Quarterly Report for Quarter Ending June 30, 2026 (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, 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 and six months ended June 30, 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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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.

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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.

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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.

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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.

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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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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 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

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.

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 June 30, 2026 and 2025

Net Sales. Net sales were as follows:

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Net sales for the three months ended June 30, 2026 were approximately $7.0 million, an increase of $1.4 million as compared to the same period in 2025. During the three months ended June 30, 2026, patient diagnostic service revenue increased $1.1 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 4,652 cases during the three months ended June 30, 2026 as compared to 3,692 cases during the same period in 2025, or a 26% increase in cases. Product revenue for the three months ended June 30, 2026 increased $0.3 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 costs and rent) associated with the operations of our laboratory. Cost of sales increased by $0.7 million for 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.

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

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Gross profit was approximately $3.1 million and $2.4 million during the three months ended June 30, 2026 and 2025, respectively. The gross profit increased $0.7 million during the three 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 45% and 43% for the three months ended June 30, 2026 and 2025, respectively. 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.

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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 $0.5 million for the three months ended June 30, 2026 as compared to the same period in 2025. For the three months ended June 30, 2026: (1) general and administrative expenses increased by $0.1 million primarily due to increased legal and professional fees, (2) sales and marketing expenses increased by $0.1 million due to increase personnel costs, specifically related to new hires in our product division sales force, (3) research and development expenses remained relatively flat as compared to the prior year period, and (4) stock-based compensation, which is a non-cash expense, increased by $0.3 million.

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Other Expense. We recorded net other income of $0.4 million for the three months ended June 30, 2026, which included income of $0.4 million from the receipt of Employee Retention Credits partially offset by net interest expense of $9 thousand. We recorded net other income of $0.9 million for the three months ended June 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 $23 thousand.

Results of Operations for the Six Months Ended June 30, 2026 and 2025

Net Sales. Net sales were as follows:

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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.

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 $1.9 million for the six 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.

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

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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.

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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 $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.

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Other Expense. We recorded net other income of $0.4 million for the six months ended June 30, 2026, which included income of $0.4 million from the receipt of Employee Retention Credits partially offset by net interest expense of $24 thousand. We recorded net other income of $0.9 million for the six months ended June 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 $48 thousand.

Liquidity and Capital Resources

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

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

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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

activities of $0.3 million during the six months ended June 30, 2025 included a decrease in other assets of $0.1 million, an increase in accounts payable of $0.5 million, an increase in deferred revenues of $0.1 million, and non-cash adjustments of $1.6 million. These were partially offset by a net loss of $0.8 million, an increase in accounts receivables of $0.6 million, an increase in inventories of $0.3 million, a decrease in operating lease liabilities of $0.1 million and a decrease in accrued expenses of $0.2 million. .

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.

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.

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 June 30, 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 June 30, 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 and six months ended June 30, 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.