SEC Form 10-Q filed by Precipio Inc.

5/14/26 4:16:28 PM ET

$PRPO

Biotechnology: Laboratory Analytical Instruments

Industrials

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PRECIPIO, INC._March 31, 2026

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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 March 31, 2026

	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 May 11, 2026, the number of shares of common stock outstanding was 1,787,372.

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PRECIPIO, INC. AND SUBSIDIARIES

INDEX

			Page No.

PART I.	Financial Information		3

Item 1.	Condensed Consolidated Financial Statements		3

	Condensed Consolidated Balance Sheets at March 31, 2026 (unaudited) and December 31, 2025		3

	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2026 and 2025 (unaudited)		4

	Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2026 and 2025 (unaudited)		5

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2026 and 2025 (unaudited)		6

	Notes to Unaudited Condensed Consolidated Financial Statements		8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		28

Item 4.	Controls and Procedures		29

PART II.	Other Information		30

Item 1.	Legal Proceedings		30

Item 1A.	Risk Factors		30

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		30

Item 3.	Defaults Upon Senior Securities		30

Item 4.	Mine Safety Disclosures		31

Item 5.	Other Information		31

Item 6.	Exhibits		32

Signatures			33

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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)
	March 31, 2026		December 31, 2025
ASSETS
CURRENT ASSETS:
Cash	$	2,604	$	2,651
Accounts receivable (net of allowance for credit losses of $1,295 and $1,045, respectively)		1,988		1,984
Inventories		870		935
Other current assets		470		469
Total current assets		5,932		6,039

PROPERTY AND EQUIPMENT, NET		735		729

OTHER ASSETS:
Finance lease right-of-use assets, net		936		998
Operating lease right-of-use assets, net		2,451		2,565
Intangibles, net		10,682		10,919
Other assets		67		67
Total assets	$	20,803	$	21,317
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt, less debt issuance costs	$	30	$	30
Current maturities of finance lease liabilities		202		209
Current maturities of operating lease liabilities		434		410
Accounts payable		1,363		1,131
Accrued expenses		1,660		1,690
Deferred revenue		121		282
Total current liabilities		3,810		3,752
LONG TERM LIABILITIES:
Long-term debt, less current maturities and debt issuance costs		40		47
Finance lease liabilities, less current maturities		701		751
Operating lease liabilities, less current maturities		2,085		2,206
Total liabilities		6,636		6,756
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS’ EQUITY:
Preferred stock - $0.01 par value, 15,000,000 shares authorized at March 31, 2026 and December 31, 2025, 47 shares issued and outstanding at March 31, 2026 and December 31, 2025, liquidation preference of $147 at March 31, 2026		—		—
Common stock, $0.01 par value, 150,000,000 shares authorized at March 31, 2026 and December 31, 2025, 1,783,682 and 1,780,899 shares issued and outstanding at March 31, 2026 and December 31, 2025, respectively		18		18
Additional paid-in capital		118,395		117,346
Accumulated deficit		(104,246)		(102,803)
Total stockholders’ equity		14,167		14,561
Total liabilities and stockholders’ equity	$	20,803	$	21,317

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 March 31,
	2026			2025
SALES:
Service revenue, net	$	6,302		$	4,257
Product revenue		659			654
Revenue, net of contractual allowances and adjustments		6,961			4,911
Adjustment for allowance for credit losses		(250)			18
Net sales		6,711			4,929
COST OF SALES:
Cost of service revenue		3,705			2,466
Cost of product revenue		281			323
Total cost of sales		3,986			2,789
Gross profit		2,725			2,140
OPERATING EXPENSES:
Operating expenses		4,153			2,999
OPERATING LOSS		(1,428)			(859)
OTHER EXPENSE:
Interest expense, net		(15)			(25)
LOSS BEFORE INCOME TAXES		(1,443)			(884)
INCOME TAX EXPENSE		–			—
NET LOSS	$	(1,443)		$	(884)

Net loss per common share:
BASIC AND DILUTED LOSS PER COMMON SHARE	$	(0.81)		$	(0.59)
BASIC AND DILUTED WEIGHTED-AVERAGE SHARES OF COMMON STOCK OUTSTANDING		1,783,080			1,502,652

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 March 31, 2026
		Preferred Stock					Common Stock					Additional
		Outstanding		Par			Outstanding		Par			Paid-in			Accumulated
		Shares		Value			Shares		Value			Capital			Deficit			Total
Balance, January 1, 2026		47		$	—		1,780,899		$	18		$	117,346		$	(102,803)		$	14,561
Net loss		—			—		—			—			—			(1,443)			(1,443)
Proceeds upon issuance of common stock from exercise of stock options		—			—		562			—			3			—			3
Issuance of common stock for Board fees and consulting services		—			—		2,221			—			53			—			53
Stock-based compensation		—			—		—			—			993			—			993
Balance, March 31, 2026		47		$	—		1,783,682		$	18		$	118,395		$	(104,246)		$	14,167


		For the Three Months Ended March 31, 2025
		Preferred Stock					Common Stock					Additional
		Outstanding		Par			Outstanding		Par			Paid-in			Accumulated
		Shares		Value			Shares		Value			Capital			Deficit			Total
Balance, January 1, 2025		47		$	—		1,493,639		$	15		$	114,519		$	(102,440)		$	12,094
Net loss		—			—		—			—			—			(884)			(884)
Issuance of common stock for Board fees and consulting services		—			—		10,673			—			65			—			65
Stock-based compensation		—			—		—			—			423			—			423
Balance, March 31, 2025		47		$	—		1,504,312		$	15		$	115,007		$	(103,324)		$	11,698

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)


		Three Months Ended March 31,
		2026			2025
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(1,443)		$	(884)

Adjustments to reconcile net loss to net cash flows provided by operating activities:
Depreciation and amortization			281			324
Amortization of operating lease right-of-use asset			115			57
Amortization of finance lease right-of-use asset			61			36
Amortization of deferred financing costs, debt discounts and debt premiums			1			—
Stock-based compensation			993			423
Value of stock issued in payment of Board fees and consulting services			53			65
Provision for credit losses			250			(38)
Derecognition of operating lease right-of-use asset and liability			—			(11)
Changes in operating assets and liabilities:
Accounts receivable			(254)			(139)
Inventories			65			(101)
Other assets			(2)			73
Accounts payable			231			288
Operating lease liabilities			(97)			(54)
Deferred revenue			(161)			57
Accrued expenses			(29)			(140)
Net cash provided by (used in) operating activities			64			(44)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment			(50)			(138)
Net cash used in investing activities			(50)			(138)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on finance lease obligations			(56)			(33)
Proceeds from exercise of stock options			3			—
Principal payments on long-term debt			(8)			(157)
Net cash flows used in financing activities			(61)			(190)
NET CHANGE IN CASH			(47)			(372)
CASH AT BEGINNING OF PERIOD			2,651			1,389
CASH AT END OF PERIOD		$	2,604		$	1,017

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)


	Three Months Ended March 31,
	2026			2025
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for interest	$	26		$	30

SUPPLEMENTAL DISCLOSURE OF CONSULTING SERVICES OR ANY OTHER NON-CASH COMMON STOCK RELATED ACTIVITY
Operating lease right-of-use assets obtained in exchange for operating lease obligations		—			1,237

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 Months Ended March 31, 2026 and 2025

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 improving cancer diagnostics. Our objective is to enhance diagnostic accuracy and accessibility while building a sustainable business model that supports ongoing innovation. We seek to achieve these objectives through a combination of clinical laboratory services and proprietary diagnostic product development. By integrating diagnostic services with product development, our service business doubles as a self-funded research and development (R&D) unit, enabling us to achieve rapid and cost-efficient innovation rather than being a major cost center of the Company.

This unique integrated operating structure is the foundation of our approach to research, development, and product commercialization. Unlike companies that rely primarily on stand-alone research facilities or external clinical validation programs, our clinical laboratory operations enables our R&D team to evaluate, refine, and validate diagnostic products in the course of routine clinical testing activities, and at minimal incremental cost. Through these activities, we generate clinical data, operational experience, and specimen access that support ongoing assay development and product improvement. While these activities are initially conducted to provide diagnostic services to patients and their healthcare providers, they also contribute to product development and validation processes.

Precipio operates under a single segment that encompasses two business divisions that are complementary to each other. Our pathology services division provides specialized cancer diagnostic testing services to physicians, hospitals, and laboratories. This division generates revenue and supports the development of our expertise in oncology diagnostics. The pathology services division delivers specialized diagnostic testing focused primarily on hematologic cancers and operates a full laboratory that includes all the equipment, personnel, and work processes required to receive patient samples daily, and deliver clinical results to the physicians under the proper compliance umbrella, while also generating profitable revenue to us. While reimbursement levels and testing volumes may vary, we view the pathology services division as an important foundation for both current operations and future product development.

Our product division focuses on the development and commercialization of proprietary diagnostic assay kits designed for use by clinical laboratories. These products allow us to expand our reach by enabling other laboratories to benefit from the diagnostic products developed by us, while building scalable diagnostic solutions. We believe this dual structure provides a unique model for R&D development of clinically applicable products, while delivering operational stability and supporting innovation and future growth. Furthermore, it provides us with competitive advantages in terms of the economics of product development, and time to market. These products are designed to improve testing accessibility and laboratory workflow efficiency while enabling broader market reach without requiring us to perform all testing internally. Product revenues may offer greater scalability than traditional laboratory services, although adoption depends on regulatory, reimbursement, and market factors.

To deliver our strategy, we have structured our organization to develop diagnostic products, including our laboratory and 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 laboratories to support R&D beta-testing of the products we develop, in a clinical environment.

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.

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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 for the past several years and while it has shown cash provided by its operating activities over the past year, this was largely aided by $0.8 million in payments received related to non-recurring Employee Retention Credits. See Note 12 Employee Retention Credit. For the three months ended March 31, 2026, the Company had an operating loss of $1.4 million and net cash provided by operating activities of $0.1 million. As of March 31, 2026, the Company had an accumulated deficit of $104.2 million and working capital of $2.1 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, if needed, to meet its debt obligations and paying liabilities arising from normal business operations when they come due.

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 on Form 10-Q.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation.

The accompanying condensed consolidated financial statements are presented in conformity with GAAP and, as of March 31, 2026 and for the three months ended March 31, 2026 and 2025, 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, 2025 contained in our Annual Report on Form 10-K, filed with the SEC on March 30, 2026. The results of operations for the interim periods presented are not necessarily indicative of the results for fiscal year 2026.

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Recently Adopted Accounting Pronouncements

In July 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-05, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides a practical expedient related to the estimation of expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under Topic 606, including those assets acquired in a business combination. The practical expedient permits all entities to assume that current conditions as of the balance sheet date do not change for the remaining life of the asset. This ASU is effective for fiscal years beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. The Company has adopted this standard. The standard did not impact our financial position, results of operations or cash flows.

Recent Accounting Pronouncements Not Yet Adopted.

In December 2025, the FASB issued ASU 2025-12, Codification Improvements. ASU 2025-12 contains amendments to the Codification that affect a wide variety of Topics in the Codification and applies to all reporting entities within the scope of the affected accounting guidance. The amendments in this update represent changes to the Codification that clarify, correct errors or make minor improvements, making the Codification easier to understand and apply. The amendments in this update are effective for public entities for fiscal years beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early adoption of the amendments in this update are permitted for any fiscal year or interim period for which financial statements have not yet been issued or made available for issuance. If adopted in an interim period, the amendment must be adopted as of the beginning of the fiscal years that includes the interim period. An entity should apply the amendments in this update (except for amendments to Topic 260, Earnings per Share, related to Issue 4) using one of the following transition methods: (1) prospectively to all new transactions recognized on or after the date that the entity first applies the amendments, or (2) retrospectively to the beginning of the earliest comparative period presented in which the amendments were first applied, by adjusting the opening balance of retained earnings, or other appropriate components of equity or net assets, as of the beginning of the earliest comparative period presented. For amendments to Topic 260, Issue 4, an entity shall apply the amendments retrospectively to each prior reporting period presented in the period of adoption. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements and disclosures.

In November 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270) - Narrow-Scope Improvements. This update is intended to improve the navigability of the required interim disclosures under Topic 270 and clarify when the guidance is applicable. The amendments also provide a comprehensive list of disclosures required by Topic 270 that should be provided in interim reporting periods. The amendments add to Topic 270 a principle that requires entities to disclose since the end of the last annual reporting period that have a material impact on the entity. The amendments clarify the applicability of Topic 270, the types of interim reporting, and the form and content of the interim financial statements in accordance with GAAP. The amendments in this update apply to all entities that provide interim financial statements and notes in accordance with GAAP and include guidance on the definition of interim financial statements and notes in accordance with GAAP, including referencing the U.S. Securities and Exchange Commission requirements for entities to which those requirements apply. The amendments are effective for interim reporting periods beginning after December 15, 2027, for public entities. Early adoption is permitted. The amendments can be applied either prospectively or retrospectively to any and all prior periods presented in the financial statements. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements and disclosures.

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In September 2025, the FASB issued ASU 2025-06, Intangibles — Goodwill and Other — Internal-use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which eliminates the previous stage-based model for capitalizing software costs and replaces it with a principles-based framework. This new guidance is designed to be more adaptable to modern, agile software development methods, clarifying when an entity should capitalize software costs based on a “probable-to-complete” threshold. This ASU is effective for fiscal years beginning after December 15, 2027, and interim reporting periods within those annual reporting periods, and may be applied using a prospective, modified, or retrospective transition approach. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements and disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income (Topic 220): Expense Disaggregation Disclosures (“ASU 2024-03”). This update requires entities to disaggregate operating expenses into specific categories, such as purchases of inventory, compensation, depreciation, and amortization, to provide enhanced transparency into the nature and function of expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, with early adoption permitted. ASU 2024-03 may be applied retrospectively or prospectively. The Company is currently evaluating the impact of this standard on its financial statement presentation and disclosures.

Loss Per Share.

Basic loss per share is calculated based on the weighted-average number of common shares 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. Options, warrants and conversion rights pertaining to 471,541 and 831,501 shares of our common stock have been excluded from the computation of diluted loss per share at March 31, 2026 and 2025, 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:


	March 31,
	2026		2025
Stock options	455,666		381,182
Warrants	10,000		444,444
Preferred stock	5,875		5,875
Total	471,541		831,501

3. LONG-TERM DEBT

Long-term debt consists of the following:


	Dollars in Thousands
	March 31, 2026			December 31, 2025
Connecticut Department of Economic and Community Development (DECD)	$	75		$	83
DECD debt issuance costs		(5)			(6)
Total long-term debt		70			77
Current portion of long-term debt		(30)			(30)
Long-term debt, net of current maturities	$	40		$	47

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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 March 31, 2026 and 2025, respectively.

4. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses at March 31, 2026 and December 31, 2025 are as follows:


(dollars in thousands)	March 31, 2026		December 31, 2025
Accrued expenses	$	341	$	402
Accrued compensation		1,100		977
Accrued franchise, property and sales and use taxes		200		209
CHC temporary funding assistance		—		83
Accrued interest		19		19
	$	1,660	$	1,690

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.

During the year ended December 31, 2024, the Company received approximately $1.1 million through CHC’s Temporary Assistance Program and began repayments during 2025. During the three months ended March 31, 2026, the Company made its final repayment to CHC of approximately $0.1 million. As of March 31, 2026 and December 31, 2025 the amount due to CHC was zero and $0.1 million, respectively.

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.

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PURCHASE COMMITMENTS

The Company has entered into purchase commitments for reagents from suppliers. Some of these agreements run through 2031. 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 $2.8 million at March 31, 2026.

LEGAL PROCEEDINGS

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 March 31, 2026 and December 31, 2025.

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 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 and from finance leases for laboratory equipment. 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

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of operations. There were no derecognized finance lease ROU assets for the three months ended
March 31, 2026 and 2025, respectively.

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


(dollars in thousands)
Classification on the Consolidated Balance Sheet	March 31, 2026		December 31, 2025
Assets:
Operating lease right-of-use assets, net	$	2,451	$	2,565
Finance lease right-of-use assets, net		936		998
Total lease assets	$	3,387	$	3,563

Liabilities:
Current:
Current maturities of operating lease liabilities	$	434	$	410
Current maturities of finance lease liabilities		202		209
Noncurrent:
Operating lease liabilities, less current maturities		2,085		2,206
Finance lease liabilities, less current maturities		701		751
Total lease liabilities	$	3,422	$	3,576

As of March 31, 2026, the estimated future minimum lease payments, excluding non-lease components, are as follows:


(dollars in thousands)		Operating Leases		Finance Leases		Total
2026 (remaining)		$	487	$	218	$	705
2027			701		274		975
2028			745		234		979
2029			787		186		973
2030			299		129		428
Thereafter			93		78		171
Total lease obligations			3,112		1,119		4,231
Less: Amount representing interest			(593)		(216)		(809)
Present value of net minimum lease obligations			2,519		903		3,422
Less, current portion			(434)		(202)		(636)
Long term portion		$	2,085	$	701	$	2,786

Other information as of March 31, 2026 and December 31, 2025 is as follows:


	March 31,	December 31,
	2026	2025
Weighted-average remaining lease term (years):
Operating leases	4.3	4.6
Finance leases	4.3	4.5
Weighted-average discount rate:
Operating leases	10.00%	10.00%
Finance leases	10.60%	10.70%

During each of the three months ended March 31, 2026 and 2025, operating cash flows from operating leases were $0.1 million, and operating lease ROU assets obtained in exchange for operating lease liabilities were zero and $1.2 million, respectively.

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During the three months ended March 31, 2026 and 2025, there were no finance lease ROU assets obtained in exchange for finance lease liabilities.

Operating Lease Costs

Operating lease costs were approximately $0.1 million and $0.1 million during the three months ended March 31, 2026 and 2025, 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 months ended March 31, 2026 and 2025, respectively.

Finance Lease Costs

Finance lease amortization and interest expenses are included in the condensed consolidated statements of operations for the three months ended March 31, 2026 and 2025 and the balances within these accounts are less than $0.1 million, respectively.

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 (the “Board”) 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 months ended March 31, 2026, the Company issued 562 shares of its common stock in connection with the exercise of 562 stock options. The stock option exercises resulted in net cash proceeds to the Company of $3 thousand. There were no stock option exercises during the three months ended March 31, 2025.

During the three months ended March 31, 2026 and 2025, the Company issued 2,221 and 10,673 shares of its common stock, respectively, in connection with Board fees of $0.1 million and $0.1 million, respectively.

Preferred Stock.

The Board 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.

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.

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There were no conversions of Series B Preferred Stock during the three months ended March 31, 2026 and 2025, respectively. At March 31, 2026 and December 31, 2025, the Company had 6,900 shares of Series B Preferred Stock 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 March 31, 2026 were convertible into 5,875 shares of common stock.

Common Stock Warrants.

The following represents a summary of the warrants outstanding as of March 31, 2026:


				Underlying	Exercise
		Issue Year	Expiration	Shares	Price
Warrants
(1)		2025	February 2027	10,000	$	60.00

(1) These warrants were issued to a consultant in connection with services performed.

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.

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 484,425 at March 31, 2026, of which 10,357 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 Board or Compensation Committee of the Board. During the three months ended March 31, 2026, the shares authorized for issuance increased by 89,045 shares.

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 Company records the expense for stock-based compensation awards

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subject to market-condition vesting over a derived service period which is calculated at the grant date. The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes or other option pricing models, 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 three months ended March 31, 2026, the Company granted stock options to purchase up to 98,000 shares of common stock at a weighted average exercise price of $23.82 per share. The stock options granted have either time-based or market-condition vesting.

The awards with time-based vesting have vesting periods of up to four years and had grant date fair values between $16.32 and $20.97. The fair value was calculated using the Black-Scholes option pricing model and used the following assumptions: risk free interest rate of 3.77% to 3.85%, based on the U.S. Treasury yield in effect at the time of grant; expected life of five to six years; and volatility of 82% to 121% based on historical volatility of the Company’s common stock over a time that is consistent with the expected life of the option.

The awards with market-condition vesting have a derived service period of 0.4 years and had a grant date fair value of $20.61. The fair value was calculated using a Monte Carlo Simulation and used the following assumptions: risk free interest rate of 4.15%; remaining term of ten years; and volatility of 122%.

The following table summarizes stock option activity under our plans during the three months ended March 31, 2026:


		Number of	Weighted-Average
		Options	Exercise Price
Outstanding at January 1, 2026		359,306	$	7.13
Granted		98,000		23.82
Exercised		(562)		5.62
Forfeited		(1,078)		6.25
Outstanding at March 31, 2026		455,666	$	10.73
Exercisable at March 31, 2026		257,042	$	7.37

As of March 31, 2026, there were 413,342 options that were vested or expected to vest with aggregate intrinsic value of $5.8 million and a remaining weighted average contractual life of 6.9 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 March 31, 2026 and December 31, 2025, there were no restricted stock awards that were unvested.

There were no restricted stock awards granted during the three months ended March 31, 2026 and 2025, respectively.

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Stock Compensation.

For the three months ended March 31, 2026, we recorded non-cash stock-based compensation expense for all stock awards of approximately $1.0 million within operating expense in the accompanying statements of operations. For the three months ended March 31, 2025, we recorded non-cash stock-based compensation expense for all stock awards of $0.4 million. As of March 31, 2026, the unrecognized compensation expense related to unvested stock awards was $1.5 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:

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.

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 laboratory interpretation services, billing services and 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. Control of billing and laboratory interpretation services 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.

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.

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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.

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 months ended March 31, 2026 and 2025 was as follows:


		For the Three Months Ended March 31,
(dollars in thousands)		Diagnostic Testing
		2026			2025
Medicaid		$	25		$	5
Medicare			2,950			1,904
Self-pay			5			5
Third party payers			3,267			2,325
Contract diagnostics and other			55			18
Service revenue, net		$	6,302		$	4,257

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.

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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 March 31, 2026 and December 31, 2025, the deferred revenue was $0.1 million and $0.3 million, respectively.

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 months ended March 31, 2026 and 2025.


		For the Three Months Ended March 31,
(dollars in thousands)								Contractual Allowances and						Revenues, net of Contractual
		Gross Revenues						adjustments						Allowances and adjustments
		2026			2025			2026			2025			2026			2025
Medicaid		$	25		$	5		$	—		$	—		$	25		$	5
Medicare			2,950			1,904			—			—			2,950			1,904
Self-pay			5			5			—			—			5			5
Third party payers			11,673			8,138			(8,406)			(5,813)			3,267			2,325
Contract diagnostics and other			55			18			—			—			55			18
			14,708			10,070			(8,406)			(5,813)			6,302			4,257
Product			659			654			—			—			659			654
		$	15,367		$	10,724		$	(8,406)		$	(5,813)		$	6,961		$	4,911

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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 ASC 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 months ended March 31, 2026 and 2025.


		For the Three Months Ended March 31,
		Revenues, net of
(dollars in thousands)		Contractual Allowances						Allowances for credit
		and adjustments						losses						Total
		2026			2025			2026			2025			2026			2025
Medicaid		$	25		$	5		$	(1)		$	18		$	24		$	23
Medicare			2,950			1,904			(182)			—			2,768			1,904
Self-pay			5			5			—			—			5			5
Third party payers			3,267			2,325			(67)			—			3,200			2,325
Contract diagnostics and other			55			18			—			—			55			18
			6,302			4,257			(250)			18			6,052			4,275
Product			659			654			—			—			659			654
		$	6,961		$	4,911		$	(250)		$	18		$	6,711		$	4,929

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.

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


(dollars in thousands)	March 31, 2026		December 31, 2025
Medicaid	$	22	$	19
Medicare		2,362		1,838
Self-pay		12		16
Third party payers		611		859
Contract diagnostic services, product and other		276		297
	$	3,283	$	3,029
Less allowance for credit losses		(1,295)		(1,045)
Accounts receivable, net	$	1,988	$	1,984

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The following table presents the roll-forward of the allowance for credit losses for the three months ended March 31, 2026 and 2025.


		Three Months Ended March 31,
(dollars in thousands)			2026	2025
Balance, January 1		$	(1,045)	$	(995)
Provision for credit losses:
Medicaid			(1)		18
Medicare			(182)		—
Self-pay			—		—
Third party payers			(67)		—
			(250)		18
Credit loss income			—		20
Total charges			(250)		38
Balance, March 31		$	(1,295)	$	(957)

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:


	Net sales				Accounts receivable, as of
	Three Months Ended
	March 31,				March 31,		December 31,
	2026		2025		2026		2025

Customer A	27	%	26	%	34	%	34	%
Customer B	*		*		*		12	%
Customer C	*		*		13		10	%

* represents less than 10%

11. SEGMENT REPORTING

The Company’s chief operating decision maker (the “CODM”) is its Chief Executive Officer. The Company has no segment managers who are held accountable by the CODM for operations, operating results, and planning for levels or components below the consolidated unit level. Accordingly, the Company has determined it has a single operating segment.

The CODM uses consolidated net loss for purposes of allocating resources and assessing segment performance, including monitoring actual results versus historical periods. Cost of revenue and operating expenses are considered significant segment expenses that are regularly provided to the CODM and included within consolidated net loss. The measure of segment assets is the total assets on the Company’s condensed consolidated balance sheets. Capital expenditures are reported on a consolidated basis on the Company’s condensed consolidated statements of cash flows. The following table includes the Company's segment revenue, significant segment expenses, and other segment items to reconcile to net loss.

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	Dollars in Thousands
	Three Months Ended
	March 31,
	2026			2025
Net sales	$	6,711		$	4,929
Less expense:
Cost of sales		3,986			2,789
Operating expenses (1)		4,153			2,999
Other segment expense (2)		15			25
Net loss	$	(1,443)		$	(884)

(1) Operating expenses include sales and marketing expenses, general and administrative expenses, research and development expenses and stock-based compensation.

(2) Other segment items include interest income and interest expense.

12. EMPLOYEE RETENTION CREDIT

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). Under the provisions of the CARES Act, and the subsequent extensions, the Company became eligible to apply for a refundable Employee Retention Credit (the “ERC”) subject to certain criteria, which could be used to offset payroll tax liabilities.

In November 2022, the Company submitted an ERC claim totaling approximately $1.5 million. During the year ended December 31, 2025, the Company received payments for part of the ERC claim totaling approximately $0.8 million. No such amounts were received during the three months ended March 31, 2026.

The Company retains all rights to pursue and receive the remaining balance of approximately $0.7 million and is actively evaluating the likelihood and timing of any additional disbursements. The Company has not waived any claims to the unpaid portion of the ERC and is taking reasonable steps to secure the remaining balance. However, there can be no assurance as to the timing, amount, or certainty of receipt of additional funds, and the Company will continue to assess the collectability of the remaining claim in accordance with applicable accounting standards.

13. SUBSEQUENT EVENTS

The Company has evaluated events and transactions subsequent to March 31, 2026 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 or the information incorporated herein by reference, 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 a 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 audited 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, 2025, which we filed with the Securities and Exchange Commission on March 30, 2026. Results for the three months ended March 31, 2026 are not necessarily indicative of results that may be attained in the future.

Overview

We are a healthcare biotechnology company focused on improving cancer diagnostics. Our objective is to enhance diagnostic accuracy and accessibility while building a sustainable business model that supports ongoing innovation. We seek to achieve these objectives through a combination of clinical laboratory services and proprietary diagnostic product development. By integrating diagnostic services with product development, our service business doubles as a self-funded research and development (“R&D”) unit, enabling us to achieve rapid and cost-efficient innovation, rather than being a major cost center of the Company.

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clinical data, operational experience, and specimen access that support ongoing assay development and product improvement. While these activities are initially conducted to provide diagnostic services to patients and their healthcare providers, they also contribute to product development and validation processes.

To deliver our strategy, we have structured our organization to develop diagnostic products, including our laboratory and 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 laboratories to support R&D beta-testing of the products we develop, in a clinical environment.

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 we will realize our assets and discharge our liabilities in the ordinary course of business and do not include any adjustments that might result should we be unable to continue as a going concern. We have incurred substantial operating losses for the past several years and while we have shown cash provided by our operating activities over the past year, this was largely aided by $0.8 million in payments received related to non-recurring Employee Retention Credits. See Note 12 Employee Retention Credit. For the three months ended March 31, 2026, we had an operating loss of $1.4 million and net cash provided by operating activities of $0.1 million. As of March 31, 2026, we had an accumulated deficit of $104.2 million and working capital of $2.1 million. Our 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 our business plan, including generating additional revenue, and raising additional financing to meet our debt obligations and paying liabilities arising from normal business operations when they come due.

Notwithstanding the aforementioned circumstances, there remains substantial doubt about our 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 we will be able to successfully achieve our initiatives summarized above in order to continue as a going concern.

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One Big Beautiful Bill Act of 2025

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States. The OBBBA includes significant changes to federal tax law and other regulatory provisions that may impact us. The legislation has various effective dates between 2025 and 2027 and we will continue to evaluate any changes needed when additional guidance becomes available.

Results of Operations for the Three Months Ended March 31, 2026 and 2025

Net Sales. Net sales were as follows:


		Dollars in Thousands
		Three Months Ended
		March 31,						Change
		2026			2025			$			%
Service revenue, net, less allowance for credit loss		$	6,052		$	4,275		$	1,777		42	%
Product revenue			659			654			5		1	%
Net Sales		$	6,711		$	4,929		$	1,782		36	%

Net sales for the three months ended March 31, 2026 were approximately $6.7 million, an increase of $1.8 million as compared to the same period in 2025. During the three months ended March 31, 2026, patient diagnostic service revenue increased $1.8 million as compared to the same period in 2025. This increase was due to a greater number of cases processed in the current year period. We processed 4,912 cases during the three months ended March 31, 2026 as compared to 3,021 cases during the same period in 2025, or a 63% increase in cases. The benefit of the increase in cases billed during the three months ended March 31, 2026 as compared to the same period of 2025 was partially offset by a lower average price per case during the current year as a result of a different product mix. Product revenue for the three months ended March 31, 2026 remained flat as compared to the prior year first quarter.

Cost of Sales. Cost of sales includes material and supply costs for the patient tests performed, costs related to 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 $1.2 million for the three months ended March 31, 2026 as compared to the same period in 2025. The increase is primarily attributable to increases in reagents, operating supplies, personnel costs and pathologist interpretation costs all due to the higher number of cases processed, as discussed above.

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


		Dollars in Thousands
		Three Months Ended
		March 31,						Change
		2026			2025			$		%
Gross Profit		$	2,725		$	2,140		585		26
Gross Margin			41%			43%

Gross profit was approximately $2.7 million and $2.1 million during the three months ended March 31, 2026 and 2025, respectively. The gross profit increased $0.6 million during the three months ended March 31, 2026, as compared to the prior year period, as a result of increases in case volume and revenue. The gross margin was 41% and 43% for the three months ended March 31, 2026 and 2025, respectively. The decrease is mostly due to the lower average price per case in our patient diagnostic service revenues in the current quarter, as mentioned above. 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 or average price per case 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 increased by

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$1.2 million for the three months ended March 31, 2026 as compared to the same period in 2025. For the three months ended March 31, 2026: (1) general and administrative expenses increased by $0.1 million primarily due to increased consulting and professional fees, (2) sales and marketing expenses increased by $0.3 million due to increase personnel costs and recruiting costs for our sales force, which are tied to our increased revenues, (3) research and development expenses increased by $0.2 million due to an increase in personnel costs of $0.1 million and $0.1 million in increased operating supplies, and (4) stock-based compensation, which is a non-cash expense, increased by $0.6 million.

Other Expense. We recorded net other expense of $15 thousand and $25 thousand for the three months ended March 31, 2026 and 2025, respectively. These amounts were all related to net interest expense.

Liquidity and Capital Resources

Our working capital positions were as follows (in thousands):


	March 31, 2026			December 31, 2025			Change
Current assets (including cash of $2,604 and $2,651 respectively)	$	5,932		$	6,039		$	(107)
Current liabilities		3,810			3,752			58
Working capital	$	2,122		$	2,287		$	(165)

Analysis of Cash Flows – Three Months Ended March 31, 2026 and 2025


	Dollars in Thousands
	Three Months Ended March 31,
	2026			2025			Change
Net cash provided by (used in) operating activities	$	64		$	(44)		$	108
Net cash used in investing activities		(50)			(138)			88
Net cash used in financing activities		(61)			(190)			129
Net change in cash	$	(47)		$	(372)		$	325

Cash Flows Provided by or Used in Operating Activities. The cash flows provided by operating activities of $0.1 million during the three months ended March 31, 2026 included an increase in accounts payable of $0.2 million, a decrease in inventories of $0.1 million, and non-cash adjustments of $1.8 million. These were partially offset by a net loss of $1.4 million, an increase in accounts receivables of $0.3 million, a decrease in operating lease liabilities of $0.1 million, a decrease in deferred revenue of $0.1 million and a decrease in accrued expenses of $0.1 million. The non-cash adjustments included $0.3 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 $1.5 million include, among other things, depreciation and amortization, and stock-based compensation. The cash flows used in operating activities of less than $0.1 million during the three months ended March 31, 2025 included a net loss of $0.9 million, an increase in accounts receivables of $0.1 million, an increase in inventories of $0.1 million, a decrease in operating lease liabilities of $0.1 million and a decrease in accrued expenses of $0.1 million. These were partially offset by a decrease in other assets of $0.1 million, an increase in accounts payable of $0.2 million, an increase in deferred revenues of $0.1 million, and non-cash adjustments of $0.9 million.

Cash Flows Used In Investing Activities. Cash flows used in investing activities were approximately $0.1 million and $0.1 million for the three months ended March 31, 2026 and 2025, respectively, resulting from purchases of property and equipment.

Cash Flows Used in Financing Activities. Cash flows used in financing activities totaled $0.1 million for the three months ended March 31, 2026, which included payments on our long-term debt and finance lease obligations. Cash flows used in financing activities totaled $0.2 million for the three months ended March 31, 2025, which included $0.2 million in payments on our long-term debt and finance lease obligations.

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For further information regarding our future funding requirements, see the Going Concern disclosure in Note 1 of the notes to the unaudited condensed consolidated financial statements included with this Quarterly Report on Form 10-Q.

Off-Balance Sheet Arrangements

At each of March 31, 2026 and December 31, 2025, other than certain purchase commitments of approximately $2.8 million and $3.1 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.

Contractual Obligations and Commitments

No significant changes to contractual obligations and commitments occurred during the three months ended March 31, 2026, as compared to those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the Securities and Exchange Commission on March 30, 2026.

Critical Accounting Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires our 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, 2025, filed with the Securities and Exchange Commission on March 30, 2026.

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 included elsewhere in this Quarterly Report on Form 10-Q, for additional information regarding recently issued accounting pronouncements.

Impact of Inflation

Inflationary factors, such as increases in our cost of goods, labor, or other operating expenses, may adversely affect our operating results. While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, we do not believe inflation had a material effect on our financial condition or results of operations during the three months ended March 31, 2026 and 2025. We cannot assure you, however, that we will be able to increase the prices of our products or reduce our operating expenses in an amount sufficient to offset the effects future inflationary pressures may have on our gross margin. Accordingly, we cannot assure you that our financial condition and results of operations will not be materially impacted by inflation in the future.

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.

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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 March 31, 2026.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2026 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

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 we are 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. 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 and adversely affected. In general, the resolution of a legal matter resolved against us, could also 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.

From time to time, we are involved in legal proceedings related to matters, which are incidental to our business. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of these ordinary course matters will not have a material adverse effect on our business, but, regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

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, 2025, 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, 2025, 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 and adversely affect our business, financial condition or operating results.

There have been no material changes from the risk factors disclosed in “Part I, Item 1A—Risk Factors” of our most recent Annual Report.

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

During the three months ended March 31, 2026, we did not have any sales of unregistered securities.

Item 3. Defaults Upon Senior Securities

None.

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Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

(a)

None

(b)

None

(c)

None 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 Quarterly Report on Form 10-Q.

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Item 6. Exhibits

(a)

Exhibits



3.1		Third Amended and Restated Certificate of Incorporation, as amended (incorporated by reference to Exhibit 3.1 of the Company’s 8-K filed on June 30, 2017).

3.2		Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 of the Company’s Form 8-K filed on June 30, 2017).

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

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

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

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

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.

101.SCH		Inline XBRL Taxonomy Extension Schema Document

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

104		Cover Page Interactive Data File – formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.

* 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: May 14, 2026	By:	/S/ ILAN DANIELI
		Ilan Danieli
		Chief Executive Officer (Principal Executive Officer)


Date: May 14, 2026	By:	/S/ MATTHEW GAGE
		Matthew Gage
		Chief Financial Officer (Principal Financial and Accounting Officer)

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