Precipio(PRPO) - 2023 Q2 - Quarterly Report

PART I. Financial Information Condensed Consolidated Financial Statements 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 $5.3 million for the first six months of 2023[25][28] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance for the three and six months ended June 30, 2023, compared to the same periods in 2022 Results of Operations for the Three Months Ended June 30, 2023 and 2022 Q2 Net Sales Comparison (in thousands) | Revenue Type | Q2 2023 | Q2 2022 | Change ($) | 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] 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 (-$0.1M)[153][154] Results of Operations for the Six Months Ended June 30, 2023 and 2022 H1 Net Sales Comparison (in thousands) | Revenue Type | H1 2023 | H1 2022 | Change ($) | 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] 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] Liquidity and Capital Resources 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] - 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] - 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] Quantitative and Qualitative Disclosures About Market Risk 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] Controls and Procedures 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] - 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] PART II. Other Information Legal Proceedings 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] - 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] Risk Factors 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] - 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][189] - 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] - 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] Unregistered Sales of Equity Securities and Use of Proceeds 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] Defaults Upon Senior Securities Not applicable Mine Safety Disclosures Not applicable Other Information None Exhibits This section lists the exhibits filed with the Form 10-Q, including forms of warrants, the securities purchase agreement, and officer certifications