Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited interim condensed financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled " Risk Factors" included in this Quarterly Report on Form 10-Q, as may be amended, supplemented or superseded from time to time by other reports we file with the SEC. All amounts in this report are in U.S. dollars, unless otherwise noted.

Throughout this Quarterly Report on Form 10-Q, references to "we," "our," "us," the "Company," or "Syra," refer to Syra Health Corp.

Overview

We are a healthcare services company promoting preventative health, holistic wellness, health education, and equitable healthcare for all patient demographics. We leverage deep scientific and healthcare expertise to create strategic frameworks and develop patient-centric solutions for the betterment of patient lives and health outcome linked to developing a healthier population. We are developing comprehensive end-to-end solutions in population health, behavioral and mental health, and healthcare workforce. During the current quarter, we reclassified our digital health and health education revenues into our population health division.

On October 18, 2024, we received a Notice from Nasdaq Stock Market LLC ("Nasdaq") indicating that the bid price for its Class A common stock, for the last 30 consecutive business days for the last thirty consecutive business days, had closed below the minimum $1.00 per share and, as a result, the Company was not in compliance with the $1.00 minimum bid price requirement (the "Minimum Bid Price Requirement") for the continued listing on the Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2).

On April 11, 2025, we voluntarily delisted our Class A common stock from the Nasdaq Capital Market.

On June 13, 2025, the Board of Directors of Syra Health Corp. (the "Company") approved the termination for cause of the employment agreement between Deepika Vuppalanchi, the Company's CEO, and the Company dated April 5, 2021, as amended.

On June 16, 2025, the Board of Directors of the Company appointed Priya Prasad, the Company's CFO and COO, as interim CEO.

On July 1, 2025, the Company entered into a consulting agreement with a former member of the Board of Directors for services related to developing a new strategic plan for the Company and identifying and hiring a new CEO.

On July 28, 2025, Deepika Vuppalanchi resigned from the Board of Directors of the Company for personal reasons.

On August 13, 2025, the Company appointed Radhika Mereddy to its Board of Directors.

Results of Operations for the Three Months Ended September 30, 2025 and 2024

The following table summarizes selected items from the statements of operations for the three months ended September 30, 2025 and 2024.

		For the Three Months Ended
		September 30,				September 30,				Increase /
		2025				2024				(Decrease)
Net revenues
Healthcare workforce		$	407,960			$	1,577,788			$	(1,169,828	)
Population health			1,280,011				652,298				627,713
Behavioral and mental health			-				23,250				(23,250	)
Net revenues			1,687,971				2,253,336				(565,365	)
Cost of services			1,133,430				1,585,038				(451,608	)
Gross profit			554,541				668,298				(113,757	)
Operating expenses:
Salaries and benefits			336,390				594,738				(258,348	)
Professional fees			191,726				153,803				37,923
Research and development expenses			816				34,821				(34,005	)
Selling, general and administrative expenses			252,384				288,305				(35,921	)
Depreciation			5,396				25,541				(20,145	)
Total operating expenses:			786,712				1,097,208				(310,496	)
Operating loss			(232,171	)			(428,910	)			196,739
Total other income (expense)			6,269				11,375				(5,106	)
Net loss		$	(225,902	)		$	(417,535	)		$	191,633

Net Revenues

Net revenue during the three months ended September 30, 2025 was comprised of $407,960 of healthcare staffing services revenue, $1,280,011 of population health revenue, and $0 of behavioral and mental health revenue, compared to net revenue during the three months ended September 30, 2024 comprised of $1,577,788 of healthcare staffing services revenue, $652,298 of population health revenue, and $23,250 of behavioral and mental health revenue, an overall revenue decrease of $565,365, or 25%. The decrease in healthcare workforce revenue was due to fewer new customer acquisitions and lower renewal value on our FSSA (NeuroDiagnostic Institute contract in January 2025, which runs through June 2026 and has a ceiling value of approximately $1,480,000). Population health revenues increased in 2025 due to additional services provided to state health departments and other customers. We depend heavily on state, local and county government budgets for our revenue. In 2025, the United States federal government began pausing or terminating numerous spending programs that potentially fund those programs and institutions that are our customers. As such, we have begun to see delays in new contract awards, or cancellations of previous requests for proposals. These factors, and the possibility of further spending reviews and cancellations are expected to negatively affect the quantity and time of our revenue, results of operations and cash flows in the near term.

Cost of Services

Our cost of services included wages and related payroll taxes, employee benefits and certain other employee-related costs of our contract service employees while they worked on contract assignments. We incurred $1,133,430 of cost of services for the three months ended September 30, 2025, compared to $1,585,038 for the three months ended September 30, 2024, a decrease of $451,608, or 9%. Our gross profit was approximately 33% for the three months ended September 30, 2025, compared to approximately 30% for the three months ended September 30, 2024, an increase of approximately 3%. Our cost of services decreased primarily due to a decrease in labor costs from lower workforce contracts, and decreased consulting costs associated with a change in service mix from healthcare workforce services to project-based population health and digital health services that carry better margins.

Operating Expenses

Salaries and Benefits

Our salaries and benefits include wages and related payroll taxes, employee benefits and certain other employee-related costs of our management and office personnel. We incurred $336,390 of salaries and benefits during the three months ended September 30, 2025, compared to $594,738 for the three months ended September 30, 2024, a decrease of $258,348, or 43%. Salaries and benefits decreased as our headcount decreased in 2025, and due to a strategic focus on streamlining our operations by reducing redundancies and optimizing our workforce.

Professional Fees

Professional fees primarily consisted of expenses incurred from business development, accounting, legal fees, and consulting activities. We incurred $191,726 of professional fees for the three months ended September 30, 2025, compared to $153,803 for the three months ended September 30, 2024, an increase of $37,923, or 25%. Professional fees increased in 2025 due to increased legal related costs from a settlement of an employment claim in the current period, and increased accounting and audit fees.

Research and Development Expenses

Research and development expenses primarily consist of consulting expenses incurred to develop our technology-based solutions. We incurred $816 and $34,821 of research and development expenses for the three months ended September 30, 2025 and 2024, respectively, a decrease of $34,005, or 98%, due to a decrease in consulting expenses incurred to develop our technology-based solutions.

Selling, General and Administrative Expenses

SG&A primarily consisted of marketing, rent, office, insurance, travel and repair and maintenance expenses incurred. We incurred $252,384 of SG&A expenses during the three months ended September 30, 2025, compared to $288,305 for the three months ended September 30, 2024, a decrease of $35,921, or 12%. Our SG&A expenses decreased primarily due to our efforts to reduce overhead in 2025. SG&A included $22,369 and $33,626 of rent incurred in both periods from STVentures, LLC, an entity beneficially owned by our principal owners, our management team and their affiliates, $26,013 and $41,699 of software expense, $115,900 and $112,248 of insurance, $4,337 and $28,639 of investor relations, and $25,071 and $19,281 of subscription and membership fees for the three months ended September 30, 2025 and 2024, respectively.

Depreciation

We incurred $5,396 of depreciation expense for the three months ended September 30, 2025, compared to $25,541 of depreciation expense for the three months ended September 30, 2024, a decrease of $20,145, or 79%.

Other Income (Expense)

Other expense, on a net basis, consisted of $1,905 of interest incurred on insurance finance charges, as partially offset by $8,174 of interest income, for the three months ended September 30, 2025. Other income, on a net basis, consisted of $2,266 of interest incurred on insurance finance charges, offset by $13,941 of interest income, for the three months ended September 30, 2024. Other income, on a net basis, decreased by $5,106, or 45%, primarily due to decreased interest income compared to the prior period.

Net Loss

Our net loss for the three months ended September 30, 2025 was $225,902, compared to a net loss of $417,535 for the three months ended September 30, 2024, a decrease of $191,633.

Results of Operations for the Nine Months Ended September 30, 2025 and 2024

The following table summarizes selected items from the statements of operations for the nine months ended September 30, 2025 and 2024.

		For the Nine Months Ended
		September 30,				September 30,				Increase /
		2025				2024				(Decrease)
Net revenues
Healthcare workforce		$	1,425,624			$	4,411,683			$	(2,986,059	)
Population health			4,066,320				1,518,329				2,547,991
Behavioral and mental health			-				45,345				(45,345	)
Net revenues			5,491,944				5,975,357				(483,413	)
Cost of services			3,595,352				4,657,273				(1,061,921	)
Gross profit			1,896,592				1,318,084				578,508
Operating expenses:
Salaries and benefits			1,169,951				2,178,105				(1,008,154	)
Professional fees			580,691				489,839				90,852
Research and development expenses			67,701				590,263				(522,562	)
Selling, general and administrative expenses			828,741				1,267,634				(438,893	)
Depreciation			18,171				55,460				(37,289	)
Total operating expenses:			2,665,255				4,581,301				(1,916,046	)
Operating loss			(768,663	)			(3,263,217	)			2,494,554
Total other income (expense)			6,900				8,376				(1,476	)
Net loss		$	(761,763	)		$	(3,254,841	)		$	2,493,078

Net Revenues

Net revenue during the nine months ended September 30, 2025 was comprised of $1,425,624 of healthcare staffing services revenue, $4,066,320 of population health revenue, and $0 of behavioral and mental health revenue, compared to net revenue during the nine months ended September 30, 2024 comprised of $4,411,683 of healthcare staffing services revenue, $1,518,329 of population health revenue, and $45,345 of behavioral and mental health revenue, an overall revenue decrease of $483,413, or 8%. The decrease in healthcare workforce revenue was due to fewer new customer acquisitions and lower renewal value on our FSSA (NeuroDiagnostic Institute contract in January 2025, which runs through June 2026 and has a ceiling value of approximately $1,480,000). Population health revenues increased in 2025 due to additional services provided to state departments and other customers. We depend heavily on state, local and county government budgets for our revenue. In 2025, the United States federal government began pausing or terminating numerous spending programs that potentially fund those programs and institutions that are our customers. As such, we have begun to see delays in new contract awards, or cancellations of previous requests for proposals. These factors, and the possibility of further spending reviews and cancellations are expected to negatively affect the quantity and time of our revenue, results of operations and cash flows in the near term.

Cost of Services

Our cost of services included wages and related payroll taxes, employee benefits and certain other employee-related costs of our contract service employees while they worked on contract assignments. We incurred $3,595,352 of cost of services for the nine months ended September 30, 2025, compared to $4,657,273 for the nine months ended September 30, 2024, a decrease of $1,061,921, or 23%. Our gross profit was approximately 35% for the nine months ended September 30, 2025, compared to approximately 22% for the nine months ended September 30, 2024, an increase of approximately 13%. Our cost of services decreased primarily due to a decrease in labor costs, and decreased consulting costs associated with a change in service mix from healthcare workforce services to project-based population health and digital health services that carry better margins. In addition, the cost of services for the nine months ended September 30, 2024 above compared to as reported in the prior period reflects a $120,000 reclassification of expenses from cost of services to selling, general, and administrative (SG&A) expenses. This reclassification was made to more accurately align vendor-related costs with their functional purpose and streamlining the categorization of expenses.

Operating Expenses

Salaries and Benefits

Our salaries and benefits include wages and related payroll taxes, employee benefits and certain other employee-related costs of our management and office personnel. We incurred $1,169,951 of salaries and benefits during the nine months ended September 30, 2025, compared to $2,178,105 for the nine months ended September 30, 2024, a decrease of $1,008,154, or 46%. Salaries and benefits decreased as our headcount decreased in 2025, and due to a strategic focus on streamlining our operations by reducing redundancies and optimizing our workforce.

Professional Fees

Professional fees primarily consisted of expenses incurred from business development, accounting, legal fees, and consulting activities. We incurred $580,691 of professional fees for the nine months ended September 30, 2025, compared to $489,839 for the nine months ended September 30, 2024, an increase of $90,852, or 19%. Professional fees increased in 2025 due to increased legal related costs from a settlement of an employment claim in the current period, and increased accounting and audit fees.

Research and Development Expenses

Research and development expenses primarily consist of consulting expenses incurred to develop our technology-based solutions. We incurred $67,701 and $590,263 of research and development expenses for the nine months ended September 30, 2025 and 2024, respectively, a decrease of $522,562, or 89%, due to a decrease in consulting expenses incurred to develop our technology-based solutions.

Selling, General and Administrative Expenses

SG&A primarily consisted of marketing, rent, office, insurance, travel and repair and maintenance expenses incurred. We incurred $828,741 of SG&A expenses during the nine months ended September 30, 2025, compared to $1,267,634 for the nine months ended September 30, 2024, a decrease of $438,893, or 35%. Our SG&A expenses decreased primarily due to our efforts to reduce overhead in 2025. SG&A included $89,621 and $97,890 of rent incurred in both periods from STVentures, LLC, an entity beneficially owned by our principal owners, our management team and their affiliates, $104,117 and $136,007 of software expense, $345,152 and $443,233 of insurance, $24,558 and $119,322 of investor relations, and $77,234 and $83,489 of subscription and membership fees for the nine months ended September 30, 2025 and 2024, respectively.

Depreciation

We incurred $18,171 of depreciation expense for the nine months ended September 30, 2025, compared to $55,460 of depreciation expense for the nine months ended September 30, 2024, a decrease of $37,289, or 67%.

Other Income (Expense)

Other income, on a net basis, consisted of $8,992 of interest incurred on insurance finance charges, offset by $15,892 of interest income, for the nine months ended September 30, 2025. Other expense, on a net basis, consisted of $10,072 of interest incurred on insurance finance charges, offset by $18,448 of interest income, for the nine months ended September 30, 2024. Other expense, on a net basis, decreased by $1,476, or 18%, primarily due to decreased interest income compared to the prior period.

Net Loss

Our net loss for the nine months ended September 30, 2025 was $761,763, compared to a net loss of $3,254,841 for the nine months ended September 30, 2024, a decrease of $2,493,078.

Liquidity and Capital Resources

We believe that our existing sources of liquidity, along with cash expected to be generated from sales and services, will not be sufficient to fund our operations, anticipated capital expenditures, working capital and other financing requirements for at least the next twelve months from the issuance of the financial statements included elsewhere in this annual report. In the event we are unable to achieve profitable operations in the near term, we may require additional equity and/or debt financing; however, we cannot provide assurance that such financing will be available to us on favorable terms, or at all. We will continue to monitor our expenditures and cash flow position.

The following table summarizes total current assets, liabilities, accumulated deficit and working capital (deficit) at September 30, 2025 and December 31, 2024.

		September 30, 2025				December 31, 2024
Current Assets		$	3,210,591			$	3,352,795
Current Liabilities		$	1,053,829			$	613,549
Accumulated Deficit		$	(9,585,956	)		$	(8,824,193	)
Working Capital		$	2,156,762			$	2,739,246

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. To date, we have funded our operations through equity and debt financings. Our primary uses of cash have been for the development of operations, compensation, and professional fees. All funds received have been expended in the furtherance of growing our business and establishing our services and solutions. The following trends are reasonably likely to result in a material decrease in our liquidity over the near to long term:

	●	A substantial increase in working capital requirements to finance our operations;
	●	Addition of administrative and professional personnel as our business continues to grow;
	●	The cost of being a public company; and
	●	Payments for seeking and securing quality staffing personnel.

Cash Flow Activities for the Nine Months Ended September 30, 2025 and 2024

Net Cash Used in Operating Activities

Cash used provided by operating activities for the nine months ended September 30, 2025 was $158,554 and cash used in operating activities for the nine months ended September 30, 2024 was $2,717,313. The improvement in operating cash activities is a result of our efforts to reduce expenses and better working capital management.

Net Cash Used in Investing Activities

Cash used in investing activities for the nine months ended September 30, 2025 and 2024 was $0 and $11,111, respectively, which related entirely to the purchase of property and equipment during both periods.

Net Cash Provided by Financing Activities

Cash used in financing activities for the nine months ended September 30, 2025 was $260,306, which consisted of $14,800 of proceeds received from the exercise of Class A common stock warrants, offset by $275,106 of repayments on notes payable. Cash provided by financing activities for the nine months ended September 30, 2024 was $2,145,808, which consisted of $2,469,150 of proceeds received from the exercise of Class A common stock warrants, partially offset by $323,342 of repayments on notes payable.

Critical Accounting Policies and Estimates

The preparation of the financial statements included elsewhere in this Quarterly Report on Form 10-Q requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.

The critical accounting estimates, assumptions and judgments that we believe have the most significant impact on our financial statements are described below.

Accounts Receivable

Accounts receivable is carried at their estimated collectible amounts. Accounts receivable is periodically evaluated for collectability based on past credit history with customers and their current financial condition. We had an allowance of $5,520 at September 30, 2025 and December 31, 2024, respectively.

Impairment of Long-Lived Assets

In accordance with the provisions of Accounting Standards Codification ("ASC") Topic 360, "Impairment or Disposal of Long-Lived Assets," all long-lived assets such as property and equipment held and used by us are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets.

Leases

We account for our leases under ASC 842 - Leases. We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use ("ROU") assets, current portion of obligations under operating leases, and obligations under operating leases, non-current on our balance sheets.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date, adjusted by the deferred rent liabilities at the adoption date. As our lease does not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Our terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term.

Revenue Recognition

We recognize revenue in accordance with ASC 606, the core principle of which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services. To achieve this core principle, five basic criteria must be met before revenue can be recognized: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to performance obligations in the contract; and (5) recognize revenue when or as we satisfy a performance obligation.

We account for revenues when both parties to the contract have approved the contract, the rights and obligations of the parties are identified, payment terms are identified, and collectability of consideration is probable. Payment terms vary by client and the services offered.

We have the following main forms of revenue:

	-	Healthcare Workforce Services
	-	Behavioral and Mental Health Services
	-	Population Health

The Company primarily provides its services to state health and social service agencies and universities. Healthcare Workforce, Behavioral Mental Health Service contracts are primarily accounted for as a single performance obligation satisfied over time because the customer simultaneously receives and consumes the benefits of our medical staffing on an hourly or daily basis. Population Health contracts generally consist of multiple performance obligations that are distinct, such as to provide data analytics and reporting, training, or develop technology for implementation and maintenance with the customer. The Company allocates the transaction price across the performance obligations based on the estimated fair value of the distinct performance obligations. Depending on the performance obligation, revenue is recognized at a point in time when the customer obtains the benefit of the services are provide, or over time in the case of digital health revenue where the customer simultaneously receives and consumes benefits of the contract, such as ongoing performance of our technology product.

The contracts generally stipulate bi-weekly or monthly billing, and we have elected the " as invoiced" practical expedient to recognize revenue based on the hours incurred at the contractual rate as we have the right to payment in an amount that corresponds directly with the value of performance completed to date. We may also be subject to penalties for violations of certain ethical standards and non-performance measures within these state contracts. We recognize revenue net of penalties.

Significant Concentrations

The majority of accounts receivable and revenue contracts are between the Company and different divisions within the Indiana Family and Social Services Administration ("FSSA"). Most contracts require monthly payments as the projects progress. The Company generally does not require collateral or advance payments. For the nine months ended September 30, 2025 and 2024, FSSA accounted for approximately 59% and 61% of revenues, respectively, which was derived through a combination of divisions within the State of Indiana, including the FSSA-NeuroDiagnostic Institute, representing $837,703 and $3,398,761 of the Company's Healthcare Workforce revenue for nine months ended September 30, 2025 and 2024, respectively, and the FSSA-Division of Mental Health and Addiction and FSSA-HSCP, representing $1,211,568 and $248,000 of the Company's Population Health revenues for the nine months ended September 30, 2025 and 2024, respectively. Additionally, for the nine months ended September 30, 2025, Humana, Inc accounted for approximately 24% of the Company's Population Health revenue. In addition, the combined divisions of the FSSA, Coordinated Care Corporation (doing business as Managed Health Services, owed 30% of the Company's accounts receivable, respectively, at September 30, 2025, and FSSA represented 11% of outstanding accounts receivable as of December 31, 2024. Two other customers owed 43% and 10% of the Company's accounts receivable at September 30, 2025.

JOBS Act

On April 5, 2012, the Jumpstart Our Business Startups Act (the "JOBS Act") was enacted. Section 107 of the JOBS Act provides that an " emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an " emerging growth company" can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

We have chosen to take advantage of the extended transition periods available to emerging growth companies under the JOBS Act for complying with new or revised accounting standards until those standards would otherwise apply to private companies provided under the JOBS Act. As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates for complying with new or revised accounting standards.

Subject to certain conditions set forth in the JOBS Act, as an "emerging growth company," we intend to rely on certain of these exemptions, including, without limitation, (i) providing an auditor's attestation report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended, and (ii) complying with the requirement adopted by the Public Company Accounting Oversight Board regarding the communication of critical audit matters in the auditor's report on financial statements. We will remain an " emerging growth company" until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of our IPO; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.