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Table of Contents

​

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

​ | ​
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
​ | For the quarterly period ended September 30, 2024
​ | ​
​ | OR
​ | ​
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
​ | For the transition period from _____ to _____

​

Commission File Number: 001-36439

PRECIPIO, INC.

(Exact name of registrant as specified in its charter)

​ | ​
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)

​

(203) 787-7888

(Registrant’s telephone number, including area 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

​

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

​

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

​

As of November 3, 2024, the number of shares of common stock outstanding was 1,482,333.

​

​

​

Table of Contents

PRECIPIO, INC. AND SUBSIDIARIES

INDEX

​ | ​ |  | Page No.
​ | ​ | ​ | ​
PART I. | Financial Information | ​ | 3
​ | ​ | ​ | ​
Item 1. | Condensed Consolidated Financial Statements | ​ | 3
​ | ​ | ​ | ​
​ | Condensed Consolidated Balance Sheets at September 30, 2024 (unaudited) and December 31, 2023 | ​ | 3
​ | ​ | ​ | ​
​ | Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2024 and 2023 (unaudited) | ​ | 4
​ | ​ | ​ | ​
​ | Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2024 and 2023 (unaudited) | ​ | 5
​ | ​ | ​ | ​
​ | Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023 (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 | ​ | 36
​ | ​ | ​ | ​
Item 1. | Legal Proceedings | ​ | 36
​ | ​ | ​ | ​
Item 1A. | Risk Factors | ​ | 36
​ | ​ | ​ | ​
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | ​ | 40
​ | ​ | ​ | ​
Item 3. | Defaults Upon Senior Securities | ​ | 40
​ | ​ | ​ | ​
Item 4. | Mine Safety Disclosures | ​ | 41
​ | ​ | ​ | ​
Item 5. | Other Information | ​ | 41
​ | ​ | ​ | ​
Item 6. | Exhibits | ​ | 41
​ | ​ | ​ | ​
Signatures | ​ | ​ | 42

​

​

​

2

Table of Contents

PART 1. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

PRECIPIO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share data)

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | (unaudited) | ​ | ​
​ |  | September 30, 2024 |  | December 31, 2023
ASSETS | ​ | ​ | ​ | ​ | ​ | ​
CURRENT ASSETS: | ​ | ​ | ​ | ​ | ​ | ​
Cash | ​ | $ | 1,053 | ​ | $ | 1,502
Accounts receivable (net of allowance for credit losses of $2,755 and $2,572, respectively) | ​ |  | 1,021 | ​ | ​ | 1,301
Inventories | ​ |  | 590 | ​ | ​ | 384
Other current assets | ​ |  | 591 | ​ | ​ | 495
Total current assets | ​ |  | 3,255 | ​ | ​ | 3,682
​ | ​ | ​ | ​ | ​ | ​ | ​
PROPERTY AND EQUIPMENT, NET | ​ |  | 753 | ​ | ​ | 739
​ | ​ | ​ | ​ | ​ | ​ | ​
OTHER ASSETS: | ​ | ​ | ​ | ​ | ​ | ​
Finance lease right-of-use assets, net | ​ | ​ | 342 | ​ | ​ | 174
Operating lease right-of-use assets, net | ​ | ​ | 447 | ​ | ​ | 612
Intangibles, net | ​ |  | 12,106 | ​ | ​ | 12,818
Other assets | ​ |  | 48 | ​ | ​ | 76
Total assets | ​ | $ | 16,951 | ​ | $ | 18,101
LIABILITIES AND STOCKHOLDERS’ EQUITY | ​ | ​ | ​ | ​ | ​ | ​
CURRENT LIABILITIES: | ​ | ​ | ​ | ​ | ​ | ​
Current maturities of long-term debt, less debt issuance costs | ​ | $ | 444 | ​ | $ | 235
Current maturities of finance lease liabilities | ​ |  | 103 | ​ | ​ | 132
Current maturities of operating lease liabilities | ​ |  | 205 | ​ | ​ | 218
Accounts payable | ​ |  | 701 | ​ | ​ | 622
Accrued expenses | ​ |  | 2,743 | ​ | ​ | 1,824
Deferred revenue | ​ |  | 282 | ​ | ​ | 110
Total current liabilities | ​ |  | 4,478 | ​ | ​ | 3,141
LONG TERM LIABILITIES: | ​ | ​ | ​ | ​ | ​ | ​
Long-term debt, less current maturities and debt issuance costs | ​ |  | 84 | ​ | ​ | 106
Finance lease liabilities, less current maturities | ​ |  | 190 | ​ | ​ | 18
Operating lease liabilities, less current maturities | ​ |  | 254 | ​ | ​ | 407
Total liabilities | ​ |  | 5,006 | ​ | ​ | 3,672
COMMITMENTS AND CONTINGENCIES (Note 5) | ​ | ​ | ​ | ​ | ​ | ​
STOCKHOLDERS’ EQUITY: | ​ | ​ | ​ | ​ | ​ | ​
Preferred stock - $0.01 par value, 15,000,000 shares authorized at September 30, 2024 and December 31, 2023, 47 shares issued and outstanding at September 30, 2024 and December 31, 2023, liquidation preference of $39 at September 30, 2024 | ​ |  | — | ​ | ​ | —
Common stock, $0.01 par value, 150,000,000 shares authorized at September 30, 2024 and December 31, 2023, 1,482,133 and 1,420,125 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively | ​ |  | 15 | ​ | ​ | 14
Additional paid-in capital | ​ |  | 114,005 | ​ | ​ | 112,565
Accumulated deficit | ​ |  | (102,075) | ​ | ​ | (98,150)
Total stockholders’ equity | ​ | ​ | 11,945 | ​ | ​ | 14,429
Total liabilities and stockholders’ equity | ​ | $ | 16,951 | ​ | $ | 18,101

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​

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See notes to unaudited condensed consolidated financial statements.

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PRECIPIO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share data)

(unaudited)

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended September 30, | ​ | Nine Months Ended September 30,
​ |  | 2024 |  | 2023 | ​ | 2024 |  | 2023
SALES: |  | ​ |  |  | ​ |  | ​ | ​ |  |  | ​ |
Service revenue, net | ​ | $ | 4,599 | ​ | $ | 3,738 | ​ | $ | 11,329 | ​ | $ | 8,574
Product revenue | ​ |  | 681 | ​ |  | 831 | ​ |  | 1,936 | ​ |  | 2,469
Revenue, net of contractual allowances and adjustments | ​ |  | 5,280 | ​ |  | 4,569 | ​ |  | 13,265 | ​ |  | 11,043
Adjustment for allowance for credit losses | ​ |  | (71) | ​ |  | (51) | ​ |  | (183) | ​ |  | (175)
Net sales | ​ |  | 5,209 | ​ |  | 4,518 | ​ |  | 13,082 | ​ |  | 10,868
COST OF SALES: | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |
Cost of service revenue | ​ |  | 2,579 | ​ |  | 2,401 | ​ |  | 7,105 | ​ |  | 6,050
Cost of product revenue | ​ |  | 353 | ​ |  | 232 | ​ |  | 1,064 | ​ |  | 813
Total cost of sales | ​ |  | 2,932 | ​ |  | 2,633 | ​ |  | 8,169 | ​ |  | 6,863
Gross profit | ​ |  | 2,277 | ​ |  | 1,885 | ​ |  | 4,913 | ​ |  | 4,005
OPERATING EXPENSES: | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |
Operating expenses | ​ |  | 2,874 | ​ |  | 3,333 | ​ |  | 8,793 | ​ |  | 10,771
OPERATING LOSS | ​ |  | (597) | ​ |  | (1,448) | ​ |  | (3,880) | ​ |  | (6,766)
OTHER EXPENSE: | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |
Interest expense, net | ​ |  | (29) | ​ |  | (7) | ​ |  | (45) | ​ |  | (12)
LOSS BEFORE INCOME TAXES | ​ |  | (626) | ​ |  | (1,455) | ​ |  | (3,925) | ​ |  | (6,778)
INCOME TAX EXPENSE | ​ |  | – | ​ |  | – | ​ |  | – | ​ |  | —
NET LOSS | ​ | $ | (626) | ​ | $ | (1,455) | ​ | $ | (3,925) | ​ | $ | (6,778)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
BASIC AND DILUTED LOSS PER COMMON SHARE | ​ | $ | (0.42) | ​ | $ | (1.04) | ​ | $ | (2.69) | ​ | $ | (5.39)
BASIC AND DILUTED WEIGHTED-AVERAGE SHARES OF COMMON STOCK OUTSTANDING | ​ |  | 1,480,217 | ​ |  | 1,394,596 | ​ |  | 1,456,653 | ​ |  | 1,258,633

​

​

See notes to unaudited condensed consolidated financial statements.

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PRECIPIO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Dollars in thousands)

(unaudited)

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | For the Three Months Ended September 30, 2024 | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Preferred Stock | ​ | Common Stock | ​ | Additional | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Noncontrolling | ​ | ​ | ​
​ | ​ | Outstanding | ​ | Par |  | Outstanding |  | Par | ​ | Paid-in | ​ | Accumulated | ​ | ​ | ​ | Interest in | ​ | ​ | ​
​ |  | Shares |  | Value |  | Shares |  | Value |  | Capital |  | Deficit |  | Total |  | Joint Venture |  | Total
Balance, July 1, 2024 |  | 47 | ​ | $ | — |  | 1,469,540 | ​ | $ | 14 | ​ | $ | 113,550 | ​ | $ | (101,449) | ​ | $ | 12,115 | ​ | $ | — | ​ | $ | 12,115
Net loss | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | (626) | ​ | ​ | (626) | ​ | ​ | — | ​ | ​ | (626)
Issuance of common stock for consulting services | ​ | — | ​ | ​ | — | ​ | 12,593 | ​ | ​ | 1 | ​ | ​ | 57 | ​ | ​ | — | ​ | ​ | 58 | ​ | ​ | — | ​ | ​ | 58
Stock-based compensation | ​ | — | ​ |  | — |  | — | ​ |  | — | ​ |  | 398 | ​ |  | — | ​ |  | 398 | ​ |  | — | ​ |  | 398
Balance, September 30, 2024 | ​ | 47 | ​ | $ | — | ​ | 1,482,133 | ​ | $ | 15 | ​ | $ | 114,005 | ​ | $ | (102,075) | ​ | $ | 11,945 | ​ | $ | — | ​ | $ | 11,945
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | For the Nine Months Ended September 30, 2024 | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Preferred Stock | ​ | Common Stock | ​ | Additional | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Noncontrolling | ​ | ​ | ​
​ | ​ | Outstanding | ​ | Par |  | Outstanding |  | Par | ​ | Paid-in | ​ | Accumulated | ​ | ​ | ​ | Interest in | ​ | ​ | ​
​ | ​ | Shares |  | Value |  | Shares |  | Value |  | Capital |  | Deficit |  | Total |  | Joint Venture |  | Total
Balance, January 1, 2024 | ​ | 47 | ​ | $ | — |  | 1,420,125 | ​ | $ | 14 | ​ | $ | 112,565 | ​ | $ | (98,150) | ​ | $ | 14,429 | ​ | $ | — | ​ | $ | 14,429
Net loss |  | — | ​ |  | — |  | — | ​ |  | — | ​ |  | — | ​ |  | (3,925) | ​ |  | (3,925) | ​ |  | — | ​ |  | (3,925)
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 consulting services | ​ | — | ​ | ​ | — | ​ | 50,186 | ​ | ​ | 1 | ​ | ​ | 308 | ​ | ​ | — | ​ | ​ | 309 | ​ | ​ | — | ​ | ​ | 309
Stock-based compensation |  | — | ​ |  | — |  | — | ​ |  | — | ​ |  | 1,054 | ​ |  | — | ​ |  | 1,054 | ​ |  | — | ​ |  | 1,054
Balance, September 30, 2024 |  | 47 | ​ | $ | — | ​ | 1,482,133 | ​ | $ | 15 | ​ | $ | 114,005 | ​ | $ | (102,075) | ​ | $ | 11,945 | ​ | $ | — | ​ | $ | 11,945

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​

See notes to unaudited condensed consolidated financial statements

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PRECIPIO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Dollars in thousands)

(unaudited)

​

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 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 |  | — | ​ |  | — |  | — | ​ |  | — | ​ |  | — | ​ |  | (1,455) | ​ |  | (1,455) | ​ |  | — | ​ |  | (1,455)
Issuance of common stock in connection with restricted stock awards | ​ | — | ​ | ​ | — | ​ | 2,492 | ​ | ​ | — | ​ | ​ | 16 | ​ | ​ | — | ​ | ​ | 16 | ​ | ​ | — | ​ | ​ | 16
Payment of fractional common shares in conjunction with reverse stock split | ​ | — | ​ | ​ | — | ​ | (52) | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
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 |  | — | ​ |  | — |  | — | ​ |  | — | ​ |  | — | ​ |  | (6,778) | ​ |  | (6,778) | ​ |  | — | ​ |  | (6,778)
Issuance of common stock in connection with purchase agreements | ​ | — | ​ | ​ | — | ​ | 206,250 | ​ | ​ | 3 | ​ | ​ | 1,757 | ​ | ​ | — | ​ | ​ | 1,760 | ​ | ​ | — | ​ | ​ | 1,760
Issuance of common stock in connection with at the market offering, net of issuance costs | ​ | — | ​ | ​ | — | ​ | 30,852 | ​ | ​ | — | ​ | ​ | 485 | ​ | ​ | — | ​ | ​ | 485 | ​ | ​ | — | ​ | ​ | 485
Issuance of common stock in connection with restricted stock awards | ​ | — | ​ | ​ | — | ​ | 2,492 | ​ | ​ | — | ​ | ​ | 16 | ​ | ​ | — | ​ | ​ | 16 | ​ | ​ | — | ​ | ​ | 16
Payment of fractional common shares in conjunction with reverse stock split | ​ | — | ​ | ​ | — | ​ | (52) | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
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

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(1) The common stock and additional paid-in capital for all periods presented reflect the one-for-twenty reverse stock split, which was effected on September 21, 2023

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See notes to unaudited condensed consolidated financial statements.

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PRECIPIO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(unaudited)

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Nine Months Ended September 30,
​ |  | 2024 |  | 2023
CASH FLOWS FROM OPERATING ACTIVITIES: | ​ | ​ | ​ | ​ | ​ | ​
Net loss | ​ | $ | (3,925) | ​ | $ | (6,778)
​ | ​ | ​ | ​ | ​ | ​ | ​
Adjustments to reconcile net loss to net cash flows used in operating activities: | ​ |  |  | ​ |  |
Depreciation and amortization | ​ |  | 900 | ​ |  | 931
Amortization of operating lease right-of-use asset | ​ | ​ | 165 | ​ | ​ | 153
Amortization of finance lease right-of-use asset | ​ | ​ | 66 | ​ | ​ | 63
Amortization of deferred financing costs, debt discounts and debt premiums | ​ |  | 2 | ​ |  | 2
Stock-based compensation | ​ |  | 1,054 | ​ |  | 1,168
Value of stock issued in payment of services | ​ |  | 309 | ​ |  | —
Provision for credit losses | ​ |  | 183 | ​ |  | 175
Changes in operating assets and liabilities: | ​ |  |  | ​ |  |
Accounts receivable | ​ |  | 97 | ​ |  | (622)
Inventories | ​ |  | (206) | ​ |  | 72
Other assets | ​ |  | 249 | ​ |  | 306
Accounts payable | ​ |  | 55 | ​ |  | 468
Operating lease liabilities | ​ | ​ | (166) | ​ | ​ | (150)
Deferred revenue | ​ | ​ | 172 | ​ | ​ | (90)
Accrued expenses | ​ |  | 919 | ​ |  | 629
Net cash used in operating activities | ​ |  | (126) | ​ |  | (3,673)
CASH FLOWS FROM INVESTING ACTIVITIES: | ​ |  |  | ​ |  | ​
Purchase of property and equipment | ​ |  | (179) | ​ |  | (77)
Net cash used in investing activities | ​ |  | (179) | ​ |  | (77)
CASH FLOWS FROM FINANCING ACTIVITIES: | ​ |  |  | ​ |  |
Principal payments on finance lease obligations | ​ |  | (62) | ​ |  | (62)
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 | ​ |  | (382) | ​ |  | (316)
Net cash flows (used in) provided by financing activities | ​ |  | (144) | ​ |  | 1,867
NET CHANGE IN CASH | ​ |  | (449) | ​ |  | (1,883)
CASH AT BEGINNING OF PERIOD | ​ |  | 1,502 | ​ |  | 3,445
CASH AT END OF PERIOD | ​ | $ | 1,053 | ​ | $ | 1,562
​ | ​ | ​ | ​ | ​ | ​ | ​

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See notes to unaudited condensed consolidated financial statements.

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PRECIPIO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS- CONTINUED

(Dollars in thousands)

(unaudited)

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Nine Months Ended September 30,
​ | ​ | 2024 |  | 2023
SUPPLEMENTAL CASH FLOW INFORMATION | ​ | ​ | ​ | ​ | ​ | ​
Cash paid during the period for interest | ​ | $ | 54 | ​ | $ | 29
​ | ​ | ​ | ​ | ​ | ​ | ​
SUPPLEMENTAL DISCLOSURE OF CONSULTING SERVICES OR ANY OTHER NON-CASH COMMON STOCK RELATED ACTIVITY | ​ |  |  | ​ |  |
Purchases of equipment financed through accounts payable | ​ | ​ | 24 | ​ | ​ | 3
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 | ​ | ​ | 205 | ​ | ​ | —

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See notes to unaudited condensed consolidated financial statements.

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PRECIPIO, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 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.

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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.

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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, 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.

Going Concern.

The condensed consolidated financial statements have been prepared using accounting principles generally accepted in the United States of America (“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 nine months ended September 30, 2024, the Company had a net loss of $3.9 million and net cash used in operating activities of $0.1 million.

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As of September 30, 2024, the Company had an accumulated deficit of $102.1 million and a working capital deficit of $1.2 million. The Company’s ability to continue as a going concern over the next twelve months from the date of issuance of these condensed consolidated financial statements in this Quarterly Report on Form 10-Q 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 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:

| ● | 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 U.S. Securities and Exchange Commission (“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 condensed 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 Note 7 Stockholders’ Equity, AGP 2023 Sales Agreement, for further discussion.

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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 condensed 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 Quarterly Report Form 10-Q.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation.

The accompanying condensed consolidated financial statements are presented in conformity with GAAP. As required under GAAP, pursuant to a 1-for-20 reverse stock split which was effected on September 21, 2023, unless otherwise indicated, the Company has adjusted all share amounts, per share data, share prices, exercise prices and conversion rates set forth in these notes and the accompanying condensed consolidated financial statements. As of September 30, 2024 and for the three and nine months ended September 30, 2024 and 2023, the condensed consolidated financial statements are unaudited and reflect all adjustments (consisting of only normal recurring adjustments) that are necessary for a fair presentation of the financial position and operating results for the interim periods. These unaudited condensed consolidated financial statements and notes should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2023 contained in our Annual Report on Form 10-K, filed with the SEC on March 29, 2024. The results of operations for the interim periods presented are not necessarily indicative of the results for fiscal year 2024.

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

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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 condensed 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 condensed consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted.

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. The guidance will be effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 and requires retrospective application to all periods presented upon adoption, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this guidance will have on its condensed consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09—Income Taxes (Topic 740)—Improvements to Income Tax Disclosures (“ASU 2023-09”) which is intended 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 flow.

Loss Per Share.

Basic loss per share is calculated based on the weighted-average number of common shares (including pre-funded warrants) 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. Shares of the Company’s common stock underlying pre-funded warrants are included in the calculation of basic and diluted loss per share due to the negligible exercise price of the pre-funded warrants. Options, warrants and conversion rights pertaining to 753,752 and 705,976 shares of our common stock have been excluded from the computation of diluted loss per share at September 30, 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:

​ | ​ | ​ | ​ | ​
​ | ​ | September 30,
​ |  | 2024 |  | 2023
Stock options |  | 303,433 |  | 234,213
Warrants |  | 444,444 |  | 465,888
Preferred stock |  | 5,875 |  | 5,875
Total |  | 753,752 |  | 705,976

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3. LONG-TERM DEBT

Long-term debt consists of the following:

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Dollars in Thousands
​ |  | September 30, 2024 |  | December 31, 2023
Connecticut Department of Economic and Community Development (DECD) | ​ | $ | 123 | ​ | $ | 146
DECD debt issuance costs | ​ |  | (10) | ​ |  | (12)
Financed insurance loan | ​ |  | 261 | ​ |  | 207
Business loan agreement | ​ | ​ | 154 | ​ | ​ | —
Total long-term debt | ​ |  | 528 | ​ |  | 341
Current portion of long-term debt | ​ |  | (444) | ​ |  | (235)
Long-term debt, net of current maturities | ​ | $ | 84 | ​ | $ | 106

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Department of Economic and Community Development.

On January 8, 2018, the Company entered into an agreement with the Connecticut Department of Economic and Community Development (“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.

Amortization of the debt issuance costs were less than $1 thousand for the three months ended September 30, 2024 and 2023, respectively and $2 thousand for the nine months ended September 30, 2024 and 2023, respectively.

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 and made payments on a monthly basis through June 2024. As of September 30, 2024 and December 31, 2023, the Financed Insurance Loan’s outstanding balance of $0.3 million and $0.2 million, respectively, was included in current maturities of long-term debt in the Company’s condensed 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 52 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.

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As of September 30, 2024 and December 31, 2023, the outstanding balance of $0.2 million and zero, respectively, under the Loan Agreement, was included in current maturities of long-term debt in the Company’s condensed consolidated balance sheets.

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4. ACCRUED EXPENSES

Accrued expenses at September 30, 2024 and December 31, 2023 are as follows:

​ | ​ | ​ | ​ | ​ | ​ | ​
(dollars in thousands) |  | September 30, 2024 |  | December 31, 2023
Accrued expenses | ​ | $ | 586 | ​ | $ | 764
Accrued compensation | ​ |  | 929 | ​ |  | 754
Accrued franchise, property and sales and use taxes | ​ | ​ | 152 | ​ | ​ | 287
CHC temporary funding assistance | ​ | ​ | 1,057 | ​ | ​ | —
Accrued interest | ​ |  | 19 | ​ |  | 19
​ | ​ | $ | 2,743 | ​ | $ | 1,824

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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. As of September 30, 2024, CHC’s systems have yet to be fully restored.

During the nine months ended September 30, 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 anticipates negotiating a repayment plan that will enable the Company to meet its obligations to CHC while continuing to support our ongoing operational needs with minimal disruption.

5. COMMITMENTS AND CONTINGENCIES

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.

PURCHASE COMMITMENTS

The Company has entered into purchase commitments for reagents from suppliers. These agreements started in 2011 and run through 2025. 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 approximately $2.3 million at September 30, 2024.

LITIGATIONS

CPA Global provides us with certain patent management services. On February 6, 2017, CPA Global claimed that we owed 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 condensed consolidated balance sheets at September 30, 2024 and December 31, 2023.

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

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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.

6. 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.

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 HemeScreen Reagent Rental (“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 condensed consolidated statements of operations. There were no derecognized finance lease ROU assets for the three and nine months ended September 30, 2024 and 2023, respectively. 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 September 30, 2024 and December 31, 2023, respectively, and is included in other current assets and other assets in our condensed consolidated balance sheets.

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The balance sheet presentation of our operating and finance leases is as follows:

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​ | ​ | ​ | ​ | ​ | ​ | ​
(dollars in thousands) | ​ | ​ | ​ | ​ | ​ | ​
Classification on the Condensed Consolidated Balance Sheet | ​ | September 30, 2024 | ​ | December 31, 2023
Assets: | ​ | ​ | ​ | ​ | ​ | ​
Operating lease right-of-use assets, net | ​ | $ | 447 | ​ | $ | 612
Finance lease right-of-use assets, net (1) | ​ | ​ | 342 | ​ | ​ | 174
Total lease assets | ​ | $ | 789 | ​ | $ | 786
​ | ​ | ​ | ​ | ​ | ​ | ​
Liabilities: | ​ | ​ | ​ | ​ | ​ | ​
Current: | ​ | ​ | ​ | ​ | ​ | ​
Current maturities of operating lease liabilities | ​ | $ | 205 | ​ | $ | 218
Current maturities of finance lease liabilities | ​ | ​ | 103 | ​ | ​ | 132
Noncurrent: | ​ | ​ | ​ | ​ | ​ | ​
Operating lease liabilities, less current maturities | ​ | ​ | 254 | ​ | ​ | 407
Finance lease liabilities, less current maturities | ​ | ​ | 190 | ​ | ​ | 18
Total lease liabilities | ​ | $ | 752 | ​ | $ | 775

| (1) | As of September 30, 2024 and December 31, 2023, finance lease right-of-use assets included zero, respectively, of assets related to finance leases associated with the HSRR program.

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As of September 30, 2024, the estimated future minimum lease payments, excluding non-lease components, are as follows:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(dollars in thousands) |  | Operating Leases | ​ | Finance Leases | ​ | Total
​ | ​ | ​ | September 30, | ​ | ​ | September 30, | ​ | ​ | September 30,
​ | ​ | ​ | 2024 | ​ | ​ | 2024 | ​ | ​ | 2024
2024 (remaining) | ​ | $ | 60 | ​ | $ | 37 | ​ | $ | 97
2025 | ​ |  | 224 | ​ |  | 134 | ​ |  | 358
2026 | ​ |  | 214 | ​ |  | 95 | ​ |  | 309
2027 | ​ |  | — | ​ | ​ | 69 | ​ |  | 69
2028 | ​ | ​ | — | ​ | ​ | 29 | ​ | ​ | 29
Total lease obligations | ​ |  | 498 | ​ |  | 364 | ​ |  | 862
Less: Amount representing interest | ​ |  | (39) | ​ |  | (71) | ​ |  | (110)
Present value of net minimum lease obligations | ​ |  | 459 | ​ |  | 293 | ​ |  | 752
Less, current portion | ​ |  | (205) | ​ |  | (103) | ​ |  | (308)
Long term portion | ​ | $ | 254 | ​ | $ | 190 | ​ | $ | 444

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Other information as of September30, 2024 and December 31, 2023 is as follows:

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​ | ​ | ​ | ​
​ | September 30, | ​ | December 31,
​ | 2024 | ​ | 2023
Weighted-average remaining lease term (years): | ​ | ​ | ​
Operating leases | 2.2 | ​ | 2.8
Finance leases | 2.8 | ​ | 2.0
Weighted-average discount rate: | ​ | ​ | ​
Operating leases | 8.00% | ​ | 8.00%
Finance leases | 13.77% | ​ | 10.63%

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During the nine months ended September 30, 2024 and 2023, operating cash flows from operating leases was $0.2 million, respectively, and operating lease ROU assets obtained in exchange for operating lease liabilities was zero and $0.1 million, respectively.

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During the nine months ended September 30, 2024 and 2023, finance lease ROU assets obtained in exchange for finance lease liabilities was $0.2 million and zero, respectively.

Operating Lease Costs

Operating lease costs were approximately $0.1 million during the three months ended September 30, 2024 and 2023, respectively, and $0.2 million for the nine months ended September 30, 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 three and nine months ended September 30, 2024 and 2023, respectively.

Finance Lease Costs

Finance lease amortization and interest expenses are included in the condensed consolidated statements of operations for the three and nine months ended September 30, 2024 and 2023. The balances within these accounts are less than $0.1 million, respectively.

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7. 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 three and nine months ended September 30, 2024, the Company issued 12,593 and 50,186 shares of its common stock, respectively, in connection with consulting services of approximately $0.1 million and $0.3 million, respectively.

At The Market Offering Agreement

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AGP Sales Agreement

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On April 2, 2021, the Company entered into a sales agreement with A.G.P./Alliance Global Partners (“AGP”), pursuant to which the Company was permitted to 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”). The Company is limited in the number of shares it can sell in the 2021 ATM Offering due to the offering limitations currently applicable to the Company under General Instruction I.B.6. of Form S-3 and the Company’s 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.

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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 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

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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.

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During the three and nine months ended September 30, 2023, we received net proceeds of zero and $0.5 million from the sale of zero and 30,827 shares of common stock through the AGP Sales Agreement.

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As of the date of issuance of this Quarterly Report on Form 10-Q, 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).

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AGP 2023 Sales Agreement

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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.

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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.

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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

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During the three and nine months ended September 30, 2023, we received net proceeds of zero and less than $1 thousand, respectively, from the sale of zero and 25 shares of common stock, respectively, pursuant to the AGP 2023 Sales Agreement. During the three and nine months ended September 30, 2024, we received net proceeds of zero and $0.1 million, respectively, from the sale of zero and 11,822 shares of common stock, respectively, pursuant to the AGP 2023 Sales Agreement.

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We have approximately $1.0 million of remaining availability pursuant to the 2024 Prospectus Supplement.

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Registered Direct Offering

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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

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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 September 30, 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 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.

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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

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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.

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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.

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 thousand 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 three and nine months ended September 30, 2024 and 2023, respectively. At September 30, 2024 and December 31, 2023, the Company had 6,900 shares of Series B Preferred Stock designated and issued and 47 shares of Series B Preferred Stock outstanding. Based on the stated value of $1 thousand per share and a conversion price of $8.00 per share, the outstanding shares of Series B Preferred Stock at September 30, 2024 were convertible into 5,875 shares of common stock.

Common Stock Warrants.

The following represents a summary of the warrants outstanding as of September 30, 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.

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During the three and nine months ended September 30, 2023, 5,593 and 13,012 warrants expired, respectively. The warrants had been issued in connection with transactions that were completed in 2018.

During the three and nine months ended September 30, 2024, zero and 15,091 warrants expired, respectively. The warrants had been issued in connection with transactions that were completed in 2019.

RDO Common Warrants. In connection with the Registered Direct Offering and concurrent private placement in June 2023, the Company issued 444,444 RDO Common Warrants to purchase up to 444,444 shares of Common Stock.

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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.

8. 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 condensed 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 condensed consolidated statements of operations.

Bridge Note Warrant Liabilities

During 2018 and 2019, 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 nine months ended September 30, 2024, the last remaining warrants related to Bridge Note Warrant Liabilities expired and thus at September 30, 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; volatility rate of 71% to 77%; and risk free rate of 5.33% to 5.40%.

During the three and nine months ended September 30, 2024, the changes in the fair value of the warrant liabilities measured using significant unobservable inputs (Level 3) were zero. During the three and nine months ended September 30, 2023, the changes in the fair value of the warrant liabilities were less than $1 thousand, respectively.

​

​

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9. 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 September 30, 2024, of which 14,705 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 nine months ended September 30, 2024, the shares authorized for issuance increased by 71,006 shares.

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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 condensed 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 nine months ended September 30, 2024, the Company granted stock options to purchase up to 75,862 shares of common stock at a weighted average exercise price of $4.99 per share. These awards have vesting periods of up to four years and had a weighted average grant date fair value of $4.54. The fair value calculation of options granted during the nine months ended September 30, 2024 used the following assumptions: risk free interest rate of 3.94% to 4.26%, based on the U.S. Treasury yield in effect at the time of grant; expected life of six years; and volatility of 133% 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 repricing was undertaken in accordance with, and as permitted by the 2017 Plan. The Option Repricing applies to all Relevant Options (as defined below) granted pursuant to the 2017 Plan that were held by employees, including executive officers and non-employee directors of the Board, to the extent such options had an exercise price in excess of $6.56, the closing price per share of the Company’s Common Stock as reported on The Nasdaq Stock Market on August 30, 2024. “Relevant Options” means all outstanding eligible stock options granted to eligible employees, service providers and non-employee directors of the board of the Company before and including December 31, 2022. As of the Effective Date, all such options were repriced such that the exercise price per share was reduced to $6.56, provided that the original exercise price will apply to stock option exercises during a one year retention period. Under the terms of the Option Repricing, if prior to the first anniversary of the Effective Date (except following a change of control), a Relevant Option is exercised or employment/services are terminated by the Company with cause or voluntarily by the option holder, the option holder will be required to pay the original exercise price of the Relevant Option. If the employment/services of an option holder is terminated by the Company without cause prior to the first anniversary of the Effective Date, the option holder will retain the benefit of the reduced exercise price. The Option Repricing does not change the number of shares, the vesting schedule, or the expiration date of the Relevant Options.

​

Out of the Company’s approximately 304,000 total outstanding options on the Effective Date, approximately 177,000 were repriced. The Board approved the Option Repricing after careful consideration of various alternatives and the recommendation of the compensation committee of the Board that the repricing was fair, just, and reasonable to the Company and its stockholders.

​

Management determined that the Option Repricing represents a modification of the impacted awards and calculated incremental compensation cost of approximately $0.5 million resulting from the modification. The incremental expense will be recognized over 1.4 years.

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The following table summarizes stock option activity under our plans during the nine months ended September 30, 2024:

​ | ​ | ​ | ​ | ​ | ​
​ |  | Number of |  | Weighted-Average
​ | ​ | Options | ​ | Exercise Price
Outstanding at January 1, 2024 |  | 232,744 | ​ | $ | 46.56
Granted |  | 75,862 | ​ |  | 4.99
Forfeited |  | (5,173) | ​ |  | 18.26
Outstanding at September 30, 2024 |  | 303,433 | ​ | $ | 7.19
Exercisable at September 30, 2024 |  | 187,554 | ​ | $ | 7.52

​

As of September 30, 2024, there were 274,463 options that were vested or expected to vest with aggregate intrinsic value of $0.1 million and a remaining weighted average contractual life of 6.8 years.

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.

As of September 30, 2024, there were 2,492 and zero restricted stock awards that were vested and unvested, respectively.

There were no restricted stock awards granted during the three and nine months ended September 30, 2024. There were 2,492 restricted stock awards granted during the three and nine months ended September 30, 2023, respectively.

Stock Compensation.

For the three and nine months ended September 30, 2024, we recorded non-cash stock-based compensation expense for all stock awards of $0.4 million and $1.1 million, respectively, within operating expense in the accompanying statements of operations. For the three and nine months ended September 30, 2023, we recorded non-cash stock-based compensation expense for all stock awards of $0.4 million and $1.2 million, respectively, within operating expense in the accompanying statements of operations. As of September 30, 2024, the unrecognized compensation expense related to unvested stock awards and the Option Repricing was $1.9 million, which is expected to be recognized over a weighted-average period of 1.7 years.

10. 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:

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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.

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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.

​

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 product revenue in our condensed consolidated statements of operations.

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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 three and nine months ended September 30, 2024 and 2023 was as follows:

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | For the Three Months Ended September 30,
(dollars in thousands) | ​ | Diagnostic Testing
​ |  | 2024 |  | 2023
Medicaid | ​ | $ | 8 | ​ | $ | 10
Medicare | ​ |  | 1,819 | ​ |  | 1,691
Self-pay | ​ |  | 1 | ​ |  | 39
Third party payers | ​ |  | 2,743 | ​ |  | 1,998
Contract diagnostics and other | ​ |  | 28 | ​ |  | —
Service revenue, net | ​ | $ | 4,599 | ​ | $ | 3,738

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | For the Nine Months Ended September 30,
(dollars in thousands) | ​ | Diagnostic Testing
​ |  | 2024 |  | 2023
Medicaid | ​ | $ | 33 | ​ | $ | 22
Medicare | ​ |  | 4,435 | ​ |  | 3,736
Self-pay | ​ |  | 33 | ​ |  | 155
Third party payers | ​ |  | 6,796 | ​ |  | 4,661
Contract diagnostics and other | ​ |  | 32 | ​ |  | —
Service revenue, net | ​ | $ | 11,329 | ​ | $ | 8,574

​

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.

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. For the periods ended September 30, 2024 and December 31, 2023, the deferred revenue was $0.3 million and $0.1 million, respectively.

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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 condensed 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 three and nine months ended September 30, 2024 and 2023.

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​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | For the Three Months Ended September 30,
(dollars in thousands) | ​ | ​ | ​ | Contractual Allowances and | ​ | Revenues, net of Contractual
​ | ​ | Gross Revenues | ​ | adjustments | ​ | Allowances and adjustments
​ |  | 2024 |  | 2023 |  | 2024 |  | 2023 |  | 2024 |  | 2023
Medicaid | ​ | $ | 8 | ​ | $ | 10 | ​ | $ | — | ​ | $ | — | ​ | $ | 8 | ​ | $ | 10
Medicare | ​ |  | 1,819 | ​ |  | 1,693 | ​ |  | — | ​ |  | (2) | ​ |  | 1,819 | ​ |  | 1,691
Self-pay | ​ |  | 1 | ​ |  | 39 | ​ |  | — | ​ |  | — | ​ |  | 1 | ​ |  | 39
Third party payers | ​ |  | 9,356 | ​ |  | 6,956 | ​ |  | (6,613) | ​ |  | (4,958) | ​ |  | 2,743 | ​ |  | 1,998
Contract diagnostics and other | ​ |  | 28 | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | 28 | ​ |  | —
​ | ​ |  | 11,212 | ​ |  | 8,698 | ​ |  | (6,613) | ​ |  | (4,960) | ​ |  | 4,599 | ​ |  | 3,738
Product | ​ |  | 681 | ​ |  | 831 | ​ |  | — | ​ |  | — | ​ |  | 681 | ​ |  | 831
​ | ​ | $ | 11,893 | ​ | $ | 9,529 | ​ | $ | (6,613) | ​ | $ | (4,960) | ​ | $ | 5,280 | ​ | $ | 4,569

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​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | For the Nine Months Ended September 30,
(dollars in thousands) | ​ | ​ | ​ | Contractual Allowances and | ​ | Revenues, net of Contractual
​ | ​ | Gross Revenues | ​ | adjustments | ​ | Allowances and adjustments
​ |  | 2024 |  | 2023 |  | 2024 |  | 2023 |  | 2024 |  | 2023
Medicaid | ​ | $ | 33 | ​ | $ | 22 | ​ | $ | — | ​ | $ | — | ​ | $ | 33 | ​ | $ | 22
Medicare | ​ |  | 4,435 | ​ |  | 3,738 | ​ |  | — | ​ |  | (2) | ​ |  | 4,435 | ​ |  | 3,736
Self-pay | ​ |  | 33 | ​ |  | 155 | ​ |  | — | ​ |  | — | ​ |  | 33 | ​ |  | 155
Third party payers | ​ |  | 23,285 | ​ |  | 16,233 | ​ |  | (16,489) | ​ |  | (11,572) | ​ |  | 6,796 | ​ |  | 4,661
Contract diagnostics | ​ |  | 32 | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | 32 | ​ |  | —
​ | ​ |  | 27,818 | ​ |  | 20,148 | ​ |  | (16,489) | ​ |  | (11,574) | ​ |  | 11,329 | ​ |  | 8,574
Product | ​ |  | 1,936 | ​ |  | 2,469 | ​ |  | — | ​ |  | — | ​ |  | 1,936 | ​ |  | 2,469
​ | ​ | $ | 29,754 | ​ | $ | 22,617 | ​ | $ | (16,489) | ​ | $ | (11,574) | ​ | $ | 13,265 | ​ | $ | 11,043

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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 is made to 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 three and nine months ended September 30, 2024 and 2023.

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​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | For the Three Months Ended September 30,
​ | ​ | Revenues, net of | ​ | ​ | ​ |
(dollars in thousands) | ​ | Contractual Allowances | ​ | Allowances for credit | ​ |
​ | ​ | and adjustments | ​ | losses | ​ | Total
​ |  | 2024 |  | 2023 |  | 2024 |  | 2023 |  | 2024 |  | 2023
Medicaid | ​ | $ | 8 | ​ | $ | 10 | ​ | $ | (3) | ​ | $ | (4) | ​ | $ | 5 | ​ | $ | 6
Medicare | ​ |  | 1,819 | ​ |  | 1,691 | ​ |  | (27) | ​ |  | (20) | ​ |  | 1,792 | ​ |  | 1,671
Self-pay | ​ |  | 1 | ​ |  | 39 | ​ |  | — | ​ |  | (3) | ​ |  | 1 | ​ |  | 36
Third party payers | ​ |  | 2,743 | ​ |  | 1,998 | ​ |  | (41) | ​ |  | (24) | ​ |  | 2,702 | ​ |  | 1,974
Contract diagnostics and other | ​ |  | 28 | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | 28 | ​ |  | —
​ | ​ |  | 4,599 | ​ |  | 3,738 | ​ |  | (71) | ​ |  | (51) | ​ |  | 4,528 | ​ |  | 3,687
Product | ​ |  | 681 | ​ |  | 831 | ​ |  | — | ​ |  | — | ​ |  | 681 | ​ |  | 831
​ | ​ | $ | 5,280 | ​ | $ | 4,569 | ​ | $ | (71) | ​ | $ | (51) | ​ | $ | 5,209 | ​ | $ | 4,518

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | For the Nine Months Ended September 30,
​ | ​ | Revenues, net of | ​ | ​ | ​ |
(dollars in thousands) | ​ | Contractual Allowances | ​ | Allowances for credit | ​ |
​ | ​ | and adjustments | ​ | losses | ​ | Total
​ |  | 2024 |  | 2023 |  | 2024 |  | 2023 |  | 2024 |  | 2023
Medicaid | ​ | $ | 33 | ​ | $ | 22 | ​ | $ | (12) | ​ | $ | (10) | ​ | $ | 21 | ​ | $ | 12
Medicare | ​ |  | 4,435 | ​ |  | 3,736 | ​ |  | (66) | ​ |  | (43) | ​ |  | 4,369 | ​ |  | 3,693
Self-pay | ​ |  | 33 | ​ |  | 155 | ​ |  | (3) | ​ |  | (15) | ​ |  | 30 | ​ |  | 140
Third party payers | ​ |  | 6,796 | ​ |  | 4,661 | ​ |  | (102) | ​ |  | (107) | ​ |  | 6,694 | ​ |  | 4,554
Contract diagnostics and other | ​ |  | 32 | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | 32 | ​ |  | —
​ | ​ |  | 11,329 | ​ |  | 8,574 | ​ |  | (183) | ​ |  | (175) | ​ |  | 11,146 | ​ |  | 8,399
Product | ​ |  | 1,936 | ​ |  | 2,469 | ​ |  | — | ​ |  | — | ​ |  | 1,936 | ​ |  | 2,469
​ | ​ | $ | 13,265 | ​ | $ | 11,043 | ​ | $ | (183) | ​ | $ | (175) | ​ | $ | 13,082 | ​ | $ | 10,868

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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 condensed 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 condensed 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.

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The following summarizes the mix of receivables outstanding related to payer categories:

​

​ | ​ | ​ | ​ | ​ | ​ | ​
(dollars in thousands) |  | September 30, 2024 |  | December 31, 2023
Medicaid | ​ | $ | 10 | ​ | $ | 25
Medicare | ​ |  | 1,850 | ​ |  | 1,561
Self-pay | ​ |  | 191 | ​ |  | 229
Third party payers | ​ |  | 1,508 | ​ |  | 1,641
Contract diagnostic services, product and other | ​ |  | 217 | ​ |  | 417
​ | ​ | $ | 3,776 | ​ | $ | 3,873
Less allowance for credit losses | ​ |  | (2,755) | ​ |  | (2,572)
Accounts receivable, net | ​ | $ | 1,021 | ​ | $ | 1,301

​

The following table presents the roll-forward of the allowance for credit losses for the nine months ended September 30, 2024.

​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ | ​ |  | Allowance for
​ | ​ | ​ | ​ | ​ | Credit
(dollars in thousands) | ​ | ​ | ​ | ​ | Losses
Balance, January 1, 2024 |  | ​ |  | ​ | $ | (2,572)
Provision for credit losses: |  | ​ |  | ​ |  |
Medicaid | ​ | $ | (12) | ​ |  |
Medicare | ​ |  | (66) | ​ |  |
Self-pay | ​ | ​ | (3) | ​ | ​ | ​
Third party payers | ​ |  | (102) | ​ |  |
​ | ​ |  | (183) | ​ |  |
Credit loss expense | ​ | $ | — | ​ |  |
Total charges | ​ |  |  | ​ |  | (183)
Balance, September 30, 2024 | ​ |  |  | ​ | $ | (2,755)

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Customer Revenue and Accounts Receivable Concentration

Our customers are oncologists, hospitals, reference laboratories, physician-office laboratories, and pharma and biotech companies. Customers that accounted for 10% or greater of our net sales or accounts receivable for the identified periods is as follows:

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​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Net sales | ​ | ​ | Net sales | ​ | ​ | Accounts receivable, as of | ​
​ | ​ | Three Months Ended | ​ | ​ | Nine Months Ended | ​ | ​ | ​ | ​
​ | ​ | September 30, | ​ | ​ | September 30, | ​ | ​ | September 30, | ​ | December 31, | ​
​ | ​ | 2024 | ​ | 2023 | ​ | ​ | 2024 | ​ | 2023 | ​ | ​ | 2024 | ​ | 2023 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Customer A | ​ | * | ​ | 13 | % | ​ | * | ​ | 14 | % | ​ | * | ​ | * | ​
Customer B | ​ | * | ​ | * | ​ | ​ | * | ​ | * | ​ | ​ | * | ​ | 13 | %
Customer C | ​ | 24 | % | * | ​ | ​ | 14 | % | * | ​ | ​ | 20 | % | * | ​
Customer D | ​ | * | ​ | 12 | % | ​ | * | ​ | * | ​ | ​ | * | ​ | * | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
* represents less than 10% | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​

​

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11. SUBSEQUENT EVENTS

The Company has evaluated events and transactions subsequent to September 30, 2024 through the date of this Quarterly Report on Form 10-Q, and there are no other events to report other than what has been disclosed in the condensed consolidated financial statements.

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

Forward-Looking Information

This Quarterly Report on Form 10-Q, including this Management’s Discussion and Analysis, contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. These statements are based on management’s current views, assumptions or beliefs of future events and financial performance and are subject to uncertainty and changes in circumstances. Readers of this report should understand that these statements are not guarantees of performance or results. Many factors could affect our actual financial results and cause them to vary materially from the expectations contained in the forward-looking statements. These factors include, among other things: our expected revenue, income (loss), receivables, operating expenses, the effects of the recent Change Healthcare cyberattack on us or our operations, supplier pricing, availability and prices of raw materials, insurance reimbursements, product pricing, foreign currency exchange rates, sources of funding operations and acquisitions, our ability to raise funds, sufficiency of available liquidity, future interest and inflation costs, future economic circumstances, business strategy, industry conditions and key trends, our ability to execute our operating plans, the success of our cost savings initiatives, competitive environment and related market conditions, our ability to comply with the listing requirements of the Nasdaq Capital Market, expected financial and other benefits from our organizational restructuring activities, geopolitical uncertainties including the ongoing Russia and Ukraine conflict and the Israel-Hamas war, actions of governments and regulatory factors affecting our business, projections of future earnings, revenues, synergies, accretion or other financial items, any statements of the plans, strategies and objectives of management for future operations, retaining key employees and other risks as described in our reports filed with the SEC. In some cases these statements are identifiable through the use of words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “should,” “will,” “would” or the negative of such terms and other similar expressions.

You are cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements we make are not guarantees of future performance and are subject to various assumptions, risks and other factors that could cause actual results to differ materially from those suggested by these forward-looking statements. Actual results may differ materially from those suggested by the forward-looking statements that we make for a number of reasons, including those described in Part II, Item 1A, “Risk Factors,” of this Quarterly Report on Form 10-Q and our prior filings with the Securities and Exchange Commission.

We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

The following discussion should be read together with our condensed consolidated financial statements and related notes contained in this Quarterly Report on Form 10-Q and with the financial statements, related notes and Management’s Discussion and Analysis included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which we filed with the Securities and Exchange Commission on March 29, 2024. Results for the three and nine months ended September 30, 2024 are not necessarily indicative of results that may be attained in the future.

Overview

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,

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respectively, which house teams that collaborate on the development of new products and services. We operate 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.

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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.

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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.

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Our Products Division commercial team generates direct sales and works with our key distributors. Global healthcare distributors, such as ThermoFisher, McKesson, 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.

Recent Developments

Change Healthcare

Change Healthcare (“CHC”), a subsidiary of UnitedHealth Group, suffered a cybersecurity breach in February 2024 which resulted in the temporary shut-down of some of its systems. Precipio uses CHC to process its billings for pathology services. Thus, when CHC shut down its business operations our pathology billings were halted. Our ability to process billings, accept payer remittances, process medical and billing benefit notices, bill secondary insurers, as well as patients, and communicate with commercial payers was severely impacted. Starting shortly after the breach, we redirected a significant amount of our internal resources to manually manufacture the billing services that CHC was no longer delivering. This resulted in billing and cash reimbursement delays during the nine months ended September 30, 2024.

Along with the delays in billing and cash reimbursements, we incurred approximately $0.2 million of expense during the nine months ended September 30, 2024, as we used alternative methods for claims processing. CHC established a Temporary Funding Assistance Program to help bridge the gap in short-term cash flow needs for its customers affected by the disruption of its services due to the cyberattack. During the nine months ended September 30, 2024, we received approximately $1.1 million from CHC through this program. See Note 4 Accrued Expenses for further discussion. As a result of the manual claims processing methods that we put in place following the CHC shutdown, our billing and cash reimbursement processes are nearly rectified as of September 30, 2024.

Going Concern

The condensed consolidated financial statements have been prepared using accounting principles generally accepted in the United States of America (“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 nine months ended September 30, 2024, the Company had a net loss of $3.9 million and net cash used in operating activities of $0.1 million.

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As of September 30, 2024, the Company had an accumulated deficit of $102.1 million and a working capital deficit of $1.2 million. The Company’s ability to continue as a going concern over the next twelve months from the date the condensed consolidated financial statements were issued is dependent upon a combination of achieving its business plan, including generating additional revenue, and raising additional financing to meet its debt obligations and paying liabilities arising from normal business operations when they come due.

To meet its current and future obligations the Company has taken the following steps to capitalize the business:

| ● | 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 condensed consolidated financial statements were issued, we have 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.

Notwithstanding the aforementioned circumstances, there remains substantial doubt about the Company’s ability to continue as a going concern over the next twelve months from the date of issuance of this Quarterly Report on Form 10-Q. 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.

Results of Operations for the Three Months Ended September 30, 2024 and 2023

Net Sales. Net sales were as follows:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Dollars in Thousands |
​ | ​ | Three Months Ended | ​ | ​ | ​
​ | ​ | September 30, | ​ | Change |
​ |  | 2024 |  | 2023 |  | $ |  | % |
Service revenue, net, less allowance for credit loss | ​ | $ | 4,528 | ​ | $ | 3,687 | ​ | $ | 841 | ​ | 23 | %
Product revenue | ​ |  | 681 | ​ |  | 831 | ​ | ​ | (150) | ​ | (18) | %
Net Sales | ​ | $ | 5,209 | ​ | $ | 4,518 | ​ | $ | 691 | ​ | 15 | %

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Net sales for the three months ended September 30, 2024 were approximately $5.2 million, an increase of $0.7 million as compared to the same period in 2023. During the three months ended September 30, 2024, patient diagnostic service revenue increased $0.8 million as compared to the same period in 2023. This increase was due to a greater number of cases processed in the current year period. We processed 3,584 cases during the three months ended September 30, 2024 as compared to 2,105 cases during the same period in 2023, or a 70% increase in cases. The benefit of the increase in cases billed during the third quarter of 2024 as compared to the same period in 2023 was partially offset by a lower average price per case during the current year as a result of a different product mix. Product revenue decreased by $0.1 million for the three months ended September 30, 2024 as compared to the same period in 2023.

Cost of Sales. Cost of sales includes material and supply costs for the patient tests performed, costs related to HSRR products and other direct costs (primarily personnel costs, pathologist interpretation costs and rent) associated with the operations of our laboratory. Cost of sales increased by $0.3 million for the three months ended September 30, 2024 as compared to the same period in 2023.

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Gross Profit. Gross profit and gross margins were as follows:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Dollars in Thousands |
​ | ​ | Three Months Ended | ​ | ​ | ​
​ | ​ | September 30, | ​ | Margin % |
​ |  | 2024 |  | 2023 |  | 2024 |  | 2023 |
Gross Profit | ​ | $ | 2,277 | ​ | $ | 1,885 |  | 44 | % | 42 | %

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Gross margin was 44% and 42% of total net sales for the three months ended September 30, 2024 and 2023, respectively. Gross profit was approximately $2.3 million and $1.9 million during the three months ended September 30, 2024 and 2023, respectively. The gross profit increased during the three months ended September 30, 2024, as compared to the prior year period, as a result of increases in case volume and revenue. We operate a fully staffed CLIA and College of American Pathologists (“CAP”) certified clinical pathology and molecular laboratory. As such, it is necessary to maintain appropriate staffing levels to provide industry standard laboratory processing and reporting to ordering physicians. An increase in case volume will enable our laboratory to yield economies of scale and to leverage fixed expenses.

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Operating Expenses. Operating expenses primarily consist of personnel costs, professional fees, travel costs, facility costs, stock-based compensation costs and depreciation and amortization. Our operating expenses decreased by $0.5 million to $2.9 million for the three months ended September 30, 2024 as compared to the same period in 2023. The decrease was attributable to: (1) an increase of less than 0.1 million in stock-based compensation expense, (2) an increase of less than $0.1 million in general and administrative expenses due mainly to an increase of $0.1 million legal and professional fees and franchise taxes, partially offset by a decrease of less than $0.1 million in personnel costs (3) a decrease of $0.4 million in sales and marketing expenses due mainly to a decrease in personnel costs of $0.4 million as a result of a lower headcount, and (4) a decrease of $0.1 million in research and development expenses mainly related to decreases in operating supply costs and personnel costs.

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Other (Expense) Income. We recorded net other expense of $29 thousand and $7 thousand for the three months ended September 30, 2024 and 2023, respectively, which was related to net interest expense.

Results of Operations for the Nine Months Ended September 30, 2024 and 2023

Net Sales. Net sales were as follows:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Dollars in Thousands | ​
​ | ​ | Nine Months Ended | ​ | ​ | ​
​ | ​ | September 30, | ​ | Change | ​
​ |  | 2024 |  | 2023 |  | $ |  | % |
Service revenue, net, less allowance for doubtful accounts | ​ | $ | 11,146 | ​ | $ | 8,399 | ​ | $ | 2,747 | ​ | 33 | %
Product revenue | ​ |  | 1,936 | ​ |  | 2,469 | ​ | ​ | (533) | ​ | (22) | %
Net Sales | ​ | $ | 13,082 | ​ | $ | 10,868 | ​ | $ | 2,214 | ​ | 20 | %

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Net sales for the nine months ended September 30, 2024 were approximately $13.1 million, an increase of $2.2 million as compared to the same period in 2023. During the nine months ended September 30, 2024, patient diagnostic service revenue increased $2.7 million as compared to the same period in 2023. This increase was due to a greater number of cases processed in the current year period. We processed 8,745 cases during the nine months ended September 30, 2024 as compared to 4,915 cases during the same period in 2023, or a 78% increase in cases. The benefit of the increase in cases billed during the third quarter of 2024 as compared to the same period in 2023 was partially offset by a lower average price per case during the current year as a result of a different product mix. Product revenue decreased by $0.5 million for the nine months ended September 30, 2024 as compared to the same period in 2023.

Cost of Sales. Cost of sales includes material and supply costs for the patient tests performed, costs related to HSRR products and other direct costs (primarily personnel costs, pathologist interpretation costs and rent) associated with

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the operations of our laboratory. Cost of sales increased by $1.3 million for the nine months ended September 30, 2024 as compared to the same period in 2023.

Gross Profit. Gross profit and gross margins were as follows:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Dollars in Thousands | ​
​ | ​ | Nine Months Ended | ​ |  | ​
​ | ​ | September 30, | ​ | Margin % | ​
​ |  | 2024 |  | 2023 |  | 2024 |  | 2023 | ​
Gross Profit | ​ | $ | 4,913 | ​ | ​ | 4,005 |  | 38 | % | 37 | %

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Gross margin was 38% of total net sales, for the nine months ended September 30, 2024 and 37% for the nine months ended September 30, 2023. Gross profit was approximately $4.9 million and $4.0 million during the nine months ended September 30, 2024 and 2023, respectively. The increase in gross profit during the nine months ended September 30, 2024, as compared to the prior year period, was a result of increases in case volume and revenue. We operate a fully staffed CLIA and CAP certified clinical pathology and molecular laboratory. As such, it is necessary to maintain appropriate staffing levels to provide industry standard laboratory processing and reporting to ordering physicians. An increase in case volume will enable our laboratory to yield economies of scale and to leverage fixed expenses.

Operating Expenses. Operating expenses primarily consist of personnel costs, professional fees, travel costs, facility costs, stock-based compensation costs and depreciation and amortization. Our operating expenses decreased by $2.0 million to $8.8 million for the nine months ended September 30, 2024 as compared to the same period in 2023. The decrease was attributable to: (1) a decrease of $0.1 million in stock-based compensation expense, (2) a decrease of $0.1 million in general and administrative expenses due a decrease in legal and professional fees of $0.3 million, partially offset by an increase of $0.1 million in franchise tax costs and an increase of $0.1 million in other costs, (3) a decrease of $1.3 million in sales and marketing expenses due mainly to a decrease in personnel costs of $1.2 million as a result of a lower headcount and a decrease of $0.1 million other costs and (4) a decrease of $0.4 million in research and development expenses mainly related to a decrease of $0.1 million in operating supplies, a decrease of $0.1 million in personnel costs and a decrease of $0.2 million in other costs.

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Other (Expense) Income. We recorded net other expense of $45 thousand and $12 thousand for the nine months ended September 30, 2024 and 2023, respectively, which was related to net interest expense.

Liquidity and Capital Resources

Our working capital positions were as follows:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | September 30, 2024 |  | December 31, 2023 |  | Change
Current assets (including cash of $1,053 and $1,502 respectively) | ​ | $ | 3,255 | ​ | $ | 3,682 | ​ | $ | (427)
Current liabilities | ​ |  | 4,478 | ​ |  | 3,141 | ​ |  | 1,337
Working capital | ​ | $ | (1,223) | ​ | $ | 541 | ​ | $ | (1,764)

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During the nine months ended September 30, 2024 we received $0.6 million in proceeds from debt issuance and net proceeds of $0.1 million from sale of 11,822 shares of our common stock through at the market offerings. The Company has approximately $3.7 million available for future sales pursuant to the AGP 2023 Sales Agreement.

Analysis of Cash Flows – Nine Months Ended September 30, 2024 and 2023

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Nine Months Ended September 30,
​ |  | 2024 |  | 2023 |  | Change
Net cash used in operating activities | ​ | $ | (126) | ​ | $ | (3,673) | ​ | $ | 3,547
Net cash used in investing activities | ​ | ​ | (179) | ​ | ​ | (77) | ​ | ​ | (102)
Net cash (used in) provided by financing activities | ​ |  | (144) | ​ |  | 1,867 | ​ |  | (2,011)
Net change in cash | ​ | $ | (449) | ​ | $ | (1,883) | ​ | $ | 1,434

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Cash Flows Used in Operating Activities. The cash flows used in operating activities of approximately $0.1 million during the nine months ended September 30, 2024 included a net loss of $3.9 million, an increase in inventories of $0.2 million and a decrease in operating lease liabilities of $0.2 million. These were partially offset by a decrease in accounts receivables of $0.1 million, a decrease in other assets of $0.1 million, an increase in accounts payable of $0.1 million, an increase in deferred revenues of $0.2 million, an increase in accrued expenses of $0.9 million and non-cash adjustments of $2.7 million. The non-cash adjustments included $0.2 million for the change in provision for credit losses. We routinely provide a reserve for credit losses as a result of having limited in-network payer contracts. The other non-cash adjustments to net loss of approximately $2.5 million include, among other things, depreciation and amortization, and stock-based compensation. The cash flows used in operating activities of approximately $3.7 million during the nine months ended September 30, 2023 included a net loss of $6.8 million, an increase in accounts receivables of $0.6 million and a decrease in operating lease liabilities and deferred revenue of $0.3 million. These were partially offset by a decrease in inventories of $0.1 million, a decrease in other assets of $0.3 million, an increase in accounts payable of $0.5 million, an increase in accrued expenses of $0.6 million, and non-cash adjustments of $2.5 million.

Cash Flows Used In Investing Activities. Cash flows used in investing activities were $0.2 million and $0.1 million for the nine months ended September 30, 2024 and 2023, respectively, resulting from purchases of property and equipment.

Cash Flows Used in or Provided by Financing Activities. Cash flows provided by financing activities totaled $0.2 million for the nine months ended September 30, 2024, which included $0.2 million of proceeds from debt and $0.1 million of proceeds from the issuance of common stock. These were partially offset by $0.4 million in payments on our long-term debt and finance lease obligations. Cash flows provided by financing activities totaled $1.9 million for the nine months ended September 30, 2023, which included $2.2 million of proceeds from the issuance of common stock partially offset by payments on our long-term debt and finance lease obligations of $0.3 million.

For further information regarding the Company’s future funding requirements, see the Going Concern disclosure in Note 1 of the Notes to Unaudited Condensed Consolidated Financial Statements included with this Quarterly Report on Form 10-Q.

Off-Balance Sheet Arrangements

At each of September 30, 2024 and December 31, 2023, other than certain purchase commitments of approximately $2.3 million and $1.9 million, respectively, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. The purchase commitments are mostly for laboratory reagents used in our normal operating business.

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Contractual Obligations and Commitments

No significant changes to contractual obligations and commitments occurred during the nine months ended September 30, 2024, as compared to those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission on March 29, 2024.

Critical Accounting Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires the Company’s 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 statement and the reported amounts of revenues and expenses during the reporting period. Actual financial results based on judgments or estimates may vary under different assumptions or circumstances. Our critical accounting estimates are discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission on March 29, 2024.

Recently Issued Accounting Pronouncements

See the accompanying unaudited condensed consolidated financial statements and Note 2 - “Summary of Significant Accounting Policies” in the Notes to unaudited condensed consolidated financial statements for additional information regarding recently issued accounting pronouncements.

Impact of Inflation

Inflation generally affects us with increased cost of labor and operating supplies. We do not believe that price inflation had a material adverse effect on our financial condition or results of operations during the periods presented.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company, as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and are not required to provide the information required under this item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, management performed, with the participation of our Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to management including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and no evaluation of controls and procedures can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2024.

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Changes in Internal Control over Financial Reporting

We have evaluated the changes in our internal control over financial reporting that occurred during the three months ended September 30, 2024 and concluded that there have not been any changes that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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.

The outcome of legal proceedings and claims brought against us are subject to significant uncertainty. Therefore, although management considers the likelihood of such an outcome to be remote, if one or more of these legal matters were resolved against us in the same reporting period for amounts in excess of management’s expectations, our financial statements for such reporting period could be materially adversely affected. In general, the resolution of a legal matter could prevent us from offering our services or products to others, could be material to our financial condition or cash flows, or both, or could otherwise adversely affect our operating results.

The Company is involved in legal proceedings related to matters, which are incidental to its business and 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.

Item 1A. Risk Factors

As disclosed in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, there are a number of risks and uncertainties that may have a material effect on the operating results of our business and our financial condition. The following information updates, and should be read in conjunction with, the factors discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, and other filings we make with the Securities and Exchange Commission, which could materially affect our business, financial condition or future results. The risks described in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results.

We have incurred losses since our inception and expect to incur losses for the foreseeable future. We cannot be certain that we will achieve or sustain profitability.

We have incurred losses since our inception and expect to incur losses in the future. At September 30, 2024, we had a working capital deficit of $1.2 million. For the nine months ended September 30, 2024, we had an operating cash flow deficit of $0.4 million and a net loss of $3.9 million. For the period ended September 30, 2024, we have experienced negative cash flow from development of our diagnostic technology, as well as from the costs associated with establishing a laboratory and building a sales force to market our products and services. We expect to incur substantial net losses through at least 2024 as we further develop and commercialize our diagnostic technology. We also expect that our selling, general and administrative expenses will continue to increase due to the additional costs associated with market development activities and expanding our staff to sell and support our products. Our ability to achieve or, if achieved, sustain profitability is based on numerous factors, many of which are beyond our control, including the market acceptance of our products, competitive product development and our market penetration and margins. We may never be able to generate sufficient revenue to achieve or, if achieved, sustain profitability.

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We may need to raise substantial additional capital to commercialize our diagnostic technology, and our failure to obtain funding when needed may force us to delay, reduce or eliminate our product development programs or collaboration efforts or force us to restrict or cease operations.

As of September 30, 2024, we had cash of $1.1 million and a working capital deficit of $1.2 million. Due to our recurring losses from operations and the expectation that we will continue to incur losses in the future, we may be required to raise additional capital to complete the development and commercialization of our current product candidates and to pay off our obligations. To date, to fund our operations and develop and commercialize our products, we have relied primarily on equity and debt financings. In future periods, when we seek additional capital, we may seek to sell additional equity and/or debt securities or to obtain a credit facility, which we may not be able to do on favorable terms, or at all. Our ability to obtain additional financing will be subject to a number of factors, including market conditions, our operating performance and investor sentiment. If we are unable to raise additional capital when required or on acceptable terms, we may have to significantly delay, scale back or discontinue the development and/or commercialization of one or more of our product candidates, restrict or cease our operations or obtain funds by entering into agreements on unattractive terms.

The sale or issuance of our common stock to, or through, AGP, or otherwise, may cause significant dilution and the sale of the shares of common stock acquired by AGP or others, or the perception that such sales may occur, could cause the price of our common stock to fall.

On April 14, 2023, we entered into a sales agreement with AGP, pursuant to which we may offer and sell our Common Stock, having aggregate sales proceeds of up to $5.8 million, to or through AGP, from time to time, in an at-the-market offering (the “2023 ATM Offering”). We are limited in the number of shares we can sell in the 2023 ATM Offering due to the offering limitations currently applicable to the Company under General Instruction I.B.6. of Form S-3 and the Company’s 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 2023 Sales Agreement. Sales to, or through, AGP by us could result in substantial dilution to the interests of other holders of our common stock. Additionally, the sale of a substantial number of shares of our common stock, or the anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales.

From April 14, 2023 through the date of issuance of this Quarterly Report on From 10-Q, we received $0.1 million in gross proceeds through the AGP 2023 Sales Agreement from the sale of 11,847 shares of Common Stock. The Company has an additional $3.7 million available for future sales pursuant to the AGP 2023 Sales Agreement. On January 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. We have approximately $1.0 million of remaining availability pursuant to this prospectus supplement.

We have issued a substantial number of warrants and equity awards from our equity plans which are exercisable into shares of our common stock which could result in substantial dilution to the ownership interests of our existing stockholders.

As of September 30, 2024, approximately 444,444 shares of our common stock were reserved for issuance upon exercise or conversion of outstanding warrants. Additionally, 304,025 shares of our common stock were reserved for issuance upon exercise of outstanding stock options. The exercise or conversion of these securities will result in a significant increase in the number of outstanding shares and substantially dilute the ownership interests of our existing stockholders. The shares underlying the equity awards from our equity plans are registered on a Form S-8 registration statement. As a result, upon vesting these shares can be freely exercised and sold in the public market upon issuance, subject to volume limitations applicable to affiliates. The exercise of options and the subsequent sale of the underlying common stock could cause a decline in our stock price.

Cybersecurity risks could compromise our information and expose us to liability, which may harm our ability to operate effectively and may cause our business and reputation to suffer.

Cybersecurity refers to the combination of technologies, processes and procedures established to protect information technology systems and data from unauthorized access, misuse, attack, or damage. We rely on our information systems to

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provide security for processing, transmission and storage of confidential information about our patients, customers and personnel, such as names, addresses and other individually identifiable information protected by the Health Insurance Portability and Accountability Act, (“HIPAA”), other privacy laws. We rely on our third-party providers to implement effective security measures and identify and correct for any such failures, deficiencies or incidents. We also rely on our employees and consultants to safeguard their security credentials and follow our policies and procedures regarding use and access of computers and other devices that may contain our sensitive information. If we or our third-party providers fail to maintain or protect our information technology systems and data integrity effectively or fail to anticipate, plan for or manage significant disruptions to our information technology systems, we or our third-party providers could have difficulty preventing, detecting and controlling such cyberattacks and any such attacks could result in losses described above, as well as disputes with physicians, patients and our partners, regulatory sanctions or penalties, increases in operating expenses, expenses or lost revenues or other adverse consequences, any of which could have a material adverse effect on our business, results of operations, financial condition, prospects and cash flows. Any failure by such third parties to prevent or mitigate security breaches or improper access to, misuse of, or disclosure of such information could have similarly adverse consequences for us. For example, our vendor, Change Healthcare, disclosed a security incident in February 2024 which resulted in temporary inaccessibility of certain of its information technology systems. While the Change Healthcare incident did not materially adversely affect our business, financial condition or operating results, it did result in temporary delays in our ability to complete our typical billing and reimbursement processes. If, in the future, we are unable to prevent or mitigate the impact of such security or data privacy breaches or other incidents, we could be exposed to litigation and governmental investigations, which could lead to a potential disruption to our business.

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Cyberattacks are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect. Cyberattacks could include wrongful conduct by hostile foreign governments, industrial espionage, wire fraud and other forms of cyber fraud, the deployment of harmful malware, denial-of-service, social engineering fraud or other means to threaten data security, confidentiality, integrity and availability. A successful cyberattack could cause serious negative consequences for us, including, without limitation, the disruption of operations, the misappropriation of confidential business information, including financial information, trade secrets, financial loss and the disclosure of corporate strategic plans. The regulatory environment surrounding information security and privacy is increasingly demanding, with the frequent imposition of new and changing requirements. Compliance with changes in privacy and information security laws and with rapidly evolving industry standards may result in our incurring significant expense due to increased investment in technology and the development of new operational processes.

We have not experienced any known attacks on our information technology systems that compromised any confidential information. We maintain our information technology systems with safeguards designed to protect against cyberattacks including passive intrusion protection, firewalls and virus detection software. However, these safeguards do not ensure that a significant cyberattack could not occur. Although we have taken steps to protect the security of our information systems and the data maintained in those systems, it is possible that our safety and security measures will not prevent the systems’ improper functioning or damage or the improper access or disclosure of personally identifiable information such as in the event of cyberattacks.

Security incidents, including physical or electronic break-ins, computer viruses, attacks by hackers and similar incidents can create system disruptions or shutdowns or the unauthorized disclosure of, access to, or misuse of confidential information. If personal information or protected health information is improperly accessed, tampered with, misused or disclosed as a result of a security breach, we may incur significant costs to notify and mitigate potential harm to the affected individuals, and we may be subject to sanctions and civil or criminal penalties if we are found to be in violation of the privacy or security rules under HIPAA or other similar federal or state laws protecting confidential personal information. In addition, a security breach of or other incident affecting our information systems could damage our reputation, subject us to liability claims or regulatory penalties for compromised personal information and could have a material adverse effect on our business, financial condition and results of operations.

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Our products that we sell as research use only products and/or that we offer as laboratory developed tests could become subject to government regulations requiring marketing authorization, and the marketing authorization and maintenance process for such products may be expensive, time-consuming and uncertain in both timing and outcome.

A number of our products are currently, and in the future will be, labeled and sold as research use only (RUO) products. Even though our products are labeled and sold as RUO products, the United States Food and Drug Administration (FDA) could question whether our products are intended for research use only. For example, in August 2021, we were contacted by the FDA regarding HemeScreen, and we have subsequently revised the labeling for HemeScreen. Should the FDA disagree with our conclusion that our products are intended for research use only or deem our sales, marketing and promotional efforts as being inconsistent with RUO products, our products could be subject to government regulation as diagnostic products. Diagnostic products are regulated as medical devices by the FDA and may require marketing authorization from the FDA through clearance following the premarket notification (510(k)) process, authorization following a request for de novo classification or approval following the submission of a premarket approval (PMA) application, in each case prior to marketing. Obtaining the requisite marketing authorizations can be expensive and may involve considerable delay. Moreover, if the FDA believed we inappropriately labeled our products as RUO products, it could allege that we had misbranded or adulterated our RUO products. If the FDA asserts that our RUO products are subject to marketing authorization, or that our RUO products are adulterated or misbranded, our business, financial condition or results of operations could be adversely affected.

Additionally, our CLIA laboratory offers testing utilizing our laboratory developed tests (LDTs). Historically, the FDA has exercised enforcement discretion with respect to most LDTs and has not required laboratories that offer LDTs to comply with the FDA’s requirements for medical devices, such as the FDA’s requirements pertaining to marketing authorization, establishment registration, device listing, the Quality System Regulation, and other post-market controls. However, at various points in recent years, the FDA has stated it intends to end its policy of enforcement discretion and to actively regulate LDTs.

Most recently, on April 29, 2024, the FDA published a final rule on LDTs, in which FDA outlines its plans to end enforcement discretion for many LDTs in five stages over a four-year period.

| ● | In Phase 1 (effective May 6, 2025), clinical laboratories would be required to comply with medical device reporting, correction/removal reporting, and certain quality systems complaint handling requirements.

| ● | In Phase 2 (effective May 6, 2026), clinical laboratories would be required to comply with all other device requirements (e.g., establishment registration and device listing, labeling, investigational use requirements), except for remaining quality systems requirements and premarket review requirements.

| ● | In Phase 3 (effective May 6, 2027), clinical laboratories would be required to comply with all remaining applicable quality systems requirements.

| ● | In Phase 4 (effective November 6, 2027), clinical laboratories would be required to comply with premarket submission requirements for high-risk tests (i.e., tests subject to FDA’s premarket approval (PMA) requirement).

| ● | In Phase 5 (effective May 6, 2028), clinical laboratories would be required to comply with premarket submission requirements for moderate- and low-risk tests (i.e., tests subject to de novo classification or the 510(k) requirement).

The final rule potentially extends enforcement discretion for certain tests, such as LDTs approved by the New York State Department of Health and LDTs first marketed prior to May 6, 2024 which are not modified or are modified in certain limited ways, from certain FDA regulatory requirements, provided certain important limitations have been met. We are actively reviewing the final rule to evaluate its applicability to our operations, and the extent to which we may be required to modify our operations to comply with its requirements.

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On May 29, 2024, the American Clinical Laboratory Association filed a lawsuit challenging the FDA’s authority to regulate LDTs as medical devices under the Federal Food, Drug, and Cosmetic Act. Subsequently, on August 19, 2024, the Association for Molecular Pathology filed a lawsuit similarly challenging FDA’s final rule on LDTs. The outcome of these lawsuits are uncertain at this time.

If the FDA were to determine that certain tests offered by us as LDTs are no longer eligible for enforcement discretion for any reason, including new rules, policies or guidance, or due to changes in statute, our test may become subject to extensive FDA requirements and our business, financial condition or results of operations may be adversely affected. If required, the regulatory marketing authorization process required to bring our current or future LDTs into compliance may involve, among other things, successfully completing additional clinical validations and submitting to and obtaining clearance, authorization or approval from the FDA. Furthermore, pending legislative proposals, if enacted, could create new or different regulatory and compliance burdens on us and could have a negative effect on our ability to keep products on the market or develop new products, which could have a material effect on our business.

In the event that the FDA requires marketing authorization of our LDTs in the future, the FDA may not ultimately grant any clearance, authorization or approval requested by us in a timely manner, may limit our indication in a way that is not commercially desirable, or refuse to provide such marketing authorization at all. In addition, if the FDA inspects our laboratory in relation to the marketing of any FDA-authorized test, any enforcement action the FDA takes might not be limited to the FDA-authorized test carried by us and could encompass our other testing services.

Unfavorable U.S. or global economic conditions could adversely affect our business, financial condition or results of operations.

Our results of operations could be adversely affected by general conditions in the global economy and financial markets. A severe or prolonged economic downturn or increase in inflation rates could result in a variety of risks to our business, including weakened demand for our products and services and our ability to raise additional capital when needed on favorable terms, if at all. A weak declining or inflationary economy could strain our collaborators and suppliers, possibly resulting in supply disruption, or cause delays in their payments to us. The future geopolitical landscape also remains particularly uncertain with the U.S. presidential election in November 2024. Any resulting changes in international trade relations, legislation and regulations, including those related to taxation and importation, or economic and monetary policies, or heightened diplomatic tensions or political and civil unrest, among other potential impacts, could adversely impact the global economy and our operating results.

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In addition, the Company’s operations and access to capital may be impacted by disruptions to the banking system and financial market volatility resulting from bank failures, particularly in light of the recent events that have occurred with respect to Silicon Valley Bank (“SVB”) and other financial institutions.

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Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business

There have been no other material changes from the risk factors disclosed in “Part I, Item 1A—Risk Factors” of our most recent Annual Report. The above risk factor should be read in conjunction with the risk factors disclosed therein.

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

During the three months ended September 30, 2024, we did not have any sales of unregistered securities.

Item 3. Defaults Upon Senior Securities

Not applicable.

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Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

No ne of our directors or “officers,” as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, adopted or terminated a Rule 10b5-1 trading plan or arrangement or a non-Rule 10b5-1 trading plan or arrangement, as defined in Item 408(c) of Regulation S-K, during the fiscal quarter covered by this report.

Item 6. Exhibits

| (a) | Exhibits

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​ | ​ | ​
​ | ​ | ​
10.1 | ​ | Form of Notice of Stock Option Repricing
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31.1 | ​ | Certification of Principal Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended.
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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.
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32.2* | ​ | Certification of Principal Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended.
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101.INS | ​ | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
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101.SCH | ​ | Inline XBRL Taxonomy Extension Schema Document
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101.CAL | ​ | Inline XBRL Taxonomy Extension Calculation Linkbase Document
​ | ​ | ​
101.DEF | ​ | Inline XBRL Taxonomy Extension Definition Linkbase Document
​ | ​ | ​
101.LAB | ​ | Inline XBRL Taxonomy Extension Label Linkbase Document
​ | ​ | ​
101.PRE | ​ | Inline XBRL Taxonomy Extension Presentation Linkbase Document
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104 | ​ | Cover Page Interactive Data File – formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.
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* This certification is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates it by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

​ | PRECIPIO, INC.
​ | ​ | ​
Date: November 6, 2024 | By: | /S/ ILAN DANIELI
​ | ​ | Ilan Danieli
​ | ​ | Chief Executive Officer (Principal Executive Officer)
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​ | ​ | ​
Date: November 6, 2024 | By: | /S/ MATTHEW GAGE
​ | ​ | Matthew Gage
​ | ​ | Chief Financial Officer (Principal Financial and Accounting Officer)

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