PART I. Financial Information [Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) This section presents Precipio, Inc.'s unaudited condensed consolidated financial statements for H1 2020, highlighting a **$5.4 million net loss**, **$2.7 million negative working capital**, and substantial doubt about going concern [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2020, total assets were **$19.0 million**, total liabilities **$6.4 million**, and stockholders' equity **$12.6 million**, with a **$2.7 million negative working capital** Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2020 (unaudited) | December 31, 2019 | | :--- | :--- | :--- | | **Total Current Assets** | $2,015 | $1,878 | | **Total Assets** | $19,034 | $19,511 | | **Total Current Liabilities** | $4,680 | $4,334 | | **Total Liabilities** | $6,407 | $6,306 | | **Total Stockholders' Equity** | $12,627 | $13,205 | | **Working Capital** | ($2,665) | ($2,456) | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2020 net sales grew **39% to $1.3 million** with a **$2.2 million net loss**, while H1 2020 net sales grew **53% to $2.5 million** but net loss widened to **$8.8 million** due to a deemed dividend Q2 Performance (in thousands, except per share data) | Metric | Q2 2020 | Q2 2019 | | :--- | :--- | :--- | | Net Sales | $1,308 | $942 | | Gross Profit | $171 | $172 | | Operating Loss | ($2,259) | ($2,295) | | Net Loss Attributable to Common Stockholders | ($2,249) | ($5,913) | | Basic and Diluted Loss Per Share | ($0.20) | ($1.05) | Six-Month Performance (in thousands, except per share data) | Metric | H1 2020 | H1 2019 | | :--- | :--- | :--- | | Net Sales | $2,524 | $1,655 | | Gross Profit | $296 | $210 | | Operating Loss | ($4,462) | ($4,354) | | Net Loss Attributable to Common Stockholders | ($8,798) | ($7,565) | | Basic and Diluted Loss Per Share | ($0.89) | ($1.66) | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Total stockholders' equity decreased by **$0.6 million** in H1 2020 due to a **$5.5 million net loss**, partially offset by **$4.8 million** from common stock issuances and note conversions, nearly doubling outstanding shares - For the six months ended June 30, 2020, total stockholders' equity decreased by approximately **$0.6 million**. This was mainly due to a net loss of **$5.45 million**, which was largely offset by **$4.8 million** in capital raised from common stock issuances via note conversions and purchase agreements[12](index=12&type=chunk) - The number of outstanding common shares increased significantly from **7,898,117** at the beginning of the year to **14,616,916** at June 30, 2020, primarily due to conversions of debt and stock purchase agreements[12](index=12&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) H1 2020 saw **$3.6 million cash used in operations**, offset by **$3.1 million from financing**, resulting in a **$0.5 million net cash decrease** and a **$0.4 million ending cash balance** Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | ($3,562) | ($4,887) | | Net cash used in investing activities | ($10) | ($30) | | Net cash provided by financing activities | $3,077 | $5,705 | | **Net Change in Cash** | **($495)** | **$788** | | **Cash at End of Period** | **$353** | **$1,169** | [Notes to the Condensed Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, a joint venture with Poplar Healthcare, **going concern doubt** due to losses and **negative working capital**, long-term debt including a **$0.8 million PPP loan**, convertible note activities, and **equity financing** - The company's financial statements are prepared on a going concern basis, but management has identified substantial doubt about its ability to continue as a going concern due to a history of operating losses, negative working capital of **$2.7 million**, and net cash used in operations of **$3.6 million** as of June 30, 2020[27](index=27&type=chunk) - In April 2020, the company formed a joint venture, Precipio Oncometrix LLC, with Poplar Healthcare, holding a **49% interest**, and consolidates the joint venture as a Variable Interest Entity (VIE)[23](index=23&type=chunk)[32](index=32&type=chunk)[42](index=42&type=chunk) - On April 23, 2020, the company received a **$787,200** loan under the Paycheck Protection Program (PPP), which it believes has been used for qualifying expenses and will apply for forgiveness[52](index=52&type=chunk)[53](index=53&type=chunk) - A March 2020 amendment to convertible notes triggered a down-round feature in the Series B Preferred Stock, adjusting its conversion price to **$0.40** from **$2.25**, resulting in a non-cash deemed dividend of approximately **$3.3 million**[118](index=118&type=chunk)[154](index=154&type=chunk) - The company relies heavily on equity financing, having raised **$2.6 million** in the first six months of 2020 through purchase agreements with Lincoln Park Capital[107](index=107&type=chunk)[109](index=109&type=chunk)[113](index=113&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=65&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, liquidity, and capital resources, covering business overview, recent developments like **Nasdaq compliance** and **COVID-19 test market entry**, and the significant **going concern risk** - The company regained compliance with Nasdaq's **$1.00** minimum bid price requirement on June 29, 2020[213](index=213&type=chunk) - On July 30, 2020, the company announced an agreement with ADS Biotec to distribute its FDA-authorized COVID-19 serology antibody tests[214](index=214&type=chunk) - Management reiterates that there is substantial doubt about the company's ability to continue as a going concern, dependent on achieving its business plan and raising additional financing[218](index=218&type=chunk)[219](index=219&type=chunk) [Results of Operations](index=70&type=section&id=Results%20of%20Operations) Q2 2020 net sales grew **39% to $1.3 million** with gross profit flat at **$0.2 million**, while H1 2020 net sales grew **53% to $2.5 million** due to increased cases and sales force expansion Q2 2020 vs. Q2 2019 Results (in thousands) | Metric | Q2 2020 | Q2 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $1,308 | $942 | $366 | 39% | | Cost of Sales | $1,137 | $770 | $367 | 48% | | Gross Profit | $171 | $172 | ($1) | -1% | | Gross Margin | 13% | 18% | - | - | H1 2020 vs. H1 2019 Results (in thousands) | Metric | H1 2020 | H1 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $2,524 | $1,655 | $869 | 53% | | Cost of Sales | $2,228 | $1,445 | $783 | 54% | | Gross Profit | $296 | $210 | $86 | 41% | | Gross Margin | 12% | 13% | - | - | - The increase in net sales was primarily driven by a significant increase in patient diagnostic cases processed (**76%** in Q2 and **79%** in H1), resulting from an increased sales force[222](index=222&type=chunk)[227](index=227&type=chunk) [Liquidity and Capital Resources](index=74&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2020, the company had a **$2.7 million working capital deficit** and **$0.4 million cash**, relying on **$2.6 million stock sales** and a **$0.8 million PPP loan** to fund **$3.6 million operating cash outflow**, with substantial doubt about going concern Working Capital Position (in thousands) | Metric | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Current Assets | $2,015 | $1,878 | | Current Liabilities | $4,680 | $4,334 | | **Working Capital** | **($2,665)** | **($2,456)** | - Cash decreased by **$0.5 million** in H1 2020. Financing activities, including a **$2.6 million** stock issuance and a **$0.8 million** PPP loan, were crucial for funding the **$3.6 million** operating cash outflow[235](index=235&type=chunk)[236](index=236&type=chunk)[239](index=239&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=76&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Precipio is exempt from providing quantitative and qualitative disclosures about market risk - As a smaller reporting company, Precipio is exempt from providing quantitative and qualitative disclosures about market risk[245](index=245&type=chunk) [Controls and Procedures](index=76&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2020, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2020[248](index=248&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2020[249](index=249&type=chunk) PART II. Other Information [Legal Proceedings](index=79&type=section&id=Item%201.%20Legal%20Proceedings) The company reports the dismissal of the Jesse Campbell lawsuit and an unresolved **$0.2 million claim** from CPA Global for patent services, with a **less than $0.1 million liability** recorded - The Jesse Campbell lawsuit was settled and officially dismissed by the court on June 3, 2020, and this matter is now closed[252](index=252&type=chunk) - A claim from CPA Global for approximately **$0.2 million** in patent maintenance services remains unresolved. The company has recorded a liability of less than **$0.1 million** for this matter[251](index=251&type=chunk) [Risk Factors](index=79&type=section&id=Item%201A.%20Risk%20Factors) Key risks include a history of losses, **negative working capital**, the critical need for **additional capital**, **NASDAQ listing compliance**, **COVID-19 pandemic impact**, and **PPP loan forgiveness uncertainty** - The company has a history of losses, had negative working capital of **$2.7 million** as of June 30, 2020, and requires substantial additional capital to continue operations and commercialize its technology[256](index=256&type=chunk)[260](index=260&type=chunk) - The COVID-19 pandemic poses a significant risk, with the company having experienced business interruptions in certain urban markets ranging from **30% to 85%**, and the full and ongoing impact remains uncertain[267](index=267&type=chunk)[269](index=269&type=chunk) - The company regained compliance with Nasdaq's minimum bid price rule on June 29, 2020, but faces the risk of future delisting if it cannot continue to satisfy listing requirements[261](index=261&type=chunk)[263](index=263&type=chunk) - The company received a **$787,200** PPP loan, but there is no assurance that the loan will be forgiven in whole or in part, and repayment could adversely affect future cash flows[271](index=271&type=chunk)[274](index=274&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=85&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None[275](index=275&type=chunk) [Defaults Upon Senior Securities](index=85&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Not applicable - Not applicable[276](index=276&type=chunk) [Mine Safety Disclosures](index=85&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable - Not applicable[277](index=277&type=chunk) [Other Information](index=85&type=section&id=Item%205.%20Other%20Information) The company reported no other information - None[278](index=278&type=chunk) [Exhibits](index=85&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the report, including Sarbanes-Oxley certifications and XBRL data files - The report includes certifications from the Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, as well as XBRL data files[280](index=280&type=chunk)

Precipio, Inc. (NASDAQ:PRPO) Q1 2020 Earnings Conference Call May 19, 2020 5:00 PM ET Company Participants Miri Radomski - In-House Counsel Ilan Danieli - CEO Carl Iberger - CFO Conference Call Participants Operator Good day and welcome to the Precipio Quarterly Shareholder Update Call. All participants will be in a listen-only mode. [Operator Instructions] Please note that the conference is being recorded. [Operator instructions] Please note that the conference is being recorded. Statements made during thi ...

PART I. Financial Information This section presents Precipio, Inc.'s unaudited condensed consolidated financial statements and management's analysis for Q1 2020 [Item 1. Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) This section presents Precipio, Inc.'s unaudited condensed consolidated financial statements for Q1 2020 and 2019, with detailed notes on financial position, performance, and cash flows [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a decrease in total assets and stockholders' equity from December 31, 2019, to March 31, 2020, while total liabilities significantly increased, primarily driven by current maturities of convertible notes Condensed Consolidated Balance Sheet Highlights (Dollars in thousands) | Item | March 31, 2020 (unaudited) | December 31, 2019 | | :-------------------------------- | :------------------------- | :------------------ | | Total assets | $18,995 | $19,511 | | Total liabilities | $7,710 | $6,306 | | Total stockholders' equity | $11,285 | $13,205 | | Cash | $417 | $848 | | Accounts receivable, net | $883 | $574 | | Current maturities of convertible notes | $2,292 | $142 | | Total current liabilities | $6,739 | $4,334 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the three months ended March 31, 2020, the company reported increased net sales but a significantly higher net loss compared to the prior year, primarily due to a substantial loss on extinguishment of convertible notes and increased interest expense Condensed Consolidated Statements of Operations Highlights (Three Months Ended March 31, Dollars in thousands, except per share data) | Item | 2020 | 2019 | | :------------------------------------ | :----- | :----- | | Net sales | $1,216 | $713 | | Gross profit | $125 | $38 | | Operating loss | $(2,203) | $(2,059) | | Total other expenses (income) | $(1,002) | $407 | | Loss before income taxes | $(3,205) | $(1,652) | | Net loss | $(3,205) | $(1,652) | | Deemed dividends | $(3,344) | $— | | Net loss available to common stockholders | $(6,549) | $(1,652) | | Basic and diluted loss per common share | $(0.78) | $(0.48) | | Weighted-average shares outstanding | 8,371,956 | 3,441,893 | - Net sales increased by **71%** from **$713 thousand** in Q1 2019 to **$1,216 thousand** in Q1 2020, driven by service revenue[11](index=11&type=chunk) - Net loss significantly widened from **$(1,652) thousand** in Q1 2019 to **$(3,205) thousand** in Q1 2020, further exacerbated by **$3,344 thousand** in deemed dividends in 2020[11](index=11&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) Stockholders' equity decreased from $13.2 million at January 1, 2020, to $11.3 million at March 31, 2020, primarily due to the net loss, partially offset by common stock issuances related to purchase agreements and convertible note conversions Condensed Consolidated Statements of Stockholders' Equity Highlights (Dollars in thousands) | Item | January 1, 2020 | March 31, 2020 | | :------------------------------------ | :-------------- | :------------- | | Total Stockholders' Equity | $13,205 | $11,285 | | Net loss | — | $(3,205) | | Conversion of convertible notes into common stock | — | $353 | | Issuance of common stock in connection with purchase agreements | — | $1,350 | | Stock-based compensation | — | $168 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The company continued to use cash in operating activities, with a net cash outflow of $1.6 million for the three months ended March 31, 2020. Financing activities provided $1.2 million, primarily from common stock issuance, partially offsetting the operational cash burn Condensed Consolidated Statements of Cash Flows Highlights (Three Months Ended March 31, Dollars in thousands) | Item | 2020 | 2019 | | :------------------------------------ | :----- | :----- | | Net cash used in operating activities | $(1,589) | $(1,879) | | Net cash used in investing activities | $(24) | $(3) | | Net cash flows provided by financing activities | $1,182 | $1,803 | | Net change in cash | $(431) | $(79) | | Cash at end of period | $417 | $302 | - Net cash used in operating activities decreased from **$(1,879) thousand** in Q1 2019 to **$(1,589) thousand** in Q1 2020[14](index=14&type=chunk) - Net cash provided by financing activities decreased from **$1,803 thousand** in Q1 2019 to **$1,182 thousand** in Q1 2020[14](index=14&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and disclosures for the condensed consolidated financial statements, covering the company's business, significant accounting policies, debt, equity, fair value measurements, revenue recognition, and material subsequent events [1. BUSINESS DESCRIPTION](index=8&type=section&id=1.%20BUSINESS%20DESCRIPTION) Precipio, Inc. is a cancer diagnostics company focused on eliminating misdiagnosis through academic partnerships and proprietary technologies like IV-Cell, HemeScreen, and ICE-COLD-PCR. The company faces a going concern risk due to historical operating losses and negative working capital, but has taken steps to secure financing through a $10.0 million purchase agreement with Lincoln Park and a $50 million S-3 registration statement - Precipio, Inc. is a cancer diagnostics company providing diagnostic products and services to the oncology market, aiming to eradicate misdiagnosis[18](index=18&type=chunk) - The company operates a cancer diagnostic laboratory in New Haven, CT, and an R&D facility in Omaha, NE, focusing on technologies like IV-Cell, HemeScreen, and ICE-COLD-PCR (ICP)[18](index=18&type=chunk) - As of March 31, 2020, the company had a net loss of **$3.2 million**, negative working capital of **$5.0 million**, and net cash used in operating activities of **$1.6 million**, raising substantial doubt about its ability to continue as a going concern[19](index=19&type=chunk) - To address going concern, Precipio entered a **$10.0 million** common stock purchase agreement with Lincoln Park Capital Fund LLC (received **$0.3 million** post-Q1) and filed an S-3 registration statement for up to **$50 million** in securities[20](index=20&type=chunk)[21](index=21&type=chunk) [2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=10&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section outlines the basis of presentation for the unaudited condensed consolidated financial statements, discusses the adoption of ASU 2018-13 and ASU 2018-15 (which had no material impact), and notes upcoming pronouncements like ASU 2019-12 and ASU 2016-13. It also details the calculation of basic and diluted loss per share, identifying anti-dilutive securities - The condensed consolidated financial statements are presented in conformity with GAAP and are unaudited, reflecting normal recurring adjustments[23](index=23&type=chunk) - The company adopted ASU 2018-13 (Fair Value Measurement) and ASU 2018-15 (Intangibles—Goodwill and Other—Internal Use Software) on January 1, 2020, with no material impact[24](index=24&type=chunk)[25](index=25&type=chunk) - ASU 2019-12 (Income Taxes) and ASU 2016-13 (Credit Losses) are not yet adopted, with no material impact expected from ASU 2019-12[26](index=26&type=chunk)[27](index=27&type=chunk) Outstanding Securities Excluded from Diluted Loss Per Share (March 31, in shares) | Security Type | 2020 | 2019 | | :------------ | :------- | :------- | | Stock options | 802,113 | 498,262 | | Warrants | 907,601 | 917,563 | | Preferred stock | 117,500 | 20,888 | | Convertible notes | 4,032,281 | 1,663,330 | | **Total** | **5,859,495** | **3,100,043** | [3. LONG-TERM DEBT](index=12&type=section&id=3.%20LONG-TERM%20DEBT) Precipio's total long-term debt decreased from $519 thousand at December 31, 2019, to $374 thousand at March 31, 2020. This includes a DECD loan, financed insurance loans, and a settlement agreement, with the majority of the debt classified as current maturities Long-Term Debt (Dollars in Thousands) | Item | March 31, 2020 | December 31, 2019 | | :------------------------------------------ | :------------- | :---------------- | | Department of Economic and Community Development (DECD) | $242 | $249 | | Financed insurance loan | $131 | $260 | | September 2018 Settlement | $25 | $34 | | **Total long-term debt** | **$374** | **$519** | | Current portion of long-term debt | $(180) | $(321) | | **Long-term debt, net of current maturities** | **$194** | **$198** | - The DECD 2018 Loan is a ten-year loan due December 31, 2027, with monthly interest at **3.25%**[31](index=31&type=chunk) - Financed Insurance Loans outstanding balance decreased from **$0.3 million** at December 31, 2019, to **$0.1 million** at March 31, 2020[33](index=33&type=chunk) [4. CONVERTIBLE NOTES](index=13&type=section&id=4.%20CONVERTIBLE%20NOTES) The company's convertible notes, primarily Bridge Notes, saw significant activity, including an amendment in March 2020 that extended maturity and adjusted conversion prices, leading to an extinguishment of the notes and a $1.2 million loss. Various notes were converted into common stock during the periods presented Convertible Notes (Dollars in Thousands) | Item | March 31, 2020 | December 31, 2019 | | :------------------------------------------ | :------------- | :---------------- | | Convertible bridge notes | $1,613 | $1,938 | | Convertible bridge notes discount and debt issuance costs | $— | $(1,796) | | Convertible bridge notes premiums | $679 | $— | | **Total convertible notes** | **$2,292** | **$142** | | Current portion of convertible notes | $(2,292) | $(142) | | **Convertible notes, net of current maturities** | **$—** | **$—** | - The March 2020 Amendment to the April 2019 and May 2019 Bridge Notes extended maturity, amended the floor price from **$2.25** to **$0.40**, and extended guaranteed interest, resulting in a **$1.2 million** loss on extinguishment[44](index=44&type=chunk)[45](index=45&type=chunk) - During Q1 2020, **$0.3 million** of bridge notes (plus interest) were converted into **427,997 shares** of common stock, compared to **$2.1 million** converted into **1,019,430 shares** in Q1 2019[47](index=47&type=chunk) [5. ACCRUED EXPENSES OTHER CURRENT LIABILITIES](index=19&type=section&id=5.%20ACCRUED%20EXPENSES%20OTHER%20CURRENT%20LIABILITIES) Accrued expenses increased from $1,639 thousand at December 31, 2019, to $1,833 thousand at March 31, 2020, with increases in accrued compensation and interest Accrued Expenses (Dollars in thousands) | Item | March 31, 2020 | December 31, 2019 | | :------------------ | :------------- | :---------------- | | Accrued expenses | $1,289 | $1,268 | | Accrued compensation | $407 | $247 | | Accrued interest | $137 | $124 | | **Total** | **$1,833** | **$1,639** | - The company recorded no gain on settlement of liability in Q1 2020, compared to **$0.2 million** in Q1 2019[58](index=58&type=chunk) [6. COMMITMENTS AND CONTINGENCIES](index=19&type=section&id=6.%20COMMITMENTS%20AND%20CONTINGENCIES) The company is involved in legal proceedings, including a patent management service claim and a class-action lawsuit with a $1.95 million settlement awaiting final court approval. It also operates within a highly regulated healthcare industry, subject to various federal and state laws - A liability of less than **$0.1 million** is recorded for a patent management service claim by CPA Global[60](index=60&type=chunk) - A class-action lawsuit settlement of **$1.95 million** is awaiting final court approval, with funds held in escrow[61](index=61&type=chunk) - The healthcare industry is subject to numerous federal, state, and local laws and regulations, including those related to licensure, accreditation, and fraud and abuse[62](index=62&type=chunk) [7. LEASES](index=20&type=section&id=7.%20LEASES) Precipio adopted Topic 842 for leases, recognizing ROU assets and lease liabilities for operating and finance leases. As of March 31, 2020, total lease assets were $630 thousand and total lease liabilities were $623 thousand, with future minimum lease payments detailed for both lease types - The company adopted Topic 842 on January 1, 2019, recording initial ROU assets and operating lease liabilities of approximately **$750,000**[65](index=65&type=chunk) Lease Assets and Liabilities (Dollars in thousands) | Item | March 31, 2020 | December 31, 2019 | | :------------------------------------ | :------------- | :---------------- | | Operating lease right-of-use assets, net | $463 | $519 | | Finance lease assets (Property and equipment, net) | $167 | $184 | | **Total lease assets** | **$630** | **$703** | | Current maturities of operating lease liabilities | $212 | $209 | | Current maturities of finance lease liabilities | $36 | $52 | | Operating lease liabilities, less current maturities | $263 | $317 | | Finance lease liabilities, less current maturities | $112 | $119 | | **Total lease liabilities** | **$623** | **$697** | Weighted-Average Lease Terms and Discount Rates (March 31, 2020) | Item | Operating Leases | Finance Leases | | :-------------------------------- | :--------------- | :------------- | | Weighted-average remaining lease term (years) | 2.4 | 4.5 | | Weighted-average discount rate | 8.00% | 7.25% | [8. STOCKHOLDERS' EQUITY](index=22&type=section&id=8.%20STOCKHOLDERS%27%20EQUITY) Stockholders' equity details include common stock authorization, issuances from convertible note conversions and purchase agreements (LP Purchase Agreement and LP 2020 Purchase Agreement), and preferred stock. The March 2020 Amendment triggered down round features on Series B Preferred Stock and certain warrants, resulting in $3.344 million in deemed dividends - The company issued **427,997 shares** of common stock in Q1 2020 (vs. **1,248,115** in Q1 2019) from convertible note conversions[74](index=74&type=chunk) - Under the LP Purchase Agreement, the company received **$9.4 million** from common stock sales to Lincoln Park through April 6, 2020, including **$1.3 million** in Q1 2020[80](index=80&type=chunk) - A new LP 2020 Purchase Agreement was entered into on March 26, 2020, allowing Lincoln Park to purchase up to **$10.0 million** of common stock over 24 months, with **$0.3 million** received post-Q1[81](index=81&type=chunk)[85](index=85&type=chunk) - The March 2020 Amendment triggered a down round feature on Series B Preferred Stock, adjusting the conversion price from **$2.25** to **$0.40** per share, and resulting in a **$3.333 million** deemed dividend[89](index=89&type=chunk)[115](index=115&type=chunk) - Down round features on August 2017 Offering Warrants, Note Conversion Warrants, and Convertible Promissory Note Warrants also triggered deemed dividends totaling **$11 thousand**[99](index=99&type=chunk)[101](index=101&type=chunk)[103](index=103&type=chunk)[115](index=115&type=chunk) [9. FAIR VALUE](index=31&type=section&id=9.%20FAIR%20VALUE) The company measures certain financial instruments, such as common stock warrant liabilities and derivative liabilities, at fair value using a three-level hierarchy. Significant revaluation gains were recognized on warrant liabilities, while derivative liabilities saw no change in fair value in Q1 2020 - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[117](index=117&type=chunk) - Common stock warrant liabilities are recorded at fair value, with changes recognized in earnings. The 2016 Warrant Liability and Bridge Note Warrant Liabilities are Level 3 instruments[118](index=118&type=chunk)[119](index=119&type=chunk)[123](index=123&type=chunk) Change in Fair Value of Warrant Liabilities (Three Months Ended March 31, Dollars in Thousands) | Item | 2020 | 2019 | | :------------------------------------ | :----- | :----- | | Beginning balance at January 1 | $1,338 | $1,132 | | Revaluation recognized in earnings (gain) | $(936) | $(240) | | **Balance at March 31** | **$402** | **$892** | - Derivative liabilities related to convertible notes (Bridge Notes Redemption Feature, Conversion Option) are bifurcated and remeasured at each reporting date. There was no change in fair value in Q1 2020, compared to a **$(23) thousand** gain in Q1 2019[126](index=126&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk) [10. EQUITY INCENTIVE PLAN](index=34&type=section&id=10.%20EQUITY%20INCENTIVE%20PLAN) The 2017 Stock Option and Incentive Plan was amended to increase authorized shares and include an "evergreen" provision. During Q1 2020, 325,050 stock options were granted, and the company recognized $0.2 million in stock-based compensation expense - The 2017 Stock Option and Incentive Plan was amended to increase authorized shares by **359,300** and add an "evergreen" provision, automatically increasing shares by **5%** of outstanding common stock annually[131](index=131&type=chunk) Stock Option Activity (Three Months Ended March 31, 2020) | Item | Number of Options | Weighted Average Exercise Price | | :-------------------------- | :---------------- | :------------------------------ | | Outstanding at January 1, 2020 | 490,330 | $8.30 | | Granted | 325,050 | $2.09 | | Forfeited | (13,267) | $5.43 | | **Outstanding at March 31, 2020** | **802,113** | **$5.85** | | Exercisable at March 31, 2020 | 244,357 | $11.06 | - Stock-based compensation expense was **$0.2 million** for both Q1 2020 and Q1 2019[134](index=134&type=chunk) [11. SALES SERVICE REVENUE, NET AND ACCOUNTS RECEIVABLE](index=35&type=section&id=11.%20SALES%20SERVICE%20REVENUE%2C%20NET%20AND%20ACCOUNTS%20RECEIVABLE) Precipio recognizes revenue under ASC 606 for diagnostic testing (point in time), clinical research grants, and biomarker testing (over time). Total service revenue, net, increased to $1,458 thousand in Q1 2020 from $910 thousand in Q1 2019. Accounts receivable, net, increased to $883 thousand at March 31, 2020, with a corresponding increase in the allowance for doubtful accounts - Revenue from diagnostic testing is recognized at a point in time upon delivery of the patient's laboratory report[140](index=140&type=chunk) - Revenue from clinical research grants and biomarker testing is recognized over time using an "effort based" method[141](index=141&type=chunk)[142](index=142&type=chunk) Disaggregation of Service Revenue, Net (Three Months Ended March 31, Dollars in thousands) | Payer Class | 2020 | 2019 | | :------------------ | :----- | :----- | | Medicaid | $9 | $3 | | Medicare | $524 | $394 | | Self-pay | $50 | $4 | | Third party payers | $517 | $356 | | Contract diagnostics | $358 | $153 | | **Total Service Revenue, Net** | **$1,458** | **$910** | Accounts Receivable, Net (Dollars in thousands) | Item | March 31, 2020 | December 31, 2019 | | :-------------------------- | :------------- | :---------------- | | Medicaid | $31 | $107 | | Medicare | $1,692 | $814 | | Self-pay | $65 | $88 | | Third party payers | $1,710 | $2,203 | | Contract diagnostic services | $327 | $36 | | Less allowance for doubtful accounts | $(2,942) | $(2,674) | | **Accounts receivable, net** | **$883** | **$574** | [12. SUBSEQUENT EVENTS](index=40&type=section&id=12.%20SUBSEQUENT%20EVENTS) Subsequent to March 31, 2020, Precipio secured a $787,200 Paycheck Protection Program (PPP) loan, received a Nasdaq delisting notice for failing to meet the $1.00 minimum bid price requirement (with compliance period tolled until July 1, 2020), and formed a joint venture, Precipio Oncometrix LLC, with Poplar Healthcare PLLC - On April 23, 2020, the company received an unsecured **$787,200** loan under the Paycheck Protection Program (PPP) with a **1.00%** interest rate and deferred payments for six months, with potential for forgiveness[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk) - On April 29, 2020, Nasdaq issued a delisting notice due to the common stock's closing bid price falling below **$1.00** for 30 consecutive business days. The compliance period is tolled until July 1, 2020, with a deadline of December 28, 2020, to regain compliance[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk) - In April 2020, Precipio formed a joint venture, Precipio Oncometrix LLC (POC), with Poplar Healthcare PLLC, with Precipio SPV holding a **49%** ownership interest, to provide oncology services[171](index=171&type=chunk)[172](index=172&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition, Q1 2020 operations, going concern, COVID-19 impact, liquidity, and capital resources [Forward-Looking Information](index=43&type=section&id=Forward-Looking%20Information) This section contains forward-looking statements based on management's current views, assumptions, or beliefs of future events and financial performance - The report contains forward-looking statements based on management's current views, assumptions, or beliefs of future events and financial performance[174](index=174&type=chunk) - Actual financial results may vary materially due to factors such as the impact of COVID-19, revenue, operating expenses, funding, economic circumstances, and regulatory factors[174](index=174&type=chunk) - The company expressly disclaims any obligation to update or revise forward-looking statements, except as required by law[176](index=176&type=chunk) [Overview](index=44&type=section&id=Overview) Precipio, Inc. is a cancer diagnostics company dedicated to eradicating misdiagnosis through its platform, academic partnerships, and proprietary technologies (IV-Cell, HemeScreen, ICE-COLD-PCR). It operates diagnostic and R&D facilities in New Haven and Omaha - Precipio is a cancer diagnostics company focused on eradicating misdiagnosis using academic expertise and technologies like IV-Cell, HemeScreen, and ICE-COLD-PCR (ICP)[179](index=179&type=chunk) - The company operates a cancer diagnostic laboratory in New Haven, Connecticut, and a research and development facility in Omaha, Nebraska, which is also CLIA and CAP certified[179](index=179&type=chunk) [Going Concern](index=44&type=section&id=Going%20Concern) The company's ability to continue as a going concern is in substantial doubt due to recurring operating losses, negative working capital, and cash usage. Despite securing a $10.0 million purchase agreement with Lincoln Park and filing an S-3 registration for up to $50 million, there's no assurance these initiatives will fully resolve the uncertainty - The company has incurred substantial operating losses and used cash in operating activities for several years, with a net loss of **$3.2 million**, negative working capital of **$5.0 million**, and **$1.6 million** net cash used in operations as of March 31, 2020[180](index=180&type=chunk) - Substantial doubt exists about the company's ability to continue as a going concern for the next twelve months[183](index=183&type=chunk) - Financing efforts include a **$10.0 million** common stock purchase agreement with Lincoln Park (with **$0.3 million** already received post-Q1) and an effective S-3 registration statement for up to **$50 million** in securities[181](index=181&type=chunk) [Outlook - COVID-19 related](index=46&type=section&id=Outlook%20-%20COVID-19%20related) The COVID-19 pandemic has caused significant business disruption, leading to business interruptions ranging from 30% to 85% in certain urban markets. The full impact on the company's operational and financial performance remains uncertain, with management actively monitoring and adapting operations - The COVID-19 outbreak has caused significant business disruption, with its impact on operational and financial performance being uncertain and unpredictable[184](index=184&type=chunk) - The company has experienced business interruptions ranging from **30%** to **85%** in certain urban markets[222](index=222&type=chunk) - Management is actively monitoring the situation, protecting employees, engaging customers, and employing remote work where possible[223](index=223&type=chunk) [Results of Operations for the Three Months Ended March 31, 2020 and 2019](index=46&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202020%20and%202019) For Q1 2020, net sales increased by 71% to $1.2 million, driven by a 90% increase in patient diagnostic cases and higher contract diagnostics revenue. Gross profit improved, but operating expenses rose due to sales and marketing. A significant net expense of $1.0 million was recorded, primarily from a $1.2 million loss on extinguishment of convertible notes and increased interest expense, partially offset by warrant revaluation gains Key Financial Results (Three Months Ended March 31, Dollars in Thousands) | Item | 2020 | 2019 | Change ($) | Change (%) | | :------------------------------------ | :----- | :----- | :--------- | :--------- | | Net Sales | $1,216 | $713 | $503 | 71% | | Gross Profit | $125 | $38 | $87 | 229% | | Gross Margin | 10% | 5% | 5% | 100% | | Operating Expenses | $2,328 | $2,097 | $231 | 11% | | Other Income (Expense), net | $(1,002) | $407 | $(1,409) | -346% | - Service revenue increased due to a **90%** increase in patient diagnostic cases (**683 cases** in Q1 2020 vs. **360** in Q1 2019) and a **$0.2 million** increase in contract diagnostics revenue[185](index=185&type=chunk) - Other expense, net, of **$1.0 million** in Q1 2020 included a **$1.2 million** loss on extinguishment of convertible notes and **$0.7 million** in interest expense, partially offset by **$0.9 million** income from warrant revaluations[190](index=190&type=chunk) [Liquidity and Capital Resources](index=47&type=section&id=Liquidity%20and%20Capital%20Resources) The company's working capital remained negative, decreasing to $(5.0) million at March 31, 2020. Cash decreased by $0.4 million, with operating activities using $1.6 million, partially offset by $1.2 million provided by financing activities, primarily from common stock issuance Working Capital Position (Dollars in Thousands) | Item | March 31, 2020 | December 31, 2019 | Change ($) | | :------------------------------------ | :------------- | :---------------- | :--------- | | Current assets | $1,692 | $1,878 | $(186) | | Current liabilities | $6,739 | $4,334 | $2,405 | | **Working capital** | **$(5,047)** | **$(2,456)** | **$(2,591)** | - Cash decreased by **$0.4 million** in Q1 2020, compared to a **$0.1 million** decrease in Q1 2019[192](index=192&type=chunk) - Net cash used in operating activities was **$1.6 million** in Q1 2020, driven by net loss and increased accounts receivable, partially offset by non-cash adjustments[193](index=193&type=chunk) - Net cash provided by financing activities was **$1.2 million** in Q1 2020, primarily from **$1.4 million** in common stock issuance, offset by debt payments[195](index=195&type=chunk) [Off-Balance Sheet Arrangements](index=48&type=section&id=Off-Balance%20Sheet%20Arrangements) The company reported no material off-balance sheet arrangements as of March 31, 2020, or December 31, 2019 - The company did not have any off-balance sheet arrangements that have or are reasonably likely to have a material effect on its financial condition or results of operations[196](index=196&type=chunk) [Contractual Obligations and Commitments](index=48&type=section&id=Contractual%20Obligations%20and%20Commitments) No significant changes to contractual obligations and commitments occurred during the three months ended March 31, 2020, compared to those disclosed in the Annual Report on Form 10-K for 2019 - No significant changes to contractual obligations and commitments occurred during the three months ended March 31, 2020, as compared to the Annual Report on Form 10-K for 2019[197](index=197&type=chunk) [Critical Accounting Policies and Estimates](index=48&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The company's critical accounting policies and estimates, which involve significant management judgments, are discussed in detail in its Annual Report on Form 10-K for the fiscal year ended December 31, 2019 - Critical accounting policies and estimates, involving significant management judgments, are discussed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2019[198](index=198&type=chunk) [Recently Issued Accounting Pronouncements](index=48&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) Additional information regarding recently issued accounting pronouncements can be found in Note 2 to the unaudited condensed consolidated financial statements - Information on recently issued accounting pronouncements is provided in Note 2 to the unaudited condensed consolidated financial statements[199](index=199&type=chunk) [Impact of Inflation](index=48&type=section&id=Impact%20of%20Inflation) The company does not believe that price inflation or deflation had a material adverse effect on its financial condition or results of operations during the periods presented - Price inflation or deflation did not have a material adverse effect on the company's financial condition or results of operations during the periods presented[200](index=200&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=48&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Precipio, Inc. is exempt from providing quantitative and qualitative disclosures about market risk - Precipio, Inc. is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[201](index=201&type=chunk) [Item 4. Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of March 31, 2020, concluding they were effective at a reasonable assurance level. No material changes in internal control over financial reporting occurred during the quarter - Management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2020[203](index=203&type=chunk) - There have been no material changes in internal control over financial reporting during the three months ended March 31, 2020[204](index=204&type=chunk) PART II. Other Information This section provides other required information, including legal proceedings, updated risk factors, and report exhibits [Item 1. Legal Proceedings](index=51&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in legal proceedings, including a patent management service claim and a class-action lawsuit with a $1.95 million settlement awaiting final court approval. The healthcare industry's legal and regulatory environment also poses ongoing compliance considerations - A claim by CPA Global for approximately **$0.2 million** for patent management services is outstanding, with less than **$0.1 million** recorded as a liability[206](index=206&type=chunk) - A class-action lawsuit settlement of **$1.95 million** is awaiting final court approval, with funds held in escrow[207](index=207&type=chunk) - The healthcare industry is subject to extensive federal, state, and local laws and regulations, including those related to fraud and abuse, which could result in significant fines or program expulsion for violations[208](index=208&type=chunk)[209](index=209&type=chunk) [Item 1A. Risk Factors](index=51&type=section&id=Item%201A.%20Risk%20Factors) This section updates the company's risk factors, emphasizing its history of losses and future profitability uncertainty, the need for substantial additional capital, the risk of NASDAQ delisting due to minimum bid price non-compliance, and the significant adverse impacts of the COVID-19 pandemic and the associated Paycheck Protection Program loan - The company has incurred losses since inception and expects to continue incurring losses, with no certainty of achieving or sustaining profitability[211](index=211&type=chunk)[212](index=212&type=chunk) - Substantial additional capital is needed to commercialize diagnostic technology, and failure to obtain funding could delay or cease operations[214](index=214&type=chunk) - The company received a Nasdaq delisting notice for failing to meet the **$1.00** minimum bid price requirement, with a compliance deadline of December 28, 2020[216](index=216&type=chunk)[217](index=217&type=chunk) - The COVID-19 pandemic has caused significant business disruption and uncertainty, with experienced business interruptions ranging from **30%** to **85%** in urban markets[220](index=220&type=chunk)[222](index=222&type=chunk) - Risks related to the Paycheck Protection Program (PPP) loan include uncertainty of forgiveness and the potential adverse effect on future cash flows if repayment is required[224](index=224&type=chunk)[226](index=226&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=57&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities or use of proceeds to report[227](index=227&type=chunk) [Item 3. Defaults Upon Senior Securities](index=57&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the company for the reporting period - This item is not applicable[228](index=228&type=chunk) [Item 4. Mine Safety Disclosures](index=57&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company for the reporting period - This item is not applicable[229](index=229&type=chunk) [Item 5. Other Information](index=57&type=section&id=Item%205.%20Other%20Information) There is no other information to report under this item - No other information to report[230](index=230&type=chunk) [Item 6. Exhibits](index=57&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications from the Principal Executive Officer and Principal Financial Officer, and various XBRL taxonomy documents - Exhibits include certifications (31.1, 31.2, 32.1, 32.2) and XBRL Instance, Schema, Calculation, Definition, Label, and Presentation Linkbase Documents (101.INS to 101.PRE)[232](index=232&type=chunk) [Signatures](index=59&type=section&id=Signatures) The report is duly signed on behalf of Precipio, Inc. by its Chief Executive Officer, Ilan Danieli, and Chief Financial Officer, Carl Iberger, on May 14, 2020 - The report is signed by Ilan Danieli, Chief Executive Officer, and Carl Iberger, Chief Financial Officer, on May 14, 2020[237](index=237&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR ☐ 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) (State or other jurisdiction of incorp ...

Financial Data and Key Metrics Changes - The company's Q3 revenue was lower than the prior quarter, with reported revenues year-to-date at $2.4 million, reflecting a 12% increase compared to the same period in 2018 [17][18] - The net loss for Q3 was $2.4 million, an improvement from a net loss of $4.1 million in the equivalent period in 2018, primarily due to a $1.6 million write-off associated with Goodwill [23] Business Line Data and Key Metrics Changes - Pathology services revenue continued to grow, but pharma revenues were virtually nonexistent in Q3 due to project phases that did not generate business [11] - October case volume increased by almost 20% above the Q3 average, indicating a rebound in pathology volume [11] Market Data and Key Metrics Changes - The company experienced a summer slowdown, particularly in August, leading to a sharp decline in pathology volume due to customer vacations [11] - Ordering patterns have rebounded in Q4, suggesting a recovery in demand [18] Company Strategy and Development Direction - The company aims to diversify its revenue by adding a third revenue line from products and services, which are less susceptible to reimbursement issues [12] - The introduction of IV-cell and HemeScreen products is expected to generate revenue for the first time in Q4, with significant growth potential anticipated [14] Management's Comments on Operating Environment and Future Outlook - Management expressed disappointment with Q3 results but emphasized that the decline is temporary and not indicative of a long-term trend [15] - The company is committed to growth and fiscal responsibility, aiming for cash flow breakeven during 2020 [30][26] Other Important Information - Cash on hand as of September 30 was $1.7 million, an increase of $1.3 million from year-end December 2018 [25] - The company has successfully reduced spending in certain areas, enabling a focus on growth initiatives [24] Q&A Session Summary Question: What are the expectations for future revenue growth? - Management projected a 15% increase in revenue but fell short in September due to decreased patient referrals [18] Question: How is the company managing its operating expenses? - The company is focusing on cost reductions and efficiencies through outsourcing and external systems, which have yielded both recurring and non-recurring savings [21] Question: What is the outlook for the new product lines? - Management is optimistic about the IV-cell and HemeScreen products, with expectations for significant revenue contributions in 2020 [22]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION 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 For the quarterly period ended September 30, 2019 OR ☐ 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 ...

Financial Data and Key Metrics Changes - Total reported revenues grew by 32% quarter over quarter and 8% year over year for the six-month period ending June 30, 2019 [18] - Cash reserves increased to $1.2 million as of June 30, 2019, compared to $0.4 million at year-end December 31, 2018 [26] - The company executed a reverse stock split of 15 for 1 on April 26, 2019, resulting in 5.9 million shares outstanding as of June 30, 2019 [17] Business Line Data and Key Metrics Changes - Diagnostic testing accounts for almost all reported revenue, with pathology services representing approximately 75% and pharma services providing the remaining 25% [19] - The sales force has expanded to cover 18 states, contributing to revenue growth from pathology diagnostic testing primarily from office-based oncologists and multi-oncologist physician groups [20] - New laboratory processes, HemeScreen and IV-cell, are expected to expand revenues and improve clinical outcomes [21][22] Market Data and Key Metrics Changes - The company is making significant inroads into international markets, including Brazil, Asia, South America, Europe, and the Middle East, which will diversify revenue sources away from reliance solely on the U.S. market [13] - The New Haven, Connecticut pathology lab received CAP approval in August, which is anticipated to translate into additional diagnostic sales from key oncology practices [19] Company Strategy and Development Direction - The company is focused on expanding its sales force and improving customer relationships to drive revenue growth [20] - Management is confident in the technology and its application, with ongoing validation processes expected to enhance the company's market position [30] - The company aims to achieve cash flow breakeven and profitability through effective marketing of IV-cell and HemeScreen [27] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the volatility in stock price but emphasizes stable revenue growth and positive prospects for product validation [29] - The company is committed to reducing public reporting expenses and reinvesting savings into sales force expansion [25] - Management expresses confidence that completed validation processes will have a significant positive impact on finances and market position [30] Other Important Information - The company settled significant legal claims from the 2017 merger, alleviating financial burdens [15][16] - Operating expenses have remained level year over year, with reductions in certain G&A expenses allowing for reinvestment in sales [24] Q&A Session Summary Question: What is the outlook for the company's growth? - Management believes that the annualized growth rate will continue to increase, exceeding the current rate of 15% [18] Question: How is the company addressing stock price volatility? - Management notes that the stock's volatility reflects market perception rather than company performance, with stable revenue growth demonstrated [29]

[PART I. Financial Information](index=3&type=section&id=PART%20I.%20Financial%20Information) This section presents the company's unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and internal controls [Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, and cash flows, highlighting a net loss and going concern doubt Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2019 (unaudited) | December 31, 2018 | | :--- | :--- | :--- | | **Total Assets** | **$22,205** | **$21,605** | | Cash | $1,169 | $381 | | Total Current Assets | $2,331 | $1,793 | | **Total Liabilities** | **$7,978** | **$15,482** | | Total Current Liabilities | $4,750 | $13,765 | | **Total Stockholders' Equity** | **$14,227** | **$6,123** | Condensed Consolidated Statement of Operations Highlights (in thousands) | Metric | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $942 | $817 | $1,655 | $1,529 | | Gross Profit | $172 | $175 | $210 | $199 | | Operating Loss | $(2,295) | $(2,183) | $(4,354) | $(4,631) | | Net Loss | $(5,913) | $(2,831) | $(7,565) | $(5,270) | | Net Loss per Share (Basic & Diluted) | $(1.05) | $(2.29) | $(1.66) | $(8.20) | Condensed Consolidated Statement of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | $(4,887) | $(3,611) | | Net cash used in investing activities | $(30) | $(44) | | Net cash provided by financing activities | $5,705 | $3,305 | | **Net Change in Cash** | **$788** | **$(350)** | | **Cash at End of Period** | **$1,169** | **$71** | [Business Description and Going Concern](index=10&type=section&id=1.%20BUSINESS%20DESCRIPTION) Precipio is a cancer diagnostics company that operates a laboratory in New Haven, CT, and a research facility in Omaha, NE, focusing on its licensed ICE-COLD-PCR (ICP) technology - The company is a cancer diagnostics firm leveraging academic partnerships and its proprietary ICP technology[22](index=22&type=chunk) - There is **substantial doubt** about the company's ability to continue as a going concern due to a **net loss of $7.6 million**, **negative working capital of $2.4 million**, and **net cash used in operations of $4.9 million** for the six months ended June 30, 2019[23](index=23&type=chunk)[26](index=26&type=chunk) - The company is relying on a **$10.0 million equity purchase agreement** with Lincoln Park to fund operations, with **$5.9 million remaining available** for drawdown[24](index=24&type=chunk)[25](index=25&type=chunk) - The company regained compliance with Nasdaq's minimum bid price requirement after a **1-for-15 reverse stock split** effective April 26, 2019[27](index=27&type=chunk) [Convertible Notes](index=16&type=section&id=4.%20CONVERTIBLE%20NOTES) As of June 30, 2019, the company had a minimal balance of $39,000 in convertible notes, down from $4.4 million at year-end 2018 Convertible Notes Balance (in thousands) | Note Type | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Convertible bridge notes, net | $39 | $3,830 | | Convertible promissory notes - Exchange Notes, net | $0 | $547 | | **Total convertible notes, net** | **$39** | **$4,377** | - In April and May 2019, the company issued new Bridge Notes for **gross proceeds totaling approximately $1.9 million**. These issuances included significant debt discounts, warrant liabilities, and beneficial conversion features, leading to **immediate recognized losses of $1.9 million**[56](index=56&type=chunk)[62](index=62&type=chunk)[66](index=66&type=chunk) - During the six months ended June 30, 2019, a **total of $7.3 million in convertible notes** (including Bridge, Crede, and Leviston notes) plus interest were converted into **2,386,425 shares of common stock**[67](index=67&type=chunk)[78](index=78&type=chunk)[84](index=84&type=chunk)[112](index=112&type=chunk) - **All outstanding Exchange Notes ($2.8 million)**, **the Crede Note ($1.45 million)**, and **the Leviston Note ($0.7 million)** were fully converted or settled during the first half of 2019[74](index=74&type=chunk)[78](index=78&type=chunk)[84](index=84&type=chunk) [Commitments and Contingencies](index=27&type=section&id=6.%20COMMITMENTS%20AND%20CONTINGENCIES) The company is involved in several legal matters - **Settled a lawsuit with XIFIN, Inc. for $40,000** in April 2019[90](index=90&type=chunk) - Reached a **settlement in principle in the Jesse Campbell lawsuit for $1.95 million**, which will be primarily funded by insurance. The company recorded a liability for its **remaining deductible of approximately $0.3 million**[92](index=92&type=chunk) - A **claim from CPA Global for approximately $0.2 million** for patent services remains, with a **liability of less than $0.1 million recorded**[91](index=91&type=chunk) - Settled an **outstanding debt of approximately $1.5 million** with a service provider for **payments totaling $0.6 million**, resulting in a **gain on settlement of $0.9 million** for the six months ended June 30, 2019[94](index=94&type=chunk)[96](index=96&type=chunk) [Stockholders' Equity](index=31&type=section&id=8.%20STOCKHOLDERS%27%20EQUITY) Stockholders' equity increased significantly from $6.1 million at year-end 2018 to $14.2 million at June 30, 2019 - A **1-for-15 reverse stock split** was effected on April 26, 2019[27](index=27&type=chunk) - The company utilized its equity purchase agreement with Lincoln Park, **receiving $2.4 million from the sale of 998,076 shares** during the six months ended June 30, 2019[126](index=126&type=chunk) - During the six months ended June 30, 2019, the company **issued 310,200 shares from warrant exercises for $1.6 million in cash proceeds** and **2,386,425 shares from the conversion of $7.3 million in convertible notes**[111](index=111&type=chunk)[112](index=112&type=chunk) - Financing agreements in 2018 and 2019 triggered down-round provisions in preferred stock and warrants, leading to conversion and exercise price adjustments and the recognition of **significant deemed dividends of $3.8 million in 2018**[129](index=129&type=chunk)[131](index=131&type=chunk)[142](index=142&type=chunk)[172](index=172&type=chunk) [Revenue and Accounts Receivable](index=51&type=section&id=11.%20SALES%20SERVICE%20REVENUE%2C%20NET%20AND%20ACCOUNTS%20RECEIVABLE) For the six months ended June 30, 2019, net service revenue was $2.1 million, up from $1.7 million year-over-year, primarily driven by diagnostic testing Disaggregation of Service Revenue, Net (in thousands) | Revenue Source | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--- | :--- | :--- | | Diagnostic Testing | $1,678 | $834 | | Biomarker Testing | $427 | $856 | | **Total Service Revenue, Net** | **$2,105** | **$1,690** | - **Customer A accounted for 29% of net sales in Q2 2019** and **26% for the six months ended June 30, 2019**[216](index=216&type=chunk) - **Customer A represented 28% of total net accounts receivable as of June 30, 2019**, up from 23% at December 31, 2018[217](index=217&type=chunk) Accounts Receivable, Net (in thousands) | Category | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Gross Accounts Receivable | $3,054 | $2,398 | | Less: Allowance for doubtful accounts | $(2,171) | $(1,708) | | **Accounts Receivable, Net** | **$883** | **$690** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=57&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance, highlighting a 15% increase in net sales for Q2 2019 compared to Q2 2018, driven by a 16% rise in diagnostic case volume - The company's ability to continue as a going concern is in **substantial doubt**, dependent on generating more revenue and raising additional financing. The Lincoln Park equity line is a key source of capital[226](index=226&type=chunk)[227](index=227&type=chunk)[229](index=229&type=chunk) - **Net sales for Q2 2019 increased 15% YoY to $0.9 million**, driven by a **16% increase in patient diagnostic cases processed** (445 vs 383)[230](index=230&type=chunk) - For the six months ended June 30, 2019, **cash increased by $0.8 million**. This was due to **$5.7 million raised from financing activities** (stock issuance, warrant exercises, convertible notes) offsetting **$4.9 million used in operating activities**[243](index=243&type=chunk)[244](index=244&type=chunk)[246](index=246&type=chunk) Working Capital (in thousands) | | June 30, 2019 | December 31, 2018 | Change | | :--- | :--- | :--- | :--- | | Current Assets | $2,331 | $1,793 | $538 | | Current Liabilities | $4,750 | $13,765 | $(9,015) | | **Working Capital** | **$(2,419)** | **$(11,972)** | **$9,553** | [Quantitative and Qualitative Disclosures About Market Risk](index=66&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is a smaller reporting company as defined by the Securities Exchange Act of 1934 and is therefore not required to provide the information requested under this item - As a smaller reporting company, Precipio is exempt from providing quantitative and qualitative disclosures about market risk[253](index=253&type=chunk) [Controls and Procedures](index=66&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective at a reasonable assurance level as of June 30, 2019 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2019[255](index=255&type=chunk) - No material changes to the company's internal control over financial reporting occurred during the three months ended June 30, 2019[256](index=256&type=chunk) [PART II. Other Information](index=69&type=section&id=PART%20II.%20Other%20Information) This section details legal proceedings, key risk factors, unregistered equity sales, and a list of exhibits filed with the report [Legal Proceedings](index=69&type=section&id=Item%201.%20Legal%20Proceedings) This section outlines the company's recent legal activities - The lawsuit with XIFIN, Inc. was **settled and paid in full for $40,000** on April 19, 2019[258](index=258&type=chunk) - The Jesse Campbell lawsuit has a **settlement in principle for $1.95 million**. The company's insurance will cover most of the cost, leaving a recorded liability of **approximately $0.3 million** for the company to pay[260](index=260&type=chunk) - The obligation to Bio-Rad Laboratories for **$39,000 was paid in full** during the second quarter of 2019[261](index=261&type=chunk) [Risk Factors](index=71&type=section&id=Item%201A.%20Risk%20Factors) This section updates key risk factors, emphasizing the company's history of losses and the expectation of future losses, which could prevent it from achieving profitability - The company has a **history of significant losses ($7.6 million net loss as of June 30, 2019)** and expects to incur future losses, with no certainty of achieving profitability[267](index=267&type=chunk) - A **critical risk is the need to raise substantial additional capital**. Failure to secure funding could force delays, reduction, or elimination of product development and operations[269](index=269&type=chunk) - The company is subject to **significant customer concentration risk**. For Q2 2019, **two customers represented approximately 40% of total revenue**. One customer accounted for **28% of total accounts receivable at June 30, 2019**[273](index=273&type=chunk)[274](index=274&type=chunk) - Although the company regained compliance with Nasdaq's minimum bid price rule via a reverse stock split, it **may be unable to continue to satisfy listing requirements**, which could lead to **delisting**[275](index=275&type=chunk)[276](index=276&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=73&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities during the period covered by this report - None [Other Information](index=73&type=section&id=Item%205.%20Other%20Information) There is no other information to report for the period - None [Exhibits](index=73&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the quarterly report - Exhibits filed include **Certifications of the Principal Executive Officer and Principal Financial Officer under Sarbanes-Oxley Sections 302 and 906**[280](index=280&type=chunk)[281](index=281&type=chunk) - **XBRL Instance Document and related taxonomy files** were also submitted as exhibits[281](index=281&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION 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 For the quarterly period ended March 31, 2019 OR ☐ 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 91‑1789357 ( ...

Precipio, Inc. (NASDAQ:PRPO) Shareholder Update Earnings Conference Call May 6, 2019 5:00 PM ET Company Participants Miri Chiko-Radomski - In-House Counsel Ilan Danieli - CEO Ori Karev - Chief Strategy Officer Conference Call Participants Operator Good afternoon, and welcome to Precipio's Shareholder's Update Conference Call. [Operator Instructions] Please note, today's event is being recorded. I would now like to turn the conference over to Miri Radomski, In-House Legal Counsel. Please go ahead. Miri Chiko ...