MRAI Marpai Inc (QX)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-40904

MARPAI, INC.

(Exact Name of Registrant as Specified in Its Charter)

615 Channelside Drive, Suite 207

Tampa, Florida 33602

(Address of principal executive offices)

(855) 389-7330

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of August 7, 2024, there were 11,045,290 shares of the Company’s common stock, par value $0.0001 per share, outstanding.

MARPAI, INC.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements.

MARPAI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MARPAI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except share and per share data)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MARPAI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

(UNAUDITED)

(in thousands, except share data)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MARPAI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MARPAI, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARPAI, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARPAI, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARPAI, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARPAI, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARPAI, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARPAI, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARPAI, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARPAI, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARPAI, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARPAI, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARPAI, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARPAI, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF MARPAI, INC.

As used in this report, the terms “we”, “us”, “our”, the “Company”, and “Marpai” mean Marpai, Inc., and our wholly owned subsidiaries, Marpai Captive, Marpai Administrators, Maestro Health, and Marpai Health and its wholly owned Israeli subsidiary EYME Technologies, Ltd. (“EYME”), unless otherwise indicated or required by the context.

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performances, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performances or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to Part II, Item 1A of this Quarterly report and the Risk Factors section of our Annual Report on Form 10-K, filed on March 26, 2024 with the SEC.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information.

The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

On May 24, 2024, the Company informed the staff of the Nasdaq Stock Market LLC of its intention to withdraw from the Nasdaq hearings process and transition the listing of its common shares from the Nasdaq Capital Market (“Nasdaq”) and have its shares of common stock quoted on the OTCQX Market (“OTCQX”).

Overview

We are a national technology-driven healthcare third party administration (“TPA”), which uses AI and data analytics combined with cost containment programs to help our Clients lower their cost of healthcare by enabling better health outcomes for their employees and families. Our mission is to positively change healthcare for the benefit of (i) our Clients who are self-insured employers that pay for their employees’ healthcare benefits and engage us to administer the latter’s healthcare claims, and we refer to them as our “Clients”, (ii) employees and their family members who receive these healthcare benefits from our Clients, and we refer to them as our “Members”, and (iii) healthcare providers including, doctors, doctor groups, hospitals, clinics, and any other entities providing healthcare services or products, and we refer to them as the “Providers.” We provide affordable, intelligent, healthcare programs for self-insured employers in the U.S. We provide administrative services, and act as TPA to self-insured employers who provide healthcare benefits to their employees. Most of our Clients are small and medium-sized companies as well as local government entities.

Based on our current financial condition, our Board of Directors, supported by our management team, is considering exploring strategic alternatives focused on maximizing shareholder value. Strategic alternatives may include, among others, a strategic investment financing which would allow the company to pursue its current business plan to commercialize its products, a business combination such as a merger with another party, or a sale of the company.

Representation in the Financial Statements of Marpai, Inc.

The unaudited condensed consolidated financial statements of Marpai, Inc and the discussion of the results of its operations in this quarterly report, reflect the results of the operations of Marpai for all periods presented. The results for the three and six months ended June 30, 2024, as applicable, are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

Results of Operations

Comparison of the Three and Six Months Ended June 30, 2024 and 2023

The following tables set forth our consolidated results of operations for the periods indicated.

(dollars in thousands)

Comparison of the Three and Six Months Ended June 30, 2024 and 2023

Revenues and Cost of Revenue

During the three months ended June 30, 2024 and 2023, our total revenue was $7.2 million and $10 million, respectively, representing a decrease in revenue of $2.8 million. The decline is primarily due to customer turnover. The market is evolving, and we are adapting our approach to better serve our customers’ needs. While we have seen some customer turnover, we are confident that our new initiatives will lead to long-term revenue growth.

During the six months ended June 30, 2024 and 2023, our total revenue was $14.6 million and $19.7 million, respectively, representing a decrease in revenue of $5.1 million. The decline is primarily due to customer turnover. The market is evolving, and we are adapting our approach to better serve our customers’ needs. While we have seen some customer turnover, we are confident that our new initiatives will lead to long-term revenue growth.

Total revenues consist of fees that we charge our customers in consideration for administering their self-insured healthcare plans as well as fees that we receive for ancillary services such as care management, case management, cost containment services, and other services provided to our customers by us or other vendors.

During the three months ended June 30, 2024 and 2023, our cost of revenue exclusive of depreciation and amortization was $5.2 million and $6.4 million, respectively, representing a decrease of $1.2 million, in line with the decrease in revenue.

During the six months ended June 30, 2024 and 2023, our cost of revenue exclusive of depreciation and amortization was $10 million and $12.8 million, respectively, representing a decrease of $2.8 million, in line with the decrease in revenue.

Total cost of revenues consists of (i) service fees, which primarily include vendor fees associated with the client’s benefit program selections, (ii) the direct labor cost associated with claim management and processing services, and (iii) direct labor costs associated with providing customer support and services to the clients, members, and other external stakeholders.

General and Administrative Expenses

We incurred $3.7 million of general and administrative expenses for the three months ended June 30, 2024 compared to $5.7 million for the three months ended June 30, 2023, a decrease of $2.0 million. The reason for the decrease is due to (i) the actions taken throughout 2023 to aligning the two TPA companies into one amounting to approximately $1.2 million in savings and, (ii) the elimination of non-value added services amounting to approximately $224 thousand in savings.

We incurred $7.1 million of general and administrative expenses for the six months ended June 30, 2024 compared to $11.0 million for the six months ended June 30, 2023, a decrease of $3.9 million. The reason for the decrease is due to (i) the actions taken throughout 2023 to aligning the two TPA companies into one amounting to approximately $3.4 million in savings and, (ii) the elimination of non-value added services amounting to approximately $449 thousand in savings.

Sales and Marketing Expenses

We incurred $436 thousand of sales and marketing expenses for the three months ended June 30, 2024 compared to $1.5 million for the three months ended June 30, 2023, a decrease of $1.0 million. The reason for the decrease is due to the actions taken throughout 2023 to align the two TPA companies into one amounting to approximately $1.5 million in savings.

We incurred $1.0 million of sales and marketing expenses for the six months ended June 30, 2024 compared to $3.7 million for the six months ended June 30, 2023, a decrease of $2.7 million. The reason for the decrease is due to the actions taken throughout 2023 to align the two TPA companies into one amounting to approximately $2.6 million in savings.

Information Technology Expenses

We incurred $1.2 million of information technology expenses for the three months ended June 30, 2024 compared to $1.3 million for the three months ended June 30, 2023, a decrease of $109 thousand. The reason for the decrease is due to the actions taken throughout 2023 to align the two TPA companies into one amounting to approximately $109 thousand in savings.

We incurred $2.3 million of information technology expenses for the six months ended June 30, 2024 compared to $3.5 million for the six months ended June 30, 2023, a decrease of $1.2 million. The reason for the decrease is due to the actions taken throughout 2023 to align the two TPA companies into one amounting to approximately $1.2 million in savings.

Research and Development Expenses

We incurred $8 thousand of research and development expenses for the three months ended June 30, 2024 compared to $523 thousand for the three months ended June 30, 2023, a decrease of $515 thousand. The decrease is attributable to adapting our approach to better serve our customers’ needs by the elimination of non-value added development projects amounting to approximately $523 thousand.

We incurred $15 thousand of research and development expenses for the six months ended June 30, 2024 compared to $1.0 million for the six months ended June 30, 2023, a decrease of $1.0 million. The decrease is attributable to adapting our approach to better serve our customers’ needs by the elimination of non-value added development projects amounting to approximately $1.0 million.

Depreciation and Amortization

We incurred $914 thousand of depreciation and amortization expenses for the three months ended June 30, 2024 compared to $1.0 million for the three months ended June 30, 2023, a decrease of $89 thousand. This decrease was primarily due to a reduction by approximately $91 thousand in the depreciation of assets that were disposed of during the prior year and software becoming fully depreciated in early 2024 amounting to approximately $36 thousand, partially offset by the new patents placed into service during 2024 amounting to approximately $33 thousand.

We incurred $1.9 million of depreciation and amortization expenses for the six months ended June 30, 2024 compared to $2.0 million for the six months ended June 30, 2023, a decrease of $182 thousand. This decrease was primarily due to a reduction by approximately $203 thousand in the depreciation of assets that were disposed of during the prior year and software becoming fully depreciated in early 2024 amounting to approximately $36 thousand, partially offset by the new patents placed into service during 2024 amounting to approximately $65 thousand.

Impairment of Goodwill and Intangible Assets

The Company conducts an annual impairment test of goodwill and intangible asset at December 31^st or if events or circumstances exist that would indicate that the Company’s goodwill may be impaired. As circumstances changed during the three months ended June 30, 2024, that would, more likely than not, reduce the Company’s fair value below its net equity value, the Company performed qualitative and quantitative analyses of the potential impairment of its goodwill and intangible assets, specifically evaluating trends in market capitalization, current and future cash flows, revenue growth rates, and the impact of macroeconomic conditions on the Company and its performance. Based on the analysis performed, the Company determined that its goodwill and intangible assets were fully impaired due to the continuation of revenues being below management’s expectations, continued operating losses and negative operating cash flows, reductions in the Company’s stock price and market capitalization, and the delisting from the Nasdaq and subsequent transition to the OTCQX market in the second quarter of 2024 whereby the Company’s common stock has been thinly traded. As a result, the Company recorded a goodwill and intangible asset impairment charge in the amount of $7.6 million for the three and six months ended June 30, 2024.

Interest Expense, net

We incurred $872 thousand of interest expense for the three months ended June 30, 2024 compared to $333 thousand for the three months ended June 30, 2023, an increase of $539 thousand. Interest expense increased primarily due to the debt to Libertas Funding LLC (“Libertas”) and JGB Collateral LLC (“JGB”) which was offset by the decrease in interest due to AXA S.A., a French société anonyme (“AXA”) for the acquisition of Maestro being partially paid down in 2023.

We incurred $1.3 million of interest expense for the six months ended June 30, 2024 compared to $718 thousand for the six months ended June 30, 2023, an increase of $552 thousand. Interest expense increased primarily due to the debt to and JGB which was offset by the decrease in interest due to AXA for the acquisition of Maestro being partially paid down in 2023.

Liquidity and Capital Resources

As of June 30, 2024, we had an accumulated deficit of approximately $94.1 million, unrestricted cash and cash equivalents of approximately $1.3 million and negative working capital of approximately $1.5 million. For the six months ended June 30, 2024, we recognized a net loss of approximately $17.4 million and negative cash flows from operations of approximately $6.7 million.

We have spent most of our cash resources on funding our operating activities. Through June 30, 2024, we have financed our operations primarily with the proceeds from loans, the issuance of convertible promissory notes and warrants, and sales of our equity securities.

On April 15, 2024, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with each of the purchasers that are parties thereto (each, including its successors and assigns, a “Purchaser” and collectively, the “Purchasers”) and JGB, as collateral agent for the Purchasers (the “Agent”).Pursuant to the terms of the Purchase Agreement, on April 15, 2024, we issued the Senior Secured Convertible Debentures (the “Debentures”) due on April 15, 2027 for a principal sum of $11.83 million, subject to the redemption of $5 million at the Company’s election. In accordance with the Purchase Agreement JGB purchased an aggregate of $6.35 million in principal amount of the Debentures. On June 21, 2024, the Company elected not to redeem an additional $5 million of the Debentures with JGB.

Management continues to evaluate additional funding alternatives and is seeking to raise additional funds through the issuance of equity or debt securities.

If we are unable to raise additional capital moving forward, our ability to operate in the normal course and continue to invest in its product portfolio may be materially and adversely impacted and we may be forced to scale back operations or divest some or all of our assets.

As a result of the above, in connection with our assessment of going concern considerations in accordance with Financial Accounting Standard Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that our liquidity condition raises substantial doubt about our ability to continue as a going concern through twelve months from the date these condensed consolidated financial statements are available to be issued. The 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 we be unable to continue as a going concern.

Cash Flows

The following tables summarizes selected information about our sources and uses of cash and cash equivalents for the six months ended June 30, 2024 and 2023:

Comparison of the Six Months Ended June 30, 2024 and 2023

(in thousands)

Net Cash Used in Operating Activities

Net cash used in operating activities totaled $6.7 million for the six months ended June 30, 2024, a decrease of $2.0 million as compared to $8.7 million for the six months ended June 30, 2023. The primary reason for the decrease was the reduction in our net loss from the prior year. Net cash used in operating activities was primarily driven by our net loss for the period of $17.4 million, net of (i) non-cash items totaling $13.0 million and (ii) a decrease in net working capital items amounting to $2.3 million.

Net Cash Provided by Investing Activities

A total of $0 was provided by investing activities in the six months ended June 30, 2024 a decrease of $18 thousand as compared to $18 thousand for the six months ended June 30, 2023. The primary reason for the decrease was no disposal of property and equipment.

Net Cash Provided by Financing Activities

A total of $7.3 million was received from financing activities during the six months ended June 30, 2024, an increase of $836 thousand compared to $6.4 million for the six months ended June 30, 2023. The net proceeds for 2024 were provided from private offerings of common stock of $2.7 million, net proceeds from the Debenture of $5.5 million proceeds from the sale of future cash receipts on accounts receivable of $1.5 million partially offset by the repayment of the AXA loan of $631 thousand, and payments to the buyer of receivables of $1.8 million. The net proceeds for 2023 were provided from the public offering of common stock of $6.4 million.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires management to make estimates, assumptions and judgments 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 revenue and expenses during the applicable periods. We evaluate our estimates, assumptions and judgments on an ongoing basis. Our estimates, assumptions and judgments are based on historical experience and various other factors that we believe to be reasonable under the circumstances. Different assumptions and judgments would change the estimates used in the preparation of our condensed consolidated financial statements, which, in turn, could change the results from those reported.

See Note 4 to our condensed consolidated financial statements included in this Form 10-Q for a description of the significant accounting policies that we use to prepare our consolidated financial statements.

New Accounting Pronouncements

We have considered recently issued accounting pronouncements and do not believe the adoption of such pronouncements will have a material impact on our condensed consolidated financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign exchange risk

The cash generated from revenue is denominated in U.S. Dollars. Our expenses are generally denominated in the currencies of the jurisdictions in which we conduct our operations, which are in the United States and Israel. Our results of current and future operations and cash flows are therefore subject to fluctuations due to changes in the exchange rate of the New Israeli Shekel (NIS). The effect of a hypothetical 10% change in the exchange rate of the NIS versus the U.S. Dollar would not have had a material impact on our historical condensed consolidated financial statements for the six months ended June 30, 2024. To date we have not entered into derivative or hedging transactions, but we may do so in the future if our exposure to foreign currency becomes or is expected to become more significant.

Interest rate risk

We had cash and cash equivalents balances of $1.3 million and $1.1 million on June 30, 2024 and December 31, 2023, respectively. Currently, management does not view this exposure to be a significant risk.

Inflation Risk

Inflation generally affects us by increasing our labor costs. We do not believe that inflation had a material effect on our business, financial condition or results of operations during the six months ended June 30, 2024.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial and Accounting Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the fiscal quarter ended June 30, 2024. Based on this evaluation, our Chief Executive Officer and Chief Financial and Accounting Officer have concluded that, during the period covered by this Quarterly Report, our disclosure controls and procedures were effective.

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial and accounting officer or persons performing similar functions, as appropriate, to allow timely decisions.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the second quarter ended June 30, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

PART II – OTHER INFORMATION

Item 1A. Risk Factors.

In addition to the other information set forth in this report, you should carefully consider the factors discussed below and in Part I, “Item 1A. Risk Factors” in our 2023 Annual Report, which could materially affect our business, financial condition or future results.

For the three month periods ended June 30, 2024 and 2023, we had one customer that accounted for 16.6% and 12.0% of total revenue, respectively. For the six month periods ended June 30, 2024 and 2023, we had one customer that had 15.8% and 11.0% of total revenue, respectively. At June 30, 2024, three customer accounted for 41.9%, 13.3% and 11.6% of accounts receivable. At December 31, 2023, two customers accounted for 16.6% and 14.0% of accounts receivable.

Currently, our revenues are concentrated with one major customers and our revenues may decrease significantly if we were to lose our major customer.

Due to our limited operating history, we have a limited customer base and have depended on a major customer for a significant portion of our revenue. For the three month period ended June 30, 2024 and 2023 we had one customer that accounted for 15.1% and 12.0% of total revenue, respectively. For the six month period ended June 30, 2024 and 2023 we had one customer that accounted for 15.8% and 10.8% of total revenue, respectively. At June 30, 2024, one customer accounted for 21.0% of accounts receivable. At December 31, 2023, two customer accounted for 16.6% and 14.0% of accounts receivable.

If our major customer were to terminate their agreement with us, or if we fail to adequately perform under our agreement, and if we are unable to diversify our customer base, our revenue could decline, and our results of operations could be adversely affected.

Based on the Company’s current financial condition, the Company’s Board of Directors, supported by its management team, is considering exploring strategic alternatives focused on maximizing shareholder value. Strategic alternatives may include, among others, a strategic investment financing which would allow the company to pursue its current business plan to commercialize its products, a business combination such as a merger with another party, or a sale of the company.

We are reviewing strategic alternatives and there can be no assurance that we will be successful in identifying or completing any strategic transaction, that any such strategic transaction will result in additional value for our stockholders or that the process will not have an adverse impact on our business.

The process of reviewing strategic alternatives may be costly, time consuming and disruptive to our business operations and, if we are unable to effectively manage the process, our business, financial condition and results of operations could be adversely affected. We may incur significant costs associated with identifying, evaluating and negotiating potential strategic alternatives, such as legal, financial advisor and accounting fees and expenses and other related charges. We may also incur additional unanticipated expenses in connection with this process. A considerable portion of these costs will be incurred regardless of whether any such course of action is implemented or transaction is completed, decreasing cash available for use in our business.

There can be no assurance that any potential transaction, or series of transactions, or other strategic alternative, if found and if consummated, will provide greater value to our stockholders than that reflected in the current price of our common stock. Until the review process is concluded, perceived uncertainties related to our future may impact our business performance and volatility in the market price of our common stock and may make it more difficult for us to attract and retain qualified personnel and key employees. Our Board has not set a timetable for the conclusion of this review, nor has it made any definitive decisions related to taking any further actions or potential strategic options at this time or at all.

ITEM 6. Exhibits.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.