Precipio, Inc. 10-K

Item 8. Financial Statements and Supplementary Data REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ​ To the Stockholders and Board of Directors of Precipio , Inc . Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Precipio, Inc. (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. ​ Explanatory Paragraph – Going Concern ​ The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1, the Company has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. ​ Basis for Opinion ​ These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. ​ We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. ​ Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. ​ Critical Audit Matters ​ The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. 53 Table of Contents ​ Assessment of the estimation for collections over diagnostic testing for which revenue is recognized. ​ Description of Matter As described in Note 2 to the financial statements, the Company records its service revenues from diagnostic testing net of contractual and collection allowances that are estimated based on historical trends and anticipated reimbursement from third party payers. As of December 31, 2023, the Company recognized gross revenue of approximately $29.5 million along with contractual allowances of approximately $14.1 million and collection allowances of approximately $0.2 million. The net revenue figure of approximately $15.2 million is recorded as net sales on the consolidated statements of operations. ​ The principal considerations for our determination that performing procedures over revenue recognition relating to the service revenue is a critical audit matter is based on the significant judgments by management in estimating the amount to be recognized as revenue as well as the effort and complexity in assessing audit evidence in performing procedures to evaluate the amount recognized. The calculation involves estimating adjustments to gross revenue based upon sales mix and third-party contractual terms, such as Medicare rates or variations of Medicare rates. ​ How We Addressed the Matter We obtained an understanding of the design of controls in place over the Company’s process to calculate the various allowances. Our audit procedures included the evaluation of significant inputs through the evaluation of the Company's retrospective analysis of allowances as compared to actual payments received, evaluation of estimates based on historical collections by payer, and performance of analytical procedures and sensitivity analyses over the Company’s significant inputs to assess the Company’s ability to accurately estimate the allowances. We also tested the underlying data used in management’s calculations for accuracy and completeness, which included detail testing of the service revenue. ​ /s/ Marcum LLP Marcum LLP We have served as the Company’s auditor since 2016. New Haven, CT March 29, 2024 ​ 54 Table of Contents PRECIPIO, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 2023 and 2022 (Dollars in thousands, except share data) ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 ASSETS ​ ​ ​ ​ ​ ​ CURRENT ASSETS: ​ ​ ​ ​ ​ ​ Cash ​ $ 1,502 ​ $ 3,445 Accounts receivable (net of allowance for credit losses of $ 2,572 and $ 2,354 , respectively) ​ 1,301 ​ ​ 1,036 Inventories ​ 384 ​ ​ 708 Other current assets ​ 495 ​ ​ 521 Total current assets ​ 3,682 ​ ​ 5,710 ​ ​ ​ ​ ​ ​ ​ PROPERTY AND EQUIPMENT, NET ​ 739 ​ ​ 877 ​ ​ ​ ​ ​ ​ ​ OTHER ASSETS: ​ ​ ​ ​ ​ ​ Finance lease right-of-use assets, net ​ ​ 174 ​ ​ 257 Operating lease right-of-use assets, net ​ ​ 612 ​ ​ 763 Intangibles, net ​ 12,818 ​ ​ 13,768 Other assets ​ 76 ​ ​ 129 Total assets ​ $ 18,101 ​ $ 21,504 LIABILITIES AND STOCKHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​ CURRENT LIABILITIES: ​ ​ ​ ​ ​ ​ Current maturities of long-term debt, less debt issuance costs ​ $ 235 ​ $ 255 Current maturities of finance lease liabilities ​ 132 ​ ​ 162 Current maturities of operating lease liabilities ​ 218 ​ ​ 199 Accounts payable ​ 622 ​ ​ 2,042 Accrued expenses ​ 1,824 ​ ​ 1,584 Deferred revenue ​ 110 ​ ​ 119 Total current liabilities ​ 3,141 ​ ​ 4,361 LONG TERM LIABILITIES: ​ ​ ​ ​ ​ ​ Long-term debt, less current maturities and debt issuance costs ​ 106 ​ ​ 134 Finance lease liabilities, less current maturities ​ 18 ​ ​ 68 Operating lease liabilities, less current maturities ​ 407 ​ ​ 574 Total liabilities ​ 3,672 ​ ​ 5,137 COMMITMENTS AND CONTINGENCIES (Note 8) ​ ​ ​ ​ ​ ​ STOCKHOLDERS’ EQUITY: ​ ​ ​ ​ ​ ​ Preferred stock - $ 0.01 par value, 15,000,000 shares authorized at December 31, 2023 and December 31, 2022, 47 shares issued and outstanding at December 31, 2023 and December 31, 2022, liquidation preference of $ 38 at December 31, 2023 ​ — ​ ​ — Common stock, $ 0.01 par value, 150,000,000 shares authorized at December 31, 2023 and December 31, 2022, 1,420,125 and 1,141,013 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively (1) 14 ​ ​ 11 Additional paid-in capital (1) 112,565 ​ ​ 108,588 Accumulated deficit ​ ( 98,150 ) ​ ​ ( 92,297 ) Total Precipio, Inc. stockholders’ equity ​ 14,429 ​ ​ 16,302 Noncontrolling interest in joint venture ​ ​ — ​ ​ 65 Total stockholders’ equity ​ ​ 14,429 ​ ​ 16,367 Total liabilities and stockholders’ equity ​ $ 18,101 ​ $ 21,504 ​ (1) The common stock and additional paid-in capital for all periods presented reflect the one -for-twenty reverse stock split, which was effected on September 21, 2023. ​ See notes to consolidated financial statements. ​ 55 Table of Contents PRECIPIO, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended December 31, 2023 and 2022 (Dollars in thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2023 2022 SALES: ​ ​ ​ Service revenue, net ​ $ 12,396 ​ $ 8,418 Other revenue ​ 3,019 ​ 1,402 Revenue, net of contractual allowances and adjustments ​ 15,415 ​ 9,820 Adjustment for allowance for credit losses ​ ( 218 ) ​ ( 408 ) Net sales ​ 15,197 ​ 9,412 COST OF SALES: ​ ​ Cost of service revenue ​ 8,099 ​ 5,917 Cost of other revenue ​ 1,080 ​ 985 Total cost of sales ​ 9,179 ​ 6,902 Gross profit ​ 6,018 ​ 2,510 OPERATING EXPENSES: ​ ​ Operating expenses ​ 13,638 ​ 15,307 OPERATING LOSS ​ ( 7,620 ) ​ ( 12,797 ) OTHER (EXPENSE) INCOME: ​ ​ Interest expense, net ​ ( 18 ) ​ ( 12 ) Warrant revaluation ​ – ​ 606 Gain on settlement of liability ​ – ​ 25 Gain on write-off of liability ​ ​ 1,720 ​ ​ — Other income ​ 65 ​ — Total other income ​ 1,767 ​ 619 LOSS BEFORE INCOME TAXES ​ ( 5,853 ) ​ ( 12,178 ) INCOME TAX EXPENSE ​ – ​ — NET LOSS ​ ( 5,853 ) ​ ( 12,178 ) ​ ​ ​ ​ ​ ​ ​ Less: Net income attributable to noncontrolling interest in joint venture ​ ​ – ​ ​ ( 25 ) NET LOSS ATTRIBUTABLE TO PRECIPIO, INC. COMMON STOCKHOLDERS ​ $ ( 5,853 ) ​ $ ( 12,203 ) ​ ​ ​ ​ ​ ​ ​ BASIC AND DILUTED LOSS PER COMMON SHARE (1) $ ( 4.51 ) ​ $ ( 10.73 ) BASIC AND DILUTED WEIGHTED-AVERAGE SHARES OF COMMON STOCK OUTSTANDING (1) 1,297,851 ​ 1,137,573 ​ (1) Net loss per share and the number of shares used in the per share calculations for all periods presented reflect the one -for-twenty reverse stock split, which was effected on September 21, 2023. See notes to consolidated financial statements. ​ 56 Table of Contents PRECIPIO, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY For the Years Ended December 31, 2023 and 2022 (Dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Preferred Stock ​ Common Stock ​ Additional ​ ​ ​ ​ ​ ​ ​ Noncontrolling ​ ​ ​ ​ Outstanding ​ Par Outstanding Par ​ Paid-in ​ Accumulated ​ Total ​ Interest in ​ ​ Shares Value Shares (1) Value (1) Capital (1) Deficit Precipio, Inc. ​ Joint Venture Total Balance, January 1, 2022 47 ​ $ — 1,135,422 ​ $ 11 ​ $ 104,647 ​ $ ( 80,094 ) ​ $ 24,564 ​ $ 40 ​ $ 24,604 Net loss — ​ — — ​ — ​ — ​ ( 12,203 ) ​ ​ ( 12,203 ) ​ ​ 25 ​ ( 12,178 ) Issuance of common stock in connection with at the market offering, net of issuance costs ​ — ​ ​ — ​ 4,251 ​ ​ — ​ ​ 129 ​ ​ — ​ ​ 129 ​ ​ — ​ ​ 129 Proceeds upon issuance of common stock from exercise of warrants ​ — ​ ​ — ​ 1,340 ​ ​ — ​ ​ 11 ​ ​ — ​ ​ 11 ​ ​ — ​ ​ 11 Non-cash stock-based compensation — ​ — — ​ — ​ 3,801 ​ — ​ ​ 3,801 ​ ​ — ​ 3,801 Balance, December 31, 2022 47 ​ $ — 1,141,013 ​ $ 11 ​ $ 108,588 ​ $ ( 92,297 ) ​ $ 16,302 ​ $ 65 ​ $ 16,367 Net loss — ​ — — ​ — ​ — ​ ( 5,853 ) ​ ​ ( 5,853 ) ​ ​ — ​ ( 5,853 ) Gain on dissolution of joint venture ​ — ​ — — ​ — ​ — ​ — ​ ​ — ​ ​ ( 65 ) ​ ( 65 ) Issuance of common stock in connection with purchase agreements ​ — ​ ​ — ​ 206,250 ​ ​ 2 ​ ​ 1,758 ​ ​ — ​ ​ 1,760 ​ ​ — ​ ​ 1,760 Issuance of common stock in connection with at the market offering, net of issuance costs ​ — ​ ​ — ​ 30,852 ​ ​ 1 ​ ​ 484 ​ ​ — ​ ​ 485 ​ ​ — ​ ​ 485 Proceeds upon issuance of common stock from exercise of warrants ​ — ​ ​ — ​ 15,972 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Issuance of common stock for consulting services — ​ — 23,598 ​ — ​ 177 ​ — ​ ​ 177 ​ ​ — ​ 177 Non-cash stock-based compensation in connection with stock options — ​ — — ​ — ​ 1,542 ​ — ​ ​ 1,542 ​ ​ — ​ 1,542 Non-cash stock-based compensation in connection with restricted stock awards — ​ — 2,492 ​ — ​ 16 ​ — ​ ​ 16 ​ ​ — ​ 16 Payment of fractional common shares in conjunction with reverse stock split ​ — ​ ​ — ​ ( 52 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Balance, December 31, 2023 47 ​ $ — 1,420,125 ​ $ 14 ​ $ 112,565 ​ $ ( 98,150 ) ​ $ 14,429 ​ $ — ​ $ 14,429 ​ (1) The common stock and additional paid-in capital for all periods presented reflect the one -for-twenty reverse stock split, which was effected on September 21, 2023. ​ See notes to consolidated financial statements. ​ 57 Table of Contents PRECIPIO, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2023 and 2022 (Dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: ​ ​ ​ ​ ​ ​ Net loss ​ $ ( 5,853 ) ​ $ ( 12,178 ) ​ ​ ​ ​ ​ ​ ​ Adjustments to reconcile net loss to net cash flows used in operating activities: ​ ​ Depreciation and amortization ​ 1,225 ​ 1,219 Amortization of operating lease right-of-use asset ​ ​ 209 ​ ​ 187 Amortization of finance lease right-of-use asset ​ ​ 83 ​ ​ 114 Amortization of deferred financing costs, debt discounts and debt premiums ​ 3 ​ 4 Gain on settlement of liability ​ — ​ ( 25 ) Gain on dissolution of joint venture ​ ​ ( 65 ) ​ ​ — Gain on write-off of liabilities ​ ​ ( 1,720 ) ​ ​ — Stock-based compensation ​ 1,558 ​ 3,801 Value of stock issued in payment of services ​ 177 ​ — Provision for credit losses ​ 218 ​ 406 Warrant revaluation ​ — ​ ( 606 ) Changes in operating assets and liabilities: ​ ​ Accounts receivable ​ ( 483 ) ​ ( 745 ) Inventories ​ 324 ​ ( 144 ) Other assets ​ 451 ​ 491 Accounts payable ​ ( 169 ) ​ 165 Operating lease liabilities ​ ​ ( 206 ) ​ ​ ( 182 ) Deferred revenue ​ ​ ( 9 ) ​ ​ 101 Accrued expenses ​ 698 ​ ( 329 ) Net cash used in operating activities ​ ( 3,559 ) ​ ( 7,721 ) CASH FLOWS FROM INVESTING ACTIVITIES: ​ ​ ​ Purchase of property and equipment ​ ( 126 ) ​ ( 277 ) Net cash used in investing activities ​ ( 126 ) ​ ( 277 ) CASH FLOWS FROM FINANCING ACTIVITIES: ​ ​ Principal payments on finance lease obligations ​ ( 80 ) ​ ( 151 ) Issuance of common stock, net of issuance costs ​ ​ 2,245 ​ ​ 129 Proceeds from exercise of warrants ​ — ​ 11 Principal payments on long-term debt ​ ( 423 ) ​ ( 214 ) Net cash flows provided by (used in) financing activities ​ 1,742 ​ ( 225 ) NET CHANGE IN CASH ​ ( 1,943 ) ​ ( 8,223 ) CASH AT BEGINNING OF PERIOD ​ 3,445 ​ 11,668 CASH AT END OF PERIOD ​ $ 1,502 ​ $ 3,445 ​ ​ ​ ​ ​ ​ ​ ​ See notes to consolidated financial statements. ​ ​ 58 Table of Contents PRECIPIO, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - continued For the Years Ended December 31, 2023 and 2022 (Dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2023 2022 SUPPLEMENTAL CASH FLOW INFORMATION ​ ​ ​ ​ ​ ​ Cash paid during the period for interest ​ $ 42 ​ $ 45 ​ ​ ​ ​ ​ ​ ​ SUPPLEMENTAL DISCLOSURE OF CONSULTING SERVICES OR ANY OTHER NON-CASH COMMON STOCK RELATED ACTIVITY ​ ​ Purchases of equipment financed through accounts payable ​ ​ 11 ​ ​ 34 Prepaid insurance financed with loan ​ ​ 372 ​ ​ 413 Operating lease right-of-use assets obtained in exchange for operating lease obligations ​ ​ 58 ​ ​ 92 Finance lease right-of-use assets obtained in exchange for finance lease obligations ​ ​ — ​ ​ 12 ​ See notes to consolidated financial statements. ​ ​ ​ ​ ​ 59 Table of Contents PRECIPIO, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended December 31, 2023 and 2022 1. BUSINESS DESCRIPTION Business Description. Precipio, Inc., and its subsidiaries, (collectively, “we”, “us”, “our”, the “Company” or “Precipio”) is a healthcare solutions company focused on cancer diagnostics. The Company’s business mission is to address the pervasive problem of cancer misdiagnoses by developing solutions to mitigate the root causes of this problem in the form of diagnostic products, reagents and services. Misdiagnoses originate from outdated commercial diagnostic cancer testing technologies, lack of subspecialized expertise, and sub-optimal laboratory processes that are needed in today’s diagnostic cancer testing in order to provide accurate, rapid, and resource-effective results to treat patients. Industry studies estimate 1 in 5 blood-cancer patients are misdiagnosed. As cancer diagnostic testing has evolved from cellular to molecular (genes and exons), laboratory testing has become extremely complex, requiring even greater diagnostic precision, attention to process and a more appropriate evaluation of the abundance of genetic data to effectively gather, consider, analyze and present information for the physician for patient treatment. Precipio believes cancer diagnostics requires a holistic approach to improve the quality of diagnostic data and achieve more accurate interpretations of the patient situation with the intent to reduce misdiagnoses. By delivering products, reagents and services that improve the accuracy and efficiency of diagnostics, leading to fewer misdiagnoses, we believe patient outcomes can be improved through the selection of appropriate therapeutic options. Furthermore, we believe that better patient outcomes will have a positive impact on healthcare expenses as misdiagnoses are reduced. Better Diagnostic Results – Better Patient Outcome – Lower Healthcare Expenditures. ​ To deliver its strategy, the Company has structured its organization to develop diagnostic products. Laboratory and R&D facilities located in New Haven, Connecticut and Omaha, Nebraska house teams that collaborate on the development of new products and services. The Company operates CLIA laboratories in both the New Haven, Connecticut and Omaha, Nebraska locations providing essential blood cancer diagnostics to office-based oncologists in many states nationwide. To deliver on our strategy of mitigating misdiagnoses we rely heavily on our CLIA laboratory to support R&D beta-testing of the products we develop, in a clinical environment. ​ Our Products Division commercial team generates direct sales as well as works with our key distributors. Global healthcare distributors, such as ThermoFisher, McKesson and Cardinal Health, have partnered with us to form the backbone of the Company’s go-to-market strategy and enable us to access laboratories around the country that can benefit from using our diagnostic product. ​ Our operating structure promotes the harnessing of our proprietary technology and genetic diagnostic expertise to bring to market the Company’s robust pipeline of innovative solutions designed to address the root causes of misdiagnoses. ​ Joint Venture. The Company has determined that it held a variable interest in a joint venture formed in April 2020 (the “Joint Venture”) and is the primary beneficiary of the variable interest entity (“VIE”). See Note 2 - Summary of Significant Accounting Policies for further discussion regarding consolidation of variable interest entities. The Joint Venture was dissolved on November 1, 2023 with an effective date of December 31, 2022 and the Company recorded a gain on dissolution of the Joint Venture of less than $ 0.1 million during the year ended December 31, 2023 which is included in other income in the consolidated statements of operations. ​ 60 Table of Contents Going Concern. The consolidated financial statements have been prepared using GAAP applicable for a going concern, which assume that the Company will realize its assets and discharge its liabilities in the ordinary course of business. The Company has incurred substantial operating losses and has used cash in its operating activities for the past several years. For the year ended December 31, 2023, the Company had a net loss of $ 5.8 million and net cash used in operating activities of $ 3.6 million. As of December 31, 2023, the Company had an accumulated deficit of $ 98.2 million and working capital of $ 0.5 million. The Company’s ability to continue as a going concern, for the next twelve months from the date of issuance of these consolidated financial statements in this Annual Report on Form 10-K, is dependent upon a combination of achieving its business plan, including generating additional revenue and raising additional financing to meet its debt obligations and paying liabilities arising from normal business operations when they come due. To meet its current and future obligations the Company has taken the following steps to capitalize the business and successfully achieve its business plan: ● On April 14, 2023 , the Company entered into a sales agreement with AGP, pursuant to which the Company may offer and sell its common stock having aggregate sales proceeds of up to $ 5.8 million, to or through AGP, as sales agent (the “AGP 2023 Sales Agreement”). The sale of our shares of common stock to or through AGP, pursuant to the AGP 2023 Sales Agreement, will be made pursuant to the registration statement (the “2023 Registration Statement”) on Form S-3 (File No. 333-271277), filed by the Company with the SEC on April 14, 2023, as amended by Amendment No. 1 filed by the Company with the SEC on April 25, 2023, and declared effective on April 27, 2023. As of the date the consolidated financial statements were issued, we have received $ 0.1 million in gross proceeds through the AGP 2023 Sales Agreement from the sale of 10,192 shares of common stock. The Company has approximately $ 3.7 million available for future sales pursuant to the AGP 2023 Sales Agreement. On January 19, 2024, we filed a prospectus supplement to our prospectus dated April 25, 2023 registering the offer and sales of up to $ 865,889 of shares of our common stock. We have approximately $ 0.8 million of remaining availability pursuant to this prospectus supplement. ● On June 8, 2023, the Company entered into a securities purchase agreement pursuant to which it received $ 2.0 million in gross proceeds through the sale of 206,250 shares of common stock and warrants to purchase shares of our common stock. Issuance costs were approximately $ 0.2 million and the Company intends to use the net proceeds for working capital and general corporate purposes. Notwithstanding the aforementioned circumstances, there remains substantial doubt about the Company’s ability to continue as a going concern for the next twelve months from the date these consolidated financial statements were available to be issued. There can be no assurance that the Company will be able to successfully achieve its initiatives summarized above in order to continue as a going concern over the next twelve months from the date of issuance of this Annual Report Form 10-K . The accompanying financial statements have been prepared assuming the Company will continue as a going concern and do not include any adjustments that might result should the Company be unable to continue as a going concern as a result of the outcome of this uncertainty. Reverse Stock Split . On September 21, 2023 we filed a Certificate of Amendment to our Third Amended and Restated Certificate of Incorporation with the Secretary of State of Delaware, pursuant to which we effected a 1-for- 20 reverse stock split (the “Reverse Stock Split”) of our issued and outstanding common stock. The Reverse Stock Split became effective as of 5:00 p.m. (Eastern Time) on September 21, 2023 , and our common stock began trading on a split-adjusted basis on the Nasdaq Capital Market at the market open on September 22 , 2023. Unless otherwise indicated, all share amounts, per share data, share prices, exercise prices and conversion rates set forth in these notes and the accompanying consolidated financial statements have, where applicable, been adjusted retroactively to reflect this reverse stock split 61 Table of Contents 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation. The consolidated financial statements include the accounts of Precipio, Inc. and our wholly owned subsidiaries, and the Joint Venture which is a VIE in which we are the primary beneficiary. Refer to the section titled “Consolidation of Variable Interest Entities” for further information related to our accounting for the Joint Venture. All inter-company balances and transactions have been eliminated in consolidation. Use of Estimates. The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses during the reporting period. The most significant estimates and assumptions with regard to these consolidated financial statements relate to the allowance for credit losses, assumptions used within the fair value of debt and equity transactions and contractual allowances. These assumptions require considerable judgment by management. Actual results could differ from the estimates and assumptions used in preparing these consolidated financial statements. Risks and Uncertainties. Certain risks and uncertainties are inherent in our day-to-day operations and in the process of preparing our financial statements. The more significant of those risks are presented below and throughout the notes to the consolidated financial statements. The Company operates in the healthcare industry which is subject to numerous laws and regulations of federal, state and local governments. These laws and regulations include, but are not necessarily limited to, matters such as licensure, accreditation, government healthcare program participation requirements, reimbursement for patient services, and Medicare and Medicaid fraud and abuse. Government activity has increased with respect to investigations and allegations concerning possible violations of fraud and abuse statutes and regulations by healthcare providers. Violations of these laws and regulations could result in expulsion from government healthcare programs together with the imposition of significant fines and penalties, as well as significant repayments for patient services previously billed. Management believes that the Company is in compliance with fraud and abuse regulations, as well as other applicable government laws and regulations. While no material regulatory inquiries have been made, compliance with such laws and regulations can be subject to future government review and interpretation as well as regulatory actions unknown or unasserted at this time. Fair Value. Unless otherwise specified, book value approximates fair value. The common stock warrant liabilities are recorded at fair value. See Note 11 - Fair Value for additional information. Other Current Assets. Other current assets of $ 0.5 million as of December 31, 2023 include prepaid insurance of approximately $ 0.3 million and prepaid and other assets of $ 0.2 million. Other current assets of $ 0.5 million as of December 31, 2022 include prepaid insurance of $ 0.3 million and prepaid and other assets of $ 0.2 million. Concentrations of Risk. From time to time, we may maintain a cash position with financial institutions in amounts that exceed Federal Deposit Insurance Corporation insured limits of up to $250,000 per depositor per financial institution. We have not experienced any losses on such accounts as of December 31, 2023. 62 Table of Contents Service companies in the health care industry typically grant credit without collateral to patients. The majority of these patients are insured under third-party insurance agreements. The services provided by the Company are routinely billed utilizing the Current Procedural Terminology (CPT) code set designed to communicate uniform information about medical services and procedures among physicians, coders, patients, accreditation organizations, and payers for administrative, financial, and analytical purposes. CPT codes are currently identified by the Centers for Medicare and Medicaid Services and third-party payers. The Company utilizes CPT codes for Pathology and Laboratory Services contained within codes 80000-89398. Inventories. Inventories consist of laboratory supplies and are valued at cost (determined on an average cost basis, which approximates the first-in, first-out method) or net realizable value, whichever is lower. We evaluate inventory for items that are slow moving or obsolete and record an appropriate reserve for obsolescence if needed. The allowance for slow moving or obsolete inventory was zero at December 31, 2023 and 2022, respectively. Property and Equipment, net. Property and equipment are carried at cost, net of accumulated depreciation and amortization. Expenditures for maintenance and repairs are expensed as incurred. Depreciation and amortization are computed by the straight-line method over the estimated useful lives of the related assets as follows: ​ ​ ​ Furniture and fixtures 5 to 7 years Leasehold improvements ​ Lesser of useful life or lease term Laboratory equipment 3 to 10 years Computer equipment and software 3 to 7 years ​ For assets sold or otherwise disposed of, the cost and related accumulated depreciation and amortization are removed from the accounts, and any related gain or loss is reflected in operations for the period. Expenditures for major betterments that extend the useful lives of property and equipment are capitalized. Intangible Assets. We review our amortizable long-lived assets for impairment annually or whenever events indicate that the carrying amount of the asset (group) may not be recoverable. An impairment loss may be needed if the sum of the future undiscounted cash flows is less than the carrying amount of the asset (group). The amount of the loss would be determined by comparing the fair value of the asset to the carrying amount of the asset (group). There were no impairment charges on our amortizable long-lived assets during the years ended December 31, 2023 and 2022. Debt Issuance Costs Debt issuance costs are being amortized over the lives of the related financings on a basis that approximates the effective interest method. Costs are presented as a reduction of the related debt in the accompanying balance sheets. The amortization expense recorded was less than $ 0.1 million for the years ended December 31, 2023 and 2022, respectively. See Note 5 – Long Term Debt for further discussion. Stock-Based Compensation. All stock-based awards to date have exercise prices equal to the market price of our common stock on the date of grant and have ten-year contractual terms. Stock-based compensation cost is based on the fair value of the portion of stock-based awards that is ultimately expected to vest. The Company utilizes the Black-Scholes option pricing model for determining the estimated fair value for stock-based awards. Unvested awards as of December 31, 2023 had vesting periods of up to four years from the date of grant. No awards outstanding at December 31, 2023 and 2022, respectively, are subject to performance vesting conditions or market-based vesting. 63 Table of Contents Net Sales Recognition. Revenue recognition occurs when a customer obtains control of the promised goods and service. Revenue assigned to the goods and services reflects the consideration which the Company expects to receive in exchange for those goods and services. ​ The Company derives its revenues from diagnostic testing - histology, flow cytometry, cytology and molecular testing; clinical research from bio-pharma customers, state and federal grant programs; biomarker testing from bio-pharma customers and from other product sales including revenues from equipment leases and reagent sales associated with our HSRR program . All sources of revenue are recorded net of accruals for estimated chargebacks, rebates, cash discounts, other allowances, and returns. Due to differences in the substance of these revenue types, the transactions require, and the Company utilizes, different revenue recognition policies for each. See more detailed information on revenue in Note 13 – Sales Service Revenue, Net And Accounts Receivable. ​ The Company recognizes revenue utilizing the five-step framework of ASC 606. Control of the laboratory testing services is transferred to the customer at a point in time. As such, the Company recognizes revenue for diagnostic testing at a point in time based on the delivery method (web-portal access or fax) for a patient’s laboratory report. Diagnostic testing service revenue is reported at the estimated net realizable amounts from patients, third-party payers and others for services rendered, including retroactive adjustment under reimbursement agreements with third-party payers. Provisions for third-party payer settlements are provided in the period in which the related services are rendered and adjusted in the future periods, as final settlements are determined. For clinical research and biomarker services, the Company utilizes an “effort based” method of assessing performance and measures progress towards satisfaction of the performance obligation based upon the delivery of results per the contract. Control of reagents and other diagnostic products are transferred to the customer at a point in time and, as such, the Company recognizes these revenues at a point in time based on the delivery method. When we receive payment in advance, we initially defer the revenue and recognize it when we deliver the service. ​ Taxes collected from customers and remitted to government agencies for specific net sales producing transactions are recorded net with no effect on the statements of operations. Accounts Receivable Accounts Receivable result from diagnostic services provided to self-pay and insured patients, project based testing services and clinical research. The payment for services provided by the Company are generally due within 30 days from the invoice date. Accounts receivable are reduced by an allowance for credit losses. In evaluating the collectability of accounts receivable, the Company analyzes and identifies trends for each of its sources of revenue to estimate the appropriate allowance for credit losses. For receivables associated with self-pay patients, including patients with insurance and a deductible and copayment, the Company records an allowance for credit losses in the period of services on the basis of past experience of patients unable or unwilling to pay for service fee for which they are financially responsible. For receivables associated with services provided to patients with third-party coverage, the Company analyzes contractually due amounts and provides an allowance, if necessary. The difference between the standard rates and the amounts actually collected after all reasonable collection efforts have been exhausted is charged against the allowance for credit losses. Presentation of Insurance Claims and Related Insurance Recoveries. The Company accounts for its insurance claims and related insurance recoveries at their gross values as standards for health care entities do not allow the Company to net insurance recoveries against the related claim liabilities. There were no insurance claims or insurance recoveries recorded during the years ended December 31, 2023 and 2022. Advertising Costs. Advertising costs are expensed as incurred and are included in operating expenses on the consolidated statements of operations. Advertising costs charged to operations totaled approximately $ 0.1 million in 2023 and 2022, respectively. 64 Table of Contents Research and Development Costs. All costs associated with internal research and development are expensed as incurred. These costs include salaries and employee related expenses, operating supplies and facility-related expenses. Research and development costs charged to operations totaled $ 1.7 million for the years ended December 31, 2023 and 2022, respectively. Income Taxes. Deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax basis of assets and liabilities at each balance sheet date using tax rates expected to be in effect in the year the differences are expected to reverse. The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in the period when the change in tax rates is enacted. A valuation allowance is established when it is determined that it is more likely than not that some portion or all of the deferred tax assets will not be realized. A full valuation allowance has been applied against the Company’s net deferred tax assets as of December 31, 2023 and 2022, due to projected losses and because it is not more likely than not that the Company will realize future benefits associated with these deferred tax assets. Management’s conclusions regarding uncertain tax positions may be subject to review and adjustment at a later date based upon ongoing analysis of, or changes in tax laws, regulations and interpretations thereof as well as other factors. The Company’s policy is to record interest and penalties directly related to income taxes as income tax expense in the accompanying consolidated statements of operations, of which there was none for the years ended December 31, 2023 and 2022. Common Stock Warrants. The Company classifies the issuance of common stock warrants as equity any contracts that (i) require physical settlement or net-stock settlement or (ii) gives the Company a choice of net-cash settlement or settlement in its own stocks (physical settlement or net-stock settlement). The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net-cash settle the contract if an event occurs and if that event is outside of the Company’s control), or (ii) gives the counterparty a choice of net-cash settlement or settlement in stock (physical settlement or net-stock settlement). Certain of our issued and outstanding warrants to purchase common stock do not qualify to be treated as equity and accordingly, are recorded as a liability (“Common Stock Warrant Liability”). We are required to present these instruments at fair value at each reporting date and any changes in fair values are recorded as an adjustment to earnings. Consolidation of Variable Interest Entities. We evaluate any entity in which we are involved to determine if the entity is a VIE and if so, whether we hold a variable interest and are the primary beneficiary. We consolidate VIEs that are subject to assessment when we are deemed to be the primary beneficiary of the VIE. The process for determining whether we are the primary beneficiary of the VIE is to conclude whether we are a party to the VIE holding a variable interest that meets both of the following criteria: (1) has the power to make decisions that most significantly affect the economic performance of the VIE, and (2) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. 65 Table of Contents We have determined that we hold a variable interest in the Joint Venture, have the power to make significant operational decisions on behalf of the VIE and also have the obligation to absorb the majority of the losses from the VIE. As such we have also determined that we are the primary beneficiary of the VIE. The Joint Venture was dissolved on November 1, 2023 with an effective date of December 31, 2022. The following table presents information about the carrying value of the assets and liabilities of the Joint Venture which we consolidate and which are included on our consolidated balance sheets. Intercompany balances are eliminated in consolidation and not reflected in the following table. ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) December 31, 2023 December 31, 2022 Assets: ​ ​ ​ ​ ​ ​ Accounts receivable, net ​ $ — ​ $ 335 Total assets ​ $ — ​ $ 335 Liabilities: ​ ​ ​ ​ ​ ​ Accrued expenses ​ $ — ​ $ 50 Total liabilities ​ $ — ​ $ 50 Noncontrolling interest in Joint Venture ​ $ — ​ $ 65 Equity attributable to Precipio, Inc. ​ $ — ​ $ 127 ​ Loss Per Share. Basic loss per share is calculated based on the weighted-average number of common shares outstanding during each period. Diluted loss per share includes shares issuable upon exercise of outstanding stock options, warrants or conversion rights that have exercise or conversion prices below the market value of our common stock. Options, warrants and conversion rights pertaining to 698,154 and 224,398 shares of our common stock have been excluded from the computation of diluted loss per share at December 31, 2023 and 2022, respectively, because the effect is anti-dilutive due to the net loss. The following table summarizes the outstanding securities not included in the computation of diluted net loss per share: ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2023 2022 Stock options 232,744 184,067 Warrants 459,535 34,456 Preferred stock 5,875 5,875 Total 698,154 224,398 ​ Recently Adopted Accounting Pronouncements. In June 2016, the FASB issued ASU 2016-13 “ Measurement of Credit Losses on Financial Instruments ”, which replaces current methods for evaluating impairment of financial instruments not measured at fair value, including trade accounts receivable and certain debt securities, with a current expected credit loss model. The Company adopted this guidance on January 1, 2023. The adoption of this standard was not material to our consolidated financial statements. ​ Recent Accounting Pronouncements Not Yet Adopted. In December 2023, the FASB issued ASU 2023-09—Income Taxes (Topic 740)—Improvements to Income Tax Disclosures (“ASU 2023-09”) which amends the Codification to enhance the transparency and decision usefulness of income tax disclosures. ASU 2023-09 requires additional disaggregation of the reconciliation between the statutory and effective tax rate for an entity and of income taxes paid, both of which are disclosures required by current GAAP. The amendments improve the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. The amendments in ASU 2023-09 apply to all entities that are subject to Topic 740, Income Taxes. For public business entities, 66 Table of Contents the amendments in ASU 2023-09 are effective for annual periods beginning after December 15, 2024. Early adoption is permitted. ASU 2023-09 is effective for the Company beginning January 1, 2025. Adoption of ASU 2023-09 is expected to enhance the usefulness of income tax disclosures and is not expected to have a material impact on the Company’s financial position, results of operations or cash flows. In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820) (“ASU 2022-03”). The amendments in ASU 2022-03 clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. The amendments in this Update also require additional disclosures for equity securities subject to contractual sale restrictions. The provisions in this Update are effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. The Company does not expect to early adopt this ASU. The Company is currently assessing the potential impact that the adoption of this ASU will have on its consolidated financial statements. In August 2020, the FASB issued ASU 2020-06 “ Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity .” This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity and improves and amends the related EPS guidance for both Subtopics. The ASU will be effective for annual reporting periods after December 15, 2023 and interim periods within those annual periods and early adoption is permitted in annual reporting periods ending after December 15, 2020. The Company is currently assessing the potential impact that the adoption of this ASU will have on its consolidated financial statement. ​ 3 . PROPERTY AND EQUIPMENT, NET A summary of property and equipment at December 31, 2023 and 2022 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 Furniture and fixtures and leasehold improvements ​ $ 24 ​ $ 24 Laboratory equipment ​ 965 ​ 931 Computer equipment and laboratory software ​ 1,097 ​ 990 Construction in process ​ 30 ​ 34 ​ ​ 2,116 ​ 1,979 Less—accumulated depreciation and amortization ​ ( 1,377 ) ​ ( 1,102 ) Total ​ $ 739 ​ $ 877 ​ Depreciation expense was approximately $ 0.3 million and $ 0.3 million for the years ended December 31, 2023 and 2022, respectively. 4 . INTANGIBLES Intangible assets consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dollars in Thousands ​ ​ December 31, 2023 ​ ​ ​ Accumulated Net Book ​ ​ Cost ​ Amortization ​ Value Technology ​ $ 18,990 ​ $ 6,172 ​ $ 12,818 ​ 67 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dollars in Thousands ​ ​ December 31, 2022 ​ ​ ​ Accumulated Net Book ​ ​ Cost ​ Amortization ​ Value Technology ​ $ 18,990 ​ $ 5,222 ​ $ 13,768 ​ ​ ​ ​ ​ ​ Estimated Useful Life ​ Technology 20 years ​ Amortization expense for intangible assets was $ 1.0 million during the years ended December 31, 2023 and 2022, respectively. Amortization expense for intangible assets is expected to be $ 1.0 million for each of the years ending December 31, 2024, 2025 , 2026 , 2027 and 2028 , respectively. 5 . LONG-TERM DEBT Long-term debt consists of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ Dollars in Thousands ​ December 31, 2023 December 31, 2022 Connecticut Department of Economic and Community Development (DECD) ​ $ 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 ​ Department of Economic and Community Development On January 8, 2018, the Company entered into an agreement with DECD by which the Company received a loan of $ 300,000 secured by substantially all of the Company’s assets (the “DECD 2018 Loan”.) The DECD 2018 Loan is a ten-year loan due on December 31, 2027 and includes interest paid monthly at 3.25 %. The maturity date of the DECD 2018 Loan was extended to May 31, 2028 and the modification did not have a material impact on the Company’s cash flows. ​ Debt issuance costs associated with the DECD 2018 Loan were approximately $ 31,000 . Amortization of the debt issuance cost was approximately $ 3,000 and $ 4,000 for the years ended December 31, 2023 and 2022, respectively. Net debt issuance costs were approximately $ 12,000 and $ 15,000 at December 31, 2023 and 2022, respectively, and are presented as a reduction of the related debt in the accompanying consolidated balance sheets. Amortization for each of the next four years is expected to be approximately $ 3,000 . Financed Insurance Loan. The Company finances certain of its insurance premiums (the “Financed Insurance Loans”). In July 2023, the Company financed $ 0.4 million with a 9.99 % interest rate and is obligated to make payments on a monthly basis through June 2024. In July 2022, the Company financed $ 0.4 million with a 5.99 % interest rate, which was paid off in June 2023. As of December 31, 2023 and 2022, the Financed Insurance Loan’s outstanding balance of $ 0.2 million, respectively, was included in current maturities of long-term debt in the Company’s consolidated balance sheets. A corresponding prepaid asset was included in other current assets. ​ 68 Table of Contents The aggregate future maturities required on gross long-term debt at December 31, 2023 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 2025 2026 2027 2028 Total DECD loan ​ $ 31 ​ $ 32 ​ $ 33 ​ $ 34 ​ $ 16 ​ $ 146 Financed insurance loan ​ ​ 207 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 207 ​ ​ $ 238 ​ $ 32 ​ $ 33 ​ $ 34 ​ $ 16 ​ $ 353 ​ ​ 6 . ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES. Accrued expenses at December 31, 2023 and 2022 are as follows: ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) December 31, 2023 December 31, 2022 Accrued expenses ​ $ 764 ​ $ 983 Accrued compensation ​ 754 ​ 491 Accrued franchise, property and sales and use taxes ​ ​ 287 ​ ​ 91 Accrued interest ​ 19 ​ 19 ​ ​ $ 1,824 ​ $ 1,584 ​ During the year ended December 31, 2023, the Company wrote-off $ 1.3 million of accounts payable and $ 0.4 million of accrued expenses resulting in a gain of $ 1.7 million which is recorded as a gain on write-off of liability in the consolidated statements of operations. The Company recorded certain settlement reductions in accrued expenses and accounts payable as gains which are included in gain on settlement of liability, net in the consolidated statements of operations. During the years ended December 31, 2023 and 2022, zero and approximately $ 0.1 million, respectively, was recorded as a gain. 7 . LEASES The Company leases administrative facilities and laboratory equipment through operating lease agreements. In addition we rent various equipment used in our diagnostic lab and in our administrative offices through finance lease arrangements. Our operating leases include both lease (e.g., fixed payments including rent) and non-lease components (e.g., common area or other maintenance costs). The facility leases include one or more options to renew, from 1 to 5 years or more. The exercise of lease renewal options is typically at our sole discretion, therefore, the renewals to extend the lease terms are not included in our right-of-use (“ROU”) assets and lease liabilities as they are not reasonably certain of exercise. We regularly evaluate the renewal options and, when they are reasonably certain of exercise, we include the renewal period in our lease term. As our leases do not provide an implicit rate, we use our collateralized incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments. Operating leases result in the recognition of ROU assets and lease liabilities on the balance sheet. ROU assets represent our right to use the leased asset for the lease term and lease liabilities represent our obligation to make lease payments. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Lease expense is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The primary leases we enter into with initial terms of 12 months or less are for equipment. On May 11, 2022, we extended the lease term for our office facility in Omaha, Nebraska by modifying the expiration date from May 31, 2022 to May 31, 2025. As a result of this lease extension agreement, on the lease extension date, we recognized an additional operating lease ROU asset and corresponding operating lease liability of $ 0.1 million which equals the present value of the remaining payments due under the lease extension. The Company also recognizes ROU assets from finance leases in connection with its HSRR program. For certain customers in the HSRR program, the Company leases diagnostic testing equipment and then subleases the equipment to the customer. Finance lease ROU assets and finance lease liabilities are recognized at the lease commencement date, and 69 Table of Contents at the sublease commencement date the finance lease ROU asset is derecognized and is recorded as cost of sales in the consolidated statements of operations. There were no derecognized finance lease ROU assets for the years ended December 31, 2023 and 2022. Where Precipio is the lessor, customers lease diagnostic testing equipment from the Company with the transfer of ownership to the customer at the end of the lease term at no additional cost. For these contracts, the Company accounts for the arrangements as sales-type leases. The lease asset for sales-type leases is the net investment in leased asset, which is recorded once the finance lease ROU asset is derecognized and a related gain or loss is noted. The net investment in leased assets was $ 0.1 million as of December 31, 2023 and 2022, respectively, and is included in other current assets and other assets in our consolidated balance sheets. The balance sheet presentation of our operating and finance leases is as follows: ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ Classification on the Consolidated Balance Sheet ​ December 31, 2023 ​ December 31, 2022 Assets: ​ ​ ​ ​ ​ ​ Operating lease right-of-use assets, net ​ $ 612 ​ $ 763 Finance lease right-of-use assets, net (1) ​ ​ 174 ​ ​ 257 Total lease assets ​ $ 786 ​ $ 1,020 ​ ​ ​ ​ ​ ​ ​ Liabilities: ​ ​ ​ ​ ​ ​ Current: ​ ​ ​ ​ ​ ​ Current maturities of operating lease liabilities ​ $ 218 ​ $ 199 Current maturities of finance lease liabilities ​ ​ 132 ​ ​ 162 Noncurrent: ​ ​ ​ ​ ​ ​ Operating lease liabilities, less current maturities ​ ​ 407 ​ ​ 574 Finance lease liabilities, less current maturities ​ ​ 18 ​ ​ 68 Total lease liabilities ​ $ 775 ​ $ 1,003 ​ (1) As of December 31, 2023 and 2022, finance lease right-of-use assets included zero and $ 13 , respectively, of assets related to finance leases associated with the HSRR program. As of December 31, 2023, the estimated future minimum lease payments, excluding non-lease components, are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) Operating Leases ​ Finance Leases ​ Total ​ ​ ​ December, 31 ​ ​ December, 31 ​ ​ December, 31 ​ ​ ​ 2023 ​ ​ 2023 ​ ​ 2023 2024 ​ $ 258 ​ $ 80 ​ $ 338 2025 ​ 224 ​ 65 ​ 289 2026 ​ 214 ​ 26 ​ 240 Total lease obligations ​ 696 ​ 171 ​ 867 Less: Amount representing interest ​ ( 71 ) ​ ( 21 ) ​ ( 92 ) Present value of net minimum lease obligations ​ 625 ​ 150 ​ 775 Less, current portion ​ ( 218 ) ​ ( 132 ) ​ ( 350 ) Long term portion ​ $ 407 ​ $ 18 ​ $ 425 ​ 70 Table of Contents Other information as of December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2023 ​ 2022 Weighted-average remaining lease term (years): ​ ​ ​ Operating leases 2.8 ​ 3.7 Finance leases 2.0 ​ 2.8 Weighted-average discount rate: ​ ​ ​ Operating leases 8.00 % ​ 8.00 % Finance leases 10.63 % ​ 10.31 % ​ During the years ended December 31, 2023 and 2022, operating cash flows from operating leases was $ 0.2 million, respectively, and operating lease ROU assets obtained in exchange for operating lease liabilities was $ 0.1 million, respectively. Operating Lease Costs Operating lease costs were $ 0.3 million during the years ended December 31, 2023 and 2022, respectively. These costs are primarily related to long-term operating leases for the Company’s facilities and laboratory equipment. Short-term and variable lease costs were less than $ 0.1 million for the years ended December 31, 2023 and 2022, respectively. Finance Lease Costs Finance lease amortization and interest expenses are included in the consolidated statements of operations for the years ended December 31, 2023 and 2022. The balances within these accounts are approximately $ 0.1 million, respectively. ​ ​ 8. COMMITMENTS AND CONTINGENCIES PURCHASE COMMITMENTS The Company has entered into purchase commitments for reagents from suppliers. These agreements started in 2011 and run through 2025. The Company and the suppliers will true up the amounts on an annual basis. The future minimum purchase commitments under these and other purchase agreements are as follows: ​ ​ ​ ​ ​ Years ending December 31, ​ (dollars in thousands) 2024 ​ $ 1,834 2025 ​ 50 ​ ​ $ 1,884 ​ LITIGATIONS The Company is involved in legal proceedings related to matters, which are incidental to its business. Also, the Company is delinquent on the payment of outstanding accounts payable for certain vendors and suppliers who have taken or have threatened to take legal action to collect such outstanding amounts. See below for a discussion on these matters. CPA Global provides us with certain patent management services. On February 6, 2017, CPA Global claimed that we owe approximately $ 0.2 million for certain patent maintenance services rendered. CPA Global has not filed claims against us in connection with this allegation. A liability of less than $ 0.1 million has been recorded and is reflected in accounts payable within the accompanying consolidated balance sheets at December 31, 2023 and 2022. 71 Table of Contents LEGAL AND REGULATORY ENVIRONMENT The healthcare industry is subject to numerous laws and regulations of federal, state and local governments. These laws and regulations include, but are not limited to, matters such as licensure, accreditation, government healthcare program participation requirement, reimbursement for patient services and Medicare and Medicaid fraud and abuse. Government activity has increased with respect to investigations and allegations concerning possible violations of fraud and abuse statutes and regulations by healthcare providers. Violations of these laws and regulations could result in expulsion from government healthcare programs together with the imposition of significant fines and penalties, as well as significant repayments for patient services previously billed. Management believes that the Company is in compliance with fraud and abuse regulations, as well as other applicable government laws and regulations. While no material regulatory inquiries have been made, compliance with such laws and regulations can be subject to future government review and interpretation, as well as regulatory actions unknown or unasserted at this time. 9. INCOME TAXES Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company’s net deferred tax assets relate primarily to its net operating loss carryforwards, allowance for credit losses and stock-based compensation, partially offset by property and equipment and intangible assets. The Company has recorded a full valuation allowance to offset the net deferred tax assets, as it is more likely than not that the Company will not realize future benefits associated with these net deferred tax assets at December 31, 2023 and 2022. At December 31, 2023 and 2022, the Company had net deferred tax assets of $ 19.9 million and $ 18.6 million, respectively, against which a full valuation allowance has been recorded. The increase in the valuation allowance for the years ended December 31, 2023 and 2022 is $ 1.4 million and $ 3.4 million, respectively, resulting from additional net operating losses generated in the year. The deferred tax liabilities associated with the book versus tax basis difference of intangible assets are the result of an asset step-up pursuant to a June 2017 merger transaction (the “Merger”). Significant components of the Company’s net deferred tax assets at December 31, 2023 and 2022 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dollars in Thousands ​ 2023 2022 Deferred tax assets: ​ ​ Net operating loss and credit carryforwards ​ $ 18,792 ​ $ 18,410 Allowance for credit losses ​ ​ 616 ​ ​ 371 Stock-based compensation ​ 2,182 ​ 1,906 Other ​ 235 ​ 140 Gross deferred tax assets ​ 21,825 ​ 20,827 Deferred tax liabilities: ​ ​ Property and equipment ​ ( 201 ) ​ ( 274 ) Intangible assets ​ ( 1,690 ) ​ ( 1,950 ) Other ​ — ​ ( 35 ) 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 ​ $ — ​ $ — ​ 72 Table of Contents The Company’s provision for income taxes for the years ended December 31, 2023 and December 31, 2022 relates to income taxes in states and other jurisdictions and differs from the amounts determined by applying the statutory federal income tax rate to the loss before income taxes for the following reasons: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dollars in Thousands ​ ​ 2023 ​ 2022 Benefit at federal rate ​ $ ( 1,229 ) ​ $ ( 2,563 ) Increase (decrease) resulting from: ​ ​ State income taxes—net of federal benefit ​ ( 173 ) ​ ( 747 ) Miscellaneous permanent differences ​ 39 ​ 51 Warrant liability revaluation ​ — ​ ( 153 ) Meals and entertainment ​ ​ 21 ​ ​ 32 Federal and state credits ​ ​ ( 72 ) ​ ​ — Other, net ​ ​ 48 ​ ​ — Income taxed to owners on Non-Controlling Interest (NCI) ​ ​ — ​ ​ ( 3 ) Change in valuation allowance ​ 1,366 ​ 3,383 Total income tax benefit ​ $ — ​ $ — ​ The income tax expense consists of the following for the years ended December 31, 2023 and 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dollars in Thousands ​ 2023 2022 Federal: ​ ​ Current ​ $ — ​ $ — Deferred ​ — ​ — Total Federal ​ $ — ​ $ — State: ​ ​ Current ​ $ — ​ $ — Deferred ​ — ​ — Total State ​ $ — ​ $ — Foreign: ​ ​ Current ​ $ — ​ $ — Deferred ​ — ​ — Total Foreign ​ $ — ​ $ — Total Tax Provision ​ $ — ​ $ — ​ The Company had available gross federal net operating loss (“NOL”) carryforwards of approximately $ 76 million, and state NOL carryforwards of $ 2.4 million as of December 31, 2023. Approximately $ 28 million of the federal NOLs will expire at various dates beginning in 2036 through 2037 if not utilized, while the remaining amount will have an indefinite life. Beginning in 2018, under the TCJ Act, federal loss carryforwards have an unlimited carryforward period, however such losses can only offset 80% of taxable income in any one year. Included in the total NOLs for 2023 are $ 48 million of federal losses that fall under these new rules. State NOLs expire on various dates. Section 382 of the Internal Revenue Code, and similar state regulations, contain provisions that may limit the NOL carryforwards available to be used to offset income in any given year upon the occurrence of certain events, including changes in the ownership interests of significant stockholders. In the event of a cumulative change in ownership in excess of 50% over a three-year period, the amount of the NOL carryforwards that the Company may utilize in any one year may be limited. The Company reduced its tax attributes (NOLs and tax credits) and generated a limitation on utilization of such attributes resulting from the Merger. 73 Table of Contents At December 31, 2023, and as a result of the limitations under Section 382 of the Internal Revenue Code, the Company had a total of unused federal tax net operating loss carryforwards with expiration dates as follows: ​ ​ ​ ​ ​ ​ ​ Dollars in ​ ​ Thousands ​ 2023 2036 ​ $ 14,277 2037 ​ ​ 13,641 Unlimited life ​ 47,839 Total Federal ​ $ 75,757 ​ The Company has adopted guidance on accounting for uncertainty in income taxes which clarified the accounting for income taxes by prescribing the minimum threshold a tax position is required to meet before being recognized in the financial statements as well as guidance on de-recognition, measurement, classification and disclosure of tax positions. There are no material uncertain tax positions that would require recognition in the financial statements. The Company is obligated to file income tax returns in the U.S. federal jurisdiction and various U.S. states. Since the Company had losses in the past, all prior years that generated NOLs are open and subject to audit examination in relation to the NOL generated from those years. During the year ended December 31, 2022, the IRS completed an exam of the Company’s 2019 tax year, which resulted in a change to the NOL carryforward. Our evaluation of uncertain tax positions was performed for the tax years open to examination. 10. STOCKHOLDERS’ EQUITY Common Stock Pursuant to our Third Amended and Restated Certificate of Incorporation, as amended, we currently have 150,000,000 shares of common stock authorized for issuance. On December 20, 2018, the Company’s shareholders approved the proposal to authorize the Company’s Board of Directors to, in its discretion, amend the Company’s Third Amended and Restated Certificate of Incorporation to increase the total number of authorized shares of common stock from 150,000,000 shares to 250,000,000 shares. The Company has not yet implemented this increase. During the years ended December 31, 2023 and 2022, the Company issued 15,972 and 1,340 shares of its common stock, respectively, in connection with the exercise of 15,972 and 1,340 warrants, respectively. The warrant exercises resulted in net cash proceeds to the Company of less than $ 0.1 million during the years ended December 31, 2023 and 2022, respectively. During the year ended December 31, 2023, the Company issued 23,598 shares of its common stock in connection with consulting services of approximately $ 0.2 million. At The Market Offering Agreement ​ AGP Sales Agreement ​ On April 2, 2021, the Company entered into a sales agreement with A.G.P./Alliance Global Partners (“AGP”), pursuant to which we may offer and sell its common stock, par value $ 0.01 per share (the “Common Stock”) (the “Shares”), having aggregate sales proceeds of up to $ 22.0 million. Shares can be sold either directly to or through AGP as a sales agent (the “AGP Sales Agreement”), from time to time, in an “at the market offering” (as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended) of the Shares (the “2021 ATM Offering”). We are limited in the number of shares we can sell in the 2021 ATM Offering due to the offering limitations currently applicable to us under General Instruction I.B.6. of Form S-3 and our public float as of the applicable date of such sales, as well as the number of authorized and unissued shares available for issuance, in accordance with the terms of the AGP Sales Agreement. ​ 74 Table of Contents The sale of our shares of Common Stock to or through AGP, will be made pursuant to the registration statement (the “Registration Statement”) on Form S-3 (File No. 333-237445), which was declared effective by the Securities and Exchange Commission (the “SEC”) on April 13, 2020, for an aggregate offering price of up to $ 50.0 million. Under the AGP Sales Agreement, Shares were permitted to be sold by any method permitted by law deemed to be an “at the market offering.” AGP will also be able to sell shares of Common Stock by any other method permitted by law, including in negotiated transactions with the Company’s prior written consent. Upon delivery of a placement notice and subject to the terms and conditions of the AGP Sales Agreement, AGP was required to use its commercially reasonable efforts consistent with its normal trading and sales practices, applicable state and federal law, rules and regulations, and the rules of The Nasdaq Capital Market to sell the Shares from time to time based upon the Company’s instructions, including any price, time or size limits specified by the Company. AGP is not under any obligation to purchase any of the Shares on a principal basis pursuant to the AGP Sales Agreement, except as otherwise agreed by AGP and the Company in writing and expressly set forth in a placement notice. AGP’s obligations to sell the Shares under the AGP Sales Agreement are subject to satisfaction of certain conditions, including customary closing conditions. The Company is not obligated to make any sales of Shares under the AGP Sales Agreement and any determination by the Company to do so will be dependent, among other things, on market conditions and the Company’s capital raising needs. The Company agreed to pay AGP a cash fee of 3.0 % of the aggregate gross proceeds from the sale of the Shares on the Company’s behalf pursuant to the AGP Sales Agreement. The AGP Sales Agreement contains representations, warranties and covenants that are customary for transactions of this type. In addition, the Company has provided AGP with customary indemnification and contribution rights. The Company also agreed to reimburse AGP for certain specified expenses, including the expenses of counsel to AGP. The offering of the Shares pursuant to the AGP Sales Agreement terminated upon the expiration of the Company’s Registration Statement on Form S-3 (File No. 333-237445). ​ During the years ended December 31, 2023 and 2022, we received net proceeds of approximately $ 0.5 million and $ 0.1 million, respectively, from the sale of 30,827 and 4,251 shares of common stock through AGP, respectively. ​ As of the date of issuance of this Annual Report on Form 10-K, we have received an aggregate of $ 15.6 million in net proceeds, after issuance costs of approximately $ 0.5 million, from the sale of 260,128 shares of common stock pursuant to the AGP Sales Agreement. ​ AGP 2023 Sales Agreement ​ On April 14, 2023, the Company entered into the AGP 2023 Sales Agreement, in an “at the market offering” (as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended) of the shares of Common Stock. AGP will be entitled to a commission at a fixed rate of 3.0 % of the gross proceeds from each sale of shares of Common Stock pursuant to the AGP 2023 Sales Agreement. ​ The sale of our shares of Common Stock to or through AGP, pursuant to the AGP 2023 Sales Agreement, will be made pursuant to the 2023 Registration Statement on Form S-3 (File No. 333-271277), filed by the Company with the SEC on April 14, 2023, as amended by Amendment No. 1 filed by the Company with the SEC on April 25, 2023, and declared effective on April 27, 2023, for an aggregate offering price of up to $ 5.8 million. ​ During the year ended December 31, 2023, we received net proceeds of less than $ 1,000 from the sale of 25 shares of common stock pursuant to the AGP 2023 Sales Agreement. As of the date of issuance of this Annual Report on Form 10-K, we have received an aggregate of less than $ 0.1 million in net proceeds, after issuance costs of approximately $ 2 thousand, from the sales of 10,189 shares of common stock through AGP, including less than $ 0.1 million in net proceeds from the sale of 10,167 shares of common stock through AGP from January 1, 2024 through the date of issuance of this Annual Report on Form 10-K. ​ As a result of sales already made through the AGP 2023 Sales Agreement and the Registered Direct Offering, mentioned below, the Company has approximately $ 3.7 million available for future sales pursuant to the AGP 2023 Sales Agreement. On January 19, 2024, we filed a prospectus supplement to our prospectus dated April 25, 2023 registering the 75 Table of Contents offer and sales of up to $ 865,889 of shares of our common stock. We have approximately $ 0.8 million of remaining availability pursuant to this prospectus supplement. ​ Registered Direct Offering ​ On June 8, 2023, the Company, entered into a securities purchase agreement (the “Purchase Agreement”) with certain institutional investors (the “Purchasers”), pursuant to which the Company agreed to issue and sell to the Purchasers, in a registered direct offering (the “Registered Direct Offering”), an aggregate of: (i) 206,250 shares (the “Shares”) of its common stock, $ 0.01 par value (the “Common Stock”), at a price of $ 9.00 per share, and (ii) pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 15,972 shares of Common Stock, at a price of $ 8.98 per Pre-Funded Warrant. The Company reviewed the provisions of the Pre-Funded Warrants to determine the balance sheet classification and concluded that these warrants are to be classified as equity and are not subject to remeasurement on each balance sheet date. The Pre-Funded Warrants are immediately exercisable, have an exercise price of $ 0.02 per share, and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full. All of the Pre-Funded Warrants were exercised during the year ended December 31, 2023 and no Pre-Funded Warrants were outstanding as of December 31, 2023. In a concurrent private placement (the “Private Placement” and together with the Registered Direct Offering, the “Offering”), pursuant to the Purchase Agreement, the Company agreed to issue and sell to the Purchasers, for no additional consideration, warrants (the “RDO Common Warrants” and, together with the Shares and the Pre-Funded Warrants, the “Securities”) to purchase up to 444,444 shares of Common Stock. The Company reviewed the provisions of the RDO Common Warrants to determine the balance sheet classification and concluded that these warrants are to be classified as equity and are not subject to remeasurement on each balance sheet date. The RDO Common Warrants are exercisable beginning six months after the date of issuance, have an exercise price of $ 12.60 per share, and will expire December 12, 2028. The fair value of the RDO Common Warrants of approximately $ 3.5 million at the date of issuance was estimated using the Black-Scholes model which used the following inputs: term of 5 years; risk free rate of 3.89 %; volatility of 143 %; and share price of $ 9.00 per share based on the trading price of the Company’s common stock. The Company allocated $ 1.3 million of the issuance proceeds to the RDO Common Warrants based on the relative fair value of the RDO Common Warrants, Common Stock and Pre-Funded Warrants issued in the Offering. A holder of Pre-Funded Warrants may not exercise the warrant if the holder, together with its affiliates, would beneficially own more than 4.99 % (or, at the election of the purchaser, 9.99 %) of the number of shares of the Common Stock outstanding immediately after giving effect to such exercise. A holder of Pre-Funded Warrants may increase or decrease this percentage not in excess of 19.99 % by providing at least 61 days ’ prior notice to the Company. The Registered Direct Offering resulted in gross proceeds to the Company of approximately $ 2.0 million. The net proceeds to the Company from the Registered Direct Offering are approximately $ 1.8 million, excluding any proceeds that may be received upon the cash exercise of the RDO Common Warrants, after deducting the financial advisor’s fees and estimated offering expenses payable by the Company. The Company intends to use the net proceeds from the Registered Direct Offering for working capital and general corporate purposes, which may include capital expenditures, research and development expenditures, regulatory affairs expenditures, clinical trial expenditures, acquisitions of new technologies and investments and others. The Purchase Agreement contains customary representations, warranties and agreements by the Company, customary conditions to closing, indemnification obligations of the Company, other obligations of the parties, and termination provisions. Additionally, each of the directors and executive officers of the Company, pursuant to lock-up agreements (the “Lock-Up Agreements”), agreed not to sell or transfer any of the Company securities which they hold, subject to certain exceptions, during the 90 -day period following the closing of the Registered Direct Offering. The Purchase Agreement also requires the Company to use commercially reasonable efforts to file a registration statement with the SEC to register the resale by the Purchasers of the shares of Common Stock issuable upon exercise of the RDO Common Warrants within thirty ( 30 ) days of the date of the Purchase Agreement. The Company filed this registration statement on Form S-1 (File No. 333-273172), which was declared effective by the SEC on July 19, 2023. 76 Table of Contents On June 7, 2023, the Company also entered into a financial advisory agreement (the “Financial Advisor Agreement”) with A.G.P./Alliance Global Partners (the “Financial Advisor”). Pursuant to the terms of the Financial Advisor Agreement, the Financial Advisor agreed to use its reasonable best efforts to arrange for the sale of the Securities. ​ The Company paid the Financial Advisor a cash fee of $ 140,000 generated from the sale of the Shares and Pre-Funded Warrants. The Financial Advisor Agreement contains customary representations, warranties and agreements by the Company, customary conditions to closing, indemnification obligations of the Company and the Financial Advisor, including for liabilities under the Securities Act of 1933, as amended (the “Securities Act”), other obligations of the parties, and termination provisions. ​ Pursuant to the Purchase Agreement, the Company has agreed that, subject to certain exceptions, (i) it will not issue any shares of common stock or securities exercisable or convertible into shares of common stock or to file any registration statement or amendment or supplement thereto for a period of ninety ( 90 ) days following the closing of the Offering and that (ii) it will not enter into a variable rate transaction for a period of one hundred eighty ( 180 ) days following the closing of the Offering. The Registered Direct Offering was made pursuant to the 2023 Registration Statement, as supplemented by a prospectus supplement dated June 9, 2023. There is $ 3.7 million of remaining availability under the 2023 Registration Statement. ​ Preferred Stock The Company’s Board of Directors is authorized to issue up to 15,000,000 shares of preferred stock in one or more series, from time to time, with such designations, powers, preferences and rights and such qualifications, limitations and restrictions as may be provided in a resolution or resolutions adopted by the Board of Directors. The authority of the Board of Directors includes, but is not limited to, the determination or fixing of the following with respect to shares of such class or any series thereof: (i) the number of shares; (ii) the dividend rate, whether dividends shall be cumulative and, if so, from which date; (iii) whether shares are to be redeemable and, if so, the terms and amount of any sinking fund providing for the purchase or redemption of such shares; (iv) whether shares shall be convertible and, if so, the terms and provisions thereof; (v) what restrictions are to apply, if any, on the issue or reissue of any additional preferred stock; and (vi) whether shares have voting rights. The preferred stock may be issued with a preference over the common stock as to the payment of dividends. We have no current plans to issue any additional preferred stock. Classes of stock such as the preferred stock may be used, in certain circumstances, to create voting impediments on extraordinary corporate transactions or to frustrate persons seeking to effect a merger or otherwise to gain control of the Company. For the foregoing reasons, any additional preferred stock issued by the Company could have an adverse effect on the rights of the holders of the common stock. Series B Preferred Stock The Company filed a Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock (“Series B Preferred Stock”) with the State of Delaware, which designates 6,900 shares of our preferred stock as Series B Preferred Stock. The Series B Preferred Stock has a stated value of $ 1,000 per share and a par value of $ 0.01 per share. The Series B Preferred Stock includes a beneficial ownership blocker but has no dividend rights (except to the extent dividends are also paid on the common stock). On August 28, 2017, the Company completed an underwritten public offering (the “August 2017 Offering”) consisting of the Company’s Series B Preferred Stock and warrants. The conversion price of the Series B Preferred Stock contains a down round feature. The Company will recognize the effect of the down round feature when it is triggered. At that time, the effect would be treated as a deemed dividend and as a reduction of income available to common shareholders in our basic earnings per share calculation. There were no conversions of Series B Preferred Stock during the years ended December 31, 2023 and 2022, respectively. At December 31, 2023 and 2022, the Company had 6,900 shares of Series B designated and issued and 47 77 Table of Contents shares of Series B outstanding. Based on the stated value of $ 1,000 per share and a conversion price of $ 8.00 per share, the outstanding shares of Series B Preferred Stock at December 31, 2023 were convertible into 5,875 shares of common stock. Liquidation Preferences The following is the liquidation preferences for the Company’s preferred stock; Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, the holders shall be entitled to receive out of the assets of the Corporation an amount equal to the par value, plus any accrued and unpaid dividends thereon, for each share of Preferred Stock before any distribution or payment shall be made to the holders of the Common Stock, and if the assets of the Corporation shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the holders shall be ratably distributed among the holders in accordance with the respective amounts that would be payable on such shares. If all amounts were paid in full; and thereafter, the holders shall be entitled to receive out of the assets, whether capital or surplus, of the Corporation the same amount that a holder of Common Stock would receive if the Preferred Stock were fully converted to Common Stock which amount shall be paid pari passu with all holders of Common Stock. Common Stock Warrants The following represents a summary of the warrants outstanding as of December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Underlying Exercise ​ ​ Issue Year ​ Expiration ​ Shares ​ Price Warrants ​ ​ ​ ​ ​ ​ ​ ​ ​ (1) ​ 2019 ​ April 2024 ​ 7,374 ​ $ 108.00 (2) ​ 2019 ​ May 2024 ​ 7,717 ​ $ 191.20 (3) ​ 2023 ​ December 2028 ​ 444,444 ​ $ 12.60 ​ 459,535 ​ (1) These warrants were issued in connection with a 2018 securities purchase agreement, as amended. (2) These warrants were issued in connection with convertible notes issued in May 2019. (3) These warrants were issued in connection with the 2023 registered direct offering and concurrent private placement and are the RDO common warrants discussed below . ​ During the years ended December 31, 2023 and 2022, 19,365 and 5,798 warrants expired. These warrants had been issued in connection with transactions which were completed between 2017 and 2018. During the years ended December 31, 2023 and 2022, t here were 15,972 and 1,340 warrants exercised, respectively, for proceeds to the Company of zero and $ 11,000 , respectively. During the years ended December 31, 2023 and 2022, the intrinsic value of the warrants exercised was $ 0.1 million and less than $ 0.1 million, respectively. Pre -Funded Warrants . In connection with the Registered Direct Offering in June 2023, the Company issued 15,972 Pre-Funded Warrants to purchase up to 15,972 shares of Common Stock, at a price of $ 8.98 per Pre-Funded Warrant. The Pre-Funded Warrants are immediately exercisable and have an exercise price of $ 0.02 per share. During the year ended December 31, 2023, all of the Pre-Funded Warrants were exercised and there are none outstanding as of December 31, 2023. RDO Common Warrants . In connection with the Registered Direct Offering in June 2023, the Company issued 444,444 RDO Common Warrants to purchase up to 444,444 shares of Common Stock. The RDO Common Warrants are exercisable beginning six months after the date of issuance, have an exercise price of $ 12.60 per share, and will expire December 12, 2028. Deemed Dividends 78 Table of Contents Certain of our preferred stock and warrant issuances contain down round provisions which require us to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic earnings per share. Some warrants that expired or were exercised during the year ended December 31, 2022 contained down round provisions but such provisions had no impact on the respective expiration or exercise dates. There were no deemed dividends recorded during the years ended December 31, 2023 and 2022. 11. FAIR VALUE FASB guidance on fair value measurements, which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements for our financial assets and liabilities, as well as for other assets and liabilities that are carried at fair value on a recurring basis in our consolidated financial statements. FASB guidance establishes a three-level fair value hierarchy based upon the assumptions (inputs) used to price assets or liabilities. The three levels of inputs used to measure fair value are as follows: Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities; Level 2—Observable inputs other than those included in Level 1, such as quoted prices for similar assets and liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets; and Level 3—Unobservable inputs reflecting our own assumptions and best estimate of what inputs market participants would use in pricing the asset or liability. Common Stock Warrant Liabilities. Certain of our issued and outstanding warrants to purchase shares of common stock do not qualify to be treated as equity and, accordingly, are recorded as a liability. We are required to record these instruments at fair value at each reporting date and changes are recorded as a non-cash adjustment to earnings. The gains or losses included in earnings are reported in other income (expense) in our consolidated statement of operations. Bridge Note Warrant Liabilities During 2019 and 2018, the Company issued warrants in connection with the issuance of convertible notes. All of these warrants issuances were classified as warrant liabilities (the “Bridge Note Warrant Liabilities”). The Bridge Note Warrant Liabilities are considered Level 3 financial instruments and were valued using the Black Scholes model. As of December 31, 2023, assumptions used in the valuation of the Bridge Note Warrant Liabilities include: remaining life to maturity of 0.3 to 0.4 years; annual volatility of 71 % to 77 %; and risk free rate of 5.33 to 5.40 %. As of December 31, 2022, assumptions used in the valuation of the Bridge Note Warrant Liabilities include: remaining life to maturity of 0.3 to 1.4 years; annual volatility of 69 % to 77 %; and risk free rate of 4.42 % to 4.76 %. During the year ended December 31, 2023, the change in the fair value of the warrant liabilities measured using significant unobservable inputs (Level 3) was less than $ 1 thousand, respectively. 79 Table of Contents The change during the year ended December 31, 2022 was comprised of the following: ​ ​ ​ ​ Dollars in Thousands ​ ​ ​ ​ ​ ​ Year Ended December 31, 2022 ​ Bridge Note ​ Warrant Liabilities Beginning balance at January 1 $ 606 Total gains: Revaluation recognized in earnings ​ ( 606 ) Balance at December 31 $ – ​ ​ 12. EQUITY INCENTIVE PLAN The Company currently issues stock awards under its 2017 Stock Option and Incentive Plan, as amended (the "2017 Plan") which will expire on June 5, 2027 . The shares authorized for issuance under the 2017 Plan were 249,693 at December 31, 2023 of which 14,392 were available for future grant. The shares authorized under the 2017 Plan are subject to annual increases on January 1 by 5 % of the number of shares of common stock issued and outstanding on the immediately preceding December 31, or such lessor number of shares determined by the Company’s Board of Directors or Compensation Committee. During the year ended December 31, 2023, the shares authorized for issuance increased by 57,051 shares. The Plan is administered by the Compensation Committee of the Board of Directors (the “Committee”), which has the authority to set the number, exercise price, term and vesting provisions of the awards granted under the Plan, subject to the terms thereof. Either incentive or non-qualified stock options may be granted to employees of the Company, but only non-qualified stock options may be granted to non-employee directors and advisors. However, in either case, the Plan requires that stock options must be granted at exercise prices not less than the fair market value of the common stock on the date of the grant. Options issued under the plan vest over periods as determined by the Committee and expire 10 years after the date the option was granted. Stock Options. The Company accounts for all stock-based compensation payments to employees and directors, including grants of employee stock options, at fair value at the date of grant and expenses the benefit in operating expense in the consolidated statements of operations over the service period of the awards. The Company records the expense for stock-based compensation awards subject to performance-based milestone vesting over the remaining service period when management determines that achievement of the milestone is probable based on the expected satisfaction of the performance conditions as of the reporting date. The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes option pricing model, which requires various assumptions including estimating stock price volatility, expected life of the stock option, risk free interest rate and estimated forfeiture rate. During the year ended December 31, 2023, the Company granted stock options to purchase up to 58,780 shares of common stock at a weighted average exercise price of $ 12.12 . These awards have vesting periods of up to four years and had a weighted average grant date fair value of $ 11.60 . The fair value calculation of options granted during 2023 used the follow assumptions: risk free interest rates of 3.63 % to 4.05 %, based on the U.S. Treasury yield in effect at the time of grant; expected life of six years ; and volatility of 142 % to 162 % based on historical volatility of the Company’s common stock over a time that is consistent with the expected life of the option. 80 Table of Contents The following table summarizes stock option activity under our plans during the year ended December 31, 2023: ​ ​ ​ ​ ​ ​ ​ Number of Weighted-Average ​ ​ Options ​ 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 Exercisable at December 31, 2023 151,479 ​ $ 56.06 ​ As of December 31, 2023, there were 213,891 options that were vested or expected to vest with an aggregate intrinsic value of zero and a remaining weighted average contractual life of 7.5 years. During the year ended December 31, 2022, there were 55,700 options granted with a weighted average exercise price of $ 30.20 and 3,397 options forfeited with a weighted average exercise price of $ 43.60 . Restricted Stock Awards. Restricted stock awards are subject to vesting restrictions. If a grantee’s service with the Company is terminated prior to vesting of the restricted stock, all unvested shares shall be forfeited and returned to the Company. Upon vesting, the restricted stock award shall no longer be deemed restricted. During the year ended December 31, 2023, the Company granted 2,492 restricted stock awards to directors of the Company. The awards vested immediately and had a weighted average grant date fair value of $ 5.90 . As of December 31, 2023, there were 2,492 and zero restricted stock awards that were vested and unvested, respectively. There were no restricted stock awards granted during the year ended December 31, 2022. Stock Compensation. During the years ended December 31, 2023 and 2022, we recorded compensation expense for all stock awards of $ 1.6 million and $ 3.8 million, respectively, within operating expense in the accompanying statements of operations. As of December 31, 2023, the unrecognized compensation expense related to unvested stock awards was $ 2.1 million, which is expected to be recognized over a weighted-average period of 1.9 years. 81 Table of Contents 13 SALES SERVICE REVENUE, NET AND ACCOUNTS RECEIVABLE ASC Topic 606, “Revenue from contracts with customers” ​ The Company follows the guidance of ASC 606 for the recognition of revenue from contracts with customers to transfer goods and services. The Company performed a comprehensive review of its existing revenue arrangements following the five-step model: ​ Step 1: Identification of the contract with the customer. Sub-steps include determining the customer in a contract, initial contract identification and determining if multiple contracts should be combined and accounted for as a single transaction. Step 2: Identify the performance obligation in the contract. Sub-steps include identifying the promised goods and services in the contract and identifying which performance obligations within the contract are distinct. Step 3: Determine the transaction price. Sub-steps include variable consideration, constraining estimates of variable consideration, the existence of a significant financing component in the contract, noncash consideration and consideration payable to a customer. Step 4: Allocate transaction price. Sub-steps include assessing the amount of consideration to which the Company expects to be entitled in exchange for transferring the promised goods or services to the customer. Step 5: Satisfaction of performance obligations. Sub-steps include ascertaining the point in time when an asset is transferred to the customer and when the customer obtains control of the asset upon which time the Company recognizes revenue. ​ Nature of Contracts and Customers The Company’s contracts and related performance obligations are similar for its customers and the sales process for all customers starts upon the receipt of requisition forms from the customers for patient diagnostic testing and the execution of contracts for biomarker testing and clinical research. Payment terms for the services provided are 30 days, unless separately negotiated. ​ Diagnostic testing ​ Control of the laboratory testing services is transferred to the customer at a point in time. As such, the Company recognizes revenue for laboratory testing services at a point in time based on the delivery method (web-portal access or fax) for the patient’s laboratory report, per the contract. ​ Clinical research grants ​ Control of the clinical research services are transferred to the customer over time. The Company will recognize revenue utilizing the “effort based” method, measuring its progress toward complete satisfaction of the performance obligation. ​ Biomarker testing and clinical project services ​ Control of the biomarker testing and clinical project services are transferred to the customer over time. The Company utilizes an “effort based” method of assessing performance and measures progress towards satisfaction of the performance obligation based upon the delivery of results. ​ The Company generates revenue from the provision of diagnostic testing provided to patients, biomarker testing provided to bio-pharma customers and clinical research grants funded by both bio-pharma customers and government health programs. ​ 82 Table of Contents Reagents and other diagnostic products Control of reagents and other diagnostic products are transferred to the customer at a point in time and, as such, the Company recognizes these revenues at a point in time based on the delivery method. These revenues include revenues from reagent sets for our HSRR program and other product sales and are included in other revenue in our consolidated statements of operations. ​ Disaggregation of Revenues by Transaction Type ​ We operate in one business segment and, therefore, the results of our operations are reported on a consolidated basis for purposes of segment reporting, consistent with internal management reporting. Service revenue, net for the years ended December 31, 2023 and 2022 was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, (dollars in thousands) ​ Diagnostic Testing ​ 2023 2022 Medicaid ​ $ 27 ​ $ 50 Medicare ​ 5,000 ​ 3,831 Self-pay ​ 156 ​ 326 Third party payers ​ 7,208 ​ 4,211 Contract diagnostics and other ​ 5 ​ — Service revenue, net ​ $ 12,396 ​ $ 8,418 ​ Revenue from the Medicare and Medicaid programs account for a portion of the Company’s patient diagnostic service revenue. Laws and regulations governing those programs are extremely complex and subject to interpretation. As a result, there is at least a reasonable possibility that recorded estimates will change by a material amount in the near term. ​ Revenue Recognition ​ Revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price using the expected value method based on historical experience. The Company does not typically enter arrangements where multiple contracts can be combined as the terms regarding services are generally found within a single agreement/requisition form. The Company derives its revenues from the following types of transactions: diagnostic testing (“Diagnostic”), revenues from the Company’s ICP technology and bio-pharma projects encompassing genetic diagnostics (collectively “Biomarker”), revenues from clinical research grants from state and federal research programs and diagnostic product sales, including revenues from equipment leases and reagent sales associated with our HSRR program . ​ 83 Table of Contents Deferred revenue ​ Deferred revenue, or unearned revenue, refers to advance payments for products or services that are to be delivered in the future. The Company records such prepayment of unearned revenue as a liability, as revenue that has not yet been earned, but represents products or services that are owed to a customer. As the product or service is delivered over time, the Company recognizes the appropriate amount of revenue from deferred revenue. As of December 31, 2023 and 2022, the deferred revenue was $ 0.1 million, respectively. ​ Contractual Allowances and Adjustments We are reimbursed by payers for services we provide. Payments for services covered by payers average less than billed charges. We monitor revenue and receivables from payers and record an estimated contractual allowance for certain revenue and receivable balances as of the revenue recognition date to properly account for anticipated differences between amounts estimated in our billing system and amounts ultimately reimbursed by payers. Accordingly, the total revenue and receivables reported in our consolidated financial statements are recorded at the amounts expected to be received from these payers. For service revenue, the contractual allowance is estimated based on several criteria, including unbilled claims, historical trends based on actual claims paid, current contract and reimbursement terms and changes in customer base and payer/product mix. The billing functions for the remaining portion of our revenue are contracted and fixed fees for specific services and are recorded without an allowance for contractual discounts. The following table presents our revenues initially recognized for each associated payer class during the years ended December 31, 2023 and 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, (dollars in thousands) ​ ​ ​ Contractual Allowances and ​ Revenues, net of Contractual ​ ​ Gross Revenues ​ adjustments ​ Allowances and adjustments ​ 2023 2022 2023 2022 2023 2022 Medicaid ​ $ 27 ​ $ 50 ​ $ — ​ $ — ​ $ 27 ​ $ 50 Medicare ​ 5,002 ​ 3,831 ​ ( 2 ) ​ — ​ 5,000 ​ 3,831 Self-pay ​ 156 ​ 326 ​ — ​ — ​ 156 ​ 326 Third party payers ​ 21,300 ​ 14,681 ​ ( 14,092 ) ​ ( 10,470 ) ​ 7,208 ​ 4,211 Contract diagnostics ​ 5 ​ — ​ — ​ — ​ 5 ​ — ​ ​ 26,490 ​ 18,888 ​ ( 14,094 ) ​ ( 10,470 ) ​ 12,396 ​ 8,418 Other ​ 3,019 ​ 1,402 ​ — ​ — ​ 3,019 ​ 1,402 ​ ​ $ 29,509 ​ $ 20,290 ​ $ ( 14,094 ) ​ $ ( 10,470 ) ​ $ 15,415 ​ $ 9,820 ​ ​ 84 Table of Contents Allowance for Credit Losses ​ The Company provides for a general allowance for collectability of services when recording net sales. The Company has adopted the policy of recognizing net sales to the extent it expects to collect that amount. Reference FASB 954-605-45-5 and ASU 2011-07, Health Care Entities: Presentation and Disclosure of Patient Service Revenue, Provision for Credit Loss, and the Allowance for Credit Losses. The change in the allowance for credit losses is directly related to the increase in patient service revenues. The following table presents our reported revenues net of the collection allowance and adjustments for the years ended December 31, 2023 and 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ Revenues, net of ​ ​ ​ (dollars in thousands) ​ Contractual Allowances ​ Allowances for credit ​ ​ ​ and adjustments ​ losses ​ Total ​ 2023 2022 2023 2022 2023 2022 Medicaid ​ $ 27 ​ $ 50 ​ $ ( 11 ) ​ $ ( 25 ) ​ $ 16 ​ $ 25 Medicare ​ 5,000 ​ 3,831 ​ ( 62 ) ​ ( 110 ) ​ 4,938 ​ 3,721 Self-pay ​ 156 ​ 326 ​ ( 16 ) ​ ( 19 ) ​ 140 ​ 307 Third party payers ​ 7,208 ​ 4,211 ​ ( 129 ) ​ ( 254 ) ​ 7,079 ​ 3,957 Contract diagnostics ​ 5 ​ — ​ — ​ — ​ 5 ​ — ​ ​ 12,396 ​ 8,418 ​ ( 218 ) ​ ( 408 ) ​ 12,178 ​ 8,010 Other ​ 3,019 ​ 1,402 ​ — ​ — ​ 3,019 ​ 1,402 ​ ​ $ 15,415 ​ $ 9,820 ​ $ ( 218 ) ​ $ ( 408 ) ​ $ 15,197 ​ $ 9,412 ​ Costs to Obtain or Fulfill a Customer Contract ​ Sales commissions are expensed when incurred because the amortization period would have been one year or less. These costs are recorded in operating expenses in the consolidated statements of operations. ​ Shipping and handling costs are comprised of inbound and outbound freight and associated labor. The Company accounts for shipping and handling activities related to contracts with customers as fulfillment costs which are included in cost of sales in the consolidated statements of operations. ​ Accounts Receivable The Company has provided an allowance for potential credit losses, which has been determined based on management’s industry experience. The Company grants credit without collateral to its patients, most of who are insured under third party payer agreements. The following summarizes the mix of receivables as of December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) December 31, 2023 December 31, 2022 Medicaid ​ $ 25 ​ $ 34 Medicare ​ 1,561 ​ 1,124 Self-pay ​ 229 ​ 291 Third party payers ​ 1,641 ​ 1,888 Contract diagnostic services and other ​ 417 ​ 53 ​ ​ $ 3,873 ​ $ 3,390 Less allowance for credit losses ​ ( 2,572 ) ​ ( 2,354 ) Accounts receivable, net ​ $ 1,301 ​ $ 1,036 ​ 85 Table of Contents The following table presents the roll-forward of the allowance for credit losses for the year ended December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for ​ ​ ​ ​ ​ Credit (dollars in thousands) ​ ​ ​ ​ Losses Balance, January 1, 2023 ​ ​ $ ( 2,354 ) Provision for credit losses: ​ ​ Medicaid ​ $ ( 11 ) ​ Medicare ​ ( 62 ) ​ Self-pay ​ ​ ( 16 ) ​ ​ ​ Third party payers ​ ( 129 ) ​ ​ ​ ( 218 ) ​ Credit loss expense ​ $ — ​ Total charges ​ ​ ( 218 ) Balance, December 31, 2023 ​ ​ $ ( 2,572 ) ​ Customer Revenue and Accounts Receivable Concentration Customer revenue and accounts receivable concentration amounted to the following for the identified periods. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net sales ​ ​ Accounts receivable, as of ​ ​ ​ Years Ended ​ ​ ​ ​ ​ ​ December 31, ​ ​ December 31, ​ December 31, ​ ​ ​ 2023 ​ 2022 ​ ​ 2023 ​ 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Customer A ​ 11 % * ​ ​ * ​ * ​ Customer B ​ * ​ * ​ ​ 13 % * ​ Customer C ​ * ​ * ​ ​ * ​ 12 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ * represents less than 10% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 14. SUBSEQUENT EVENTS The Company has evaluated events and transactions subsequent to December 31, 2023 through the date the consolidated financial statements were issued. There are no other events to report other than what has been disclosed in the consolidated financial statements. ​ ​ ​ ​ ​ 86 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.