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

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

As used in this quarterly report on Form 10-Q (this "Quarterly Report"), the terms "we", "us", "our", the "Company", and "Marpai" mean Marpai, Inc., and our wholly owned subsidiaries, Marpai Captive Inc. ("Marpai Captive"), Marpai Administrators LLC (formerly known as Continental Benefits, LLC) ("Marpai Administrators"), Maestro Health, LLC ("Maestro Health"), and Marpai Health, Inc. ("Marpai Health") and our 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 contains "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 Quarterly Report including, without limitation, statements in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding our 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 27, 2025 with the U.S. Securities and Exchange Commission (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, 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.

Our 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, we disclaim 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, we informed the staff of the Nasdaq Stock Market LLC of our intention to withdraw from the Nasdaq hearings process and transition the listing of our common shares from the Nasdaq Capital Market ("Nasdaq") and have our shares of common stock quoted on the OTCQX Market ("OTCQX"). Our common stock was suspended from trading on Nasdaq effective at the opening of trading on Wednesday, May 29, 2024, and commenced trading on OTCQX immediately thereafter.

Overview

We are a technology platform company which operates subsidiaries that provide third party administration ("TPA") and value-oriented health plan services to employers that directly pay for employee health benefits. 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 (the "Board"), supported by our management team, is considering exploring strategic alternatives focused on maximizing shareholder value. Strategic alternatives may include, among others, a strategic investment which would allow us to pursue our current business plan to commercialize our 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 our operations in this Quarterly Report, reflect the results of the operations of Marpai for all periods presented. The results for the three and nine months ended September 30, 2025, as applicable, are not necessarily indicative of the results that may be expected for the year ending December 31, 2025.

Results of Operations

Comparison of the Three and Nine months Ended September 30, 2025 and 2024

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

(dollars in thousands)

		Three Months Ended September 30,
		2025				2024				Change				%
Revenue		$	4,037			$	7,008			$	(2,971	)			(42.4	)%
Costs and expenses
Cost of revenue (exclusive of depreciation and amortization shown separately
below)			2,963				5,033				(2,070	)			(41.1	)%
General and administrative			2,067				2,813				(746	)			(26.5	)%
Information technology			1,245				1,273				(28	)			(2.2	)%
Sales and marketing			295				345				(50	)			(14.5	)%
Research and development			-				7				(7	)			(100.0	)%
Depreciation and amortization			107				213				(106	)			(49.8	)%
Loss on sale of business unit			-				73				(73	)			(100.0	)%
Facilities			131				311				(180	)			(57.9	)%
Total costs and expenses			6,808				10,068				(3,260	)			(32.4	)%
Operating loss			(2,771	)			(3,060	)			289				(9.4	)%
Other income and (expenses)
Other income, net			74				119				(45	)			(37.8	)%
Interest expense, net			(797	)			(620	)			(177	)			28.5	%
Foreign exchange loss			-				1				(1	)			(100.0	)%
Total other expense, net			(723	)			(500	)			(223	)			44.6	%
Loss before income taxes			(3,494	)			(3,560	)			66				(1.9	)%
Income tax expense			-				-				-				-
Net loss		$	(3,494	)		$	(3,560	)		$	66				(1.9	)%
Net loss per share, basic and fully diluted		$	(0.20	)		$	(0.30	)		$	0.10				(33.3	)%

(dollars in thousands)

		Nine months Ended September 30,
		2025				2024				Change				%
Revenue		$	14,111			$	21,582			$	(7,471	)			(34.6	)%
Costs and expenses
Cost of revenue (exclusive of depreciation and amortization shown separately
below)			10,357				15,078				(4,721	)			(31.3	)%
General and administrative			6,833				9,954				(3,121	)			(31.4	)%
Information technology			3,927				3,608				319				8.8	%
Sales and marketing			851				1,383				(532	)			(38.5	)%
Research and development			7				22				(15	)			(68.2	)%
Depreciation and amortization			321				2,078				(1,757	)			(84.6	)%
Impairment of goodwill and intangible assets			-				7,588				(7,588	)			(100.0	)%
Loss on sale of business unit			-				73				(73	)			(100.0	)%
Facilities			442				1,197				(755	)			(63.1	)%
Total costs and expenses			22,738				40,981				(18,243	)			(44.5	)%
Operating loss			(8,627	)			(19,399	)			10,772				(55.5	)%
Other income and (expenses)
Other income, net			123				360				(237	)			(65.8	)%
Interest expense, net			(2,430	)			(1,890	)			(540	)			28.6	%
Foreign exchange loss			-				(3	)			3				(100.0	)%
Total other expense, net			(2,307	)			(1,533	)			(774	)			50.5	%
Loss before income taxes			(10,934	)			(20,932	)			9,998				(47.8	)%
Income tax expense			-				-				-				-
Net loss		$	(10,934	)		$	(20,932	)		$	9,998				(47.8	)%
Net loss per share, basic and fully diluted		$	(0.69	)		$	(1.96	)		$	1.27				(64.8	)%

Revenues and Cost of Revenue

During the three months ended September 30, 2025 and 2024, our total revenue was $4.0 million and $7.0 million, respectively, representing a decrease in revenue of $3.0 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.

During the nine months ended September 30, 2025 and 2024, our total revenue was $14.1 million and $21.6 million, respectively, representing a decrease in revenue of $7.5 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.

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 September 30, 2025 and 2024, our cost of revenue exclusive of depreciation and amortization was $3.0 million and $5.0 million, respectively, representing a decrease of $2.0 million.

During the nine months ended September 30, 2025 and 2024, our cost of revenue exclusive of depreciation and amortization was $10.4 million and $15.1 million, respectively, representing a decrease of $4.7 million

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 $2.1 million of general and administrative expenses for the three months ended September 30, 2025, compared to $2.8 million for the three months ended September 30, 2024, representing a decrease of $746 thousand. The decrease is due to the actions taken throughout 2024 to streamline the Company's TPA operations.

We incurred $6.8 million of general and administrative expenses for the nine months ended September 30, 2025, compared to $10.0 million for the nine months ended September 30, 2024, representing a decrease of $3.2 million. The decrease is due to the actions taken throughout 2024 to streamline the Company's TPA operations.

Information Technology Expenses

We incurred $1.2 million of information technology expenses for the three months ended September 30, 2025, compared to $1.3 million for the three months ended September 30, 2024, representing a decrease of $28 thousand. This decrease is the result of changes in two departments' core functions, aligning their tasks with information technology tasks.

We incurred $3.9 million of information technology expenses for the nine months ended September 30, 2025, compared to $3.6 million for the nine months ended September 30, 2024, representing an increase of $319 thousand. This increase is the result of changes in two departments' core functions, aligning their tasks with information technology tasks.

Sales and Marketing Expenses

We incurred $295 thousand of sales and marketing expenses for the three months ended September 30, 2025, compared to $345 thousand for the three months ended September 30, 2024, representing a decrease of $50 thousand. The reason for the decrease is due to the actions taken in 2024, including a headcount reduction, to consolidate certain departments to improve overall efficiency and resource allocation.

We incurred $851 thousand of sales and marketing expenses for the nine months ended September 30, 2025, compared to $1.4 million for the nine months ended September 30, 2024, representing a decrease of $532 thousand. The reason for the decrease is due to the actions taken in the second quarter of 2024, including a headcount reduction, to consolidate certain departments to improve overall efficiency and resource allocation.

Depreciation and Amortization

We incurred $107 thousand of depreciation and amortization expenses for the three months ended September 30, 2025, compared to $213 thousand for the three months ended September 30, 2024, representing a decrease of $106 thousand. This decrease was primarily due to the full depreciation or elimination of fixed assets during 2024 and early 2025.

We incurred $321 thousand of depreciation and amortization expenses for the nine months ended September 30, 2025, compared to $2.1 million for the nine months ended September 30, 2024, representing a decrease of $1.8 million. This decrease was primarily due to the impairment of intangibles in June 2024 and the elimination of fixed assets in November 2024.

Impairment of Goodwill and Intangible Assets

The Company conducts an annual impairment test of goodwill and intangible asset at December 31, 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 had 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 nine months ended September 30, 2024.

Facilities expenses

We incurred facilities expenses of $131 thousand for the three months ended September 30, 2025, compared to facilities expenses of $311 thousand for the three months ended September 30, 2024, representing a decrease of $180 thousand. The decrease in facilities expenses was due to the strategic decommissioning of unutilized facilities.

We incurred facilities expenses of $442 thousand for the nine months ended September 30, 2025, compared to facilities expenses of $1.2 million for the nine months ended September 30, 2024, representing a decrease of $755 thousand. The decrease in facilities expenses was due to the strategic decommissioning of unutilized facilities.

Interest Expense, net

We incurred $797 thousand of net interest expense for the three months ended September 30, 2025, compared to $620 thousand for the three months ended September 30, 2024, representing an increase of $177 thousand primarily due to the loan modification of the JGB Collateral LLC ("JGB") loan.

We incurred $2.4 million of net interest expense for the nine months ended September 30, 2025, compared to $1.9 million for the nine months ended September 30, 2024, representing an increase of $540 thousand. Interest expense increased primarily due to the debt to JGB, which was partially offset by the decrease in interest due to AXA S.A. ("AXA"), resulting from the partial repayment of the principal balance for the acquisition of Maestro.

Liquidity and Capital Resources

As of September 30, 2025, we had an accumulated deficit of approximately $109.8 million, unrestricted cash and cash equivalents of approximately $445 thousand and negative working capital of approximately $10.7 million. For the nine months ended September 30, 2025, we recognized a net loss of approximately $10.9 million and negative cash flows from operations of approximately $2.7 million.

We have spent most of our cash resources on funding our operating activities. Through September 30, 2025, we have financed our operations primarily with the proceeds from loans, the issuance of convertible notes and warrants, and sales of our equity securities.

On January 16, 2024, we entered into a securities purchase agreement (the "Second SPA") with certain Company insiders consisting of HillCour Investment Fund, LLC, an entity controlled by our Chief Executive Officer, Damien Lamendola, ("HillCour"), our Chairman, Yaron Eitan, and one of our directors, Robert Pons, pursuant to which we agreed and sold 1,322,100 shares of our common stock in a private placement, at a purchase price of $0.9201 per share (the consolidated closing bid price of our common stock on Nasdaq as of January 16, 2024).

On February 5, 2024, we entered into an Agreement of Sale of Future Receipts (the "Libertas Agreement") with Libertas Funding, LLC ("Libertas") to sell future receipts totaling $2.2 million for a purchase price of $1.7 million. The future receipts sold were to be delivered weekly to Libertas at predetermined amounts over a period of nine months. The agreement contained an early delivery discount fee for delivering the future receivables before the expiration of the Libertas Agreement and other provisions. Our Chief Executive Officer, Damien Lamendola, provided a guarantee for the funding agreement through various entities he controls. In April 2024, we repaid $1.8 million to Libertas to satisfy the Libertas Agreement in full.

On March 7, 2024, we entered into a securities purchase agreement with HillCour pursuant to which we sold 910,000 shares of common stock in a private placement to HillCour, at a purchase price of $1.65 per share.

On April 15, 2024, we entered into a Securities Purchase Agreement (the "JGB Purchase Agreement") with each of the purchasers that are parties thereto (the "Purchasers") and JGB, a Delaware limited liability company, as collateral agent for the Purchasers (the "Agent"). Pursuant to the terms of the JGB Purchase Agreement, on April 15, 2024, we issued Senior Secured Convertible Debentures due on April 15, 2027 for a principal sum of $11.83 million, subject to the redemption of $5 million at our election (the "Debentures"). In accordance with the JGB Purchase Agreement, JGB purchased an aggregate of $6.35 million in principal amount of the Debentures. On June 21, 2024, we elected not to redeem an additional $5 million of the Debentures with JGB. On December 30, 2024, we entered into amendments to the Purchase Agreement (the "Amendment Agreement") and the Debentures (each, a "Debenture Amendment" and collectively, the "Debenture Amendments") with the Purchasers and the Agent, to, among other things, sell Debentures up to an additional aggregate principal amount of $5.4 million, for a total purchase price of $5.0 million (the "Additional Investment"). Pursuant to the terms of the Amendment Agreement and the Debenture Amendments, a total of $2.0 million of the Additional Investment was delivered to the Company at closing, and the balance of $3.0 million of the Additional Investment was being held in escrow pending satisfaction of certain terms and conditions specified in the Amendment Agreement and the Debenture Amendments. On January 17, 2025, we received proceeds of $3.0 million from an additional investment by JGB that had been held in escrow.

On August 28, 2024, we entered into a securities purchase agreement with two investors, including HillCour, pursuant to which we agreed to issue and sell an aggregate of 2,702,702 shares of our common stock (of which HillCour purchased 1,351,351 shares of common stock) in a private placement, at a purchase price of $0.481 per share (or the closing bid price of our common stock on the OTCQX on August 28, 2024).

On December 5, 2024, we entered into a Securities Purchase Agreement with four investors, including Yaron Eitan, our Chairman, Steve Johnson, our Chief Financial Officer and John Powers, our President and Chief Operating Officer, pursuant to which we agreed to issue and sell an aggregate of 621,194 shares of our shares of common stock (of which Mr. Eitan purchased 110,619 shares of common stock, Mr. Johnson purchased 5,000 shares of common stock and Mr. Powers purchased 10,000 shares of common stock) in a private placement, at a purchase price of $1.13 per share.

On May 13, 2025, we entered into a securities purchase agreement with accredited investors, pursuant to which we agreed to issue and sell an aggregate of 730,000 shares of our common stock in a private placement, at a purchase price of $1.00 per share.

On July 17, 2025, we entered into a securities purchase agreement with two investors, including HillCour, pursuant to which we agreed to issue and sell an aggregate of 130,208 shares of our common stock (of which HillCour purchased 86,805 shares of common stock) in a private placement, at a purchase price of $1.152 per share.

On July 29, 2025, we entered into a securities purchase agreement with three investors, including HillCour, pursuant to which we agreed to issue and sell an aggregate of 603,640 shares of our common stock (of which HillCour purchased 371,470 shares of common stock) in a private placement, at a purchase price of $1.0768 per share.

On September 10, 2025, we entered into a securities purchase agreement with three investors, including HillCour, pursuant to which we agreed to issue and sell an aggregate of 1,038,519 shares of our common stock (of which HillCour purchased 896,903 shares of common stock) in a private placement, at a purchase price of $1.0592 per share.

On September 30, 2025, we entered into a securities purchase agreement with HillCour, pursuant to which the Company agreed to issue and sell an aggregate of 147,058 shares of our common stock in a private placement, at a purchase price of $1.36 per share.

On November 7, 2025, we entered into a securities purchase agreement with certain investors, including the Company's Chief Operating Officer and President, the chairman and certain directors of the Board, pursuant to which we agreed to issue and sell an aggregate of 3,850,000 shares of our common stock and warrants to purchase up to 7,700,000 shares of our common stock (of which the Company's Chief Operating Officer and President, the chairman and certain directors of the Board purchased 300,000 shares of common stock and warrants to purchase up to 600,000 shares of our common stock) in a private placement, at a purchase price of $1.00 per share and accompanying warrant.

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 our 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 nine months ended September 30, 2025 and 2024:

Comparison of the nine months Ended September 30, 2025 and 2024

(in thousands)

		Nine months Ended September 30,
		2025				2024
Net cash used in operating activities		$	(2,690	)		$	(10,478	)
Net cash provided by investing activities			500				227
Net cash provided by financing activities			3,473				8,567
Net increase (decrease) in cash and cash equivalents and restricted cash		$	1,283			$	(1,684	)

Net Cash Used in Operating Activities

Net cash used in operating activities totaled $2.7 million for the nine months ended September 30, 2025, and $10.5 million for the nine months ended September 30, 2024. The primary reason for the decrease in net cash used in operating activities was the reduction in our net loss from the prior year and other changes in operating cash flows. Net cash used in operating activities was primarily driven by our net loss for the period of $10.9 million, net of (i) non-cash items totaling $4.2 million and (ii) an increase in net working capital items amounting to $4.1 million.

Net Cash Provided by Investing Activities

A total of $500 thousand was provided by investing activities for the nine months ended September 30, 2025 and $227 thousand for the nine months ended September 30, 2024. The net cash provided by investing activities was due to the collection of cash for the sale of a business unit.

Net Cash Provided by Financing Activities

A total of $3.5 million was received from financing activities during the nine months ended September 30, 2025, a decrease of $5.1 million compared to $8.6 million for the nine months ended September 30, 2024. The net cash provided by financing activities for the nine months ended September 30, 2025 were provided primarily from the issuance of senior secured convertible debentures issued for net proceeds in the amount of $1.0 million and private placements of common stock of $2.8 million, partially offset by the repayment of the AXA loan of $196 thousand. The net proceeds for 2024 were provided from the public offering of common stock of $4.0 million, proceeds from the sale of future cash receipts on accounts receivable of $1.5 million, senior secured convertible debentures issued in the amount of $5.5 million, partially offset by the repayment of a loan from AXA of $631 thousand, and payments to the buyer of receivables of $1.8 million.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles. 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 Quarterly Report for a description of the significant accounting policies that we use to prepare our unaudited interim condensed consolidated financial statements.

New Accounting Pronouncements

We have considered recently issued accounting pronouncements and are currently evaluating the impact the adoption of such pronouncements will have on our condensed consolidated financial statements.