Quarterly report pursuant to Section 13 or 15(d)

ACQUISITION

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ACQUISITION
9 Months Ended
Sep. 30, 2021
ACQUISITION.  
ACQUISITION

NOTE 4 – ACQUISITION

On April 1, 2021, the Company consummated the acquisition of Continental Benefits. According to the Agreement, Continental Benefits was valued, on a cash-free and debt-free basis, at $8.5 million. In addition, pursuant to the Agreement, Marpai Health was valued at an assumed pre-money valuation of the last convertible note’s conversion price of $35 million.

For accounting purposes, the acquirer is the entity that has obtained control of another entity and, thus, consummated a business combination. For the Acquisition, Marpai Health is the accounting acquirer and Continental Benefits is deemed to be the acquired company for financial reporting purposes based on an evaluation of the following facts and circumstances:

1. Marpai Health’s legacy stockholders hold a majority ownership and voting interest in the Company;
2. Marpai Health’s senior management team comprise the senior management of the Company; and
3. Directors appointed by Marpai Health hold a majority of board seats of the Company.

Other factors were considered but they would not change the preponderance of factors indicating that Marpai Health was the accounting acquirer.

NOTE 4 – ACQUISITION (CONTINUED)

The following table represents the allocation of the preliminary purchase consideration among the Continental Benefits’ assets acquired and liabilities assumed at their estimated acquisition-date fair values:

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

The following table summarizes the estimated fair values of Continental Benefits’ identifiable intangible assets, their estimated useful lives and expected amortization periods:

    

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

 

(*)

(*)

Patents which have yet to be approved by US Patent Office. Useful life is determined upon placement into service after approval.

NOTE 4 – ACQUISITION (CONTINUED)

The following unaudited pro forma summary presents consolidated information of the Company as if the business combination had occurred on January 1, 2020:

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)

The pro forma financial information includes adjustments that are directly attributable to the business combination and are factually supportable. The pro forma adjustments include incremental amortization expense of $303,566 related to intangible and tangible assets acquired.

The unaudited pro forma results do not reflect any cost saving synergies from operating efficiencies or the effect of the incremental costs incurred in integrating the two companies.

Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the acquisition had occurred at the beginning of the period presented, nor are they indicative of future results of operations.