Precipio, Inc 10-Q for FY2023 Q2

Precipio, Inc. (PRPO)

10-Q 2023-08-11 For: 2023-06-30

Added on April 06, 2026

About this 10-Q

Precipio, Inc filed this 10-Q on August 11, 2023, covering the quarter ended June 30, 2023 (FY2023 Q2).

Headline figures

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

Revenue: $3.53M; up 49.8% from $2.36M a year earlier
Net loss: $2.29M; compared with a net loss of $2.14M a year earlier
Diluted EPS: -$0.09; compared with -$0.09 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 June 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 June 30, 2023 (unaudited) and December 31, 2022	3

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

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

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 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	33

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		41


	June 30, 2023
	(unaudited)		December 31, 2022
ASSETS
CURRENT ASSETS:
Cash	$	2,573	$	3,445
Accounts receivable, net		884		1,036
Inventories		537		708
Other current assets		354		521
Total current assets		4,348		5,710

PROPERTY AND EQUIPMENT, NET		791		877

OTHER ASSETS:
Finance lease right-of-use assets, net		214		257
Operating lease right-of-use assets, net		722		763
Intangibles, net		13,293		13,768
Other assets		104		129
Total assets	$	19,472	$	21,504
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt, less debt issuance costs	$	27	$	255
Current maturities of finance lease liabilities		155		162
Current maturities of operating lease liabilities		225		199
Accounts payable		2,402		2,042
Accrued expenses		1,895		1,584
Deferred revenue		17		119
Total current liabilities		4,721		4,361
LONG TERM LIABILITIES:
Long-term debt, less current maturities and debt issuance costs		120		134
Finance lease liabilities, less current maturities		31		68
Operating lease liabilities, less current maturities		509		574
Total liabilities		5,381		5,137
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS’ EQUITY:
Preferred stock - $0.01 par value, 15,000,000 shares authorized at June 30, 2023 and December 31, 2022, 47 shares issued and outstanding at June 30, 2023 and December 31, 2022, liquidation preference of $46 at June 30, 2023		—		—
Common stock, $0.01 par value, 150,000,000 shares authorized at June 30, 2023 and December 31, 2022, 27,562,298 and 22,820,260 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively		275		228
Additional paid-in capital		111,371		108,371
Accumulated deficit		(97,620)		(92,297)
Total Precipio, Inc. stockholders’ equity		14,026		16,302
Noncontrolling interest in joint venture		65		65
Total stockholders’ equity		14,091		16,367
Total liabilities and stockholders’ equity	$	19,472	$	21,504


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
SALES:
Service revenue, net	$	2,768	$	2,226	$	4,836	$	4,231
Other revenue		877		220		1,638		742
Revenue, net of contractual allowances and adjustments		3,645		2,446		6,474		4,973
Adjustment for allowance for doubtful accounts		(112)		(87)		(124)		(167)
Net sales		3,533		2,359		6,350		4,806
COST OF SALES:
Cost of service revenue		1,880		1,366		3,649		2,902
Cost of other revenue		282		220		581		428
Total cost of sales		2,162		1,586		4,230		3,330
Gross profit		1,371		773		2,120		1,476
OPERATING EXPENSES:
Operating expenses		3,663		3,206		7,438		8,718
OPERATING LOSS		(2,292)		(2,433)		(5,318)		(7,242)
OTHER (EXPENSE) INCOME:
Interest expense, net		(1)		(2)		(5)		—
Warrant revaluation		–		297		–		519
Gain on settlement of liability		–		–		–		1
Total other (expense) income		(1)		295		(5)		520
LOSS BEFORE INCOME TAXES		(2,293)		(2,138)		(5,323)		(6,722)
INCOME TAX EXPENSE		–		–		–		—
NET LOSS		(2,293)		(2,138)		(5,323)		(6,722)

Less: Net income attributable to noncontrolling interest in joint venture		–		(6)		–		(12)
NET LOSS ATTRIBUTABLE TO PRECIPIO, INC. COMMON STOCKHOLDERS	$	(2,293)	$	(2,144)	$	(5,323)	$	(6,734)

BASIC AND DILUTED LOSS PER COMMON SHARE	$	(0.09)	$	(0.09)	$	(0.22)	$	(0.30)
BASIC AND DILUTED WEIGHTED-AVERAGE SHARES OF COMMON STOCK OUTSTANDING		24,362,785		22,708,708		23,790,491		22,708,648


	For the Three Months Ended June 30, 2023
	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, April 1, 2023	47	$	—	23,364,086	$	233	$	109,254	$	(95,327)	$	14,160	$	65	$	14,225
Net (loss) income	—		—	—		—		—		(2,293)		(2,293)		—		(2,293)
Issuance of common stock in connection with purchase agreements, net of issuance costs	—		—	4,125,000		41		1,719		—		1,760		—		1,760
Issuance of common stock in connection with at the market offering, net of issuance costs	—		—	73,212		1		46		—		47		—		47
Stock-based compensation	—		—	—		—		352		—		352		—		352
Balance, June 30, 2023	47	$	—	27,562,298	$	275	$	111,371	$	(97,620)	$	14,026	$	65	$	14,091

	For the Six Months Ended June 30, 2023
	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, 2023	47	$	—	22,820,260	$	228	$	108,371	$	(92,297)	$	16,302	$	65	$	16,367
Net (loss) income	—		—	—		—		—		(5,323)		(5,323)		—		(5,323)
Issuance of common stock in connection with purchase agreements	—		—	4,125,000		41		1,719		—		1,760		—		1,760
Issuance of common stock in connection with at the market offering, net of issuance costs	—		—	617,038		6		479		—		485		—		485
Stock-based compensation	—		—	—		—		802		—		802		—		802
Balance, June 30, 2023	47	$	—	27,562,298	$	275	$	111,371	$	(97,620)	$	14,026	$	65	$	14,091


	June 30,
	2023	2022
Stock options	4,636,043	3,660,457
Warrants	9,429,643	822,500
Preferred stock	117,500	117,500
Total	14,183,186	4,600,457


(dollars in thousands)	June 30, 2023		December 31, 2022
Assets:
Accounts receivable, net	$	224	$	335
Total assets	$	224	$	335
Liabilities:
Accrued expenses	$	17	$	50
Total liabilities	$	17	$	50
Noncontrolling interest in Joint Venture	$	65	$	65
Total stockholders' equity	$	127	$	127


	Dollars in Thousands
	June 30, 2023		December 31, 2022
Connecticut Department of Economic and Community Development (DECD)	$	161	$	176
DECD debt issuance costs		(14)		(15)
Financed insurance loan		—		228
Total long-term debt		147		389
Current portion of long-term debt		(27)		(255)
Long-term debt, net of current maturities	$	120	$	134


(dollars in thousands)
Classification on the Condensed Consolidated Balance Sheet	June 30, 2023		December 31, 2022
Assets:
Operating lease right-of-use assets, net	$	722	$	763
Finance lease right-of-use assets, net (1)		214		257
Total lease assets	$	936	$	1,020

Liabilities:
Current:
Current maturities of operating lease liabilities	$	225	$	199
Current maturities of finance lease liabilities		155		162
Noncurrent:
Operating lease liabilities, less current maturities		509		574
Finance lease liabilities, less current maturities		31		68
Total lease liabilities	$	920	$	1,003


(dollars in thousands)	Operating Leases		Finance Leases		Total
		June 30,		June 30,		June 30,
		2023		2023		2023
2023 (remaining)	$	136	$	45	$	181
2024		258		80		338
2025		224		65		289
2026		214		26		240
Total lease obligations		832		216		1,048
Less: Amount representing interest		(98)		(30)		(128)
Present value of net minimum lease obligations		734		186		920
Less, current portion		(225)		(155)		(380)
Long term portion	$	509	$	31	$	540


	June 30,	December 31,
	2023	2022
Weighted-average remaining lease term (years):
Operating leases	3.3	3.7
Finance leases	2.5	2.8
Weighted-average discount rate:
Operating leases	8.00%	8.00%
Finance leases	10.48%	10.31%


			Underlying	Exercise
	Issue Year	Expiration	Shares	Price
Warrants
(1)	2018	July 2023	29,343	$	5.40
(2)	2018	August 2023	41,806	$	5.40
(3)	2018	September 2023	40,719	$	5.40
(4)	2018	November 2023	75,788	$	5.40
(5)	2018	December 2023	51,282	$	5.40
(6)	2019	April 2024	147,472	$	5.40
(7)	2019	May 2024	154,343	$	9.56
(8)	2023	None	319,445	$	0.001
(9)	2023	December 2028	8,888,890	$	0.63
			9,749,088


	Six Months Ended June 30,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(5,323)	$	(6,722)

Adjustments to reconcile net loss to net cash flows used in operating activities:
Depreciation and amortization		621		604
Amortization of operating lease right-of-use asset		99		93
Amortization of finance lease right-of-use asset		43		67
Amortization of deferred financing costs, debt discounts and debt premiums		1		2
Gain on settlement of liability		—		(1)
Stock-based compensation		802		2,683
Provision for losses on doubtful accounts		124		165
Warrant revaluation		—		(519)
Changes in operating assets and liabilities:
Accounts receivable		28		(595)
Inventories		171		(78)
Other assets		192		207
Accounts payable		353		692
Operating lease liabilities		(97)		(90)
Deferred revenue		(102)		(5)
Accrued expenses		311		(483)
Net cash used in operating activities		(2,777)		(3,980)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(54)		(106)
Net cash used in investing activities		(54)		(106)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on finance lease obligations		(44)		(95)
Issuance of common stock, net of issuance costs		2,245		—
Principal payments on long-term debt		(242)		(14)
Net cash flows provided by (used in) financing activities		1,959		(109)
NET CHANGE IN CASH		(872)		(4,195)
CASH AT BEGINNING OF PERIOD		3,445		11,668
CASH AT END OF PERIOD	$	2,573	$	7,473


Dollars in Thousands

	Three Months Ended June 30, 2022
	Bridge Note
	Warrant Liabilities
Beginning balance at April 1	$	384
Total gains:
Revaluation recognized in earnings		(297)
Balance at June 30	$	87


Dollars in Thousands

	Six Months Ended June 30, 2022
	Bridge Note
	Warrant Liabilities
Beginning balance at January 1	$	606
Total gains:
Revaluation recognized in earnings		(519)
Balance at June 30	$	87


	Number of	Weighted-Average
	Options	Exercise Price
Outstanding at January 1, 2023	3,681,336	$	2.84
Granted	1,100,600		0.62
Forfeited	(145,893)		1.18
Outstanding at June 30, 2023	4,636,043	$	2.36
Exercisable at June 30, 2023	2,668,542	$	2.96


	For the Three Months Ended June 30,
(dollars in thousands)	Diagnostic Testing
	2023		2022
Medicaid	$	5	$	12
Medicare		1,165		1,076
Self-pay		36		48
Third party payers		1,562		1,090
Service revenue, net	$	2,768	$	2,226


	For the Six Months Ended June 30,
(dollars in thousands)	Diagnostic Testing
	2023		2022
Medicaid	$	13	$	27
Medicare		2,045		2,050
Self-pay		116		97
Third party payers		2,662		2,057
Service revenue, net	$	4,836	$	4,231


	For the Three Months Ended June 30,
(dollars in thousands)					Contractual Allowances and				Revenues, net of Contractual
	Gross Revenues				adjustments				Allowances and adjustments
	2023		2022		2023		2022		2023		2022
Medicaid	$	5	$	12	$	—	$	—	$	5	$	12
Medicare		1,165		1,076		—		—		1,165		1,076
Self-pay		36		48		—		—		36		48
Third party payers		5,442		3,793		(3,880)		(2,703)		1,562		1,090
		6,648		4,929		(3,880)		(2,703)		2,768		2,226
Other		877		220		—		—		877		220
	$	7,525	$	5,149	$	(3,880)	$	(2,703)	$	3,645	$	2,446


	For the Three Months Ended June 30,
	Revenues, net of
(dollars in thousands)	Contractual Allowances				Allowances for doubtful
	and adjustments				accounts				Total
	2023		2022		2023		2022		2023		2022
Medicaid	$	5	$	12	$	(2)	$	(6)	$	3	$	6
Medicare		1,165		1,076		(23)		(27)		1,142		1,049
Self-pay		36		48		(4)		—		32		48
Third party payers		1,562		1,090		(83)		(54)		1,479		1,036
		2,768		2,226		(112)		(87)		2,656		2,139
Other		877		220		—		—		877		220
	$	3,645	$	2,446	$	(112)	$	(87)	$	3,533	$	2,359


			Allowance for
			Doubtful
(dollars in thousands)			Accounts
Balance, January 1, 2023			$	(2,354)
Collection Allowance:
Medicaid	$	(6)
Medicare		(23)
Self-pay		(12)
Third party payers		(83)
		(124)
Bad debt expense	$	—
Total charges				(124)
Balance, June 30, 2023			$	(2,478)


	Dollars in Thousands
	Three Months Ended
	June 30,				Change
	2023		2022		$		%
Service revenue, net, less allowance for doubtful accounts	$	2,656	$	2,139	$	517	24	%
Other		877		220		657	299	%
Net Sales	$	3,533	$	2,359	$	1,174	50	%


	Dollars in Thousands
	Six Months Ended
	June 30,				Change
	2023		2022		$		%
Service revenue, net, less allowance for doubtful accounts	$	4,712	$	4,064	$	648	16	%
Other		1,638		742		896	121	%
Net Sales	$	6,350	$	4,806	$	1,544	32	%



4.1		Form of Pre-Funded Warrant (incorporated by reference to the Company’s Current Report on Form 8-K filed on June 12, 2023).

4.2		Form of Common Warrant (incorporated by reference to the Company’s Current Report on Form 8-K filed on June 12, 2023).

10.1		Sales Agreement, dated April 14, 2021, by and between Precipio, Inc. and A.G.P./Alliance Global Partners (incorporated by reference to the Company’s Current Report on Form 8-K filed on April 17, 2023).

10.2+		Securities Purchase Agreement, dated June 8, 2023, by and between Precipio, Inc. and the Purchaser (incorporated by reference to the Company’s Current Report on Form 8-K filed on June 12, 2023).

10.3		Form of Lock-Up Agreement (incorporated by reference to the Company’s Current Report on Form 8-K filed on June 12, 2023).

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: August 11, 2023	By:	/S/ ILAN DANIELI
		Ilan Danieli
		Chief Executive Officer (Principal Executive Officer)


Date: August 11, 2023	By:	/S/ MATTHEW GAGE
		Matthew Gage
		Interim Chief Financial Officer (Principal Financial and Accounting Officer)