What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-27 compared with 2024-03-29 · 179 added, 156 removed, 759 unchanged (31% of the section changed)

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Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of

To the Shareholders and Board of Directors of

Precipio , Inc .

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(the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2024, 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.

In our opinion, based on our audit, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, 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.

The accompanying 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 a significant working capital deficiency, 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.

The 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.

Our responsibility is to express an opinion on these 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.

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(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.

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.

Assessment of the estimation for collections over diagnostic testing for which revenue is recognized.

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The net revenue figure of approximately $18.5 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 principal considerations for our determination that performing procedures over revenue recognition relating to the service revenue is a critical audit matter are 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.

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Accumulated deficit

Total Precipio, Inc.

stockholders’ equity

Noncontrolling interest in joint venture

Total stockholders’ equity

Total liabilities and stockholders’ equity

(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.

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Service revenue, net

Other revenue

Product revenue

Revenue, net of contractual allowances and adjustments

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Cost of service revenue

Cost of other revenue

Cost of product revenue

Total cost of sales

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OPERATING LOSS

OTHER (EXPENSE) INCOME:

OTHER EXPENSE:

Interest expense, net

Warrant revaluation

Gain on settlement of liability

Gain on write-off of liability

Total other income

Total other expense

LOSS BEFORE INCOME TAXES

INCOME TAX EXPENSE

Net income attributable to noncontrolling interest in joint venture

NET LOSS ATTRIBUTABLE TO PRECIPIO, INC.

COMMON STOCKHOLDERS

BASIC AND DILUTED LOSS PER COMMON SHARE

BASIC AND DILUTED WEIGHTED-AVERAGE SHARES OF COMMON STOCK OUTSTANDING

(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.

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Balance, January 1, 2023

Issuance of common stock in connection with at the market offering, net of issuance costs

Proceeds upon issuance of common stock from exercise of warrants

Non-cash stock-based compensation

Balance, December 31, 2022

Gain on dissolution of joint venture

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Proceeds upon issuance of common stock from exercise of warrants

Issuance of common stock for consulting services

Issuance of common stock for Board fees and consulting services

Non-cash stock-based compensation in connection with stock options

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Balance, December 31, 2023

Issuance of common stock in connection with at the market offering, net of issuance costs

Issuance of common stock for Board fees and consulting services

Non-cash stock-based compensation in connection with stock options

Balance, December 31, 2024

(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.

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CASH FLOWS FROM OPERATING ACTIVITIES:

Adjustments to reconcile net loss to net cash flows used in operating activities:

Adjustments to reconcile net loss to net cash flows provided by (used in) operating activities:

Depreciation and amortization

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Amortization of deferred financing costs, debt discounts and debt premiums

Gain on settlement of liability

Gain on dissolution of joint venture

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Stock-based compensation

Value of stock issued in payment of services

Value of stock issued in payment of Board fees and consulting services

Provision for credit losses

Warrant revaluation

Derecognition of finance lease right-of-use asset

Changes in operating assets and liabilities:

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Accrued expenses

Net cash used in operating activities

Net cash provided by (used in) operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

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Principal payments on finance lease obligations

Deposits on finance lease right-of-use assets

Issuance of common stock, net of issuance costs

Proceeds from exercise of warrants

Proceeds from debt

Principal payments on long-term debt

Net cash flows provided by (used in) financing activities

Net cash flows (used in) provided by financing activities

NET CHANGE IN CASH

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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.

Precipio, Inc., and its subsidiaries, (collectively, “we”, “us”, “our”, the “Company” or “Precipio”) is a healthcare biotechnology company focused on cancer diagnostics.

Our mission is to address the pervasive problem of cancer misdiagnoses by developing solutions in the form of diagnostic products and services.

Our products and services aim to deliver higher accuracy, improved laboratory workflow, and ultimately better patient outcomes, which reduce healthcare expenses.

We develop innovative technologies in our laboratory where we design, test, validate, and use these products clinically.

We believe these technologies improve diagnostic outcomes across various diseases within the hematologic field.

We then commercialize these technologies as proprietary products that serve the global laboratory community in furtherance of our mission to eliminate or greatly reduce the prevalence of misdiagnosis.

To deliver our strategy, we have structured our organization to develop diagnostic products, including our laboratory and research and development (“R&D”) facilities located in New Haven, Connecticut and Omaha, Nebraska, respectively, which house teams that collaborate on the development of new products and services.

We operate clinical laboratory improvement amendment (“CLIA”) laboratories in both New Haven, Connecticut and Omaha, Nebraska where we provide 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.

The development of laboratory products involves a qualified facility;

highly skilled laboratory staff;

and access to viable patient specimens to conduct development and testing.

Our CLIA laboratory in New Haven, which is operated by our pathology services division, encapsulates these components, and also generates revenue for us which covers costs associated with operating this laboratory.

This structure of utilizing our clinical lab to obtain samples and utilize the equipment and staffing to develop, test and validate our products, significantly reduces the development costs and timeline for our products.

This also enables us to accelerate the time to market of new product development and launch.

Furthermore, as a clinical laboratory, we are always the first user of every product we develop, which allows us to optimize important laboratory functions such as workflow, inventory management, regulatory and billing issues.

As a vendor, this places us as a reputable user of our own products, and we believe gains us significant credibility with existing and prospective customers.

Furthermore, because we use our products as part of our day-to-day operations, we are able to deliver a high level of hands-on, experienced support to customers, improving their experience with our products.

Our Products Division commercial team generates direct sales and works with our key distributors.

Global healthcare distributors, such as ThermoFisher, McKesson, Medline and Cardinal Health, have partnered with us to form the backbone of our go-to-market strategy and enable us to access laboratories around the country that can benefit from using our diagnostic products.

Our operating structure promotes the harnessing of our proprietary technology and genetic diagnostic expertise to bring to market our robust pipeline of innovative solutions designed to address the root causes of misdiagnoses .

Joint Venture.

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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 and do not include any adjustments that might result should the Company be unable to continue as a going concern.

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.

For the year ended December 31, 2024, the Company had a net loss of $ 4.3 million and net cash provided by operating activities of $ 0.4 million.

As of December 31, 2024, the Company had an accumulated deficit of $ 102.4 million and a working capital deficit of $ 0.8 million.

The Company’s ability to continue as a going concern, over 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 avoiding potential business disruption due to the macroeconomic environment and geopolitical instability, and raising additional financing, if needed, 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:

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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.

On April 8, 2024, we filed a prospectus supplement to our prospectus dated April 25, 2023 registering the offer and sale of up to $ 1,061,478 of shares of our common stock (the “April 2024 Prospectus Supplement”).

As of the date the consolidated financial statements were issued, the Company has approximately $ 3.7 million available for future sales pursuant to the 2023 Registration Statement, which includes approximately $ 1.0 million of remaining availability pursuant to the April 2024 Prospectus Supplement.

See N ote 10 – “Stockholders’ Equity”, AGP 2023 Sales Agreement, for further discussion.

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.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern over the next twelve months from the date of issuance of this Annual Report Form 10-K .

Reverse Stock Split .

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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.

and our wholly owned subsidiaries.

All inter-company balances and transactions have been eliminated in consolidation.

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Unless otherwise specified, book value approximates fair value.

The common stock warrant liabilities are recorded at fair value.

Our common stock warrant liabilities are recorded at fair value.

See Note 11 – “Fair Value” for additional information.

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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.

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.

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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.

Research and development costs charged to operations totaled $ 1.3 million and $ 1.7 million for the years ended December 31, 2024 and 2023, respectively.

Income Taxes.

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(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.

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.

We 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

Accounts receivable, net

Accrued expenses

Total liabilities

Noncontrolling interest in Joint Venture

Equity attributable to Precipio, Inc.

Loss Per Share.

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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.

Options, warrants and conversion rights pertaining to 754,251 and 698,154 shares of our common stock have been excluded from the

computation of diluted loss per share at December 31, 2024 and 2023, 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:

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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.

In June 2022, the Financial Accounting Standards Board (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 Company adopted this guidance on January 1, 2024.

The adoption of this standard was not material to our 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 earnings per share (“EPS”) guidance for both Subtopics.

The Company adopted this guidance on January 1, 2024.

The adoption of this standard was not material to our consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis, primarily through enhanced disclosures of significant segment expenses.

Under the new guidance an entity is required to disclose the title and position of the chief operating decision maker ("CODM") and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources.

The ASU also requires that an entity that has a single reportable segment provide all the disclosures required by this ASU and all existing segment disclosures in Topic 280.

The ASU does not change how operating segments are identified or, when applicable, aggregated.

The Company adopted this standard for fiscal year 2024 and such adoption did not have a material impact on our consolidated financial statements.

Refer to Note 14 Segment Reporting.

Recent Accounting Pronouncements Not Yet Adopted.

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The amendments in ASU 2023-09 apply to all entities that are subject to Topic 740, Income Taxes.

For public business entities,

the amendments in ASU 2023-09 are effective for annual periods beginning after December 15, 2024.

For public business entities, the amendments in ASU 2023-09 are effective for annual periods beginning after December 15, 2024.

Early adoption is permitted.

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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 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):

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.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income (Topic 220):

Expense Disaggregation Disclosures (ASU 2024-03”).

This update requires entities to disaggregate operating expenses into specific categories, such as purchases of inventory, compensation, depreciation, and amortization, to provide enhanced transparency into the nature and function of expenses.

ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, with early adoption permitted.

ASU 2024-03 may be applied retrospectively or prospectively.

The Company is currently evaluating the impact of this standard on its financial statement presentation and disclosures.

PROPERTY AND EQUIPMENT, NET

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Financed insurance loan

Business loan agreement

Total long-term debt

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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 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.

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Net debt issuance costs were approximately $ 9,000 and $ 12,000 at December 31, 2024 and 2023, 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 .

Amortization for each of the next three years is expected to be approximately $ 3,000 .

Financed Insurance Loan.

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A corresponding prepaid asset was included in other current assets.

Business Loan Agreement.

On May 1, 2024, the Company entered into a Business Loan and Security Agreement (the “Loan Agreement”) with Altbanq Lending LLC, pursuant to which the Company obtained a loan in the principal amount of $ 250,000 (the “Secured Loan”).

According to the Loan Agreement, the Company granted the lender a continuing security interest in certain collateral (as defined in the Loan Agreement).

Furthermore, the Company’s Chief Executive Officer provided a personal guaranty for the Secured Loan.

The Secured Loan has a term of one year and an interest rate of 20 % , such that pursuant to the Loan Agreement, the Company is obligated to pay the Lender fifty-two payments of $ 5,769 on a weekly basis and the total sum of the Secured Loan and interest (not including any fees) shall equal a total repayment amount of $ 300,000 .

If the Company defaults on payments then a default fee of $ 15,000 shall be payable to the lender.

The Company has the right, at its discretion, to request the lender to loan an additional amount of up to $ 250,000 on the same terms and conditions as set forth in the Loan Agreement, provided that there has been no material change in the Company’s finances.

As of December 31, 2024 and December 31, 2023, the outstanding balance of $ 0.1 million and zero , respectively, under the Loan Agreement, was included in current maturities of long-term debt in the Company’s consolidated balance sheets.

The aggregate future maturities required on gross long-term debt at December 31, 2024 are as follows:

Financed insurance loan

Business loan agreement

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES.

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Accrued franchise, property and sales and use taxes

CHC temporary funding assistance

Accrued interest

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.

The Company uses Change Healthcare (“CHC”), a healthcare technology company owned by UnitedHealth Group, to process some of its patient claims billings.

In February 2024, CHC announced that it had experienced a cyberattack and as a result had to temporarily shut down some of its information technology systems.

This system shut down caused delays in billing and reimbursement processes to CHC’s customers and, as a result, CHC established a Temporary Funding Assistance Program to help bridge the gap in short-term cash flow needs for customers affected by the disruption of its services due to the cyberattack.

Funding distributed through this program is interest free and has no other fees or costs associated with it.

During the year ended December 31, 2024, the Company received approximately $ 1.1 million through CHC’s Temporary Assistance Program.

On October 28, 2024, the Company received a notice from CHC stating that they have restored the connectivity of their systems and are requesting repayment of the funds the Company received through the Temporary Assistance Program.

The repayment date contained in the notice is January 2, 2025.

The Company has been in correspondence with CHC and anticipates negotiating a repayment plan that will enable the Company to meet its obligations to CHC while continuing to support its ongoing operational needs with minimal disruption.

From January 1, 2025 through the date of issuance of this Annual Report on Form 10-K we have made approximately $ 0.1 million in repayments to CHC.

The Company leases administrative facilities and laboratory equipment through operating lease agreements.

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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

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.

Finance lease ROU assets and finance lease liabilities are recognized at the lease commencement date, and 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 related to the HSSR program for the years ended December 31, 2024 and 2023.

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.

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Total lease liabilities

(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.

(1) As of December 31, 2024 and 2023, finance lease right-of-use assets included zero , respectively, of assets related to finance leases associated with the HSRR program.

As of December 31, 2024, the estimated future minimum lease payments, excluding non-lease components, are as follows:

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Finance leases

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.

During the years ended December 31, 2024 and 2023, operating cash flows from operating leases were $ 0.2 million, respectively, and operating lease ROU assets obtained in exchange for operating lease liabilities were zero and $ 0.1 million, respectively.

Operating Lease Costs

Operating lease costs were $ 0.3 million during the years ended December 31, 2023 and 2022, respectively.

Operating lease costs were $ 0.2 million and $ 0.3 million during the years ended December 31, 2024 and 2023, respectively.

These costs are primarily related to long-term operating leases for the Company’s facilities and laboratory equipment.

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The Company has entered into purchase commitments for reagents from suppliers.

These agreements started in 2011 and run through 2025.

These agreements started run through 2031.

The Company and the suppliers will true up the amounts on an annual basis.

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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, 2024 and 2023.

The Company is currently involved in a legal proceeding brought by a former employee before the court in San Antonio, Texas alleging unfair dismissal where the former employee seeks monetary damages.

It disputes these allegations and intends to defend itself vigorously.

While the outcome remains uncertain, management does not currently expect the case to have a material impact on its financial results.

LEGAL AND REGULATORY ENVIRONMENT

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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’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, 2024 and 2023.

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Miscellaneous permanent differences

Warrant liability revaluation

Meals and entertainment

Federal and state credits

Income taxed to owners on Non-Controlling Interest (NCI)

Rate difference

Change in valuation allowance

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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.

After passage of the Tax Cuts and Jobs Act of 2017, federal loss NOL carryforwards arising in taxable years beginning after December 31, 2017 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 2024 are $ 51 million of federal losses that fall under these rules.

State NOLs expire on various dates.

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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.

During the years ended December 31, 2024 and 2023, the Company issued zero and 15,972 shares of its common stock, respectively, in connection with the exercise of zero and 15,972 warrants, respectively.

The warrant exercises resulted in net cash proceeds to the Company of zero and less than $ 0.1 million during the years ended December 31, 2024 and 2023, respectively.

During the years ended December 31, 2024 and 2023, the Company issued 61,692 and 23,598 shares of its common stock, respectively, in connection with consulting services of approximately $ 0.4 million and $ 0.2 million, respectively.

At The Market Offering Agreement

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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.

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.

During the year ended December 31, 2023, we received net proceeds of approximately $ 0.5 million from the sale of 30,827 shares of common stock through AGP.

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.

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.

AGP 2023 Sales Agreement

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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

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 April 8, 2024, we filed a prospectus supplement (the “April 2024 Prospectus Supplement”) to our prospectus dated April 25, 2023 registering the offer and sale of up to $ 1,061,478 of shares of our common stock.

During the years ended December 31, 2024 and 2023, we received net proceeds of $ 0.1 million and less than $ 1,000 , respectively, from the sale of 11,822 and 25 shares of common stock, respectively, 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 $ 0.1 million in net proceeds, after issuance costs of approximately $ 2 thousand, from the sales of 11,847 shares of common stock through AGP.

Registered Direct Offering

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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.

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.

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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.

As a result of sales already made through the AGP 2023 Sales agreement and the Registered Direct Offering, the Company has $ 3.7 million of remaining availability under the 2023 Registration Statement.

Preferred Stock

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(i) the number of shares;

(ii) the dividend rate, whether dividends shall be cumulative and, if so, from which date;

(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;

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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.

On August 28, 2017, the Company completed an underwritten public 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.

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There were no conversions of Series B Preferred Stock during the years ended December 31, 2024 and 2023, respectively.

At December 31, 2023 and 2022, the Company had 6,900 shares of Series B designated and issued and 47

shares of Series B outstanding.

At December 31, 2024 and 2023, the Company had 6,900 shares of Series B designated and issued and 47 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, 2024 were convertible into 5,875 shares of common stock.

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December 2028

(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.

(1) These warrants were issued in connection with the 2023 registered direct offering and concurrent private placement and are the RDO common warrants discussed below .

1 unchanged sentence

These warrants had been issued in connection with transactions which were completed between 2018 and 2019.

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.

During the years ended December 31, 2024 and 2023, t here were zero and 15,972 warrants exercised, respectively.

During the years ended December 31, 2024 and 2023, the intrinsic value of the warrants exercised was zero and $ 0.1 million, respectively.

Pre -Funded Warrants .

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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, 2024 and 2023.

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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 %.

During the year ended December 31, 2024, the last remaining warrants related to Bridge Note Warrant Liabilities expired and thus at December 31, 2024 there were no warrant liabilities to be valued.

As of December 31, 2023, assumptions used in the valuation of the Bridge Note Warrant Liabilities include:

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and risk free rate of 5.33 to 5.40 %.

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.

The change during the year ended December 31, 2022 was comprised of the following:

Dollars in Thousands

Year Ended December 31, 2022

Warrant Liabilities

Beginning balance at January 1

Revaluation recognized in earnings

Balance at December 31

During the year ended December 31, 2024 and 2023, the change in the fair value of the warrant liabilities measured using significant unobservable inputs (Level 3) was zero and less than $ 1 thousand, respectively.

EQUITY INCENTIVE PLAN

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Treasury yield in effect at the time of grant;

expected life of six years ;

expected life of approximately six years ;

and volatility of 129 % to 139 % based on historical volatility of the Company’s common stock over a time that is consistent with the expected life of the option.

On August 30, 2024, the Company’s board of directors (the “Board”) approved a one-time stock option repricing (the “Option Repricing”), effective August 31, 2024 (the “Effective Date”).

The Option Repricing was undertaken in accordance with, and as permitted by the 2017 Plan.

The Option Repricing applies to all Relevant Options (as defined below) granted pursuant to the 2017 Plan that were held by employees, including executive officers and non-employee

directors of the Board, to the extent such options had an exercise price in excess of $ 6.56 , the closing price per share of the Company’s Common Stock as reported on The Nasdaq Stock Market on August 30, 2024.

“Relevant Options” means all outstanding eligible stock options granted to eligible employees, service providers and non-employee directors of the board of the Company before and including December 31, 2022.

As of the Effective Date, all such options were repriced such that the exercise price per share was reduced to $ 6.56 , provided that the original exercise price will apply to stock option exercises during a one year retention period.

Under the terms of the Option Repricing, if prior to the first anniversary of the Effective Date (except following a change of control), a Relevant Option is exercised or employment/services are terminated by the Company with cause or voluntarily by the option holder, the option holder will be required to pay the original exercise price of the Relevant Option.

If the employment/services of an option holder is terminated by the Company without cause prior to the first anniversary of the Effective Date, the option holder will retain the benefit of the reduced exercise price.

The Option Repricing does not change the number of shares, the vesting schedule, or the expiration date of the Relevant Options.

Out of the Company’s approximately 304,000 total outstanding options on the Effective Date, approximately 177,000 were repriced.

The Board approved the Option Repricing after careful consideration of various alternatives and the recommendation of the compensation committee of the Board that the repricing was fair, just, and reasonable to the Company and its stockholders.

Management determined that the Option Repricing represents a modification of the impacted awards and calculated incremental compensation cost of approximately $ 0.5 million resulting from the modification.

The incremental expense will be recognized over 1.4 years.

The following table summarizes stock option activity under our plans during the year ended December 31, 2024:

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Exercisable at December 31, 2024

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.

As of December 31, 2024, there were 277,298 options that were vested or expected to vest with an aggregate intrinsic value of less than $ 0.1 million and a remaining weighted average contractual life of 6.8 years.

During the year ended December 31, 2023, there were 58,780 options granted with a weighted average exercise price of $ 12.12 and 10,103 options forfeited with a weighted average exercise price of $ 24.02 .

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Upon vesting, the restricted stock award shall no longer be deemed restricted.

There were no restricted stock awards granted during the year ended December 31, 2024.

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.

As of December 31, 2024 and 2023, there were 2,492 and zero restricted stock awards that were vested and unvested, respectively.

Stock Compensation.

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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.

As of December 31, 2024 and 2023, the deferred revenue was $ 0.2 million and $ 0.1 million, respectively.

Contractual Allowances and Adjustments

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Third party payers

Contract diagnostics

Contract diagnostics and other

Allowance for Credit Losses

12 unchanged sentences

Third party payers

Contract diagnostics

Contract diagnostics and other

Costs to Obtain or Fulfill a Customer Contract

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Third party payers

Contract diagnostic services and other

Contract diagnostic services, product and other

Less allowance for credit losses

Accounts receivable, net

The following table presents the roll-forward of the allowance for credit losses for the year ended December 31, 2023:

Allowance for

The following table presents the roll-forward of the allowance for credit losses for the years ended December 31, 2024 and 2023.

Year Ended December 31,

(dollars in thousands)

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* represents less than 10%

SEGMENT REPORTING

The Company’s chief operating decision maker (CODM) is its Chief Executive Officer.

The Company has no segment managers who are held accountable by the CODM for operations, operating results, and planning for levels or components below the consolidated unit level.

Accordingly, the Company has determined it has a single operating segment.

The CODM uses consolidated net loss for purposes of allocating resources and assessing segment performance, including monitoring actual results versus historical periods.

Cost of revenue and operating expenses are considered significant segment expenses that are regularly provided to the CODM and included within consolidated net loss.

The measure of segment assets is the total assets on the Company’s consolidated balance sheets.

Capital expenditures are reported on a consolidated basis on the Company’s consolidated statements of cash flows.

The following table includes the Company's segment revenue, significant segment expenses, and other segment items to reconcile to net loss.

Dollars in Thousands

Less expense (income):

Cost of sales

Operating expenses (1)

Other segment items (2)

(1) Operating expenses include sales and marketing expenses, general and administrative expenses, research and development expenses and stock-based compensation.

(2) Other segment items include interest income, interest expense, gain on write-off of liability and other income.

SUBSEQUENT EVENTS

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data