Precipio, Inc 10-Q for FY2022 Q3

Precipio, Inc. (PRPO)

10-Q 2022-11-10 For: 2022-09-30

Added on April 06, 2026

About this 10-Q

Precipio, Inc filed this 10-Q on November 10, 2022, covering the quarter ended September 30, 2022 (FY2022 Q3).

Headline figures

Quarter ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $2.22M; down 1.4% from $2.25M a year earlier
Net loss: $3.17M; compared with a net loss of $1.85M a year earlier
Diluted EPS: -$0.14; compared with -$0.08 a year earlier

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☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2022

	OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _____ to _____


Delaware	91-1789357
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

4 Science Park, New Haven, CT	06511
(Address of principal executive offices)	(Zip Code)

	a
Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	PRPO	The Nasdaq Capital Market

Large accelerated filer	◻	Accelerated filer	◻
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

		Page No.

PART I.	Financial Information	3

Item 1.	Condensed Consolidated Financial Statements	3

	Condensed Consolidated Balance Sheets at September 30, 2022 (unaudited) and December 31, 2021	3

	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)	4

	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)	5

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 (unaudited)	7

	Notes to the Unaudited Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34

Item 4.	Controls and Procedures	34

PART II.	Other Information	35

Item 1.	Legal Proceedings	35

Item 1A.	Risk Factors	35

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39

Item 3.	Defaults Upon Senior Securities	39

Item 4.	Mine Safety Disclosures	39

Item 5.	Other Information	39

Item 6.	Exhibits	39

Signatures		40


	September 30, 2022
	(unaudited)		December 31, 2021
ASSETS
CURRENT ASSETS:
Cash	$	5,144	$	11,668
Accounts receivable, net		955		697
Inventories		663		564
Other current assets		656		549
Total current assets		7,418		13,478

PROPERTY AND EQUIPMENT, NET		885		836

OTHER ASSETS:
Finance lease right-of-use assets, net		284		371
Operating lease right-of-use assets, net		811		858
Intangibles, net		14,005		14,717
Other assets		144		179
Total assets	$	23,547	$	30,439
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt, less debt issuance costs	$	367	$	26
Current maturities of finance lease liabilities		168		222
Current maturities of operating lease liabilities		194		166
Accounts payable		2,132		1,863
Accrued expenses		1,536		1,918
Deferred revenue		13		18
Total current liabilities		4,410		4,213
LONG TERM LIABILITIES:
Long-term debt, less current maturities and debt issuance costs		141		160
Finance lease liabilities, less current maturities		89		159
Operating lease liabilities, less current maturities		625		697
Common stock warrant liabilities		28		606
Total liabilities		5,293		5,835
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS’ EQUITY:
Preferred stock - $0.01 par value, 15,000,000 shares authorized at September 30, 2022 and December 31, 2021, 47 shares issued and outstanding at September 30, 2022 and December 31, 2021, liquidation preference of $94 at September 30, 2022		—		—
Common stock, $0.01 par value, 150,000,000 shares authorized at September 30, 2022 and December 31, 2021, 22,820,260 and 22,708,442 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		228		227
Additional paid-in capital		107,975		104,431
Accumulated deficit		(90,007)		(80,094)
Total Precipio, Inc. stockholders’ equity		18,196		24,564
Noncontrolling interest in joint venture		58		40
Total stockholders’ equity		18,254		24,604
Total liabilities and stockholders’ equity	$	23,547	$	30,439


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
SALES:
Service revenue, net	$	2,060	$	1,998	$	6,291	$	5,980
Other revenue		235		141		977		514
Revenue, net of contractual allowances and adjustments		2,295		2,139		7,268		6,494
Adjustment for allowance for doubtful accounts		(80)		107		(247)		(80)
Net sales		2,215		2,246		7,021		6,414
COST OF SALES:
Cost of service revenue		1,512		1,450		4,414		4,121
Cost of other revenue		267		268		695		546
Total cost of sales		1,779		1,718		5,109		4,667
Gross profit		436		528		1,912		1,747
OPERATING EXPENSES:
Operating expenses		3,665		2,967		12,383		8,455
OPERATING LOSS		(3,229)		(2,439)		(10,471)		(6,708)
OTHER INCOME (EXPENSE):
Interest expense, net		(6)		(6)		(6)		(14)
Warrant revaluation		59		578		578		(434)
Gain on settlement of liability		3		13		4		47
Gain on forgiveness of Paycheck Protection Program loan		–		–		—		794
Total other income (expense)		56		585		576		393
LOSS BEFORE INCOME TAXES		(3,173)		(1,854)		(9,895)		(6,315)
INCOME TAX EXPENSE		–		–		—		—
NET LOSS		(3,173)		(1,854)		(9,895)		(6,315)

Less: Net income attributable to noncontrolling interest in joint venture		(6)		(6)		(18)		(10)
NET LOSS ATTRIBUTABLE TO PRECIPIO, INC. COMMON STOCKHOLDERS	$	(3,179)	$	(1,860)	$	(9,913)	$	(6,325)

BASIC AND DILUTED LOSS PER COMMON SHARE	$	(0.14)	$	(0.08)	$	(0.44)	$	(0.31)
BASIC AND DILUTED WEIGHTED-AVERAGE SHARES OF COMMON STOCK OUTSTANDING		22,766,890		22,708,034		22,728,275		20,555,588


	For the Three Months Ended September 30, 2022
	Preferred Stock			Common Stock			Additional						Noncontrolling
	Outstanding	Par		Outstanding	Par		Paid-in		Accumulated		Total		Interest in
	Shares	Value		Shares	Value		Capital		Deficit		Precipio, Inc.		Joint Venture		Total
Balance, July 1, 2022	47	$	—	22,708,708	$	227	$	107,114	$	(86,828)	$	20,513	$	52	$	20,565
Net (loss) income	—		—	—		—		—		(3,179)		(3,179)		6		(3,173)
Issuance of common stock in connection with at the market offering, net of issuance costs	—		—	85,023		1		128		—		129		—		129
Proceeds upon issuance of common stock from exercise of warrants	—		—	26,529		—		11		—		11		—		11
Stock-based compensation	—		—	—		—		722		—		722		—		722
Balance, September 30, 2022	47	$	—	22,820,260	$	228	$	107,975	$	(90,007)	$	18,196	$	58	$	18,254

	For the Nine Months Ended September 30, 2022
	Preferred Stock			Common Stock			Additional						Noncontrolling
	Outstanding	Par		Outstanding	Par		Paid-in		Accumulated		Total		Interest in
	Shares	Value		Shares	Value		Capital		Deficit		Precipio, Inc.		Joint Venture		Total
Balance, January 1, 2022	47	$	—	22,708,442	$	227	$	104,431	$	(80,094)	$	24,564	$	40	$	24,604
Net (loss) income	—		—	—		—		—		(9,913)		(9,913)		18		(9,895)
Issuance of common stock in connection with at the market offering, net of issuance costs	—		—	85,023		1		128		—		129		—		129
Proceeds upon issuance of common stock from exercise of warrants	—		—	26,795		—		11		—		11		—		11
Stock-based compensation	—		—	—		—		3,405		—		3,405		—		3,405
Balance, September 30, 2022	47	$	—	22,820,260	$	228	$	107,975	$	(90,007)	$	18,196	$	58	$	18,254


	September 30,
	2022	2021
Stock options	3,698,712	2,647,516
Warrants	712,470	831,901
Preferred stock	117,500	117,500
Total	4,528,682	3,596,917


(dollars in thousands)	September 30, 2022		December 31, 2021
Assets:
Accounts receivable, net	$	248	$	180
Total assets	$	248	$	180
Liabilities:
Accrued expenses	$	32	$	36
Total liabilities	$	32	$	36
Noncontrolling interest in Joint Venture	$	58	$	40
Total stockholders' equity	$	114	$	79


	Dollars in Thousands
	September 30, 2022		December 31, 2021
Department of Economic and Community Development (DECD)	$	184	$	205
DECD debt issuance costs		(16)		(19)
Financed insurance loan		340		—
Total long-term debt		508		186
Current portion of long-term debt		(367)		(26)
Long-term debt, net of current maturities	$	141	$	160


(dollars in thousands)
Classification on the Condensed Consolidated Balance Sheet	September 30, 2022		December 31, 2021
Assets:
Operating lease right-of-use assets, net	$	811	$	858
Finance lease right-of-use assets, net (1)		284		371
Total lease assets	$	1,095	$	1,229

Liabilities:
Current:
Current maturities of operating lease liabilities	$	194	$	166
Current maturities of finance lease liabilities		168		222
Noncurrent:
Operating lease liabilities, less current maturities		625		697
Finance lease liabilities, less current maturities		89		159
Total lease liabilities	$	1,076	$	1,244


(dollars in thousands)	Operating Leases				Finance Leases				Total
		September 30,		December 31,		September 30,		December 31,		September 30,		December 31,
		2022		2021		2022		2021		2022		2021
2022	$	62	$	227	$	33	$	176	$	95	$	403
2023		252		218		101		101		353		319
2024		239		204		80		80		319		284
2025		205		191		65		65		270		256
2026		195		195		26		26		221		221
Thereafter		—		—		—		—		—		—
Total lease obligations		953		1,035		305		448		1,258		1,483
Less: Amount representing interest		(134)		(172)		(48)		(67)		(182)		(239)
Present value of net minimum lease obligations		819		863		257		381		1,076		1,244
Less, current portion		(194)		(166)		(168)		(222)		(362)		(388)
Long term portion	$	625	$	697	$	89	$	159	$	714	$	856


			Underlying	Exercise
	Issue Year	Expiration	Shares	Price
Warrants
(1)	2017	October 2022	666	$	0.40
(2)	2018	October 2022	7,207	$	112.50
(3)	2018	April 2023	69,964	$	5.40
(3)	2018	April 2023	78,414	$	5.40
(4)	2018	October 2022	15,466	$	11.25
(5)	2018	July 2023	14,671	$	5.40
(5)	2018	July 2023	14,672	$	5.40
(5)	2018	August 2023	20,903	$	5.40
(5)	2018	August 2023	20,903	$	5.40
(5)	2018	September 2023	19,816	$	5.40
(5)	2018	September 2023	20,903	$	5.40
(6)	2018	November 2023	75,788	$	5.40
(6)	2018	December 2023	51,282	$	5.40
(7)	2019	April 2024	147,472	$	5.40
(8)	2019	May 2024	154,343	$	9.56
			712,470


Dollars in Thousands
	Three Months Ended September 30, 2022
	Bridge Note		Total Warrant
	Warrant Liabilities		Liabilities
Beginning balance at July 1	$	87	$	87
Total gains:
Revaluation recognized in earnings		(59)		(59)
Balance at September 30	$	28	$	28

	Three Months Ended September 30, 2021
	Bridge Note		Total Warrant
	Warrant Liabilities		Liabilities
Beginning balance at July 1	$	2,207	$	2,207
Total losses:
Revaluation recognized in earnings		(578)		(578)
Deductions – warrant liability settlement		–		–
Balance at September 30	$	1,629	$	1,629


	Nine Months Ended September 30,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(9,895)	$	(6,315)

Adjustments to reconcile net loss to net cash flows used in operating activities:
Depreciation and amortization		910		835
Amortization of operating lease right-of-use asset		139		162
Amortization of finance lease right-of-use asset		99		44
Amortization of deferred financing costs, debt discounts and debt premiums		3		2
Gain on forgiveness of debt		—		(794)
Gain on settlement of liability		(4)		(47)
Stock-based compensation		3,405		1,310
Value of stock issued in payment of services		—		150
Provision for losses on doubtful accounts		245		82
Warrant revaluation		(578)		434
Derecognition of finance lease right-of-use asset		—		60
Changes in operating assets and liabilities:
Accounts receivable		(503)		222
Inventories		(99)		(330)
Other assets		341		(354)
Accounts payable		235		(156)
Operating lease liabilities		(136)		(167)
Accrued expenses and other liabilities		(383)		(274)
Net cash used in operating activities		(6,221)		(5,136)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(225)		(624)
Net cash used in investing activities		(225)		(624)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on finance lease obligations		(124)		(79)
Deposits on finance lease right-of-use assets		—		(41)
Issuance of common stock, net of issuance costs		129		16,207
Proceeds from exercise of warrants		11		400
Proceeds from exercise of stock options		—		3
Principal payments on long-term debt		(94)		(33)
Payments on common stock warrant liabilities		—		(130)
Net cash flows (used in) provided by financing activities		(78)		16,327
NET CHANGE IN CASH		(6,524)		10,567
CASH AT BEGINNING OF PERIOD		11,668		2,656


	September 30,	December 31,
	2022	2021
Weighted-average remaining lease term (years):
Operating leases	3.9	4.7
Finance leases	2.9	3.1
Weighted-average discount rate:
Operating leases	8.00%	8.00%
Finance leases	10.23%	10.03%


	Number of	Weighted-Average
	Options	Exercise Price
Outstanding at January 1, 2022	2,635,287	$	3.38
Granted	1,114,000		1.51
Forfeited	(50,575)		2.43
Outstanding at September 30, 2022	3,698,712	$	2.83
Exercisable at September 30, 2022	1,998,581	$	3.33


	For the Three Months Ended September 30,
(dollars in thousands)					Contractual Allowances and				Revenues, net of Contractual
	Gross Revenues				adjustments				Allowances and adjustments
	2022		2021		2022		2021		2022		2021
Medicaid	$	12	$	4	$	—	$	—	$	12	$	4
Medicare		936		942		—		—		936		942
Self-pay		109		65		—		—		109		65
Third party payers		3,486		3,313		(2,483)		(2,361)		1,003		952
Contract diagnostics		—		35		—		—		—		35
		4,543		4,359		(2,483)		(2,361)		2,060		1,998
Other		235		141		—		—		235		141
	$	4,778	$	4,500	$	(2,483)	$	(2,361)	$	2,295	$	2,139


Dollars in Thousands
			Nine Months Ended September 30, 2022
			Bridge Note		Total Warrant
			Warrant Liabilities		Liabilities
Beginning balance at January 1			$	606	$	606
Total losses:
Revaluation recognized in earnings				(578)		(578)
Deductions – warrant exercises and write-offs				–		–
Balance at September 30			$	28	$	28

	Nine Months Ended September 30, 2021
	2016 Warrant		Bridge Note		Total Warrant
	Liability		Warrant Liabilities		Liabilities
Beginning balance at January 1	$	130	$	1,195	$	1,325
Total losses:
Revaluation recognized in earnings		–		434		434
Deductions – warrant liability settlement		(130)		–		(130)
Balance at September 30	$	–	$	1,629	$	1,629


	For the Three Months Ended September 30,
(dollars in thousands)	Diagnostic Testing				Biomarker Testing				Total
	2022		2021		2022		2021		2022		2021
Medicaid	$	12	$	4	$	—	$	—	$	12	$	4
Medicare		936		942		—		—		936		942
Self-pay		109		65		—		—		109		65
Third party payers		1,003		952		—		—		1,003		952
Contract diagnostics		—		—		—		35		—		35
Service revenue, net	$	2,060	$	1,963	$	—	$	35	$	2,060	$	1,998


	For the Three Months Ended September 30,
	Revenues, net of
(dollars in thousands)	Contractual Allowances				Allowances for doubtful
	and adjustments				accounts				Total
	2022		2021		2022		2021		2022		2021
Medicaid	$	12	$	4	$	(6)	$	(3)	$	6	$	1
Medicare		936		942		(24)		(47)		912		895
Self-pay		109		65		—		—		109		65
Third party payers		1,003		952		(50)		157		953		1,109
Contract diagnostics		—		35		—		—		—		35
		2,060		1,998		(80)		107		1,980		2,105
Other		235		141		—		—		235		141
	$	2,295	$	2,139	$	(80)	$	107	$	2,215	$	2,246


			Allowance for
			Doubtful
(dollars in thousands)			Accounts
Balance, January 1, 2022			$	(2,484)
Collection Allowance:
Medicaid	$	(19)
Medicare		(75)
Third party payers		(153)
		(247)
Bad debt expense	$	2
Total charges				(245)
Other				536
Balance, September 30, 2022			$	(2,193)


	Dollars in Thousands
	Three Months Ended
	September 30,				Change
	2022		2021		$		%
Service revenue, net, less allowance for doubtful accounts	$	1,980	$	2,105	$	(125)	(6)	%
Other		235		141		94	67	%
Net Sales	$	2,215	$	2,246	$	(31)	(1)	%


	Dollars in Thousands
	Nine Months Ended
	September 30,				Change
	2022		2021		$		%
Service revenue, net, less allowance for doubtful accounts	$	6,044	$	5,900	$	144	2	%
Other		977		514		463	90	%
Net Sales	$	7,021	$	6,414	$	607	9	%



31.1		Certification of Principal Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended.

31.2		Certification of Principal Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended.

32.1*		Certification of Principal Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended.

32.2*		Certification of Principal Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended.

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	PRECIPIO, INC.

Date: November 10, 2022	By:	/S/ ILAN DANIELI
		Ilan Danieli
		Chief Executive Officer (Principal Executive Officer)


Date: November 10, 2022	By:	/S/ MATTHEW GAGE
		Matthew Gage
		Interim Chief Financial Officer (Principal Financial and Accounting Officer)