Precipio, Inc.

Previous wording

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.

Current wording

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 and six months ended June 30, 2026 are not necessarily indicative of results that may be attained in the future.

Previous wording

We are a healthcare biotechnology company focused on improving cancer diagnostics. Ourobjective 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.

Current wording

We are a healthcare biotechnology company focused on improving cancer diagnostics. Ourobjective 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

Previous wording

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 its 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

Current wording

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 its 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.

Previous wording

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.

Current wording

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 18 months, this was largely aided by $1.2 million in payments received related to non-recurring Employee Retention Credits. See Note 12 Employee Retention Credit. For the six months ended June 30, 2026, we had an operating loss of $2.0 million and net cash provided by operating activities of $0.7 million. As of June 30, 2026, we had an accumulated deficit of $104.5 million and working capital of $2.8 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

Previous wording

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 millionfor 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.

Current wording

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 $0.7 millionfor the three months ended June 30, 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.

Previous wording

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.

Current wording

Net sales for the six months ended June 30, 2026 were approximately $13.7 million, an increase of $3.1 million as compared to the same period in 2025. During the six months ended June 30, 2026, patient diagnostic service revenue increased $2.9 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 9,564 cases during the six months ended June 30, 2026 as compared to 6,713 cases during the same period in 2025, or a 42% increase in cases. The benefit of the increase in cases billed during the six months ended June 30, 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 six months ended June 30, 2026 increased by $0.3 million.

Previous wording

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 thelower 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.

Current wording

Gross profit was approximately $5.9 million and $4.6 million during the six months ended June 30, 2026 and 2025, respectively. The gross profit increased $1.3 million during the six months ended June 30, 2026, as compared to the prior year period, as a result of increases in case volume and revenue. The gross margin was 43% for the six months ended June 30, 2026 and 2025. 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.

Previous wording

$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.

Current wording

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 $1.6 million for the six months ended June 30, 2026 as compared to the same period in 2025. For the six months ended June 30, 2026: (1) general and administrative expenses increased by $0.2 million primarily due to increased legal and professional fees, (2) sales and marketing expenses increased by $0.4 million due to increased personnel and recruiting costs, specifically related to new hires in our product division sales force, (3) research and development expenses increased by $0.1 million due to increased personnel costs, and (4) stock-based compensation, which is a non-cash expense, increased by $0.9 million.

Previous wording

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

Current wording

Analysis of Cash Flows – Six Months Ended June 30, 2026 and 2025

Previous wording

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.

Current wording

Cash Flows Provided by Operating Activities. The cash flows provided by operating activities of $0.7 million during the six months ended June 30, 2026 included an increase in deferred revenue of $0.1 million, a decrease in inventories and other assets of $0.2 million, and non-cash adjustments of $3.0 million. These were partially offset by a net loss of $1.7 million, an increase in accounts receivables of $0.5 million, a decrease in operating lease liabilities of $0.2 million, and a decrease in accounts payable and accrued expenses of $0.2 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 $2.7 million include, among other things, depreciation and amortization, and stock-based compensation. The cash flows provided by operating

Previous wording

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.

Current wording

Cash Flows Used In Investing Activities. Cash flows used in investing activities were approximately $0.2 million for the six months ended June 30, 2026 and 2025 resulting from purchases of property and equipment.

Previous wording

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.

Current wording

Cash Flows Used in Financing Activities. Cash flows used in financing activities totaled $0.1 million for the six months ended June 30, 2026, which included payments on our long-term debt and finance lease obligations. Cash flows used in financing activities totaled $0.4 million for the six months ended June 30, 2025, which included $0.4 million in payments on our long-term debt and finance lease obligations.

Previous wording

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.

Current wording

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 six months ended June 30, 2026 and 2025. We cannot assure you, however, that we will be able to