Executive Summary / Key Takeaways

• Strategic Transformation Achieved: Precipio has successfully transitioned from a "survival mode" focused on capital raises to a "build mode" driven by organic growth, achieving positive adjusted EBITDA and cash flow in Q4 2024, with management confident in reaching overall breakeven in 2025 without further dilutive capital.
• Dual-Engine Business Model: The company leverages its Pathology Services division as a robust cash generator and self-financed R&D platform, while the Products division, featuring proprietary technologies like HemeScreen, is positioned as the primary engine for future high-margin, recurring revenue growth.
• Technological Differentiators & Operational Excellence: Precipio's integrated clinical lab model allows for rapid, low-cost product development and provides a unique "send-out continuity program" for customers, offering a competitive edge in accuracy, workflow efficiency, and service reliability in specialized blood cancer diagnostics.
• Accelerating Growth Trajectory: Recent MolDx approval for NGS testing (projected $250K/quarter revenue boost), the overturning of an FDA ruling on LDTs, and a revitalized distributor strategy are expected to drive consistent and accelerated revenue growth, particularly in the Products division, aiming to double its Q4 2024 run rate by year-end 2025.
• Enhanced Investor Visibility: With a strengthening financial foundation, Precipio plans to increase market engagement through investor conferences and future guidance on key financial metrics, seeking to align its valuation with its improving performance and growth prospects.

The Battle Against Misdiagnosis: Precipio's Core Mission and Strategic Foundation

Precipio, Inc. is a healthcare biotechnology company singularly focused on addressing the pervasive problem of cancer misdiagnoses. Its mission is to deliver diagnostic products and services that offer higher accuracy, improved laboratory workflow, and ultimately better patient outcomes, which in turn reduce healthcare expenses. This commitment is not merely aspirational; it is embedded in the company's operational structure and technological prowess, forming the bedrock of its investment thesis.

The company operates a dual-engine business model. Its Pathology Services division provides essential blood cancer diagnostics through CLIA-compliant laboratories in New Haven, Connecticut, and Omaha, Nebraska. Crucially, these labs also serve as a self-financed research and development platform for Precipio's Products division. This integrated approach significantly reduces product development costs and accelerates time to market for new solutions. The Products division then commercializes proprietary diagnostic tools, such as the HemeScreen suite of genetic panels and IV-Cell, a unique cell culture media.

The Technological Edge: Precision in Cancer Diagnostics

Precipio's competitive advantage is deeply rooted in its differentiated technology, which aims to enhance diagnostic accuracy and efficiency in the complex field of hematologic cancers.

The company's HemeScreen panels are a suite of robust genetic diagnostic tools designed to detect specific genetic mutations critical for blood cancer diagnosis and prognosis. While specific quantitative performance metrics are not publicly detailed, management emphasizes that these panels deliver "higher accuracy" and "improved laboratory workflow." This translates into tangible benefits for customers: faster turnaround times, increased diagnostic coverage, and enhanced reliability, which are paramount in cancer care.

Another key offering is IV-Cell, a proprietary cell culture media. This technology enables the simultaneous culturing of four hematopoietic cell lineages, a process that is vital for comprehensive cytogenetic analysis in blood cancers. The benefit here is a more efficient and thorough analysis of patient samples, potentially leading to a more complete and accurate diagnostic picture.

The company's integrated model, where its clinical labs are the "first user of every product," provides a unique feedback loop. This allows Precipio to optimize critical laboratory functions such as workflow, inventory management, and regulatory compliance, directly translating into a higher level of informed support for its customers. This operational synergy is a significant differentiator, enabling Precipio to develop, test, and validate products at a lower cost and faster pace than many competitors.

Recent R&D initiatives include proactively updating panels to better distinguish between similar mutations, anticipating future regulatory guidelines. This forward-looking approach aims to "dramatically reduce, in fact, eliminate any downtime and loss of revenue due to any regulatory changes," ensuring continuous service and revenue stability. These technological advancements and the unique R&D model contribute directly to Precipio's competitive moat, supporting its ability to command market share in specialized diagnostic niches and drive long-term growth.

A Pivotal Transformation: From Survival to Strategic Growth

For many years, Precipio operated under a "constantly playing defense" mindset. The company incurred substantial operating losses and consistently used cash in its operating activities, necessitating ongoing capital raises. This environment, while fostering strong organizational discipline and frugality, inherently limited the company's ability to maximize growth.

A significant turning point arrived at the end of 2023 when management set an ambitious goal: to achieve breakeven by year-end 2024. This objective was successfully met, with Precipio reporting both positive adjusted EBITDA and positive cash flow in Q4 2024. This milestone marked a crucial shift from "survival mode" to "build mode," allowing management to view expenditures as investments in future growth rather than merely extending the runway. This strategic pivot is fundamental to understanding Precipio's current trajectory and future potential.

Financial Performance and Operational Momentum

Precipio's recent financial results underscore this strategic transformation, demonstrating consistent operational improvements and a clear path toward sustained profitability.

For the second quarter of 2025, net sales reached $5.654 million, a notable 27% increase compared to $4.441 million in Q2 2024. This growth was primarily fueled by the Pathology Services division, which processed 3,692 cases in Q2 2025, a 19% increase from 3,099 cases in the prior-year period. For the first six months of 2025, net sales climbed to $10.583 million, up 34% from $7.873 million in H1 2024, driven by a 30% increase in cases processed (6,713 cases).

Gross profit saw substantial improvement, rising from 39% in Q2 2024 to 43% in Q2 2025. For the first half of 2025, gross margin reached 43%, a significant jump from 34% in H1 2024. This margin expansion is a direct result of increased case volumes, which enable the company's laboratories to achieve economies of scale and leverage fixed expenses more effectively. Cost of sales increased by $0.5 million in Q2 2025, primarily due to higher reagent, operating supply, personnel, and pathologist interpretation costs associated with the increased case volume.

Operating expenses increased by $0.3 million in Q2 2025, driven by a $0.1 million rise in stock-based compensation and a $0.2 million increase in general and administrative expenses. However, operating loss significantly narrowed to $0.824 million in Q2 2025 from $1.209 million in Q2 2024. For H1 2025, the operating loss was $1.683 million, a substantial improvement from $3.283 million in H1 2024.

The company also benefited from non-recurring items in Q2 2025, recording $0.9 million in net other income. This included an $0.8 million payment from Employee Retention Credits (ERC) and a $0.1 million gain on the settlement of liabilities with Change Healthcare (CHC). These one-time gains further bolstered the quarter's financial results.

Liquidity and Capital Resources

Despite a historical pattern of operating losses and cash consumption, Precipio is demonstrating a marked improvement in its liquidity profile. As of June 30, 2025, the company reported an accumulated deficit of $103.3 million and a working capital deficit of $0.3 million. However, net cash provided by operating activities for the six months ended June 30, 2025, was $0.309 million, a significant turnaround from $0.167 million used in the prior-year period.

Management remains confident in its ability to reach breakeven in 2025 without the need for additional capital. This confidence is supported by strategic capitalization steps, including an existing sales agreement with AGP for up to $5.8 million in common stock sales, with approximately $3.7 million remaining available. In July 2025, the company strategically exercised 100,000 warrants, generating $1.3 million in net cash proceeds, while opting for a cashless exercise for an additional 200,000 warrants to minimize shareholder dilution. This approach reflects a commitment to responsibly managing its capital structure while supporting positive stock momentum.

The Dual Engines of Growth: Pathology Services and Products

Precipio's growth strategy is powered by two distinct yet synergistic divisions.

Pathology Services: The Foundation of Cash and Innovation

The Pathology Services division continues to be a consistent revenue generator and cash contributor. In July 2025, the division achieved a new record, exceeding $2 million in revenue for a single month. Management projects this division to reach an approximate $25 million run rate by the end of 2025. Gross margins are expected to stabilize in the mid-40%s range, with models indicating a potential to level off at around 50% by 2026, driven by increasing scale efficiencies.

A significant boost to this division's financial performance is the MolDx approval for its next-generation sequencing (NGS) testing, secured in Q1 2025. Previously, the company incurred costs for NGS tests from MolDx-governed states without reimbursement. This approval is estimated to add approximately $250,000 per quarter in increased revenue or cash from current case volumes alone. Beyond its financial contributions, this division is critical for the Products division, providing a continuous supply of patient samples for R&D beta-testing, effectively creating a self-financed innovation engine.

Products Division: The High-Margin Future

The Products division, encompassing proprietary offerings like HemeScreen, is slated to become the "main engine of growth" due to its recurring revenue potential, higher customer retention, and significantly better margins. In Q1 2025, Product gross margins improved from 37% to 51% year-over-year, driven by operational efficiencies such as improved shelf-life quality control as production scales. While Q2 2025 product revenue was $624,000, management notes this reflects a recovery from prior customer disruptions and expects continued growth.

The division has faced challenges, including customer operational issues (e.g., equipment downtime, lab tech turnover) and regulatory uncertainties. A notable headwind was the FDA ruling on Laboratory Developed Tests (LDTs) in 2024, which caused prospective customers to delay adoption. The overturning of this ruling in March 2025 has re-engaged these customers, leading to an expected acceleration in product revenue. Precipio is actively mitigating these challenges through a "send-out continuity program" (offering its clinical lab as a backup testing site for customers), proactive regulatory anticipation, detailed onboarding checklists, and structured incentives for rapid customer validation.

To accelerate growth, Steve Miller, a former Chief Commercial Officer, has rejoined the company to lead the Products division. The strategy emphasizes leveraging global healthcare distributors like ThermoFisher (TMO), McKesson (MCK), Medline, and Cardinal Health (CAH), which management believes is the fastest way to scale. The company aims to double the Products division's Q4 2024 run rate of $2.8 million by the end of 2025, driven by a strong pipeline, including two large institutional customers adopting the full HemeScreen suite via distributors.

Competitive Landscape: Differentiating Through Specialization and Integration

Precipio operates in a competitive healthcare diagnostics market, facing larger, more diversified players such as NeoGenomics, Inc. (NEO), Guardant Health, Inc. (GH), Quest Diagnostics Incorporated (DGX), and Laboratory Corporation of America Holdings (LH). These competitors typically boast greater scale, broader service portfolios, and more extensive market reach.

Precipio differentiates itself through its specialized focus on blood cancer diagnostics and its unique integrated model. While larger players like DGX and LH offer comprehensive testing, Precipio's proprietary technologies, such as HemeScreen and IV-Cell, offer enhanced sensitivity and efficiency in niche applications. For instance, management asserts that its integrated clinical lab model allows it to develop and implement regulatory updates (like new Limit of Detection plates) much faster than competitors, providing a distinct advantage in a rapidly evolving scientific field. This agility is a key competitive moat against the slower adaptation of larger, more bureaucratic organizations.

Compared to NeoGenomics, which also focuses on oncology, Precipio's integrated lab and product development cycle offers a cost-effective R&D platform that NeoGenomics may not replicate. Against Guardant Health's liquid biopsy focus, Precipio's reagent-based diagnostics and ICE-COLD PCR technology may offer superior sensitivity for specific mutation detection, carving out a niche where ultra-precision is paramount. While Precipio's market share is smaller and its overall revenue growth may trail these larger, more established players, its targeted innovation and operational efficiency in its specific segment allow it to compete effectively. The "send-out continuity program" further strengthens customer loyalty by providing a unique service continuity solution that most manufacturers cannot offer.

Outlook and Investor Visibility

Precipio's management is optimistic about its future, projecting continued revenue growth and a return to positive operating cash flow in Q2 or Q3 2025. The company's confidence in reaching overall breakeven in 2025 is a critical indicator of its maturing business model.

Looking ahead, Precipio plans to significantly enhance its visibility within the financial markets. Having spent two years in "stealth mode" to build a solid track record, the company will now gradually engage with investors, participate in industry and investor conferences, and build analyst coverage. This strategy aims to provide clear insights into its trajectory, with plans to offer management guidance on key financial metrics like revenue and EBITDA once consistent, strong performance across multiple quarters and greater customer diversity are achieved. This proactive engagement, coupled with continued operational execution, is expected to drive greater market awareness, increase trading volume, and ultimately enhance shareholder value.

Conclusion

Precipio, Inc. stands at a pivotal juncture, having successfully navigated years of development and capital dependency to emerge as a company with a clear path to financial independence. Its core investment thesis is built upon a dual-engine business model: a Pathology Services division that generates consistent cash flow and fuels R&D, and a Products division poised for high-margin, recurring revenue growth driven by proprietary, precision diagnostic technologies.

The company's integrated operational structure, which allows for rapid product development and unique customer support programs, provides a distinct competitive advantage in the specialized field of blood cancer diagnostics. With recent MolDx approval, the resolution of LDT regulatory uncertainty, and a revitalized commercial strategy, Precipio is well-positioned to accelerate its growth trajectory. While the "going concern" warning remains a formal disclosure, management's demonstrated ability to achieve breakeven and strategically manage capital inflows suggests a robust response to this challenge. For discerning investors, Precipio represents a compelling opportunity in a critical healthcare sector, offering a story of transformation, technological leadership, and disciplined growth.