BUSINESS DESCRIPTION

3 Months Ended

Mar. 31, 2024

BUSINESS DESCRIPTION [Abstract]

BUSINESS DESCRIPTION

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 CLIA laboratories in both New Haven, Connecticut and Omaha, Nebraska where we provide essential blood cancer diagnostics to office-based oncologists in many states nationwide. To deliver on our strategy of mitigating misdiagnoses we rely heavily on our CLIA laboratory to support R&D beta-testing of the products we develop, in a clinical environment.

The development of laboratory products involves a qualified facility; highly skilled laboratory staff; and access to viable patient specimens to conduct development and testing. Our CLIA laboratory in New Haven, which is operated by our pathology services division, encapsulates these components, and also generates revenue for us which covers costs associated with operating this laboratory. This structure of utilizing our clinical lab to obtain samples and utilize the equipment and staffing to develop, test and validate our products, significantly reduces the development costs and timeline for our products. This also enables us to accelerate the time to market of new product development and launch.

Furthermore, as a clinical laboratory, we are always the first user of every product we develop, which allows us to optimize important laboratory functions such as workflow, inventory management, regulatory and billing issues. As a vendor, this places us as a reputable user of our own products, and we believe gains us significant credibility with existing and prospective customers. Furthermore, because we use our products as part of our day-to-day operations, we are able to deliver a high level of hands-on, experienced support to customers, improving their experience with our products.

Our Products Division commercial team generates direct sales and works with our key distributors. Global healthcare distributors, such as ThermoFisher, McKesson, 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. The Company has incurred substantial operating losses and has used cash in its operating activities for the past several years. For the three months ended March 31, 2024, the Company had a net loss of $2.1 million and net cash used in operating activities of $0.7 million. As of March 31, 2024, the Company had an accumulated deficit of $100.2 million and a working capital deficit of $0.7 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 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. As of the date the condensed consolidated financial statements were issued, we have 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 approximately $3.7 million available for future sales pursuant to the AGP 2023 Sales Agreement. 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. We have approximately $1.0 million of remaining availability pursuant to this prospectus supplement. See Note 7 Stockholders’ Equity, AGP 2023 Sales Agreement, for further discussion.

● On June 8, 2023, the Company entered into a securities purchase agreement pursuant to which it received $2.0 million in gross proceeds through the sale of 206,250 shares of common stock and warrants to purchase shares of our common stock. Issuance costs were approximately $0.2 million and the Company intends to use the net proceeds for working capital and general corporate purposes. See Note 7 Stockholders’ Equity, Registered Direct Offering, for further discussion.

Notwithstanding the aforementioned circumstances, there remains substantial doubt about the Company’s ability to continue as a going concern for the next twelve months from the date these 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. The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern and do not include any adjustments that might result should the Company be unable to continue as a going concern as a result of the outcome of this uncertainty.