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What changed in Precipio, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Precipio, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+298 added−276 removedSource: 10-K (2024-03-29) vs 10-K (2023-03-30)

Top changes in Precipio, Inc.'s 2023 10-K

298 paragraphs added · 276 removed · 203 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

41 edited+25 added−9 removed67 unchanged
Biggest changeCompetitors include Gibco, Irvine Scientific, Capricorn Scientific, Sigma-Aldrich, Euroclone and others. ​ Precipio’s IV-Cell is the only media that has an all-in-one product that includes a base media plus all necessary mitogens, enabling the simultaneous culturing of all 4 cell lineages. 7 Table of Contents Competitive Advantage Our competitive advantage is derived from our ability to identify real-world clinical challenges in the laboratory; develop technology-based solutions to those challenges; test them within our lab on real clinical samples; and then commercialize the technology and bring it to market.
Biggest changeCompetitors include Gibco, Irvine Scientific, Capricorn Scientific, Sigma-Aldrich, Euroclone and others. ​ Precipio’s IV-Cell is the only known media that has an all-in-one product that includes a base media plus all necessary mitogens, enabling the simultaneous culturing of all 4 cell lineages.
In accordance with the transitional provisions in the IVDR, devices placed on the EU market prior to 26 May 2022 in accordance with the IVDD (except for Class A, non-sterile devices which must conform with the IVDR requirements since May 26, 2022) may continue to be supplied until a certain date (ranging from May 2025 to May 2027) which will depend on the risk class of the device, provided that manufacturers comply with the IVDR requirements relating to post-market surveillance, market surveillance, vigilance and registration of economic operators and devices.
In accordance with the transitional provisions in the IVDR, devices placed on the EU market prior to May 26, 2022 in accordance with the IVDD (except for Class A, non-sterile devices which must conform with the IVDR requirements since May 26, 2022) may continue to be supplied until a certain date (ranging from May 2025 to May 2027) which will depend on the risk class of the device, provided that manufacturers comply with the IVDR requirements relating to post-market surveillance, market surveillance, vigilance and registration of economic operators and devices.
Gage served as Director of Financial Reporting and Analysis of Precipio, Inc. since joining the Company in June 2017 following its acquisition of Transgenomic Inc., where he was Director of Financial Reporting and Analysis since 2014. Mr. Gage has over 30 years of experience in company finance, 25 years of which being with publicly traded companies. Mr.
Gage previously served as Director of Financial Reporting and Analysis of Precipio, Inc. since joining the Company in June 2017 following its acquisition of Transgenomic Inc., where he was Director of Financial Reporting and Analysis since 2014. Mr. Gage has over 30 years of experience in company finance, 25 years of which being with publicly traded companies. Mr.
Our panels: ​ Typically range from 4-7 genes (matching the clinical requirements); Are all run on one, inexpensive machine (a RT-PCR, which costs between $30-75k); Require very basic laboratory training and can be run by any lab tech with limited training; and, Have attractive economics that provide attractive margins to laboratories who decide to use the RUO assays as an LDT. ​ IV-Cell competition ​ As described in the section above, the cytogenetics workup requires the selection and evaluation of a cell lineage within 4 potential cell lineages.
Our panels: ​ Typically range from 4-7 genes (matching the clinical requirements); Are all run on one, inexpensive machine (a RT-PCR, which costs between $30-75k); Require very basic laboratory training and can be run by any lab tech with limited training; and, Have attractive economics that provide attractive margins to laboratories who decide to use the RUO assays as an LDT. ​ IV-Cell competition 7 Table of Contents ​ As described in the section above, the cytogenetics workup requires the selection and evaluation of a cell lineage within 4 potential cell lineages.
We believe that the diagnostic industry focuses primarily on competitive pricing and test turnaround times, (“TAT”), at the expense of quality and accuracy. Increasingly complex disease states are met with eroding specialization rather than increased subspecialized expertise.
We believe that the diagnostic industry focuses primarily on competitive pricing and test turnaround times, at the expense of quality and accuracy. Increasingly complex disease states are met with eroding specialization rather than increased subspecialized expertise.
We invest in our employees by providing development opportunities, and the necessary resources to support their success, including coaching, management and leadership training, presentation workshops and paid conference attendance. The diversity of our employees and their skillsets also offer a unique opportunity for us to learn from each other’s experiences. Compensation and Benefits.
We invest in our employees by providing development opportunities, and the necessary resources to support their success, including coaching, management and leadership training, presentation workshops and paid conference attendance. The diversity of our employees and their skillsets also offer a unique opportunity for us to learn from each other’s experiences.
It is unclear how other healthcare reform measures of the Biden administration or other efforts, if any, to challenge, repeal or replace the PPACA will impact our business. U.S. Food and Drug Administration Regulation We offer our products as research use only (RUO) products.
It is unclear how other healthcare reform measures of the Biden administration or other efforts, if any, to challenge, repeal or replace the PPACA will impact our business. U.S. Food and Drug Administration Regulation We offer our products as research use only (“RUO”) products.
Conversely, NGS, although providing broad gene coverage, is cumbersome and expensive to operate, thus resulting in lengthy TAT; and is costly to the payors who are reluctant to pay for the testing of 50 genes, when only 5 are defined as medically necessary. ​ A small panel targeted approach that operates on a single, low-cost, and easy-to-operate platform should be considered an attractive solution that provides the clinician with the answers they need while maintaining a simple, cost-effective workflow and economic model within the laboratory.
Conversely, NGS, although providing broad gene coverage, is cumbersome and expensive to operate, thus resulting in lengthy test turnaround time; and is costly to the payors who are reluctant to pay for the testing of 50 genes, when only 5 are defined as medically necessary. ​ A small panel targeted approach that operates on a single, low-cost, and easy-to-operate platform should be considered an attractive solution that provides the clinician with the answers they need while maintaining a simple, cost-effective workflow and economic model within the laboratory.
The RUO Guidance further articulates the FDA’s position that any assistance offered in performing clinical validation or verification, or similar specialized technical support, to clinical laboratories, conflicts with RUO status. Additionally, our CLIA laboratories offer testing utilizing our laboratory developed tests (LDTs).
The RUO Guidance further articulates the FDA’s position that any assistance offered in performing clinical validation or verification, or similar specialized technical support, to clinical laboratories, conflicts with RUO status. Additionally, our CLIA laboratories offer testing utilizing our laboratory developed tests (“LDTs”).
All other competitors have a set of products that include a “base media” that is used for culturing, plus a set of various mitogens that are “cocktailed” into the base media in order to stimulate the specific cell lineage in question.
All other competitors have a set of products that include a “base media” that is used for culturing, plus a set of various mitogens that are mixed into the base media in order to stimulate the specific cell lineage in question.
Approximately 40% of our revenue for the year ended December 31, 2022 was derived directly from Medicare, Medicaid or other government-sponsored healthcare programs. Also, we indirectly provide services to beneficiaries of Medicare, Medicaid and other government-sponsored healthcare programs through managed care entities.
Approximately 33% of our revenue for the year ended December 31, 2023 was derived directly from Medicare, Medicaid or other government-sponsored healthcare programs. Also, we indirectly provide services to beneficiaries of Medicare, Medicaid and other government-sponsored healthcare programs through managed care entities.
Executive Officers of the Registrant Our executive officers, their ages as of March 15, 2023 and their respective positions are as follows: Ilan Danieli, Chief Executive Officer, age 51 ​ Mr. Danieli was the founder of Precipio Diagnostics LLC and was the Chief Executive Officer of Precipio Diagnostics LLC since 2011. Mr.
Executive Officers of the Registrant Our executive officers, their ages as of March 15, 2024 and their respective positions are as follows: Ilan Danieli, Chief Executive Officer, age 52 ​ Mr. Danieli was the founder of Precipio Diagnostics LLC and was the Chief Executive Officer of Precipio Diagnostics LLC since 2011. Mr.
Our customers that utilize HemeScreen have demonstrated a reduction in TAT of 2 weeks to 2 days, and have also improved their financial outcome through this cost-effective technology. ​ The first panel developed using HemeScreen technology was our Myeloproliferative Neoplasms (MPN) panel.
Our customers that utilize HemeScreen have demonstrated a reduction in test turnaround time of 2 weeks to 2 days, and have also improved their financial outcome through this cost-effective technology. ​ The first panel developed using HemeScreen technology was our Myeloproliferative Neoplasms panel.
Danieli assumed the role of Chief Executive Officer of Precipio, Inc. at the time of a June 2017 merger transaction with Transgenomic, Inc. (the “Merger”).
Danieli assumed the role of Chief Executive Officer of Precipio, Inc. at the time of a 12 Table of Contents June 2017 merger transaction with Transgenomic, Inc. (the “Merger”).
You can review our electronically filed reports and other information that we file with the SEC on the SEC’s web site at http://www.sec.gov.
You can review our electronically filed reports and other information that we file with the SEC on the SEC’s web site at http://www.sec.gov. 13 Table of Contents
HemeScreen utilizes an inexpensive RT-PCR (reverse transcription polymerase chain reaction). HemeScreen is a set of disease-specific reagents that provide a simple workflow, is easy to use, and create attractive economics to the lab, resulting in their ability to reduce batches and provide faster TAT.
HemeScreen utilizes an inexpensive RT-PCR (reverse transcription polymerase chain reaction). HemeScreen is a set of disease-specific reagents that provide a simple workflow, is easy to use, and create attractive economics to the lab, resulting in their ability to reduce batches and provide faster test 5 Table of Contents turnaround time.
For our laboratory services, as blood-related cancers are more likely to be developed later in life, the largest insurance provider is Medicare, which constitutes approximately 40% of our patients’ cases. Non-Medicare patients are typically insured by private insurance companies who provide patient coverage and pay for patients’ health-related costs.
For our laboratory services, as blood-related cancers are more likely to be developed later in life, the largest insurance provider is Medicare, which constituted approximately 32% of our patients’ cases during the year ended December 31, 2023. Non-Medicare patients are typically insured by private insurance companies who provide patient coverage and pay for patients’ health-related costs.
For example, the U.S. federal transparency requirements under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, (“PPACA”), including the provision commonly referred to as the Physician Payments Sunshine Act, and its implementing regulations, which requires applicable manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program to report annually to CMS, information related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members.
For example, the U.S. federal transparency requirements under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, (“PPACA”), including the provision commonly referred to as the Physician Payments Sunshine Act, and its implementing regulations, which requires applicable manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program to report annually to CMS, information related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other licensed health care practitioners, and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members. ​ Our business is impacted not only by those laws and regulations that are directly applicable to us but also by certain laws and regulations that are applicable to our payers, vendors and referral sources.
The annual growth rate of each market segment is estimated at 5%. Successful deployment within the United States will be closely followed by international marketing where the same product opportunities exist for our products. From our New Haven, Connecticut commercial lab, we currently provide diagnostic blood cancer testing services to oncology practices in over 20 states.
Successful deployment within the United States will be closely followed by international marketing where the same product opportunities exist for our products. From our New Haven, Connecticut commercial lab, we currently provide diagnostic blood cancer testing services to oncology practices in over 20 states.
Our principal office is located at 4 Science Park, New Haven, Connecticut 06511. Our internet address is www.precipiodx.com. Information found on our website is not incorporated by reference into this report and should not be considered as part of this report.
Corporate History Precipio, Inc. was incorporated in Delaware on March 6, 1997. Our principal office is located at 4 Science Park, New Haven, Connecticut 06511. Our internet address is www.precipiodx.com. Information found on our website is not incorporated by reference into this report and should not be considered as part of this report.
More information regarding our research and development activities can be found in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Item 7 of this Annual Report. Human Capital Employees. As of March 15, 2023, Precipio employed fifty-five (53) employees on a full-time basis and three (3) employees as part-time.
More information regarding our research and development activities can be found in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Item 7 of this Annual Report. Human Capital Employees. As of March 1, 2024, Precipio employed fifty-one (51) employees on a full-time basis and six (6) employees as part-time.
An RUO product is one that is not intended for clinical diagnostic use and must be labeled “For Research Use Only. Not for use in diagnostic procedures.” Products that are intended for research use only and are properly labeled as RUO are exempt from compliance with the requirements of the U.S. Food and Drug Administration (FDA) applicable to medical devices.
An RUO product is one that is not intended for clinical diagnostic use and must be labeled “For Research Use Only. Not for use in diagnostic procedures.” Products that are intended for research use only and are properly labeled as RUO are exempt from compliance with the requirements of 9 Table of Contents the U.S.
The oncology total available market, (“TAM”), is estimated to exceed $20 billion in 2023, with an estimated compound annual growth rate exceeding 5%. We also provide new technologies to the oncology diagnostic laboratory market in the form of HemeScreen and IV-Cell product offerings. The diagnostics product market is estimated to have annual revenues exceeding $14 billion by 2025.
We also provide new technologies to the oncology diagnostic laboratory market in the form of HemeScreen and IV-Cell product offerings. The diagnostics product market is estimated to have annual revenues exceeding $14 billion by 2025. The annual growth rate of each market segment is estimated at 5%.
We believe that Insurance Providers, Medicare and Medicaid waste valuable dollars on the application of incorrect treatments and can incur substantial downstream costs. According to a report by Pinnacle Health, the estimated cost of misdiagnosis within the healthcare system is $750 billion annually. Most importantly however, patients pay the ultimate price of misdiagnosis with increased morbidity and mortality.
We believe that insurance providers, Medicare and Medicaid waste valuable dollars on the 4 Table of Contents application of incorrect treatments and can incur substantial downstream costs. According to a report by Pinnacle Health, the estimated cost of misdiagnosis within the healthcare system is $750 billion annually.
We have since added Acute Myeloid Leukemia (AML), Chronic Lymphocytic Leukemia (CLL), Cytopenia, and BCR- 5 Table of Contents ABL panels, evolving HemeScreen into a “suite” of robust genetic diagnostic panels, and we expect the release of additional diagnostic panels during 2023. ​ We own a provisional patent application on our proprietary panels.
We have since added Acute Myeloid Leukemia, Chronic Lymphocytic Leukemia, Cytopenia, and BCR-ABL panels, evolving HemeScreen into a “suite” of robust genetic diagnostic panels, and we released a number of panels during 2023 and expect the release of additional diagnostic panels in the coming years. ​ We own an international patent application on our proprietary panels.
Compliance with Environmental Laws ​ We believe we are in compliance with current environmental protection requirements that apply to us or our business. Costs attributable to environmental compliance are not currently material. ​ Intellectual Property ​ The Company has filed provisional patent applications for its proprietary HemeScreen technology. Corporate History Precipio, Inc. was incorporated in Delaware on March 6, 1997.
Compliance with Environmental Laws ​ We believe we are in compliance with current environmental protection requirements that apply to us or our business. Costs attributable to environmental compliance are not currently material. ​ Intellectual Property ​ The Company has filed an international patent applications for its proprietary HemeScreen technology.
The first group consists of companies that specialize in oncology and offer directly competing services to our diagnostic services. These companies provide a high level of service focused on oncology and offer their services to oncologists and pathology departments within hospitals. Competitors in this group include NeoGenomics Laboratories, Inc., also known as NeoGenomics or Neo, GenPath Diagnostics and Inform Diagnostics.
The first group consists of companies that specialize in oncology and offer directly competing services to our diagnostic services. These companies provide a high level of service focused on oncology and offer their services to oncologists and pathology departments within hospitals.
The IV-Cell technology and media can be purchased via a direct supply contract, whereby we are contracted with a manufacturer (under license and non-disclosure) to produce the media. ​ Competition Our principal competition in clinical pathology services comes largely from two groups.
Subsequently, IV-Cell has been used at our laboratory for the past few years on more than 1,000 clinical specimens, producing more precise diagnostic results. ​ The IV-Cell technology and media can be purchased via a direct supply contract, whereby we are contracted with a manufacturer (under license and non-disclosure) to produce the media. ​ Competition Our principal competition in clinical pathology services comes largely from two groups.
Ilan holds an MBA from the Darden School at the University of Virginia, and a BA in Economics from Bar-Ilan University in Israel. 12 Table of Contents Matthew Gage, Interim Chief Financial Officer, age 56 ​ Mr. Gage was appointed Interim Chief Financial Officer of Precipio, Inc. effective March 21, 2022. Mr.
Ilan holds an MBA from the Darden School at the University of Virginia, and a BA in Economics from Bar-Ilan University in Israel. Matthew Gage, Chief Financial Officer, age 57 ​ Mr.
The aim is to structure our compensation programs to balance incentive earnings for both short-term and long-term performance. 11 Table of Contents We are committed to providing comprehensive benefits and some examples of the benefits we offer are: medical insurance including prescription drug benefits, dental insurance, vision insurance, accident insurance, life insurance, disability insurance, health savings accounts, flexible spending accounts and access to mental health support.
We are committed to providing comprehensive benefits and some examples of the benefits we offer are: medical insurance including prescription drug benefits, dental insurance, vision insurance, accident insurance, life insurance, disability insurance, health savings accounts, flexible spending accounts and access to mental health support.
Of the total, eleven (11) were in Finance, General and Administration, twenty-one (21) were in laboratory and production, fifteen (15) were in Sales and Marketing, four (4) were in Customer Service and Support and five (5) were in Research & Development. All of our employees are based in the U.S. and a majority are based in Connecticut.
Of the total, thirteen (13) were in Finance, General and Administration, twenty-four (24) were in laboratory and production, ten (10) were in Sales and Marketing, three (3) were in Customer Service and Support and seven (7) were in Research & Development. All of our employees are based in the U.S. and a majority are based in Connecticut.
Our human capital strategies, initiatives, and outcomes are reviewed on a regular basis with our Board’s Governance Committee as well as Compensation Committee to help align with our overall business strategies. Our competitive compensation programs are designed to align the compensation of our employees with our performance and to provide the proper incentives to attract, retain and motivate employees.
Compensation and Benefits. 11 Table of Contents Our human capital strategies, initiatives, and outcomes are reviewed on a regular basis with our Board’s Governance Committee as well as Compensation Committee to help align with our overall business strategies.
The second group consists of large commercial companies that offer a wide variety of laboratory tests ranging from simple chemistry tests to complex genetic testing. Competitors in this group include LabCorp (NYSE: LH) and Quest Diagnostics (NYSE: DGX).
Competitors in this group include NeoGenomics Laboratories, Inc., also known as NeoGenomics or Neo, 6 Table of Contents GenPath Diagnostics and Inform Diagnostics. The second group consists of large commercial companies that offer a wide variety of laboratory tests ranging from simple chemistry tests to complex genetic testing.
Item 1. Our Business Business Description Precipio, Inc., and its subsidiaries, (collectively, “we”, “us”, “our”, the “Company” or “Precipio”) is a healthcare biotechnology company focused on cancer diagnostics. Our mission is to address the pervasive problem of cancer misdiagnoses by developing solutions to mitigate the root causes of this problem in the form of diagnostic products, reagents and services.
Item 1. Business Business Description Precipio, Inc., and its subsidiaries, (collectively, “we”, “us”, “our”, the “Company” or “Precipio”) is a healthcare biotechnology company focused on cancer diagnostics.
A product labeled RUO but intended to be used diagnostically may be viewed by the FDA as adulterated or misbranded and is subject to FDA enforcement activities. 9 Table of Contents The FDA may consider the totality of the circumstances surrounding distribution and use of an RUO product, including how the product is marketed, when determining its intended use.
The FDA may consider the totality of the circumstances surrounding distribution and use of an RUO product, including how the product is marketed, when determining its intended use.
Such proposals would implement differing approaches to the regulation of LDTs, including in certain instances to require marketing authorization from the FDA. In early 2023, the FDA has also indicated that the agency was looking at rulemaking for diagnostics reform. Medical devices are subject to extensive regulation by the FDA.
Such proposals would implement differing approaches to the regulation of LDTs, including in certain instances to require marketing authorization from the FDA.
Developing diagnostic products that increase accuracy, while also providing improved workflow and economic outcomes to laboratories is key to addressing this problem and delivering better diagnostic care. 4 Table of Contents Market Our market is the United States domestic oncology market where we participate as a commercial diagnostic laboratory and market our products.
Most importantly, however, patients pay the ultimate price of misdiagnosis with increased morbidity and mortality. Developing diagnostic products that increase accuracy, while also providing improved workflow and economic outcomes to laboratories is key to addressing this problem and delivering better diagnostic care.
After the applicable date, all devices must be certified under the IVDR in order to be marketed in the EU. Research and Development Expenses For the years ended December 31, 2022 and 2021, we recorded $1.7 million and $1.3 million, respectively, of research and development expenses.
After the applicable date, all devices must be certified under the IVDR in order to be marketed in the EU.
We operate CLIA (Clinical Laboratory Improvement Amendments), laboratories in both the New Haven, Connecticut and Omaha, Nebraska locations providing essential blood cancer diagnostics to office-based oncologists in many states nationwide. ​ ​ Industry We believe there is a significant problem of misdiagnosis across numerous disease states (particularly in blood-related cancers) due to an inefficient and commoditized industry.
We operate 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.
Within the liquid biopsy market, our competitors include Foundation Medicine and Guardant Health. 6 Table of Contents For the Products division, our competitors include various reagent manufacturers who produce various products that compete with our products. Single gene vs. NGS (Next Generation Sequencing) concept ​ Molecular tests have become part of standard of care for the diagnostic of cancer biopsies.
Competitors in this group include LabCorp (NYSE: LH) and Quest Diagnostics (NYSE: DGX). Within the liquid biopsy market, our competitors include Foundation Medicine and Guardant Health. For the Products division, our competitors include various reagent manufacturers who produce various products that compete with our products.
In our laboratory and R&D facilities located in New Haven, Connecticut and Omaha, Nebraska, our development teams work to develop, test, and ultimately run new products and services in a clinical setting.
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.
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Misdiagnoses are caused by numerous factors, among them outdated diagnostic technologies, lack of subspecialized expertise, and sub-optimal laboratory processes that are needed in today’s diagnostic cancer testing in order to provide accurate, rapid, and resource-effective results to treat patients.
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Our 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.
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We focus on blood related cancers which represent some of the most complex cancers to diagnose, and are prone to some of the highest rates of misdiagnosis; industry studies estimate 1 in 5 blood-cancer patients are misdiagnosed.
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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 misdiagnosis.
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As cancer diagnostic testing has evolved from a cellular to a molecular/genetic-based approach, laboratory testing has become extremely complex, requiring even greater diagnostic precision, attention to process and a more appropriate evaluation of the abundance of genetic data to effectively gather, consider, analyze and present information for the physician for patient treatment. ​ We develop and sell diagnostic products, reagents and services that improve the accuracy and efficiency of diagnostics, and lead to fewer misdiagnoses.
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To deliver on our strategy of mitigating misdiagnoses we rely heavily on our CLIA laboratory to support R&D beta-testing of the products we develop, in a clinical environment. ​ The development of laboratory products involves a qualified facility; highly skilled laboratory staff; and access to viable patient specimens to conduct development and testing.
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We believe that our products and services impact patient outcomes by providing more accurate diagnostic results than current industry accepted practices that better inform the selection of appropriate therapeutic options. Furthermore, we believe that better patient outcomes have a positive impact on healthcare expenses as a result of fewer misdiagnoses.
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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.
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We believe our platform delivers better diagnostic accuracy than industry peers because of the technologies, workflow processes and experience we have developed.
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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.
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We market our technologies to other laboratories; additionally, we also operate our own laboratory, focused on delivering specialized diagnostic services to physicians and their patients to better ensure they receive accurate results leading to fewer misdiagnoses and promoting cost savings.
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This also enables us to accelerate the time to market of new product development and launch. ​ 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.
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Better Diagnostic Results – Better Patient Outcome – Lower Healthcare Expenditures. ​ To deliver our strategy, we have structured our organization in order to drive development of diagnostic products.
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As a vendor, this places us as a reputable user of our own products, and we believe gains us significant credibility with existing and prospective customers.
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Subsequently, IV-Cell has been used at our laboratory for the past few years on more than 1,000 clinical specimens, producing superior diagnostic results. ​ We are marketing this technology by providing major laboratories with access to the media.
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Furthermore, because we use our products as part of our day-to-day operations, we are able to deliver a high level of hands-on, experienced support to customers, improving their experience with our products. ​ Our Products Division commercial team generates direct sales and works with our key distributors.
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Effective January 1, 2022, these reporting obligations extend to include transfers of value made to certain non-physician providers (physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists and anesthesiologist assistants, and certified-nurse midwives). ​ Our business is impacted not only by those laws and regulations that are directly applicable to us but also by certain laws and regulations that are applicable to our payers, vendors and referral sources.
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Global healthcare distributors, such as ThermoFisher, McKesson, 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. ​ 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. ​ ​ Industry We believe there is a significant problem of misdiagnosis across numerous disease states (particularly in blood-related cancers) due to an inefficient and commoditized industry.
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Market Our market is the United States domestic oncology market where we participate as a commercial diagnostic laboratory and market our products. The oncology total available market, is currently estimated to exceed $20 billion, with an estimated compound annual growth rate exceeding 5%.
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Many of the companies against which we may compete have significantly greater financial resources and expertise than we do in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products.
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These competitors also compete with us in recruiting and retaining qualified scientific and management personnel as well as in acquiring technologies complementary to, or necessary for, our programs.
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Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market. Single gene vs.
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NGS (Next Generation Sequencing) concept ​ Molecular tests have become part of standard of care for the diagnostic of cancer biopsies.
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Competitive Advantage Our competitive advantage is derived from our ability to identify real-world clinical challenges in the laboratory; develop technology-based solutions to those challenges; test them within our lab on real clinical samples; and then commercialize the technology and bring it to market.
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Food and Drug Administration (FDA) applicable to medical devices. A product labeled RUO but intended to be used diagnostically may be viewed by the FDA as adulterated or misbranded and is subject to FDA enforcement activities.
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On October 3, 2023, the FDA published a proposed rule on LDTs, in which the FDA proposes to end enforcement discretion for virtually all LDTs in five stages over a four-year period from the date the FDA publishes a final rule.
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In Phase 1 (effective one year post-finalization), laboratories would be required to comply with medical device (adverse event) reporting and correction/removal reporting requirements. In Phase 2 (effective two years post-finalization), laboratories would be required to comply with all other device requirements (e.g., registration/listing, labeling, investigational use), except for quality systems and premarket review.
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In Phase 3 (effective three years post-finalization), laboratories would be required to comply with quality systems requirements. In Phase 4 (effective three and a half years post-finalization, but not before October 1, 2027), laboratories would be required to comply with premarket review requirements for high-risk tests (i.e., tests subject to the PMA requirement).
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Finally, in Phase 5 (effective four years post-finalization, but not before April 1, 2028), laboratories would be required to comply with premarket review requirements for moderate- and low-risk tests (i.e., tests subject to de novo or the 510(k) requirement). Unlike previous proposals, the proposed rule does not provisions that would allow for “grandfathering” of existing tests.
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The content and timing of any final rule on LDTs is uncertain at this time. Medical devices are subject to extensive regulation by the FDA.
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In January 2024, the European Commission published a proposal for a further extension to the transitional periods until December 2027 to December 2029, depending on the risk class of the device and subject to certain requirements (e.g. for devices requiring notified body assessment, the manufacturer must submit an application to a notified body to transfer the device to the IVDR by a certain date (ranging from May 2025 to May 2027), depending on the risk class of the device).
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The proposal will now be put forward to the European Parliament and European Council for adoption. Research and Development Expenses For the years ended December 31, 2023 and 2022, we recorded $1.7 million, respectively, of research and development expenses.
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Our competitive compensation programs are designed to align the compensation of our employees with our performance and to provide the proper incentives to attract, retain and motivate employees. The aim is to structure our compensation programs to balance incentive earnings for both short-term and long-term performance.
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Gage was appointed Interim Chief Financial Officer of Precipio, Inc. effective March 21, 2022 and promoted to Chief Financial Officer effective July 1, 2023 without any change to his compensation or any additional stock award. Mr.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAdditionally, the sale of a substantial number of shares of our common 39 Table of Contents stock, or the anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales. ​ From April 2, 2021 through the date the consolidated financial statements were issued, we received approximately $16.0 million in gross proceeds through the AGP Sales Agreement from the sale of 5,119,656 shares of Common Stock, leaving us with an additional $6.0 million available for future sales pursuant to the AGP Sales Agreement . ​ Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our diagnostic technologies or current or future development programs. ​ Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of private and public equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements.
Biggest changeRaising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our diagnostic technologies or current or future development programs. ​ Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of private and public equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements.
If we are unable to establish marketing and sales capabilities and retain the proper talent to execute on our sales and marketing strategy, we may not be able to generate product revenue. ● Cybersecurity risks could compromise our information and expose us to liability, which may harm our ability to operate effectively and may cause our business and reputation to suffer. ● Our ability to use net operating loss carryforwards to offset future taxable income for U.S. federal tax purposes is subject to limitation and risk that could further limit our ability to utilize our net operating losses. ● The testing, manufacturing and marketing of diagnostics entails an inherent risk of product liability and personal injury claims. ● All of our diagnostic technology development and our clinical services are performed at two laboratories, and in the event either or both of these facilities were to be affected by a termination of the lease or a man-made or natural disaster, our operations could be severely impaired. ● An impairment in the carrying value of our intangible assets could negatively affect our results of operations. 14 Table of Contents ● Governmental payers and health care plans have taken steps to control costs. ● Changes in payer mix could have a material adverse impact on our net sales and profitability. ● Our laboratories require ongoing CLIA certification and we cannot guarantee that our laboratories will pass all future certification inspections. ● Our products that we sell as research use only products and/or that we offer as laboratory developed tests could become subject to government regulations requiring marketing authorization, and the marketing authorization and maintenance process for such products may be expensive, time-consuming and uncertain in both timing and outcome. ● Failure to comply with HIPAA could be costly. ● Our failure to comply with any applicable government laws and regulations or otherwise respond to claims relating to improper handling, storage or disposal of hazardous chemicals that we use may adversely affect our results of operations. ● We may become subject to the Anti-Kickback Statute, Stark Law, False Claims Act, Civil Monetary Penalties Law and may be subject to analogous provisions of applicable state laws and could face substantial penalties if we fail to comply with such laws. ● We cannot be certain that measures taken to protect our intellectual property will be effective. ● The price of our common stock may fluctuate significantly, which could negatively affect us and holders of our common stock. ● The price of our stock may be vulnerable to manipulation. ● If we cannot continue to satisfy Nasdaq listing maintenance requirements and other rules, our securities may be delisted, which could negatively impact the price of our securities. ● Increased costs associated with corporate governance compliance may significantly impact our results of operations. ● We have not paid dividends on our common stock in the past and do not expect to pay dividends on our common stock for the foreseeable future.
If we are unable to establish marketing and sales capabilities and retain the proper talent to execute on our sales and marketing strategy, we may not be able to generate product revenue. ● Cybersecurity risks could compromise our information and expose us to liability, which may harm our ability to operate effectively and may cause our business and reputation to suffer. ● Our ability to use net operating loss carryforwards to offset future taxable income for U.S. federal tax purposes is subject to limitation and risk that could further limit our ability to utilize our net operating losses. ● The testing, manufacturing and marketing of diagnostics entails an inherent risk of product liability and personal injury claims. 14 Table of Contents ● All of our diagnostic technology development and our clinical services are performed at two laboratories, and in the event either or both of these facilities were to be affected by a termination of the lease or a man-made or natural disaster, our operations could be severely impaired. ● An impairment in the carrying value of our intangible assets could negatively affect our results of operations. ● Governmental payers and health care plans have taken steps to control costs. ● Changes in payer mix could have a material adverse impact on our net sales and profitability. ● Our laboratories require ongoing CLIA certification and we cannot guarantee that our laboratories will pass all future certification inspections. ● Our products that we sell as research use only products and/or that we offer as laboratory developed tests could become subject to government regulations requiring marketing authorization, and the marketing authorization and maintenance process for such products may be expensive, time-consuming and uncertain in both timing and outcome. ● Failure to comply with HIPAA could be costly. ● Our failure to comply with any applicable government laws and regulations or otherwise respond to claims relating to improper handling, storage or disposal of hazardous chemicals that we use may adversely affect our results of operations. ● We may become subject to the Anti-Kickback Statute, Stark Law, False Claims Act, Civil Monetary Penalties Law and may be subject to analogous provisions of applicable state laws and could face substantial penalties if we fail to comply with such laws. ● We cannot be certain that measures taken to protect our intellectual property will be effective. ● The price of our common stock may fluctuate significantly, which could negatively affect us and holders of our common stock. ● The price of our stock may be vulnerable to manipulation. ● If we cannot continue to satisfy Nasdaq listing maintenance requirements and other rules, our securities may be delisted, which could negatively impact the price of our securities. ● Increased costs associated with corporate governance compliance may significantly impact our results of operations. ● We have not paid dividends on our common stock in the past and do not expect to pay dividends on our common stock for the foreseeable future.
If Nasdaq were to delist our securities, we could face significant consequences, including: ● a limited availability for market quotations for our securities; ● reduced liquidity with respect to our securities; ● a determination that our common stock is a “penny stock,” which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in reduced trading; ● activity in the secondary trading market for our common stock; ● limited amount of news and analyst coverage; and ● a decreased ability to issue additional securities or obtain additional financing in the future.
If Nasdaq were to delist our securities, we could face significant consequences, including: ● a limited availability for market quotations for our securities; ● reduced liquidity with respect to our securities; ● a determination that our common stock is a “penny stock,” which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in reduced trading; ● activity in the secondary trading market for our common stock; ● reduced or limited amount of news and analyst coverage; and ● a decreased ability to issue additional securities or obtain additional financing in the future.
We are limited in the number of shares we can sell in the ATM Offering due to the offering limitations currently applicable to us under General Instruction I.B.6. of Form S-3 and our public float as of the applicable date of such sales, as well as the number of authorized and unissued shares available for issuance, in accordance with the terms of the AGP Sales Agreement. ​ The extent we rely on AGP as a source of funding will depend on a number of factors including, the prevailing market price of our common stock and the extent to which we are able to secure working capital from other sources.
We are limited in the number of shares we can sell in the 2023 ATM Offering due to the offering limitations currently applicable to us under General Instruction I.B.6. of Form S-3 and our public float as of the applicable date of such sales, as well as the number of authorized and unissued shares available for issuance, in accordance with the terms of the AGP 2023 Sales Agreement. ​ The extent we rely on AGP as a source of funding will depend on a number of factors including, the prevailing market price of our common stock and the extent to which we are able to secure working capital from other sources.
If personal information or protected health information is improperly accessed, tampered with or disclosed as a result of a security breach, we may incur significant costs to notify and mitigate potential harm to the affected individuals, and we may be subject to sanctions and civil or criminal penalties if we are found to be in violation of the privacy or security rules under HIPAA or other similar federal or state laws protecting confidential personal information.
If personal information or protected health information is improperly accessed, tampered with, misused or disclosed as a result of a security breach, we may incur significant costs to notify and mitigate potential harm to the affected individuals, and we may be subject to sanctions and civil or criminal penalties if we are found to be in violation of the privacy or security rules under HIPAA or other similar federal or state laws protecting confidential personal information.
For example: ​ •others may be able to make products that are similar to our product candidates or utilize similar technology but that are not covered by the claims of the patents that we hold rights to; ​ •we, or our licensors or collaborators, might not have been the first to invent or the first to file patent applications covering certain of our or their inventions; ​ •others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our owned intellectual property rights; ​ •it is possible that our current or future pending owned patent applications will not lead to issued patents; ​ •issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors or other third parties; ​ •our competitors or other third parties might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in the US; ​ •we may not develop additional proprietary technologies that are patentable; ​ •the patents of others may harm our business; and ​ •we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property. ​ Should any of these events occur, they could have a material adverse effect on our business, financial condition, results of operations and prospects 36 Table of Contents Risks Related to Our Common Stock The price of our common stock may fluctuate significantly, which could negatively affect us and holders of our common stock.
For example: ​ •others may be able to make products that are similar to our product candidates or utilize similar technology but that are not covered by the claims of the patents that we hold rights to; ​ •we, or our licensors or collaborators, might not have been the first to invent or the first to file patent applications covering certain of our or their inventions; ​ •others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our owned intellectual property rights; ​ •it is possible that our current or future pending owned patent applications will not lead to issued patents; ​ •issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors or other third parties; ​ •our competitors or other third parties might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in the US; ​ •we may not develop additional proprietary technologies that are patentable; ​ •the patents of others may harm our business; and ​ •we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property. ​ Should any of these events occur, they could have a material adverse effect on our business, financial condition, results of operations and prospects Risks Related to Our Common Stock The price of our common stock may fluctuate significantly, which could negatively affect us and holders of our common stock.
If we or our third-party providers fail to maintain or protect our information technology systems and data integrity effectively or fail to anticipate, plan for or manage significant disruptions to our information technology systems, we or our third-party providers could have difficulty preventing, detecting and controlling such cyber-attacks and any such attacks could result in losses described above, as well as disputes with physicians, patients and our partners, regulatory sanctions or penalties, increases in operating expenses, expenses or lost revenues or other adverse consequences, any of which could have a material adverse effect on our business, results of operations, financial condition, prospects and cash flows.
If we or our third-party providers fail to maintain or protect our information technology systems and data integrity effectively or fail to anticipate, plan for or manage significant disruptions to our information technology systems, we or our third-party providers could have difficulty preventing, detecting and controlling such cyberattacks and any such attacks could result in losses described above, as well as disputes with physicians, patients and our partners, regulatory sanctions or penalties, increases in operating expenses, expenses or lost revenues or other adverse consequences, any of which could have a material adverse effect on our business, results of operations, financial condition, prospects and cash flows.
Our intellectual property portfolio with respect to certain aspects of our technology and product candidates is at an early stage. We have one company-owned, pending patent application directed to our HemeScreen test.
Our intellectual property portfolio with respect to certain aspects of our technology and product candidates is at an early stage. We have one company-owned, pending international patent application directed to our HemeScreen test.
We also expect that our selling, general and administrative expenses will continue to increase due to the additional costs associated with market development activities and expanding our staff to sell and support our products.
We also expect that our selling, general and administrative expenses will increase due to the additional costs associated with market development activities and expanding our staff to sell and support our products.
A weak declining or inflationary economy could strain our collaborators and suppliers, possibly resulting in supply disruption, or cause delays in their payments to us. ​ In addition, the Company’s operations and access to capital may be impacted by disruptions to the banking system and financial market volatility resulting from bank failures, particularly in light of the recent events that have occurred with respect to Silicon Valley Bank and other financial institutions. ​ Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business. ​ Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect the Company’s current and projected business operations and its financial condition and results of operations. ​ Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems.
A weak declining or inflationary economy could strain our collaborators and suppliers, possibly resulting in supply disruption, or cause delays in their payments to us. ​ In addition, the Company’s operations and access to capital may be impacted by disruptions to the banking system and financial market volatility resulting from bank failures, particularly in light of the recent events that have occurred with respect to Silicon Valley Bank (“SVB”) and other financial institutions. ​ Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business. ​ Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect the Company’s current and projected business operations and its financial condition and results of operations. ​ Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past 21 Table of Contents and may in the future lead to market-wide liquidity problems.
Department of Treasury, FDIC and Federal Reserve Board will provide access to uninsured funds in the future in the event of the closure of other banks or financial institutions, or that they would do so in a timely fashion. ​ Although we assess our banking relationships as we believe necessary or appropriate, our access to funding sources and other credit arrangements in amounts adequate to finance or capitalize our current and projected future business operations could be significantly impaired by factors that affect the Company, the financial institutions with 22 Table of Contents which we have or may enter into credit agreements or arrangements directly, or the financial services industry or economy in general.
Department of Treasury, FDIC and Federal Reserve Board will provide access to uninsured funds in the future in the event of the closure of other banks or financial institutions, or that they would do so in a timely fashion. ​ Although we assess our banking relationships as we believe necessary or appropriate, our access to funding sources and other credit arrangements in amounts adequate to finance or capitalize our current and projected future business operations could be significantly impaired by factors that affect the Company, the financial institutions with which we have or may enter into credit agreements or arrangements directly, or the financial services industry or economy in general.
Cybersecurity refers to the combination of technologies, processes and procedures established to protect information technology systems and data from unauthorized access, attack, or damage.
Cybersecurity refers to the combination of technologies, processes and procedures established to protect information technology systems and data from unauthorized access, misuse, attack, or damage.
The Court of Chancery of the State of Delaware and the federal district courts of the United States may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be 41 Table of Contents located or would otherwise choose to bring the action, and such judgments may be more or less favorable to us than our stockholders.
The Court of Chancery of the State of Delaware and the federal district courts of the United States may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be 42 Table of Contents located or would otherwise choose to bring the action, and such judgments may be more or less favorable to us than our stockholders.
In addition, a security breach of our information systems could damage our reputation, subject us to liability claims or regulatory penalties for compromised personal information and could have a material adverse effect on our business, financial condition and results of operations. ​ 25 Table of Contents Changes in tax law could adversely affect our business and financial condition. ​ The rules dealing with U.S. federal, state, and local and non-U.S. taxation are constantly under review by persons involved in the legislative process, the Internal Revenue Service, the U.S.
In addition, a security breach of or other incident affecting our information systems could damage our reputation, subject us to liability claims or regulatory penalties for compromised personal information and could have a material adverse effect on our business, financial condition and results of operations. ​ 25 Table of Contents Changes in tax law could adversely affect our business and financial condition. ​ The rules dealing with U.S. federal, state, and local and non-U.S. taxation are constantly under review by persons involved in the legislative process, the Internal Revenue Service, the U.S.
Generally, we do not require collateral or other securities to support our accounts receivable and while we are directly affected by the financial condition of our customers, management does not believe significant credit risks exist at December 31, 2022. We have been, and may continue to be, subject to costly litigation.
Generally, we do not require collateral or other securities to support our accounts receivable and while we are directly affected by the financial condition of our customers, management does not believe significant credit risks exist at December 31, 2023. We have been, and may continue to be, subject to costly litigation.
We rely on our third-party providers to implement effective security measures and identify and correct for any such failures, deficiencies or breaches. We also rely on our employees and consultants to safeguard their security credentials and follow our policies and procedures regarding use and access of computers and other devices that may contain our sensitive information.
We rely on our third-party providers to implement effective security measures and identify and correct for any such failures, deficiencies or incidents. We also rely on our employees and consultants to safeguard their security credentials and follow our policies and procedures regarding use and access of computers and other devices that may contain our sensitive information.
If we are unable to prevent or mitigate the impact of such security or data privacy breaches, we could be exposed to litigation and governmental investigations, which could lead to a potential disruption to our business ​ Cyberattacks are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect.
If we are unable to prevent or mitigate the impact of such security or data privacy breaches or other incidents, we could be exposed to litigation and governmental investigations, which could lead to a potential disruption to our business. ​ Cyberattacks are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect.
We expect to incur substantial net losses through at least 2023 as we further develop and commercialize our diagnostic technology. We also expect that our selling, general and administrative expenses will continue to increase due to the additional costs associated with market development activities and expanding our staff to sell and support our products.
We expect to incur substantial net losses through at least 2024 as we further develop and commercialize our diagnostic technology. We also expect that our selling, general and administrative expenses will continue to increase due to the additional costs associated with market development activities and expanding our staff to sell and support our products.
To date, we have experienced negative cash flow from development of our diagnostic technology, as well as from the costs associated with establishing a laboratory and building a sales force to market our products and services. We expect to incur net losses through at least 2023 as we further develop and commercialize our diagnostic technology.
To date, we have experienced negative cash flow from development of our diagnostic technology, as well as from the costs associated with establishing a laboratory and building a sales force to market our products and services. We expect to incur net losses through at least 2024 as we further develop and commercialize our diagnostic technology.
Our ability to achieve commercial market acceptance for our existing and future products will depend on several factors, including: ● our ability to convince the medical community of the clinical utility of our products and their potential advantages over existing diagnostics technology; ● the willingness of physicians and patients to utilize our products; and ● the agreement by commercial third-party payers and government payers to reimburse our products, the scope and amount of which will affect patients’ willingness or ability to pay for our products and will likely heavily influence physicians’ decisions to recommend our products.
Our ability to achieve commercial market acceptance for our existing and future products will depend on several factors, including: ● our ability to convince the medical community of the clinical utility of our products and their potential advantages over existing diagnostics technology; ● the willingness of physicians and patients to utilize our products; and 18 Table of Contents ● the agreement by commercial third-party payers and government payers to reimburse our products, the scope and amount of which will affect patients’ willingness or ability to pay for our products and will likely heavily influence physicians’ decisions to recommend our products.
If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of our product candidates, constructs or molecules used in or formed during the manufacturing process, or any final product itself, the holders of any such patents may be able to block our ability to commercialize the product candidate unless we obtained a license under the applicable patents, or until such patents expire or they are finally determined to be held invalid or unenforceable.
If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of our product candidates, 33 Table of Contents constructs or molecules used in or formed during the manufacturing process, or any final product itself, the holders of any such patents may be able to block our ability to commercialize the product candidate unless we obtained a license under the applicable patents, or until such patents expire or they are finally determined to be held invalid or unenforceable.
We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common 42 Table of Contents stock and our common stock prices may be more volatile.
We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common 43 Table of Contents stock and our common stock prices may be more volatile.
In addition, we may face claims that our agreements with employees, contractors, or consultants obligating them to assign intellectual property to us are ineffective, or in conflict with prior or competing contractual obligations of assignment, which could result in ownership disputes regarding intellectual property we have developed or will develop and interfere with our ability to capture the commercial 35 Table of Contents value of such inventions.
In addition, we may face claims that our agreements with employees, contractors, or consultants obligating them to assign intellectual property to us are ineffective, or in conflict with prior or competing contractual obligations of assignment, which could result in ownership disputes regarding intellectual property we have developed or will develop and interfere with our ability to capture the commercial value of such inventions.
If customers believe that such products will offer enhanced features or be sold for a more attractive price, they may delay purchases until such products are available. We may also have excess or obsolete inventory of older products as we transition to new products and our experience in managing product transitions is very limited.
If customers believe that such products will 19 Table of Contents offer enhanced features or be sold for a more attractive price, they may delay purchases until such products are available. We may also have excess or obsolete inventory of older products as we transition to new products and our experience in managing product transitions is very limited.
If we are not able to demonstrate compliance with the Sarbanes-Oxley Act, that our 38 Table of Contents internal control over financial reporting is perceived as inadequate, or that we are unable to produce timely or accurate financial statements, investors may lose confidence in our operating results, and the price of our common stock could decline.
If we are not able to demonstrate compliance with the Sarbanes-Oxley Act, that our internal control over financial reporting is perceived as inadequate, or that we are unable to produce timely or accurate financial statements, investors may lose confidence in our operating results, and the price of our common stock could decline.
If we are unable to obtain a necessary license to a third-party patent on commercially reasonable terms, or at all, we may be unable 33 Table of Contents to commercialize our product candidates or such efforts may be impaired or delayed, which could in turn significantly harm our business. ​ Parties making claims against us may seek and obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize our products or product candidates.
If we are unable to obtain a necessary license to a third-party patent on commercially reasonable terms, or at all, we may be unable to commercialize our product candidates or such efforts may be impaired or delayed, which could in turn significantly harm our business. ​ Parties making claims against us may seek and obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize our products or product candidates.
Although we have taken steps to protect the security of our information systems and the data maintained in those systems, it is possible that our safety and security measures will not prevent the systems’ improper functioning or damage or the improper access or disclosure of personally identifiable information such as in the event of cyber-attacks.
Although we have taken steps to protect the security of our information systems and the data maintained in those systems, it is possible that our safety and security measures will not prevent the systems’ improper functioning or damage or the improper access or disclosure of personally identifiable information such as in the event of cyberattacks.
False Claims Act The FCA prohibits providers from, among other things, (1) knowingly presenting or causing to be presented, claims for payments from the Medicare, Medicaid or other federal healthcare programs that are false or fraudulent; (2) knowingly making, using or causing to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the federal government; or (3) knowingly making, using or causing to be made or used, a false record or statement to avoid, decrease or conceal an obligation to pay money to the federal government.
False Claims Act The FCA prohibits providers from, among other things, (1) knowingly presenting or causing to be presented, claims for payments from the Medicare, Medicaid or other federal healthcare programs that are false or fraudulent; (2) knowingly making, using or causing to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the federal government; or (3) knowingly making, using or causing to be made or used, a false record 30 Table of Contents or statement to avoid, decrease or conceal an obligation to pay money to the federal government.
Under the terms of this agreement, we may offer for sale, and Culain in its sole discretion may purchase eligible 16 Table of Contents receivables of the Company (the “Purchased Accounts”). Upon purchase, Culain becomes the absolute owner of the Purchased Accounts, which are payable directly to Culain, subject to certain repurchase obligations of the Company.
Under the terms of this agreement, we may offer for sale, and Culain in its sole discretion may purchase eligible receivables of the Company (the “Purchased Accounts”). Upon purchase, Culain becomes the absolute owner of the Purchased Accounts, which are payable directly to Culain, subject to certain repurchase obligations of the Company.
In addition, a number of states have adopted their own false claims and whistleblower provisions whereby a private 30 Table of Contents party may file a civil lawsuit in state court. We are required to provide information to our employees and certain contractors about state and federal false claims laws and whistleblower provisions and protections.
In addition, a number of states have adopted their own false claims and whistleblower provisions whereby a private party may file a civil lawsuit in state court. We are required to provide information to our employees and certain contractors about state and federal false claims laws and whistleblower provisions and protections.
If the current equity and credit markets deteriorate, or do not improve, it may make any necessary debt or equity financing more difficult, more costly, and more dilutive. Furthermore, our stock price may decline due in part to the volatility of the stock market and the general economic downturn.
If the current equity and credit markets deteriorate, or do not improve, it 41 Table of Contents may make any necessary debt or equity financing more difficult, more costly, and more dilutive. Furthermore, our stock price may decline due in part to the volatility of the stock market and the general economic downturn.
In addition, there is a risk that one or more of our current service providers, manufacturers and 40 Table of Contents other partners may not survive these difficult economic times, which could directly affect our ability to attain our operating goals on schedule and on budget.
In addition, there is a risk that one or more of our current service providers, manufacturers and other partners may not survive these difficult economic times, which could directly affect our ability to attain our operating goals on schedule and on budget.
Any revenue we receive will depend upon the efforts of such third parties, which may not be successful. We may have little or no control over the marketing and sales efforts of such third parties and our revenue from 24 Table of Contents product sales may be lower than if we had commercialized our product candidates ourselves.
Any revenue we receive will depend upon the efforts of such third parties, which may not be successful. We may have little or no control over the marketing and sales efforts of such third parties and our revenue from product sales may be lower than if we had commercialized our product candidates ourselves.
In any patent infringement proceeding, there is a risk that a court will decide that a patent of ours is invalid or unenforceable, in whole or in part, and that we do not have the right to stop the other party from using the invention at issue.
In any patent infringement 34 Table of Contents proceeding, there is a risk that a court will decide that a patent of ours is invalid or unenforceable, in whole or in part, and that we do not have the right to stop the other party from using the invention at issue.
Any future regulations aimed at mitigating climate change may negatively impact the prices of raw materials and energy as well as the demand for certain of our customer’s products which could in turn impact demand for our products and impact our results of operations.
Any future regulations aimed at mitigating climate change 22 Table of Contents may negatively impact the prices of raw materials and energy as well as the demand for certain of our customer’s products which could in turn impact demand for our products and impact our results of operations.
We may increase the number of employees in the future depending on the progress of our development of diagnostic technology. Our future financial performance and our ability to commercialize our product candidates and to compete effectively will depend, in part, on our ability to manage any future growth effectively.
We may increase the number of employees in the future depending on the progress of our development of diagnostic technology. Our future financial performance and our ability to 23 Table of Contents commercialize our product candidates and to compete effectively will depend, in part, on our ability to manage any future growth effectively.
Therefore, we cannot be certain that we were the first to make the inventions claimed in any of our owned or pending patent applications, or that we were the first to file for patent protection of such inventions 31 Table of Contents We depend on certain technologies that are licensed to us.
Therefore, we cannot be certain that we were the first to make the inventions claimed in any of our owned or pending patent applications, or that we were the first to file for patent protection of such inventions. We depend on certain technologies that are licensed to us.
Our ability to use net operating loss carryforwards to offset future taxable income for U.S. federal tax purposes is subject to limitation and risk that could further limit our ability to utilize our net operating losses. As of December 31, 2022, we had approximately $74 million of federal net operating losses, (“NOLs”).
Our ability to use net operating loss carryforwards to offset future taxable income for U.S. federal tax purposes is subject to limitation and risk that could further limit our ability to utilize our net operating losses. As of December 31, 2023, we had approximately $76 million of federal net operating losses, (“NOLs”).
Enforcing a claim against a third party that illegally obtained and is using our trade secrets, like patent litigation, is expensive and time-consuming and the outcome is unpredictable. ​ Moreover, our trade secrets could otherwise become known or be independently discovered by our competitors or other third parties.
Enforcing a claim 32 Table of Contents against a third party that illegally obtained and is using our trade secrets, like patent litigation, is expensive and time-consuming and the outcome is unpredictable. ​ Moreover, our trade secrets could otherwise become known or be independently discovered by our competitors or other third parties.
These rules and regulations will cause us to incur significant legal and financial compliance costs and will make some activities more time-consuming and costly. ​ The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal control over financial reporting.
These rules and regulations will 38 Table of Contents cause us to incur significant legal and financial compliance costs and will make some activities more time-consuming and costly. ​ The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal control over financial reporting.
If obtaining sufficient funding from AGP were to prove unavailable or prohibitively dilutive, we will need to secure another source of funding in order to satisfy our working capital needs. Even if we sell all $22.0 million under the AGP Sales Agreement, we may still need additional capital to fully implement our business, operating and development plans.
If obtaining sufficient funding from AGP were to prove unavailable or prohibitively dilutive, we will need to secure another source of funding in order to satisfy our working capital needs. Even if we sell all $5.8 million under the AGP 2023 Sales Agreement, we may still need additional capital to fully implement our business, operating and development plans.
The business risks associated with this concentration, including increased credit risks for these and other customers and the possibility of related bad debt write-offs, could negatively affect our margins and profits.
The business risks associated with this concentration, including increased credit risks for these and other customers and the possibility of related credit loss write-offs, could negatively affect our margins and profits.
Accordingly, our business and financial results in the future could be adversely affected due to a variety of factors, including: ● multiple, conflicting and changing laws and regulations such as privacy, security and data use regulations, tax laws, export and import restrictions, economic sanctions and embargoes, employment laws, anticorruption laws, regulatory requirements, reimbursement or payer regimes and other governmental; ● approvals, permits and licenses; ● failure by us, our collaborators or our distributors to obtain regulatory clearance, authorization or approval for the use of our products and services in various countries; ● additional potentially relevant third-party patent rights; ● complexities and difficulties in obtaining intellectual property protection and enforcing our intellectual property; ● difficulties in staffing and managing foreign operations, including repatriating foreign earned profits; ● complexities associated with managing multiple payer reimbursement regimes, government payers or patient self-pay systems; ● difficulties in negotiating favorable reimbursement negotiations with governmental authorities; ● logistics and regulations associated with shipping samples, including infrastructure conditions and transportation delays; ● limits in our ability to penetrate international markets if we are not able to conduct our clinical diagnostic services locally; 20 Table of Contents ● financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our products and services and exposure to foreign currency exchange rate fluctuations; ● international regulations and license requirements that may restrict foreign investment in and operation of the internet, IT infrastructure, data centers and other sectors, and international transfers of data; ● natural disasters, political and economic instability, including wars, terrorism and political unrest, and outbreak of disease; ● boycotts, curtailment of trade and other business restrictions; ● regulatory and compliance risks that relate to maintaining accurate information and control over sales and distributors’ activities that may fall within the purview of the Foreign Corrupt Practices Act of 1977, or FCPA, its books and records provisions, or its anti-bribery provisions or laws similar to the FCPA in other jurisdictions in which we may in the future operate, such as the United Kingdom’s, (“UK”), Bribery Act of 2010 and anti-bribery requirements of member states in the European Union, (“EU”); and ● our products (including HemeScreen® reagents which are authorized under the previous EU Directive on In-Vitro Diagnostic Devices (98/79/EC)) may not be compliant with the new regulatory framework brought in by the In-Vitro Diagnostic Devices Regulation ((EU) 2017/746), and approvals of our products under the new regulatory regime may be delayed and consequently our ability to continue to commercialize them in the EU may be impacted. ​ Any of these factors could significantly harm our future international expansion and operations and, consequently, our revenue and results of operations. ​ The sales of our products in the EU and the UK are regulated through a process that either requires self-certification or certification by a notified body in order to affix a CE mark.
Accordingly, our business and financial results in the future could be adversely affected due to a variety of factors, including: ● multiple, conflicting and changing laws and regulations such as privacy, security and data use regulations, tax laws, export and import restrictions, economic sanctions and embargoes, employment laws, anticorruption laws, regulatory requirements, reimbursement or payer regimes and other governmental; ● approvals, permits and licenses; ● failure by us, our collaborators or our distributors to obtain regulatory clearance, authorization or approval for the use of our products and services in various countries; ● additional potentially relevant third-party patent rights; ● complexities and difficulties in obtaining intellectual property protection and enforcing our intellectual property rights throughout the world; ● difficulties in staffing and managing foreign operations, including repatriating foreign earned profits; ● complexities associated with managing multiple payer reimbursement regimes, government payers or patient self-pay systems; ● difficulties in negotiating favorable reimbursement negotiations with governmental authorities; ● logistics and regulations associated with shipping samples, including infrastructure conditions and transportation delays; ● limits in our ability to penetrate international markets if we are not able to conduct our clinical diagnostic services locally; ● financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our products and services and exposure to foreign currency exchange rate fluctuations; ● international regulations and license requirements that may restrict foreign investment in and operation of the internet, IT infrastructure, data centers and other sectors, and international transfers of data; ● natural disasters, political and economic instability, including wars, terrorism and political unrest, and outbreak of disease; ● boycotts, curtailment of trade and other business restrictions; and ● regulatory and compliance risks that relate to maintaining accurate information and control over sales and distributors’ activities that may fall within the purview of the Foreign Corrupt Practices Act of 1977, or FCPA, its books and records provisions, or its anti-bribery provisions or laws similar to the FCPA in other jurisdictions in which we may in the future operate, such as the United Kingdom’s, (“UK”), Bribery Act of 2010 and anti-bribery requirements of member states in the European Union, (“EU”). ​ Any of these factors could significantly harm our future international expansion and operations and, consequently, our revenue and results of operations. 20 Table of Contents ​ The sales of our products in the EU and the UK are regulated through a process that either requires self-certification or certification by a notified body in order to affix a CE mark.
We cannot be certain that we will achieve or sustain profitability. ● We are subject to concentrations of revenue risk and concentrations of credit risk in accounts receivable. ● We have been, and may continue to be, subject to costly litigation. ● The commercial success of our products, including those we are developing, will depend upon the degree of market acceptance of these products among physicians, patients, health care payers and the medical community and on our ability to successfully market our products. ● If we cannot compete successfully with our competitors, including new entrants in the market, we may be unable to increase or sustain our revenue or achieve and sustain profitability. ● We may not be able to develop new products or enhance the capabilities of our systems to keep pace with rapidly changing technology and customer requirements, which could have a material adverse effect on our business and operating results. ● We face risks related to health pandemics and other widespread outbreaks of contagious disease, including the novel coronavirus, COVID-19, which could significantly disrupt our operations and impact our financial results. ● International expansion of our business could expose us to business, regulatory, political, operational, financial and economic risks associated with doing business outside of the United States. ● Unfavorable U.S. or global economic conditions could adversely affect our business, financial condition or results of operations. ● Global climate change could negatively affect our business. ● We depend upon a limited number of key personnel, and if we are not able to retain them or recruit additional qualified personnel, the execution of our strategy, management of our business and commercialization of our product candidates could be delayed or negatively impacted. ● We will need to increase the size of our organization, and we may experience difficulties in managing growth. ● We currently have limited experience in marketing products.
We cannot be certain that we will achieve or sustain profitability. ● We are subject to concentrations of revenue risk and concentrations of credit risk in accounts receivable. ● We have been, and may continue to be, subject to costly litigation. ● The commercial success of our products, including those we are developing, will depend upon the degree of market acceptance of these products among physicians, patients, health care payers and the medical community and on our ability to successfully market our products. ● If we cannot compete successfully with our competitors, including new entrants in the market, we may be unable to increase or sustain our revenue or achieve and sustain profitability. ● We may not be able to develop new products or enhance the capabilities of our systems to keep pace with rapidly changing technology and customer requirements, which could have a material adverse effect on our business and operating results. ● International expansion of our business could expose us to business, regulatory, political, operational, financial and economic risks associated with doing business outside of the United States. ● Unfavorable U.S. or global economic conditions and conflicts could adversely affect our business, financial condition or results of operations. ● Global climate change could negatively affect our business. ● We depend upon a limited number of key personnel, and if we are not able to retain them or recruit additional qualified personnel, the execution of our strategy, management of our business and commercialization of our product candidates could be delayed or negatively impacted. ● We will need to increase the size of our organization, and we may experience difficulties in managing growth. ● We currently have limited experience in marketing products.
The patent prosecution process is expensive, time-consuming and complex, and we may not be able to file, prosecute, maintain, enforce or license all necessary or desirable patents and patent applications at a reasonable cost or in a timely manner.
The patent prosecution process is expensive, time-consuming and complex, and we may not be able to file, prosecute, maintain, enforce or license all necessary or desirable patents and patent applications at a reasonable cost or in 31 Table of Contents a timely manner.
We may never be able to generate sufficient revenue to achieve or, if achieved, sustain profitability. ​ 17 Table of Contents We are subject to concentrations of revenue risk and concentrations of credit risk in accounts receivable.
We may never be able to generate sufficient revenue to achieve or, if achieved, sustain profitability. ​ We are subject to concentrations of revenue risk and concentrations of credit risk in accounts receivable.
We also cannot be certain that additional financing, if needed, will be available on 15 Table of Contents acceptable terms, or at all, and our failure to raise capital when needed could limit our ability to continue our operations.
We also cannot be certain that additional financing, if needed, will be available on acceptable terms, or at all, and our failure to raise capital when needed could limit our ability to continue our operations.
We are limited in the number of shares it can sell in the ATM Offering due to the offering limitations currently applicable to the Company under General Instruction I.B.6. of Form S-3 and the Company’s public float as of the applicable date of such sales, as well as the number of authorized and unissued shares available for issuance, in accordance with the terms of the AGP Sales Agreement.
We are limited in the number of shares we can sell in the 2023 ATM Offering due to the offering limitations currently applicable to us under General Instruction I.B.6. of Form S-3 and our public float as of the applicable date of such sales, as well as the number of authorized and unissued shares available for issuance, in accordance with the terms of the AGP 2023 Sales Agreement.
Similarly, if we assert trademark infringement claims, a court may determine that the marks we have asserted are invalid or unenforceable, or that the party against whom we have 34 Table of Contents asserted trademark infringement has superior rights to the marks in question.
Similarly, if we assert trademark infringement claims, a court may determine that the marks we have asserted are invalid or unenforceable, or that the party against whom we have asserted trademark infringement has superior rights to the marks in question.
For the year ended December 31, 2022, we have experienced negative cash flow from development of our diagnostic technology, as well as from the costs associated with establishing a laboratory and building a sales force to market our products and services.
For the year ended December 31, 2023, we have experienced negative cash flow from development of our diagnostic technology, as well as from the costs associated with establishing a laboratory and 17 Table of Contents building a sales force to market our products and services.
Third parties may assert ownership or commercial rights to inventions we develop. Third parties may in the future make claims challenging the inventorship or ownership of our intellectual property. For example, third parties that have been introduced to or have benefited from our inventions may attempt to replicate or reverse engineer our products and circumvent ownership of our inventions.
Third parties may in the future make claims challenging the inventorship or ownership of our intellectual property. For example, third parties that have been introduced to or have benefited from our inventions may attempt to replicate or reverse engineer our products and circumvent ownership of our inventions.
We have had several customers who, from time to time, have individually represented 10% or more of our total revenue, or whose accounts receivable balances individually represented 10% or more of our total accounts receivable. For the years ended December 31, 2022 and 2021, no customer individually represented 10% or more of our total revenue.
We have had several customers who, from time to time, have individually represented 10% or more of our total revenue, or whose accounts receivable balances individually represented 10% or more of our total accounts receivable. For the years ended December 31, 2023 and 2022, one and no customers individually represented 10% or more of our total revenue, respectively.
Any failure by such third parties to prevent or mitigate security breaches or improper access to or disclosure of such information could have similarly adverse consequences for us.
Any failure by such third parties to prevent or mitigate security breaches or improper access to, misuse of, or disclosure of such 24 Table of Contents information could have similarly adverse consequences for us.
We may need to raise substantial additional capital to commercialize our diagnostic technology, and our failure to obtain funding when needed may force us to delay, reduce or eliminate our product development programs or collaboration efforts or force us to restrict or cease operations. ​ As of December 31, 2022, we had cash of $3.4 million and our working capital was $1.3 million.
We may need to raise substantial additional capital to commercialize our diagnostic technology, and our failure to obtain funding when needed may force us to delay, reduce or eliminate our product development programs or collaboration efforts or force us to restrict or cease operations. ​ As of December 31, 2023, we had cash of $1.5 million and we had working capital of $0.5 million.
To facilitate ongoing operations and product development, on April 2, 2021, the Company entered into a sales agreement with AGP, pursuant to which we may offer and sell our common stock, par value $0.01 per share (the “Common Stock”) (the “Shares”), having aggregate sales proceeds of up to $22.0 million, to or through AGP, as sales agent (the “AGP Sales Agreement”), from time to time, in an “at the market offering” (as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended) of the Shares (the “ATM Offering”).
To facilitate ongoing operations and product development, on April 14, 2023, we entered into a sales agreement with AGP, pursuant to which we may offer and sell our common stock, par value $0.01 per share (the “Common Stock”) (the “Shares”), having aggregate sales proceeds of up to $5.8 million, to or through AGP, as sales agent (the “AGP 2023 Sales Agreement”), from time to time, in an “at the market offering” (as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended) of the Shares (the “2023 ATM Offering”).
HIPAA and associated regulations protect the privacy and security of certain patient health information and establish standards for electronic health care transactions in the United States. These privacy regulations establish federal standards regarding the uses and disclosures of protected health information. Our laboratories are subject to HIPAA and its associated regulations.
Failure to comply with HIPAA could be costly. HIPAA and associated regulations protect the privacy and security of certain patient health information and establish standards for electronic health care transactions in the United States. These privacy regulations establish federal standards regarding the uses and disclosures of protected health information. Our laboratories are subject to HIPAA and its associated regulations.
We have incurred losses since our inception and expect to incur losses for the foreseeable future. We cannot be certain that we will achieve or sustain profitability. We have incurred losses since our inception and expect to incur losses in the future. At December 31, 2022, we had working capital of $1.3 million.
We have incurred losses since our inception and expect to incur losses for the foreseeable future. We cannot be certain that we will achieve or sustain profitability. We have incurred losses since our inception and expect to incur losses in the future. At December 31, 2023, we had working capital of $0.5 million.
Security breaches, including physical or electronic break-ins, computer viruses, attacks by hackers and similar breaches can create system disruptions or shutdowns or the unauthorized disclosure of confidential information.
Security incidents, including physical or electronic break-ins, computer viruses, attacks by hackers and similar incidents can create system disruptions or shutdowns or the unauthorized disclosure of, access to, or misuse of confidential information.
As widely reported, global credit and financial markets have experienced extreme volatility and disruptions in the past several years, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability, including most recently in connection with the ongoing COVID-19 pandemic, current macroeconomic conditions, currency exchange rates, and volatile financial markets.
As widely reported, global credit and financial markets have experienced extreme volatility and disruptions in the past several years, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability, current macroeconomic conditions, currency exchange rates, and volatile financial markets.
If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, scale back or discontinue the development and commercialization of one or more of our product candidates, delay our pursuit of potential in-licenses or acquisitions or grant rights to develop and market current or future product candidates that we would otherwise prefer to develop and market ourselves. ​ The issuance of our common stock to creditors or litigants may cause significant dilution to our stockholders and cause the price of our common stock to fall We may seek to settle outstanding obligations to vendors, debtholders or litigants in any litigation through the issuance of our common stock or other security to such persons.
If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, scale back or discontinue the development and commercialization of one or more of our product candidates, delay our pursuit of potential in-licenses or acquisitions or grant rights to develop and market current or future product candidates that we would otherwise prefer to develop and market ourselves. ​ The issuance of our common stock to creditors or litigants may cause significant dilution to our stockholders and cause the price of our common stock to fall.
The medical diagnostic industry is intensely competitive and characterized by rapid technological progress. We face significant competition from competitors ranging in size from diversified global companies with significant research and development resources to small, specialized firms whose narrower product lines may allow them to be more effective in deploying related PCR technology in the genetic diagnostic industry.
We face significant competition from competitors ranging in size from diversified global companies with significant research and development resources to small, specialized firms whose narrower product lines may allow them to be more effective in deploying related PCR technology in the genetic diagnostic industry.
On May 24, 2022, we received CE-IVD approval for the sale of HemeScreen® reagents in the UK and the EU in accordance with the requirements of the EU IVDD. However, the new EU In-Vitro Diagnostic Devices Regulation ((EU) 2017/746), came into effect on May 26, 2022 and repealed the IVDD.
On May 24, 2022, we received CE-IVD approval for the sale of HemeScreen® reagents in the UK and the EU in accordance with the requirements of the EU IVDD. However, the new EU IVDR, came into effect on May 26, 2022 and repealed the IVDD.
On April 2, 2021, we entered into a sales agreement with AGP, pursuant to which we may offer and sell our Common Stock, having aggregate sales proceeds of up to $22.0 million, to or through AGP, from time to time, in the ATM Offering.
On April 14, 2023, we entered into a sales agreement with AGP, pursuant to which we may offer and sell our Common Stock, having aggregate sales proceeds of up to $5.8 million, to or through AGP, from time to time, in the 2023 ATM Offering.
If our trade secrets are not adequately protected or sufficient to provide an advantage over our competitors, our competitive position could be adversely affected, as could our business. 32 Table of Contents Additionally, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating our trade secrets. ​ If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected. ​ Our registered or unregistered trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks.
Additionally, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating our trade secrets. ​ If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected. ​ Our registered or unregistered trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks.
If the price at the time of replacement is lower than the price at which the security was originally sold by the market participant, then the market participant will realize a gain on the transaction.
The market participant is then obligated to replace the security borrowed by purchasing the security at the market price at the time of required replacement. If the price at the time of replacement is lower than the price at which the security was originally sold by the market participant, then the market participant will realize a gain on the transaction.
We may require significant additional financing to sustain our operations and without it we will not be able to continue operations. At December 31, 2022, we had working capital of $1.3 million. For the year ended December 31, 2022, we had an operating cash flow deficit of $7.7 million and a net loss of $12.2 million.
We may require significant additional financing to sustain our operations and without it we will not be able to continue operations. At December 31, 2023, we had working capital of $0.5 million. For the year ended December 31, 2023, we had an operating cash flow deficit of $3.6 million and a net loss of $5.8 million.
Our consolidated financial statements have been prepared using accounting principles generally accepted in the United States of America applicable for a going concern, which assume that we will realize our assets and discharge our liabilities in the ordinary course of business. We have incurred substantial operating losses and have used cash in our operating activities for the past few years.
Our consolidated financial statements have been prepared using accounting principles generally accepted in the United States of America applicable for a going concern, which assume that we will realize our assets and discharge our liabilities in the ordinary course of business.
Any failure to file a non-provisional patent application within this timeline could cause us to lose the ability to obtain patent protection for the inventions disclosed in the associated provisional patent applications. If any of our owned patent applications do not issue as patents in any jurisdiction, we may not be able to compete effectively.
Any failure to file one or more national and/or regional stage patent applications within this timeline could cause us to lose the ability to obtain patent protection for the inventions disclosed in the associated international patent application. If any of our owned patent applications do not issue as patents in any jurisdiction, we may not be able to compete effectively.
The UK’s departure from the EU has also impacted customs regulations as well as timing and ease of shipments into the EU from UK. 21 Table of Contents ​ Unfavorable U.S. or global economic conditions could adversely affect our business, financial condition or results of operations.
The UK’s departure from the EU has also impacted customs regulations as well as timing and ease of shipments into the EU from UK. Unfavorable U.S. or global economic conditions could adversely affect our business, financial condition or results of operations. Our results of operations could be adversely affected by general conditions in the global economy and financial markets.
Approximately $28 million of the federal NOLs will expire at various dates beginning in 2036 through 2037 if not utilized, while the remaining amount will have an indefinite life. As of December 31, 2022, we had approximately $2.4 million of state NOLs. For state NOLs expiration dates, it varies from 2022 to unlimited.
Approximately $28 million of the federal NOLs will expire at various dates beginning in 2036 through 2037 if not utilized, while the remaining amount will have an indefinite life. As of December 31, 2023, we had approximately $2.4 million of state NOLs. The state NOLs expire on various dates.
There are several federal laws addressing fraud and abuse that apply to businesses that receive reimbursement from a federal health care program. There are also a number of similar state laws covering fraud and abuse with respect to, for example, private payers, self-pay and insurance. Currently, we receive a substantial percentage of our revenue from private payers and from Medicare.
There are several federal laws addressing fraud and abuse that apply to businesses that receive reimbursement from a federal health care program. There are also a number of similar state laws covering fraud and abuse with respect 29 Table of Contents to, for example, private payers, self-pay and insurance.
In addition, we may elect to license third party intellectual property to further our business objectives and/or as needed for freedom to operate for our products. We do not and will not own the patents, patent applications or other intellectual property rights that are the subject of the Dana-Farber license or these other future licenses.
In addition, we may elect to license third party intellectual property to further our business objectives and/or as needed for freedom to operate for our products. We may not own the patents, patent applications or other intellectual property rights that are the subject of the license agreements we enter into.
Litigation may be necessary to resolve an ownership dispute, and if we are not successful, we may be precluded from using certain intellectual property, or may lose our exclusive rights in that intellectual property. Either outcome could have an adverse impact on our business.
Litigation may be necessary to resolve an ownership dispute, and if we are not successful, we may be precluded from using certain intellectual property, or may lose our exclusive rights in that intellectual property.
In general, an ownership change will occur if there is a cumulative change in a corporation’s ownership by “5-percent shareholders” that exceeds 50 percentage points over a rolling three-year period.
In general, an ownership change will occur if there is a cumulative change in a corporation’s ownership by “5-percent shareholders” that exceeds 50 percentage points over a rolling three-year period, including changes in ownership arising from new issuances of stock.
Any of the risk factors we describe below could adversely affect our business, financial condition or results of operations, and could cause the market price of our common stock to fluctuate or decline. 13 Table of Contents Summary of Risk Factors ● There is substantial doubt about our ability to continue as a going concern. ● We may require significant additional financing to sustain our operations and without it we will not be able to continue operations. ● We may need to raise substantial additional capital to commercialize our diagnostic technology, and our failure to obtain funding when needed may force us to delay, reduce or eliminate our product development programs or collaboration efforts or force us to restrict or cease operations. ● We have incurred losses since our inception and expect to incur losses for the foreseeable future.
Summary of Risk Factors ● There is substantial doubt about our ability to continue as a going concern. ● We may require significant additional financing to sustain our operations and without it we will not be able to continue operations. ● We may need to raise substantial additional capital to commercialize our diagnostic technology, and our failure to obtain funding when needed may force us to delay, reduce or eliminate our product development programs or collaboration efforts or force us to restrict or cease operations. ● We have incurred losses since our inception and expect to incur losses for the foreseeable future.
We maintain our information technology systems with safeguard protection against cyber-attacks including passive intrusion protection, firewalls and virus detection software. However, these safeguards do not ensure that a significant cyber-attack could not occur.
We maintain our information technology systems with safeguards designed to protect against cyberattacks including passive intrusion protection, firewalls and virus detection software. However, these safeguards do not ensure that a significant cyberattack could not occur.
The “qui tam” or “whistleblower” provisions of the FCA allow private individuals to bring actions under the FCA on behalf of the government. These private parties are entitled to share in any amounts recovered by the government, and, as a result, the number of “whistleblower” lawsuits that have been filed against providers has increased significantly in recent years.
These private parties are entitled to share in any amounts recovered by the government, and, as a result, the number of “whistleblower” lawsuits that have been filed against providers has increased significantly in recent years.
At December 31, 2022, one customer accounted for approximately 12% of our total accounts receivable and at December 31, 2021, two customers accounted for approximately 33% of our total accounts receivable.
At December 31, 2023, one customer accounted for approximately 13% of our total accounts receivable and at December 31, 2022, one customer accounted for approximately 12% of our total accounts receivable.
If any of them becomes unable or unwilling to continue in their respective positions, and we are unable to find suitable replacements, our business and financial results could be materially negatively affected. We will need to increase the size of our organization, and we may experience difficulties in managing growth.
If any of them becomes unable or unwilling to continue in their respective positions, and we are unable to find suitable replacements, our business and financial results could be materially negatively affected.
If certain formalities and requirements are not met, however, such European patents and patent applications could be challenged for non-compliance and brought under the jurisdiction of the UPC. We cannot be certain that future European patents and patent applications will avoid falling under the jurisdiction of the UPC, if we decide to opt out of the UPC.
If certain formalities and requirements are not met, however, such European patents and patent applications could be challenged for non-compliance and brought under the jurisdiction of the UPC.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties We currently lease approximately 7,630 square feet of laboratory and office space in New Haven, Connecticut, which we occupy under a lease expiring in December 2026 with annual rental payments of $0.2 million.
Biggest changeItem 2. Properties We currently lease approximately 8,267 square feet of laboratory and office space in New Haven, Connecticut, which we occupy under leases expiring in December 2026 with annual rental payments of $0.2 million.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe Company is involved in legal proceedings related to matters, which are incidental to its business and is delinquent on the payment of outstanding accounts payable for certain vendors and suppliers who have taken or have threatened to take legal action to collect such outstanding amounts. See below for a discussion on these matters.
Biggest changeThe Company is involved in legal proceedings related to matters, which are incidental to its business and is delinquent on the payment of outstanding accounts payable for certain vendors and suppliers who have taken or have threatened to take legal action to collect such outstanding amounts. See below for a discussion on these matters. Item 4.
Removed
CPA Global provides us with certain patent management services. As previously reported, on February 6, 2017, CPA Global claimed that we owed approximately $0.2 million for certain patent maintenance services rendered. CPA Global has not filed claims against us in connection with this allegation.
Added
Mine Safety Disclosures Not Applicable. ​ 45 Table of Contents PART II
Removed
A liability of less than $0.1 million has been recorded and is reflected in accounts payable within the accompanying consolidated balance sheets at December 31, 2022 and 2021. Item 4. Mine Safety Disclosures Not Applicable. ​ 43 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWe are a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act, and are not required to provide the information required under this item. Holders. At March 28, 2023, there were 23,353,893 shares of our common stock outstanding and approximately 38 holders of record. Dividends. No cash dividends have been paid on our common stock.
Biggest changeWe are a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act, and are not required to provide the information required under this item. Holders. At March 24, 2024, there were 1,430,292 shares of our common stock outstanding and approximately 34 holders of record. Dividends. No cash dividends have been paid on our common stock.
Investors in our common stock should not rely on an investment in our company if they require dividend income and should not purchase our common stock with the expectation of receiving cash dividends. Issuer Purchases of Equity Securities . We made no purchases of our common stock during the year ended December 31, 2022. Therefore, tabular disclosure is not presented.
Investors in our common stock should not rely on an investment in our company if they require dividend income and should not purchase our common stock with the expectation of receiving cash dividends. Issuer Purchases of Equity Securities . We made no purchases of our common stock during the year ended December 31, 2023. Therefore, tabular disclosure is not presented.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeFinancial Statements and Supplementary Data 53 ​ Report of Independent Registered Public Accounting Firm (PCAOB ID#688) 53 ​ Consolidated Balance Sheets as of December 31, 2022 and 2021 55 ​ Consolidated Statements of Operations for the Years Ended December 31, 2022 and 2021 56 ​ Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2022 and 2021 57 ​ Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and 2021 58 ​ Notes to the Consolidated Financial Statements for the Years Ended December 31, 2022 and 2021 60
Biggest changeFinancial Statements and Supplementary Data 53 ​ Report of Independent Registered Public Accounting Firm (PCAOB ID#688) 53 ​ Consolidated Balance Sheets as of December 31, 2023 and 2022 55 ​ Consolidated Statements of Operations for the Years Ended December 31, 2023 and 2022 56 ​ Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2023 and 2022 57 ​ Consolidated Statements of Cash Flows for the Years Ended December 31, 2023 and 2022 58 ​ Notes to the Consolidated Financial Statements for the Years Ended December 31, 2023 and 2022 60
Item 6. [Reserved] 44 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 44 Item 7A. Quantitative and Qualitative Disclosures About Market Price 52 Item 8.
Item 6. [Reserved] 46 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 46 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 52 Item 8.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeDuring the year ended December 31, 2022 we received net proceeds of $0.1 million from sale of 85,023 shares of our common stock and less than $0.1 million from the issuance of 26,795 shares of our common stock in connection with the exercise of 26,795 warrants. 47 Table of Contents Analysis of Cash Flows - Years Ended December 31, 2022 and 2021 The following table summarizes our net cash flow activity (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 Change Net cash used in operating activities ​ $ (7,721) ​ $ (6,577) ​ $ (1,144) Net cash used in investing activities ​ ​ (277) ​ ​ (682) ​ ​ 405 Net cash (used in) provided by financing ​ (225) ​ 16,271 ​ (16,496) Net change in cash ​ $ (8,223) ​ $ 9,012 ​ $ (17,235) ​ Net Change in Cash.
Biggest changeAnalysis of Cash Flows - Years Ended December 31, 2023 and 2022 The following table summarizes our net cash flow activity (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 Change Net cash used in operating activities ​ $ (3,559) ​ $ (7,721) ​ $ 4,162 Net cash used in investing activities ​ ​ (126) ​ ​ (277) ​ ​ 151 Net cash provided by (used in) financing ​ 1,742 ​ (225) ​ 1,967 Net change in cash ​ $ (1,943) ​ $ (8,223) ​ $ 6,280 ​ Net Change in Cash.
The cash flows used in operating activities of $7.7 million during the year ended December 31, 2022 included a net loss of $12.2 million, an increase in accounts receivables of $0.7 million, a decrease accrued expenses of $0.3 million, an increase in inventories of $0.1 million and a decrease in operating lease liabilities of $0.2 million.
The cash flows used in operating activities in the year ended December 31, 2022 included the net loss of $12.2 million, an increase in accounts receivables of $0.7 million, a decrease accrued expenses of $0.3 million, an increase in inventories of $0.1 million and a decrease in operating lease liabilities of $0.2 million.
At each of December 31, 2022 and December 31, 2021, other than certain purchase commitments, 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.
At each of December 31, 2023 and December 31, 2022, other than certain purchase commitments, 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.
As cancer diagnostic testing has evolved from cellular to molecular (genes and exons), laboratory testing has become extremely complex, requiring even greater diagnostic precision, attention to process and a more appropriate evaluation of the abundance of genetic data to effectively gather, consider, analyze and 44 Table of Contents present information for the physician for patient treatment.
As cancer diagnostic testing has evolved from cellular to molecular (genes and exons), laboratory testing has become extremely complex, requiring even greater diagnostic precision, attention to process and a more appropriate evaluation of the abundance of genetic data to effectively gather, consider, analyze and present information for the 46 Table of Contents physician for patient treatment.
The ASU will be effective for annual reporting periods after December 15, 2023 and interim periods within those annual periods and early adoption is permitted in annual reporting periods ending after December 15, 2020. The Company is currently assessing the potential impact that the adoption of this ASU will have on its consolidated financial statements.
The ASU will be effective for annual reporting periods after December 15, 2023 and interim periods within those annual periods and early adoption is permitted in annual reporting periods ending after December 15, 2020. The Company is currently assessing the potential impact that the adoption of this ASU will have on its consolidated financial statement.
See “—Liquidity and Capital Resources.” The Company’s ability to continue as a going concern over the next twelve months from the date the 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.
The Company’s ability to continue as a going concern over the next twelve months from the date the 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.
Cash flows used in investing activities were $0.3 million and $0.7 million for the years ended December 31, 2022 and 2021, respectively, resulting from purchases of property and equipment. Cash Flows Provided by Financing Activities.
Cash flows used in investing activities were $0.1 million and $0.3 million for the years ended December 31, 2023 and 2022, respectively, resulting from purchases of property and equipment. Cash Flows Provided by (used in) Financing Activities.
Misdiagnoses originate from aged commercial diagnostic cancer testing technologies, lack of subspecialized expertise, and sub-optimal laboratory processes that are needed in today’s diagnostic cancer testing in order to provide accurate, rapid, and resource-effective results to treat patients. Industry studies estimate 1 in 5 blood-cancer patients are misdiagnosed.
Misdiagnoses originate from outdated commercial diagnostic cancer testing technologies, lack of subspecialized expertise, and sub-optimal laboratory processes that are needed in today’s diagnostic cancer testing in order to provide accurate, rapid, and resource-effective results to treat patients. Industry studies estimate one in five blood-cancer patients are misdiagnosed.
Overview We are a healthcare solutions company focused on cancer diagnostics. Our business mission is to address the pervasive problem of cancer misdiagnoses by developing solutions to mitigate the root causes of this problem in the form of diagnostic products, reagents and services.
Overview We are a healthcare solutions 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.
Cost of sales includes material and supply costs for the patient tests performed, costs related to HSRR 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 $0.4 million for the year ended December 31, 2022 as compared to the same period in 2021.
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 $2.3 million for the year ended December 31, 2023 as compared to the same period in 2022.
Gross profit and gross margins were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dollars in Thousands ​ ​ Year Ended ​ ​ ​ ​ ​ December 31, ​ Margin % ​ 2022 2021 2022 2021 Gross Profit ​ $ 2,510 ​ $ 2,392 27 % 27 % ​ Gross margin was 27% of total net sales, for the years ended December 31, 2022 and 2021, respectively, and the gross profit was approximately $2.5 million and $2.4 million during the years ended December 31, 2022 and 2021, respectively.
Gross profit and gross margins were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dollars in Thousands ​ ​ Year Ended ​ ​ ​ ​ ​ December 31, ​ Margin % ​ 2023 2022 2023 2022 Gross Profit ​ $ 6,018 ​ $ 2,510 40 % 27 % ​ Gross margin was 40% and 27% of total net sales, for the years ended December 31, 2023 and 2022, respectively, and the gross profit was approximately $6.0 million and $2.5 million during the years ended December 31, 2023 and 2022, respectively.
The increase is in line with the changes in related revenues discussed above. 46 Table of Contents Gross Profit.
The increase is in line with the changes in related revenues discussed above. Gross Profit.
We are working with Poplar to dissolve the Joint Venture with an effective date of December 31, 2022. ​ Going Concern The 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 the Company will realize its assets and discharge its liabilities in the ordinary course of business.
The Joint Venture was dissolved on November 1, 2023 with an effective date of December 31, 2022. ​ Going Concern The 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.
The Company has incurred substantial operating losses and has used cash in its operating activities for the past several years. For the year ended December 31, 2022, the Company had a net loss of $12.2 million and net cash used in operating activities of $7.7 million.
The Company has incurred substantial operating losses and has used cash in its operating activities for the past several years. For the year ended December 31, 2023, the Company had a net loss of $5.8 million and net cash used in operating activities of $3.6 million.
In June 2016, the FASB issued ASU 2016-13 “ Measurement of Credit Losses on Financial Instruments ”, which replaces current methods for evaluating impairment of financial instruments not measured at fair value, including trade 51 Table of Contents accounts receivable and certain debt securities, with a current expected credit loss model.
Recently Adopted Accounting Pronouncements In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13 “ Measurement of Credit Losses on Financial Instruments ”, which replaces current methods for evaluating impairment of financial instruments not measured at fair value, including trade accounts receivable and certain debt securities, with a current expected credit loss model.
Liquidity and Capital Resources Our working capital positions at December 31, 2022 and 2021 were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 December 31, 2021 Change Current assets (including cash of $3,445 and $11,668 respectively) ​ $ 5,710 ​ $ 13,478 ​ $ (7,768) Current liabilities ​ 4,361 ​ 4,213 ​ 148 Working capital ​ $ 1,349 ​ $ 9,265 ​ $ (7,916) To date, we have incurred significant net losses and have funded our operations primarily through cash generated from operations, the issuance of convertible debt and the issuance of shares of our common stock.
Liquidity and Capital Resources Our working capital positions at December 31, 2023 and 2022 were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 December 31, 2022 Change Current assets (including cash of $1,502 and $3,445 respectively) ​ $ 3,682 ​ $ 5,710 ​ $ (2,028) Current liabilities ​ 3,141 ​ 4,361 ​ (1,220) Working capital ​ $ 541 ​ $ 1,349 ​ $ (808) To date, we have incurred significant net losses and have funded our operations primarily through cash generated from operations, the issuance of convertible debt and the issuance of shares of our common stock.
These were partially offset by a decrease in in accounts receivable of $0.3 million, an increase in accounts payable of $0.1 million and non-cash adjustments of approximately $2.4 million . Cash Flows Used In Investing Activities.
These were partially offset by a decrease in other assets of $0.5 million, an increase in accounts payable of $0.1 million, an increase in deferred revenue of $0.1 million and non-cash adjustments of $5.1 million . Cash Flows Used In Investing Activities.
Cash decreased by $8.2 million and increased by $9.0 million during the years ended December 31, 2022 and 2021, respectively. Cash Flows Used in Operating Activities.
Cash decreased by $1.9 million and $8.2 million during the years ended December 31, 2023 and 2022, respectively. 49 Table of Contents Cash Flows Used in Operating Activities.
The cash flows used in operating activities in the year ended December 31, 2021 included the net loss of $8.5 million, an increase in inventories and other assets of $0.6 million and a decrease in accrued expenses and operating lease liabilities of $0.3 million.
The cash flows used in operating activities of $3.6 million during the year ended December 31, 2023 included a net loss of $5.8 million, an increase in accounts receivables of $0.5 million, a decrease in accounts payable of $0.2 million and a decrease in operating lease liabilities of $0.2 million.
We do not believe that price inflation had a material adverse effect on our financial condition or results of operations during the periods presented .
Impact of Inflation Inflation generally affects us with increased cost of labor and operating supplies. We do not believe that price inflation had a material adverse effect on our financial condition or results of operations during the periods presented .
To meet our current and future obligations we have taken the following steps to capitalize the business and successfully achieve our business plan: ● On April 2, 2021, we entered into a sales agreement with A.G.P./Alliance Global Partners (“AGP”), pursuant to which we may offer and sell our common stock, par value $0.01 per share (the “Common Stock”) (the “Shares”), having aggregate sales proceeds of up to $22.0 million, to or through AGP, as sales agent (the “AGP Sales Agreement”).
To meet our current and future obligations we have taken the following steps to capitalize the business and successfully achieve our business plan: ● On April 14, 2023 , we entered into a sales agreement with AGP, pursuant to which we may offer and sell our common stock having aggregate sales proceeds of up to $5.8 million, to or through AGP, as sales agent (the “AGP 2023 Sales Agreement”).
We routinely provide a reserve for doubtful accounts as a result of having limited in-network payer contracts. The other non-cash adjustments to net loss of approximately $4.7 million include, among other things, depreciation and amortization, warrant revaluations and stock-based compensation .
We routinely provide a reserve for credit losses accounts as a result of having limited in-network payer contracts. The other non-cash adjustments to net loss of approximately $3.2 million include, among other things, depreciation and amortization, the value of stock issued in payment of services, gain on write-off of liabilities and stock-based compensation .
These were partially offset by a decrease in other assets of $0.5 million, an increase in accounts payable of $0.1 million, an increase in deferred revenue of $0.1 million and non-cash adjustments of $5.1 million. The non-cash adjustments included $0.4 million for the change in provision for losses on doubtful accounts.
These were partially offset by a decrease in inventories of $0.3 million, a decrease in other assets of $0.4 million, an increase in accrued expenses of $0.7 million and non-cash adjustments of $1.7 million. The non-cash adjustments included $0.2 million for the change in provision for credit losses.
We recorded net other income of $0.6 million and $1.1 million for the years ended December 31, 2022 and 2021, respectively. The current year period other income of $0.6 million is attributable to non-cash income recorded on warrant revaluations.
During the year ended December 31, 2022, we recorded net other income of $0.6 million which was primarily attributable to non-cash income recorded on warrant revaluations .
To deliver on our strategy of mitigating misdiagnoses we rely heavily on our CLIA laboratory to support R&D beta-testing of the products we develop, in a clinical environment. In April 2020, we formed a Joint Venture with Poplar. Poplar provides specialized laboratory testing services to a nationwide client base of gastroenterologists, dermatologists, oncologists, urologists, gynecologists and their patients.
In April 2020, we formed a Joint Venture with Poplar. Poplar provides specialized laboratory testing services to a nationwide client base of gastroenterologists, dermatologists, oncologists, urologists, gynecologists and their patients.
We view cancer diagnostics as requiring a holistic approach to improve diagnostic data for improved interpretations with the intent to reduce misdiagnoses. By delivering diagnostic products, reagents and services that improve the accuracy and efficiency of diagnostics, leading to fewer misdiagnoses, we believe patient outcomes can be improved through the selection of appropriate therapeutic options.
By delivering diagnostic products, reagents and services that improve the accuracy and efficiency of diagnostics, leading to fewer misdiagnoses, we believe patient outcomes can be improved through the selection of appropriate therapeutic options. Furthermore, we believe that better patient outcomes will have a positive impact on healthcare expenses as misdiagnoses are reduced.
Notwithstanding the aforementioned circumstances, there remains substantial doubt about our ability to continue as a going concern for the next twelve months from the date the consolidated financial statements were available to be 45 Table of Contents issued.
Issuance costs were approximately $0.2 million and we intend to use the net proceeds for working capital and general corporate purposes. Notwithstanding the aforementioned circumstances, there remains substantial doubt about our ability to continue as a going concern for the next twelve months from the date the consolidated financial statements were available to be issued.
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. An increase in case volume would enable our laboratory to yield economies of scale and to leverage fixed expenses.
As such, it is necessary to maintain appropriate staffing levels to provide industry standard 48 Table of Contents laboratory processing and reporting to ordering physicians. An increase in case volume enables our laboratory to yield economies of scale and to leverage fixed expenses, as we saw during 2023 with the increases in case volume and gross margin mentioned above.
From April 2, 2021 through the date the consolidated financial statements were issued, we have already received approximately $16.0 million in gross proceeds through the AGP Sales Agreement from the sale of 5,119,656 shares of common stock, leaving us an additional $6.0 million available for future sales pursuant to the AGP Sales Agreement.
As of the date the consolidated financial statements were issued, we have received $0.1 million in gross proceeds through the AGP 2023 Sales Agreement from the sale of 10,192 shares of common stock. The Company has approximately $3.7 47 Table of Contents million available for future sales pursuant to the AGP 2023 Sales Agreement.
Net sales were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dollars in Thousands ​ ​ Year Ended ​ ​ ​ ​ ​ December 31, ​ Change ​ 2022 2021 $ % Service revenue, net, less allowance for doubtful accounts ​ $ 8,010 ​ $ 7,935 ​ $ 75 ​ 1 % Other ​ 1,402 ​ 914 ​ ​ 488 ​ 53 % Net Sales ​ $ 9,412 ​ $ 8,849 ​ $ 563 ​ 6 % ​ Net sales for the year ended December 31, 2022 were $9.4 million, an increase of $0.6 million, as compared to the same period in 2021.
Net sales were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dollars in Thousands ​ ​ Year Ended ​ ​ ​ ​ ​ December 31, ​ Change ​ 2023 2022 $ % Service revenue, net, less allowance for credit loss ​ $ 12,178 ​ $ 8,010 ​ $ 4,168 ​ 52 % Other ​ 3,019 ​ 1,402 ​ ​ 1,617 ​ 115 % Net Sales ​ $ 15,197 ​ $ 9,412 ​ $ 5,785 ​ 61 % ​ Net sales for the year ended December 31, 2023 were $15.2 million, an increase of $5.8 million, as compared to the same period in 2022.
Cash flows provided by financing activities totaled $16.3 million for the year ended December 31, 2021, which included proceeds of $16.2 million from the issuance of common stock and $0.4 million from warrant exercises.
Cash flows provided by financing activities totaled $1.7 million for the year ended December 31, 2023, which included $2.2 million of proceeds from the issuance of common stock partially offset by payments on our long-term debt and finance lease obligations of $0.5 million .
The accompanying financial statements have been prepared assuming we will continue as a going concern and do not include any adjustments that might result should we be unable to continue as a going concern as a result of the outcome of this uncertainty. ​ Outlook - COVID-19 related The COVID-19 outbreak, which spread worldwide in the first quarter of 2020, has caused significant business disruption.
The accompanying financial statements have been prepared assuming we will continue as a going concern and do not include any adjustments that might result should we be unable to continue as a going concern as a result of the outcome of this uncertainty. ​ Results of Operations for the Years Ended December 31, 2023 and 2022 Net Sales.
The Company adopted this guidance on January 1, 2022. The adoption of this standard was not material to our consolidated financial statements . Recent Accounting Pronouncements Not Yet Adopted In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820) (“ASU 2022-03”).
The Company adopted this guidance on January 1, 2023. The adoption of this standard was not material to our consolidated financial statements. Recent Accounting Pronouncements Not Yet Adopted In December 2023, the FASB issued ASU 2023-09—Income Taxes (Topic 740)—Improvements to Income Tax Disclosures (“ASU 2023-09”) which amends the Codification to enhance the transparency and decision usefulness of income tax disclosures.
Laboratory and R&D facilities located in New Haven, Connecticut and Omaha, Nebraska house development teams that collaborate on new products and services. The Company operates CLIA laboratories in both the New Haven, Connecticut and Omaha, Nebraska locations providing essential blood cancer diagnostics to office-based oncologists in many states nationwide.
We operate CLIA laboratories in both the New Haven, Connecticut and Omaha, Nebraska locations providing 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 laboratory to support R&D beta-testing of the products we develop, in a clinical environment.
(3) These amounts represent purchase commitments, including all open purchase orders See Note 8 – “Commitments and Contingencies” to our accompanying consolidated financial statements included with this Annual Report on Form 10-K. ​ Critical Accounting Policies and Estimates The following discussion and analysis of financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America.
(3) These amounts represent purchase commitments, including all open purchase orders See Note 8 – “Commitments and Contingencies” to our accompanying consolidated financial statements included with this Annual Report on Form 10-K. 50 Table of Contents ​ Critical Accounting Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires the Company’s 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.
During the year ended December 31, 2022, despite the fact that we had a decrease in cases processed, patient diagnostic service revenue increased $0.1 million as compared to the same period in 2021 due to better reimbursement rates achieved for the tests billed in the current year .
During the year ended December 31, 2023, patient diagnostic service revenue increased $4.2 million as compared to the same period in 2022. This increase was due to a greater number of cases processed in the current year period.
The purchase commitments are mostly for laboratory reagents used in our normal operating business.
The purchase commitments are mostly for laboratory reagents used in our normal operating business. See Note 8 – Commitments and Contingencies to our consolidated financial statements appearing elsewhere in this report for further discussion.
The Company’s significant accounting policies are more fully described in Note 2 of the Notes to Consolidated Financial Statements included with this Annual Report on Form 10-K.
For additional information on critical accounting estimates, see Note 2 to the consolidated Financial Statements, “Summary of Significant Accounting Policies and New Accounting Standards,” in Part II, Item 8, of this Annual Report on Form 10-K.
The increase in patient diagnostic service revenue was partially offset by a decrease of less than $0.1 million in service revenue from contract diagnostics for the year ended December 31, 2022 as compared to the same period in 2021. Other revenues increased by $0.5 million for the year ended December 31, 2022 as compared to the same period in 2021.
We processed 6,765 cases during the year ended December 31, 2023 as compared to 4,109 cases during the same period in 2022, or a 65% increase in cases. Other revenue increased by $1.6 million for the year ended December 31, 2023 as compared to the same period in 2022.
We anticipate case volume to increase in the future and for our costs per case to improve as additional economies of scale are possible. Operating Expenses. Operating expenses primarily consist of personnel costs, professional fees, travel costs, facility costs, stock based compensation costs and depreciation and amortization.
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 decreased by $1.7 million to $13.6 million for the year ended December 31, 2023 as compared to $15.3 million for the year ended December 31, 2022.
These increases were partially offset by a decrease of $0.2 million in general and administrative expenses due to a $0.3 million decrease in legal and professional fees and a decrease of $0.2 million in personnel costs partially offset by a $0.3 million increase in franchise and other tax expenses. Other Income (Expense).
These decreases were partially offset by a $0.6 million increase in sales and marketing expenses due mainly to increased personnel costs as we expanded our product sales force starting in the second half of 2022 . Other Income (Expense).
Furthermore, we believe that better patient outcomes will have a positive impact on healthcare expenses as misdiagnoses are reduced. Better diagnostic results – Better Patient Outcome – Lower Healthcare Expenditures. To deliver our strategy, we have structured our organization in order to drive development of diagnostic products.
Better diagnostic results – Better Patient Outcome – Lower Healthcare Expenditures. To deliver our strategy, we have structured our organization to develop diagnostic products. Laboratory and R&D facilities located in New Haven, Connecticut and Omaha, Nebraska house development teams that collaborate on the development of new products and services.
See Note 8 – Commitments and Contingencies to our consolidated financial statements appearing elsewhere in this report for further discussion. 48 Table of Contents Contractual Obligations and Commitments At December 31, 2022, our contractual obligations and other commitments were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payments Due By Period (in thousands) ​ Total Less Than 1 Year 1-3 Years 3-5 Years More than 5 Years Long term debt (1) ​ $ 426 ​ $ 268 ​ $ 70 ​ $ 71 ​ $ 17 Finance lease obligations (2) ​ 272 ​ 101 ​ 145 ​ 26 ​ — Operating lease obligations (2) ​ 891 ​ 252 ​ 444 ​ 195 ​ — Purchase obligations (3) ​ 1,333 ​ 1,113 ​ 220 ​ — ​ — ​ ​ $ 2,922 ​ $ 1,734 ​ $ 879 ​ $ 292 ​ $ 17 (1) Total payments include $404,000 in principal and $22,000 in interest.
Contractual Obligations and Commitments At December 31, 2023, our contractual obligations and other commitments were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payments Due By Period (in thousands) ​ Total Less Than 1 Year 1-3 Years 3-5 Years Long term debt (1) ​ $ 370 ​ $ 248 ​ $ 70 ​ $ 52 Finance lease obligations (2) ​ 171 ​ 79 ​ 92 ​ — Operating lease obligations (2) ​ 696 ​ 258 ​ 438 ​ — Purchase obligations (3) ​ 1,884 ​ 1,834 ​ 50 ​ — ​ ​ $ 3,121 ​ $ 2,419 ​ $ 650 ​ $ 52 (1) Total payments include $353,000 in principal and $17,000 in interest.
The increase included the following: an increase of $1.2 million in sales and marketing expenses resulting from increased personnel costs largely due to increased headcount in our product sales force; an increase of $0.4 million in research and development expenses due to a $0.1 million increase in personnel costs and a $0.3 million increase in operating supplies; and, an increase of $1.9 million in stock based compensation expenses for the year ended December 31, 2022 as compared to the prior year.
The decrease included decreases from: (1) a decrease of less than $0.1 million in general and administrative expenses, which was due to a decrease of $0.2 million in legal and professional fee expenses partially offset by a $0.1 million increase in state franchise taxes; and (2), a decrease of $2.2 million in stock-based compensation expenses for the year ended December 31, 2023.
Removed
As of December 31, 2022, the Company had an accumulated deficit of $92.3 million and working capital of $1.3 million. We believe the existing cash, cash equivalents and marketable securities on hand will enable us to fund our operating expenses and capital expenditure requirements through the first half of 2023.
Added
We believe cancer diagnostics requires a holistic approach to improve the quality of diagnostic data and achieve more accurate interpretations of the patient situation, with the intent to reduce misdiagnoses.
Removed
We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.
Added
Our Products Division commercial team generates direct sales as well as works with our key distributors. Global healthcare distributors, such as ThermoFisher, McKesson 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.
Removed
The extent of the impact of the ongoing COVID-19 pandemic on the Company’s operational and financial performance will depend on future developments. While our laboratory operations resumed to near-normal capacity, we may continue to experience challenges in procuring materials and supplies in a consistently timely manner due to COVID-19-related supply chain issues.
Added
As of December 31, 2023, the Company had an accumulated deficit of $98.2 million and working capital of $0.5 million.
Removed
In addition, delays in the development of COVID-19 vaccines or the deployment of vaccines which are approved or otherwise authorized for emergency use, a recurrence or “subsequent waves” of COVID-19 cases, or the discovery of vaccine-resistant COVID-19 variants, the emergence of subvariants, or the discovery of vaccine-resistant COVID-19 variants could cause other widespread or more severe impacts.
Added
The sale of our shares of common stock to or through AGP, pursuant to the AGP 2023 Sales Agreement, will be made pursuant to the registration statement (the “2023 Registration Statement”) on Form S-3 (File No. 333-271277), filed by the Company with the SEC on April 14, 2023, as amended by Amendment No. 1 filed by the Company with the SEC on April 25, 2023, and declared effective on April 27, 2023.
Removed
We have been actively monitoring the COVID-19 pandemic and its impact on the global economy and the Company. As the global pandemic evolves, we will continue to monitor the extent to which COVID-19 impacts our revenues, expenses and liquidity. ​ Results of Operations for the Years Ended December 31, 2022 and 2021 Net Sales.
Added
On January 19, 2024, we filed a prospectus supplement to our prospectus dated April 25, 2023 registering the offer and sales of up to $865,889 of shares of our common stock.
Removed
We billed 4,109 cases during the year ended December 31, 2022 as compared to 4,345 cases during the same period in 2021, or a 5% decrease in cases. Patient diagnostic service revenue accounted for 85% and 89% our total net sales for the years ended December 31, 2022 and 2021, respectively.
Added
We have approximately $0.8 million of remaining availability pursuant to this prospectus supplement. ● On June 8, 2023, we entered into a securities purchase agreement pursuant to which we received $2.0 million in gross proceeds through the sale of 206,250 shares of common stock and warrants to purchase shares of our common stock.
Removed
The increase is the result of a $0.6 million increase in revenues related to our HemeScreen Reagent Rental (“HSRR”) program, partially offset by a $0.1 million decrease in other miscellaneous revenues . Cost of Sales.
Added
The other revenues were primarily related to increased sales of our HemeScreen product as a result of a greater number of customers purchasing reagents during the current year period . Cost of Sales.
Removed
Our operating expenses increased by $3.3 million to $15.3 million for the year ended December 31, 2022 as compared to $12.0 million for the year ended December 31, 2021.
Added
The gross profit increased during the year ended December 31, 2023, 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.
Removed
The other income for the year ended December 31, 2021 includes $0.8 million of a gain on forgiveness of debt related to the forgiveness of our Paycheck Protection Program Loan and $0.3 of non-cash income recorded on warrant revaluations.
Added
We recorded net other income of $1.8 million for the year ended December 31, 2023 which was related to $1.7 million of income from the write-off of certain liabilities and $0.1 million of income related to a gain on the dissolution of joint venture. These were partially offset by less than $0.1 million of interest expense.
Removed
These were partially offset by payments on our long-term debt and finance lease obligations of $0.2 million and payments on common stock warrant liabilities of $0.1 million.
Added
During the year ended December 31, 2023 we received net proceeds of $2.2 million from sale of 237,102 shares of our common stock through purchase agreements and at the market offerings. We have approximately $3.7 million available for future sales pursuant to the AGP 2023 Sales Agreement .
Removed
Certain accounting estimates are particularly important to the understanding of the Company’s financial position and results of operations and require the application of significant judgment by the Company’s management and can be materially affected by changes from period to period in economic factors or conditions that are outside the control of management.
Added
On January 19, 2024, we filed a prospectus supplement to our prospectus dated April 25, 2023 registering the offer and sales of up to $865,889 of shares of our common stock. We have approximately $0.8 million of remaining availability pursuant to this prospectus supplement.
Removed
The Company’s management uses its judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on historical operations, future business plans and projected financial results, the terms of existing contracts, the observance of trends in the industry, information provided by customers and information available from other outside sources, as appropriate.
Added
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events.
Removed
The following discusses the Company’s critical accounting policies and estimates: Revenue Recognition The Company derives its revenues from diagnostic testing - histology, flow cytometry, cytology and molecular testing; clinical research from bio-pharma customers, state and federal grant programs; biomarker testing from bio-pharma customers and, from; diagnostic product sales.
Added
We believe that the following critical accounting estimates are particularly subject to management’s judgment and could materially affect our financial condition and results of operations: ● Assumptions used in the Black-Scholes pricing model for valuation of stock option awards, such as expected volatility, risk-free interest rate, expected term and expected dividends. ● Assumptions used in the recording of allowances for credit losses and contractual allowances, including customer creditworthiness, market conditions, and trends in healthcare and insurance practices.
Removed
Service revenues are comprised of patient diagnostic services for cancer as well as contract diagnostic services for pharmacogenomics trials. Service revenue is recognized upon completion of the testing process and when the diagnostic result is delivered to the ordering physician and/or customer.
Added
Management also regularly makes estimates related to the recoverability of long-lived assets; the fair values and useful lives of intangible assets acquired in business combinations; and income taxes.
Removed
Net patient service revenue is reported at the estimated net realizable amounts from patients, third-party payers and others for services rendered, including retroactive adjustment under reimbursement agreements with third-party payers. Revenue under third-party payer agreements is subject to audit and retroactive adjustment.
Added
The Company bases its estimates on historical experience and on various assumptions that are believed to be reasonable, the results of which form the basis for the amounts recorded in the consolidated financial statements. As appropriate, the Company obtains reports from third-party valuation experts to inform and support estimates related to fair value measurements.
Removed
Provisions for third-party payer settlements are provided in the period in which the related services are rendered and adjusted in the future periods, as final settlements are determined. Revenue from clinical research grant is recognized over time as the service is being performed using a proportional performance method. The Company uses an "efforts based" method of assessing performance.
Added
ASU 2023-09 requires additional disaggregation of the reconciliation between the statutory and effective tax rate for an entity and of income taxes paid, both of which are disclosures required by current GAAP.
Removed
If the 49 Table of Contents arrangement requires the performance of a specified number of similar acts (i.e. test), then revenue is recognized in equal amounts as each act is completed. Other revenues are comprised of the Company’s sales to bio-pharma customers, clinical research, and HemeScreen and other product sales.
Added
The amendments improve the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. The amendments in ASU 2023-09 apply to all entities that are subject to Topic 740, Income Taxes.
Removed
For the year ended December 31, 2022, service revenue represented 85% of our consolidated revenues and other revenues represented 15%. For the year ended December 31, 2021, service revenue represented 90% of our consolidated revenues and other revenues represented 10%. Allowance for Contractual Discounts We are reimbursed by payers for services we provide.
Added
For public business entities, the amendments in ASU 2023-09 are effective for annual periods beginning after December 15, 2024. Early adoption is permitted. ASU 2023-09 is effective for the Company beginning January 1, 2025.

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