Financial Data and Key Metrics Changes - Net revenues for Q3 2025 were $4 million, a decrease of $3 million or approximately 42% compared to Q3 2024 [5] - Operating expenses were $3.9 million, reflecting a $1.2 million or 24% improvement year-over-year [5] - Operating loss was $3.5 million, showing a $0.1 million or 2% improvement from Q3 2024 [5] - Net loss for the quarter was $3.0 million, an improvement of $0.1 million or 2% from Q3 2024 [5] - Basic and diluted loss per share was $0.20, improving by $0.10 per share from Q3 2024 [5] - The company had $450,000 in unrestricted cash on hand at the end of Q3 [6] Business Line Data and Key Metrics Changes - The company is focusing on self-funded health benefit programs, which are gaining popularity among employers due to cost savings [3] - Marpai Rx program is highlighted as a differentiating factor in winning new business [9] Market Data and Key Metrics Changes - The total addressable market for the TPA industry is over $150 billion, expected to grow by 123% by 2031 [4] - The growth is driven by rising healthcare costs, increasing employer-sponsored health plans, and technological advancements [4] Company Strategy and Development Direction - The company is consolidating claims processing into a single operating system to unlock significant cost savings [6] - The focus is on leveraging renewed efficiencies to capture market share and deliver long-term value [11] - The company aims to disrupt the $5.5 trillion U.S. healthcare market with a scalable platform [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's future potential, citing a successful capital raise and strategic partnerships [6] - The organization is positioned to pivot from recovery to aggressive, sustainable growth [11] - The CEO emphasized a commitment to improving patient outcomes at lower costs [10] Other Important Information - The company completed a $3.9 million PIPE transaction to strengthen its financial position [6] - The rollout of the Empara Client Experience Tool is expected to enhance client retention and new business [8] Q&A Session Summary - There were no questions from participants during the Q&A session [12][13]

Core Insights - Marpai, Inc. is experiencing a significant turnaround driven by cost discipline and operational efficiency, positioning itself for strong growth in 2026 [1][2]. Financial Performance - For Q3 2025, Marpai achieved a 24% reduction in operating expenses, decreasing from $5.0 million to $3.8 million, resulting in approximately $1.2 million in cost savings [3][10]. - The operating loss improved by 9%, narrowing from $3.1 million to $2.8 million year-over-year, indicating consistent progress towards profitability [3][10]. - The net loss showed a slight improvement of 2%, decreasing from $3.6 million in Q3 2024 to $3.5 million in Q3 2025 [10]. Growth Outlook - Marpai's sales momentum is strong, with over double-digit new clients contracted for January 1, 2026, indicating a considerable increase in the client base [4]. - The integrated MarpaiRx PBM offering is gaining traction, expanding the total addressable market and enhancing value per client [4]. Strategic Initiatives - The company is focusing on automation, data-driven claims management, and integrated pharmacy benefits to meet industry demand for cost transparency and smarter benefits administration [5]. - Marpai completed a Private Investment in Public Equity (PIPE) transaction, raising gross proceeds of $3.9 million, which will support its turnaround strategy [6]. Operational Efficiency - The company is operating with a leaner model designed to convert future revenue growth into earnings leverage, with a strong pipeline for 2026 [5]. - Marpai's disciplined investment approach and operational rigor are transitioning it from a turnaround story to one focused on profitability and shareholder value [5].

Revenue Performance - Total revenue for Q3 2025 was $4.0 million, a decrease of 42.4% from $7.0 million in Q3 2024, primarily due to customer turnover [110]. - Total revenue for the nine months ended September 30, 2025, was $14.1 million, down 34.6% from $21.6 million in the same period of 2024 [111]. Expenses - General and administrative expenses for Q3 2025 were $2.1 million, a decrease of 26.5% from $2.8 million in Q3 2024 [114]. - General and administrative expenses for the nine months ended September 30, 2025, were $6.8 million, down 31.4% from $10.0 million in the same period of 2024 [115]. - Total costs and expenses for Q3 2025 were $6.8 million, a decrease of 32.4% from $10.1 million in Q3 2024 [108]. - Research and development expenses for Q3 2025 were negligible, reflecting a 100% decrease from $7,000 in Q3 2024 [108]. - Facilities expenses decreased by $180 thousand to $131 thousand for the three months ended September 30, 2025, compared to $311 thousand for the same period in 2024 [123]. - Net interest expense increased by $177 thousand to $797 thousand for the three months ended September 30, 2025, primarily due to loan modifications [125]. Losses - Operating loss for Q3 2025 was $2.8 million, an improvement of 9.4% compared to a loss of $3.1 million in Q3 2024 [108]. - Net loss for Q3 2025 was $3.5 million, a slight improvement of 1.9% from a net loss of $3.6 million in Q3 2024 [108]. - Net loss per share for Q3 2025 was $0.20, a 33.3% improvement from $0.30 in Q3 2024 [108]. - The company recognized a net loss of approximately $10.9 million for the nine months ended September 30, 2025 [127]. Cash Flow - Net cash used in operating activities totaled $2.7 million for the nine months ended September 30, 2025, a decrease from $10.5 million for the same period in 2024 [144]. - Net cash provided by financing activities was $3.5 million for the nine months ended September 30, 2025, a decrease of $5.1 million compared to $8.6 million for the same period in 2024 [146]. Strategic Initiatives - The company is exploring strategic alternatives to maximize shareholder value, which may include a merger or sale of the company [104]. - The company is evaluating additional funding alternatives and may need to scale back operations if unable to raise additional capital [141]. - Management has determined that the liquidity condition raises substantial doubt about the company's ability to continue as a going concern [142]. Financial Position - The company had an accumulated deficit of approximately $109.8 million and negative working capital of approximately $10.7 million as of September 30, 2025 [127]. - The company recorded a goodwill and intangible asset impairment charge of $7.6 million for the nine months ended September 30, 2024, due to continued operating losses and negative cash flows [122]. - The company entered into multiple securities purchase agreements, including a private placement of 3,850,000 shares at $1.00 per share on November 7, 2025 [140].

Financial Performance - Operating expenses decreased by 24%, from $5.0 million to $3.8 million, resulting in approximately $1.2 million in cost savings[7] - Operating loss narrowed by 9%, improving from $3.1 million to $2.8 million year-over-year[7] - Net loss improved by 2%, from $3.6 million to $3.5 million, reflecting a disciplined investment posture[7] - Revenue for the third quarter was $4.037 million, down from $7.008 million in the same quarter last year[18] - Net loss for the nine months ended September 30, 2025, was $10,934, compared to a net loss of $20,932 for the same period in 2024, representing a 47.8% improvement[20] Client Expansion - The company contracted over double-digit new clients for January 1, indicating significant client expansion[5] - The company aims to achieve profitability in the first quarter of 2026, supported by a strong pipeline and committed client base[6] Capital and Financing - Marpai successfully completed a PIPE transaction, raising gross proceeds of $3.9 million to support its turnaround strategy[9] - Financing activities generated a net cash inflow of $3,473, down from $8,567 in the previous year, primarily due to lower proceeds from convertible debentures[20] Asset and Liability Management - The total assets decreased slightly from $12.878 million in December 2024 to $12.753 million in September 2025[16] - Total liabilities increased from $40.587 million in December 2024 to $46.099 million in September 2025[16] Cash Flow and Expenses - Cash flows from operating activities showed a net cash used of $2,690, significantly reduced from $10,478 in the prior year, indicating improved operational efficiency[20] - Cash provided by investing activities increased to $500 from $227 year-over-year, reflecting a positive trend in asset management[20] - Total cash, cash equivalents, and restricted cash at the end of the period was $10,515, a decrease from $11,808 at the end of the previous year[20] - Cash paid for interest decreased to $1,133 from $1,508, indicating a reduction in interest expenses[20] - The company reported a depreciation and amortization expense of $321, down from $2,078, suggesting a decrease in asset write-downs[20] - Share-based compensation expenses were $1,458, compared to $2,786 in the prior year, reflecting cost management efforts[20] - The company recorded a loss on the sale of receivables of $306 in the previous year, which was eliminated in the current period[20] - The company had cash and cash equivalents of $445 and restricted cash of $10,070 at the end of the period, indicating a strong liquidity position[20] Shareholder Value - Earnings per share strengthened by $0.10, highlighting improving shareholder value metrics[7]

Financial Data and Key Metrics Changes - In Q2 2025, net revenues were $4.7 million, approximately 35% lower than Q2 2024 [9] - Operating expenses were $4.4 million, showing a 70% improvement compared to the previous year [10] - Operating loss was $3.6 million, a 71% improvement year-over-year [11] - Net loss for Q2 was $4.4 million, reflecting a 66% improvement from the same period last year [11] - Basic and diluted loss per share improved by $0.95 to $0.28 [11] Business Line Data and Key Metrics Changes - The company is focusing on exiting unprofitable legacy contracts, which contributed to the revenue decline [12] - Investments in new member engagement tools and system enhancements have increased costs but are expected to reduce costs and improve member experiences in the future [12] Market Data and Key Metrics Changes - The TPA industry has a total addressable market exceeding $150 billion, with a forecasted CAGR of 12.1% through 2031 [4] - The TPA market is highly fragmented, presenting opportunities for national independent TPAs like Marpay to scale [4] Company Strategy and Development Direction - Marpay is transitioning from a simple TPA to a technology-driven company, focusing on enhancing member experiences through innovations [16] - The relaunch of MarpayRx, a pharmacy benefit management platform, is expected to significantly reduce specialty drug costs for clients [7][16] - The company anticipates profitability in 2026 due to operational cost reductions and an expected net gain in lives [14] Management's Comments on Operating Environment and Future Outlook - Management believes the company is better positioned for substantial growth despite the revenue decline [16] - The upcoming busy season is expected to bring in significant business, with many employers renewing benefits at the start of the year [13] - A comprehensive update is expected in the next earnings call, with a focus on the progress of MarpayRx [14] Other Important Information - The company has transferred nearly 2,000 lives to the MarpayRx program as of August [14] - The management emphasizes a mission to reduce healthcare costs for self-funded employers while building a profitable enterprise [17] Q&A Session Summary - No specific questions or answers were documented in the provided content, indicating a lack of detailed interaction during the Q&A session [18]

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides Marpai, Inc.'s unaudited condensed consolidated financial statements and management's discussion and analysis for the periods ended June 30, 2025 and 2024 [Item 1. Unaudited Condensed Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section presents Marpai, Inc.'s unaudited condensed consolidated financial statements and related notes for Q2 2025 and 2024 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of Marpai, Inc.'s financial position at June 30, 2025, and December 31, 2024 | Metric | June 30, 2025 (Unaudited) (in thousands) | December 31, 2024 (in thousands) | | :----------------------------------- | :-------------------------- | :------------------ | | **ASSETS (in thousands):** | | | | Cash and cash equivalents | $619 | $764 | | Restricted cash | $7,661 | $8,468 | | Accounts receivable, net | $548 | $837 | | Total current assets | $10,332 | $11,897 | | Total assets | $11,061 | $12,878 | | **LIABILITIES (in thousands):** | | | | Accounts payable | $3,588 | $3,109 | | Accrued fiduciary obligations | $7,179 | $6,308 | | Total current liabilities | $19,734 | $18,982 | | Total liabilities | $43,428 | $40,587 | | **STOCKHOLDERS' DEFICIT (in thousands):** | | | | Accumulated deficit | $(106,274) | $(98,834) | | Total stockholders' deficit | $(32,367) | $(27,709) | - Total assets decreased from **$12.878 million** at December 31, 2024, to **$11.061 million** at June 30, 2025, a decrease of approximately **14.0%**[10](index=10&type=chunk) - Total liabilities increased from **$40.587 million** at December 31, 2024, to **$43.428 million** at June 30, 2025, an increase of approximately **7.0%**[10](index=10&type=chunk) - Total stockholders' deficit worsened from **$(27.709) million** at December 31, 2024, to **$(32.367) million** at June 30, 2025[10](index=10&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section details Marpai, Inc.'s financial performance, including revenue, expenses, and net loss, for Q2 2025 and 2024 | Metric | Three months ended June 30, 2025 (in thousands) | Three months ended June 30, 2024 (in thousands) | Six months ended June 30, 2025 (in thousands) | Six months ended June 30, 2024 (in thousands) | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $4,656 | $7,189 | $10,074 | $14,574 | | Total costs and expenses | $8,263 | $19,462 | $15,930 | $30,912 | | Operating loss | $(3,607) | $(12,273) | $(5,856) | $(16,338) | | Net loss | $(4,371) | $(13,026) | $(7,440) | $(17,372) | | Net loss per share | $(0.28) | $(1.23) | $(0.49) | $(1.73) | - Revenue decreased by **35.2%** for the three months and by **30.9%** for the six months ended June 30, 2025, compared to the same periods in 2024[12](index=12&type=chunk) - Net loss significantly improved, decreasing by **66.4%** for the three months and by **57.2%** for the six months ended June 30, 2025, primarily due to a **100% reduction** in impairment of goodwill and intangible assets (from **$7.588 million** in 2024 to **$0** in 2025)[12](index=12&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Deficit](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Deficit) This section outlines changes in Marpai, Inc.'s stockholders' deficit, including common stock, additional paid-in capital, and accumulated deficit, for the period ended June 30, 2025 | Metric | Balance, January 1, 2025 (in thousands) | Balance, June 30, 2025 (in thousands) | | :-------------------- | :----------------------- | :--------------------- | | Common Stock Amount | $1 | $2 | | Additional Paid-In Capital | $71,124 | $73,905 | | Accumulated Deficit | $(98,834) | $(106,274) | | Total Stockholders' Deficit | $(27,709) | $(32,367) | - The accumulated deficit increased from **$(98.834) million** at January 1, 2025, to **$(106.274) million** at June 30, 2025, primarily due to the net loss of **$(7.440) million** during the period[15](index=15&type=chunk) - Additional paid-in capital increased by **$2.781 million** for the six months ended June 30, 2025, driven by share-based compensation (**$1.043 million**), issuance of common stock to vendors (**$1.008 million**), and issuance of privately placed shares (**$730 thousand**)[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents Marpai, Inc.'s cash flow activities from operations, investing, and financing for the six months ended June 30, 2025, and 2024 | Metric | Six months ended June 30, 2025 (in thousands) | Six months ended June 30, 2024 (in thousands) | | :-------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(3,324) | $(6,705) | | Net cash provided by investing activities | $500 | $0 | | Net cash provided by financing activities | $1,872 | $7,268 | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(952) | $563 | | Cash, cash equivalents and restricted cash at end of period | $8,280 | $14,055 | - Net cash used in operating activities decreased by **50.4%** from **$(6.705) million** in 2024 to **$(3.324) million** in 2025[17](index=17&type=chunk) - Net cash provided by financing activities decreased significantly by **74.2%** from **$7.268 million** in 2024 to **$1.872 million** in 2025[17](index=17&type=chunk) - Overall cash, cash equivalents, and restricted cash decreased by **$(952) thousand** in the first six months of 2025, compared to an increase of **$563 thousand** in the same period of 2024[17](index=17&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements [NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS](index=8&type=section&id=NOTE%201%20%E2%80%93%20ORGANIZATION%20AND%20DESCRIPTION%20OF%20BUSINESS) This note describes Marpai's corporate structure, subsidiaries, and core business activities in the healthcare administration sector - Marpai operates primarily through its wholly-owned subsidiaries: Marpai Health, Inc., Marpai Administrators LLC, and Maestro Health LLC, providing third-party administration (TPA) services to self-insured employer groups[19](index=19&type=chunk) - The company's mission is to improve healthcare for self-insured employers, their employees, and healthcare providers by offering technology-driven administration services[20](index=20&type=chunk)[21](index=21&type=chunk) - Marpai Captive, Inc., founded in March 2022, commenced operations in the captive insurance market in **Q1 2023**[19](index=19&type=chunk) [NOTE 2 – UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS](index=8&type=section&id=NOTE%202%20%E2%80%93%20UNAUDITED%20INTERIM%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This note clarifies the basis of preparation for the interim financial statements, adhering to U.S. GAAP and Form 10-Q requirements - The interim financial statements are prepared in accordance with U.S. GAAP for interim financial information and Form 10-Q instructions, omitting some annual disclosures[23](index=23&type=chunk) - Management believes all necessary adjustments for a fair statement of interim results have been included[23](index=23&type=chunk) [NOTE 3 – LIQUIDITY AND GOING CONCERN](index=8&type=section&id=NOTE%203%20%E2%80%93%20LIQUIDITY%20AND%20GOING%20CONCERN) This note addresses Marpai's liquidity position and the management's assessment of its ability to continue as a going concern | Metric (as of June 30, 2025) | Amount (in thousands) | | :--------------------------- | :-------------------- | | Accumulated deficit | $(106,300) | | Negative working capital | $(9,400) | | Long-term debt | $23,000 | | Unrestricted cash | $619 | | Net loss (six months ended) | $(7,400) | | Negative cash flows from operations (six months ended) | $(3,300) | - The company projects a need for additional capital to fund operations and investments until cash self-sufficiency, anticipating funding from equity sales, debt issuance, or asset divestment[26](index=26&type=chunk) - Management has determined that the company's liquidity condition raises substantial doubt about its ability to continue as a going concern for the next twelve months[28](index=28&type=chunk) [NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=9&type=section&id=NOTE%204%20%E2%80%93%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the key accounting principles and methods used in preparing Marpai's financial statements [Use of Estimates](index=9&type=section&id=Use%20of%20Estimates) This sub-note explains the necessity of management's estimates and assumptions in financial reporting - Preparation of financial statements requires management to make estimates and assumptions affecting reported amounts of assets, liabilities, revenues, and expenses, which are continuously evaluated[29](index=29&type=chunk) [Concentrations of Credit Risk](index=9&type=section&id=Concentrations%20of%20Credit%20Risk) This sub-note details the company's exposure to credit risk, particularly regarding customer revenue and accounts receivable concentrations - For the three and six months ended June 30, 2025, no single customer accounted for more than **10%** of total revenue, a change from 2024 where one customer accounted for **16.6%** (three months) and **15.8%** (six months)[30](index=30&type=chunk) - As of June 30, 2025, three customers accounted for **34.8%**, **12.0%**, and **11.4%** of accounts receivable, respectively[30](index=30&type=chunk) [Restricted Cash](index=10&type=section&id=Restricted%20Cash) This sub-note explains the nature and purpose of restricted cash balances, which are generally unavailable for general corporate use - Restricted cash includes fiduciary funds for clients, cash collateral for credit cards, and a CD for a letter of credit, generally unavailable for corporate purposes[31](index=31&type=chunk) [Capitalized Software](index=10&type=section&id=Capitalized%20Software) This sub-note describes the company's policy for capitalizing and amortizing costs related to internally developed software - The company capitalizes direct internal and external costs for internally developed software projects once in development, amortizing them over three to five years[32](index=32&type=chunk) [Revenue Recognition](index=10&type=section&id=Revenue%20Recognition) This sub-note outlines the principles by which Marpai recognizes revenue from its services - Revenue is recognized when control of promised services is transferred to customers, reflecting the consideration expected for those services[33](index=33&type=chunk) [Contract Balances](index=10&type=section&id=Contract%20Balances) This sub-note provides a summary of key contract-related financial balances, including receivables and deferred revenue | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------- | :------------ | :---------------- | | Accounts receivable, net | $548 | $837 | | Unbilled receivables | $914 | $569 | | Deferred revenue | $743 | $625 | | Performance guarantee liabilities | $123 | $247 | [Significant Payment Terms](index=11&type=section&id=Significant%20Payment%20Terms) This sub-note describes the typical payment terms for Marpai's accounts receivable - Accounts receivable are generally expected to be collected within **30 days**, with invoices sent on the **15th** of the month prior to service with **10-day** payment terms[36](index=36&type=chunk) [Timing of Performance Obligations](index=11&type=section&id=Timing%20of%20Performance%20Obligations) This sub-note explains how revenue is recognized over time as performance obligations for various services are satisfied - Revenue for services like health and welfare administration, COBRA administration, and benefit billing is recognized over time as performance obligations are satisfied[38](index=38&type=chunk) [Determining and Allocating the Transaction Price](index=11&type=section&id=Determining%20and%20Allocating%20the%20Transaction%20Price) This sub-note describes the process for establishing and allocating transaction prices based on customary business practices and contract terms - Transaction prices are determined based on customary business practices and contract terms, with fixed fees denominated per covered employee per month[39](index=39&type=chunk)[41](index=41&type=chunk) [Captive Revenue](index=11&type=section&id=Captive%20Revenue) This sub-note explains the recognition policy for general insurance premiums from captive operations - General insurance premiums for annual policies are recognized in income on a pro-rata basis[42](index=42&type=chunk) [Loss and Loss Adjustment Expenses](index=12&type=section&id=Loss%20and%20Loss%20Adjustment%20Expenses) This sub-note discusses the complexities and potential variations in establishing loss reserves for claims - The establishment of loss reserves is a complex process influenced by past claims experience, exposing the company to potential variations in anticipated loss costs[43](index=43&type=chunk) [Earnings (Loss) Per Share](index=12&type=section&id=Earnings%20(Loss)%20Per%20Share) This sub-note details the calculation methodology for basic and diluted earnings (loss) per share - Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of outstanding common shares[44](index=44&type=chunk) - Diluted earnings (loss) per share includes common stock equivalents, but these were excluded for the six months ended June 30, 2025 and 2024, as their effect would have been anti-dilutive[44](index=44&type=chunk) [Recently Issued Accounting Pronouncements](index=12&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) This sub-note identifies new accounting standards and the company's ongoing evaluation of their potential financial impact - The company is evaluating the impact of ASU 2023-09 (Income Tax Disclosures, effective after Dec 15, 2024), ASU 2024-03 (Expense Disaggregation Disclosures, effective after Dec 15, 2026), and ASU 2024-04 (Convertible Debt Instruments, effective after Dec 15, 2025) on its financial statements[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk) [NOTE 5 – CAPITALIZED SOFTWARE](index=13&type=section&id=NOTE%205%20%E2%80%93%20CAPITALIZED%20SOFTWARE) This note provides details on the company's capitalized software assets, including their net book value and amortization expense | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------- | :------------ | :---------------- | | Capitalized software | $3,835 | $7,085 | | Accumulated amortization | $(3,608) | $(6,644) | | Capitalized software, net | $227 | $441 | - Net capitalized software decreased from **$441 thousand** at December 31, 2024, to **$227 thousand** at June 30, 2025[48](index=48&type=chunk) - Amortization expense for capitalized software was **$214 thousand** for the six months ended June 30, 2025, a significant decrease from **$1.2 million** for the same period in 2024[48](index=48&type=chunk) [NOTE 6 – LOSS AND LOSS ADJUSTMENT EXPENSES](index=13&type=section&id=NOTE%206%20%E2%80%93%20LOSS%20AND%20LOSS%20ADJUSTMENT%20EXPENSES) This note details the changes in net reserves for loss and loss adjustment expenses, including incurred expenses and payments | Metric | Six months ended June 30, 2025 (in thousands) | Six months ended June 30, 2024 (in thousands) | | :-------------------- | :----------------------------- | :----------------------------- | | Net reserves at January 1 | $201 | $266 | | Total incurred loss and loss adjustment expense | $(161) | $98 | | Total payments | $12 | $178 | | Net reserves at June 30 | $28 | $186 | - Net reserves for loss and loss adjustment expenses decreased from **$201 thousand** at January 1, 2025, to **$28 thousand** at June 30, 2025[50](index=50&type=chunk) - Total incurred loss and loss adjustment expense for the six months ended June 30, 2025, was a negative **$(161) thousand**, compared to **$98 thousand** in the prior year, primarily due to a change in provision for prior year insured events[50](index=50&type=chunk) [NOTE 7 – CONVERTIBLE DEBENTURES](index=14&type=section&id=NOTE%207%20%E2%80%93%20CONVERTIBLE%20DEBENTURES) This note provides details on the company's convertible debentures, including issuance, amendments, interest rates, and maturity terms - On April 15, 2024, Marpai issued Senior Secured Convertible Debentures for a principal sum of **$11.8 million**, with JGB purchasing **$6.35 million**[51](index=51&type=chunk) - On December 30, 2024, amendments allowed for the sale of an additional **$5.4 million** in principal amount of Debentures for **$5 million** in proceeds, with **$3 million** received on January 17, 2025[52](index=52&type=chunk) - The Debentures bear **14%** annual interest, require monthly principal payments of **$250 thousand** starting January 2025, and mature on April 15, 2027[53](index=53&type=chunk) | Metric (as of June 30, 2025) | Amount (in thousands) | | :--------------------------------------- | :----- | | Convertible debenture principal | $10,286 | | Unamortized debt premium and issuance costs | $62 | | Outstanding balance, net | $10,348 | | Less: current portion | $(3,037)| | Long-term portion | $7,311 | [NOTE 8 – OTHER LIABILITIES](index=15&type=section&id=NOTE%208%20%E2%80%93%20OTHER%20LIABILITIES) This note details other significant liabilities, including amounts due to AXA S.A. related to the Maestro Health acquisition | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------- | :------------ | :---------------- | | Due to AXA | $18,503 | $17,788 | | Sublease security deposit | $84 | $108 | | Other liabilities | $18,587 | $17,896 | - As of June 30, 2025, the company had **$18.5 million** in outstanding liabilities due to AXA S.A. related to the Maestro Health acquisition, including **$4.5 million** in accrued interest[57](index=57&type=chunk) [NOTE 9 – REVENUE](index=15&type=section&id=NOTE%209%20%E2%80%93%20REVENUE) This note disaggregates revenue by type, highlighting the primary sources and overall trends for the reported periods | Revenue Type | Three months ended June 30, 2025 (in thousands) | Three months ended June 30, 2024 (in thousands) | Six months ended June 30, 2025 (in thousands) | Six months ended June 30, 2024 (in thousands) | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | TPA services | $4,656 | $7,168 | $10,081 | $14,520 | | Captive insurance | $0 | $21 | $(7) | $54 | | Total Revenue | $4,656 | $7,189 | $10,074 | $14,574 | - TPA services remain the primary revenue source, though total revenue decreased by **35.2%** for the three months and **30.9%** for the six months ended June 30, 2025, compared to 2024[58](index=58&type=chunk) [NOTE 10 – SHARE-BASED COMPENSATION](index=16&type=section&id=NOTE%2010%20%E2%80%93%20SHARE-BASED%20COMPENSATION) This note details the company's share-based compensation plans, including stock options and restricted stock units [Global Stock Incentive Plan](index=16&type=section&id=Global%20Stock%20Incentive%20Plan) This sub-note describes the company's stock incentive plans and the number of shares authorized for issuance - Shareholders approved an increase of **500,000 shares** to the 2020 Global Incentive Plan on May 31, 2023, bringing the total to **2,450,855 shares**[59](index=59&type=chunk) - A new 2024 Global Incentive Plan was approved on May 6, 2024, with **2,227,910 shares** initially issuable[60](index=60&type=chunk) [Stock Options](index=16&type=section&id=Stock%20Options) This sub-note provides a summary of stock option activity and related compensation expense | Metric (as of June 30, 2025) | Number of Options | Weighted Average Exercise Price ($) | | :--------------------------- | :---------------- | :------------------------------ | | Balance at January 1, 2025 | 1,145,639 | $3.32 | | Forfeited/Cancelled | (344,014) | $5.85 | | Balance at June 30, 2025 | 801,625 | $2.23 | | Exercisable at June 30, 2025 | 715,804 | $2.22 | - No stock options were granted for the six months ended June 30, 2025 and 2024[62](index=62&type=chunk) - Stock compensation expense for options decreased from **$215 thousand** in H1 2024 to **$79 thousand** in H1 2025[64](index=64&type=chunk) [Restricted Stock Units](index=17&type=section&id=Restricted%20Stock%20Units) This sub-note details the grants, vesting, and compensation expense associated with restricted stock units - **600,000 RSUs** were granted to a director on January 28, 2025, with **200,000** vesting upon grant and the remainder vesting over two years[65](index=65&type=chunk) - An additional **82,000 RSUs** were granted to employees on March 7, 2025, vesting immediately, and **700,000 RSUs** were granted on June 9, 2025, with a portion vesting immediately and the rest over three years or upon milestones[66](index=66&type=chunk)[67](index=67&type=chunk) | Metric (as of June 30, 2025) | Restricted Stock Units | Weighted Average Grant Date Fair Value Per Share ($) | | :--------------------------- | :--------------------- | :----------------------------------------------- | | Outstanding at January 1, 2025 | 1,320,000 | $1.94 | | Granted | 1,382,000 | $1.12 | | Vested | (851,500) | $1.55 | | Outstanding at June 30, 2025 | 1,850,500 | $1.51 | - Share-based compensation expense for RSUs decreased from **$1.5 million** in H1 2024 to **$964 thousand** in H1 2025[68](index=68&type=chunk) [NOTE 11 – WARRANTS](index=18&type=section&id=NOTE%2011%20%E2%80%93%20WARRANTS) This note summarizes the activity and outstanding balance of warrants to purchase common shares | Metric (as of June 30, 2025) | Number of Warrants to Purchase Common Shares | Weighted Average Exercise Price ($) | | :--------------------------- | :------------------------------------------- | :------------------------------ | | Balance at January 1, 2025 | 644,718 | $16.40 | | Forfeited | (91,117) | $5.71 | | Balance at June 30, 2025 | 553,601 | $18.16 | - The number of outstanding warrants decreased by **91,117** due to forfeitures during the six months ended June 30, 2025[70](index=70&type=chunk) [NOTE 12 – SEGMENT INFORMATION](index=18&type=section&id=NOTE%2012%20%E2%80%93%20SEGMENT%20INFORMATION) This note clarifies that the company operates as a single segment and provides geographic revenue and asset information - The company operates as one operating segment, with its CEO serving as the Chief Operating Decision Maker (CODM) reviewing consolidated financial information[72](index=72&type=chunk)[73](index=73&type=chunk) - All revenues are derived from customers located in the United States[71](index=71&type=chunk) | Geographic Region | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------- | :------------ | :---------------- | | United States | $445 | $596 | | Israel | $47 | $141 | | Total long-lived assets | $492 | $737 | [NOTE 13 – RELATED PARTY TRANSACTIONS](index=19&type=section&id=NOTE%2013%20%E2%80%93%20RELATED%20PARTY%20TRANSACTIONS) This note discloses transactions with related parties, including private placements of common stock involving the CEO's controlled entity - In January and March 2024, the company entered into securities purchase agreements with HillCour Investment Fund LLC (controlled by the CEO) and other insiders, issuing common stock in private placements[74](index=74&type=chunk)[75](index=75&type=chunk) [NOTE 14 – ACCRUED EXPENSES](index=19&type=section&id=NOTE%2014%20%E2%80%93%20ACCRUED%20EXPENSES) This note provides a breakdown of accrued expenses, including payables, employee compensation, and performance guarantee liabilities | Accrued Expense Type | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :---------------------------------- | :------------ | :---------------- | | Accrued payables | $1,039 | $1,381 | | Employee compensation | $723 | $504 | | Performance guarantee liabilities | $123 | $247 | | Accrued bonuses | $157 | $252 | | Other accrued expenses and liabilities | $27 | $201 | | Total Accrued expenses | $2,069 | $2,585 | - Total accrued expenses decreased from **$2.585 million** at December 31, 2024, to **$2.069 million** at June 30, 2025[76](index=76&type=chunk) [NOTE 15 – INCOME TAXES](index=19&type=section&id=NOTE%2015%20%E2%80%93%20INCOME%20TAXES) This note explains the company's income tax position, including its effective tax rate and net operating loss carryforwards - The effective tax rate was **0%** for the three and six months ended June 30, 2025 and 2024, due to a full valuation allowance on deferred tax assets[77](index=77&type=chunk) - As of December 31, 2024, the company had federal NOLs of approximately **$58.7 million** (carryforward indefinitely, limited to **80%** of taxable income) and state NOLs of approximately **$51.8 million** (expiring starting 2031)[78](index=78&type=chunk) [NOTE 16 – LITIGATION AND LOSS CONTINGENCIES](index=20&type=section&id=NOTE%2016%20%E2%80%93%20LITIGATION%20AND%20LOSS%20CONTINGENCIES) This note addresses the company's exposure to legal proceedings and potential loss contingencies - The company is not currently subject to any pending legal proceedings believed to have a material adverse impact on its business or financial statements[82](index=82&type=chunk) [NOTE 17 – SUBSEQUENT EVENTS](index=20&type=section&id=NOTE%2017%20%E2%80%93%20SUBSEQUENT%20EVENTS) This note discloses significant events that occurred after the balance sheet date but before the financial statements were issued - On July 4, 2025, the 'One Big Beautiful Bill Act' was signed into law, with certain provisions impacting the company effective in 2025 and 2026; the company is evaluating its impact[84](index=84&type=chunk) - On July 17, 2025, and July 29, 2025, the company entered into securities purchase agreements to issue and sell common stock in private placements, with HillCour (controlled by the CEO) participating[85](index=85&type=chunk)[86](index=86&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Marpai's financial condition, operating results, liquidity, and capital resources for Q2 2025 and 2024, addressing going concern uncertainty [Special Note Regarding Forward-Looking Statements](index=21&type=section&id=Special%20Note%20Regarding%20Forward-Looking%20Statements) This section cautions readers that the report contains forward-looking statements subject to risks and uncertainties - The report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially from expectations[89](index=89&type=chunk) - Readers are cautioned not to place undue reliance on these statements, and the company disclaims any obligation to update them[90](index=90&type=chunk)[91](index=91&type=chunk) [Overview](index=21&type=section&id=Overview) This section provides a general description of Marpai's business, mission, and strategic initiatives, including its market transition - Marpai is a technology platform company providing third-party administration (TPA) and value-oriented health plan services to self-insured employers in the U.S[93](index=93&type=chunk) - The company's mission is to deliver affordable, intelligent healthcare programs to clients, members, and providers[93](index=93&type=chunk) - Due to its current financial condition, the Board is exploring strategic alternatives, including investment, business combination, or sale, to maximize shareholder value[94](index=94&type=chunk) - Marpai's common stock transitioned from Nasdaq to the OTCQX Market effective **May 29, 2024**[92](index=92&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) This section analyzes Marpai's financial performance, including revenue and expense trends, for the reported periods [Comparison of the Three and Six Months Ended June 30, 2025 and 2024](index=23&type=section&id=Comparison%20of%20the%20Three%20and%20Six%20Months%20Ended%20June%2030,%202025%20and%202024) This sub-section provides a detailed comparative analysis of Marpai's financial results for the three and six months ended June 30, 2025 and 2024 | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | Change ($ in thousands) | Change (%) | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Revenue | $4,656 | $7,189 | $(2,533) | (35.2)% | | Total costs and expenses | $8,263 | $19,462 | $(11,199) | (57.5)% | | Operating loss | $(3,607) | $(12,273) | $8,666 | (70.6)% | | Net loss | $(4,371) | $(13,026) | $8,655 | (66.4)% | | Net loss per share | $(0.28) | $(1.23) | $0.95 | (77.2)% | | Metric | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change ($ in thousands) | Change (%) | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Revenue | $10,074 | $14,574 | $(4,500) | (30.9)% | | Total costs and expenses | $15,930 | $30,912 | $(14,982) | (48.5)% | | Operating loss | $(5,586) | $(16,338) | $10,482 | (64.2)% | | Net loss | $(7,440) | $(17,372) | $9,932 | (57.2)% | | Net loss per share | $(0.49) | $(1.73) | $1.24 | (71.7)% | [Revenues and Cost of Revenue](index=25&type=section&id=Revenues%20and%20Cost%20of%20Revenue) This sub-section analyzes the changes in Marpai's revenue and associated cost of revenue for the reported periods - Total revenue decreased by **$2.5 million** (**35.2%**) for the three months and **$4.5 million** (**30.9%**) for the six months ended June 30, 2025, primarily due to customer turnover[99](index=99&type=chunk)[100](index=100&type=chunk) - Cost of revenue decreased by **$1.3 million** (**24.4%**) for the three months and **$2.6 million** (**26.4%**) for the six months ended June 30, 2025, directionally in line with the revenue decline[102](index=102&type=chunk)[103](index=103&type=chunk) [General and Administrative Expenses](index=25&type=section&id=General%20and%20Administrative%20Expenses) This sub-section examines the changes in general and administrative expenses, attributing them to operational streamlining efforts - General and administrative expenses decreased by **$1.2 million** (**33.3%**) for the three months and **$2.3 million** (**33.3%**) for the six months ended June 30, 2025, due to streamlining TPA operations in 2024[105](index=105&type=chunk)[106](index=106&type=chunk) [Information Technology Expenses](index=25&type=section&id=Information%20Technology%20Expenses) This sub-section analyzes the increase in information technology expenses, linked to the realignment of core functions - Information technology expenses increased by **$81 thousand** (**6.7%**) for the three months and **$347 thousand** (**14.9%**) for the six months ended June 30, 2025, due to aligning core functions with IT tasks[107](index=107&type=chunk)[108](index=108&type=chunk) [Sales and Marketing Expenses](index=25&type=section&id=Sales%20and%20Marketing%20Expenses) This sub-section details the reduction in sales and marketing expenses, primarily due to headcount reductions and strategic realignment - Sales and marketing expenses decreased by **$124 thousand** (**28.4%**) for the three months and **$482 thousand** (**46.4%**) for the six months ended June 30, 2025, attributed to headcount reduction and strategic realignment in **Q2 2024**[109](index=109&type=chunk)[110](index=110&type=chunk) [Depreciation and Amortization](index=26&type=section&id=Depreciation%20and%20Amortization) This sub-section analyzes the significant decrease in depreciation and amortization expenses, linked to prior impairments and asset eliminations - Depreciation and amortization expenses decreased significantly by **$807 thousand** (**88.3%**) for the three months and **$1.7 million** (**88.5%**) for the six months ended June 30, 2025, due to prior impairments and fixed asset elimination[111](index=111&type=chunk)[112](index=112&type=chunk) [Impairment of Goodwill and Intangible Assets](index=26&type=section&id=Impairment%20of%20Goodwill%20and%20Intangible%20Assets) This sub-section discusses the significant goodwill and intangible asset impairment charge recorded in 2024 and its absence in 2025 - The company recorded a **$7.6 million** goodwill and intangible asset impairment charge for the three and six months ended June 30, 2024, due to underperforming revenues, operating losses, negative cash flows, stock price reduction, and Nasdaq delisting[113](index=113&type=chunk) - No impairment charge was recorded for the three and six months ended June 30, 2025[98](index=98&type=chunk) [Facilities expenses](index=26&type=section&id=Facilities%20expenses) This sub-section analyzes the decrease in facilities expenses, resulting from the strategic decommissioning of unutilized facilities - Facilities expenses decreased by **$251 thousand** (**61.1%**) for the three months and **$574 thousand** (**64.9%**) for the six months ended June 30, 2025, due to strategic decommissioning of unutilized facilities[114](index=114&type=chunk)[115](index=115&type=chunk) [Interest Expense, net](index=26&type=section&id=Interest%20Expense,%20net) This sub-section examines the changes in net interest expense, influenced by loan modifications and debt repayments - Net interest expense decreased by **$59 thousand** (**6.8%**) for the three months ended June 30, 2025, primarily due to the JGB loan modification[116](index=116&type=chunk) - Net interest expense increased by **$363 thousand** (**28.6%**) for the six months ended June 30, 2025, due to debt to JGB, partially offset by decreased interest due to AXA from partial principal repayment[117](index=117&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses Marpai's ability to meet its short-term and long-term obligations, including its accumulated deficit and funding strategies - As of June 30, 2025, the company had an accumulated deficit of **$106.3 million**, **$619 thousand** in unrestricted cash, and negative working capital of **$9.4 million**[118](index=118&type=chunk) - Operations have been financed primarily through loans, convertible promissory notes, warrants, and equity securities sales[119](index=119&type=chunk) - The company continues to seek additional funding through equity or debt issuance, and management's assessment raises substantial doubt about its ability to continue as a going concern for the next twelve months[129](index=129&type=chunk)[130](index=130&type=chunk) [Cash Flows](index=29&type=section&id=Cash%20Flows) This section analyzes Marpai's cash generation and usage across operating, investing, and financing activities [Net Cash Used in Operating Activities](index=29&type=section&id=Net%20Cash%20Used%20in%20Operating%20Activities) This sub-section details the decrease in net cash used in operating activities, primarily due to a reduction in net loss - Net cash used in operating activities decreased to **$3.3 million** for the six months ended June 30, 2025, from **$6.7 million** in the prior year, primarily due to a reduction in net loss[133](index=133&type=chunk) [Net Cash Provided by Investing Activities](index=29&type=section&id=Net%20Cash%20Provided%20by%20Investing%20Activities) This sub-section explains the cash provided by investing activities, primarily from the sale of a business unit - Net cash provided by investing activities was **$500 thousand** for the six months ended June 30, 2025, resulting from the collection of cash from the sale of a business unit[134](index=134&type=chunk) [Net Cash Provided by Financing Activities](index=29&type=section&id=Net%20Cash%20Provided%20by%20Financing%20Activities) This sub-section details the significant decrease in net cash provided by financing activities, including debentures and stock placements - Net cash provided by financing activities decreased significantly to **$1.9 million** for the six months ended June 30, 2025, from **$7.3 million** in the prior year[135](index=135&type=chunk) - Key financing activities in 2025 included **$1.3 million** from convertible debentures and **$730 thousand** from private placement of common stock, partially offset by **$196 thousand** repayment of the AXA loan[135](index=135&type=chunk) [Critical Accounting Policies and Estimates](index=29&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights the significant accounting policies and estimates that require management's judgment and assumptions - The preparation of consolidated financial statements requires management to make estimates, assumptions, and judgments that affect reported amounts, which are continuously evaluated[136](index=136&type=chunk) [New Accounting Pronouncements](index=29&type=section&id=New%20Accounting%20Pronouncements) This section notes the company's ongoing evaluation of recently issued accounting pronouncements and their potential impact - The company is currently evaluating the impact of recently issued accounting pronouncements on its condensed consolidated financial statements[138](index=138&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=30&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section discusses Marpai's exposure to foreign exchange, interest rate, and inflation risks, none of which are currently deemed significant [Foreign exchange risk](index=30&type=section&id=Foreign%20exchange%20risk) This section addresses the company's exposure to foreign exchange rate fluctuations, particularly with the New Israeli Shekel - The company's expenses are denominated in U.S. Dollars and New Israeli Shekel (NIS), creating foreign exchange risk[139](index=139&type=chunk) - A hypothetical **10%** change in the NIS/USD exchange rate would not have materially impacted historical financial statements for the six months ended June 30, 2025[139](index=139&type=chunk) [Interest rate risk](index=30&type=section&id=Interest%20rate%20risk) This section discusses the company's exposure to interest rate fluctuations on its cash and cash equivalents - The company held cash and cash equivalents of **$619 thousand** at June 30, 2025, and **$764 thousand** at December 31, 2024[140](index=140&type=chunk) - Management does not currently view interest rate exposure as a significant risk[140](index=140&type=chunk) [Inflation Risk](index=30&type=section&id=Inflation%20Risk) This section addresses the potential impact of inflation on the company's operations, particularly labor costs - Inflation primarily affects the company through increased labor costs[141](index=141&type=chunk) - Inflation did not have a material effect on the company's business, financial condition, or results of operations during the six months ended June 30, 2025[141](index=141&type=chunk) [Item 4. Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of Marpai's disclosure controls and procedures as of June 30, 2025, with no material changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=30&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section reports on management's assessment of the effectiveness of the company's disclosure controls and procedures - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2025[142](index=142&type=chunk) [Changes in Internal Control over Financial Reporting](index=30&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section confirms that no material changes occurred in internal control over financial reporting during the second quarter of 2025 - There were no changes in internal control over financial reporting during the second quarter ended June 30, 2025, that materially affected or are reasonably likely to materially affect internal control over financial reporting[144](index=144&type=chunk) [Limitations on the Effectiveness of Controls](index=30&type=section&id=Limitations%20on%20the%20Effectiveness%20of%20Controls) This section acknowledges the inherent limitations of any control system, providing only reasonable assurance of achieving objectives - Management acknowledges that controls and procedures, regardless of design, can only provide reasonable assurance of achieving control objectives due to inherent resource constraints and the need for judgment[145](index=145&type=chunk) [PART II. OTHER INFORMATION](index=31&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information not covered in the financial statements, including risk factors and equity security sales [Item 1A. Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) This section highlights key risks, including customer concentration and uncertainties related to the ongoing review of strategic alternatives - The company's revenues are concentrated with a few major customers; as of June 30, 2025, three customers accounted for **34.8%**, **12.0%**, and **11.4%** of accounts receivable[148](index=148&type=chunk) - Loss of major customers or failure to perform adequately could significantly decrease revenue and adversely affect operations[149](index=149&type=chunk) - The ongoing review of strategic alternatives is costly, time-consuming, and disruptive, with no assurance of success or additional value for stockholders[150](index=150&type=chunk)[151](index=151&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.](index=31&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) During Q2 2025, Marpai, Inc. issued 725,000 restricted common shares to a consultant in an unregistered transaction - During **Q2 2025**, **725,000** restricted common shares were issued to a consultant in an unregistered sale, exempt under Section 4(a)(2) and/or Rule 506(b) of Regulation D[152](index=152&type=chunk) [Item 5. Other Information](index=31&type=section&id=Item%205.%20Other%20Information) This section indicates no other information to report under Item 5 [Item 6. Exhibits](index=32&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate documents, agreements, and certifications - Exhibits include Amended and Restated Certificates of Incorporation, Securities Purchase Agreements from July 2025, and CEO/CFO Certification Statements (302 and 906 of Sarbanes Oxley Act)[154](index=154&type=chunk) [SIGNATURES](index=33&type=section&id=SIGNATURES) This section contains the official signatures certifying the filing of the report [Signatures](index=33&type=section&id=Signatures) This section contains the official signatures of Marpai, Inc.'s CEO and CFO, certifying the report filing on August 13, 2025 - The report was signed by Damien Lamendola, Chief Executive Officer, and Steve Johnson, Chief Financial Officer, on **August 13, 2025**[160](index=160&type=chunk)

[Press Release Highlights](index=1&type=section&id=Press%20Release%20Highlights) Marpai's Q2 2025 press release details significant financial improvements, management's positive outlook towards Q1 2026 profitability, and standard forward-looking statements [Second Quarter 2025 Financial Results Overview](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Results%20Overview) Marpai reported significant year-over-year improvements in Q2 2025, drastically cutting operating expenses by 70% and reducing net loss by 66%, signaling a decisive step in its turnaround strategy despite a decrease in net revenues - Marpai slashed losses by **two-thirds** in Q2 2025, paving the way to profitability, with operating expenses cut by **70%**[1](index=1&type=chunk) Q2 2025 Key Financial Improvements (Year-over-Year) | Metric | Change | Improvement/Decrease | | :-------------------------------- | :-------------------------------- | :------------------- | | Operating expenses | Down 70% | $9.9 million savings | | Operating loss | Reduced by 71% | $8.7 million improvement (to $3.6 million) | | Net loss | Reduced by 66% | $8.7 million improvement (to $4.4 million) | | Net loss per share | Improved by $0.95 | | | Net revenues | Down $2.5 million | (to $4.7 million) | [Management Outlook and Strategic Initiatives](index=1&type=section&id=Management%20Outlook%20and%20Strategic%20Initiatives) CEO Damien Lamendola expressed confidence in the accelerating turnaround, attributing progress to cost control and operational discipline. The company anticipates achieving profitability in Q1 2026 and plans a major infrastructure investment in Q3 2025 to enhance efficiency and client service - CEO Damien Lamendola believes the turnaround is 'real and accelerating' due to strengthened financial position from cost cutting and streamlined operations[2](index=2&type=chunk) - Marpai estimates it is on track to deliver a profitable company in the **first quarter of 2026**[2](index=2&type=chunk) - A major infrastructure investment is expected in **Q3 2025** to further improve efficiency and client service[2](index=2&type=chunk) - The CEO continues to invest personal capital in the company, signaling deep belief in Marpai's future[2](index=2&type=chunk) [Company Information and Forward-Looking Statements](index=2&type=section&id=Company%20Information%20and%20Forward-Looking%20Statements) Marpai, Inc. is a technology platform company providing TPA and value-oriented health plan services to self-funded employers, operating nationwide with access to leading provider networks. The report includes a standard disclaimer regarding forward-looking statements, highlighting inherent risks and uncertainties that could cause actual results to differ from expectations - Marpai, Inc. is a technology platform company operating subsidiaries that provide TPA and value-oriented health plan services to self-funded employers[5](index=5&type=chunk) - The company competes in the **$150 billion TPA sector**, serving self-funded employer health plans representing over **$1.5 trillion in annual claims**[5](index=5&type=chunk) - The press release contains forward-looking statements, and readers are cautioned not to place undue reliance on them due to significant risks and uncertainties[6](index=6&type=chunk) - Actual results may differ materially from current expectations due to factors such as adverse economic conditions, competitive pressures, and risks associated with business growth[6](index=6&type=chunk) [Condensed Consolidated Financial Statements](index=3&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section provides Marpai's condensed consolidated balance sheets, statements of operations, and cash flows, detailing financial position and performance for the periods presented [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, Marpai's total assets decreased compared to December 31, 2024, primarily due to reductions in cash and restricted cash. Total liabilities increased, leading to an expanded stockholders' deficit Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 (Unaudited) | December 31, 2024 | | :-------------------------------- | :-------------------------- | :---------------- | | Cash and cash equivalents | $619 | $764 | | Restricted cash | $7,661 | $8,468 | | Total current assets | $10,332 | $11,897 | | Total assets | $11,061 | $12,878 | | Total current liabilities | $19,734 | $18,982 | | Total liabilities | $43,428 | $40,587 | | Total stockholders' deficit | $(32,367) | $(27,709) | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the three months ended June 30, 2025, Marpai significantly reduced its net loss to $4.371 million from $13.026 million in the prior year, primarily driven by a substantial decrease in total costs and expenses, including the absence of goodwill impairment, despite a decline in revenue Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $4,656 | $7,189 | $10,074 | $14,574 | | Total costs and expenses | $8,263 | $19,462 | $15,930 | $30,912 | | Operating loss | $(3,607) | $(12,273) | $(5,856) | $(16,338) | | Net loss | $(4,371) | $(13,026) | $(7,440) | $(17,372) | | Net loss per share, basic and fully diluted | $(0.28) | $(1.23) | $(0.49) | $(1.73) | | Impairment of goodwill and intangible assets | $— | $7,588 | $— | $7,588 | [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash used in operating activities significantly decreased. The company generated cash from investing activities through the sale of a business unit, while financing activities saw proceeds from convertible debentures and common stock issuance, though overall cash and restricted cash decreased Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(3,324) | $(6,705) | | Net cash provided by investing activities | $500 | $— | | Net cash provided by financing activities | $1,872 | $7,268 | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(952) | $563 | | Cash, cash equivalents and restricted cash at end of period | $8,280 | $14,055 | | Proceeds from sale of business unit | $500 | $— | | Proceeds from issuance of convertible debentures | $3,000 | $5,978 |

Core Insights - Marpai, Inc. has significantly reduced its losses by two-thirds in Q2 2025, indicating progress in its turnaround strategy [1][2] - The company has cut operating expenses by 70%, saving approximately $9.9 million, which has contributed to a leaner operational structure [6] - Marpai's CEO expresses confidence in achieving profitability by Q1 2026, supported by a strong pipeline of new business and planned infrastructure investments [2][3] Financial Performance - Net revenues for Q2 2025 were reported at $4.7 million, a decrease of $2.5 million compared to the same quarter last year [3][9] - Operating loss was reduced by 71% to $3.6 million, reflecting an $8.7 million improvement year-over-year [6][9] - Net loss decreased by 66% to $4.4 million, also an $8.7 million improvement, with net loss per share improving by $0.95 [6][9] Operational Highlights - The company is focused on cost control and operational discipline, which has resulted in a stronger platform for growth [2][6] - Marpai operates in the $150 billion Third-Party Administration (TPA) sector, serving self-funded employer health plans with over $1.5 trillion in annual claims [4] - The company aims to enhance efficiency and client service through major infrastructure investments planned for Q3 2025 [2][3] Balance Sheet Overview - As of June 30, 2025, total assets were reported at $11.061 million, down from $12.878 million at the end of 2024 [8] - Current liabilities increased to $19.734 million from $18.982 million, indicating a rise in financial obligations [8] - The accumulated deficit stood at $(106.274) million, reflecting ongoing challenges in achieving profitability [8]

Core Insights - Marpai, Inc. has relaunched MarpaiRx, a pharmacy benefit management solution aimed at enhancing member experiences and reducing costs for health plans in the $150 billion TPA market [1][2][3] Group 1: MarpaiRx Features - MarpaiRx offers complete transparency with no hidden fees or surprise markups, ensuring real savings for health plans and members [2][6] - The solution employs advanced technology to identify the most cost-effective medications, focusing on lowest net costs [6] - MarpaiRx enhances member experience by streamlining prescription delivery, prior authorizations, and financial assistance coordination [6] Group 2: Cost Management Strategies - The program addresses high specialty drug costs through real-time technology and a multi-pronged approach [5][6] - It includes international sourcing for specific medications to secure discounts while maintaining supply chain integrity [6] - Flexible copay programs are designed to incentivize members to choose cost-effective specialty medications [6] Group 3: Market Context - According to a 2024 study, over 24% of healthcare spending is allocated to prescription drugs, highlighting the need for cost-effective pharmacy benefits [3] - Marpai operates in a competitive landscape, serving self-funded employer health plans that represent over $1.5 trillion in annual claims [7]

Financial Data and Key Metrics Changes - Net revenues for Q1 2025 were $5.4 million, approximately 27% lower than Q1 2024 [3] - Operating expenses were $7.7 million, showing a 33% improvement over Q1 2024 [4] - Operating loss was $2.3 million, a 45% improvement over Q1 2024 [4] - Net loss was $3.1 million, representing a 29% improvement over Q1 2024 [4] - Basic and diluted earnings per share were a loss of $0.21, an improvement of $0.25 per share over Q1 2024 [4] Business Line Data and Key Metrics Changes - The company is focusing on margin-generating clients and managing lower-margin clients to drop off [3][4] - The TPA market in the U.S. is valued at $150 billion, with a forecasted annual growth of 12.1% through 2031 [8] Market Data and Key Metrics Changes - The company is positioned to partner with employers adopting self-funded health insurance, which is a growing trend due to rising healthcare inflation [5][6] - Employers can see savings of up to 10% by moving to a self-funded model managed by a TPA [6] Company Strategy and Development Direction - The core mission is to deliver affordable and intelligent healthcare solutions, with a strong pipeline of business for the second half of 2025 [10] - The company is focused on driving efficiencies and cost reductions to achieve profitability [11] - The appointment of Dallas Scripp as COO is part of the strategy to strengthen leadership and drive growth initiatives [11] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges faced in signing new business in Q1 but expects to win clients off-cycle and during the January cycle next year [14][18] - Confidence in achieving cash flow positivity by year-end is supported by ongoing cost reduction initiatives and operational efficiencies [20][21] Other Important Information - The rollout of the Empower member portal is on track to be completed by the end of Q2 2025, which aims to improve customer service and operational efficiency [10][24] Q&A Session Summary Question: Insights on new business sign-ups in Q1 - Management focused on turnaround efforts in 2024 and did not hire key sales personnel until May, impacting new business sign-ups [15][16] Question: Expectations for off-cycle client wins - Management confirmed expectations for off-cycle wins and a strong pipeline for the second half of 2025 [17][18] Question: Discussion on cash burn and cost reduction initiatives - Management highlighted ongoing rationalization of vendors and legacy contracts to reduce costs and improve operational efficiencies [20][21] Question: Details on the Empower portal - The Empower portal consolidates multiple applications into a single solution, enhancing user experience and reducing call center demands [22][24]