Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

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, 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 increased U.S. trade tariffs, reciprocal and retaliatory tariffs from other countries, and trade disputes with other countries, the ongoing Russia and Ukraine conflict and the Israel-Hamas war, actions of governments including the prolonged U.S. government shutdown 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, 2024, which we filed with the Securities and Exchange Commission on March 27, 2025. Results for the three and nine months ended September 30, 2025 are not necessarily indicative of results that may be attained in the future.

Overview

We are a healthcare biotechnology company focused on cancer diagnostics. Our business 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 misdiagnoses. To deliver our strategy, we have structured our organization to develop diagnostic products, including our laboratory and research and development ("R&D") facilities located in New Haven, Connecticut and Omaha, Nebraska,

respectively, which house teams that collaborate on the development of new products and services. We operate Clinical Laboratory Improvement Amendments ("CLIA") compliant laboratories in both New Haven, Connecticut and Omaha, Nebraska, from which we provide essential blood cancer diagnostics to oncologists 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.

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

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

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

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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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Recent Developments

Change Healthcare

Change Healthcare ("CHC"), a subsidiary of UnitedHealth Group, experienced a cybersecurity breach in February 2024 which resulted in the temporary shut-down of some of its systems. Precipio uses CHC to process its billings for pathology services. Thus, when CHC shut down its business operations our pathology billings were halted. Our ability to process billings, accept payer remittances, process medical and billing benefit notices, bill secondary insurers, as well as patients, and communicate with commercial payers was severely impacted. Starting shortly after the breach, we redirected a significant amount of our internal resources to internally handle the billing services that CHC was no longer delivering. This resulted in billing and cash reimbursement delays during the year ended December 31, 2024.

Along with the delays in billing and cash reimbursements, we incurred approximately $0.3 million of expenses during the year ended December 31, 2024, as we incurred lost collections and used alternative methods for claims processing. CHC established a Temporary Funding Assistance Program to help bridge the gap in short-term cash flow needs for its customers affected by the disruption of its services due to the cyberattack. On October 28, 2024, we received a notice from CHC stating that they had restored the connectivity of their systems. During the year ended December 31, 2024, we received approximately $1.1 million from CHC through this program.

During the nine months ended September 30, 2025, we have made approximately $0.6 million in repayments to CHC and in May 2025, we wrote off another $0.1 million. See Note 4 - "Accrued Expenses" to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further discussion.

Employee Retention Credit (ERC)

On March 27, 2020, the U.S. government enacted the CARES Act. Under the provisions of the CARES Act, and its subsequent extensions, we 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.

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In November 2022, we submitted an ERC claim totaling approximately $1.5 million. During the three months ended June 30, 2025, we received payments totaling approximately $0.8 million. We recorded this amount as other income in the condensed consolidated statements of operations.

We retain 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. We have 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 we will continue to assess the collectability of the remaining claim in accordance with applicable accounting standards.

The $0.8 million ERC refund and the $0.1 million CHC write-off discussed above are non-recurring items and, as a result of these non-recurring items, we recorded approximately $0.9 million of other income in the condensed consolidated statements of operations.

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 and have typically used cash in our operating activities for the past several years. For the nine months ended September 30, 2025, we had an operating loss of $1.7 million and net cash provided by operating activities of $0.3 million. As of September 30, 2025, we had an accumulated deficit of $103.3 million and working capital of $1.2 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 its business plan, including generating additional revenue, and raising additional financing to meet its debt obligations and paying liabilities arising from normal business operations when they come due.

To meet our current and future obligations we have taken the following steps to capitalize our business:

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.

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. We are currently assessing the impact of the OBBBA on its business, outlook, and financial statements.

Results of Operations for the Three Months Ended September 30, 2025 and 2024

Net Sales. Net sales were as follows:

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Net sales for the three months ended September 30, 2025 were approximately $6.8 million, an increase of $1.5 million as compared to the same period in 2024. During the three months ended September 30, 2025, patient diagnostic service revenue increased $1.5 million as compared to the same period in 2024. This increase was due to a greater number of cases processed in the current year period. We processed 4,258 cases during the three months ended September 30, 2025 as compared to 3,584 cases during the same period in 2024, or a 19% increase in cases. We routinely record revenue adjustments due to over-collections of recognized revenue and changes in expected reimbursement rates. During the three months ended September 30, 2025 and 2024, such adjustment was $0.2 million and zero, respectively. Product revenue for the three months ended September 30, 2025 increased less than $0.1 million as compared to the prior year second 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 costsand rent) associated with the operations of our laboratory. Cost of sales increased by $0.8 million for the three months ended September 30, 2025 as compared to the same period in 2024. 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:

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Gross margin was 44% and 44% of total net sales for the three months ended September 30, 2025 and 2024, respectively. Gross profit was approximately $3.0 million and $2.3 million during the three months ended September 30, 2025 and 2024, respectively. The gross profit increased $0.7 million during the three months ended September 30, 2025, as compared to the prior year period, as a result of increases in case volume and revenue. We operate a fully staffed CLIA and College of American Pathologists ("CAP") certified clinical pathology and molecular laboratory. As such, it is necessary to maintain appropriate staffing levels to provide industry standard laboratory processing and reporting to ordering physicians.

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Operating Expenses. Operating expenses primarily consist of personnel costs, professional fees, travel costs, facility costs, stock-based compensation costs and depreciation and amortization. Our operating expenses increased by $0.2 million for the three months ended September 30, 2025 as compared to the same period in 2024. For the three months ended September 30, 2025: (1) general and administrative expenses increased by $0.1 million primarily due to increased personnel costs, (2) sales and marketing expenses increased by $0.1 million due increases in personnel and recruiting costs for our sales force, (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 non-recurring costs related to an office move, and (4) stock-based compensation decreased by $0.2 million

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Other (Expense) Income. We recorded net other expense of $18 thousand for the three months ended September 30, 2025 which included $9 thousand related to net interest expense. During the three months ended September 30, 2024, we recorded net other expense of $29 thousand which was all related to net interest expense.

Results of Operations for the Nine Months Ended September 30, 2025 and 2024

Net Sales. Net sales were as follows:

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Net sales for the nine months ended September 30, 2025 were approximately $17.4 million, an increase of $4.3 million as compared to the same period in 2024. During the nine months ended September 30, 2025, patient diagnostic service revenue increased by $4.2 million as compared to the same period in 2024. This increase was due to a greater number of cases processed in the current year period. We processed 10,971 cases during the nine months ended September 30, 2025 as compared to 8,745 cases during the same period in 2024, or a 25% increase in cases. Product revenue for the nine months ended September 30, 2025 increased by $0.1 million as compared to the same period in 2024.

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 costsand rent) associated with the operations of our laboratory. Cost of sales increased by $1.6 million for the nine months ended September 30, 2025 as compared to the same period in 2024. 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:

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Gross margin was 44% and 38% of total net sales for the nine months ended September 30, 2025 and 2024, respectively. Gross profit was approximately $7.6 million and $4.9 million during the nine months ended September 30, 2025 and 2024, respectively. The gross profit increased during the nine months ended September 30, 2025, as compared to the prior year period, as a result of increases in case volume and revenue. We operate a fully staffed CLIA and CAP certified clinical pathology and molecular laboratory. As such, it is necessary to maintain appropriate staffing levels to provide industry standard laboratory processing and reporting to ordering physicians. The increase in case volume enabled our laboratory to yield economies of scale and to leverage fixed expenses.

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Operating Expenses. Operating expenses primarily consist of personnel costs, professional fees, travel costs, facility costs, stock-based compensation costs and depreciation and amortization. Our operating expenses increased $0.5 million for the nine months ended September 30, 2025 as compared to the same period in 2024. For the nine months ended September 30, 2025: (1) general and administrative expenses increased by $0.3 million primarily due to increases in personnel costs, (2) sales and marketing expenses decreased by $0.1 million due decreases in marketing costs, (3) research

and development expenses increased by $0.3 million due to an increase in personnel costs and operating supplies, and (4) stock-based compensation increased by less than $0.1 million

Other (Expense) Income. We recorded net other income of $0.9 million for the nine months ended September 30, 2025 which included income of $0.1 million from the gain on settlement of liabilities, income of $0.8 million from the receipt of Employee Retention Credits, and net interest expense of $57 thousand. During the nine months ended September 30, 2024, we recorded net other expense of $45 thousand which was related to net interest expense.

Liquidity and Capital Resources

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

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In July 2025, we received net cash proceeds of approximately $1.3 million from the exercise of 100,000 warrants, which resulted in the issuance of 100,000 shares of common stock of the Company.

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Analysis of Cash Flows - Nine Months Ended September 30, 2025 and 2024

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Cash Flows Provided by or Used in Operating Activities. The cash flows provided by operating activities of $0.3 million during the nine months ended September 30, 2025 included an increase in accounts payable of $0.5 million, an increase in deferred revenues of $0.1 million, and non-cash adjustments of $2.4 million. These were partially offset by a net loss of $0.9 million, a decrease in other assets of $0.1 million, an increase in accounts receivables of $1.2 million, an increase in inventories of $0.1 million, a decrease in operating lease liabilities of $0.2 million and a decrease in accrued expenses of $0.2 million. The non-cash adjustments included less than $0.1 million for the change in provision for credit losses. We routinely provide a reserve for credit losses as a result of having limited in-network payer contracts. The other non-cash adjustments to net loss of approximately $2.4 million include, among other things, depreciation and amortization, and stock-based compensation. The cash flows used in operating activities of approximately $0.1 million during the nine months ended September 30, 2024 included a net loss of $3.9 million, an increase in inventories of $0.2 million and a decrease in operating lease liabilities of $0.2 million. These were partially offset by a decrease in accounts receivables of $0.1 million, a decrease in other assets of $0.2 million, an increase in accounts payable of $0.1 million, an increase in deferred revenues of $0.2 million, an increase in accrued expenses of $0.9 million and non-cash adjustments of $2.7 million.

Cash Flows Used In Investing Activities. Cash flows used in investing activities were approximately $0.3 million and $0.2 million for the nine months ended September 30, 2025 and 2024, respectively, resulting from purchases of property and equipment.

Cash Flows Used in or Provided by Financing Activities. Cash flows provided by financing activities totaled $0.8 million for the nine months ended September 30, 2025, which included $1.3 million in proceeds from the exercise of warrants partially offset by $0.5 million in payments on our long-term debt and finance lease obligations. Cash flows used

infinancing activities totaled $0.1 million for the nine months ended September 30, 2024, which included $0.5 million in payments on our long-term debt and finance lease obligations. These were partially offset by $0.3 million of proceeds from debt and $0.1 million of proceeds from the issuance of common stock.

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 September 30, 2025 and December 31, 2024, other than certain purchase commitments of approximately $1.9 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 September 30, 2025, as compared to those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the Securities and Exchange Commission on March 27, 2025.

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, 2024, filed with the Securities and Exchange Commission on March 27, 2025.

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 and nine months ended September 30, 2025 and 2024. 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.