Marpai, Inc 10-Q for FY2021 Q3

Marpai, Inc. (MRAI)

10-Q 2021-12-14 For: 2021-09-30

Added on April 09, 2026

About this 10-Q

Marpai, Inc filed this 10-Q on December 14, 2021, covering the quarter ended September 30, 2021 (FY2021 Q3).

Headline figures

Quarter ended September 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $4.8M
Net loss: $4.79M; compared with a net loss of $926.26K a year earlier
Diluted EPS: -$0.47; compared with -$0.37 a year earlier

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Delaware		86-1916231
(State or other jurisdiction of incorporation)		(IRS Employer Identification Number)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	MRAI	The Nasdaq Stock Market LLC


Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☒	Smaller reporting company ☒	Emerging growth company ☒


		Page
PART I. FINANCIAL INFORMATION

Item 1.	Unaudited Condensed Consolidated Financial Statements	1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	37

Item 4.	Controls and Procedures	37

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	39

Item 1A.	Risk Factors	39

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39

Item 3.	Defaults Upon Senior Securities	40

Item 4.	Mine Safety Disclosures	40

Item 5.	Other Information	40

Item 6.	Exhibits	41

SIGNATURES		42


	September 30, 2021
	(Unaudited)		December 31, 2020
ASSETS:
Current assets:
Cash and cash equivalents	$	1,190,974	$	1,754,569
Restricted cash		7,809,679		63,363
Accounts receivable		299,849		—
Unbilled receivable		37,863		—
Prepaid expenses and other current assets		774,362		262,211
Other receivables		52,836		100,038
Total current assets		10,165,563		2,180,181

Property and equipment, net		720,592		195,404
Capitalized software, net		6,617,382		3,818,959
Operating lease right-of-use assets		1,546,495		337,316
Goodwill		1,676,239		—
Intangible assets, net		6,503,301		—
Security deposits		52,277		—
Total assets	$	27,281,849	$	6,531,860

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	2,651,216	$	159,168
Accounts payable – related party		—		15,725
Accrued expenses		1,932,992		267,967
Accrued fiduciary obligations		5,063,949		—
Deferred revenue		1,352,221		—
Current portion of operating lease liabilities		713,792		96,472
Current portion of convertible notes payable		999,326		1,866,237
Short-term loan		2,011,250		—
Due to related party		3,637		243,638
Total current liabilities		14,728,383		2,649,207

Convertible notes payable, net of current portion		4,865,526		7,095,887
Other long-term liabilities		45,000		—
Operating lease liabilities, net of current portion		1,027,148		283,265
Deferred tax liabilities		2,001,012		—
Total liabilities		22,667,069		10,028,359
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY (DEFICIT)
Common stock, $0.0001 par value, 227,791,050 shares authorized; 11,169,826 issued and outstanding at September 30, 2021 and 142,369 issued and outstanding at December 31, 2020 ⁽¹⁾		1,117		14
Additional paid-in capital		20,410,705		2,044,362
Accumulated deficit		(15,797,042)		(5,540,875)
Total stockholders’ equity (deficit)		4,614,780		(3,496,499)
Total liabilities and stockholders’ equity (deficit)	$	27,281,849	$	6,531,860


	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Revenue	$	4,799,251	$	—	$	8,330,763	$	—
Costs and expenses
Cost of revenue (exclusive of depreciation and amortization shown separately below)		3,343,196		—		6,063,679		—
General and administrative		2,229,809		280,557		5,044,759		1,053,780
Sales and marketing		1,588,981		21,960		3,032,766		27,583
Information technology		770,124		—		1,501,354		—
Research and development		568,817		470,943		1,118,191		1,496,929
Depreciation and amortization		802,240		18,362		1,223,207		56,246
Facilities		231,841		—		458,733		—
Total costs and expenses		9,535,008		791,822		18,442,689		2,634,538

Operating loss		(4,735,757)		(791,822)		(10,111,926)		(2,634,538)

Other income (expenses)
Other income		54,637		6,440		109,063		19,178
Interest expense		(108,503)		(137,992)		(384,564)		(364,327)
Foreign exchange loss		(2,956)		(2,890)		(18,740)		(5,079)
Loss before provision for income taxes		(4,792,579)		(926,264)		(10,406,167)		(2,984,766)

Income tax benefit		—		—		(150,000)		—
Net loss	$	(4,792,579)	$	(926,264)	$	(10,256,167)	$	(2,984,766)

Net loss per share, basic & fully diluted⁽¹⁾	$	(0.47)	$	(0.37)	$	(1.31)	$	(1.29)

Weighted average number of common shares, basic and fully diluted⁽¹⁾		10,261,001		2,521,010		7,846,348		2,315,544


	Common Stock
				Additional Paid-		Accumulated		Total Stockholders’
	Shares	Amount		In Capital		Deficit		Equity (Deficit)
Three months ended September 30, 2020
Balance, July 1, 2020	142,369	$	14	$	1,655,069	$	(3,731,393)	$	(2,076,310)
Share-based compensation	—		—		194,647		—		194,647
Net loss	—		—		—		(926,264)		(926,264)
Balance, September 30, 2020 (Unaudited)	142,369	$	14	$	1,849,716	$	(4,657,657)	$	(2,807,927)

Three months ended September 30, 2021
Balance, July 1, 2021	11,147,302	$	1,115	$	20,154,521	$	(11,004,463)	$	9,151,173
Stock options exercised	22,524		2		47		—		49
Share-based compensation	—		—		256,137		—		256,137
Net loss	—		—		—		(4,792,579)		(4,792,579)
Balance, September 30, 2021 (Unaudited)	11,169,826	$	1,117	$	20,410,705	$	(15,797,042)	$	4,614,780

Nine months ended September 30, 2020
Balance, January 1, 2020	142,369	$	14	$	799,732	$	(1,672,891)	$	(873,145)
Fair value of warrants issued with convertible note	—		—		213,828		—		213,828
Share-based compensation	—		—		836,156		—		836,156
Net loss	—		—		—		(2,984,766)		(2,984,766)
Balance, September 30, 2020 (Unaudited)	142,369	$	14	$	1,849,716	$	(4,657,657)	$	(2,807,927)

Nine months ended September 30, 2021
Balance, January 1, 2021	142,369	$	14	$	2,044,362	$	(5,540,875)	$	(3,496,499)
Exchange of common shares of Marpai Health, Inc. (see Note 1)	(142,369)		(14)		—		—		(14)
Issuance of common shares of Marpai, Inc. (see Note 1)	11,147,302		1,115		17,350,820		—		17,351,935
Stock options exercised	22,524		2		47		—		49
Warrants issued for cash	—		—		53,333		—		53,333
Share-based compensation	—		—		962,143		—		962,143
Net loss	—		—		—		(10,256,167)		(10,256,167)
Balance, September 30, 2021 (Unaudited)	11,169,826	$	1,117	$	20,410,705	$	(15,797,042)	$	4,614,780


		Useful Lives
Equipment		3 years
Furniture and fixtures		5 years
Leasehold improvements		Shorter of 5 years or lease term


	2021		2020
Risk-free interest rates	0.912	%	1.026 – 1.399	%
Expected life	5 years		6.25 years
Expected volatility	40.81	%	34.60	%
Expected dividend yield	0.00	%	0.00	%


Purchase Price
Equity value	$	13,262,000
Cash acquired		(4,762,000)
Total purchase price paid, net of cash acquired	$	8,500,000

Purchase Price Allocation
Restricted cash	$	6,622,035
Accounts receivable		92,231
Prepaid expenses and other current assets		131,413
Property and equipment		1,601,990
Intangible assets		1,010,000
Capitalized software		1,230,000
Operating lease - right of use assets		1,532,925
Goodwill		1,676,239
Trademarks		1,860,000
Patents and patent applications		700,000
Customer relationships		3,370,000
Security deposits		54,869
Account payable		(925,608)
Accrued expenses		(1,267,708)
Accrued fiduciary obligations		(4,070,908)
Operating lease liabilities		(1,716,246)
Deferred tax liability		(2,151,012)
Deferred revenue		(1,205,220)
Other long-term liabilities		(45,000)
Total fair value of net assets acquired and liabilities assumed	$	8,500,000


			Useful
	Acquisition		Life in
	Fair Value		Years
Trademarks	$	1,860,000	10 Years
Intangible assets		1,010,000	5 Years
Customer relationships		3,370,000	7 Years
Patents and patent applications		700,000	(*)


	Nine Months Ended
	September 30, 2021		Year Ended December
	(pro forma)		31, 2020 (pro forma)
Revenue	$	12,545,844	$	18,388,192
Net loss		(12,311,864)		(17,620,431)


Year Ended December 31,
2021 (three months)	$	512,138
2022		2,044,809
2023		2,044,809
2024		1,245,818
2025		447,762
Thereafter		82,716
	$	6,378,052


	September 30, 2021
	Useful		Gross Carrying		Accumulated		Net Carrying
	Life		Amount		Amortization		Amount
Trademarks		10 Years	$	1,860,000	$	(93,425)	$	1,766,575
Intangible assets		5 Years		1,010,000		(101,461)		908,539
Customer relationships		7 Years		3,370,000		(241,813)		3,128,187
Patents and patent applications		(*)		700,000		—		700,000
			$	6,940,000	$	(436,699)	$	6,503,301


Year Ended December 31,
2021 (three months)	$	217,357
2022		869,429
2023		869,429
2024		869,429
2025		869,429
Thereafter		2,808,228
	$	6,503,301


	Nine months ended September 30,
	2021		2020
Cash flows from operating activities:
Net loss	$	(10,256,167)	$	(2,984,766)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,223,207		56,246
Share-based compensation		962,143		836,156
Amortization of right-of-use asset		42,799		57,798
Amortization of debt discount		26,728		75,300
Non-cash interest		352,171		285,835
Convertible note issued for professional services		75,000		—
Deferred taxes		(150,000)		—
Changes in operating assets and liabilities:
(Increase) in accounts receivable and unbilled receivable		(245,481)		—
(Increase) in prepaid expense and other assets		(380,738)		(106,442)
Decrease in other receivable		47,202		—
Decrease in security deposit		2,592		—
Increase in accounts payable		1,566,439		70,023
(Decrease) increase in accounts payable – related party		(15,725)		15,725
Increase in accrued expenses		397,317		112,573
Increase in accrued fiduciary obligations		993,041		—
(Decrease) in operating lease liabilities		(74,096)		(64,539)
(Decrease) in due to related party		(240,001)		—
Increase in other liabilities		147,001		—
Net cash used in operating activities		(5,526,568)		(1,646,091)

Cash flows from investing activities:
Cash and restricted cash acquired as part of Acquisition (see Note 4)		11,384,035		—
Capitalization of software development costs		(1,211,511)		(140,104)
Purchase of property and equipment		(66,617)		(32,067)
Reimbursement of leasehold improvements from sublease		—		45,640
Net cash provided by (used in) investing activities		10,105,907		(126,531)

Cash flows from financing activities:
Proceeds from stock option exercises		49		—
Proceeds from convertible notes		550,000		2,000,000
Proceeds from short-term loan		2,000,000		—
Proceeds from issuance of warrants		53,333		—
Net cash provided by financing activities		2,603,382		2,000,000


				Weighted Average	Aggregate
	Number of	Weighted Average		Remaining	Intrinsic
	Options	Exercise Price		Contractual Term	Value
Balance at January 1, 2021	468,070	$	0.14	9.25	$	1,315,512
Granted	1,016,722		2.41
Forfeited/Cancelled	(64,042)		0.002
Exercised	(22,524)		0.002
Balance at September 30, 2021	1,398,226		1.80	9.22	$	1,095,303
Exercisable at September 30, 2021	332,391	$	1.27	8.92	$	436,739


				Weighted Average	Aggregate
	Number of	Weighted Average		Remaining	Intrinsic
	Options	Exercise Price		Contractual Term	Value
Balance at January 1, 2020	—	$	—	—		—
Granted	468,070		0.14
Forfeited/Cancelled	—		—
Exercised	—		—
Balance at September 30, 2020	468,070		0.14	9.50	$	932,288
Exercisable at September 30, 2020	33,294	$	0.002	9.50	$	70,886


		Weighted-Average
	Non-vested Options	Grant Date Fair
	Outstanding	Value
At January 1, 2021	427,035	$	1.21
Options granted	1,016,722		0.99
Options forfeited/cancelled	(64,042)		1.88
Options exercised	(22,524)		1.41
Options vested	(291,356)		0.97
At September 30, 2021	1,065,835	$	0.93


Year Ended December 31,
2021 (three months)	$	208,038
2022		827,607
2023		785,908
2024		83,683
2025		12,658
Total lease payments		1,917,897
Less: imputed interest		(176,954)
Present value of lease liabilities		1,740,943
Less: current lease liabilities		(713,792)
Long-term lease liabilities	$	1,027,148


Year Ended December 31,
2021 (three months)	$	54,433
2022		222,083
2023		178,409
2024		13,527
Total sublease income	$	468,452


		Weighted-Average
	Restricted Stock	Grant Date Fair Value
	Awards	Per Share
Outstanding at January 1, 2021	1,618,565	$	1.47
Granted	—		—
Forfeited/cancelled	(107,271)		1.80
Vested	(692,072)		1.43
Outstanding at September 30, 2021	819,222	$	1.42

Outstanding at January 1, 2020	2,130,689	$	1.41
Granted	134,397		2.13
Forfeited/cancelled	—		—
Vested	(516,398)		1.41
Outstanding at September 30, 2020	1,748,688	$	1.41


	September 30, 2021		December 31, 2020
	$	5,428,458	$	8,555,000
Accrued interest		436,394		518,924
Less: unamortized debt discount		—		(111,800)
Total convertible notes payable, net		5,864,852		8,962,124
Less: current portion of convertible notes payable		(999,326)		(1,866,237)
Convertible notes payable, net of current portion	$	4,865,526	$	7,095,887


Year Ended December 31,
2021 (three months)	$	272,544
2022		3,035,229
2023		1,739,450
2024		817,629
	$	5,864,852


Exercise price of the warrants	$	1.43
Contractual life of the warrants		5	years
Current value of the underlying common stock	$	2.13
Expected volatility		35.04	%
Expected dividend yield		0.00	%
Risk-free interest rate		1.693	%


Exercise price of the warrants	$	9
Contractual life of the warrants		0.42	years
Current value of the underlying common stock	$	2.58
Expected volatility		40.08	%
Expected dividend yield		0.00	%
Risk-free interest rate		0.060	%


	Number of
	Common	Exercise Price		Weighted
	Shares	Range Per		Average
	Warrants	Share		Exercise Price
Balance at January 1, 2021	364,466	$	1.43	$	1.43
Granted	1,196,907		4.00 to 7.90		7.17
Forfeited	—		—		—
Exercised	—		—		—
Balance at September 30, 2021	1,561,373	$	1.43 to 7.90	$	5.83

Balance at January 1, 2020	—	$	—	$	—
Granted	364,466		1.43		1.43
Forfeited	—		—		—
Exercised	—		—		—
Balance at September 30, 2020	364,466	$	1.43	$	1.43


	September 30, 2021		December 31, 2020
United States	$	14,984,195	$	3,250,666
Israel		2,079,815		1,101,013
Total long-lived assets	$	17,064,010	$	4,351,679
sssssssssss


Exhibit No.		Description
(10)		Material Contracts
10.1		Agreement for Conversion of Secured Convertible Promissory Note, dated October 26, 2021 between the Company and SQN Venture Income Fund, LP
(31)		Rule 13a-14(a)/15d-14(a) Certification
31.1*		Certification Statement of the Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002
31.2*		Certification Statement of the Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002
(32)		Section 1350 Certification
32.1*(1)		Certification Statement of the Chief Executive Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002
32.2*(1)		Certification Statement of the Chief Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002
(101)*		Interactive Data Files
101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)


	MARPAI, INC.

Date: December 14, 2021		/s/ Edmundo Gonzales
	Name:	Edmundo Gonzales
	Title:	Chief Executive Officer
		(Principal Executive Officer)

		/s/ Yoram Bibring
	Name:	Yoram Bibring
	Title	Chief Financial Officer
		(Principal Financial and Accounting Officer)