2, 32.1, 32.2)[196](index=196&type=chunk) [SIGNATURES](index=32&type=section&id=SIGNATURES) This section contains the official signatures certifying the submission of the report in accordance with the Securities Exchange Act of 1934 [Signatures](index=32&type=section&id=Signatures) The report was signed by Edmundo Gonzales (CEO) and Yoram Bibring (CFO) on November 9, 2022, certifying its submission in accordance with the Securities Exchange Act of 1934 - The report was signed by Edmundo Gonzales (CEO) and Yoram Bibring (CFO) on November 9, 2022[201](index=201&type=chunk)

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Unaudited Condensed Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Presents Marpai's unaudited condensed consolidated financial statements and detailed notes for periods ended June 30, 2022, and December 31, 2021 [Condensed Consolidated Balance Sheets](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) Balance sheets show decreased total assets and stockholders' equity, driven by reduced cash and increased accumulated deficit Condensed Consolidated Balance Sheets ($) | Metric | June 30, 2022 (Unaudited) | December 31, 2021 | | :-------------------------------- | :------------------------ | :------------------ | | Cash and cash equivalents | $9,084,839 | $19,183,044 | | Total current assets | $15,748,638 | $26,992,007 | | Total assets | $31,596,117 | $44,201,640 | | Total current liabilities | $9,535,156 | $11,145,388 | | Total liabilities | $12,525,618 | $14,493,228 | | Accumulated deficit | $(33,680,156) | $(21,525,710) | | Total stockholders' equity | $19,070,499 | $29,708,412 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) Revenue increased significantly for both periods, but rising costs led to higher operating and net losses Condensed Consolidated Statements of Operations ($) | Metric (Three months ended June 30) | 2022 | 2021 | Change ($) | Change (%) | | :---------------------------------- | :------------ | :------------ | :------------ | :--------- | | Revenue | $5,556,506 | $3,531,512 | $2,024,994 | 57.3% | | Total costs and expenses | $12,220,438 | $7,502,559 | $4,717,879 | 62.9% | | Operating loss | $(6,663,932) | $(3,971,047) | $(2,692,885) | 67.8% | | Net loss | $(6,664,782) | $(3,871,974) | $(2,792,808) | 72.1% | | Net loss per share, basic & diluted | $(0.34) | $(0.38) | $(0.04) | 10.5% | | Metric (Six months ended June 30) | 2022 | 2021 | Change ($) | Change (%) | | :---------------------------------- | :------------ | :------------ | :------------ | :--------- | | Revenue | $11,775,315 | $3,531,512 | $8,243,803 | 233.4% | | Total costs and expenses | $23,977,854 | $8,907,681 | $15,070,173 | 169.2% | | Operating loss | $(12,202,539) | $(5,376,169) | $(6,826,370) | 127.0% | | Net loss | $(12,154,446) | $(5,463,588) | $(6,690,858) | 122.5% | | Net loss per share, basic & diluted | $(0.62) | $(0.84) | $(0.22) | 26.2% | [Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit)](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20STOCKHOLDERS%27%20EQUITY%20%28DEFICIT%29) Stockholders' equity decreased due to net losses, despite increases from share-based compensation and stock issuance Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) ($) | Metric (Six months ended June 30, 2022) | Amount ($) | | :-------------------------------------- | :------------ | | Balance, January 1, 2022 | 29,708,412 | | Share-based compensation | 1,493,322 | | Issuance of stock (RSUs) | 36 | | Shares issued to vendors | 23,175 | | Net loss | (12,154,446) | | Balance, June 30, 2022 | 19,070,499 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Net cash decreased significantly due to increased operating and investing cash usage, contrasting with a prior year increase Condensed Consolidated Statements of Cash Flows ($) | Cash Flow Activity (Six months ended June 30) | 2022 | 2021 | | :-------------------------------------------- | :------------- | :------------- | | Net cash used in operating activities | $(10,122,604) | $(4,875,909) | | Net cash (used in) provided by investing activities | $(619,990) | $10,385,665 | | Net cash provided by financing activities | $0 | $553,333 | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(10,742,594) | $6,063,089 | | Cash, cash equivalents and restricted cash at end of period | $15,191,049 | $7,881,021 | [NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS](index=8&type=section&id=NOTE%201%20%E2%80%93%20ORGANIZATION%20AND%20DESCRIPTION%20OF%20BUSINESS) Marpai, Inc. was formed in January 2021 to facilitate an IPO and operate its healthcare subsidiaries, Marpai Health and Continental Benefits - Marpai, Inc. was formed on **January 22, 2021**, to facilitate an IPO and carry on the business of Marpai Health and Continental Benefits LLC[20](index=20&type=chunk) - On **April 1, 2021**, Marpai Health acquired Continental Benefits, integrating TPA services with AI and healthcare technology[22](index=22&type=chunk)[23](index=23&type=chunk) - The company consummated its IPO on **October 26, 2021**, issuing **7,187,500 shares** at **$4.00 per share**, generating gross proceeds of **$28,750,000**[25](index=25&type=chunk) - Marpai's mission is to positively change healthcare for self-insured employers, employees, and providers by using AI to predict and prevent costly events[26](index=26&type=chunk)[27](index=27&type=chunk) [NOTE 2 – UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS](index=10&type=section&id=NOTE%202%20%E2%80%93%20UNAUDITED%20INTERIM%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) Interim financial statements are prepared under U.S. GAAP, consolidating Marpai and its subsidiaries, relying on management estimates - Financial statements are prepared in accordance with U.S. GAAP for interim information and include all necessary adjustments for fair statement[31](index=31&type=chunk) - The statements consolidate Marpai, EYME, Marpai Health, and Continental Benefits (from April 1, 2021) and WellSystems[32](index=32&type=chunk) - Preparation requires management estimates and assumptions, which are evaluated ongoingly, and actual results could differ significantly[33](index=33&type=chunk) [NOTE 3 – LIQUIDITY](index=11&type=section&id=NOTE%203%20%E2%80%93%20LIQUIDITY) Marpai had a significant accumulated deficit and limited cash, but expects the Maestro Health acquisition to provide sufficient funding through mid-2023 Liquidity Metrics (as of June 30, 2022) ($) | Metric (as of June 30, 2022) | Amount ($) | | :--------------------------- | :------------ | | Accumulated deficit | (33,680,156) | | Working capital | 6,213,482 | | Unrestricted cash | 9,084,839 | - The company announced the acquisition of Maestro Health LLC on **August 4, 2022**, which is expected to provide **$15.79 million** in free cash reserves at closing[35](index=35&type=chunk) - Management believes current liquid assets plus Maestro acquisition cash will fund operations and capital expenditures through at least the **first half of 2023**[36](index=36&type=chunk) [NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=11&type=section&id=NOTE%204%20%E2%80%93%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note details Marpai's accounting policies for business combinations, software capitalization, impairment testing, and revenue recognition - Business combinations are accounted for using the acquisition method, recording identifiable assets and liabilities at fair value, with excess consideration as goodwill[37](index=37&type=chunk) - Internally developed software costs are capitalized during the development stage and amortized over **three to five years**[41](index=41&type=chunk) - Goodwill and intangible assets are tested for impairment annually or more frequently if circumstances indicate, with **no impairment recorded** for the six months ended June 30, 2022 and 2021[42](index=42&type=chunk)[43](index=43&type=chunk) - Revenue is recognized over time as services are provided, with fixed fees denominated per covered employee per month[44](index=44&type=chunk)[48](index=48&type=chunk)[51](index=51&type=chunk) [NOTE 5 – ACQUISITION](index=16&type=section&id=NOTE%205%20%E2%80%93%20ACQUISITION) Marpai acquired Continental Benefits on April 1, 2021, for $13.26 million equity value, recognizing significant intangible assets and goodwill - The acquisition of Continental Benefits was consummated on **April 1, 2021**, with an equity value of **$13,262,000** and a total purchase price paid, net of cash acquired, of **$8,500,000**[57](index=57&type=chunk)[58](index=58&type=chunk) Acquired Intangible Assets ($) | Acquired Intangible Asset | Acquisition Fair Value | | :------------------------ | :--------------------- | | Trademarks | $1,520,000 | | Noncompete agreements | $990,000 | | Customer relationships | $2,920,000 | | Patents and patent applications | $650,000 | | Goodwill | $2,382,917 | Pro Forma Financials (Six Months Ended June 30, 2021) ($) | Pro Forma Financials (Six Months Ended June 30, 2021) | Amount ($) | | :---------------------------------------------------- | :--------- | | Revenue | $7,746,953 | | Net loss | $(7,479,835) | [NOTE 6 – PROPERTY AND EQUIPMENT](index=17&type=section&id=NOTE%206%20%E2%80%93%20PROPERTY%20AND%20EQUIPMENT) Net property and equipment decreased due to depreciation and the disposal of obsolete equipment Property and Equipment, Net ($) | Property and Equipment, Net | June 30, 2022 | December 31, 2021 | | :-------------------------- | :------------ | :---------------- | | Total cost | $1,164,116 | $1,185,518 | | Accumulated depreciation | $(402,496) | $(295,583) | | Net carrying amount | $761,620 | $889,935 | - Depreciation expense for the six months ended June 30, 2022, was **$143,205**, up from **$76,064** in the prior year[62](index=62&type=chunk) - The decrease in equipment value is due to the disposal of **$96,770** of obsolete equipment[62](index=62&type=chunk) [NOTE 7 – CAPITALIZED SOFTWARE](index=17&type=section&id=NOTE%207%20%E2%80%93%20CAPITALIZED%20SOFTWARE) Net capitalized software decreased despite new in-process additions, primarily due to higher accumulated amortization Capitalized Software, Net ($) | Capitalized Software | June 30, 2022 | December 31, 2021 | | :------------------- | :------------ | :---------------- | | Capitalized software | $7,529,900 | $7,161,571 | | Accumulated amortization | $(2,322,231) | $(1,186,727) | | Net carrying amount | $5,207,669 | $5,974,844 | | Capitalized software in-process | $569,381 | $330,010 | | Total, net | $5,777,050 | $6,304,854 | - Amortization expense for capitalized software significantly increased to **$1,135,504** for the six months ended June 30, 2022, from **$126,553** in the prior year[63](index=63&type=chunk) [NOTE 8 – INTANGIBLE ASSETS](index=18&type=section&id=NOTE%208%20%E2%80%93%20INTANGIBLE%20ASSETS) Net intangible assets decreased due to ongoing amortization of trademarks, noncompete agreements, and customer relationships Intangible Assets, Net ($) | Intangible Asset | Useful Life | June 30, 2022 Net Carrying Amount | December 31, 2021 Net Carrying Amount | | :--------------- | :---------- | :-------------------------------- | :------------------------------------ | | Trademarks | 10 Years | $1,330,000 | $1,406,000 | | Noncompete agreements | 5 Years | $742,500 | $841,500 | | Customer relationships | 7 Years | $2,398,572 | $2,607,143 | | Patents and patent applications | (*) | $650,450 | $653,050 | | Total | | $5,121,522 | $5,507,693 | - Amortization expense for intangible assets was **$383,571** for the six months ended June 30, 2022, compared to **$218,350** for the same period in 2021[65](index=65&type=chunk) [NOTE 9 – SHARE-BASED COMPENSATION](index=18&type=section&id=NOTE%209%20%E2%80%93%20SHARE-BASED%20COMPENSATION) Marpai increased its stock incentive plan, granting new options and RSUs, leading to significant share-based compensation expenses - Shareholders approved an increase of **6,300,000 shares** to the Global Incentive Plan in **May 2022**, bringing the total to **7,803,421 shares**[66](index=66&type=chunk) - On **June 14, 2022**, **2,370,576 stock options** and **1,427,404 RSUs** were granted[66](index=66&type=chunk) Share-Based Compensation Expense (Six months ended June 30) ($) | Share-Based Compensation Expense (Six months ended June 30) | 2022 | 2021 | | :-------------------------------------------------------- | :--------- | :--------- | | Stock options | $483,211 | $158,695 | | Restricted Stock Awards (RSAs) | $628,318 | $547,311 | | Restricted Stock Units (RSUs) | $381,829 | $0 | - As of **June 30, 2022**, there was **$1,647,208** of unrecognized stock compensation expense for stock options and **$1,169,711** for RSUs[70](index=70&type=chunk)[75](index=75&type=chunk) [NOTE 10 – WARRANTS](index=21&type=section&id=NOTE%2010%20%E2%80%93%20WARRANTS) Marpai had 1,648,873 warrants outstanding at June 30, 2022, with exercise prices ranging from $1.43 to $7.90 Warrant Activity (June 30, 2022) | Warrant Activity | Number of Warrants to Purchase Common Shares (June 30, 2022) | Weighted Average Exercise Price (June 30, 2022) | | :--------------- | :----------------------------------------------------------- | :---------------------------------------------- | | Balance | 1,648,873 | $5.92 | - Marpai Health warrants were automatically converted into Marpai common stock warrants as part of the **April 2021 acquisition**[78](index=78&type=chunk) - Underwriter's Warrants to purchase **312,500 shares** were issued upon the IPO closing, exercisable at **$5.00 per share** from **April 4, 2022**, through **October 26, 2026**[81](index=81&type=chunk) [NOTE 11 – SEGMENT INFORMATION](index=22&type=section&id=NOTE%2011%20%E2%80%93%20SEGMENT%20INFORMATION) Marpai operates as a single segment, with all revenue from U.S. customers and R&D activities in Israel - All of the Company's revenues are derived from customers located in the **United States**[84](index=84&type=chunk) - Research and development activities are conducted through EYME in **Israel**[84](index=84&type=chunk) Long-Lived Assets by Geographic Region ($) | Geographic Region | Long-Lived Assets (June 30, 2022) | Long-Lived Assets (December 31, 2021) | | :---------------- | :-------------------------------- | :------------------------------------ | | United States | $12,848,469 | $14,369,511 | | Israel | $2,918,400 | $2,759,512 | | Total | $15,766,869 | $17,129,023 | [NOTE 12 – RELATED PARTY TRANSACTIONS](index=22&type=section&id=NOTE%2012%20%E2%80%93%20RELATED%20PARTY%20TRANSACTIONS) Marpai engages in related party transactions for consulting and marketing services, with costs changing between periods Related Party Transaction Costs (Six months ended June 30) ($) | Related Party Transaction (Six months ended June 30) | 2022 | 2021 | | :--------------------------------------------------- | :----------- | :----------- | | Consulting services cost | ~$114,000 | ~$318,000 | | Marketing services cost | ~$565,000 | ~$504,000 | | Accounts payable to shareholders (June 30, 2022) | ~$0 | ~$297,000 (Dec 31, 2021) | [NOTE 13 – ACCRUED EXPENSES](index=23&type=section&id=NOTE%2013%20%E2%80%93%20ACCRUED%20EXPENSES) Accrued expenses decreased, primarily due to reductions in performance guarantee liabilities and other accrued expenses Accrued Expenses ($) | Accrued Expense | June 30, 2022 | December 31, 2021 | | :---------------- | :------------ | :---------------- | | Employee compensation | $940,029 | $897,288 | | Accrued bonuses | $776,937 | $743,038 | | Performance guarantee liabilities | $326,121 | $418,988 | | Other accrued expenses and liabilities | $277,463 | $465,723 | | Total | $2,320,550 | $2,525,037 | [NOTE 14 – STOCKHOLDERS' EQUITY](index=23&type=section&id=NOTE%2014%20%E2%80%93%20STOCKHOLDERS%27%20EQUITY) Marpai completed a forward stock split and IPO in 2021, and issued shares to vendors in 2022 - A **4.555821-for-1 forward stock split** was effective on **September 2, 2021**, retroactively adjusting all share and per share information[88](index=88&type=chunk) - The IPO closed on **October 29, 2021**, with **7,187,500 shares** sold at **$4.00 per share**, yielding **$24,547,086** in net proceeds[88](index=88&type=chunk) - During the six months ended June 30, 2022, the Company issued **22,500 shares** of common stock to vendors for services[88](index=88&type=chunk)[89](index=89&type=chunk) [NOTE 15 – INCOME TAXES](index=24&type=section&id=NOTE%2015%20%E2%80%93%20INCOME%20TAXES) Marpai's effective tax rate was 0% due to a full valuation allowance against deferred tax assets, holding significant NOLs Effective Tax Rate | Metric (Six months ended June 30) | 2022 | 2021 | | :-------------------------------- | :--- | :----- | | Effective tax rate | 0% | 2.67% | - The effective tax rate differs from the federal rate of **21%** primarily due to a full valuation allowance[91](index=91&type=chunk) - As of **December 31, 2021**, the Company had federal NOLs of **$10,687,462** and state NOLs of **$11,173,080**[92](index=92&type=chunk) [NOTE 16 – SUBSEQUENT EVENTS](index=24&type=section&id=NOTE%2016%20%E2%80%93%20SUBSEQUENT%20EVENTS) Marpai announced the acquisition of Maestro Health LLC for $22.1 million, expected to provide $15.79 million in free cash - On **August 4, 2022**, Marpai announced the acquisition of Maestro Health LLC, a TPA servicing over **80 self-insured employers**[95](index=95&type=chunk) - The purchase price for Maestro Health is **$22.1 million**, payable by **April 1, 2024**, with potential seller financing over **four years**[96](index=96&type=chunk) - Maestro's free cash position at closing is expected to be **$15.79 million**[97](index=97&type=chunk) - Continental Benefits LLC was renamed Marpai Administrators LLC on **July 12, 2022**[98](index=98&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Marpai's financial condition and operational results, highlighting revenue growth, increased expenses, and liquidity [Special Note Regarding Forward-Looking Statements](index=25&type=section&id=Special%20Note%20Regarding%20Forward-Looking%20Statements) This section cautions that the report contains forward-looking statements subject to risks and uncertainties, advising against undue reliance - The report includes forward-looking statements that involve risks and uncertainties, which could cause actual results to differ materially[100](index=100&type=chunk) - Readers should not place undue reliance on forward-looking statements, and the company disclaims any obligation to update them[101](index=101&type=chunk)[102](index=102&type=chunk) [Overview](index=25&type=section&id=Overview) Marpai aims to transform healthcare for self-insured employers using AI and TPA services, exploring the captive insurance market - Marpai's mission is to create the 'Payer of the Future' for self-insured employers in the U.S. by using AI to predict costly events and optimize care[103](index=103&type=chunk) - The company combines Marpai Health's AI-focused R&D with Continental Benefits' TPA administration services to differentiate in the market[104](index=104&type=chunk) - Marpai Captive, Inc. was founded in **March 2022** to explore the captive insurance market, though it has not yet commenced operations[104](index=104&type=chunk) - Marpai's AI-powered TopCare program, launched in **January 2021**, uses predictions to guide members to lower-cost, high-quality providers and manage chronic conditions[105](index=105&type=chunk)[107](index=107&type=chunk)[108](index=108&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) Marpai saw substantial revenue growth but also significant increases in total costs and expenses, leading to larger operating and net losses Results of Operations Summary ($) | Metric (Six Months Ended June 30) | 2022 | 2021 | Change ($) | Change (%) | | :-------------------------------- | :------------ | :------------ | :------------ | :--------- | | Revenue | $11,775,315 | $3,531,512 | $8,243,803 | 233.4% | | Total Costs and Expenses | $23,977,854 | $8,907,681 | $15,070,173 | 169.2% | | Operating Loss | $(12,202,539) | $(5,376,169) | $(6,826,370) | 127.0% | | Net Loss | $(12,154,446) | $(5,463,588) | $(6,690,858) | 122.5% | | Metric (Three Months Ended June 30) | 2022 | 2021 | Change ($) | Change (%) | | :---------------------------------- | :------------ | :------------ | :------------ | :--------- | | Revenue | $5,556,506 | $3,531,512 | $2,024,994 | 57.3% | | Total Costs and Expenses | $12,220,437 | $7,502,559 | $4,717,878 | 62.9% | | Operating Loss | $(6,663,931) | $(3,971,047) | $(2,692,884) | 67.8% | | Net Loss | $(6,664,781) | $(3,871,974) | $(2,792,807) | 72.1% | [Revenues and Cost of Revenue](index=29&type=section&id=Revenues%20and%20Cost%20of%20Revenue) Revenue and cost of revenue significantly increased due to the Continental Benefits acquisition and new client additions Revenues and Cost of Revenue ($) | Metric (Three months ended June 30) | 2022 | 2021 | Change ($) | Change (%) | | :---------------------------------- | :----------- | :----------- | :----------- | :--------- | | Revenue | $5,556,506 | $3,531,512 | $2,024,994 | 57.3% | | Cost of revenue | $4,151,560 | $2,720,483 | $1,431,077 | 52.6% | | Metric (Six months ended June 30) | 2022 | 2021 | Change ($) | Change (%) | | :---------------------------------- | :----------- | :----------- | :----------- | :--------- | | Revenue | $11,775,315 | $3,531,512 | $8,243,803 | 233.4% | | Cost of revenue | $8,698,355 | $2,720,483 | $5,977,872 | 219.7% | - The increase in revenues was mainly due to the addition of a large client in **September 2021** and the inclusion of Continental Benefits' revenues since its acquisition on **April 1, 2021**[114](index=114&type=chunk)[115](index=115&type=chunk) [Research and Development Expenses](index=31&type=section&id=Research%20and%20Development%20Expenses) R&D expenses significantly increased due to higher personnel costs, reduced capitalization, and one-time compensation expenses Research and Development Expenses ($) | Metric (Three months ended June 30) | 2022 | 2021 | Change ($) | Change (%) | | :---------------------------------- | :----------- | :----------- | :----------- | :--------- | | R&D Expenses | $1,309,157 | $285,363 | $1,023,794 | 358.8% | | Metric (Six months ended June 30) | 2022 | 2021 | Change ($) | Change (%) | | :---------------------------------- | :----------- | :----------- | :----------- | :--------- | | R&D Expenses | $1,902,264 | $549,374 | $1,352,890 | 246.3% | - Increases were due to higher R&D personnel in EYME, a decrease in capitalized R&D costs, additional compensation for a new President of Product and Development, and a one-time expense of **$378,535** for the release of RSA shares[120](index=120&type=chunk)[121](index=121&type=chunk) [General and Administrative Expenses](index=31&type=section&id=General%20and%20Administrative%20Expenses) G&A expenses increased, primarily driven by Continental Benefits' expenses, higher personnel costs, and professional fees related to growth and public company status General and Administrative Expenses ($) | Metric (Three months ended June 30) | 2022 | 2021 | Change ($) | Change (%) | | :---------------------------------- | :----------- | :----------- | :----------- | :--------- | | G&A Expenses | $2,319,976 | $2,059,608 | $260,368 | 12.6% | | Metric (Six months ended June 30) | 2022 | 2021 | Change ($) | Change (%) | | :---------------------------------- | :----------- | :----------- | :----------- | :--------- | | G&A Expenses | $5,222,109 | $2,861,445 | $2,360,664 | 82.5% | - The six-month increase was due to Continental Benefits' G&A expenses, increased personnel costs, and professional fees related to company growth and public company status[123](index=123&type=chunk) [Sales and Marketing Expenses](index=31&type=section&id=Sales%20and%20Marketing%20Expenses) Sales and marketing expenses rose significantly due to increased staffing, the inaugural tradeshow, and new executive compensation Sales and Marketing Expenses ($) | Metric (Three months ended June 30) | 2022 | 2021 | Change ($) | Change (%) | | :---------------------------------- | :----------- | :----------- | :----------- | :--------- | | S&M Expenses | $2,216,788 | $1,122,665 | $1,094,123 | 97.5% | | Metric (Six months ended June 30) | 2022 | 2021 | Change ($) | Change (%) | | :---------------------------------- | :----------- | :----------- | :----------- | :--------- | | S&M Expenses | $3,775,904 | $1,443,785 | $2,332,119 | 161.5% | - The increase was primarily due to increased staffing, the inaugural tradeshow, and additional compensation for the President of Product and Development[124](index=124&type=chunk)[125](index=125&type=chunk)[127](index=127&type=chunk) [Information Technology Expenses](index=33&type=section&id=Information%20Technology%20Expenses) IT expenses increased substantially due to higher IT staffing at Continental Benefits and additional executive compensation Information Technology Expenses ($) | Metric (Three months ended June 30) | 2022 | 2021 | Change ($) | Change (%) | | :---------------------------------- | :----------- | :----------- | :----------- | :--------- | | IT Expenses | $1,189,733 | $731,230 | $458,503 | 62.7% | | Metric (Six months ended June 30) | 2022 | 2021 | Change ($) | Change (%) | | :---------------------------------- | :----------- | :----------- | :----------- | :--------- | | IT Expenses | $2,324,006 | $731,230 | $1,592,776 | 217.8% | - The increase was primarily due to increased IT staffing at Continental Benefits and additional compensation for the President of Product and Development[128](index=128&type=chunk)[129](index=129&type=chunk) [Depreciation and Amortization](index=33&type=section&id=Depreciation%20and%20Amortization) Depreciation and amortization expenses significantly increased due to software amortization and Continental Benefits' post-acquisition expenses Depreciation and Amortization Expenses ($) | Metric (Three months ended June 30) | 2022 | 2021 | Change ($) | Change (%) | | :---------------------------------- | :----------- | :----------- | :----------- | :--------- | | D&A Expenses | $776,411 | $402,813 | $373,598 | 92.78% | | Metric (Six months ended June 30) | 2022 | 2021 | Change ($) | Change (%) | | :---------------------------------- | :----------- | :----------- | :----------- | :--------- | | D&A Expenses | $1,601,809 | $420,967 | $1,180,842 | 280.5% | - The increase was primarily due to software amortization and Continental Benefits' depreciation and amortization expenses post-acquisition[130](index=130&type=chunk)[131](index=131&type=chunk) [Interest Expense, net](index=33&type=section&id=Interest%20Expense%2C%20net) Interest expense significantly decreased due to the repayment or conversion of all company debt in late 2021 Interest Expense, net ($) | Metric (Three months ended June 30) | 2022 | 2021 | Change ($) | Change (%) | | :---------------------------------- | :------- | :--------- | :--------- | :--------- | | Interest Expense | $(562) | $(92,621) | $92,059 | (99.4)% | | Metric (Six months ended June 30) | 2022 | 2021 | Change ($) | Change (%) | | :---------------------------------- | :------- | :--------- | :--------- | :--------- | | Interest Expense | $(4,507) | $(276,061) | $271,554 | (98.4)% | - The decrease in interest expense was due to the repayment or conversion of all company debt in **Q4 2021**[132](index=132&type=chunk)[133](index=133&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) Marpai had an accumulated deficit and limited cash, but expects the Maestro acquisition to provide sufficient funding through mid-2023 Liquidity and Capital Resources (as of June 30, 2022) ($) | Metric (as of June 30, 2022) | Amount ($) | | :--------------------------- | :------------ | | Accumulated deficit | $(33,700,000) | | Cash and cash equivalents | $9,100,000 | | Working capital | $6,200,000 | - The IPO in **October 2021** generated approximately **$24.5 million** in net proceeds, which were used to repay or convert outstanding debt[135](index=135&type=chunk) - The company expects **$15.79 million** in free cash from the Maestro acquisition, which, combined with current assets, is projected to fund operations through at least the **first half of 2023**[35](index=35&type=chunk)[36](index=36&type=chunk) [Cash Flows](index=34&type=section&id=Cash%20Flows) Net cash decreased significantly due to increased operating and investing cash usage, contrasting with a prior year increase Cash Flow Activity (Six months ended June 30) ($) | Cash Flow Activity (Six months ended June 30) | 2022 | 2021 | | :-------------------------------------------- | :------------- | :------------- | | Net cash used in operating activities | $(10,122,604) | $(4,875,909) | | Net cash (used in) provided by investing activities | $(619,990) | $10,385,665 | | Net cash provided by financing activities | $0 | $553,333 | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(10,742,594) | $6,063,089 | [Net Cash Used in Operating Activities](index=34&type=section&id=Net%20Cash%20Used%20in%20Operating%20Activities) Net cash used in operating activities increased due to the net loss, partially offset by non-cash items and decreased working capital - Net cash used in operating activities increased by **$5,246,695** to **$10,122,604** for the six months ended June 30, 2022[137](index=137&type=chunk) - This was primarily driven by a net loss of **$12,154,446**, partially offset by non-cash items totaling **$3,496,630** and a decrease in net working capital of **$1,464,788**[137](index=137&type=chunk) [Net Cash (Used in) Provided by Investing Activities](index=34&type=section&id=Net%20Cash%20%28Used%20in%29%20Provided%20by%20Investing%20Activities) Investing activities shifted from providing cash in 2021 (due to an acquisition) to using cash in 2022 for software capitalization - Net cash used in investing activities was **$619,990** for the six months ended June 30, 2022, a decrease of **$11,005,655** compared to cash provided in the prior year[138](index=138&type=chunk) - The 2021 period included **$4,762,000** unrestricted cash and **$6,622,035** restricted cash acquired from the Continental Benefits acquisition[138](index=138&type=chunk) - Cash used in investing activities in 2022 included **$607,700** for capitalization of software[138](index=138&type=chunk) [Net Cash Provided by Financing Activities](index=34&type=section&id=Net%20Cash%20Provided%20by%20Financing%20Activities) No financing activities occurred in 2022, contrasting with cash provided by convertible notes and warrants in the prior year - No financing activities occurred during the six months ended June 30, 2022[139](index=139&type=chunk) - In the prior year, **$553,333** was provided from the issuance of convertible notes and warrants[139](index=139&type=chunk) [Critical Accounting Policies and Estimates](index=34&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Financial statement preparation requires significant management estimates and assumptions, which may differ from actual results - Financial statements require management to make estimates, assumptions, and judgments affecting reported amounts of assets, liabilities, revenue, and expenses[140](index=140&type=chunk) - Estimates are based on historical experience and other reasonable factors, but actual results could differ[140](index=140&type=chunk) [New Accounting Pronouncements](index=34&type=section&id=New%20Accounting%20Pronouncements) Marpai does not anticipate a material impact from recently issued accounting pronouncements on its financial statements - The company does not believe the adoption of recently issued accounting pronouncements will have a material impact on its consolidated financial statements[142](index=142&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Marpai's market risks include foreign exchange, interest rate, and inflation, none of which have had a material impact historically [Foreign exchange risk](index=35&type=section&id=Foreign%20exchange%20risk) Marpai faces foreign exchange risk from NIS-denominated expenses in Israel, but historical impact has been immaterial - The company's expenses are denominated in NIS due to operations in Israel, creating foreign exchange risk[143](index=143&type=chunk) - A hypothetical **10%** change in the NIS exchange rate would not have had a material impact on historical financial statements[143](index=143&type=chunk) [Interest rate risk](index=35&type=section&id=Interest%20rate%20risk) Marpai holds significant cash, but management does not currently consider interest rate fluctuations a significant risk Cash and Cash Equivalents ($) | Metric | June 30, 2022 | December 31, 2021 | | :----- | :------------ | :---------------- | | Cash and cash equivalents | $9,084,839 | $19,183,044 | - Management does not view interest rate exposure as a significant risk[144](index=144&type=chunk) [Inflation Risk](index=35&type=section&id=Inflation%20Risk) Inflation primarily affects Marpai through labor costs, but had no material effect on its business for the six months ended June 30, 2022 - Inflation generally affects the company by increasing labor costs[145](index=145&type=chunk) - Inflation did not have a material effect on the business for the six months ended June 30, 2022[145](index=145&type=chunk) [Item 4. Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) Marpai's disclosure controls were ineffective due to a material weakness in internal control over financial reporting, but a remediation plan is underway [Evaluation of Disclosure Controls and Procedures](index=35&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Disclosure controls were ineffective due to a material weakness, though management believes financial statements are fairly presented - Disclosure controls and procedures were deemed not effective as of **June 30, 2022**, due to a material weakness in internal control over financial reporting[146](index=146&type=chunk) - Management believes the financial statements are fairly presented, despite the identified material weaknesses[146](index=146&type=chunk) [Previously Identified Material Weakness and Plans to Remediate](index=35&type=section&id=Previously%20Identified%20Material%20Weakness%20and%20Plans%20to%20Remediate) A material weakness in the control environment was identified, with remediation plans including additional personnel and formalized accounting policies - A material weakness was identified in internal control over financial reporting related to the control environment, including inadequate accounting policies, insufficient staffing, and lack of segregation of duties[148](index=148&type=chunk) - The remediation plan includes engaging additional accounting personnel, developing an accounting policy manual, and establishing effective monitoring and oversight controls[149](index=149&type=chunk)[151](index=151&type=chunk) - The company intends to complete the implementation of its remediation plan during **2022**[153](index=153&type=chunk) [Changes in Internal Control over Financial Reporting](index=37&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) No material changes in internal control over financial reporting occurred during the second quarter ended June 30, 2022 - No material changes in internal control over financial reporting occurred during the second quarter ended **June 30, 2022**[154](index=154&type=chunk) [Limitations on the Effectiveness of Controls](index=37&type=section&id=Limitations%20on%20the%20Effectiveness%20of%20Controls) Management acknowledges that controls provide only reasonable assurance due to inherent limitations and resource constraints - Management recognizes that controls and procedures can only provide reasonable assurance due to inherent limitations and resource constraints[155](index=155&type=chunk) [PART II. OTHER INFORMATION](index=37&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) Marpai issued 22,500 common shares to service providers in Q2 2022, claiming exemption from registration under Section 4(a)(2) - During **Q2 2022**, **22,500 shares** of common stock were issued to service providers as compensation[157](index=157&type=chunk) - The issuance claimed exemption from registration under **Section 4(a)(2) of the Securities Act**[157](index=157&type=chunk) [Item 6. Exhibits](index=37&type=section&id=ITEM%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including certification statements and XBRL interactive data files - Exhibits include Certification Statements of the CEO and CFO pursuant to **Sections 302 and 906 of the Sarbanes Oxley Act of 2002**[158](index=158&type=chunk) - Interactive Data Files (XBRL) are also furnished as exhibits[158](index=158&type=chunk) [SIGNATURES](index=39&type=section&id=SIGNATURES) This section contains the required signatures of Marpai, Inc.'s CEO and CFO, certifying the report's filing - The report is signed by **Edmundo Gonzales, Chief Executive Officer**, and **Yoram Bibring, Chief Financial Officer**, on **August 15, 2022**[161](index=161&type=chunk)[163](index=163&type=chunk)

Marpai, Inc. (OTCQX:MRAI) Q2 2022 Earnings Conference Call August 11, 2022 8:30 AM ET Company Participants Simon Li ??? Vice President Edmundo Gonzalez ??? Chief Executive Officer, Secretary and Director Yoram Bibring ??? Chief Financial Officer Conference Call Participants Allen Klee ??? Maxim Group Operator Good day and thank you for standing by. Welcome to the Marpai Second Quarter 2022 Earnings Conference Call in which management will also discuss the Maestro Health acquisition. [Operator Instructions] ...

Marpai, Inc. (OTCQX:MRAI) Q1 2022 Earnings Conference Call May 12, 2022 8:30 AM ET Company Participants Yoram Bibring - Chief Financial Officer Edmundo Gonzalez - Chief Executive Officer Conference Call Participants Operator Good morning and welcome to the Marpai's First Quarter 2022 Financial Results Conference Call. All participants will be in a listen only mode. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Marpai's CFO, Yoram Bibring. ...

Table of Contents` UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-40904 MARPAI, INC. (Exact Name of Registrant as Specified in Its Charter) (State or other jurisdiction of incorporation ...

MARA M MARKAN MARK Presentation Company M a r c h 2 0 2 2 MarpaiHealth.com Forward Looking Statements | 2 This presentation and the statements of representatives and partners of Marpai, Inc. (the "Company") related thereto contain or may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other U.S. Federal securities laws, as amended. Statements that are not statements of historical fact may be deemed to be forward-looking statements. For exampl ...