Precipio, Inc. 10-K

Item 8. Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm ​ To the Shareholders 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, 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, 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 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 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 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. 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, 61 Table of Contents 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. ​ 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, 2024, the Company recognized gross revenue of approximately $41.8 million along with contractual allowances of approximately $23.2 million and collection allowances of approximately $0.04 million. 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 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. ​ 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 27, 2025 ​ 62 Table of Contents PRECIPIO, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 2024 and 2023 (Dollars in thousands, except share data) ​ ​ ​ ​ ​ ​ ​ ​ 2024 2023 ASSETS ​ ​ ​ ​ ​ ​ CURRENT ASSETS: ​ ​ ​ ​ ​ ​ Cash ​ $ 1,389 ​ $ 1,502 Accounts receivable (net of allowance for credit losses of $ 995 and $ 2,572 , respectively) ​ 799 ​ ​ 1,301 Inventories ​ 724 ​ ​ 384 Other current assets ​ 539 ​ ​ 495 Total current assets ​ 3,451 ​ ​ 3,682 ​ ​ ​ ​ ​ ​ ​ PROPERTY AND EQUIPMENT, NET ​ 719 ​ ​ 739 ​ ​ ​ ​ ​ ​ ​ OTHER ASSETS: ​ ​ ​ ​ ​ ​ Finance lease right-of-use assets, net ​ ​ 517 ​ ​ 174 Operating lease right-of-use assets, net ​ ​ 395 ​ ​ 612 Intangibles, net ​ 11,869 ​ ​ 12,818 Other assets ​ 45 ​ ​ 76 Total assets ​ $ 16,996 ​ $ 18,101 LIABILITIES AND STOCKHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​ CURRENT LIABILITIES: ​ ​ ​ ​ ​ ​ Current maturities of long-term debt, less debt issuance costs ​ $ 297 ​ $ 235 Current maturities of finance lease liabilities ​ 124 ​ ​ 132 Current maturities of operating lease liabilities ​ 201 ​ ​ 218 Accounts payable ​ 618 ​ ​ 622 Accrued expenses ​ 2,799 ​ ​ 1,824 Deferred revenue ​ 232 ​ ​ 110 Total current liabilities ​ 4,271 ​ ​ 3,141 LONG TERM LIABILITIES: ​ ​ ​ ​ ​ ​ Long-term debt, less current maturities and debt issuance costs ​ 77 ​ ​ 106 Finance lease liabilities, less current maturities ​ 348 ​ ​ 18 Operating lease liabilities, less current maturities ​ 206 ​ ​ 407 Total liabilities ​ 4,902 ​ ​ 3,672 COMMITMENTS AND CONTINGENCIES (Note 8) ​ ​ ​ ​ ​ ​ STOCKHOLDERS’ EQUITY: ​ ​ ​ ​ ​ ​ Preferred stock - $ 0.01 par value, 15,000,000 shares authorized at December 31, 2024 and December 31, 2023, 47 shares issued and outstanding at December 31, 2024 and December 31, 2023, liquidation preference of $ 33 at December 31, 2024 ​ — ​ ​ — Common stock, $ 0.01 par value, 150,000,000 shares authorized at December 31, 2024 and December 31, 2023, 1,493,639 and 1,420,125 shares issued and outstanding at December 31, 2024 and December 31, 2023, respectively ​ 15 ​ ​ 14 Additional paid-in capital ​ 114,519 ​ ​ 112,565 Accumulated deficit ​ ( 102,440 ) ​ ​ ( 98,150 ) Total stockholders’ equity ​ ​ 12,094 ​ ​ 14,429 Total liabilities and stockholders’ equity ​ $ 16,996 ​ $ 18,101 ​ ​ See notes to consolidated financial statements. ​ 63 Table of Contents PRECIPIO, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended December 31, 2024 and 2023 (Dollars in thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2024 2023 SALES: ​ ​ ​ Service revenue, net ​ $ 15,965 ​ $ 12,396 Product revenue ​ 2,611 ​ 3,019 Revenue, net of contractual allowances and adjustments ​ 18,576 ​ 15,415 Adjustment for allowance for credit losses ​ ( 44 ) ​ ( 218 ) Net sales ​ 18,532 ​ 15,197 COST OF SALES: ​ ​ Cost of service revenue ​ 9,643 ​ 8,099 Cost of product revenue ​ 1,330 ​ 1,080 Total cost of sales ​ 10,973 ​ 9,179 Gross profit ​ 7,559 ​ 6,018 OPERATING EXPENSES: ​ ​ Operating expenses ​ 11,775 ​ 13,638 OPERATING LOSS ​ ( 4,216 ) ​ ( 7,620 ) OTHER EXPENSE: ​ ​ Interest expense, net ​ ( 74 ) ​ ( 18 ) Gain on write-off of liability ​ ​ – ​ ​ 1,720 Other income ​ – ​ 65 Total other expense ​ ( 74 ) ​ 1,767 LOSS BEFORE INCOME TAXES ​ ( 4,290 ) ​ ( 5,853 ) INCOME TAX EXPENSE ​ – ​ — NET LOSS ​ $ ( 4,290 ) ​ $ ( 5,853 ) ​ ​ ​ ​ ​ ​ ​ BASIC AND DILUTED LOSS PER COMMON SHARE ​ $ ( 2.93 ) ​ $ ( 4.51 ) BASIC AND DILUTED WEIGHTED-AVERAGE SHARES OF COMMON STOCK OUTSTANDING ​ 1,465,518 ​ 1,297,851 ​ See notes to consolidated financial statements. ​ 64 Table of Contents PRECIPIO, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY For the Years Ended December 31, 2024 and 2023 (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, 2023 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 Board fees and 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 Net loss — ​ — — ​ — ​ — ​ ( 4,290 ) ​ ​ ( 4,290 ) ​ ​ — ​ ( 4,290 ) Issuance of common stock in connection with at the market offering, net of issuance costs ​ — ​ ​ — ​ 11,822 ​ ​ — ​ ​ 78 ​ ​ — ​ ​ 78 ​ ​ — ​ ​ 78 Issuance of common stock for Board fees and consulting services — ​ — 61,692 ​ 1 ​ 385 ​ — ​ ​ 386 ​ ​ — ​ 386 Non-cash stock-based compensation in connection with stock options — ​ — — ​ — ​ 1,491 ​ — ​ ​ 1,491 ​ ​ — ​ 1,491 Balance, December 31, 2024 47 ​ $ — 1,493,639 ​ $ 15 ​ $ 114,519 ​ $ ( 102,440 ) ​ $ 12,094 ​ $ — ​ $ 12,094 ​ (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. ​ 65 Table of Contents PRECIPIO, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2024 and 2023 (Dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: ​ ​ ​ ​ ​ ​ Net loss ​ $ ( 4,290 ) ​ $ ( 5,853 ) ​ ​ ​ ​ ​ ​ ​ Adjustments to reconcile net loss to net cash flows provided by (used in) operating activities: ​ ​ Depreciation and amortization ​ 1,199 ​ 1,225 Amortization of operating lease right-of-use asset ​ ​ 217 ​ ​ 209 Amortization of finance lease right-of-use asset ​ ​ 97 ​ ​ 83 Amortization of deferred financing costs, debt discounts and debt premiums ​ 3 ​ 3 Gain on dissolution of joint venture ​ ​ — ​ ​ ( 65 ) Gain on write-off of liabilities ​ ​ — ​ ​ ( 1,720 ) Stock-based compensation ​ 1,491 ​ 1,558 Value of stock issued in payment of Board fees and consulting services ​ 386 ​ 177 Provision for credit losses ​ 64 ​ 218 Derecognition of finance lease right-of-use asset ​ ​ 2 ​ ​ — Changes in operating assets and liabilities: ​ ​ Accounts receivable ​ 438 ​ ( 483 ) Inventories ​ ( 340 ) ​ 324 Other assets ​ 303 ​ 451 Accounts payable ​ ( 10 ) ​ ( 169 ) Operating lease liabilities ​ ​ ( 218 ) ​ ​ ( 206 ) Deferred revenue ​ ​ 122 ​ ​ ( 9 ) Accrued expenses ​ 975 ​ 698 Net cash provided by (used in) operating activities ​ 439 ​ ( 3,559 ) CASH FLOWS FROM INVESTING ACTIVITIES: ​ ​ ​ Purchase of property and equipment ​ ( 223 ) ​ ( 126 ) Net cash used in investing activities ​ ( 223 ) ​ ( 126 ) CASH FLOWS FROM FINANCING ACTIVITIES: ​ ​ Principal payments on finance lease obligations ​ ( 92 ) ​ ( 80 ) Deposits on finance lease right-of-use assets ​ ​ ( 28 ) ​ ​ — Issuance of common stock, net of issuance costs ​ ​ 78 ​ ​ 2,245 Proceeds from debt ​ 250 ​ — Principal payments on long-term debt ​ ( 537 ) ​ ( 423 ) Net cash flows (used in) provided by financing activities ​ ( 329 ) ​ 1,742 NET CHANGE IN CASH ​ ( 113 ) ​ ( 1,943 ) CASH AT BEGINNING OF PERIOD ​ 1,502 ​ 3,445 CASH AT END OF PERIOD ​ $ 1,389 ​ $ 1,502 ​ ​ ​ ​ ​ ​ ​ ​ See notes to consolidated financial statements. ​ ​ 66 Table of Contents PRECIPIO, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - continued For the Years Ended December 31, 2024 and 2023 (Dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2024 2023 SUPPLEMENTAL CASH FLOW INFORMATION ​ ​ ​ ​ ​ ​ Cash paid during the period for interest ​ $ 85 ​ $ 42 ​ ​ ​ ​ ​ ​ ​ SUPPLEMENTAL DISCLOSURE OF CONSULTING SERVICES OR ANY OTHER NON-CASH COMMON STOCK RELATED ACTIVITY ​ ​ Purchases of equipment financed through accounts payable ​ ​ 6 ​ ​ 11 Prepaid insurance financed with loan ​ ​ 317 ​ ​ 372 Operating lease right-of-use assets obtained in exchange for operating lease obligations ​ ​ — ​ ​ 58 Finance lease right-of-use assets obtained in exchange for finance lease obligations ​ ​ 414 ​ ​ — ​ See notes to consolidated financial statements. ​ ​ ​ ​ ​ 67 Table of Contents PRECIPIO, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended December 31, 2024 and 2023 1. BUSINESS DESCRIPTION Business Description. 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. ​ 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. 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. 68 Table of Contents 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. ​ 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, 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: ● 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. 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. 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 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 over the next twelve months from the date of issuance of this Annual Report Form 10-K . 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 69 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. 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. Our 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, 2024 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, 2023 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, 2024. 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 70 Table of Contents 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, 2024 and 2023, 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, 2024 and 2023. 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, 2024 and 2023, 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, 2024 had vesting periods of up to four years from the date of grant. No awards outstanding at December 31, 2024 and 2023, respectively, are subject to performance vesting conditions or market-based vesting. 71 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, 2024 and 2023. 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 2024 and 2023, respectively. 72 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 $ 1.3 million and $ 1.7 million for the years ended December 31, 2024 and 2023, 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, 2024 and 2023, 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, 2024 and 2023. 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. 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. 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 754,251 and 698,154 shares of our common stock have been excluded from the 73 Table of Contents 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: ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2024 2023 Stock options 303,932 232,744 Warrants 444,444 459,535 Preferred stock 5,875 5,875 Total 754,251 698,154 ​ Recently Adopted Accounting Pronouncements. 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. 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, 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. 74 Table of Contents 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. ​ 3 . PROPERTY AND EQUIPMENT, NET A summary of property and equipment at December 31, 2024 and 2023 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 2023 Furniture and fixtures and leasehold improvements ​ $ 34 ​ $ 24 Laboratory equipment ​ 1,017 ​ 965 Computer equipment and laboratory software ​ 1,209 ​ 1,097 Construction in process ​ 86 ​ 30 ​ ​ 2,346 ​ 2,116 Less—accumulated depreciation and amortization ​ ( 1,627 ) ​ ( 1,377 ) Total ​ $ 719 ​ $ 739 ​ Depreciation expense was approximately $ 0.3 million and $ 0.3 million for the years ended December 31, 2024 and 2023, respectively. 4 . INTANGIBLES Intangible assets consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dollars in Thousands ​ ​ December 31, 2024 ​ ​ ​ Accumulated Net Book ​ ​ Cost ​ Amortization ​ Value Technology ​ $ 18,990 ​ $ 7,121 ​ $ 11,869 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dollars in Thousands ​ ​ December 31, 2023 ​ ​ ​ Accumulated Net Book ​ ​ Cost ​ Amortization ​ Value Technology ​ $ 18,990 ​ $ 6,172 ​ $ 12,818 ​ ​ ​ ​ ​ ​ Estimated Useful Life ​ Technology 20 years ​ Amortization expense for intangible assets was $ 1.0 million during the years ended December 31, 2024 and 2023, respectively. Amortization expense for intangible assets is expected to be $ 1.0 million for each of the years ending December 31, 2025, 2026 , 2027 , 2028 and 2029 , respectively. 75 Table of Contents 5 . LONG-TERM DEBT Long-term debt consists of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ Dollars in Thousands ​ December 31, 2024 December 31, 2023 Connecticut Department of Economic and Community Development (DECD) ​ $ 115 ​ $ 146 DECD debt issuance costs ​ ( 9 ) ​ ( 12 ) Financed insurance loan ​ 177 ​ 207 Business loan agreement ​ ​ 91 ​ ​ — Total long-term debt ​ 374 ​ 341 Current portion of long-term debt ​ ( 297 ) ​ ( 235 ) Long-term debt, net of current maturities ​ $ 77 ​ $ 106 ​ 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 $ 3,000 for the years ended December 31, 2024 and 2023, respectively. 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 three 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 2024, the Company financed $ 0.3 million with a 9.99 % interest rate and is obligated to make payments on a monthly basis through June 2025. In July 2023, the Company financed $ 0.4 million with a 9.99 % interest rate, which was paid off in June 2024. As of December 31, 2024 and 2023, 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. ​ 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. ​ 76 Table of Contents 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2025 2026 2027 2028 Total DECD loan ​ $ 32 ​ $ 33 ​ $ 34 ​ $ 16 ​ $ 115 Financed insurance loan ​ ​ 177 ​ ​ — ​ ​ — ​ ​ — ​ ​ 177 Business loan agreement ​ ​ 91 ​ ​ — ​ ​ — ​ ​ — ​ ​ 91 ​ ​ $ 300 ​ $ 33 ​ $ 34 ​ $ 16 ​ $ 383 ​ ​ 6 . ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES. Accrued expenses at December 31, 2024 and 2023 are as follows: ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) December 31, 2024 December 31, 2023 Accrued expenses ​ $ 595 ​ $ 764 Accrued compensation ​ 955 ​ 754 Accrued franchise, property and sales and use taxes ​ ​ 173 ​ ​ 287 CHC temporary funding assistance ​ ​ 1,057 ​ ​ — Accrued interest ​ 19 ​ 19 ​ ​ $ 2,799 ​ $ 1,824 ​ 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. 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. 77 Table of Contents 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. 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 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. 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, 2024 and 2023, 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, 2024 ​ December 31, 2023 Assets: ​ ​ ​ ​ ​ ​ Operating lease right-of-use assets, net ​ $ 395 ​ $ 612 Finance lease right-of-use assets, net (1) ​ ​ 517 ​ ​ 174 Total lease assets ​ $ 912 ​ $ 786 ​ ​ ​ ​ ​ ​ ​ Liabilities: ​ ​ ​ ​ ​ ​ Current: ​ ​ ​ ​ ​ ​ Current maturities of operating lease liabilities ​ $ 201 ​ $ 218 Current maturities of finance lease liabilities ​ ​ 124 ​ ​ 132 Noncurrent: ​ ​ ​ ​ ​ ​ Operating lease liabilities, less current maturities ​ ​ 206 ​ ​ 407 Finance lease liabilities, less current maturities ​ ​ 348 ​ ​ 18 Total lease liabilities ​ $ 879 ​ $ 775 ​ (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. 78 Table of Contents As of December 31, 2024, 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, ​ ​ ​ 2024 ​ ​ 2024 ​ ​ 2024 2025 ​ $ 224 ​ $ 171 ​ $ 395 2026 ​ 214 ​ 133 ​ 347 2027 ​ — ​ 107 ​ 107 2028 ​ — ​ ​ 67 ​ 67 2029 ​ ​ — ​ ​ 38 ​ ​ 38 Thereafter ​ — ​ 73 ​ 73 Total lease obligations ​ 438 ​ 589 ​ 1,027 Less: Amount representing interest ​ ( 31 ) ​ ( 117 ) ​ ( 148 ) Present value of net minimum lease obligations ​ 407 ​ 472 ​ 879 Less, current portion ​ ( 201 ) ​ ( 124 ) ​ ( 325 ) Long term portion ​ $ 206 ​ $ 348 ​ $ 554 ​ Other information as of December 31, 2024 and 2023: ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2024 ​ 2023 Weighted-average remaining lease term (years): ​ ​ ​ Operating leases 1.9 ​ 2.8 Finance leases 4.4 ​ 2.0 Weighted-average discount rate: ​ ​ ​ Operating leases 8.00 % ​ 8.00 % Finance leases 11.20 % ​ 10.63 % ​ 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 $ 0.2 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. Short-term and variable lease costs were less than $ 0.1 million for the years ended December 31, 2024 and 2023, respectively. Finance Lease Costs Finance lease amortization and interest expenses are included in the consolidated statements of operations for the years ended December 31, 2024 and 2023. The balances within these accounts are approximately $ 0.1 million, respectively. ​ ​ 79 Table of Contents 8. COMMITMENTS AND CONTINGENCIES PURCHASE COMMITMENTS The Company has entered into purchase commitments for reagents from suppliers. These agreements started run through 2031. 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) 2025 ​ $ 2,168 2026 ​ 158 2027 ​ 158 2028 ​ 158 2029 ​ ​ 158 Thereafter ​ ​ 316 ​ ​ $ 3,116 ​ 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, 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 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, 80 Table of Contents 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. At December 31, 2024 and 2023, the Company had net deferred tax assets of $ 21.2 million and $ 19.9 million, respectively, against which a full valuation allowance has been recorded. The increase in the valuation allowance for the years ended December 31, 2024 and 2023 is $ 1.3 million and $ 1.4 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, 2024 and 2023 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dollars in Thousands ​ 2024 2023 Deferred tax assets: ​ ​ Net operating loss and credit carryforwards ​ $ 19,748 ​ $ 18,792 Allowance for credit losses ​ ​ 249 ​ ​ 616 Stock-based compensation ​ 2,659 ​ 2,182 Other ​ 458 ​ 235 Gross deferred tax assets ​ 23,114 ​ 21,825 Deferred tax liabilities: ​ ​ Property and equipment ​ ( 233 ) ​ ( 201 ) Intangible assets ​ ( 1,673 ) ​ ( 1,690 ) Other ​ — ​ — Gross deferred tax liabilities ​ ( 1,906 ) ​ ( 1,891 ) Net deferred tax assets ​ 21,208 ​ 19,934 Less valuation allowance ​ ( 21,208 ) ​ ( 19,934 ) Net deferred liability ​ $ — ​ $ — ​ The Company’s provision for income taxes for the years ended December 31, 2024 and December 31, 2023 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 ​ ​ 2024 ​ 2023 Benefit at federal rate ​ $ ( 901 ) ​ $ ( 1,229 ) Increase (decrease) resulting from: ​ ​ State income taxes—net of federal benefit ​ ( 175 ) ​ ( 173 ) Miscellaneous permanent differences ​ 44 ​ 39 Meals and entertainment ​ ​ 15 ​ ​ 21 Federal and state credits ​ ​ ( 204 ) ​ ​ ( 72 ) Rate difference ​ ​ ( 53 ) ​ ​ — Other, net ​ ​ — ​ ​ 48 Change in valuation allowance ​ 1,274 ​ 1,366 Total income tax benefit ​ $ — ​ $ — ​ 81 Table of Contents The income tax expense consists of the following for the years ended December 31, 2024 and 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dollars in Thousands ​ 2024 2023 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 $ 79 million, and state NOL carryforwards of $ 2.5 million as of December 31, 2024. 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. 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. 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. At December 31, 2024, 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 ​ 2024 2036 ​ $ 14,277 2037 ​ ​ 13,641 Unlimited life ​ 50,835 Total Federal ​ $ 78,753 ​ 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. 82 Table of Contents 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, 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 ​ 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. ​ 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. 83 Table of Contents ​ 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. 333-237445). ​ 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. ​ 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 ​ 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, 2024. 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 84 Table of Contents 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. 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. 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 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, 85 Table of Contents 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 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, 2024 and 2023, respectively. 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. 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, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Underlying Exercise ​ ​ Issue Year ​ Expiration ​ Shares ​ Price Warrants ​ ​ ​ ​ ​ ​ ​ ​ ​ (1) ​ 2023 ​ December 2028 ​ 444,444 ​ $ 12.60 (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 . 86 Table of Contents ​ During the years ended December 31, 2024 and 2023, 15,091 and 19,365 warrants expired. These warrants had been issued in connection with transactions which were completed between 2018 and 2019. 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 . 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, 2024. 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 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. There were no deemed dividends recorded during the years ended December 31, 2024 and 2023. 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. 87 Table of Contents 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. 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: 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 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. 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 320,699 at December 31, 2024 of which 14,206 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, 2024, the shares authorized for issuance increased by 71,006 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, 2024, the Company granted stock options to purchase up to 76,987 shares of common stock at a weighted average exercise price of $ 5.01 . These awards have vesting periods of up to four years and had a weighted average grant date fair value of $ 4.56 . The fair value calculation of options granted during 2024 used the follow assumptions: risk free interest rates of 3.55 % to 4.26 %, based on the U.S. Treasury yield in effect at the time of grant; 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 88 Table of Contents 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: ​ ​ ​ ​ ​ ​ ​ Number of Weighted-Average ​ ​ Options ​ Exercise Price Outstanding at January 1, 2024 232,744 ​ $ 46.56 Granted 76,987 ​ 5.01 Forfeited ( 5,799 ) ​ 17.31 Outstanding at December 31, 2024 303,932 ​ $ 7.18 Exercisable at December 31, 2024 197,397 ​ $ 7.52 ​ 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 . 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. 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, 2024 and 2023, there were 2,492 and zero restricted stock awards that were vested and unvested, respectively. 89 Table of Contents Stock Compensation. During the years ended December 31, 2024 and 2023, we recorded compensation expense for all stock awards of $ 1.5 million and $ 1.6 million, respectively, within operating expense in the accompanying statements of operations. As of December 31, 2024, the unrecognized compensation expense related to unvested stock awards was $ 1.4 million, which is expected to be recognized over a weighted-average period of 1.5 years. 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. ​ 90 Table of Contents 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. ​ 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, 2024 and 2023 was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, (dollars in thousands) ​ Diagnostic Testing ​ 2024 2023 Medicaid ​ $ 42 ​ $ 27 Medicare ​ 6,355 ​ 5,000 Self-pay ​ 36 ​ 156 Third party payers ​ 9,483 ​ 7,208 Contract diagnostics and other ​ 49 ​ 5 Service revenue, net ​ $ 15,965 ​ $ 12,396 ​ 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 . ​ 91 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, 2024 and 2023, the deferred revenue was $ 0.2 million and $ 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, 2024 and 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, (dollars in thousands) ​ ​ ​ Contractual Allowances and ​ Revenues, net of Contractual ​ ​ Gross Revenues ​ adjustments ​ Allowances and adjustments ​ 2024 2023 2024 2023 2024 2023 Medicaid ​ $ 42 ​ $ 27 ​ $ — ​ $ — ​ $ 42 ​ $ 27 Medicare ​ 6,355 ​ 5,002 ​ — ​ ( 2 ) ​ 6,355 ​ 5,000 Self-pay ​ 36 ​ 156 ​ — ​ — ​ 36 ​ 156 Third party payers ​ 32,691 ​ 21,300 ​ ( 23,208 ) ​ ( 14,092 ) ​ 9,483 ​ 7,208 Contract diagnostics and other ​ 49 ​ 5 ​ — ​ — ​ 49 ​ 5 ​ ​ 39,173 ​ 26,490 ​ ( 23,208 ) ​ ( 14,094 ) ​ 15,965 ​ 12,396 Product ​ 2,611 ​ 3,019 ​ — ​ — ​ 2,611 ​ 3,019 ​ ​ $ 41,784 ​ $ 29,509 ​ $ ( 23,208 ) ​ $ ( 14,094 ) ​ $ 18,576 ​ $ 15,415 ​ ​ 92 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, 2024 and 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ Revenues, net of ​ ​ ​ (dollars in thousands) ​ Contractual Allowances ​ Allowances for credit ​ ​ ​ and adjustments ​ losses ​ Total ​ 2024 2023 2024 2023 2024 2023 Medicaid ​ $ 42 ​ $ 27 ​ $ 1 ​ $ ( 11 ) ​ $ 43 ​ $ 16 Medicare ​ 6,355 ​ 5,000 ​ ( 129 ) ​ ( 62 ) ​ 6,226 ​ 4,938 Self-pay ​ 36 ​ 156 ​ ( 4 ) ​ ( 16 ) ​ 32 ​ 140 Third party payers ​ 9,483 ​ 7,208 ​ 88 ​ ( 129 ) ​ 9,571 ​ 7,079 Contract diagnostics and other ​ 49 ​ 5 ​ — ​ — ​ 49 ​ 5 ​ ​ 15,965 ​ 12,396 ​ ( 44 ) ​ ( 218 ) ​ 15,921 ​ 12,178 Product ​ 2,611 ​ 3,019 ​ — ​ — ​ 2,611 ​ 3,019 ​ ​ $ 18,576 ​ $ 15,415 ​ $ ( 44 ) ​ $ ( 218 ) ​ $ 18,532 ​ $ 15,197 ​ 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, 2024 and 2023: ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) December 31, 2024 December 31, 2023 Medicaid ​ $ ( 12 ) ​ $ 25 Medicare ​ 1,086 ​ 1,561 Self-pay ​ 13 ​ 229 Third party payers ​ 530 ​ 1,641 Contract diagnostic services, product and other ​ 177 ​ 417 ​ ​ $ 1,794 ​ $ 3,873 Less allowance for credit losses ​ ( 995 ) ​ ( 2,572 ) Accounts receivable, net ​ $ 799 ​ $ 1,301 ​ 93 Table of Contents 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) ​ ​ 2024 ​ 2023 Balance, January 1 $ ( 2,572 ) ​ $ ( 2,354 ) Provision for credit losses: ​ ​ ​ Medicaid ​ ​ 1 ​ ​ ( 11 ) Medicare ​ ( 129 ) ​ ( 62 ) Self-pay ​ ​ ( 4 ) ​ ​ ( 16 ) Third party payers ​ 88 ​ ( 129 ) ​ ​ ( 44 ) ​ ( 218 ) Credit loss expense ​ ​ ( 20 ) ​ ​ — Total charges ​ ( 64 ) ​ ( 218 ) Write-offs ​ ​ 1,641 ​ ​ — Balance, December 31 ​ $ ( 995 ) ​ $ ( 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 ​ ​ ​ Year Ended ​ ​ ​ ​ ​ ​ December 31, ​ ​ December 31, ​ December 31, ​ ​ ​ 2024 ​ 2023 ​ ​ 2024 ​ 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Customer A ​ * ​ 11 % ​ * ​ * ​ Customer B ​ * ​ * ​ ​ * ​ 13 % Customer C ​ 17 % * ​ ​ 29 % * ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ * represents less than 10% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 14. 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. ​ 94 Table of Contents 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 ​ ​ Year Ended ​ ​ December 31, ​ 2024 2023 Net sales ​ $ 18,532 ​ $ 15,197 Less expense (income): ​ ​ ​ ​ ​ ​ Cost of sales ​ 10,973 ​ 9,179 Operating expenses (1) ​ ​ 11,775 ​ ​ 13,638 Other segment items (2) ​ 74 ​ ( 1,767 ) Net loss ​ $ ( 4,290 ) ​ $ ( 5,853 ) ​ (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. ​ ​ 15. SUBSEQUENT EVENTS The Company has evaluated events and transactions subsequent to December 31, 2024 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. ​ ​ ​ ​ ​ 95 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.