{"url_path":"/sec/mrai/10-q/2026/item-2","section_key":"item-2","section_title":"Item 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF MARPAI, INC.**","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-05-15","source_url":"https://www.sec.gov/Archives/edgar/data/1844392/0001213900-26-057777-index.html","accession_number":"0001213900-26-057777","cik":"0001844392","ticker":"MRAI","issuer_name":"Marpai, Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1844392/0001213900-26-057777-index.html","primary_entity_key":"0001844392","primary_entity_name":"Marpai, Inc."},"word_count":3227,"has_tables":true,"body_markdown":"** **\n\n**ITEM\n2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF MARPAI, INC.**\n\n \n\nAs\nused in this quarterly report on Form 10-Q (this “Quarterly Report”), the terms “we”, “us”, “our”,\nthe “Company”, and “Marpai” mean Marpai, Inc., and our wholly owned subsidiaries, Marpai Captive Inc. (“Marpai\nCaptive”), Marpai Administrators LLC (formerly known as Continental Benefits, LLC) (“Marpai Administrators”), Maestro\nHealth, LLC (“Maestro Health”), and Marpai Health, Inc. (“Marpai Health”) and our wholly owned Israeli subsidiary\nEYME Technologies, Ltd. (“EYME”), unless otherwise indicated or required by the context.\n\n \n\n**Special\nNote Regarding Forward-Looking Statements**\n\n \n\nThis\nQuarterly Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section\n21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ\nmaterially from those expected and projected. All statements other than statements of historical fact included in this Quarterly Report\nincluding, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results\nof Operations” regarding our financial position, business strategy and the plans and objectives of management for future operations,\nare forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,”\n“estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking\nstatements. Such forward-looking statements relate to future events or future performances, but reflect management’s current beliefs,\nbased on information currently available. A number of factors could cause actual events, performances or results to differ materially\nfrom the events, performance and results discussed in the forward-looking statements. For information identifying important factors that\ncould cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to Part II, Item\n1A of this Quarterly report and the Risk Factors section of our Annual Report on Form 10-K, filed on March 25, 2026 with the U.S. Securities\nand Exchange Commission (the “SEC”).\n\n \n\nWe\nmay not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place\nundue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations\ndisclosed in the forward-looking statements we make. In addition, statements that “we believe” and similar statements reflect\nour beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this\nQuarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited\nor incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all\npotentially available relevant information.\n\n \n\nOur\nsecurities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable\nsecurities law, we disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new\ninformation, future events or otherwise.\n\n \n\nOn\nMay 24, 2024, we informed the staff of the Nasdaq Stock Market LLC of our intention to withdraw from the Nasdaq hearings process and\ntransition the listing of our common shares from the Nasdaq Capital Market (“Nasdaq”) and have our shares of common stock\nquoted on the OTCQX Market (“OTCQX”). Our common stock was suspended from trading on Nasdaq effective at the opening of trading\non Wednesday, May 29, 2024, and commenced trading on OTCQX immediately thereafter.\n\n \n\n**Overview**\n\n \n\nWe\nare a technology platform company which operates subsidiaries that provide third party administration (“TPA”), Pharmacy Benefit\nManagement (“PBM”), and value-oriented health plan services to employers that directly pay for employee health benefits.\nOur mission is to positively change healthcare for the benefit of (i) our Clients who are self-insured employers that pay for their employees’\nhealthcare benefits and engage us to administer the latter’s healthcare claims, and we refer to them as our “Clients”,\n(ii) employees and their family members who receive these healthcare benefits from our Clients, and we refer to them as our “Members”,\nand (iii) healthcare providers including, doctors, doctor groups, hospitals, clinics, and any other entities providing healthcare services\nor products, and we refer to them as the “Providers.” We provide affordable, intelligent, healthcare programs for self-insured\nemployers in the U.S. We provide administrative services, and act as TPA to self-insured employers who provide healthcare benefits to\ntheir employees. Most of our Clients are small and medium-sized companies as well as local government entities.\n\n \n\nBased\non our current financial condition, our Board of Directors (the “Board”), supported by our management team, is considering\nexploring strategic alternatives focused on maximizing shareholder value. Strategic alternatives may include, among others, a strategic\ninvestment financing which would allow us to pursue our current business plan to commercialize our products, a business combination such\nas a merger with another party, or a sale of the Company.\n\n \n\n18\n\n \n\n \n\n**Representation\nin the Financial Statements of Marpai, Inc.**\n\n \n\nThe\nunaudited condensed consolidated financial statements of Marpai, Inc and the discussion of the results of our operations in this Quarterly\nReport, reflect the results of the operations of Marpai for all periods presented. The results for the three months ended March 31, 2026,\nas applicable, are not necessarily indicative of the results that may be expected for the year ending December 31, 2026.\n\n \n\n**Results\nof Operations**\n\n \n\n**Comparison\nof the Three Months Ended March 31, 2026 and 2025**\n\n \n\nThe\nfollowing table sets forth our consolidated results of operations for the periods indicated.\n\n \n\n(dollars\nin thousands)\n\n \n\n  \nThree Months Ended March 31, \n\n  \n2026  \n2025  \nChange  \n% \n\nRevenue \n$4,444  \n$5,418  \n$(974) \n (18.0)%\n\nCosts and expenses \n    \n    \n    \n   \n\nCost of revenue (exclusive of depreciation and amortization shown separately below) \n 3,239  \n 3,484  \n (245) \n (7.0)%\n\nGeneral and administrative \n 2,130  \n 2,283  \n (153) \n (6.7)%\n\nInformation technology \n 1,157  \n 1,390  \n (233) \n (16.8)%\n\nSales and marketing \n 229  \n 245  \n (16) \n (6.5)%\n\nResearch and development \n —  \n 7  \n (7) \n (100.0)%\n\nDepreciation and amortization \n 60  \n 107  \n (47) \n (43.9)%\n\nFacilities \n 113  \n 152  \n (39) \n (25.7)%\n\nTotal costs and expenses \n 6,928  \n 7,668  \n (740) \n (9.7)%\n\nOperating loss \n (2,484) \n (2,250) \n (234) \n (10.4)%\n\nOther income and (expenses) \n    \n    \n    \n   \n\nOther income, net \n 76  \n —  \n 76  \n N/A \n\nInterest expense, net \n (775) \n (819) \n 44  \n 5.4%\n\n**Total other expense, net**** **\n** ****(699****)**** **\n** ****(819****)**** **\n** ****120**** **** **\n** ****14.7****%**\n\nLoss before income taxes \n (3,183) \n (3,069) \n (114) \n (3.7)%\n\nIncome tax expense \n —  \n —  \n —  \n — \n\nNet loss \n$(3,183) \n$(3,069) \n$(114) \n (3.7)%\n\nNet loss per share, basic and fully diluted \n$(0.13) \n$(0.21) \n$0.08  \n 38.1%\n\n \n\n19\n\n \n\n \n\n*Revenues\nand Cost of Revenue*\n\n \n\nDuring\nthe three months ended March 31, 2026 and 2025, our total revenue was $4.4 million and $5.4 million, respectively, representing a decrease\nin revenue of $974 thousand. The decline is primarily due to customer turnover. The market is evolving, and we are adapting our approach\nto better serve our customers’ needs.\n\n \n\nTotal\nrevenues consist of fees that we charge our customers in consideration for administering their self-insured healthcare plans as well\nas fees that we receive for ancillary services such as care management, case management, cost containment services, and other services\nprovided to our customers by us or other vendors.\n\n \n\nDuring\nthe three months ended March 31, 2026 and 2025, our cost of revenue, exclusive of depreciation and amortization, was $3.2 million and\n$3.5 million, respectively, representing a decrease of $245 thousand.\n\n \n\nTotal\ncost of revenues consists of (i) service fees, which primarily include vendor fees associated with the client’s benefit program\nselections, (ii) the direct labor cost associated with claim management and processing services, and (iii) direct labor costs associated\nwith providing customer support and services to the clients, members, and other external stakeholders.\n\n \n\n*General\nand Administrative Expenses*\n\n \n\nWe\nincurred $2.1 million of general and administrative expenses for the three months ended March 31, 2026, compared to $2.3 million for\nthe three months ended March 31, 2025, representing a decrease of $153 thousand. The decrease is due to the actions taken throughout\n2025 and 2026 to streamline the Company’s TPA operations and lower equity compensation costs in 2026.\n\n \n\n*Information\nTechnology Expenses*\n\n \n\nWe\nincurred $1.2 million of information technology expenses for the three months ended March 31, 2026, compared to $1.4 million for the\nthree months ended March 31, 2025, representing a decrease of $233 thousand. The decrease is due to the actions taken throughout 2025\nand 2026 to streamline the Company’s TPA operations.\n\n \n\n*Sales\nand Marketing Expenses*\n\n \n\nWe\nincurred $229 thousand of sales and marketing expenses for the three months ended March 31, 2026, compared to $245 thousand for the three\nmonths ended March 31, 2025, representing a decrease of $16 thousand. The reason for the decrease is due to the actions taken in 2025\nand early 2026 to improve overall efficiency and resource allocation.\n\n* *\n\n*Research\nand Development Expenses*\n\n \n\nWe\nincurred $0 of research and development expenses for the three months ended March 31, 2026, compared to $7 thousand for the three months\nended March 31, 2025. The reason for the decrease is due to the actions taken in 2025 to consolidate certain departments to improve overall\nefficiency and resource allocation.\n\n \n\n*Depreciation\nand Amortization*\n\n \n\nWe\nincurred $60 thousand of depreciation and amortization expenses for the three months ended March 31, 2026, compared to $107 thousand\nfor the three months ended March 31, 2025, representing a decrease of $47 thousand. This decrease was primarily due to the full depreciation\nor elimination of fixed assets during early 2025.\n\n \n\n*Facilities\nexpenses*\n\n \n\nWe\nincurred facilities expenses of $113 thousand for the three months ended March 31, 2026, compared to facilities expenses of $152 thousand\nfor the three months ended March 31, 2025, representing a decrease of $39 thousand. The decrease in facilities expenses was due to the\nstrategic decommissioning of unutilized facilities and equipment in 2025.\n\n \n\n20\n\n \n\n \n\n*Interest\nExpense, net*\n\n \n\nWe\nincurred $775 thousand of net interest expense for the three months ended March 31, 2026, compared to $819 thousand for the three months\nended March 31, 2025, representing a decrease of $44 thousand primarily due to the decreased loan balance of the JGB Collateral LLC loan.\n\n \n\n**Liquidity\nand Capital Resources**\n\n \n\nAs of March 31, 2026, we had an accumulated deficit\nof approximately $118.6 million, unrestricted cash and cash equivalents of approximately $201 thousand and negative working capital of\napproximately $16.7 million. For the three months ended March 31, 2026, we recognized a net loss of approximately $3.2 million and negative\ncash flows from operations of approximately $477 thousand.\n\n \n\nWe\nhave spent most of our cash resources on funding our operating activities. Through March 31, 2026, we have financed our operations primarily\nwith the proceeds from loans, the issuance of convertible notes and warrants, and sales of our equity securities.\n\n \n\nOn April 15, 2024, we entered into a Securities Purchase\nAgreement (the “JGB Purchase Agreement”) with each of the purchasers that are parties thereto (the “Purchasers”)\nand JGB, a Delaware limited liability company, as collateral agent for the Purchasers (the “Agent”). Pursuant to the terms\nof the JGB Purchase Agreement, on April 15, 2024, we issued Senior Secured Convertible Debentures due on April 15, 2027 for a principal\nsum of $11.83 million, subject to the redemption of $5 million at our election. In accordance with the JGB Purchase Agreement, JGB purchased\nan aggregate of $6.35 million in principal amount of the Debentures. On June 21, 2024, we elected not to redeem an additional $5 million\nof the Debentures with JGB.\n\n \n\nOn December 30, 2024, we entered into amendments\nto the Purchase Agreement (the “Amendment Agreement”) and the Debentures (each, a “Debenture Amendment” and collectively,\nthe “Debenture Amendments”) with the Purchasers and the Agent, to, among other things, sell Debentures up to an additional\naggregate principal amount of $5.4 million, for a total purchase price of $5.0 million (the “Additional Investment”). Pursuant\nto the terms of the Amendment Agreement and the Debenture Amendments, a total of $2.0 million of the Additional Investment was delivered\nto the Company at closing, and the balance of $3.0 million of the Additional Investment is being held in escrow pending satisfaction\nof certain terms and conditions specified in the Amendment Agreement and the Debenture Amendments.\n\n \n\nOn May 13, 2026, we entered into a second\namendment agreement (the “Second Amendment Agreement”) to the JGB Purchase Agreement with each of the Purchasers and the\nAgent. The Second Amendment Agreement, among other things, extended the maturity date of the Debentures issued pursuant to the JGB\nPurchase Agreement by one year to April 15, 2028, revised the amortization schedule set forth in the Debentures and provided for\ncertain restructuring and exit payments.  In connection with the Second Amendment Agreement, Mr. Lamendola granted a second\nlien mortgage on certain personal real property as additional collateral for the obligations under the Debentures.\n\n \n\nOn February 12, 2026, we issued a promissory note (“Note 1”)\nin the principal amount of $410 thousand to our Chief Executive Officer (the “Holder”). Note 1 accrues interest at a\nrate of 12.0% per annum (or the maximum amount of interest allowed under the laws of the State of New York, whichever is less) until\nNote 1 is repaid in full. Note 1 may be prepaid by us, in whole or in part, together with all interest then accrued and any other sums\nthen due and payable to the Holder, at any time, without premium or penalty. All payments of outstanding principal, interest and all other\namounts due under Note 1 are payable by April 11, 2026 to the Holder, or its successors and assigns. The proceeds of Note 1 will be used\nby us for general working capital purposes. On April 29, 2026, we entered into an amendment agreement with the Holder pursuant to which\nthe maturity date of Note 1 was extended to September 1, 2026.\n\n \n\nOn March 9, 2026, we issued a promissory note (“Note 2”)\nin the principal amount of $250 thousand to our Chief Executive Officer. Note 2 accrues interest at a rate of 12.0% per annum\n(or the maximum amount of interest allowed under the laws of the State of New York, whichever is less) until Note 2 is repaid in full.\nNote 2 may be prepaid by us, in whole or in part, together with all interest then accrued and any other sums then due and payable to the\nHolder, at any time, without premium or penalty. All payments of outstanding principal, interest and all other amounts due under Note\n2 are payable by May 10, 2026 to the Holder, or its successors and assigns. The proceeds of Note 2 will be used by us for general working\ncapital purposes. On April 29, 2026, we entered into an amendment agreement with the Holder pursuant to which the maturity date of Note\n2 was extended to September 1, 2026.\n\n \n\nManagement\ncontinues to evaluate additional funding alternatives and is seeking to raise additional funds through the issuance of equity or debt\nsecurities.\n\n \n\nIf\nwe are unable to raise additional capital moving forward, our ability to operate in the normal course and continue to invest in our product\nportfolio may be materially and adversely impacted and we may be forced to scale back operations or divest some or all of our assets.\n\n \n\nAs\na result of the above, in connection with our assessment of going concern considerations in accordance with Financial Accounting Standards\nBoard’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability\nto Continue as a Going Concern,” management has determined that our liquidity condition raises substantial doubt about our ability\nto continue as a going concern through twelve months from the date these condensed consolidated financial statements are issued. The\ncondensed consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification\nof the liabilities that might be necessary should we be unable to continue as a going concern.\n\n \n\n21\n\n \n\n \n\n*Cash\nFlows*\n\n \n\nThe\nfollowing table summarizes selected information about our sources and uses of cash and cash equivalents for the three months ended March\n31, 2026 and 2025:\n\n \n\n**Comparison\nof the Three Months Ended March 31, 2026 and 2025**\n\n \n\n(in\nthousands)\n\n \n\n** **** **\n**Three months Ended\nMarch 31,  **** **\n\n** **** **\n**2026**** **** **\n**2025**** **\n\nNet cash used in operating activities \n$(477) \n$(115)\n\nNet cash provided by investing activities \n —  \n 500 \n\nNet cash provided by financing activities \n 160  \n 1,892 \n\nNet (decrease) increase in cash and cash equivalents and restricted cash \n$(317) \n$2,277 \n\n \n\n*Net\nCash Used in Operating Activities*\n\n \n\nNet\ncash used in operating activities totaled $477 thousand for the three months ended March 31, 2026, and the net cash used in operating\nactivities totaled $115 thousand for the three months ended March 31, 2025. Net cash used in operating activities was primarily driven\nby our net loss for the period of $3.2 million, net of (i) non-cash items totaling $777 thousand and (ii) a decrease in net working capital\nitems amounting to $1.9 million.\n\n \n\n*Net\nCash Provided by Investing Activities*\n\n \n\nA\ntotal of $0 was provided by investing activities for the three months ended March 31, 2026 and $500 thousand for the three months ended\nMarch 31, 2025. The net cash provided by investing activities was due to the collection of cash for the sale of a business unit in the\nfirst quarter 2025.\n\n \n\n*Net\nCash Provided by Financing Activities*\n\n \n\nA\ntotal of $160 thousand was provided from financing activities during the three months ended March 31, 2026, a decrease of $1.7 million\ncompared to $1.9 million for the three months ended March 31, 2025. The net cash provided by financing activities for the three months\nended March 31, 2026 was from related party loans of $660 thousand offset by the repayment of senior secured convertible debentures in\nthe amount of $500 thousand. The net proceeds for 2025 were provided from senior secured convertible debentures issued on April 15, 2024,\nin the amount of $2.3 million, partially offset by the repayment of the loan to AXA S.A., a French société anonyme, in\nconnection with our acquisition of Maestro Health on November 1, 2022, of $196 thousand. \n\n \n\n*Critical\nAccounting Policies and Estimates*\n\n \n\nOur\ncondensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles. The preparation\nof these condensed consolidated financial statements requires management to make estimates, assumptions and judgments that affect the\nreported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements,\nand the reported amounts of revenue and expenses during the applicable periods. We evaluate our estimates, assumptions and judgments\non an ongoing basis. Our estimates, assumptions and judgments are based on historical experience and various other factors that we believe\nto be reasonable under the circumstances. Different assumptions and judgments would change the estimates used in the preparation of our\ncondensed consolidated financial statements, which, in turn, could change the results from those reported.\n\n \n\nSee\nNote 4 to our condensed consolidated financial statements included in this Quarterly Report for a description of the significant accounting\npolicies that we use to prepare our unaudited interim condensed consolidated financial statements.\n\n \n\n*New\nAccounting Pronouncements*\n\n \n\nWe\nhave recently adopted ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,”, ASU 2024-04, Debt\n- Debt with Conversions and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments”, and ASU 2025-05,\nFinancial Instruments – Credit Losses (Topic 326) as of January 1, 2026. The adoption of these standards did not have a material\nimpact on our financial position and results of operations. We have considered recently issued accounting pronouncements and are currently\nevaluating the impact the adoption of such pronouncements will have on our condensed consolidated financial statements.\n\n \n\n22"}