Marpai, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Acquisition

Acquisition

Table of Contents

Table of Contents

Table of Contents

Acquisition

12 Months Ended

Dec. 31, 2022

Business Combinations [Abstract]

Acquisition

NOTE 4 – ACQUISITIONS

Maestro

On November 1, 2022, Marpai consummated the acquisition of Maestro for a purchase price of $19.9 million. Goodwill generated from this acquisition primarily represented the value that was expected from the increased scale and synergies as a result of the integration of the Maestro business into the Marpai legacy business. Maestro generated revenue for the two months after acquisition of $3,427,333 and incurred a net loss of $1,948,268.

NOTE 4 – ACQUISITION (CONTINUED)

The acquisition accounting for Maestro as reflected in these consolidated financial statements is preliminary and based on current estimates and currently available information, and are subject to revision based on final determinations of fair value and final allocations of purchase price to the identifiable assets and liabilities acquired. The estimated fair values that are not yet finalized relate primarily to the valuation of intangible assets, property and equipment, and income taxes.

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


Purchase Price
Purchase Price	$	19,900,000

Purchase Price Allocation

Cash	$	17,081,602
Restricted cash		16,306,547
Accounts receivable		321,198
Unbilled receivable		646,189
Prepaid expenses and other current assets		1,751,371
Property and equipment		921,680
Operating lease - right of use assets		2,555,375
Goodwill		3,454,143
Trademarks		800,000
Customer relationships		840,000
Security deposits		1,240,889
Account payable		(150,328	)
Accrued expenses		(4,554,280	)
Accrued fiduciary obligations		(16,306,547	)
Operating lease liabilities		(4,816,490	)
Deferred revenue		(191,349	)
Total fair value of net assets acquired and liabilities assumed	$	19,900,000

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

The following unaudited pro forma summary presents consolidated information of the Company as if the business combination had occurred on January 1, 2021:


	Year Ended
	December 31, 2022			Year Ended December 31, 2021
	(pro forma)			(pro forma)
Revenue	$	40,406,192		$	37,809,557
Net loss		(39,774,661	)		(44,417,127	)

The unaudited 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 $82,000 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 Maestro into the Marpai legacy business.

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.

NOTE 4 – ACQUISITION (CONTINUED)

Marpai Administrators (Formerly Continental Benefits)

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

The following table represents the allocation of the purchase consideration among the Marpai Administrators’ 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		131,414
Property and equipment		1,601,990
Noncompete agreements		990,000
Capitalized software		1,200,000
Operating lease - right of use assets		1,763,960
Goodwill		2,382,917
Trademarks		1,520,000
Patents and patent applications		650,000
Customer relationships		2,920,000
Security deposits		54,869
Account payable		(925,608	)
Accrued expenses		(1,267,708	)
Accrued fiduciary obligations		(4,070,908	)
Operating lease liabilities		(1,763,960	)
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 Marpai Administrators’ identifiable intangible assets, their estimated useful lives and expected amortization periods:


			Useful
	Acquisition		Life in
	Fair Value		Years
Trademarks	$	1,520,000	10 Years
Noncompete agreements		990,000	5 Years
Customer relationships		2,920,000	7 Years
Patents and patent applications		650,000	(*)

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

The following unaudited pro forma summary presents consolidated information of the Company as if the business combination had occurred on January 1, 2021:



	Year Ended December 31, 2021
	(pro forma)
Revenue	$	18,441,875
Net loss		(18,034,702	)

NOTE 4 – ACQUISITION (CONTINUED)

The unaudited 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 $297,736 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.

Acquisition

Fair Value

Trademarks

Customer relationships