Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2023 | May 10, 2023 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Mar. 31, 2023 | |
Entity File Number | 001-40904 | |
Entity Registrant Name | MARPAI, INC. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 86-1916231 | |
Entity Address State Or Province | FL | |
Entity Address, Address Line One | 5701 East Hillsborough Ave., Suite 1417 | |
Entity Address, City or Town | Tampa | |
Entity Address, Postal Zip Code | 33610‑5428 | |
City Area Code | 646 | |
Local Phone Number | 303‑3483 | |
Title of 12(b) Security | Common Stock, par value $0.0001 per share | |
Trading Symbol | MRAI | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 29,012,464 | |
Entity Central Index Key | 0001844392 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Mar. 31, 2023 | Dec. 31, 2022 |
Current assets: | ||
Cash and cash equivalents | $ 6,174,538 | $ 13,764,508 |
Restricted cash | 10,406,248 | 9,352,608 |
Accounts receivable, net | 963,110 | 1,437,786 |
Unbilled receivable | 1,064,081 | 350,393 |
Prepaid expenses and other current assets | 1,424,631 | 1,601,920 |
Other receivables | 45,603 | 30,634 |
Total current assets | 20,078,211 | 26,537,849 |
Property and equipment, net | 1,344,549 | 1,506,082 |
Capitalized software, net | 3,976,747 | 4,588,706 |
Operating lease right-of-use assets | 3,589,362 | 3,841,810 |
Goodwill | 5,873,030 | 5,837,060 |
Intangible assets, net | 6,049,492 | 6,323,279 |
Security deposits | 1,293,166 | 1,293,166 |
Other long-term asset | 21,668 | 21,668 |
Total assets | 42,226,225 | 49,949,620 |
Current liabilities: | ||
Accounts payable | 2,111,044 | 1,457,670 |
Accrued expenses | 3,769,494 | 5,274,716 |
Accrued fiduciary obligations | 9,024,091 | 9,024,463 |
Deferred revenue | 1,437,407 | 288,499 |
Current portion of operating lease liabilities | 1,112,665 | 1,311,295 |
Due to related party | 3,201 | 3,201 |
Total current liabilities | 17,457,902 | 17,359,844 |
Other long-term liabilities | 20,591,750 | 20,203,700 |
Operating lease liabilities, net of current portion | 4,607,443 | 4,771,871 |
Deferred tax liabilities | 1,479,880 | 1,479,880 |
Total liabilities | 44,136,975 | 43,815,295 |
COMMITMENTS AND CONTINGENCIES | ||
STOCKHOLDERS' (DEFICIT) EQUITY | ||
Common stock, $0.0001 par value, 227,791,050 shares authorized; 21,612,464 and 21,279,032 issued and outstanding at March 31, 2023 and December 31, 2022,respectively | 2,161 | 2,128 |
Additional paid-in capital | 54,954,038 | 54,126,297 |
Accumulated deficit | (56,866,949) | (47,994,100) |
Total stockholders' (deficit) equity | (1,910,750) | 6,134,325 |
Total liabilities and stockholders' (deficit) equity | $ 42,226,225 | $ 49,949,620 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Mar. 31, 2023 | Dec. 31, 2022 |
Statement of Financial Position [Abstract] | ||
Allowance for credit losses | $ 23,458 | $ 23,458 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 227,791,050 | 227,791,050 |
Common stock, shares issued | 21,612,482 | 21,279,032 |
Common stock, shares outstanding | 21,612,482 | 21,279,032 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Income Statement [Abstract] | ||
Revenue | $ 9,672,045 | $ 6,218,809 |
Costs and expenses | ||
Cost of revenue (exclusive of depreciation and amortization shown separately below) | 6,408,801 | 4,546,795 |
General and administrative | 5,226,419 | 2,902,133 |
Sales and marketing | 2,179,117 | 1,559,116 |
Information technology | 2,186,809 | 1,134,273 |
Research and development | 500,209 | 593,107 |
Depreciation and amortization | 1,043,636 | 825,398 |
Facilities | 649,836 | 196,594 |
Total costs and expenses | 18,194,827 | 11,757,416 |
Operating loss | (8,522,782) | (5,538,607) |
Other income (expenses) | ||
Other income | 50,452 | 48,997 |
Interest expense net | (385,010) | (3,945) |
Foreign exchange (loss) gain | (15,509) | 3,891 |
Loss before provision for income taxes | (8,872,849) | (5,489,664) |
Net loss | $ (8,872,849) | $ (5,489,664) |
Net loss per share, basic | $ (0.42) | $ (0.28) |
Net loss per share, fully diluted | $ (0.42) | $ (0.28) |
Weighted average common shares outstanding, basic | 21,162,644 | 19,629,213 |
Weighted average common shares outstanding, diluted | 21,162,644 | 19,629,213 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' (DEFICIT) EQUITY - USD ($) | Total | Common Stock | Additional Paid-In Capital | Accumulated Deficit |
Balance at the beginning at Dec. 31, 2021 | $ 29,708,412 | $ 2,030 | $ 51,232,092 | $ (21,525,710) |
Balance at the beginning (in shares) at Dec. 31, 2021 | 20,299,727 | |||
Share-based compensation | 248,988 | 248,988 | ||
Net loss | (5,489,664) | (5,489,664) | ||
Balance at the end at Mar. 31, 2022 | 24,467,736 | $ 2,030 | 51,481,080 | (27,015,374) |
Balance at the end (in shares) at Mar. 31, 2022 | 20,299,727 | |||
Balance at the beginning at Dec. 31, 2022 | $ 6,134,325 | $ 2,128 | 54,126,297 | (47,994,100) |
Balance at the beginning (in shares) at Dec. 31, 2022 | 21,279,032 | 21,279,032 | ||
Share-based compensation | $ 748,410 | 748,410 | ||
Issuance of stock upon vesting of restricted stock units | 13 | $ 13 | ||
Issuance of stock upon vesting of restricted stock units (in shares) | 133,547 | |||
Shares issued to vendors in exchange for services | 79,130 | $ 10 | 79,120 | |
Shares issued to vendors in exchange for services (in shares) | 100,000 | |||
Issuance of common stock upon exercise of stock options | 221 | $ 10 | 211 | |
Issuance of common stock upon exercise of stock options (in shares) | 99,903 | |||
Net loss | (8,872,849) | (8,872,849) | ||
Balance at the end at Mar. 31, 2023 | $ (1,910,750) | $ 2,161 | $ 54,954,038 | $ (56,866,949) |
Balance at the end (in shares) at Mar. 31, 2023 | 21,612,482 | 21,612,482 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Cash flows from operating activities: | ||
Net loss | $ (8,872,849) | $ (5,489,664) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 1,043,636 | 825,398 |
Share-based compensation | 623,424 | 665,652 |
Shares issued to vendors in exchange for services | 79,130 | |
Amortization of right-of-use asset | 252,448 | 33,381 |
Non-cash interest | 388,050 | |
Changes in operating assets and liabilities: | ||
Accounts receivable and unbilled receivable | (239,013) | 113,304 |
Prepaid expense and other assets | 177,288 | 176,225 |
Other receivables | (14,969) | 1,525 |
Accounts payable | 653,375 | (61,258) |
Accrued expenses | (1,416,192) | (767,650) |
Accrued fiduciary obligations | (372) | 1,128,461 |
Operating lease liabilities | (363,059) | (29,758) |
Other liabilities | 1,149,339 | 76,672 |
Net cash used in operating activities | (6,539,764) | (3,327,712) |
Cash flows from investing activities: | ||
Capitalization of software development costs | (393,319) | |
Disposal (purchase) of property and equipment | 3,213 | (101,051) |
Net cash provided by (used in) investing activities | 3,213 | (494,370) |
Cash flows from financing activities: | ||
Proceeds from stock options exercises | 221 | |
Net cash provided by financing activities | 221 | |
Net decrease in cash, cash equivalents and restricted cash | (6,536,330) | (3,822,082) |
Cash, cash equivalents and restricted cash at beginning of period | 23,117,116 | 25,933,643 |
Cash, cash equivalents and restricted cash at end of period | 16,580,786 | 22,111,561 |
Reconciliation of cash, cash equivalents, and restricted cash reported in the condensed consolidated balance sheet | ||
Cash and cash equivalents | 6,174,538 | 14,107,751 |
Restricted cash | 10,406,248 | 8,003,810 |
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statement of cash flows | 16,580,786 | $ 22,111,561 |
Supplemental disclosure of non-cash activity | ||
Measurement period adjustment to Goodwill | $ 35,970 |
Organization and Description of
Organization and Description of Business | 3 Months Ended |
Mar. 31, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Description of Business | NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS Organization Marpai, Inc.'s (the “Company”) operations are principally conducted through its wholly-owned subsidiaries, Marpai Health, Inc. (“Marpai Health”), Marpai Administrators, and Maestro Health LLC ( “Maestro”). Marpai Health is our technology focused subsidiary, with a research and development team in Tel Aviv, Israel. Marpai Administrators and Maestro are our healthcare payer subsidiaries that provide administration services to self-insured employer groups across the United States. They act as a third-party administration (“TPA”) handling all administrative aspects of providing healthcare to self-insured employer groups. The Company has combined these two businesses to create what it believes to be the Payer of the Future, which has not only the licenses, processes and know- how of a payer but also the latest technology. This combination allows the Company to differentiate itself in the TPA market by delivering a technology-driven service that it believes can lower the overall cost of healthcare while maintaining or improving healthcare outcomes. Marpai Captive was founded in March 2022 as a Delaware corporation. Marpai Captive engages in the captive insurance market and commenced operations in the first quarter of 2023. Nature of Business The Company’s mission is to positively change healthcare for the benefit of (i) its clients who are self-insured employers that pay for their employees’ healthcare benefits and engage the Company to administer the latter’s healthcare claims, (ii) employees who receive these healthcare benefits from its clients, and (iii) healthcare providers including doctors, doctor groups, hospitals, clinics, and any other entities providing healthcare services or products. The Company provides benefits outsourcing services to clients in the United States across multiple industries. The Company’s backroom administration and TPA services are supported by a customized technology platform and a dedicated benefits call center. Under its TPA platform, the Company provides health and welfare administration, dependent eligibility verification, Consolidated Omnibus Budget Reconciliation Act (“COBRA”) administration, and benefit billing services. The Company continues to monitor the effects of the global macroeconomic environment, including increasing inflationary pressures; supply chain disruptions; social and political issues; regulatory matters, geopolitical tensions; and global security issues. The Company is also mindful of inflationary pressures on its cost base and is monitoring the impact on customer preferences. |
Unaudited Interim Condensed Con
Unaudited Interim Condensed Consolidated Financial Statements | 3 Months Ended |
Mar. 31, 2023 | |
Condensed Financial Statements [Abstract] | |
Unaudited Interim Condensed Consolidated Financial Statements | NOTE 2 - UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim consolidated financial statements furnished reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the full fiscal year. The unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying footnotes included in the Company’s Annual Report on Form 10-K for its year ended December 31, 2022. The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Maestro is included as of November 1, 2022, the date of the Acquisition (see Note 5). All significant intercompany balances and transactions have been eliminated in consolidation. The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses reported in those financial statements. Descriptions of the Company’s significant accounting policies are discussed in the notes to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 . Management evaluates the related estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates and assumptions. Significant changes, if any, in those estimates and assumptions resulting from continuing changes in the economic environment will be reflected in the consolidated financial statements in future periods. |
Liquidity and Going Concern
Liquidity and Going Concern | 3 Months Ended |
Mar. 31, 2023 | |
LIQUIDITY | |
Liquidity and Going Concern | NOTE 3 – LIQUIDITY AND GOING CONCERN As shown in the accompanying condensed consolidated financial statements as of March 31, 2023, the Company has an accumulated deficit of $ 56.9 million and working capital of $ 2.6 million. At March 31, 2023 , the Company had long term debt of $ 20.6 million and $ 6.2 million of unrestricted cash on hand. For the three months ended March 31, 2023, the Company recognized a net loss of $ 8.9 million and negative cash flows from operations of $ 6.5 million. Since inception, the Company has met its cash needs through proceeds from issuing convertible notes, warrants and its initial public offering. As further described in Note 18, on April 19, 2023, the Company closed its public offering of 7,400,000 shares of common stock at a public offering price of $ 1.00 per share, for gross proceeds of $ 7.4 million. After deducting underwriters' discounts and offering expenses, the net proceeds from the public offering were approximately $ 6.4 million. In accordance with the terms of the Maestro share purchase agreement, 35 % of the net proceeds from the offering were used to pay down the debt to the seller. The Company currently projects that it will need additional capital to fund its current operations and capital investment requirements until the Company scales to a revenue level that permits cash self-sufficiency. As a result, the Company needs to raise additional capital or secure debt funding to support on-going operations until such time. This projection is based on the Company’s current expectations regarding revenues, expenditures, cash burn rate and other operating assumptions. The sources of this capital are anticipated to be from the sale of equity and/or debt. Alternatively, or in addition, the Company may seek to sell assets which it regards as non-strategic. Any of the foregoing may not be achievable on favorable terms, or at all. Additionally, any debt or equity transactions may cause significant dilution to existing stockholders. If the Company is unable to raise additional capital moving forward, its ability to operate in the normal course and continue to invest in its product portfolio may be materially and adversely impacted and the Company may be forced to scale back operations or divest some or all of its assets. As a result of the above, in connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s (“FASB”) Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the Company’s liquidity condition raises substantial doubt about the Company’s ability to continue as a going concern through twelve months from the date these unaudited condensed consolidated financial statements are available to be issued. These unaudited condensed consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2023 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business Combination The Company accounts for business combinations in accordance with the Financial Accounting Standard Board’s (“FASB”) Accounting Standard Codification (“ASC”) 805, Business Combinations . Accordingly, identifiable tangible and intangible assets acquired, and liabilities assumed are recorded at their estimated fair values, the excess of the purchase consideration over the fair values of net assets acquired is recorded as goodwill, and transaction costs are expensed as incurred. The Company includes the results of operations of the businesses that are acquired as of the acquisition date. Use of Estimates The preparation of the accompanying condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingencies at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates include, but are not limited to, valuation of share-based compensation, accounting for warrants, allowance for doubtful accounts, useful lives of internally developed software, fair values of net assets acquired, goodwill, intangible assets and property and equipment, incurred but not reported (“IBNR”) reserves, whether an arrangement is or contains a lease, the incremental borrowing rate used for operating leases, income tax accruals, the valuation allowance for deferred income taxes, and contingent liabilities. The Company bases these estimates on historical and anticipated results, trends, and various other assumptions that it believes are reasonable under the circumstances, including assumptions as to future events. Actual results could differ from those estimates. Restricted Cash Restricted cash balances are composed of funds held on behalf of clients in a fiduciary capacity, cash held in a separate bank account pledged to a bank as collateral for a bank guarantee provided to the lessor to secure the Company’s obligations under a lease agreement, cash in a money market account as required by a credit card company for collateral, and a certificate of deposit held for collateral of a letter of credit. Fiduciary funds generally cannot be utilized for general corporate purposes and are not a source of liquidity for the Company. A corresponding fiduciary obligation, included in current liabilities in the accompanying condensed consolidated balance sheets, exists for disbursements to be made on behalf of the clients and may be more than the restricted cash balance if payment from customers has not been received. Capitalized Software The Company complies with the guidance of ASC Topic 350‑40, “Intangibles—Goodwill and Other—Internal Use Software”, in accounting for its internally developed system projects that it utilizes to provide its services to customers. These system projects generally relate to software of the Company that is not intended for sale or otherwise marketed. Internal and external costs incurred during the preliminary project stage are expensed as they are incurred. Once a project has reached the development stage, the Company capitalizes direct internal and external costs until the software is substantially complete and ready for its intended use. Costs for upgrades and enhancements are capitalized, whereas, costs incurred for maintenance are expensed as incurred. These capitalized software costs are amortized on a project-by- project basis over the expected economic life of the underlying software on a straight-line basis, which is generally three to five years . Amortization commences when the software is available for its intended use. Goodwill Goodwill is recognized and initially measured as any excess of the acquisition-date consideration transferred in a business combination over the acquisition-date amounts recognized for the net identifiable assets acquired. Goodwill is not amortized but is tested for impairment annually, or more frequently if an event occurs or circumstances change that would more likely than not result in an impairment of goodwill. The Company operates in one reportable segment and reporting unit; therefore, goodwill is tested for impairment at the consolidated level. First, the Company assesses qualitative factors to determine whether or not it is more likely than not that the fair value of a reporting unit is less than it’s carrying amount. If the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company conducts a quantitative goodwill impairment test comparing the fair value of the applicable reporting unit with its carrying value. If the carrying amount of the reporting unit exceeds the fair value of the reporting unit, the Company recognizes an impairment loss in the condensed consolidated statement of operations for the amount by which the carrying amount exceeds the fair value of the reporting unit. The Company performs its annual goodwill impairment test at December 31, and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of goodwill below its carrying value. There was no goodwill impairment for the three months ended March 31, 2023 and 2022 . Intangible Assets Intangible assets consist of customer relationships, non-compete agreements, and amounts attributed to patent and patent applications that were acquired through an acquisition and are amortized on a straight-line basis over useful lives ranging from five to ten years . The Company’s intangible assets are reviewed for impairment when events or circumstances indicate their carrying amounts may not be recoverable. The Company reviews the recoverability of its intangible assets by comparing the carrying value of such assets to the related undiscounted value of the projected cash flows associated with the assets, or asset group. If the carrying value is found to be greater, the Company records an impairment loss for the excess of book value over fair value. No impairment of the Company’s intangible assets was recorded for the three months ended March 31, 2023 and 2022 . Revenue Recognition Third Party Administrator Revenue Revenue is recognized when control of the promised services is transferred to the Company’s customers in an amount that reflects the consideration expected to be entitled to in exchange for those services. As the Company completes its performance obligations, it has an unconditional right to consideration, as outlined in the Company’s contracts. The Company also provides certain performance guarantees under their contracts with customers. Customers may be entitled to receive compensation if the Company fails to meet the guarantees. Actual performance is compared to the contractual guarantee for each measure throughout the period. The Company had performance guarantee liabilities of $ 268,662 , which is included in accrued expenses on the accompanying condensed consolidated balance sheet as of March 31, 2023. Significant Payment Terms Generally, the Company’s accounts receivable are expected to be collected in 30 days in accordance with the underlying payment terms. Invoices for services are typically sent to the customer on the 15 th day of the month prior to the service month with a 10-day payment term. The Company does not offer discounts if the customer pays some or all of the invoiced amount prior to the due date. Consideration paid for services rendered by the Company is nonrefundable. Therefore, at the time revenue is recognized, the Company does not estimate expected refunds for services. The Company uses the practical expedient and does not account for significant financing components because the period between recognition and collection does not exceed one year for all of the Company’s contracts. Timing of Performance Obligations All of the Company’s contracts with customers obligate the Company to perform services. Services provided include health and welfare administration, dependent eligibility verification, COBRA administration, and benefit billing. Revenue is recognized over time as services are provided as the performance obligations are satisfied through the effort expended to research, investigate, evaluate, document, and report claims, and control of these services is transferred to the customer. The Company has the right to receive payment for all services rendered. Determining and Allocating the Transaction Price The transaction price of a contract is the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods or services to a customer. To determine the transaction price of a contract, the Company considers its customary business practices and the terms of the contract. For the purpose of determining transaction prices, the Company assumes that the services will be transferred to the customer as promised in accordance with existing contracts and that the contracts will not be canceled, renewed, or modified. The Company’s contracts with customers have fixed fee prices that are denominated per covered employee per month. The Company includes amounts of variable consideration in a contract’s transaction price only to the extent that it is probable that the amounts will not be subject to significant reversals (that is, downward adjustments to revenue recognized for satisfied performance obligations). In determining amounts of variable consideration to include in a contract’s transaction price, the Company relies on its experience and other evidence that supports its qualitative assessment of whether revenue would be subject to a significant reversal. The Company considers all the facts and circumstances associated with both the risk of a revenue reversal arising from an uncertain future event and the magnitude of the reversal if that uncertain event were to occur. Captive Revenue All general insurance premiums pertain to annual policies and are reflected in income on a pro-rata basis. Loss and Loss Adjustment Expenses The establishment of loss reserves by the policies primary insurer is a reasonably complex and dynamic process influenced by a large variety of factors. These factors principally include past experience with like claims. Consequently, the reserves established are a reflection of the opinions of a large number of persons and the Company is exposed to the possibility of higher or lower than anticipated loss cost due to real expense. Earnings (Loss) Per Share Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of outstanding shares of common stock for the period, considering the effect of participating securities. Diluted earnings (loss) per share is calculated by dividing net earnings (loss) by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding. During the periods when they are anti-dilutive, shares of common stock equivalents, if any, are not considered in the computation. At March 31, 2023 and 2022 , there were 4,193,405 and 2,346,764 common stock equivalents, respectively. For the three months ended March 31, 2023 and 2022 , these potential shares were excluded from the shares used to calculate diluted net loss per share as their effect would have been antidilutive. Recently Issued Accounting Pronouncements In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU No. 2020-04 provides guidance on optional expedients for a limited time to ease the operational burden in accounting for (or recognizing the effects of) reference rate reform (LIBOR) on financial reporting. In December 2022, the FASB issued ASU 2022-06 Reference Rate Reform (Topic 848) - Deferral of the Sunset Date of Topic 848 (ASU 2022-06), which extends the optional transition relief to ease the potential burden in accounting for reference rate reform on financial reporting. The transition relief is provided through December 31, 2024 based on the expectation that the LIBOR will cease to be published as of June 30, 2023. The amendments are effective prospectively at any point through December 31, 2024. The Company will continue to monitor new contracts that could potentially be eligible for contract modification relief through December 31, 2024. In September 2022, the FASB issued ASU No. 2022-04, “Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations,” which is intended to enhance the transparency surrounding the use of supplier finance programs. The guidance requires companies that use supplier finance programs to make annual disclosures about the program’s key terms, the balance sheet presentation of related amounts, the confirmed amount outstanding at the end of the period and associated rollforward information. Only the amount outstanding at the end of the period must be disclosed in interim periods. The guidance does not affect the recognition, measurement or financial statement presentation of supplier finance program obligations. The guidance becomes effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the rollforward information, which is effective for fiscal years beginning after December 15, 2023. The Company does not have any supplier finance programs and does not believe the impact of adopting this accounting standard update will be material to the condensed consolidated financial statements. In October 2021, the FASB issued ASU No. 2021-08, “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” (Topic 805). This ASU requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities (deferred revenue) from acquired contracts using the revenue recognition guidance in Topic 606. At the acquisition date, the acquirer applies the revenue model as if it had originated the acquired contracts. For the Company, the new guidance is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Adoption of the ASU should be applied prospectively. Early adoption is also permitted, including adoption in an interim period. The Company is currently evaluating the impact of this accounting standard update on its condensed consolidated financial statements. |
Acquisition
Acquisition | 3 Months Ended |
Mar. 31, 2023 | |
Business Combinations [Abstract] | |
Acquisition | NOTE 5 – ACQUISITION On November 1, 2022, the Company consummated the acquisition of Maestro. Pursuant to the terms of the Purchase Agreement (“Maestro Agreement”), Marpai agreed to acquire all of the membership interests (the “Units”) of Maestro. In consideration for Marpai’s acquisition of the Units, Marpai agreed to pay the sellers an aggregate purchase price (the “Purchase Price”) of $ 19,900,000 determined on the closing date (the “Base Purchase Price”), which shall be payable on or before April 1, 2024 (the “Payment Date”), and shall accrue interest until such time that is paid, such that on the Payment Date the Purchase Price, plus all accrued and unpaid interest, shall equal $ 22,100,000 (the “Adjusted Purchase Price”). Any unpaid portion of the Purchase Price shall accrue interest at ten percent ( 10 %) per annum, compounding annually, calculated on the basis of a 365-day year for the actual number of days elapsed (the “Specified Rate”), and shall be repaid as promptly as practicable to the Debt Seller. In addition, in the event Marpai or its subsidiaries receive proceeds from the sale of any securities in a private placement or public offering of securities (each an “Offering”), then Marpai shall pay to the seller an amount equal to thirty-five percent ( 35 %) of the net proceeds of the Offering no later than sixty ( 60 ) days after the closing of Offering until such time as the Purchase Price has been paid in full. Notwithstanding the foregoing, Marpai shall be required to make cumulative payments, representing the Adjusted Purchase Price and any additional interest that will accrue on the Adjusted Purchase Price after the Payment Date,, as follows: (i) $ 5,000,000 to be paid by December 31, 2024, (ii) $ 11,000,000 of cumulative payments to be paid by December 31, 2025, and (iii) $ 19,000,000 of cumulative payments to be paid by December 31, 2026 and (iv) $ 28,000,000 of cumulative payments to be paid by December 31, 2027. The acquisition accounting for Maestro as reflected in these unaudited condensed 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. 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. The following table represents the allocation of the purchase consideration among Maestro’s assets acquired and liabilities assumed at their acquisition-date fair values: December 31, 2022 Adjustment March 31, 2023 Purchase Price Purchase Price $ 19,900,000 $ 19,900,000 Purchase Price Allocation Cash $ 17,081,602 $ 17,081,602 Restricted cash 16,306,547 16,306,547 Accounts receivable 321,198 321,198 Unbilled receivable 646,189 646,189 Prepaid expenses and other current assets 1,751,371 1,751,371 Property and equipment 921,680 921,680 Operating lease - right of use assets 2,555,375 2,555,375 Goodwill 3,454,143 35,970 3,490,113 Trademarks 800,000 800,000 Customer relationships 840,000 840,000 Security deposits 1,240,889 1,240,889 Account payable ( 150,328 ) ( 150,328 ) Accrued expenses ( 4,554,280 ) ( 35,970 ) ( 4,590,250 ) Accrued fiduciary obligations ( 16,306,547 ) ( 16,306,547 ) Operating lease liabilities ( 4,816,490 ) ( 4,816,490 ) Deferred revenue ( 191,349 ) ( 191,349 ) Total fair value of net assets acquired and liabilities assumed $ 19,900,000 $ — $ 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: Useful Acquisition Life in Fair Value Years Trademarks $ 800,000 5 Years Customer relationships 840,000 5 Years The following unaudited pro forma summary presents consolidated information of the Company as if the business combination had occurred on January 1, 2022: Three Months Ended March 31, 2022 (pro forma) Revenue $ 11,576,405 Net loss ( 10,768,200 ) 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. |
Property and Equipment
Property and Equipment | 3 Months Ended |
Mar. 31, 2023 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | NOTE 6 – PROPERTY AND EQUIPMENT Property and equipment consist of the following at: March 31, 2023 December 31, 2022 Equipment $ 388,814 $ 402,675 Furniture and fixtures 1,007,699 1,007,699 Leasehold improvements 745,453 745,453 Total cost 2,141,966 2,155,827 Accumulated depreciation ( 797,417 ) ( 649,745 ) Property and equipment, net $ 1,344,549 $ 1,506,082 Depreciation expense was $ 154,076 and $ 71,111 for the three months ended March 31, 2023 and 2022 , respectively. |
Capitalized Software
Capitalized Software | 3 Months Ended |
Mar. 31, 2023 | |
Capitalized Computer Software, Net [Abstract] | |
Capitalized Software | NOTE 7 – CAPITALIZED SOFTWARE Capitalized software consists of the following at: March 31, 2023 December 31, 2022 Capitalized software $ 8,098,546 $ 8,094,385 Accumulated amortization ( 4,121,799 ) ( 3,505,679 ) Capitalized software, net $ 3,976,747 $ 4,588,706 Amortization expense was $ 615,773 and $ 536,929 for the three months ended March 31, 2023 and 2022 , respectively. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 3 Months Ended |
Mar. 31, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | NOTE 8 – GOODWILL AND INTANGIBLE ASSETS Goodwill consists of the following: Amount Balance as of December 31, 2022 $ 5,837,060 Measurement period adjustment to Goodwill (Note 5) 35,970 Balance as of March 31, 2023 $ 5,873,030 Intangible assets consist of the following: March 31, 2023 Useful Gross Carrying Accumulated Net Carrying Life Amount Amortization Amount Trademarks 5 - 10 Years $ 2,320,000 $ ( 370,672 ) $ 1,949,328 Noncompete agreements 5 Years 990,000 ( 396,000 ) 594,000 Customer relationships 5 - 7 Years 3,760,000 ( 904,286 ) 2,855,714 Patents and patent applications (*) 650,450 - 650,450 $ 7,720,450 $ ( 1,670,958 ) $ 6,049,492 December 31, 2022 Trademarks 5 - 10 Years $ 2,320,000 $ ( 292,671 ) $ 2,027,329 Noncompete agreements 5 Years 990,000 ( 346,500 ) 643,500 Customer relationships 5 - 7 Years 3,760,000 ( 758,000 ) 3,002,000 Patents and patent applications (*) 650,450 — 650,450 $ 7,720,450 $ ( 1,397,171 ) $ 6,323,279 (*) Patents have yet to be approved by the United States Patent and Trademark Office. Useful life is determined upon placement into service after approval. Amortization expense was $ 273,787 and $ 217,358 for the three months ended March 31, 2023 and 2022 , respectively. |
Loss and Loss Adjustment Expens
Loss and Loss Adjustment Expenses | 3 Months Ended |
Mar. 31, 2023 | |
Liability for Future Policy Benefits and Unpaid Claims and Claims Adjustment Expense [Abstract] | |
Loss and Loss Adjustment Expenses | NOTE 9 – LOSS AND LOSS ADJUSTMENT EXPENSES The following table shows changes in aggregate reserves for the Company's loss and loss adjustment expenses: March 31, March 31, Net reserves at beginning of period $ — $ — Incurred loss and loss adjustment expenses Provisions for insured events of the current year 84,412 — Change in provision for insured events of prior year — — Total incurred loss and loss adjustment expense 84,412 — Payments Loss and loss adjustment expenses attributable to insured events of the current year — — Loss and loss adjustment expenses attributable to insured events of the prior year — — Total payments — — Net reserves at end of period $ 84,412 $ — For the three months ended March 31, 2023, initial reserves were established for the start of the Company's captive operations. |
Revenue
Revenue | 3 Months Ended |
Mar. 31, 2023 | |
Revenue from Contract with Customer [Abstract] | |
Revenue | NOTE 10 – REVENUE Disaggregation of Revenue The following table illustrates the disaggregation of revenue by similar products: March 31, March 31, TPA services $ 9,582,668 $ 6,218,809 Captive insurance 89,377 — Total $ 9,672,045 $ 6,218,809 |
Share-based Compensation
Share-based Compensation | 3 Months Ended |
Mar. 31, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
Share-based Compensation | NOTE 11 – SHARE-BASED COMPENSATION Global Stock Incentive Plan On May 31, 2022, the shareholders of the Company approved the Company’s Board of Directors proposal to increase the Company’s Global Incentive Plan (the “Plan”) by 6,300,000 shares, thus bringing the total number of stock options and restricted stock units (“RSUs”) that may be issued pursuant to the Plan to 7,803,421 . Under the term of the Plan, on the grant date, the Board of Directors determines the vesting schedule of each stock option and RSUs on an individual basis. All stock options expire the earlier of (1) ten years from the date of the grant, (2) May 31, 2031 or (3) 90 days after the termination of employment of the grantee. Stock Options The fair value of options and share awards granted under the stock option plan during the three months ended March 31, 2023 was estimated at the date of grant using the Black-Scholes option pricing model and the following assumptions for grants: January 2023 Risk-free interest rates 3.43 % Expected life 5 years Expected volatility 41.00 % Expected dividend yield 0.00 % The following table summarizes the stock option activity: Weighted Average Aggregate Number of Weighted Average Remaining Intrinsic Options Exercise Price Contractual Term Value Balance at January 1, 2023 3,727,737 $ 1.47 8.91 $ 203,295 Granted 1,279,000 0.86 Forfeited/Cancelled ( 204,384 ) 1.92 Exercised ( 99,903 ) 0.002 Balance at March 31, 2023 4,702,450 1.31 9.05 $ 307,549 Exercisable at March 31, 2023 1,906,415 $ 1.54 8.70 $ 113,427 The following table summarizes the Company’s non-vested stock options: Weighted-Average Non-vested Options Grant Date Fair Outstanding Value At January 1, 2023 2,030,654 $ 0.66 Options granted 1,279,000 0.35 Options forfeited/cancelled ( 189,198 ) 0.63 Options vested ( 324,421 ) 0.55 At March 31, 2023 2,796,035 $ 0.48 For the three months ended March 31, 2023 and 2022, the Company recognized $ 216,424 and $ 104,402 of stock compensation expense relating to stock options, respectively. As of March 31, 2023, there was $ 1,312,643 of unrecognized stock compensation expense related to non-vested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of approximately 2.2 years. Restricted Stock Awards In July 2019, the Board of Directors of the Company authorized grants of restricted stock awards (“RSAs”) through a restricted stock award purchase agreement to certain founders, consultants, and advisors of the Company. Certain grants to the Company’s founders were fully vested at the date of incorporation, other grants vest over a four-year period on each anniversary of the grant date, based on continued employment, and other grants vest based on various milestones. The shares of common stock underlying the RSAs are issued upon grant. The following table summarizes the restricted stock awards activity: Weighted-Average Non-vested Options Grant Date Fair Outstanding Value Outstanding at January 1, 2023 222,938 $ 1.48 Granted — — Forfeited/cancelled — — Vested ( 92,112 ) 1.45 Outstanding at March 31, 2023 130,826 $ 1.49 For the three months ended March 31, 2023 and 2022, the Company recognized $ 120,891 and $ 144,585 of stock compensation expense relating to RSAs, respectively. As of March 31, 2023, there was $ 191,740 of unrecognized compensation expense related to unvested restricted share awards that is expected to be recognized over a weighted-average period of approximately four months . Restricted Stock Units On June 14, 2022, the Board of Directors of the Company authorized the grant of 1,427,404 RSUs, of which 1,346,154 were granted to an officer of the Company who joined the Company in February 2022. Of the RSUs granted to the officer, 192,308 vested immediately and the balance of 1,153,846 will vest in equal quarterly installments through February 28, 2023. Under the terms of the officer’s employment agreement, the Company also agreed to guarantee the minimum value of the RSUs on their vesting dates. The Company accrued an amount of $ 201,282 in accrued expenses in the condensed consolidated balance sheet, reflecting this minimum value obligation as of March 31, 2023. On February 28, 2023, the Company issued 133,547 fully vested RSUs to an officer upon his one year anniversary of employment. The following table summarizes the restricted stock units activity: Outstanding Value Outstanding at January 1, 2023 291,827 $ 1.11 Granted 608,547 0.83 Forfeited/cancelled — — Vested ( 393,082 ) 1.06 Outstanding at March 31, 2023 507,292 $ 0.81 For the three months ended March 31, 2023 and 2022, the Company recognized $ 286,109 and $ 0 of stock compensation expense relating to RSUs, respectively. As of March 31, 2023, there was $ 363,776 of unrecognized compensation expense related to unvested restricted share units that is expected to be recognized over a period of 3.5 years. |
Warrants
Warrants | 3 Months Ended |
Mar. 31, 2023 | |
Warrants and Rights Note Disclosure [Abstract] | |
Warrants | NOTE 12 – WARRANTS The table below summarizes the Company’s warrant activities: Number of Warrants to Exercise Price Weighted Purchase Common Range Per Average Shares Share Exercise Price Balance at January 1, 2023 1,648,873 $ 1.43 to 7.90 $ 5.92 Granted — — — Forfeited — — — Exercised — — — Balance at March 31, 2023 1,648,873 $ 1.43 to 7.90 $ 5.92 Balance at January 1, 2022 1,648,873 $ 1.43 to 7.90 $ 5.92 Granted — — — Forfeited — — — Exercised — — — Balance at March 31, 2022 1,648,873 $ 1.43 to 7.90 $ 5.92 |
Segment Information
Segment Information | 3 Months Ended |
Mar. 31, 2023 | |
Segment Reporting [Abstract] | |
Segment Information | NOTE 13 – SEGMENT INFORMATION Research and development activities are conducted through EYME in Israel. Geographic long-lived asset information presented below is based on the physical location of the assets at the end of year. All of the Company’s revenues are derived from customers located in the United States. Long-lived assets including goodwill, intangible assets, capitalized software, property and equipment and operating lease right-of-use, by geographic region, are as follows at: March 31, 2023 December 31, 2022 United States $ 17,292,660 $ 17,993,006 Israel 3,540,520 4,103,931 Total long-lived assets $ 20,833,180 $ 22,096,937 |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2023 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | NOTE 14 – RELATED PARTY TRANSACTIONS The Company receives consulting services and marketing services from various shareholders and directors. The total cost of these consulting services for the three months ended March 31, 2023 and 2022 was approximately $ 52,000 and $ 70,000 , respectively. The total cost of marketing services for the three months ended March 31, 2023 and 2022 was approximately $ 0 and $ 565,000 , respectively. No amounts due to these certain shareholders were included in accounts payable of March 31, 2023 and December 31, 2022. On December 30, 2020, the Company received an advance from a certain investor for reimbursement of certain expenses. This is recorded as due to related party on the accompanying condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022 in the amount of $ 3,201 and $ 3,201 , respectively. |
Accrued Expenses
Accrued Expenses | 3 Months Ended |
Mar. 31, 2023 | |
Accrued Liabilities, Current [Abstract] | |
Accrued Expenses | NOTE 15 – ACCRUED EXPENSES Accrued expenses consisted of the following: March 31, 2023 December 31, 2022 Employee compensation $ 1,090,334 $ 1,433,327 Accrued bonuses 717,965 1,712,009 Performance guarantee liabilities 268,662 244,029 Other accrued expenses and liabilities 1,692,533 1,885,351 Accrued expenses $ 3,769,494 $ 5,274,716 |
Stockholders' Equity
Stockholders' Equity | 3 Months Ended |
Mar. 31, 2023 | |
Stockholders' Equity Note [Abstract] | |
Stockholders' Equity | NOTE 16 – STOCKHOLDERS’ (DEFICIT) EQUITY During the three months ended March 31, 2023 the Company issued 100,000 shares of common stock to a vendor in consideration for services. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2023 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | NOTE 17 – INCOME TAXES The effective tax rate was 0 % for the three months ended March 31, 2023 and 2022 . The effective tax rate differs from the federal tax rate of 21 % for the three months ended March 31, 2023 and 2022 due primarily to the full valuation allowance on deferred tax assets, and other discrete items. At December 31, 2022 , the Company had federal and state net operating losses (“NOLs”) in the amount of $ 29,547,000 and $ 26,649,000 respectively. These NOLs expire from 2031 to 2041 or have indefinite lives. However, the Tax Cuts & Jobs Act of 2017 limits the amount of net operating loss the Company can utilize each year after December 31, 2020 to 80 % of taxable income. Income tax expense is recorded using the asset and liability method. Deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to temporary differences between amounts reported for income tax purposes and financial statement purposes, using current tax rates. A valuation allowance is recognized if it is anticipated that some or all of a deferred tax asset will not be realized. The Company must assess the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent that the Company believes that recovery is not likely, it must establish a valuation allowance. Significant management judgment is required in determining the provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against net deferred tax assets. The Company and its subsidiaries’ income tax returns since 2019 are open to review by the tax authorities. On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (the “Inflation Reduction Act") that includes, among other provisions, changes to the U.S. corporate income tax system, including a fifteen percent minimum tax based on "adjusted financial statement income,” and a one percent excise tax on net repurchases of stock after December 31, 2022. The Company is continuing to evaluate the Inflation Reduction Act and its requirements, as well as the application to its business. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2023 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 18 – SUBSEQUENT EVENTS Management has evaluated subsequent events through the date the unaudited condensed consolidated financial statements were available for issuance. On April 19, 2023, the Company announced a closing of a public offering of 7,400,000 shares of common stock at a public offering price of $ 1.00 per share, for gross proceeds of $ 7.4 million. After deducting underwriters' discounts and offering expenses net proceeds were approximately $ 6.4 million. The Company also issued the underwriters five year warrants for an aggregate of 370,000 shares of its common stock at an exercise price of $ 1.25 per share. In accordance with the terms of the Maestro share purchase agreement, 35 % of the net proceeds from the offering were used to pay down the debt to the seller. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2023 | |
Accounting Policies [Abstract] | |
Business Combination | Business Combination The Company accounts for business combinations in accordance with the Financial Accounting Standard Board’s (“FASB”) Accounting Standard Codification (“ASC”) 805, Business Combinations . Accordingly, identifiable tangible and intangible assets acquired, and liabilities assumed are recorded at their estimated fair values, the excess of the purchase consideration over the fair values of net assets acquired is recorded as goodwill, and transaction costs are expensed as incurred. The Company includes the results of operations of the businesses that are acquired as of the acquisition date. |
Use of Estimates | Use of Estimates The preparation of the accompanying condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingencies at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates include, but are not limited to, valuation of share-based compensation, accounting for warrants, allowance for doubtful accounts, useful lives of internally developed software, fair values of net assets acquired, goodwill, intangible assets and property and equipment, incurred but not reported (“IBNR”) reserves, whether an arrangement is or contains a lease, the incremental borrowing rate used for operating leases, income tax accruals, the valuation allowance for deferred income taxes, and contingent liabilities. The Company bases these estimates on historical and anticipated results, trends, and various other assumptions that it believes are reasonable under the circumstances, including assumptions as to future events. Actual results could differ from those estimates. |
Restricted Cash | Restricted Cash Restricted cash balances are composed of funds held on behalf of clients in a fiduciary capacity, cash held in a separate bank account pledged to a bank as collateral for a bank guarantee provided to the lessor to secure the Company’s obligations under a lease agreement, cash in a money market account as required by a credit card company for collateral, and a certificate of deposit held for collateral of a letter of credit. Fiduciary funds generally cannot be utilized for general corporate purposes and are not a source of liquidity for the Company. A corresponding fiduciary obligation, included in current liabilities in the accompanying condensed consolidated balance sheets, exists for disbursements to be made on behalf of the clients and may be more than the restricted cash balance if payment from customers has not been received. |
Capitalized Software | Capitalized Software The Company complies with the guidance of ASC Topic 350‑40, “Intangibles—Goodwill and Other—Internal Use Software”, in accounting for its internally developed system projects that it utilizes to provide its services to customers. These system projects generally relate to software of the Company that is not intended for sale or otherwise marketed. Internal and external costs incurred during the preliminary project stage are expensed as they are incurred. Once a project has reached the development stage, the Company capitalizes direct internal and external costs until the software is substantially complete and ready for its intended use. Costs for upgrades and enhancements are capitalized, whereas, costs incurred for maintenance are expensed as incurred. These capitalized software costs are amortized on a project-by- project basis over the expected economic life of the underlying software on a straight-line basis, which is generally three to five years . Amortization commences when the software is available for its intended use. |
Goodwill | Goodwill Goodwill is recognized and initially measured as any excess of the acquisition-date consideration transferred in a business combination over the acquisition-date amounts recognized for the net identifiable assets acquired. Goodwill is not amortized but is tested for impairment annually, or more frequently if an event occurs or circumstances change that would more likely than not result in an impairment of goodwill. The Company operates in one reportable segment and reporting unit; therefore, goodwill is tested for impairment at the consolidated level. First, the Company assesses qualitative factors to determine whether or not it is more likely than not that the fair value of a reporting unit is less than it’s carrying amount. If the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company conducts a quantitative goodwill impairment test comparing the fair value of the applicable reporting unit with its carrying value. If the carrying amount of the reporting unit exceeds the fair value of the reporting unit, the Company recognizes an impairment loss in the condensed consolidated statement of operations for the amount by which the carrying amount exceeds the fair value of the reporting unit. The Company performs its annual goodwill impairment test at December 31, and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of goodwill below its carrying value. There was no goodwill impairment for the three months ended March 31, 2023 and 2022 . |
Intangible Assets | Intangible Assets Intangible assets consist of customer relationships, non-compete agreements, and amounts attributed to patent and patent applications that were acquired through an acquisition and are amortized on a straight-line basis over useful lives ranging from five to ten years . The Company’s intangible assets are reviewed for impairment when events or circumstances indicate their carrying amounts may not be recoverable. The Company reviews the recoverability of its intangible assets by comparing the carrying value of such assets to the related undiscounted value of the projected cash flows associated with the assets, or asset group. If the carrying value is found to be greater, the Company records an impairment loss for the excess of book value over fair value. No impairment of the Company’s intangible assets was recorded for the three months ended March 31, 2023 and 2022 . |
Revenue Recognition | Revenue Recognition Third Party Administrator Revenue Revenue is recognized when control of the promised services is transferred to the Company’s customers in an amount that reflects the consideration expected to be entitled to in exchange for those services. As the Company completes its performance obligations, it has an unconditional right to consideration, as outlined in the Company’s contracts. The Company also provides certain performance guarantees under their contracts with customers. Customers may be entitled to receive compensation if the Company fails to meet the guarantees. Actual performance is compared to the contractual guarantee for each measure throughout the period. The Company had performance guarantee liabilities of $ 268,662 , which is included in accrued expenses on the accompanying condensed consolidated balance sheet as of March 31, 2023. Significant Payment Terms Generally, the Company’s accounts receivable are expected to be collected in 30 days in accordance with the underlying payment terms. Invoices for services are typically sent to the customer on the 15 th day of the month prior to the service month with a 10-day payment term. The Company does not offer discounts if the customer pays some or all of the invoiced amount prior to the due date. Consideration paid for services rendered by the Company is nonrefundable. Therefore, at the time revenue is recognized, the Company does not estimate expected refunds for services. The Company uses the practical expedient and does not account for significant financing components because the period between recognition and collection does not exceed one year for all of the Company’s contracts. Timing of Performance Obligations All of the Company’s contracts with customers obligate the Company to perform services. Services provided include health and welfare administration, dependent eligibility verification, COBRA administration, and benefit billing. Revenue is recognized over time as services are provided as the performance obligations are satisfied through the effort expended to research, investigate, evaluate, document, and report claims, and control of these services is transferred to the customer. The Company has the right to receive payment for all services rendered. Determining and Allocating the Transaction Price The transaction price of a contract is the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods or services to a customer. To determine the transaction price of a contract, the Company considers its customary business practices and the terms of the contract. For the purpose of determining transaction prices, the Company assumes that the services will be transferred to the customer as promised in accordance with existing contracts and that the contracts will not be canceled, renewed, or modified. The Company’s contracts with customers have fixed fee prices that are denominated per covered employee per month. The Company includes amounts of variable consideration in a contract’s transaction price only to the extent that it is probable that the amounts will not be subject to significant reversals (that is, downward adjustments to revenue recognized for satisfied performance obligations). In determining amounts of variable consideration to include in a contract’s transaction price, the Company relies on its experience and other evidence that supports its qualitative assessment of whether revenue would be subject to a significant reversal. The Company considers all the facts and circumstances associated with both the risk of a revenue reversal arising from an uncertain future event and the magnitude of the reversal if that uncertain event were to occur. Captive Revenue All general insurance premiums pertain to annual policies and are reflected in income on a pro-rata basis. Loss and Loss Adjustment Expenses The establishment of loss reserves by the policies primary insurer is a reasonably complex and dynamic process influenced by a large variety of factors. These factors principally include past experience with like claims. Consequently, the reserves established are a reflection of the opinions of a large number of persons and the Company is exposed to the possibility of higher or lower than anticipated loss cost due to real expense. |
Earnings (Loss) Per Share | Earnings (Loss) Per Share Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of outstanding shares of common stock for the period, considering the effect of participating securities. Diluted earnings (loss) per share is calculated by dividing net earnings (loss) by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding. During the periods when they are anti-dilutive, shares of common stock equivalents, if any, are not considered in the computation. At March 31, 2023 and 2022 , there were 4,193,405 and 2,346,764 common stock equivalents, respectively. For the three months ended March 31, 2023 and 2022 , these potential shares were excluded from the shares used to calculate diluted net loss per share as their effect would have been antidilutive. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU No. 2020-04 provides guidance on optional expedients for a limited time to ease the operational burden in accounting for (or recognizing the effects of) reference rate reform (LIBOR) on financial reporting. In December 2022, the FASB issued ASU 2022-06 Reference Rate Reform (Topic 848) - Deferral of the Sunset Date of Topic 848 (ASU 2022-06), which extends the optional transition relief to ease the potential burden in accounting for reference rate reform on financial reporting. The transition relief is provided through December 31, 2024 based on the expectation that the LIBOR will cease to be published as of June 30, 2023. The amendments are effective prospectively at any point through December 31, 2024. The Company will continue to monitor new contracts that could potentially be eligible for contract modification relief through December 31, 2024. In September 2022, the FASB issued ASU No. 2022-04, “Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations,” which is intended to enhance the transparency surrounding the use of supplier finance programs. The guidance requires companies that use supplier finance programs to make annual disclosures about the program’s key terms, the balance sheet presentation of related amounts, the confirmed amount outstanding at the end of the period and associated rollforward information. Only the amount outstanding at the end of the period must be disclosed in interim periods. The guidance does not affect the recognition, measurement or financial statement presentation of supplier finance program obligations. The guidance becomes effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the rollforward information, which is effective for fiscal years beginning after December 15, 2023. The Company does not have any supplier finance programs and does not believe the impact of adopting this accounting standard update will be material to the condensed consolidated financial statements. In October 2021, the FASB issued ASU No. 2021-08, “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” (Topic 805). This ASU requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities (deferred revenue) from acquired contracts using the revenue recognition guidance in Topic 606. At the acquisition date, the acquirer applies the revenue model as if it had originated the acquired contracts. For the Company, the new guidance is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Adoption of the ASU should be applied prospectively. Early adoption is also permitted, including adoption in an interim period. The Company is currently evaluating the impact of this accounting standard update on its condensed consolidated financial statements. |
Acquisition (Tables)
Acquisition (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Business Combinations [Abstract] | |
Summary of Assets Acquired and Liabilities Assumed at their Acquisition Date Fair Value | The following table represents the allocation of the purchase consideration among Maestro’s assets acquired and liabilities assumed at their acquisition-date fair values: December 31, 2022 Adjustment March 31, 2023 Purchase Price Purchase Price $ 19,900,000 $ 19,900,000 Purchase Price Allocation Cash $ 17,081,602 $ 17,081,602 Restricted cash 16,306,547 16,306,547 Accounts receivable 321,198 321,198 Unbilled receivable 646,189 646,189 Prepaid expenses and other current assets 1,751,371 1,751,371 Property and equipment 921,680 921,680 Operating lease - right of use assets 2,555,375 2,555,375 Goodwill 3,454,143 35,970 3,490,113 Trademarks 800,000 800,000 Customer relationships 840,000 840,000 Security deposits 1,240,889 1,240,889 Account payable ( 150,328 ) ( 150,328 ) Accrued expenses ( 4,554,280 ) ( 35,970 ) ( 4,590,250 ) Accrued fiduciary obligations ( 16,306,547 ) ( 16,306,547 ) Operating lease liabilities ( 4,816,490 ) ( 4,816,490 ) Deferred revenue ( 191,349 ) ( 191,349 ) Total fair value of net assets acquired and liabilities assumed $ 19,900,000 $ — $ 19,900,000 |
Summary of Identifiable Intangible Assets at Estimated Fair Values and Useful Lives with Expected Amortization Periods | Useful Acquisition Life in Fair Value Years Trademarks $ 800,000 5 Years Customer relationships 840,000 5 Years |
Summary of Unaudited Pro Forma Information | Three Months Ended March 31, 2022 (pro forma) Revenue $ 11,576,405 Net loss ( 10,768,200 ) |
Property and Equipment (Tables)
Property and Equipment (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Property, Plant and Equipment [Abstract] | |
Summary of Property and Equipment | Property and equipment consist of the following at: March 31, 2023 December 31, 2022 Equipment $ 388,814 $ 402,675 Furniture and fixtures 1,007,699 1,007,699 Leasehold improvements 745,453 745,453 Total cost 2,141,966 2,155,827 Accumulated depreciation ( 797,417 ) ( 649,745 ) Property and equipment, net $ 1,344,549 $ 1,506,082 |
Capitalized Software (Tables)
Capitalized Software (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Capitalized Software | |
Finite-Lived Intangible Assets [Line Items] | |
Summary of Intangible Assets | Capitalized software consists of the following at: March 31, 2023 December 31, 2022 Capitalized software $ 8,098,546 $ 8,094,385 Accumulated amortization ( 4,121,799 ) ( 3,505,679 ) Capitalized software, net $ 3,976,747 $ 4,588,706 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Finite-Lived Intangible Assets [Line Items] | |
Summary of Goodwill | Goodwill consists of the following: Amount Balance as of December 31, 2022 $ 5,837,060 Measurement period adjustment to Goodwill (Note 5) 35,970 Balance as of March 31, 2023 $ 5,873,030 |
Intangible Assets other than Capitalized Software | |
Finite-Lived Intangible Assets [Line Items] | |
Summary of Intangible Assets | Intangible assets consist of the following: March 31, 2023 Useful Gross Carrying Accumulated Net Carrying Life Amount Amortization Amount Trademarks 5 - 10 Years $ 2,320,000 $ ( 370,672 ) $ 1,949,328 Noncompete agreements 5 Years 990,000 ( 396,000 ) 594,000 Customer relationships 5 - 7 Years 3,760,000 ( 904,286 ) 2,855,714 Patents and patent applications (*) 650,450 - 650,450 $ 7,720,450 $ ( 1,670,958 ) $ 6,049,492 December 31, 2022 Trademarks 5 - 10 Years $ 2,320,000 $ ( 292,671 ) $ 2,027,329 Noncompete agreements 5 Years 990,000 ( 346,500 ) 643,500 Customer relationships 5 - 7 Years 3,760,000 ( 758,000 ) 3,002,000 Patents and patent applications (*) 650,450 — 650,450 $ 7,720,450 $ ( 1,397,171 ) $ 6,323,279 (*) Patents have yet to be approved by the United States Patent and Trademark Office. Useful life is determined upon placement into service after approval. |
Loss and Loss Adjustment Expe_2
Loss and Loss Adjustment Expenses (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Liability for Future Policy Benefits and Unpaid Claims and Claims Adjustment Expense [Abstract] | |
Schedule of Changes in Aggregate Reserves of Loss and Loss Adjustment Expenses | The following table shows changes in aggregate reserves for the Company's loss and loss adjustment expenses: March 31, March 31, Net reserves at beginning of period $ — $ — Incurred loss and loss adjustment expenses Provisions for insured events of the current year 84,412 — Change in provision for insured events of prior year — — Total incurred loss and loss adjustment expense 84,412 — Payments Loss and loss adjustment expenses attributable to insured events of the current year — — Loss and loss adjustment expenses attributable to insured events of the prior year — — Total payments — — Net reserves at end of period $ 84,412 $ — |
Revenue (Tables)
Revenue (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Disaggregation of Revenue | The following table illustrates the disaggregation of revenue by similar products: March 31, March 31, TPA services $ 9,582,668 $ 6,218,809 Captive insurance 89,377 — Total $ 9,672,045 $ 6,218,809 |
Share-based Compensation (Table
Share-based Compensation (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
Schedule of Fair Value of Options and Share Awards Granted Under the Stock Option Plan | January 2023 Risk-free interest rates 3.43 % Expected life 5 years Expected volatility 41.00 % Expected dividend yield 0.00 % |
Summary of Stock Option Activity | The following table summarizes the stock option activity: Weighted Average Aggregate Number of Weighted Average Remaining Intrinsic Options Exercise Price Contractual Term Value Balance at January 1, 2023 3,727,737 $ 1.47 8.91 $ 203,295 Granted 1,279,000 0.86 Forfeited/Cancelled ( 204,384 ) 1.92 Exercised ( 99,903 ) 0.002 Balance at March 31, 2023 4,702,450 1.31 9.05 $ 307,549 Exercisable at March 31, 2023 1,906,415 $ 1.54 8.70 $ 113,427 |
Summary of Non-vested Stock Options Activity | The following table summarizes the Company’s non-vested stock options: Weighted-Average Non-vested Options Grant Date Fair Outstanding Value At January 1, 2023 2,030,654 $ 0.66 Options granted 1,279,000 0.35 Options forfeited/cancelled ( 189,198 ) 0.63 Options vested ( 324,421 ) 0.55 At March 31, 2023 2,796,035 $ 0.48 |
Summary of Restricted Stock Awards Activity | The following table summarizes the restricted stock awards activity: Weighted-Average Non-vested Options Grant Date Fair Outstanding Value Outstanding at January 1, 2023 222,938 $ 1.48 Granted — — Forfeited/cancelled — — Vested ( 92,112 ) 1.45 Outstanding at March 31, 2023 130,826 $ 1.49 |
Summary of Restricted Stock Units Activity | The following table summarizes the restricted stock units activity: Outstanding Value Outstanding at January 1, 2023 291,827 $ 1.11 Granted 608,547 0.83 Forfeited/cancelled — — Vested ( 393,082 ) 1.06 Outstanding at March 31, 2023 507,292 $ 0.81 |
Warrants (Tables)
Warrants (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Warrants and Rights Note Disclosure [Abstract] | |
Schedule of Warrant Activities | The table below summarizes the Company’s warrant activities: Number of Warrants to Exercise Price Weighted Purchase Common Range Per Average Shares Share Exercise Price Balance at January 1, 2023 1,648,873 $ 1.43 to 7.90 $ 5.92 Granted — — — Forfeited — — — Exercised — — — Balance at March 31, 2023 1,648,873 $ 1.43 to 7.90 $ 5.92 Balance at January 1, 2022 1,648,873 $ 1.43 to 7.90 $ 5.92 Granted — — — Forfeited — — — Exercised — — — Balance at March 31, 2022 1,648,873 $ 1.43 to 7.90 $ 5.92 |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Segment Reporting [Abstract] | |
Schedule of Long-lived Assets by Geographic Region | Long-lived assets including goodwill, intangible assets, capitalized software, property and equipment and operating lease right-of-use, by geographic region, are as follows at: March 31, 2023 December 31, 2022 United States $ 17,292,660 $ 17,993,006 Israel 3,540,520 4,103,931 Total long-lived assets $ 20,833,180 $ 22,096,937 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Accrued Liabilities, Current [Abstract] | |
Schedule of Accrued Expenses | Accrued expenses consisted of the following: March 31, 2023 December 31, 2022 Employee compensation $ 1,090,334 $ 1,433,327 Accrued bonuses 717,965 1,712,009 Performance guarantee liabilities 268,662 244,029 Other accrued expenses and liabilities 1,692,533 1,885,351 Accrued expenses $ 3,769,494 $ 5,274,716 |
Liquidity and Going Concern - A
Liquidity and Going Concern - Additional Information (Details) - USD ($) | 3 Months Ended | ||||
Apr. 19, 2023 | Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | Nov. 01, 2022 | |
Subsequent Event [Line Items] | |||||
Accumulated deficit | $ 56,866,949 | $ 47,994,100 | |||
Working capital | 2,600,000 | ||||
Long term debt | 20,600,000 | ||||
Cash and cash equivalents | 6,174,538 | $ 14,107,751 | $ 13,764,508 | ||
Net loss | 8,872,849 | 5,489,664 | |||
Cash flows from operations | $ 6,539,764 | $ 3,327,712 | |||
Maestro | |||||
Subsequent Event [Line Items] | |||||
Percentage of net proceeds of the Offering | 35% | ||||
Subsequent Event | |||||
Subsequent Event [Line Items] | |||||
Number of shares issued | 7,400,000 | ||||
Net proceeds from offering | $ 6,400,000 | ||||
Subsequent Event | Initial Public Offering | |||||
Subsequent Event [Line Items] | |||||
Number of shares issued | 7,400,000 | ||||
Price per share | $ 1 | ||||
Proceeds from initial public offering | $ 7,400,000 | ||||
Net proceeds from offering | $ 6,400,000 | ||||
Subsequent Event | Initial Public Offering | Maestro | |||||
Subsequent Event [Line Items] | |||||
Percentage of net proceeds of the Offering | 35% |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies - Additional Information (Details) | 3 Months Ended | |
Mar. 31, 2023 USD ($) Segment shares | Mar. 31, 2022 USD ($) shares | |
Finite-Lived Intangible Assets [Line Items] | ||
Number of reportable segment | Segment | 1 | |
Goodwill impairment charges | $ 0 | $ 0 |
Impairment of intangible assets | 0 | $ 0 |
Performance guarantee liabilities | $ 268,662 | |
Accounts receivable, payments term | 30 days | |
Number of shares excluded to calculate diluted net earnings per share as their effect would have been antidilutive | shares | 4,193,405 | 2,346,764 |
Minimum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Useful Life | 5 years | |
Maximum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Useful Life | 10 years | |
Capitalized Software | Minimum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Useful Life | 3 years | |
Capitalized Software | Maximum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Useful Life | 5 years |
Acquisition - Additional Inform
Acquisition - Additional Information (Details) - Maestro - USD ($) | 3 Months Ended | 12 Months Ended | |
Nov. 01, 2022 | Mar. 31, 2023 | Dec. 31, 2022 | |
Business Acquisition [Line Items] | |||
Purchase price | $ 19,900,000 | $ 19,900,000 | $ 19,900,000 |
Adjusted Purchase Price | $ 22,100,000 | ||
Accrue interest percent | 10% | ||
Percentage of net proceeds of the Offering | 35% | ||
Number of days after closing of offering | 60 days | ||
2024 | $ 5,000,000 | ||
2025 | 11,000,000 | ||
2026 | 19,000,000 | ||
2027 | 28,000,000 | ||
Total purchase price paid, net of cash acquired | $ 19,900,000 | 19,900,000 | $ 19,900,000 |
Incremental amortization expense related to intangible and tangible assets acquired | $ 82,000 |
Acquisition - Summary of Assets
Acquisition - Summary of Assets Acquired and Liabilities Assumed at their Acquisition Date Fair Value (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |
Nov. 01, 2022 | Mar. 31, 2023 | Dec. 31, 2022 | |
Purchase Price Allocation | |||
Goodwill | $ 5,873,030 | $ 5,837,060 | |
Maestro | |||
Purchase Price | |||
Purchase price | $ 19,900,000 | 19,900,000 | 19,900,000 |
Purchase Price Allocation | |||
Cash | 17,081,602 | 17,081,602 | |
Restricted cash | 16,306,547 | 16,306,547 | |
Accounts receivable | 321,198 | 321,198 | |
Unbilled receivable | 646,189 | 646,189 | |
Prepaid expenses and other current assets | 1,751,371 | 1,751,371 | |
Property and equipment | 921,680 | 921,680 | |
Operating lease - right of use assets | 2,555,375 | 2,555,375 | |
Goodwill | 3,490,113 | 3,454,143 | |
Security deposits | 1,240,889 | 1,240,889 | |
Account payable | (150,328) | (150,328) | |
Accrued expenses | (4,590,250) | (4,554,280) | |
Accrued fiduciary obligations | (16,306,547) | 16,306,547 | |
Operating lease liabilities | (4,816,490) | 4,816,490 | |
Deferred revenue | (191,349) | (191,349) | |
Total fair value of net assets acquired and liabilities assumed | 19,900,000 | 19,900,000 | |
Measurement period adjustment to Goodwill (Note 5) | 35,970 | ||
Accrued expense, Adjustment during period | (35,970) | ||
Maestro | Trademarks | |||
Purchase Price Allocation | |||
Intangible assets | 800,000 | 800,000 | |
Maestro | Customer relationships | |||
Purchase Price Allocation | |||
Intangible assets | $ 840,000 | $ 840,000 |
Acquisition - Summary of Identi
Acquisition - Summary of Identifiable Intangible Assets at Estimated Fair Values and Useful Lives with Expected Amortization Periods (Details) - Maestro | 3 Months Ended |
Mar. 31, 2023 USD ($) | |
Trademarks | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Acquisition Fair Value | $ 800,000 |
Useful Life in Years | 5 years |
Customer Relationships | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Acquisition Fair Value | $ 840,000 |
Useful Life in Years | 5 years |
Acquisition - Summary of Unaudi
Acquisition - Summary of Unaudited Pro Forma Information (Details) - Maestro | 3 Months Ended |
Mar. 31, 2022 USD ($) | |
Business Acquisition [Line Items] | |
Proforma revenue | $ 11,576,405 |
Proforma net loss | $ (10,768,200) |
Property and Equipment - Summar
Property and Equipment - Summary of Property and Equipment (Details) - USD ($) | Mar. 31, 2023 | Dec. 31, 2022 |
Property, Plant and Equipment, Net, by Type [Abstract] | ||
Total cost | $ 2,141,966 | $ 2,155,827 |
Accumulated depreciation | (797,417) | (649,745) |
Property and equipment, net | 1,344,549 | 1,506,082 |
Equipment | ||
Property, Plant and Equipment, Net, by Type [Abstract] | ||
Total cost | 388,814 | 402,675 |
Furniture and Fixtures | ||
Property, Plant and Equipment, Net, by Type [Abstract] | ||
Total cost | 1,007,699 | 1,007,699 |
Leasehold Improvements | ||
Property, Plant and Equipment, Net, by Type [Abstract] | ||
Total cost | $ 745,453 | $ 745,453 |
Property and Equipment - Additi
Property and Equipment - Additional Information (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 154,076 | $ 71,111 |
Capitalized Software - Summary
Capitalized Software - Summary of Intangible Assets (Details) - USD ($) | Mar. 31, 2023 | Dec. 31, 2022 |
Capitalized Computer Software, Net [Abstract] | ||
Capitalized software | $ 8,098,546 | $ 8,094,385 |
Accumulated amortization | (4,121,799) | (3,505,679) |
Capitalized software, net | $ 3,976,747 | $ 4,588,706 |
Capitalized Software - Addition
Capitalized Software - Additional Information (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Capitalized Computer Software, Net [Abstract] | ||
Amortization expense | $ 615,773 | $ 536,929 |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets - Summary of Goodwill (Details) | 3 Months Ended |
Mar. 31, 2023 USD ($) | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Balance as of December 31, 2022 | $ 5,837,060 |
Measurement period adjustment to Goodwill (Note 5) | 35,970 |
Balance as of March 31, 2023 | $ 5,873,030 |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets - Summary of Intangible Assets (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
Minimum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Useful Life | 5 years | |
Maximum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Useful Life | 10 years | |
Intangible Assets other than Capitalized Software | ||
Finite-Lived Intangible Assets, Net [Abstract] | ||
Gross Carrying Amount | $ 7,720,450 | $ 7,720,450 |
Accumulated Amortization | (1,670,958) | (1,397,171) |
Net Carrying Amount | 6,049,492 | 6,323,279 |
Trademarks | ||
Finite-Lived Intangible Assets, Net [Abstract] | ||
Gross Carrying Amount | 2,320,000 | 2,320,000 |
Accumulated Amortization | (370,672) | (292,671) |
Net Carrying Amount | $ 1,949,328 | $ 2,027,329 |
Trademarks | Minimum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Useful Life | 5 years | 5 years |
Trademarks | Maximum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Useful Life | 10 years | 10 years |
Noncompete Agreements | ||
Finite-Lived Intangible Assets [Line Items] | ||
Useful Life | 5 years | 5 years |
Finite-Lived Intangible Assets, Net [Abstract] | ||
Gross Carrying Amount | $ 990,000 | $ 990,000 |
Accumulated Amortization | (396,000) | (346,500) |
Net Carrying Amount | 594,000 | 643,500 |
Customer Relationships | ||
Finite-Lived Intangible Assets, Net [Abstract] | ||
Gross Carrying Amount | 3,760,000 | 3,760,000 |
Accumulated Amortization | (904,286) | (758,000) |
Net Carrying Amount | $ 2,855,714 | $ 3,002,000 |
Customer Relationships | Minimum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Useful Life | 5 years | 5 years |
Customer Relationships | Maximum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Useful Life | 7 years | 7 years |
Patents and Patent Applications | ||
Finite-Lived Intangible Assets, Net [Abstract] | ||
Gross Carrying Amount | $ 650,450 | $ 650,450 |
Net Carrying Amount | $ 650,450 | $ 650,450 |
Goodwill and Intangible Asset_4
Goodwill and Intangible Assets - Additional Information (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization expense | $ 273,787 | $ 217,358 |
Loss and Loss Adjustment Expe_3
Loss and Loss Adjustment Expenses - Schedule of Changes in Aggregate Reserves of Loss and Loss Adjustment Expenses (Details) | 3 Months Ended |
Mar. 31, 2023 USD ($) | |
Incurred loss and loss adjustment expenses | |
Provisions for insured events of the current year | $ 84,412 |
Total incurred loss and loss adjustment expense | 84,412 |
Payments | |
Net reserves at end of period | $ 84,412 |
Revenue - Schedule of Disaggreg
Revenue - Schedule of Disaggregation of Revenue (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 9,672,045 | $ 6,218,809 |
TPA Services | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 9,582,668 | $ 6,218,809 |
Captive Insurance | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 89,377 |
Share-Based Compensation - Stoc
Share-Based Compensation - Stock Options (Details) - USD ($) | 3 Months Ended | |||
May 31, 2022 | Mar. 31, 2023 | Mar. 31, 2022 | Jun. 14, 2022 | |
Stock Options | ||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||
Expiration term of award | 10 years | |||
Stock compensation expense | $ 216,424 | $ 104,402 | ||
Unrecognized stock compensation expense | $ 1,312,643 | |||
Unrecognized stock compensation expense, expected to be recognized over a weighted-average period | 2 years 2 months 12 days | |||
Increase in number of shares authorized | 6,300,000 | |||
Restricted Stock Units | ||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||
Number of shares authorized | 7,803,421 | 1,427,404 | ||
Stock compensation expense | $ 286,109 | $ 0 | ||
Unrecognized stock compensation expense, expected to be recognized over a weighted-average period | 3 years 6 months | |||
Termination term after the termination of employment of the grantee | 90 days |
Share-Based Compensation - Fair
Share-Based Compensation - Fair Value of Options (Details) - Stock Options | 1 Months Ended |
Jan. 31, 2023 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
Risk-free interest rates | 3.43% |
Expected life | 5 years |
Expected volatility | 41% |
Expected dividend yield | 0% |
Share-Based Compensation - St_2
Share-Based Compensation - Stock Option Activity (Details) - Stock Options - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
Number of Options | ||
Balance at the beginning | 3,727,737 | |
Granted | 1,279,000 | |
Forfeited/Cancelled | (204,384) | |
Exercised | (99,903) | |
Balance at the end | 4,702,450 | 3,727,737 |
Exercisable at the end | 1,906,415 | |
Weighted Average Exercise Price | ||
Balance at the beginning (in dollars per share) | $ 1.47 | |
Granted (in dollars per share) | 0.86 | |
Forfeited/Cancelled (in dollars per share) | 1.92 | |
Exercised (in dollars per share) | 0.002 | |
Balance at the end (in dollars per share) | 1.31 | $ 1.47 |
Exercisable at the end (in dollars per share) | $ 1.54 | |
Weighted Average Remaining Contractual Term and Aggregate Intrinsic Value | ||
Balance (in years) | 9 years 18 days | 8 years 10 months 28 days |
Exercisable at the end (in years) | 8 years 8 months 12 days | |
Aggregate Intrinsic Value, balance | $ 307,549 | $ 203,295 |
Exercisable at the end (in dollars) | $ 113,427 |
Share-Based Compensation - Non-
Share-Based Compensation - Non-vested Stock Options (Details) - Stock Options | 3 Months Ended |
Mar. 31, 2023 $ / shares shares | |
Non-vested Options Outstanding | |
At the beginning | shares | 2,030,654 |
Options granted | shares | 1,279,000 |
Options forfeited/cancelled | shares | (189,198) |
Options vested | shares | (324,421) |
At the end | shares | 2,796,035 |
Weighted-Average Grant Date Fair Value | |
At the beginning (in dollars per share) | $ / shares | $ 0.66 |
Options granted (in dollars per share) | $ / shares | 0.35 |
Options forfeited/cancelled (in dollars per share) | $ / shares | 0.63 |
Options vested (in dollars per share) | $ / shares | 0.55 |
At the end (in dollars per share) | $ / shares | $ 0.48 |
Share-Based Compensation - Rest
Share-Based Compensation - Restricted Stock Awards Activity (Details) | 3 Months Ended |
Mar. 31, 2023 $ / shares shares | |
Restricted Stock Awards | |
Restricted Stock Awards | |
Outstanding at the beginning | shares | 222,938 |
Vested | shares | (92,112) |
Outstanding at the end | shares | 130,826 |
Weighted-Average Grant Date Fair Value Per Share | |
Outstanding at the beginning (in dollars per share) | $ / shares | $ 1.48 |
Vested (in dollars per share) | $ / shares | 1.45 |
Outstanding at the end (in dollars per share) | $ / shares | $ 1.49 |
Restricted Stock Units | |
Restricted Stock Awards | |
Outstanding at the beginning | shares | 291,827 |
Granted | shares | 608,547 |
Vested | shares | (393,082) |
Outstanding at the end | shares | 507,292 |
Weighted-Average Grant Date Fair Value Per Share | |
Outstanding at the beginning (in dollars per share) | $ / shares | $ 1.11 |
Granted (in dollars per share) | $ / shares | 0.83 |
Vested (in dollars per share) | $ / shares | 1.06 |
Outstanding at the end (in dollars per share) | $ / shares | $ 0.81 |
Share-Based Compensation - Re_2
Share-Based Compensation - Restricted Stock Awards (Details) - USD ($) | 3 Months Ended | |||||
Feb. 28, 2023 | Jun. 14, 2022 | Mar. 31, 2023 | Mar. 31, 2022 | May 31, 2022 | Feb. 28, 2022 | |
Restricted Stock Awards | ||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||
Vesting period | 4 years | |||||
Stock compensation expense | $ 120,891 | $ 144,585 | ||||
Unrecognized compensation expense related to unvested restricted share awards | $ 191,740 | |||||
Unrecognized compensation expense related to unvested restricted share awards recognized over a weighted-average period | 4 months | |||||
Number of shares vested | 92,112 | |||||
Restricted Stock Units | ||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||
Stock compensation expense | $ 286,109 | $ 0 | ||||
Unrecognized compensation expense related to unvested restricted share awards | $ 363,776 | |||||
Unrecognized compensation expense related to unvested restricted share awards recognized over a weighted-average period | 3 years 6 months | |||||
Number of shares vested | 393,082 | |||||
Number of shares authorized | 1,427,404 | 7,803,421 | ||||
Number of shares granted | 608,547 | |||||
Minimum value obligation | $ 201,282 | |||||
Restricted Stock Units | Officer | ||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||
Vesting period | 1 year | |||||
Number of shares vested | 133,547 | |||||
Number of shares granted | 1,346,154 | |||||
Restricted Stock Units | Vested immediately | Officer | ||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||
Number of shares vested | 192,308 | |||||
Restricted Stock Units | Vest in equal quarterly installments through February 28, 2023 | Officer | ||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||
Number of shares vested | 1,153,846 |
Warrants - Schedule of Warrant
Warrants - Schedule of Warrant Activities (Details) - Marpai Warrants - $ / shares | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Class of Warrant or Right [Line Items] | ||
Beginning balance | 1,648,873 | 1,648,873 |
Granted | 0 | |
Forfeited | 0 | |
Exercised | 0 | |
Ending balance | 1,648,873 | 1,648,873 |
Weighted Average Exercise Price | ||
Beginning balance | $ 5.92 | $ 5.92 |
Granted | 0 | |
Ending balance | 5.92 | 5.92 |
Minimum | ||
Exercise Price Range Per Share | ||
Beginning balance | 1.43 | 1.43 |
Ending balance | 1.43 | 1.43 |
Maximum | ||
Exercise Price Range Per Share | ||
Beginning balance | 7.90 | 7.90 |
Ending balance | $ 7.90 | $ 7.90 |
Segment Information - Schedule
Segment Information - Schedule of Long-lived Assets by Geographic Region (Details) - USD ($) | Mar. 31, 2023 | Dec. 31, 2022 |
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Total long-lived assets | $ 20,833,180 | $ 22,096,937 |
United States | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Total long-lived assets | 17,292,660 | 17,993,006 |
Israel | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Total long-lived assets | $ 3,540,520 | $ 4,103,931 |
Related Party Transactions - Ad
Related Party Transactions - Additional Information (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | |
Related Party Transaction [Line Items] | |||
Accounts payable - related party | $ 0 | $ 0 | |
Due to related parties | 3,201 | $ 3,201 | |
Consulting Services | |||
Related Party Transaction [Line Items] | |||
Related party transaction expense | 52,000 | $ 70,000 | |
Marketing Services | |||
Related Party Transaction [Line Items] | |||
Related party transaction expense | $ 0 | $ 565,000 |
Accrued Expenses - Schedule of
Accrued Expenses - Schedule of Accrued Expenses (Details) - USD ($) | Mar. 31, 2023 | Dec. 31, 2022 |
Accrued Liabilities, Current [Abstract] | ||
Employee compensation | $ 1,090,334 | $ 1,433,327 |
Accrued bonuses | 717,965 | 1,712,009 |
Performance guarantee liabilities | 268,662 | 244,029 |
Other accrued expenses and liabilities | 1,692,533 | 1,885,351 |
Accrued expenses | $ 3,769,494 | $ 5,274,716 |
Stockholders' Equity - Addtiona
Stockholders' Equity - Addtional Information (Details) | 3 Months Ended |
Mar. 31, 2023 shares | |
Common Stock | |
Subsidiary, Sale of Stock [Line Items] | |
Shares issued to vendors in exchange for services (in shares) | 100,000 |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | |
Operating Loss Carryforwards [Line Items] | |||
Effective tax rate | 0% | 0% | |
Maximum percentage of taxable income can be utilized for operating losses | 80% | ||
Federal tax rate | 21% | 21% | |
Federal | |||
Operating Loss Carryforwards [Line Items] | |||
Net operating losses | $ 29,547,000 | $ 29,547,000 | |
State | |||
Operating Loss Carryforwards [Line Items] | |||
Net operating losses | $ 26,649,000 | $ 26,649,000 | |
Minimum | |||
Operating Loss Carryforwards [Line Items] | |||
Net operating losses, expiration year | 2031 | 2031 | |
Maximum | |||
Operating Loss Carryforwards [Line Items] | |||
Net operating losses, expiration year | 2041 | 2041 |
Subsequent Events - Additional
Subsequent Events - Additional Information (Details) - Subsequent Event $ / shares in Units, $ in Millions | Apr. 19, 2023 USD ($) $ / shares shares |
Subsequent Event [Line Items] | |
Warrants to purchase common shares | shares | 370,000 |
Number of shares issued | shares | 7,400,000 |
Share price | $ / shares | $ 1 |
Proceeds from issuance of common stock, gross | $ | $ 7.4 |
Net proceeds from offering | $ | $ 6.4 |
Warrants term | 5 years |
Warrants exercise price | $ / shares | $ 1.25 |
Maestro Health LLC | Debt Seller | |
Subsequent Event [Line Items] | |
Percentage of payment on net proceeds of offering until such time as purchase price paid in full | 35% |