Marpai(MRAI) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION 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 This section presents Marpai, Inc.'s unaudited condensed consolidated financial statements and related notes for Q2 2025 and 2024 Condensed Consolidated Balance Sheets 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] - 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] - Total stockholders' deficit worsened from $(27.709) million at December 31, 2024, to $(32.367) million at June 30, 2025[10] Condensed Consolidated Statements of Operations 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] - 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] Condensed Consolidated Statements of Changes in Stockholders' Deficit 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] - 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] Condensed Consolidated Statements of Cash Flows 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] - Net cash provided by financing activities decreased significantly by 74.2% from $7.268 million in 2024 to $1.872 million in 2025[17] - 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] Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS 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] - The company's mission is to improve healthcare for self-insured employers, their employees, and healthcare providers by offering technology-driven administration services[20][21] - Marpai Captive, Inc., founded in March 2022, commenced operations in the captive insurance market in Q1 2023[19] NOTE 2 – UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 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] - Management believes all necessary adjustments for a fair statement of interim results have been included[23] NOTE 3 – LIQUIDITY AND GOING CONCERN 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] - 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] NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the key accounting principles and methods used in preparing Marpai's financial statements Use of Estimates 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] Concentrations of Credit Risk 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] - As of June 30, 2025, three customers accounted for 34.8%, 12.0%, and 11.4% of accounts receivable, respectively[30] Restricted Cash 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] Capitalized Software 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] Revenue Recognition 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] Contract Balances 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 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] Timing of Performance Obligations 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] Determining and Allocating the Transaction Price 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][41] Captive Revenue 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] Loss and Loss Adjustment Expenses 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] Earnings (Loss) Per Share 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] - 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] Recently Issued Accounting Pronouncements 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][46][47] NOTE 5 – CAPITALIZED SOFTWARE 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] - 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] NOTE 6 – LOSS AND LOSS ADJUSTMENT EXPENSES 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] - 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] NOTE 7 – CONVERTIBLE DEBENTURES 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] - 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] - The Debentures bear 14% annual interest, require monthly principal payments of $250 thousand starting January 2025, and mature on April 15, 2027[53] | 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 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] NOTE 9 – REVENUE 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 | $14,574 | - TPA services remain the primary revenue source, though total revenue decreased by 35.2% for the three months and 30.9% for the six months ended June 30, 2025, compared to 2024[58] NOTE 10 – SHARE-BASED COMPENSATION This note details the company's share-based compensation plans, including stock options and restricted stock units Global Stock Incentive Plan This sub-note describes the company's stock incentive plans and the number of shares authorized for issuance - Shareholders approved an increase of 500,000 shares to the 2020 Global Incentive Plan on May 31, 2023, bringing the total to 2,450,855 shares[59] - A new 2024 Global Incentive Plan was approved on May 6, 2024, with 2,227,910 shares initially issuable[60] Stock Options This sub-note provides a summary of stock option activity and related compensation expense | Metric (as of June 30, 2025) | Number of Options | Weighted Average Exercise Price ($) | | :--------------------------- | :---------------- | :------------------------------ | | 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] - Stock compensation expense for options decreased from $215 thousand in H1 2024 to $79 thousand in H1 2025[64] Restricted Stock Units This sub-note details the grants, vesting, and compensation expense associated with restricted stock units - 600,000 RSUs were granted to a director on January 28, 2025, with 200,000 vesting upon grant and the remainder vesting over two years[65] - An additional 82,000 RSUs were granted to employees on March 7, 2025, vesting immediately, and 700,000 RSUs were granted on June 9, 2025, with a portion vesting immediately and the rest over three years or upon milestones[66][67] | Metric (as of June 30, 2025) | Restricted Stock Units | Weighted Average Grant Date Fair Value Per Share ($) | | :--------------------------- | :--------------------- | :----------------------------------------------- | | 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 $964 thousand in H1 2025[68] NOTE 11 – WARRANTS This note summarizes the activity and outstanding balance of warrants to purchase common shares | Metric (as of June 30, 2025) | Number of Warrants to Purchase Common Shares | Weighted Average Exercise Price ($) | | :--------------------------- | :------------------------------------------- | :------------------------------ | | 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] NOTE 12 – SEGMENT INFORMATION 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][73] - All revenues are derived from customers located in the United States[71] | 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 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][75] NOTE 14 – ACCRUED EXPENSES 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] NOTE 15 – INCOME TAXES 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] - 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] NOTE 16 – LITIGATION AND LOSS CONTINGENCIES 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] NOTE 17 – SUBSEQUENT EVENTS 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] - 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][86] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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] - Readers are cautioned not to place undue reliance on these statements, and the company disclaims any obligation to update them[90][91] 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] - The company's mission is to deliver affordable, intelligent healthcare programs to clients, members, and providers[93] - Due to its current financial condition, the Board is exploring strategic alternatives, including investment, business combination, or sale, to maximize shareholder value[94] - Marpai's common stock transitioned from Nasdaq to the OTCQX Market effective May 29, 2024[92] Results of Operations 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 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 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][100] - 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][103] General and Administrative Expenses 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][106] Information Technology Expenses 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][108] Sales and Marketing Expenses 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][110] Depreciation and Amortization 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][112] Impairment of Goodwill and Intangible Assets 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] - No impairment charge was recorded for the three and six months ended June 30, 2025[98] Facilities expenses 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][115] Interest Expense, net 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] - 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] Liquidity and Capital Resources 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] - Operations have been financed primarily through loans, convertible promissory notes, warrants, and equity securities sales[119] - 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][130] Cash Flows This section analyzes Marpai's cash generation and usage across operating, investing, and financing activities Net Cash Used in Operating Activities 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] Net Cash Provided by Investing Activities 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] Net Cash Provided by Financing Activities 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] - 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] Critical Accounting Policies and Estimates 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] New Accounting Pronouncements 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] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section discusses Marpai's exposure to foreign exchange, interest rate, and inflation risks, none of which are currently deemed significant Foreign exchange risk 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] - 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] Interest rate risk 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] - Management does not currently view interest rate exposure as a significant risk[140] Inflation Risk 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] - 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] Item 4. Controls and Procedures 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 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] Changes in Internal Control over Financial Reporting 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] Limitations on the Effectiveness of Controls 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] PART II. OTHER INFORMATION This section provides additional information not covered in the financial statements, including risk factors and equity security sales Item 1A. Risk Factors 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] - Loss of major customers or failure to perform adequately could significantly decrease revenue and adversely affect operations[149] - The ongoing review of strategic alternatives is costly, time-consuming, and disruptive, with no assurance of success or additional value for stockholders[150][151] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 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] Item 5. Other Information This section indicates no other information to report under Item 5 Item 6. Exhibits 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] SIGNATURES This section contains the official signatures certifying the filing of the report 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]