Precipio, Inc. — FY 2021 Form 10-K
Business context and reporting period. Precipio provides cancer diagnostic laboratory services and markets diagnostic products and reagents, with a focus on blood cancers. This annual filing covers the year ended December 31, 2021; it does not provide standalone fourth-quarter results. The company operates CLIA laboratories in New Haven, Connecticut, and Omaha, Nebraska.
Financial performance and position
| Metric | FY 2021 / Dec. 31, 2021 | FY 2020 / Dec. 31, 2020 |
|---|---|---|
| Net sales | $8.85 million | $6.09 million |
| Gross profit / margin | $2.39 million / 27% | $1.15 million / 19% |
| Operating loss | $9.61 million | $9.15 million |
| Net loss | $8.52 million | $10.60 million |
| Loss per common share | $0.40 | $0.85 |
| Cash from operating activities | $(6.58) million | $(7.43) million |
| Cash / working capital | $11.67 million / $9.27 million | $2.66 million / $(0.45) million |
| Total liabilities | $5.84 million | $6.55 million |
Revenue rose 45%, supported by an 18% increase in billed cases (4,345 versus 3,677) and higher HemeScreen reagent-rental program revenue. Gross margin improved as higher case volume helped leverage fixed laboratory costs. Operating expenses increased to $12.01 million from $10.30 million, including higher legal and professional fees and stock-based compensation.
Net loss narrowed partly because 2021 included a $0.79 million gain from forgiveness of the PPP loan and favorable warrant revaluation, while 2020 included a $1.23 million loss on extinguishment of convertible notes and $3.34 million in deemed dividends attributable to common stockholders. These items make the year-over-year bottom-line comparison less indicative of underlying operating performance.
Financing activities provided $16.27 million in 2021, principally from common-stock issuance. The company reported $0.19 million of long-term debt, excluding lease liabilities, and $1.24 million of finance and operating lease liabilities at year-end. Contractual commitments totaled $3.20 million, including $1.48 million in purchase obligations. Two customers represented approximately 33% of accounts receivable.
Material changes, outlook, and risks
- Going concern: The independent auditor’s report and management disclosures state that substantial doubt exists about the company’s ability to continue as a going concern for the 12 months after the financial statements were issued. The company reported an $8.52 million net loss, $6.58 million of operating cash use, and an $80.09 million accumulated deficit for 2021.
- Funding and dilution: The company raised $16.2 million net from common-stock issuance during 2021. Under its $22 million ATM agreement, it had received approximately $15.4 million gross through the financial-statement issuance date, with $6.6 million then available. Management cautioned that further financing may be required and may be unavailable, costly, or dilutive.
- Management outlook: Management expected case volume to increase in 2022 and costs per case to improve through further scale. It also projected additional HemeScreen panels during 2022. These are expectations, not guaranteed results; the filing gives no specific revenue or earnings guidance.
- Regulatory and reimbursement: In August 2021, the FDA contacted the company regarding HemeScreen, after which the company revised the product’s labeling. The company warns that FDA treatment of research-use-only products or laboratory-developed tests could require authorization or otherwise restrict sales. Approximately 43% of 2021 revenue came directly from government-sponsored healthcare programs, making reimbursement changes a material risk.
- Other risks and contingencies: COVID-19-related supply-chain disruption, competition, customer collections, regulatory compliance, litigation and reliance on two laboratories could affect operations. The filing notes delinquent vendor payables and possible collection actions; it also describes a disputed CPA Global claim of approximately $0.2 million, against which less than $0.1 million was accrued.
Most important facts for investors to verify
- Whether operating cash use, losses, and financing needs can be reduced enough to address the disclosed going-concern uncertainty.
- ATM usage, remaining availability, share issuance, and resulting dilution; compare the filing’s share counts and proceeds through the relevant dates.
- Whether case growth and improved gross margin continue, and whether non-service product revenue becomes a meaningful, sustainable contributor.
- The status of FDA communications and labeling for HemeScreen, and any changes to LDT or research-use-only regulation.
- Collection experience and payer mix, including the concentrated receivables exposure and estimates for contractual and doubtful-account allowances; the auditor identified service-revenue collection estimates as a critical audit matter.
- Resolution of vendor disputes, purchase commitments, and other legal or regulatory matters.