Precipio, Inc 10-Q for FY2023 Q3

Precipio, Inc. (PRPO)

10-Q 2023-11-13 For: 2023-09-30

Added on April 06, 2026

About this 10-Q

Precipio, Inc filed this 10-Q on November 13, 2023, covering the quarter ended September 30, 2023 (FY2023 Q3).

Headline figures

Quarter ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $4.52M; up 104.0% from $2.22M a year earlier
Net loss: $1.46M; compared with a net loss of $3.17M a year earlier
Diluted EPS: -$1.04; compared with -$2.79 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, 2023

	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, 2023 (unaudited) and December 31, 2022	3

	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022 (unaudited)	4

	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2023 and 2022 (unaudited)	5

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022 (unaudited)	7

	Notes to 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	40

Signatures		41


		September 30, 2023
		(unaudited)		December 31, 2022
ASSETS
CURRENT ASSETS:
Cash		$	1,562	$	3,445
Accounts receivable, net			1,483		1,036
Inventories			636		708
Other current assets			628		521
Total current assets			4,309		5,710

PROPERTY AND EQUIPMENT, NET			738		877

OTHER ASSETS:
Finance lease right-of-use assets, net			194		257
Operating lease right-of-use assets, net			668		763
Intangibles, net			13,056		13,768
Other assets			88		129
Total assets		$	19,053	$	21,504
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt, less debt issuance costs		$	334	$	255
Current maturities of finance lease liabilities			143		162
Current maturities of operating lease liabilities			222		199
Accounts payable			2,513		2,042
Accrued expenses			2,213		1,584
Deferred revenue			29		119
Total current liabilities			5,454		4,361
LONG TERM LIABILITIES:
Long-term debt, less current maturities and debt issuance costs			113		134
Finance lease liabilities, less current maturities			25		68
Operating lease liabilities, less current maturities			459		574
Total liabilities			6,051		5,137
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS’ EQUITY:
Preferred stock - $0.01 par value, 15,000,000 shares authorized at September 30, 2023 and December 31, 2022, 47 shares issued and outstanding at September 30, 2023 and December 31, 2022, liquidation preference of $33 at September 30, 2023			—		—
Common stock, $0.01 par value, 150,000,000 shares authorized at September 30, 2023 and December 31, 2022, 1,380,555 and 1,141,013 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively	(1)		14		11
Additional paid-in capital	(1)		111,998		108,588
Accumulated deficit			(99,075)		(92,297)
Total Precipio, Inc. stockholders’ equity			12,937		16,302
Noncontrolling interest in joint venture			65		65
Total stockholders’ equity			13,002		16,367
Total liabilities and stockholders’ equity		$	19,053	$	21,504


		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022
SALES:
Service revenue, net		$	3,738	$	2,060	$	8,574	$	6,291
Other revenue			831		235		2,469		977
Revenue, net of contractual allowances and adjustments			4,569		2,295		11,043		7,268
Adjustment for allowance for doubtful accounts			(51)		(80)		(175)		(247)
Net sales			4,518		2,215		10,868		7,021
COST OF SALES:
Cost of service revenue			2,401		1,512		6,050		4,414
Cost of other revenue			232		267		813		695
Total cost of sales			2,633		1,779		6,863		5,109
Gross profit			1,885		436		4,005		1,912
OPERATING EXPENSES:
Operating expenses			3,333		3,665		10,771		12,383
OPERATING LOSS			(1,448)		(3,229)		(6,766)		(10,471)
OTHER (EXPENSE) INCOME:
Interest expense, net			(7)		(6)		(12)		(6)
Warrant revaluation			–		59		–		578
Gain on settlement of liability			–		3		–		4
Total other (expense) income			(7)		56		(12)		576
LOSS BEFORE INCOME TAXES			(1,455)		(3,173)		(6,778)		(9,895)
INCOME TAX EXPENSE			–		–		–		—
NET LOSS			(1,455)		(3,173)		(6,778)		(9,895)

Less: Net income attributable to noncontrolling interest in joint venture			–		(6)		–		(18)
NET LOSS ATTRIBUTABLE TO PRECIPIO, INC. COMMON STOCKHOLDERS		$	(1,455)	$	(3,179)	$	(6,778)	$	(9,913)

BASIC AND DILUTED LOSS PER COMMON SHARE	(1)	$	(1.04)	$	(2.79)	$	(5.39)	$	(8.72)
BASIC AND DILUTED WEIGHTED-AVERAGE SHARES OF COMMON STOCK OUTSTANDING	(1)		1,394,596		1,138,345		1,258,633		1,136,414


	For the Three Months Ended September 30, 2023
	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, July 1, 2023	47	$	—	1,378,115	$	14	$	111,632	$	(97,620)	$	14,026	$	65	$	14,091
Net (loss) income	—		—	—		—		—		(1,455)		(1,455)		—		(1,455)
Payment of fractional common shares in conjunction with the 1-for-20 reverse stock split, which was effected on September 21, 2023	—		—	(52)		—		—		—		—		—		—
Issuance of common stock in connection restricted stock awards	—		—	2,492		—		16		—		16		—		16
Stock-based compensation	—		—	—		—		350		—		350		—		350
Balance, September 30, 2023	47	$	—	1,380,555	$	14	$	111,998	$	(99,075)	$	12,937	$	65	$	13,002

	For the Nine Months Ended September 30, 2023
	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) income	—		—	—		—		—		(6,778)		(6,778)		—		(6,778)
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
Payment of fractional common shares in conjunction with the 1-for-20 reverse stock split, which was effected on September 21, 2023	—		—	(52)		—		—		—		—		—		—
Issuance of common stock in connection restricted stock awards	—		—	2,492		—		16		—		16		—		16
Stock-based compensation	—		—	—		—		1,152		—		1,152		—		1,152
Balance, September 30, 2023	47	$	—	1,380,555	$	14	$	111,998	$	(99,075)	$	12,937	$	65	$	13,002


	September 30,
	2023	2022
Stock options	234,213	184,936
Warrants	465,888	35,623
Preferred stock	5,875	5,875
Total	705,976	226,434


(dollars in thousands)	September 30, 2023		December 31, 2022
Assets:
Accounts receivable, net	$	219	$	335
Total assets	$	219	$	335
Liabilities:
Accrued expenses	$	17	$	50
Total liabilities	$	17	$	50
Noncontrolling interest in Joint Venture	$	65	$	65
Equity attributable to Precipio, Inc.	$	127	$	127


	Dollars in Thousands
	September 30, 2023		December 31, 2022
Connecticut Department of Economic and Community Development (DECD)	$	154	$	176
DECD debt issuance costs		(13)		(15)
Financed insurance loan		306		228
Total long-term debt		447		389
Current portion of long-term debt		(334)		(255)
Long-term debt, net of current maturities	$	113	$	134


(dollars in thousands)
Classification on the Condensed Consolidated Balance Sheet	September 30, 2023		December 31, 2022
Assets:
Operating lease right-of-use assets, net	$	668	$	763
Finance lease right-of-use assets, net (1)		194		257
Total lease assets	$	862	$	1,020

Liabilities:
Current:
Current maturities of operating lease liabilities	$	222	$	199
Current maturities of finance lease liabilities		143		162
Noncurrent:
Operating lease liabilities, less current maturities		459		574
Finance lease liabilities, less current maturities		25		68
Total lease liabilities	$	849	$	1,003


(dollars in thousands)	Operating Leases		Finance Leases		Total
		September 30,		September 30,		September 30,
		2023		2023		2023
2023 (remaining)	$	68	$	22	$	90
2024		258		80		338
2025		224		65		289
2026		214		26		240
Total lease obligations		764		193		957
Less: Amount representing interest		(83)		(25)		(108)
Present value of net minimum lease obligations		681		168		849
Less, current portion		(222)		(143)		(365)
Long term portion	$	459	$	25	$	484


	September 30,	December 31,
	2023	2022
Weighted-average remaining lease term (years):
Operating leases	3.0	3.7
Finance leases	2.3	2.8
Weighted-average discount rate:
Operating leases	8.00%	8.00%
Finance leases	10.54%	10.31%


			Underlying	Exercise
	Issue Year	Expiration	Shares	Price
Warrants
(1)	2018	November 2023	3,789	$	108.00
(2)	2018	December 2023	2,564	$	108.00
(3)	2019	April 2024	7,374	$	108.00
(4)	2019	May 2024	7,717	$	191.20
(5)	2023	None	15,972	$	0.02
(6)	2023	December 2028	444,444	$	12.60
			481,860


	Nine Months Ended September 30,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(6,778)	$	(9,895)

Adjustments to reconcile net loss to net cash flows used in operating activities:
Depreciation and amortization		931		910
Amortization of operating lease right-of-use asset		153		139
Amortization of finance lease right-of-use asset		63		99
Amortization of deferred financing costs, debt discounts and debt premiums		2		3
Gain on settlement of liability		—		(4)
Stock-based compensation		1,168		3,405
Provision for losses on doubtful accounts		175		245
Warrant revaluation		—		(578)
Changes in operating assets and liabilities:
Accounts receivable		(622)		(503)
Inventories		72		(99)
Other assets		306		341
Accounts payable		468		235
Operating lease liabilities		(150)		(136)
Deferred revenue		(90)		(5)
Accrued expenses		629		(378)
Net cash used in operating activities		(3,673)		(6,221)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(77)		(225)
Net cash used in investing activities		(77)		(225)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on finance lease obligations		(62)		(124)
Issuance of common stock, net of issuance costs		2,245		129
Proceeds from exercise of warrants		—		11
Principal payments on long-term debt		(316)		(94)
Net cash flows provided by (used in) financing activities		1,867		(78)
NET CHANGE IN CASH		(1,883)		(6,524)
CASH AT BEGINNING OF PERIOD		3,445		11,668
CASH AT END OF PERIOD	$	1,562	$	5,144


Dollars in Thousands

	Nine Months Ended September 30, 2022
	Bridge Note
	Warrant Liabilities
Beginning balance at January 1	$	606
Total gains:
Revaluation recognized in earnings		(578)
Balance at September 30	$	28


	Number of	Weighted-Average
	Options	Exercise Price
Outstanding at January 1, 2023	184,067	$	56.75
Granted	58,530		12.12
Forfeited	(8,384)		24.12
Outstanding at September 30, 2023	234,213	$	46.77
Exercisable at September 30, 2023	141,908	$	57.93


	For the Nine Months Ended September 30,
(dollars in thousands)	Diagnostic Testing
	2023		2022
Medicaid	$	22	$	39
Medicare		3,736		2,986
Self-pay		155		206
Third party payers		4,661		3,060
Service revenue, net	$	8,574	$	6,291


Dollars in Thousands

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


	For the Three Months Ended September 30,
(dollars in thousands)					Contractual Allowances and				Revenues, net of Contractual
	Gross Revenues				adjustments				Allowances and adjustments
	2023		2022		2023		2022		2023		2022
Medicaid	$	10	$	12	$	—	$	—	$	10	$	12
Medicare		1,693		936		(2)		—		1,691		936
Self-pay		39		109		—		—		39		109
Third party payers		6,956		3,486		(4,958)		(2,483)		1,998		1,003
		8,698		4,543		(4,960)		(2,483)		3,738		2,060
Other		831		235		—		—		831		235
	$	9,529	$	4,778	$	(4,960)	$	(2,483)	$	4,569	$	2,295


	For the Three Months Ended September 30,
	Revenues, net of
(dollars in thousands)	Contractual Allowances				Allowances for doubtful
	and adjustments				accounts				Total
	2023		2022		2023		2022		2023		2022
Medicaid	$	10	$	12	$	(4)	$	(6)	$	6	$	6
Medicare		1,691		936		(20)		(24)		1,671		912
Self-pay		39		109		(3)		—		36		109
Third party payers		1,998		1,003		(24)		(50)		1,974		953
		3,738		2,060		(51)		(80)		3,687		1,980
Other		831		235		—		—		831		235
	$	4,569	$	2,295	$	(51)	$	(80)	$	4,518	$	2,215


			Allowance for
			Doubtful
(dollars in thousands)			Accounts
Balance, January 1, 2023			$	(2,354)
Collection Allowance:
Medicaid	$	(10)
Medicare		(43)
Self-pay		(15)
Third party payers		(107)
		(175)
Bad debt expense	$	—
Total charges				(175)
Balance, September 30, 2023			$	(2,529)


	Dollars in Thousands
	Three Months Ended
	September 30,				Change
	2023		2022		$		%
Service revenue, net, less allowance for doubtful accounts	$	3,687	$	1,980	$	1,707	86	%
Other		831		235		596	254	%
Net Sales	$	4,518	$	2,215	$	2,303	104	%


	Dollars in Thousands
	Nine Months Ended
	September 30,				Change
	2023		2022		$		%
Service revenue, net, less allowance for doubtful accounts	$	8,399	$	6,044	$	2,355	39	%
Other		2,469		977		1,492	153	%
Net Sales	$	10,868	$	7,021	$	3,847	55	%



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 13, 2023	By:	/S/ ILAN DANIELI
		Ilan Danieli
		Chief Executive Officer (Principal Executive Officer)


Date: November 13, 2023	By:	/S/ MATTHEW GAGE
		Matthew Gage
		Chief Financial Officer (Principal Financial and Accounting Officer)