Precipio(PRPO) - 2025 Q2 - Quarterly Report

PART I. Financial Information Condensed Consolidated Financial Statements The company's unaudited statements show significant revenue growth, a return to net income driven by non-recurring items, and a persistent working capital deficit Condensed Consolidated Balance Sheets Total assets and liabilities increased, resulting in a working capital deficit of $0.3 million and total stockholders' equity of $12.3 million as of June 30, 2025 Key Balance Sheet Items (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash | $1,130 | $1,389 | | Accounts receivable, net | $1,488 | $799 | | Total current assets | $4,053 | $3,451 | | Total assets | $18,816 | $16,996 | | Total current liabilities | $4,353 | $4,271 | | Total liabilities | $6,528 | $4,902 | | Total stockholders' equity | $12,288 | $12,094 | - The company reported a working capital deficit of $0.3 million as of June 30, 2025, and an accumulated deficit of $103.3 million[25] Condensed Consolidated Statements of Operations The company achieved net income in Q2 2025, a significant turnaround from the prior year's loss, primarily due to a 27% sales increase and substantial other income Q2 & H1 2025 vs 2024 Performance (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $5,654 | $4,441 | $10,583 | $7,873 | | Gross profit | $2,429 | $1,716 | $4,569 | $2,636 | | Operating loss | $(824) | $(1,209) | $(1,683) | $(3,283) | | Net income (loss) | $74 | $(1,220) | $(810) | $(3,299) | | Basic EPS | $0.05 | $(0.83) | $(0.54) | $(2.28) | - The company's Q2 2025 profitability was significantly impacted by non-operating items, including a $789 thousand Employee Retention Credit and a $143 thousand gain on settlement of a liability[11] Condensed Consolidated Statements of Cash Flows For the first half of 2025, net cash from operations was positive, though the overall cash position decreased by $0.26 million to $1.13 million Six Months Ended June 30 Cash Flow Summary (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $309 | $(167) | | Net cash used in investing activities | $(197) | $(70) | | Net cash (used in) provided by financing activities | $(371) | $14 | | Net change in cash | $(259) | $(223) | | Cash at end of period | $1,130 | $1,279 | Notes to Unaudited Condensed Consolidated Financial Statements The notes highlight a "going concern" uncertainty, detail revenue sources, and disclose significant events including an ERC receipt and a post-quarter warrant exercise - The company has substantial doubt about its ability to continue as a going concern for the next twelve months, citing historical operating losses and a working capital deficit[25][26] - In Q2 2025, the company received and recognized as other income approximately $0.8 million from an Employee Retention Credit (ERC) claim originally filed in November 2022[120] - Subsequent to the quarter end, in July 2025, the company received approximately $1.3 million in net cash proceeds from the exercise of 100,000 warrants[123] Service Revenue by Payer (Six Months Ended June 30, in thousands) | Payer | 2025 | 2024 | | :--- | :--- | :--- | | Medicare | $4,189 | $2,616 | | Third party payers | $5,009 | $4,053 | | Medicaid | $13 | $25 | | Self-pay | $10 | $32 | | Contract diagnostics and other | $41 | $4 | | Total Service Revenue, net | $9,262 | $6,730 | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management attributes strong Q2 revenue growth to increased case volume, which improved gross margins, while noting that net income was driven by non-recurring items Results of Operations Q2 2025 net sales rose 27% year-over-year, driven by a 19% increase in cases processed, which expanded gross margin from 39% to 43% Q2 2025 vs Q2 2024 Performance Summary (in thousands) | Metric | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $5,654 | $4,441 | $1,213 | 27% | | Gross Profit | $2,426 | $1,716 | $710 | 41% | - The increase in Q2 2025 net sales was primarily driven by processing 3,692 cases compared to 3,099 cases in Q2 2024, a 19% increase in volume[150] - Gross margin improved to 43% from 39% year-over-year, which management attributes to economies of scale and leveraging fixed expenses in its CLIA certified laboratory[152] Liquidity and Capital Resources The company's liquidity remains a key focus with a working capital deficit, though a post-quarter warrant exercise provided a crucial $1.3 million cash infusion Working Capital Position (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Current assets | $4,053 | $3,451 | | Current liabilities | $4,353 | $4,271 | | Working capital | $(300) | $(820) | - A warrant exercise in July 2025 provided net cash proceeds of approximately $1.3 million, which is a critical event for the company's liquidity subsequent to the reporting period[163] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is not required to provide information for this item - Precipio is exempt from providing quantitative and qualitative disclosures about market risk because it qualifies as a smaller reporting company[174] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[175] - No material changes were made to the company's internal control over financial reporting during the second quarter of 2025[176] PART II. Other Information Legal Proceedings The company is involved in ordinary course legal matters that are not expected to have a material adverse effect on the business - The company is currently defending against a legal proceeding from a former employee in San Antonio, Texas, alleging unfair dismissal, which management does not expect to have a material impact on its financial results[182] Risk Factors A new risk factor has been introduced concerning potential adverse effects from the recently enacted "One Big Beautiful Bill Act" (OBBBA) tax law changes - A new risk factor has been introduced related to changes in tax law, specifically highlighting the "One Big Beautiful Bill Act" (OBBBA) signed into law on July 4, 2025, which could adversely affect the company's business and financial condition[186] Other Part II Items This section confirms no unregistered equity sales, no defaults on senior securities, and no adoption or termination of Rule 10b5-1 trading plans by insiders - The company did not have any sales of unregistered securities during the three months ended June 30, 2025[187] - No directors or officers adopted or terminated a Rule 10b5-1 trading plan or a non-Rule 10b5-1 trading arrangement during the fiscal quarter[190]