Marpai(MRAI) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Unaudited Condensed Consolidated Financial Statements 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] - 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][32] - 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] - A public offering on April 19, 2023, raised $7.4 million gross proceeds ($6.4 million net) from 7.4 million shares at $1.00 per share, with 35% of net proceeds used for Maestro acquisition debt repayment[105][107] Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion highlights Q1 2023 revenue growth from the Maestro acquisition, offset by increased expenses and operating losses, raising substantial doubt about going concern Comparison of Operations: Q1 2023 vs Q1 2022 | Metric | Q1 2023 ($) | 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] - 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][125][126] - 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][133] - 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] Quantitative and Qualitative Disclosures about Market Risk 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] - 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] - Inflation is believed not to have had a material effect on the business, financial condition, or results of operations during the quarter[144] Controls and Procedures 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] - 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] PART II. OTHER INFORMATION Unregistered Sales of Equity Securities and Use of Proceeds 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] - The issuance was made under the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933[151] Exhibits 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] - Interactive Data Files (Inline XBRL) are furnished as part of the filing[152] Signatures 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]