no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by the federal securities laws. Precipio shareholders as of the April 19, 2024 record date for the Annual Meeting are invited to attend the virtual Annual Meeting by visiting www.virtualshareholdermeeting.com/PRPO2024. About Precipio Forward-Looking Statements NEW HAVEN, Conn., June 13, 2024 (GLOBE NEWSWIRE) -- Specialty diagnostics company Precipi ...

During this process, we've realized that there are quite a few shareholders who didn't know whether their shares were voted on or not. You can accomplish this in one of three easy ways that will take no more than 60 seconds: The record date for determining shareholders eligible to vote at the Annual Meeting will remain the close of business on April 19, 2024. Shareholders who have already submitted a proxy do not need to vote again for the reconvened Annual Meeting, as the proxies submitted will remain vali ...

NEW HAVEN, Conn., June 12, 2024 (GLOBE NEWSWIRE) -- Management of specialty cancer diagnostics company Precipio, Inc. (NASDAQ: PRPO) is requesting that shareholders instruct their brokers to vote their shares immediately today no later than 11pm Eastern Time. In order to ensure that there is a quorum required for the shareholders' meeting that is scheduled to take place tomorrow June 13, 2024 at 10 a.m. Eastern Time. At the time of this press release, approximately 44% of shares have been voted. For the com ...

In September of 2023, Precipio's pathology division exceeded its breakeven point of $15M annualized revenue run rate, resulting in a Q4 cash burn of less than $100K for the quarter. In the following quarter, as previously discussed, due to several operational issues, revenue declined below that point. 2. Change Healthcare hacking & cash impact This rule creates two options to comply: The FDA rule has stipulated that any tests that a lab was operating before the ruling on May 2023 are "grandfathered" into ap ...

WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Table of Contents For the quarterly period ended March 31, 2024 UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR (203) 787-7888 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission File Number: 001-36439 PRECIPIO, INC. (Exact name of registrant as specified in its charter) Delawa ...

```markdown PART I [Forward-Looking Statements](index=3&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section provides a cautionary statement regarding forward-looking statements within the Annual Report on Form 10-K, highlighting substantial risks and uncertainties that could cause actual results to differ materially - Forward-looking statements are subject to **substantial risks and uncertainties**, and actual results may **vary materially** due to factors such as development and commercialization activities, intellectual property, reimbursement, market acceptance, competition, and regulatory changes[14](index=14&type=chunk)[17](index=17&type=chunk) - The company explicitly **disclaims any obligation to update or revise** forward-looking statements, except as required by law[18](index=18&type=chunk) [Item 1. Business](index=6&type=section&id=Item%201.%20Business) Precipio, Inc. is a healthcare biotechnology company focused on cancer diagnostics, aiming to reduce misdiagnoses through proprietary diagnostic products and services - Precipio, Inc. is a healthcare biotechnology company focused on cancer diagnostics, aiming to mitigate misdiagnoses by developing and commercializing diagnostic products and services[21](index=21&type=chunk)[22](index=22&type=chunk) - The company operates CLIA laboratories in New Haven, Connecticut, and Omaha, Nebraska, which serve both R&D for new product development and provide essential blood cancer diagnostics to oncologists[22](index=22&type=chunk)[23](index=23&type=chunk) - Precipio partners with global healthcare distributors like ThermoFisher, McKesson, and Cardinal Health for its go-to-market strategy, alongside direct sales[25](index=25&type=chunk) - The diagnostic industry faces a significant problem of misdiagnosis, particularly in blood-related cancers (up to **28%**), leading to an estimated annual cost of **$750 billion** within the healthcare system[27](index=27&type=chunk)[29](index=29&type=chunk) - The U.S. oncology total available market is estimated to exceed **$20 billion** with a **5% compound annual growth rate**, while the diagnostics product market is projected to reach over **$14 billion by 2025**, also with a **5% annual growth rate**[30](index=30&type=chunk) [Business Description](index=6&type=section&id=Business%20Description) Precipio, Inc. is a healthcare biotechnology company dedicated to cancer diagnostics, focusing on developing solutions to reduce misdiagnoses - Precipio's mission is to address cancer misdiagnoses by developing diagnostic products and services that offer higher accuracy and improved laboratory workflow[21](index=21&type=chunk)[22](index=22&type=chunk) - The company operates CLIA laboratories in New Haven, CT, and Omaha, NE, which are integral to R&D, beta-testing, and providing essential blood cancer diagnostics[22](index=22&type=chunk)[23](index=23&type=chunk) - Commercialization is achieved through a Products Division team that handles direct sales and collaborates with global healthcare distributors like ThermoFisher, McKesson, and Cardinal Health[25](index=25&type=chunk) [Industry](index=6&type=section&id=Industry) The diagnostic industry is characterized by a focus on competitive pricing and turnaround times, often at the expense of quality and accuracy, leading to high rates of misdiagnosis - The diagnostic industry's focus on competitive pricing and test turnaround times often compromises quality and accuracy, leading to **high misdiagnosis rates**[27](index=27&type=chunk) - Blood cancer misdiagnosis rates can be as high as **28%**, according to a study by the National Coalition of Health[27](index=27&type=chunk) - The estimated annual cost of misdiagnosis within the healthcare system is **$750 billion**, leading to incorrect treatments and increased patient morbidity and mortality[29](index=29&type=chunk) [Market](index=8&type=section&id=Market) Precipio operates in the U.S. domestic oncology market, estimated to exceed $20 billion with a 5% compound annual growth rate - The U.S. domestic oncology market is estimated to exceed **$20 billion**, with a compound annual growth rate exceeding **5%**[30](index=30&type=chunk) - The diagnostics product market is estimated to have annual revenues exceeding **$14 billion by 2025**, with an estimated annual growth rate of **5%**[30](index=30&type=chunk) - Precipio currently provides diagnostic blood cancer testing services to oncology practices in over **20 states** from its New Haven, Connecticut commercial lab[31](index=31&type=chunk) [Our Technologies](index=8&type=section&id=Our%20Technologies) Precipio has developed and commercialized two key diagnostic technologies: HemeScreen™ and IV-Cell™, designed for improved accuracy and efficiency - HemeScreen™ is a suite of disease-specific genetic diagnostic panels for blood cancers (e.g., Myeloproliferative Neoplasms, Acute Myeloid Leukemia, Chronic Lymphocytic Leukemia, Cytopenia, BCR-ABL) that utilize inexpensive RT-PCR[32](index=32&type=chunk)[35](index=35&type=chunk)[37](index=37&type=chunk) - HemeScreen™ reduces test turnaround time from **2 weeks to 2 days** and improves laboratory financial outcomes by allowing all required genes to be tested on a single, low-cost platform[35](index=35&type=chunk)[36](index=36&type=chunk)[42](index=42&type=chunk) - IV-Cell™ is a proprietary universal cell culture media that enables simultaneous culturing of all four hematopoietic cell lineages, addressing a **40% misdiagnosis rate** caused by reliance on clinical suspicion for single-lineage culturing[39](index=39&type=chunk)[40](index=40&type=chunk) - IV-Cell™ has been validated in Precipio's laboratory on over **1,000 clinical specimens**, demonstrating superior results compared to existing commercial reagents like MarrowMax[41](index=41&type=chunk) [Competition](index=10&type=section&id=Competition) Precipio faces competition in clinical pathology services and diagnostic products from specialized oncology labs and large commercial labs - In clinical pathology services, Precipio competes with specialized oncology companies (e.g., NeoGenomics, GenPath Diagnostics, Inform Diagnostics) and large commercial companies (e.g., LabCorp, Quest Diagnostics)[42](index=42&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk) - HemeScreen™ panels offer a targeted approach (**4-7 genes**) on a single, inexpensive RT-PCR machine (**$30-75k**), providing a simplified, cost-effective workflow compared to multi-platform single-gene tests or complex, expensive NGS panels (**50-500 genes**, **millions for machines**)[48](index=48&type=chunk)[49](index=49&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk) - IV-Cell™ is unique as an all-in-one media enabling simultaneous culturing of all four cell lineages, unlike competitors who offer separate base media and mitogens for specific lineages[53](index=53&type=chunk)[54](index=54&type=chunk) [Competitive Advantage](index=14&type=section&id=Competitive%20Advantage) Precipio's competitive advantage stems from its integrated model of identifying clinical challenges, developing solutions, and testing them in-house - Precipio's competitive advantage is its ability to identify clinical challenges, develop technology solutions, test them on real clinical samples in-house, and then commercialize them[55](index=55&type=chunk) - The company's model ensures product relevance, reliability, and workability within laboratory workflows, providing unparalleled hands-on support to customers[55](index=55&type=chunk) - Embedding R&D personnel within clinical laboratory operations creates a cost-effective development environment, facilitating issue identification, cause isolation, and proprietary product solutions to minimize misdiagnoses[56](index=56&type=chunk) [Government Regulation](index=14&type=section&id=Government%20Regulation) The healthcare industry is heavily regulated, impacting Precipio's operations, reimbursement, and product commercialization, with evolving FDA and EU IVDR oversight - The healthcare industry is subject to extensive and complex federal, state, and local regulations, including the PPACA and the Physician Payments Sunshine Act[57](index=57&type=chunk)[58](index=58&type=chunk) - Medicare is the largest insurance provider for the company's blood-related cancer patients, accounting for approximately **32% of cases in 2023**, with **33% of total revenue** derived directly from government-sponsored healthcare programs[61](index=61&type=chunk)[65](index=65&type=chunk) - The FDA considers products labeled 'Research Use Only' (RUO) exempt from medical device requirements if not intended for clinical diagnostic use, but scrutinizes marketing and support activities for consistency with RUO status[67](index=67&type=chunk)[69](index=69&type=chunk) - The FDA has proposed ending enforcement discretion for Laboratory Developed Tests (LDTs) in five stages over four years, which would require LDTs to comply with medical device regulations, including marketing authorization, quality systems, and adverse event reporting[70](index=70&type=chunk)[71](index=71&type=chunk) - Products in the European Union are regulated as in-vitro diagnostic devices under the IVDR, requiring a CE mark for market placement[74](index=74&type=chunk)[75](index=75&type=chunk) [Research and Development Expenses](index=20&type=section&id=Research%20and%20Development%20Expenses) The company reported consistent research and development expenses of $1.7 million for both the years ended December 31, 2023, and 2022 Research and Development Expenses | Year Ended December 31, | 2023 (Millions) | 2022 (Millions) | | :---------------------- | :-------------- | :-------------- | | R&D Expenses | $1.7 | $1.7 | [Human Capital](index=20&type=section&id=Human%20Capital) As of March 1, 2024, Precipio employed 51 full-time and 6 part-time individuals, prioritizing employee development, competitive compensation, and a diverse work environment Employee Count (as of March 1, 2024) | Category | Count | | :----------------------- | :---- | | Full-time Employees | 51 | | Part-time Employees | 6 | | **Total Employees** | **57** | | Finance, General & Admin | 13 | | Laboratory & Production | 24 | | Sales & Marketing | 10 | | Customer Service & Support | 3 | | Research & Development | 7 | - The company emphasizes employee development, training, competitive compensation, and comprehensive benefits, including unlimited personal time off and enhanced parental leave[79](index=79&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk) - Precipio is committed to creating a diverse, inclusive, and safe work environment, and all employees are expected to adhere to the Code of Business Conduct and Ethics[84](index=84&type=chunk)[85](index=85&type=chunk) [Executive Officers of the Registrant](index=22&type=section&id=Executive%20Officers%20of%20the%20Registrant) Precipio's executive leadership includes Ilan Danieli, Chief Executive Officer, and Matthew Gage, Chief Financial Officer - Ilan Danieli, age **52**, is the Chief Executive Officer, having founded Precipio Diagnostics LLC and assumed the CEO role for Precipio, Inc. in **2017**[87](index=87&type=chunk)[88](index=88&type=chunk)[89](index=89&type=chunk) - Matthew Gage, age **57**, was promoted to Chief Financial Officer effective **July 1, 2023**, after serving as Interim CFO and Director of Financial Reporting and Analysis since **2017**[90](index=90&type=chunk) [Environmental, Social, and Governance](index=24&type=section&id=Environmental%2C%20Social%2C%20and%20Governance) Precipio published its ESG Report in February 2023, demonstrating its commitment to responsible business decisions for all stakeholders - Precipio published its ESG Report in **February 2023**, outlining its commitment to responsible business decisions for stakeholders[91](index=91&type=chunk) - The company is committed to environmentally sustainable operations, focusing on reducing greenhouse gas emissions, energy use, waste, and water[92](index=92&type=chunk) - Precipio believes it is in compliance with current environmental protection requirements, with associated costs not being material[93](index=93&type=chunk) [Intellectual Property](index=24&type=section&id=Intellectual%20Property) Precipio has filed an international patent application for its proprietary HemeScreen technology, indicating efforts to protect its innovative diagnostic solutions - The company has filed an international patent application for its proprietary HemeScreen technology[94](index=94&type=chunk) [Corporate History](index=24&type=section&id=Corporate%20History) Precipio, Inc. was incorporated in Delaware on March 6, 1997, and maintains its principal office in New Haven, Connecticut - Precipio, Inc. was incorporated in Delaware on **March 6, 1997**, with its principal office located at **4 Science Park, New Haven, Connecticut 06511**[95](index=95&type=chunk) - The company's SEC filings, including exhibits, are available free of charge on its investor relations website[96](index=96&type=chunk) [Item 1A. Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) This section outlines significant risks that could adversely affect Precipio's business, financial condition, and stock price - There is **substantial doubt about Precipio's ability to continue as a going concern** due to incurred operating losses and negative cash flow from operations[103](index=103&type=chunk)[106](index=106&type=chunk) - The company requires **significant additional financing** to sustain operations and commercialize its diagnostic technology, with failure to obtain funding potentially leading to delays, reductions, or cessation of operations[109](index=109&type=chunk)[118](index=118&type=chunk) - Precipio operates in an **intensely competitive medical diagnostic industry**, facing competitors with significantly greater financial resources and expertise in R&D, manufacturing, and marketing[131](index=131&type=chunk)[132](index=132&type=chunk) - The company's products, including those sold as Research Use Only (RUO) or offered as Laboratory Developed Tests (LDTs), could become subject to government regulations requiring expensive and time-consuming marketing authorization[187](index=187&type=chunk)[188](index=188&type=chunk)[191](index=191&type=chunk) - Cybersecurity risks could compromise information, expose the company to liability, and harm its operations and reputation, despite existing safeguards[164](index=164&type=chunk)[167](index=167&type=chunk)[169](index=169&type=chunk) [Summary of Risk Factors](index=26&type=section&id=Summary%20of%20Risk%20Factors) This section provides a high-level overview of the primary risks facing Precipio, including going concern issues, the need for additional financing, and sustained losses - Key risks include **substantial doubt about continuing as a going concern**, the need for **significant additional financing**, and expected ongoing losses[100](index=100&type=chunk) - Operational risks involve intense competition, challenges in developing new products, and the commercial success depending on market acceptance and effective marketing[100](index=100&type=chunk) - Regulatory and financial risks include potential delisting from Nasdaq, increased corporate governance costs, and significant dilution from equity issuances[100](index=100&type=chunk) [Risks Related to Our Business and Strategy](index=28&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Strategy) Precipio faces critical business and strategic risks, including substantial doubt about its ability to continue as a going concern, requiring significant additional financing - The company's independent registered public accounting firm has issued a going concern opinion, citing substantial operating losses (**$5.8 million net loss in 2023**) and negative cash flow from operations (**$3.6 million in 2023**), with an accumulated deficit of **$98.2 million** and working capital of **$0.5 million** as of December 31, 2023[103](index=103&type=chunk)[106](index=106&type=chunk) - Precipio needs additional financing to sustain operations, having received **$0.1 million** from the AGP 2023 Sales Agreement (with **$3.7 million remaining**) and having a receivables factoring agreement with Culain Capital Funding LLC (unused as of report date)[111](index=111&type=chunk)[112](index=112&type=chunk)[114](index=114&type=chunk)[115](index=115&type=chunk) - The company has incurred losses since inception and expects to continue incurring losses through at least **2024**, with profitability uncertain due to factors like market acceptance, competitive development, and market penetration[119](index=119&type=chunk)[121](index=121&type=chunk) - One customer represented **11% of total revenue in 2023**, and one customer accounted for **13% of total accounts receivable** at December 31, 2023, posing concentration risks[123](index=123&type=chunk)[124](index=124&type=chunk) - Adverse U.S. or global economic conditions, including inflation, interest rate increases, and disruptions in the financial services industry (e.g., bank failures like SVB), could negatively affect the company's business, financial condition, and ability to raise capital[143](index=143&type=chunk)[144](index=144&type=chunk)[147](index=147&type=chunk) - The company is a small organization with **51 full-time and 6 part-time employees** as of March 1, 2024, and faces challenges in managing future growth, including attracting and retaining skilled personnel[158](index=158&type=chunk)[159](index=159&type=chunk) [Reimbursement and Regulatory Risks Relating to Our Business](index=51&type=section&id=Reimbursement%20and%20Regulatory%20Risks%20Relating%20to%20Our%20Business) Precipio's business is highly susceptible to changes in healthcare reimbursement policies and extensive government regulations - Governmental payers and health care plans are implementing cost control measures that could negatively affect coverage and reimbursement for Precipio's services[181](index=181&type=chunk)[182](index=182&type=chunk) - Changes in payer mix, particularly an increase in government payers, could materially impact net sales and profitability due to potential reimbursement reductions[183](index=183&type=chunk) - The FDA's proposed rule to end enforcement discretion for Laboratory Developed Tests (LDTs) in five stages over four years could require Precipio's LDTs to obtain marketing authorization, leading to significant expense and delay[191](index=191&type=chunk)[192](index=192&type=chunk) - Failure to comply with HIPAA regulations could result in civil and criminal penalties, fines, exclusion from government healthcare programs, and loss of necessary licenses[193](index=193&type=chunk) - The company is subject to federal fraud and abuse laws, including the Anti-Kickback Statute, Stark Law, False Claims Act, and Civil Monetary Penalties Law, with potential for substantial penalties and operational restructuring if non-compliant[195](index=195&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk)[201](index=201&type=chunk)[204](index=204&type=chunk) [Intellectual Property Risks Related to Our Business](index=59&type=section&id=Intellectual%20Property%20Risks%20Related%20to%20Our%20Business) Precipio's competitive position relies heavily on its intellectual property, including patents, trade secrets, copyrights, and trademarks - Precipio relies on patents, trade secrets, copyrights, and trademarks, but these measures may not provide adequate protection, and the intellectual property portfolio is at an early stage with **one pending international patent application for HemeScreen**[206](index=206&type=chunk) - The company's ability to obtain and maintain valid and enforceable patents is uncertain, with risks including failure of patent applications to issue, challenges to validity, and the high cost and time-consuming nature of the patent prosecution process[207](index=207&type=chunk)[208](index=208&type=chunk) - Dependence on licensed technologies means any loss of rights could prevent the sale of certain products, and obtaining new licenses may be difficult or costly[211](index=211&type=chunk)[212](index=212&type=chunk) - Protecting trade secrets is challenging, with risks of unauthorized disclosure by employees or independent discovery by competitors, which could harm the company's competitive position[214](index=214&type=chunk)[217](index=217&type=chunk) - Third-party claims of intellectual property infringement are a substantial risk in the diagnostic industry, potentially leading to injunctions, substantial damages, or the need to obtain costly licenses[219](index=219&type=chunk)[222](index=222&type=chunk)[224](index=224&type=chunk) - Changes to patent law in the U.S. (e.g., Supreme Court rulings) and the implementation of the European Unified Patent Court (UPC) could diminish the value of patents and impair the ability to protect product candidates[230](index=230&type=chunk)[231](index=231&type=chunk) [Risks Related to Our Common Stock](index=71&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) Precipio's common stock faces significant risks, including high price volatility, Nasdaq delisting, and dilution from future equity issuances - The price of Precipio's common stock may fluctuate significantly due to a limited public market and potential manipulation from short selling, which has previously impacted its value in an extreme and volatile manner[240](index=240&type=chunk)[241](index=241&type=chunk)[242](index=242&type=chunk)[243](index=243&type=chunk) - Failure to satisfy Nasdaq listing maintenance requirements could lead to delisting, resulting in reduced liquidity, limited market quotations, and decreased ability to raise future financing[244](index=244&type=chunk)[245](index=245&type=chunk) - Compliance with corporate governance regulations, including the Sarbanes-Oxley Act and Dodd-Frank Act, incurs significant legal, accounting, and management costs, and weaknesses in internal control over financial reporting could harm operating results[246](index=246&type=chunk)[250](index=250&type=chunk)[253](index=253&type=chunk) - The company has not paid dividends and does not expect to in the foreseeable future, meaning investor returns are limited to stock price appreciation[256](index=256&type=chunk) - Sales of common stock through 'at the market' offerings (e.g., AGP 2023 Sales Agreement with **$3.7 million remaining**) and the exercise of outstanding warrants (**459,535 warrants and 232,744 stock options** as of December 31, 2023) could cause significant dilution to existing stockholders[259](index=259&type=chunk)[260](index=260&type=chunk)[262](index=262&type=chunk)[263](index=263&type=chunk) - Anti-takeover provisions in the company's charter documents and Delaware law could delay or prevent a change of control, potentially limiting the market price of common stock[273](index=273&type=chunk)[274](index=274&type=chunk) [Item 1B. Unresolved Staff Comments](index=84&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments from the SEC regarding the company's filings - The company has no unresolved staff comments[277](index=277&type=chunk) [Item 1C. Cybersecurity](index=84&type=section&id=Item%201C.%20Cybersecurity) Precipio maintains a robust cybersecurity framework, including policies and processes for assessing, identifying, and managing threats, integrated into its overall risk management - Precipio is committed to protecting its information systems and data from cybersecurity threats through ongoing assessment, management, and oversight[278](index=278&type=chunk) - The company utilizes third-party services for security control evaluations, including penetration testing, independent audits, and cybersecurity maturity assessments[278](index=278&type=chunk)[283](index=283&type=chunk) - Primary responsibility for assessing, monitoring, and managing cybersecurity risks rests with an IT consultant who reports to the IT Manager and Chief Operating Officer, with periodic briefings provided to the audit committee[281](index=281&type=chunk)[285](index=285&type=chunk)[287](index=287&type=chunk)[289](index=289&type=chunk) - To date, Precipio has not encountered cybersecurity challenges that have materially impaired its operations or financial standing[284](index=284&type=chunk) [Item 2. Properties](index=86&type=section&id=Item%202.%20Properties) Precipio leases approximately 8,267 square feet of laboratory and office space in New Haven, Connecticut, and 5,300 square feet in Omaha, Nebraska - Precipio leases **8,267 square feet** of lab and office space in New Haven, CT, with a lease expiring in **December 2026** and annual rental payments of **$0.2 million**[290](index=290&type=chunk) - The company also leases **5,300 square feet** of lab space in Omaha, NE, with a lease expiring in **May 2025** and annual rental payments of **less than $0.1 million**[290](index=290&type=chunk) - These facilities are considered adequate for current and planned needs, with alternative space believed to be available if required[290](index=290&type=chunk) [Item 3. Legal Proceedings](index=86&type=section&id=Item%203.%20Legal%20Proceedings) Precipio is involved in legal proceedings incidental to its business, including delinquent accounts payable and a claim for patent management services - Precipio is involved in legal proceedings related to its business, including delinquency on accounts payable to certain vendors and suppliers[294](index=294&type=chunk) - CPA Global claims the company owes approximately **$0.2 million** for patent maintenance services, with a liability of **less than $0.1 million** recorded as of December 31, 2023[446](index=446&type=chunk) - Management believes the company complies with fraud and abuse regulations and other applicable government laws, but acknowledges that compliance is subject to future review and interpretation, and legal outcomes are uncertain[292](index=292&type=chunk)[293](index=293&type=chunk) [Item 4. Mine Safety Disclosures](index=86&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Precipio, Inc - This item is not applicable[295](index=295&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=88&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Precipio's common stock trades on the Nasdaq Capital Market under 'PRPO', with 1,430,292 shares outstanding as of March 24, 2024 - Precipio's common stock has traded on the Nasdaq Capital Market under the symbol **'PRPO'** since **June 30, 2017**[298](index=298&type=chunk) Common Stock Information (as of March 24, 2024) | Metric | Value | | :------------------------- | :---------- | | Shares Outstanding | 1,430,292 | | Holders of Record | ~34 | - No cash dividends have been paid on common stock, and none are expected in the near future, with any income devoted to future operations and growth[300](index=300&type=chunk) - The company made no purchases of its common stock during the year ended December 31, 2023[301](index=301&type=chunk) [Item 6. [Reserved]](index=88&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and not applicable to the company - This item is not applicable[303](index=303&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=88&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of Precipio's financial performance and condition, highlighting its mission in cancer diagnostics - Precipio is a healthcare solutions company focused on cancer diagnostics, aiming to reduce misdiagnoses through improved diagnostic products, reagents, and services[305](index=305&type=chunk)[307](index=307&type=chunk) - The Joint Venture with Poplar, formed in April 2020, was dissolved on **November 1, 2023**, with an effective date of **December 31, 2022**[310](index=310&type=chunk) - **Substantial doubt** exists about the company's ability to continue as a going concern, evidenced by a **$5.8 million net loss** and **$3.6 million net cash used in operating activities** for 2023, an accumulated deficit of **$98.2 million**, and working capital of **$0.5 million** as of December 31, 2023[311](index=311&type=chunk)[314](index=314&type=chunk) - The company is pursuing additional financing through an 'at the market' offering with AGP (up to **$5.8 million**, **$3.7 million remaining**) and a securities purchase agreement (**$2.0 million** gross proceeds in June 2023)[312](index=312&type=chunk)[313](index=313&type=chunk)[314](index=314&type=chunk) [Forward-Looking Information](index=88&type=section&id=Forward-Looking%20Information) This section serves as a forward-looking statement disclaimer, advising readers to consider the 'Risk Factors' section for important factors that could cause actual results to differ - The discussion and analysis contain forward-looking statements, and readers should review the 'Risk Factors' section for factors that could cause actual results to differ materially[304](index=304&type=chunk) [Overview](index=88&type=section&id=Overview) Precipio is a cancer diagnostics company focused on addressing misdiagnoses through innovative products and services, leveraging its CLIA laboratories for R&D and clinical operations - Precipio's mission is to address cancer misdiagnoses by developing diagnostic products and services that improve accuracy, efficiency, and patient outcomes while reducing healthcare expenditures[305](index=305&type=chunk)[307](index=307&type=chunk) - The company utilizes its CLIA laboratories in New Haven, CT, and Omaha, NE, for both R&D beta-testing and providing essential blood cancer diagnostics[308](index=308&type=chunk) - The Products Division commercial team drives sales directly and through global healthcare distributors like ThermoFisher, McKesson, and Cardinal Health[309](index=309&type=chunk) - A Joint Venture with Poplar, formed in **April 2020**, was dissolved on **November 1, 2023**, with an effective date of **December 31, 2022**[310](index=310&type=chunk) [Going Concern](index=90&type=section&id=Going%20Concern) Precipio's ability to continue as a going concern is in substantial doubt due to recurring operating losses and negative cash flows - The company has incurred substantial operating losses and negative cash flow from operations for several years, leading to **substantial doubt about its ability to continue as a going concern**[311](index=311&type=chunk)[314](index=314&type=chunk) Key Financial Indicators (Year Ended December 31, 2023) | Metric | Amount (Millions) | | :--------------------------- | :---------------- | | Net Loss | $(5.8) | | Net Cash Used in Operations | $(3.6) | | Accumulated Deficit | $(98.2) | | Working Capital | $0.5 | - Precipio is raising capital through an 'at the market' sales agreement with AGP (up to **$5.8 million**, with **$3.7 million remaining**) and a June 2023 securities purchase agreement that generated **$2.0 million** in gross proceeds[312](index=312&type=chunk)[313](index=313&type=chunk)[314](index=314&type=chunk) [Results of Operations for the Years Ended December 31, 2023 and 2022](index=92&type=section&id=Results%20of%20Operations%20for%20the%20Years%20Ended%20December%2031%2C%202023%20and%202022) Precipio experienced significant financial improvements in 2023 compared to 2022, with increased net sales and gross profit, and decreased operating losses Net Sales Performance | Metric | 2023 (Millions) | 2022 (Millions) | Change ($M) | Change (%) | | :-------- | :-------------- | :-------------- | :---------- | :--------- | | Net Sales | $15.2 | $9.4 | $5.8 | 61% | - The increase in net sales was driven by a **65% increase in diagnostic cases processed** (**6,765 in 2023** vs. **4,109 in 2022**) and a **$1.6 million increase** in other revenue, primarily from HemeScreen™ product sales[315](index=315&type=chunk) Gross Profit and Margin | Metric | 2023 (Millions) | 2022 (Millions) | 2023 Margin (%) | 2022 Margin (%) | | :---------- | :-------------- | :-------------- | :-------------- | :-------------- | | Gross Profit| $6.0 | $2.5 | 40% | 27% | - Operating expenses decreased by **$1.7 million** to **$13.6 million in 2023**, primarily due to a **$2.2 million decrease** in stock-based compensation and a **$0.2 million decrease** in legal and professional fees, partially offset by a **$0.6 million increase** in sales and marketing personnel costs[320](index=320&type=chunk) - Net other income was **$1.8 million in 2023**, mainly from a **$1.7 million gain** on the write-off of certain liabilities and a **$0.1 million gain** on the dissolution of a joint venture, compared to **$0.6 million in 2022** primarily from warrant revaluations[321](index=321&type=chunk) [Liquidity and Capital Resources](index=94&type=section&id=Liquidity%20and%20Capital%20Resources) Precipio's working capital decreased to $0.5 million at the end of 2023, despite improved cash flows from operating activities and financing from common stock issuance Working Capital Position (in thousands) | Metric | Dec 31, 2023 | Dec 31, 2022 | Change ($) | | :---------------- | :----------- | :----------- | :--------- | | Current Assets | $3,682 | $5,710 | $(2,028) | | Current Liabilities | $3,141 | $4,361 | $(1,220) | | **Working Capital** | **$541** | **$1,349** | **$(808)** | Cash Flow Summary (in thousands) | Activity | 2023 ($) | 2022 ($) | Change ($) | | :------------------------ | :--------- | :--------- | :--------- | | Net Cash Used in Operations | $(3,559) | $(7,721) | $4,162 | | Net Cash Used in Investing | $(126) | $(277) | $151 | | Net Cash Provided by (Used in) Financing | $1,742 | $(225) | $1,967 | | **Net Change in Cash** | **$(1,943)** | **$(8,223)** | **$6,280** | | Cash at End of Period | $1,502 | $3,445 | | - The company received net proceeds of **$2.2 million** from common stock sales in 2023, with approximately **$3.7 million** remaining available under the AGP 2023 Sales Agreement[323](index=323&type=chunk) - No material off-balance sheet arrangements existed as of December 31, 2023 and 2022, other than certain purchase commitments for laboratory reagents[329](index=329&type=chunk) [Contractual Obligations and Commitments](index=96&type=section&id=Contractual%20Obligations%20and%20Commitments) As of December 31, 2023, Precipio's total contractual obligations amounted to $3.121 million, with the majority due within one year Contractual Obligations and Commitments (as of December 31, 2023, in thousands) | Obligation | Total | Less Than 1 Year | 1-3 Years | 3-5 Years | | :------------------------ | :---- | :--------------- | :-------- | :-------- | | Long-term debt | $370 | $248 | $70 | $52 | | Finance lease obligations | $171 | $79 | $92 | — | | Operating lease obligations | $696 | $258 | $438 | — | | Purchase obligations | $1,884| $1,834 | $50 | — | | **Total** | **$3,121**| **$2,419** | **$650** | **$52** | [Critical Accounting Estimates](index=98&type=section&id=Critical%20Accounting%20Estimates) The preparation of Precipio's financial statements requires significant management judgment and estimates, particularly concerning stock option valuation and credit loss allowances - Critical accounting estimates include assumptions used in the Black-Scholes pricing model for stock option awards (e.g., expected volatility, risk-free interest rate, expected term, dividends)[335](index=335&type=chunk) - Estimates for allowances for credit losses and contractual allowances are based on customer creditworthiness, market conditions, and trends in healthcare and insurance practices[336](index=336&type=chunk) - Management also makes estimates regarding the recoverability of long-lived assets, fair values and useful lives of intangible assets, and income taxes, often supported by third-party valuation experts[337](index=337&type=chunk) [Recently Adopted Accounting Pronouncements](index=98&type=section&id=Recently%20Adopted%20Accounting%20Pronouncements) Precipio adopted ASU 2016-13, "Measurement of Credit Losses on Financial Instruments," on January 1, 2023, with no material impact - The company adopted **ASU 2016-13, "Measurement of Credit Losses on Financial Instruments,"** on **January 1, 2023**[339](index=339&type=chunk) - The adoption of this standard, which introduces a current expected credit loss model, was not material to Precipio's consolidated financial statements[339](index=339&type=chunk) [Recent Accounting Pronouncements Not Yet Adopted](index=98&type=section&id=Recent%20Accounting%20Pronouncements%20Not%20Yet%20Adopted) Precipio is currently assessing the potential impact of several new accounting pronouncements not yet adopted, including ASU 2023-09, ASU 2022-03, and ASU 2020-06 - **ASU 2023-09 (Income Taxes)**, effective **January 1, 2025**, will enhance income tax disclosures but is not expected to materially impact financial position, results of operations, or cash flows[340](index=340&type=chunk)[341](index=341&type=chunk) - **ASU 2022-03 (Fair Value Measurement)**, effective for fiscal years beginning after **December 15, 2023**, clarifies that contractual sale restrictions on equity securities are not considered in fair value measurement[342](index=342&type=chunk) - **ASU 2020-06 (Debt with Conversion and Other Options)**, effective for annual reporting periods after **December 15, 2023**, amends guidance on convertible instruments and contracts in an entity's own equity[343](index=343&type=chunk) [Impact of Inflation](index=100&type=section&id=Impact%20of%20Inflation) Precipio does not believe that price inflation had a material adverse effect on its financial condition or results of operations during the periods presented - Inflation generally affects the company through increased costs of labor and operating supplies[344](index=344&type=chunk) - The company does not believe that price inflation had a material adverse effect on its financial condition or results of operations during the periods presented[344](index=344&type=chunk) [Item 7A. Quantitative and Qualitative Disclosure about Market Risk](index=100&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosure%20about%20Market%20Risk) As a smaller reporting company, Precipio is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, Precipio is not required to provide quantitative and qualitative disclosures about market risk[345](index=345&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=101&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents Precipio's audited consolidated financial statements for 2023 and 2022, including balance sheets, statements of operations, stockholders' equity, cash flows, and comprehensive notes - Marcum LLP, the independent registered public accounting firm, issued an opinion that the consolidated financial statements present fairly, in all material respects, the financial position and results of operations[348](index=348&type=chunk) - The auditor's report includes an explanatory paragraph highlighting **substantial doubt about the company's ability to continue as a going concern** due to significant losses and the need for additional funds[349](index=349&type=chunk) [Report of Independent Registered Public Accounting Firm](index=101&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Marcum LLP provided an unqualified opinion on Precipio's consolidated financial statements but noted substantial doubt about the company's ability to continue as a going concern - Marcum LLP issued an opinion that the consolidated financial statements for **2023 and 2022** are presented fairly, in all material respects, in conformity with GAAP[348](index=348&type=chunk) - An explanatory paragraph in the report highlights **substantial doubt about Precipio's ability to continue as a going concern** due to significant losses and the need to raise additional funds[349](index=349&type=chunk) - The assessment of the estimation for collections over diagnostic testing revenue was identified as a critical audit matter, involving significant management judgment and complexity in evaluating audit evidence[355](index=355&type=chunk)[356](index=356&type=chunk) [Consolidated Balance Sheets](index=104&type=section&id=Consolidated%20Balance%20Sheets) Precipio's consolidated balance sheet shows a decrease in total assets from $21.5 million in 2022 to $18.1 million in 2023, and a growing accumulated deficit Consolidated Balance Sheet Highlights (in thousands) | Metric | Dec 31, 2023 | Dec 31, 2022 | | :-------------------------- | :----------- | :----------- | | Cash | $1,502 | $3,445 | | Accounts Receivable (net) | $1,301 | $1,036 | | Inventories | $384 | $708 | | Total Current Assets | $3,682 | $5,710 | | Property and Equipment, Net | $739 | $877 | | Intangibles, Net | $12,818 | $13,768 | | Total Assets | $18,101 | $21,504 | | Total Current Liabilities | $3,141 | $4,361 | | Total Liabilities | $3,672 | $5,137 | | Accumulated Deficit | $(98,150) | $(92,297) | | Total Stockholders' Equity | $14,429 | $16,367 | [Consolidated Statements of Operations](index=106&type=section&id=Consolidated%20Statements%20of%20Operations) Precipio's consolidated statements of operations show significant improvement in net sales and a reduced net loss for 2023 compared to 2022 Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | 2023 | 2022 | | :---------------------------------------- | :---------- | :---------- | | Net Sales | $15,197 | $9,412 | | Gross Profit | $6,018 | $2,510 | | Operating Expenses | $13,638 | $15,307 | | Operating Loss | $(7,620) | $(12,797) | | Total Other Income | $1,767 | $619 | | Net Loss | $(5,853) | $(12,178) | | Net Loss Attributable to Common Stockholders | $(5,853) | $(12,203) | | Basic and Diluted Loss Per Common Share | $(4.51) | $(10.73) | - Net sales increased by **$5.8 million (61%)** from **$9.4 million in 2022** to **$15.2 million in 2023**[364](index=364&type=chunk) - The net loss attributable to Precipio, Inc. common stockholders decreased by **$6.35 million**, from **$(12.203) million in 2022** to **$(5.853) million in 2023**[364](index=364&type=chunk) [Consolidated Statements of Stockholders' Equity](index=107&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) The consolidated statements of stockholders' equity reflect a decrease in total equity from $16.4 million in 2022 to $14.4 million in 2023, influenced by net loss and stock issuances Changes in Stockholders' Equity (in thousands) | Metric | 2023 | 2022 | | :------------------------------------ | :---------- | :---------- | | Balance, January 1 | $16,367 | $24,604 | | Net Loss | $(5,853) | $(12,178) | | Issuance of Common Stock (net) | $2,245 | $129 | | Non-cash Stock-Based Compensation | $1,558 | $3,801 | | Gain on dissolution of joint venture | $(65) | — | | **Balance, December 31** | **$14,429** | **$16,367** | - The common stock and additional paid-in capital for all periods presented reflect a **one-for-twenty reverse stock split**, which was effected on **September 21, 2023**[360](index=360&type=chunk)[367](index=367&type=chunk) [Consolidated Statements of Cash Flows](index=109&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Precipio's cash decreased by $1.9 million in 2023, a significant improvement from 2022, driven by reduced operating cash outflow and financing activities Consolidated Statements of Cash Flows (in thousands) | Activity | 2023 ($) | 2022 ($) | | :-------------------------------- | :--------- | :--------- | | Net Cash Used in Operating Activities | $(3,559) | $(7,721) |\n| Net Cash Used in Investing Activities | $(126) | $(277) | | Net Cash Provided by (Used in) Financing Activities | $1,742 | $(225) | | **Net Change in Cash** | **$(1,943)** | **$(8,223)** | | Cash at End of Period | $1,502 | $3,445 | - Net cash used in operating activities decreased by **$4.162 million in 2023**, primarily due to a lower net loss and favorable non-cash adjustments, including a gain on write-off of liabilities[324](index=324&type=chunk)[326](index=326&type=chunk) - Cash flows provided by financing activities totaled **$1.7 million in 2023**, mainly from **$2.2 million** in proceeds from common stock issuance, offsetting payments on long-term debt and finance lease obligations[328](index=328&type=chunk) [Notes to the Consolidated Financial Statements](index=111&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) The notes provide detailed explanations of Precipio's accounting policies, financial instruments, and specific transactions, offering crucial context to the primary financial statements [1. BUSINESS DESCRIPTION](index=111&type=section&id=1.%20BUSINESS%20DESCRIPTION) This note reiterates Precipio's core business as a cancer diagnostics company, confirms the dissolution of a joint venture, and highlights ongoing going concern uncertainty - Precipio's business mission is to address cancer misdiagnoses by developing diagnostic products, reagents, and services, leveraging its CLIA laboratories for R&D and clinical support[373](index=373&type=chunk)[374](index=374&type=chunk) - The Joint Venture with Poplar was dissolved on **November 1, 2023**, effective **December 31, 2022**, resulting in a gain of **less than $0.1 million**[378](index=378&type=chunk) - **Substantial doubt about the company's ability to continue as a going concern** persists, with a **$5.8 million net loss** and **$3.6 million net cash used in operating activities** for 2023, and an accumulated deficit of **$98.2 million**[380](index=380&type=chunk)[381](index=381&type=chunk) - The company effected a **1-for-20 reverse stock split** on **September 21, 2023**, retroactively adjusting all share amounts and per share data[382](index=382&type=chunk)[384](index=384&type=chunk) [2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=115&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines Precipio's key accounting policies, including principles of consolidation, use of estimates, revenue recognition, and recent accounting pronouncements - The consolidated financial statements include Precipio, Inc., its wholly-owned subsidiaries, and a Variable Interest Entity (VIE) where Precipio is the primary beneficiary (Joint Venture, now dissolved)[385](index=385&type=chunk)[414](index=414&type=chunk)[415](index=415&type=chunk) - Significant estimates are made for allowances for credit losses, fair value of debt and equity transactions, and contractual allowances, requiring considerable management judgment[386](index=386&type=chunk) - Revenue recognition follows **ASC 606**, with diagnostic testing and product sales recognized at a point in time, and clinical research and biomarker services recognized over time using an "effort based" method[400](index=400&type=chunk)[401](index=401&type=chunk)[402](index=402&type=chunk)[513](index=513&type=chunk)[514](index=514&type=chunk)[515](index=515&type=chunk)[517](index=517&type=chunk) - A **full valuation allowance** has been applied against the company's net deferred tax assets of **$19.9 million (2023)** and **$18.6 million (2022)** due to projected losses[410](index=410&type=chunk)[451](index=451&type=chunk) - Certain common stock warrants are classified as liabilities and measured at fair value at each reporting date, with changes recorded in earnings[413](index=413&type=chunk)[493](index=493&type=chunk) - **ASU 2016-13 (Credit Losses)** was adopted on **January 1, 2023**, with no material impact, while **ASU 2023-09 (Income Tax Disclosures)**, **ASU 2022-03 (Fair Value Measurement)**, and **ASU 2020-06 (Convertible Instruments)** are pending adoption[419](index=419&type=chunk)[420](index=420&type=chunk)[421](index=421&type=chunk)[422](index=422&type=chunk)[423](index=423&type=chunk) [3. PROPERTY AND EQUIPMENT, NET](index=124&type=section&id=3.%20PROPERTY%20AND%20EQUIPMENT%2C%20NET) Precipio's net property and equipment decreased to $0.739 million in 2023, with consistent depreciation expense of approximately $0.3 million for both years Property and Equipment, Net (in thousands) | Category | Dec 31, 2023 | Dec 31, 2022 | | :-------------------------------- | :----------- | :----------- | | Furniture and fixtures & leasehold improvements | $24 | $24 | | Laboratory equipment | $965 | $931 | | Computer equipment and software | $1,097 | $990 | | Construction in process | $30 | $34 | | **Total Cost** | **$2,116** | **$1,979** | | Less: Accumulated Depreciation & Amortization | $(1,377) | $(1,102) | | **Total Net** | **$739** | **$877** | - Depreciation expense was approximately **$0.3 million** for both the years ended December 31, 2023, and 2022[425](index=425&type=chunk) [4. INTANGIBLES](index=124&type=section&id=4.%20INTANGIBLES) Precipio's intangible assets, primarily technology, had a net book value of $12.818 million at December 31, 2023, with amortization expense of $1.0 million for both 2023 and 2022 Intangible Assets (in thousands) | Category | Cost | Accumulated Amortization (2023) | Net Book Value (2023) | Accumulated Amortization (2022) | Net Book Value (2022) | | :--------- | :------ | :------------------------------ | :-------------------- | :------------------------------ | :-------------------- | | Technology | $18,990 | $6,172 | $12,818 | $5,222 | $13,768 | - Amortization expense for intangible assets was **$1.0 million** for both the years ended December 31, 2023, and 2022[427](index=427&type=chunk) - Amortization expense is projected to be **$1.0 million annually** for each of the years ending December 31, **2024 through 2028**[427](index=427&type=chunk) [5. LONG-TERM DEBT](index=125&type=section&id=5.%20LONG-TERM%20DEBT) Precipio's total long-term debt, net of current maturities, was $106,000 at December 31, 2023, primarily consisting of a DECD loan and a financed insurance loan Long-Term Debt Composition (in thousands) | Debt Type | Dec 31, 2023 | Dec 31, 2022 | | :------------------------------------------ | :----------- | :----------- | | Connecticut DECD Loan | $146 | $176 | | DECD debt issuance costs | $(12) | $(15) | | Financed Insurance Loan | $207 | $228 | | **Total Long-Term Debt** | **$341** | **$389** | | Current portion of long-term debt | $(235) | $(255) | | **Long-Term Debt, Net of Current Maturities** | **$106** | **$134** | - The DECD 2018 Loan of **$300,000** is secured by substantially all company assets, bears **3.25% interest**, and matures on **May 31, 2028**[429](index=429&type=chunk) - A financed insurance loan of **$0.4 million** was secured in **July 2023** at a **9.99% interest rate**, with monthly payments through **June 2024**[431](index=431&type=chunk) Aggregate Future Maturities on Gross Long-Term Debt (as of Dec 31, 2023, in thousands) | Year | DECD Loan | Financed Insurance Loan | Total | | :--- | :-------- | :---------------------- | :---- | | 2024 | $31 | $207 | $238 | | 2025 | $32 | — | $32 | | 2026 | $33 | — | $33 | | 2027 | $34 | — | $34 | | 2028 | $16 | — | $16 | | **Total** | **$146** | **$207** | **$353**| [6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES](index=126&type=section&id=6.%20ACCRUED%20EXPENSES%20AND%20OTHER%20CURRENT%20LIABILITIES) Accrued expenses increased to $1.824 million at December 31, 2023, primarily due to higher compensation and taxes, with a $1.7 million gain from liability write-offs Accrued Expenses (in thousands) | Category | Dec 31, 2023 | Dec 31, 2022 | | :-------------------------------------- | :----------- | :----------- | | Accrued expenses | $764 | $983 | | Accrued compensation | $754 | $491 | | Accrued franchise, property and sales and use taxes | $287 | $91 | | Accrued interest | $19 | $19 | | **Total Accrued Expenses** | **$1,824** | **$1,584** | - During 2023, Precipio recorded a **$1.7 million gain** from the write-off of **$1.3 million** in accounts payable and **$0.4 million** in accrued expenses[433](index=433&type=chunk) [7. LEASES](index=126&type=section&id=7.%20LEASES) Precipio leases administrative facilities and laboratory equipment, with total lease assets of $0.786 million and liabilities of $0.775 million as of December 31, 2023 - Precipio leases administrative facilities and laboratory equipment through operating and finance lease agreements, with operating leases resulting in recognition of Right-of-Use (ROU) assets and lease liabilities[435](index=435&type=chunk)[436](index=436&type=chunk) Lease Assets and Liabilities (in thousands) | Category | Dec 31, 2023 | Dec 31, 2022 | | :-------------------------------- | :----------- | :----------- | | Operating lease ROU assets, net | $612 | $763 | | Finance lease ROU assets, net | $174 | $257 | | **Total Lease Assets** | **$786** | **$1,020** | | Current maturities of operating lease liabilities | $218 | $199 | | Current maturities of finance lease liabilities | $132 | $162 | | Operating lease liabilities, less current maturities | $407 | $574 | | Finance lease liabilities, less current maturities | $18 | $68 | | **Total Lease Liabilities** | **$775** | **$1,003** | Weighted-Average Lease Terms and Discount Rates (as of Dec 31, 2023) | Metric | Operating Leases | Finance Leases | | :------------------------------------ | :--------------- | :------------- | | Weighted-average remaining lease term (years) | 2.8 | 2.0 | | Weighted-average discount rate | 8.00% | 10.63% | - Operating lease costs were **$0.3 million** for both 2023 and 2022, while finance lease amortization and interest expenses were approximately **$0.1 million** for both years[442](index=442&type=chunk)[443](index=443&type=chunk) [8. COMMITMENTS AND CONTINGENCIES](index=129&type=section&id=8.%20COMMITMENTS%20AND%20CONTINGENCIES) Precipio has purchase commitments for reagents totaling $1.884 million and is involved in legal proceedings, facing ongoing compliance risks in the healthcare industry Future Minimum Purchase Commitments (in thousands) | Year | Amount | | :--- | :----- | | 2024 | $1,834 | | 2025 | $50 | | **Total** | **$1,884** | - The company is involved in legal proceedings, including being delinquent on accounts payable to certain vendors and a claim from CPA Global for approximately **$0.2 million** for patent management services[445](index=445&type=chunk)[446](index=446&type=chunk) - The healthcare industry is subject to numerous complex federal, state, and local laws and regulations, including those related to licensure, reimbursement, and fraud and abuse, with potential for significant fines and penalties for violations[448](index=448&type=chunk)[449](index=449&type=chunk) [9. INCOME TAXES](index=131&type=section&id=9.%20INCOME%20TAXES) Precipio reported net deferred tax assets of $19.9 million in 2023, fully offset by a valuation allowance, and has significant federal and state NOL carryforwards - Net deferred tax assets were **$19.9 million in 2023** and **$18.6 million in 2022**, against which a **full valuation allowance** has been recorded due to projected losses[450](index=450&type=chunk)[451](index=451&type=chunk) Net Deferred Tax Assets (in thousands) | Category | Dec 31, 2023 | Dec 31, 2022 | | :-------------------------------------- | :----------- | :----------- | | Net operating loss and credit carryforwards | $18,792 | $18,410 | | Allowance for credit losses | $616 | $371 | | Stock-based compensation | $2,182 | $1,906 | | Other deferred tax assets | $235 | $140 | | Gross deferred tax assets | $21,825 | $20,827 | | Gross deferred tax liabilities | $(1,891) | $(2,259) | | **Net deferred tax assets** | **$19,934** | **$18,568** | | Less valuation allowance | $(19,934) | $(18,568) | | **Net deferred liability** | **$0** | **$0** | - As of December 31, 2023, the company had approximately **$76 million in federal net operating loss (NOL) carryforwards** and **$2.4 million in state NOL carryforwards**[452](index=452&type=chunk) - Approximately **$28 million of federal NOLs** expire between **2036 and 2037**, while the remaining **$48 million** have an indefinite life but are subject to an **80% taxable income limitation**[452](index=452&type=chunk) - The company's NOL carryforwards are subject to potential limitations under **Section 382 of the Internal Revenue Code** due to ownership changes[452](index=452&type=chunk) [10. STOCKHOLDERS' EQUITY](index=133&type=section&id=10.%20STOCKHOLDERS%27%20EQUITY) This note details changes in Precipio's stockholders' equity, including common stock issuances, warrant exercises, and the impact of a 1-for-20 reverse stock split in September 2023 - A **1-for-20 reverse stock split** was effected on **September 21, 2023**, retroactively adjusting all share amounts and per share data[382](index=382&type=chunk)[384](index=384&type=chunk) - During 2023, the company issued **15,972 shares** from warrant exercises and **23,598 shares** for consulting services (valued at approximately **$0.2 million**)[455](index=455&type=chunk)[456](index=456&type=chunk) - Under the AGP Sales Agreement, Precipio received net proceeds of approximately **$0.5 million in 2023** and **$0.1 million in 2022** from common stock sales[461](index=461&type=chunk) - The AGP 2023 Sales Agreement allows for sales of up to **$5.8 million** in common stock, with approximately **$3.7 million remaining** available as of the report date[463](index=463&type=chunk)[465](index=465&type=chunk) - A Registered Direct Offering in **June 2023** generated **$2.0 million in gross proceeds** from the sale of **206,250 common shares**, **15,972 pre-funded warrants** (all exercised in 2023), and **444,444 RDO Common Warrants** (exercisable at **$12.60**, expiring **Dec 2028**)[467](index=467&type=chunk)[468](index=468&type=chunk)[469](index=469&type=chunk) - As of December 31, 2023, **47 shares of Series B Preferred Stock** were outstanding, convertible into **5,875 shares of common stock**[480](index=480&type=chunk) Warrants Outstanding (as of December 31, 2023) | Issue Year | Expiration | Underlying Shares | Exercise Price | | :--------- | :------------ | :---------------- | :------------- | | 2019 | April 2024 | 7,374 | $108.00 | | 2019 | May 2024 | 7,717 | $191.20 | | 2023 | December 2028 | 444,444 | $12.60 | | **Total** | | **459,535** | | [11. FAIR VALUE](index=143&type=section&id=11.%20FAIR%20VALUE) This note details Precipio's fair value measurements, particularly for common stock warrant liabilities, which are classified as Level 3 financial instruments - Common stock warrant liabilities are classified as **Level 3 financial instruments** and are recorded at fair value at each reporting date, with changes recognized in earnings[493](index=493&type=chunk) - Bridge Note Warrant Liabilities were valued using the **Black-Scholes model**, with 2023 assumptions including a remaining life of **0.3-0.4 years**, **71-77% annual volatility**, and a **5.33-5.40% risk-free rate**[495](index=495&type=chunk) - The change in the fair value of warrant liabilities was **less than $1,000 in 2023**, compared to a **$606,000 gain** recognized in 2022[496](index=496&type=chunk)[497](index=497&type=chunk) [12. EQUITY INCENTIVE PLAN](index=144&type=section&id=12.%20EQUITY%20INCENTIVE%20PLAN) Precipio operates its 2017 Stock Option and Incentive Plan, with 249,693 shares authorized and 14,392 available for future grants as of December 31, 2023 - The **2017 Stock Option and Incentive Plan** had **249,693 shares authorized** for issuance and **14,392 shares available** for future grant as of December 31, 2023[498](index=498&type=chunk) - Stock-based compensation expense for all awards was **$1.6 million in 2023**, a decrease from **$3.8 million in 2022**[507](index=507&type=chunk) - In 2023, **58,780 stock options** were granted with a weighted-average exercise price of **$12.12** and a grant date fair value of **$11.60**, using Black-Scholes assumptions[501](index=501&type=chunk) Stock Option Activity (Year Ended December 31, 2023) | Metric | Number of Options | Weighted Average Exercise Price | | :------------------------- | :---------------- | :------------------------------ | | Outstanding at January 1, 2023 | 184,067 | $56.75 | | Granted | 58,780 | $12.12 | | Forfeited | (10,103) | $24.02 | | **Outstanding at December 31, 2023** | **232,744** | **$46.56** | - **2,492 restricted stock awards** were granted to directors in 2023, which vested immediately with a weighted-average grant date fair value of **$5.90**[505](index=505&type=chunk) [13. SALES SERVICE REVENUE, NET AND ACCOUNTS RECEIVABLE](index=146&type=section&id=13.%20SALES%20SERVICE%20REVENUE%2C%20NET%20AND%20ACCOUNTS%20RECEIVABLE) This note details Precipio's revenue recognition policies under ASC Topic 606, disaggregating revenues by transaction type and payer class, and outlining accounts receivable - Revenue recognition follows the **five-step framework of ASC 606**, with diagnostic testing and product sales recognized at a point in time, and clinical research/biomarker services recognized over time[509](index=509&type=chunk)[511](index=511&type=chunk)[513](index=513&type=chunk)[514](index=514&type=c

Financial Data and Key Metrics - Revenue grew by almost 30% quarter-over-quarter and doubled year-over-year, reaching $4.5 million in Q3 2023, putting the company on an annualized run rate of $18 million [8] - Cash burn dropped to around $1 million in Q3 2023, down approximately 40% from $2.5 million in the same quarter of the previous year [9] - The Pathology division reached a cash-neutral status, achieving a breakeven run rate of $14 million, while the Product division is on track to reach a reduced breakeven threshold of $6 million annually ($1.5 million per quarter) [13][15] Business Line Performance - Both the Pathology and Product businesses contributed to the revenue growth, with the Pathology division now operating as a cash-neutral entity [8][13] - The Product division has not yet reached its $8 million target but is expected to achieve a revised breakeven threshold of $6 million annually due to operational efficiencies [15] Market and Strategic Direction - The company's strategy focuses on developing and selling diagnostic products for laboratories, leveraging its cash-neutral Pathology division as a cost-free R&D center [18][19] - The release of the BCR-ABL assay in August 2023, developed at a cost of less than $100,000, exemplifies the company's low-cost product development model [20] - The total available market potential for products like HemeScreen is estimated at $400 million annually, with significant growth potential [23] Management Commentary on Operating Environment and Future Outlook - Management emphasized the importance of maintaining a frugal mindset even after achieving breakeven, highlighting operational efficiencies such as bringing billing functions in-house, which saves $50,000 to $75,000 monthly [14][17] - The company plans to focus on financial stability, product growth, and R&D development in 2024, including expanding the HemeScreen product line and developing new products [24][26] - Management intends to increase investor outreach through conferences, social media, and digital marketing campaigns to raise awareness of the company's financial success and growth potential [27] Other Key Information - The company believes it has sufficient cash reserves to achieve financial independence, even if it takes one or two more quarters to reach the target [16] - Investments in sales and marketing, as well as product production lines, are expected to yield positive ROI within 12 months, further improving business economics [21][22] Q&A Session - No specific questions or answers were provided in the transcript [30]

FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 OR Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission File Number: 001-36439 PRECIPIO, INC. (Exact name of registrant as specified in its charter) Delaware 91-17893 ...

Precipio, Inc. (NASDAQ:PRPO) Q2 2023 Earnings Conference Call August 17, 2023 5:00 PM ET Company Participants Ilan Danieli - CEO Conference Call Participants Operator Welcome to the Precipio Second Quarter 2023 Shareholder Update Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note that the conference is being recorded. Statements made during this call contain forward-looking statements about our business. You should not place undue reliance on forward-looking s ...

[PART I. Financial Information](index=3&type=section&id=PART%20I.%2E%20Financial%20Information) [Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201%2E%20Condensed%20Consolidated%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Precipio, Inc. as of June 30, 2023, and for the three and six-month periods then ended Condensed Consolidated Balance Sheet Summary (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total Current Assets** | $4,348 | $5,710 | | **Total Assets** | $19,472 | $21,504 | | **Total Current Liabilities** | $4,721 | $4,361 | | **Total Liabilities** | $5,381 | $5,137 | | **Total Stockholders' Equity** | $14,091 | $16,367 | | **Working Capital** | ($373) | $1,349 | Condensed Consolidated Statements of Operations Summary (in thousands) | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | **Net Sales** | $3,533 | $2,359 | $6,350 | $4,806 | | **Gross Profit** | $1,371 | $773 | $2,120 | $1,476 | | **Operating Loss** | ($2,292) | ($2,433) | ($5,318) | ($7,242) | | **Net Loss** | ($2,293) | ($2,138) | ($5,323) | ($6,722) | | **Basic and Diluted Loss Per Share** | ($0.09) | ($0.09) | ($0.22) | ($0.30) | Condensed Consolidated Statements of Cash Flows Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | **Net cash used in operating activities** | ($2,777) | ($3,980) | | **Net cash used in investing activities** | ($54) | ($106) | | **Net cash provided by (used in) financing activities** | $1,959 | ($109) | | **Net change in cash** | ($872) | ($4,195) | | **Cash at end of period** | $2,573 | $7,473 | - The company's ability to continue as a going concern is in substantial doubt due to a history of operating losses, negative working capital of **$0.4 million**, and a net loss of **$5.3 million** for the first six months of 2023[25](index=25&type=chunk)[28](index=28&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202%2E%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance for the three and six months ended June 30, 2023, compared to the same periods in 2022 [Results of Operations for the Three Months Ended June 30, 2023 and 2022](index=30&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20June%2030%2C%202023%20and%202022) Q2 Net Sales Comparison (in thousands) | Revenue Type | Q2 2023 | Q2 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Service revenue, net | $2,656 | $2,139 | $517 | 24% | | Other | $877 | $220 | $657 | 299% | | **Total Net Sales** | **$3,533** | **$2,359** | **$1,174** | **50%** | - The **50% increase** in Q2 net sales was driven by a **60% increase** in cases processed (1,614 in Q2 2023 vs. 1,009 in Q2 2022) and a significant increase in 'Other revenue' primarily from HemeScreen product sales[149](index=149&type=chunk) Q2 Gross Profit Comparison (in thousands) | Metric | Q2 2023 | Q2 2022 | | :--- | :--- | :--- | | **Gross Profit** | $1,371 | $773 | | **Gross Margin** | 39% | 33% | - Operating expenses increased by **$0.5 million** to **$3.7 million** in Q2 2023, driven by higher general & administrative expenses (+$0.3M), sales & marketing (+$0.2M), and R&D (+$0.1M), partially offset by lower stock-based compensation (-$0.1M)[153](index=153&type=chunk)[154](index=154&type=chunk) [Results of Operations for the Six Months Ended June 30, 2023 and 2022](index=31&type=section&id=Results%20of%20Operations%20for%20the%20Six%20Months%20Ended%20June%2030%2C%202023%20and%202022) H1 Net Sales Comparison (in thousands) | Revenue Type | H1 2023 | H1 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Service revenue, net | $4,712 | $4,064 | $648 | 16% | | Other | $1,638 | $742 | $896 | 121% | | **Total Net Sales** | **$6,350** | **$4,806** | **$1,544** | **32%** | - The **32% increase** in H1 net sales was driven by a **40% increase** in cases processed (2,810 in H1 2023 vs. 2,006 in H1 2022) and strong growth in HemeScreen product sales[156](index=156&type=chunk) H1 Gross Profit Comparison (in thousands) | Metric | H1 2023 | H1 2022 | | :--- | :--- | :--- | | **Gross Profit** | $2,120 | $1,476 | | **Gross Margin** | 33% | 31% | - Operating expenses for H1 2023 decreased by **$1.3 million** to **$7.4 million**, primarily due to a **$1.9 million reduction** in stock-based compensation expense, partially offset by an **$0.8 million increase** in sales and marketing costs from an expanded sales force[161](index=161&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) Working Capital Position (in thousands) | Metric | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Current Assets | $4,348 | $5,710 | | Current Liabilities | $4,721 | $4,361 | | **Working Capital** | **($373)** | **$1,349** | - During the first six months of 2023, the company raised net proceeds of **$2.2 million** from the sale of **4,742,038 shares** of common stock through purchase agreements and at-the-market offerings[163](index=163&type=chunk) - Net cash used in operating activities decreased to **$2.8 million** in H1 2023 from **$4.0 million** in H1 2022, an improvement of **$1.2 million**[164](index=164&type=chunk) - Cash flows from financing activities were a net inflow of **$2.0 million** in H1 2023, compared to a net outflow of **$0.1 million** in H1 2022, primarily due to proceeds from the issuance of common stock[167](index=167&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203%2E%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is a smaller reporting company and is not required to provide the information for this item - As a smaller reporting company, Precipio, Inc. is not required to provide quantitative and qualitative disclosures about market risk[174](index=174&type=chunk) [Controls and Procedures](index=34&type=section&id=Item%204%2E%20Controls%20and%20Procedures) Management, including the CEO and Interim CFO, evaluated the company's disclosure controls and procedures and concluded they were effective at a reasonable assurance level as of June 30, 2023 - Management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2023[175](index=175&type=chunk) - There were no changes in internal control over financial reporting during the quarter ended June 30, 2023, that have materially affected, or are reasonably likely to materially affect, the company's internal controls[176](index=176&type=chunk) [PART II. Other Information](index=35&type=section&id=PART%20II%2E%20Other%20Information) [Legal Proceedings](index=35&type=section&id=Item%201%2E%20Legal%20Proceedings) The company is subject to various laws and regulations typical of the healthcare industry and is involved in incidental legal proceedings - The company is involved in a dispute with CPA Global, which claims approximately **$0.2 million** is owed for patent services, and a liability of less than **$0.1 million** has been recorded for this matter[182](index=182&type=chunk) - Management believes the company is in compliance with healthcare fraud and abuse regulations, but notes that compliance is subject to future government review and interpretation[179](index=179&type=chunk) [Risk Factors](index=35&type=section&id=Item%201A%2E%20Risk%20Factors) This section updates key risks facing the company, including a history of losses, the need for additional capital, and non-compliance with Nasdaq listing rules - The company has a history of losses, with a net loss of **$5.3 million** and an operating cash flow deficit of **$2.8 million** for the six months ended June 30, 2023, and expects to incur losses for the foreseeable future[184](index=184&type=chunk) - The company is not in compliance with the Nasdaq minimum bid price rule (**$1.00 per share**) and has until **October 23, 2023**, to regain compliance or face potential delisting[188](index=188&type=chunk)[189](index=189&type=chunk) - As of June 30, 2023, there is a risk of substantial dilution from approximately **9.7 million shares** underlying outstanding warrants and **4.6 million shares** underlying outstanding stock options[199](index=199&type=chunk) - The company may need to raise substantial additional capital to fund operations and commercialize its technology, and failure to do so on acceptable terms could force it to delay or cease operations[187](index=187&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202%2E%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no sales of unregistered securities during the three months ended June 30, 2023, except as previously detailed in a Form 8-K filing - During Q2 2023, the company did not have any sales of unregistered securities other than those disclosed in the Form 8-K filed on **June 12, 2023**, related to the private placement of warrants[204](index=204&type=chunk) [Defaults Upon Senior Securities](index=39&type=section&id=Item%203%2E%20Defaults%20Upon%20Senior%20Securities) Not applicable [Mine Safety Disclosures](index=39&type=section&id=Item%204%2E%20Mine%20Safety%20Disclosures) Not applicable [Other Information](index=39&type=section&id=Item%205%2E%20Other%20Information) None [Exhibits](index=39&type=section&id=Item%206%2E%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including forms of warrants, the securities purchase agreement, and officer certifications