[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 ...

Marpai, Inc. (OTCQX:MRAI) Q4 2021 Earnings Conference Call March 31, 2022 8:30 AM ET Company Participants Simon Li - Vice President of Marpai Edmundo Gonzalez - Chief Executive Officer, Secretary and Director Lutz Finger - President of Product and Development Yoram Bibring - Chief Financial Officer Conference Call Participants Operator Good morning and welcome to Marpai's Fourth Quarter and Full Year Financial Results Conference Call. Thank you for standing by. All participants will be in a listen-only mode ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 ☐ 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) Delaware 86-1916231 (State or other jurisdict ...

MARDAI | --- | --- | --- | --- | --- | --- | |-------------------------------------|-------|-------|-------|-------|-------| | | | | | | | | | | | | | | | SMART Technology Transforming | | | | | | | Health Plan | | | | | | | Administration Company Presentation | | | | | | | | | | | | | January 2022 marpaihealth.com Forward Looking Statements | 2 The Company filed a registration statement on Form S-1, as amended (Registration No.: 333-258029) (the "Registration Statement") with the Securities and Exchange Co ...

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 September 30, 2021 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 incorpora ...