Full Press Release Details
Precipio Announces Third Quarter 2017 Financial Results and Provides Corporate Update
Conference Call to be held Tuesday, November 21, 2017 at 9:00am Eastern Time
NEW HAVEN, CT, (November 20, 2017) Precipio, Inc. (NASDAQ: PRPO), today announced financial results for the third quarter ended
September 30, 2017 and provided an update on corporate developments.
Third Quarter 2017 Business Highlights and Recent Developments
At the start of Q3-2017, our company faced significant financial, operational, product development, and sales
challenges. I am delighted to report that we have overcome these challenges and have delivered on our stated objectives, said Ilan Danieli, President and CEO. We now have the appropriate resources, products and services mix, financial
foundation and infrastructure to build upon last quarter s successes and drive growth. We have succeeded in recapitalizing the company, restructuring our debt to manage cash flow and relocating lab operations, which has provided the Company
runway to accelerate R&D development, transfer those developments into production tests and to build our sales force for market expansion. While much work remains, I have never been more excited about the future of Precipio,
Mr. Danieli concluded.
Third Quarter Ended September 30, 2017 Financial Results
Net sales decreased by
$0.1 million, or 26%, during the three months ended September 30, 2017 as compared to the same period in 2016. The decrease is entirely due to the decrease in cases processed during the three months ended September 30, 2017 as
compared to the same period in 2016. We processed 207 cases during the three months ended September 30, 2017 as compared to 269 cases during the same period in 2016, or a 23% decrease in cases. The decrease in volume is the result of turnover
of key sales personnel.
Cost of Diagnostic Services increased by $0.1 million, or 46%, for the three months ended September 30, 2017 as
compared to the same period in 2016. The increase is due to increased professional fees involved with the processing of patient tests in the three months ended September 30, 2017.
Gross Margin was a negative (29%) of total net sales, during the third quarter of 2017, compared to 35% of total net sales during the same quarter in 2016.
The gross profit decreased by $0.2 million during the three months ended September 30, 2017 as compared to the same period in 2016 due to decreased revenues and associated fixed costs to operate our laboratories.
Operating expenses increased by $3.1 million to $3.6 million during the three months ended September 30, 2017 as compared to the same period in
2016. The increase in operating expenses reflects the increase in professional fees attributed to legal expenses related to the Merger and increased compensation and other costs associated with restructuring the organization resulting from the
Merger. Additional increases in our general and administrative expenses resulted from increased amortization related to acquired intangibles from the Merger and expenses related to operating as a public company. The increase during the three months
ended September 30, 2017 also included a $1.0 million impairment of goodwill charge resulting from interim impairment testing of goodwill during the current quarter. The interim impairment testing was triggered by the significant reduction
in our market capitalization during the three months ended September 30, 2017
Other expense for the three months ended September 30, 2017 and
2016 includes interest expense of approximately $1.9 million and $0.2 million, respectively. The increase in interest expense is due to $1.8 million of debt discounts and debt issuance costs that were amortized to interest expense
during the third quarter of 2017 as a result of the payment and conversion of all of our convertible bridge notes during the quarter.
quarter ended September 30, 2017 was ($6.3m) compared to ($0.5m) in the same period in 2016. Merger and recapitalization expenses represent approximately $5.0m of the $5.8m increase in net loss, and are mostly
one-time, non-recurring expenses.
Conference Call to be Held Tuesday,
November 21, 2017 at 9:00am
Management will host a conference call on Tuesday, November 21, 2017 at 9:00am to review financial results and
provide a corporate update. Following management s formal remarks, there will be a question and answer session.
To listen to the call by phone,
interested parties within the U.S. should call 1-877-317-6789 and International callers should call 1-412-317-6789. All callers should ask for the Precipio Inc., conference call.
A replay of the call will be available approximately 24 hours after the call and may be accessed via Precipio s website.
Precipio has built a platform
designed to eradicate the problem of misdiagnosis by harnessing the intellect, expertise and technology developed within academic institutions and delivering quality diagnostic information to physicians and their patients worldwide. Through its
collaborations with world-class academic institutions specializing in cancer research, diagnostics and treatment, initially the Yale School of Medicine, Precipio offers a new standard of diagnostic accuracy enabling the highest level of patient
care. For more information, please visit www.precipiodx.com.
Forward-Looking Statements
Certain statements in this press release constitute
forward-looking statements, within the meaning of federal securities laws, including statements related to plans and prospects for Precipio and other statements containing the words anticipate, intend,
may, plan, predict, will, would, could, should, and similar expressions, constitute forward-looking statements within the meaning of The Private Securities
Litigation Reform Act of 1995. The Company s actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors. Factors that could cause future results to materially differ from the
recent results or those projected in forward-looking statements include the known risks, uncertainties and other factors described in the Company s definitive proxy statement filed on May 12, 2017, the Company s Quarterly
Report on Form 10-Q filed on August 22, 2017, the Company s prior filings and from time to time in the Company s subsequent filings with the Securities and Exchange Commission. Any change
in such factors, risks and uncertainties may cause the actual results, events and performance to differ materially from those referred to in such statements. All information in this press release is as of the date of the release and the Company does
not undertake any duty to update this information, including any forward-looking statements, unless required by law.
Precipio Investor Relations:
Garden City, NY 11530
PRECIPIO, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
| September 30, | ||||||||
| 2017 | December 31, | |||||||
| (unaudited) | 2016 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | 381 | $ | 51 | ||||
| Accounts receivable, net | 505 | 388 | ||||||
| Inventories | 99 | 100 | ||||||
| Other current assets | 127 | 13 | ||||||
| Total current assets | 1,112 | 552 | ||||||
| PROPERTY AND EQUIPMENT, NET | 255 | 280 | ||||||
| OTHER ASSETS: | ||||||||
| Goodwill | 12,817 | |||||||
| Intangibles, net | 20,779 | |||||||
| Other assets | 14 | 10 | ||||||
| $ | 34,977 | $ | 842 | |||||
| LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Current maturities of long-term debt | $ | 42 | $ | 395 | ||||
| Convertible bridge notes, less debt discounts and debt issuance costs | 695 | |||||||
| Accounts payable | 10,034 | 1,084 | ||||||
| Current maturities of capital leases | 49 | 46 | ||||||
| Accrued expenses | 1,872 | 700 | ||||||
| Deferred revenue | 210 | 92 | ||||||
| Other current liabilities | 1,528 | |||||||
| Total current liabilities | 13,735 | 3,012 | ||||||
| LONG TERM LIABILITIES: | ||||||||
| Long-term debt, less current maturities and discounts | 4,127 | |||||||
| Common stock warrant liability | 618 | |||||||
| Capital leases, less current maturities | 126 | 163 | ||||||
| Other long-term liabilities | 92 | |||||||
| Total liabilities | 14,571 | 7,302 | ||||||
| STOCKHOLDERS EQUITY (DEFICIT): | ||||||||
| Preferred stock $0.01 par value, 15,000,000 and 1,294,434 shares authorized at September 30, 2017 and December 31, 2016, respectively, 3,641 and 780,105 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively | 8 | |||||||
| Common stock, $0.01 par value, 150,000,000 and 1,806,850 shares authorized at September 30, 2017 and December 31, 2016, respectively, 9,446,878 and 449,175 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively | 94 | 4 | ||||||
| Additional paid-in capital | 41,879 | 4,376 | ||||||
| Accumulated deficit | (21,567 | ) | (10,848 | ) | ||||
| Total stockholders equity (deficit) | 20,406 | (6,460 | ) | |||||
| $ | 34,977 | $ | 842 |
PRECIPIO, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| SALES | ||||||||||||||||
| Patient service revenue, net | $ | 327 | $ | 445 | $ | 946 | $ | 1,716 | ||||||||
| less provision for bad debts | (57 | ) | (80 | ) | (168 | ) | (309 | ) | ||||||||
| Net sales | 270 | 365 | 778 | 1,407 | ||||||||||||
| COST OF DIAGNOSTIC SERVICES | 347 | 231 | 813 | 710 | ||||||||||||
| Gross profit (loss) | (77 | ) | 134 | (35 | ) | 697 | ||||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| Operating expenses | 2,541 | 497 | 3,981 | 1,573 | ||||||||||||
| Impairment of goodwill | 1,015 | 1,015 | ||||||||||||||
| TOTAL OPERATING EXPENSES | 3,556 | 497 | 4,996 | 1,573 | ||||||||||||
| OPERATING LOSS | (3,633 | ) | (363 | ) | (5,031 | ) | (876 | ) | ||||||||
| OTHER INCOME (EXPENSE): | ||||||||||||||||
| Interest expense, net | (1,883 | ) | (136 | ) | (2,265 | ) | (378 | ) | ||||||||
| Warrant revaluation | (3 | ) | ||||||||||||||
| Loss on extinguishment of debt and induced conversion of convertible bridge notes | (1,338 | ) | (1,391 | ) | ||||||||||||
| Gain on settlement of liability | 647 | 647 | ||||||||||||||
| Merger advisory fees | (73 | ) | (2,676 | ) | ||||||||||||
| Other, net | 3 | |||||||||||||||
| (2,647 | ) | (136 | ) | (5,688 | ) | (375 | ) | |||||||||
| LOSS BEFORE INCOME TAXES | (6,280 | ) | (499 | ) | (10,719 | ) | (1,251 | ) | ||||||||
| INCOME TAX EXPENSE | ||||||||||||||||
| NET LOSS | (6,280 | ) | (499 | ) | (10,719 | ) | (1,251 | ) | ||||||||
| DEEMED DIVIDENDS ON ISSUANCE OR EXCHANGE OF PREFERRED UNITS | (3,764 | ) | (9,012 | ) | (1,422 | ) | ||||||||||
| PREFERRED DIVIDENDS | (84 | ) | (84 | ) | (433 | ) | ||||||||||
| TOTAL DIVIDENDS | (3,848 | ) | (9,096 | ) | (1,855 | ) | ||||||||||
| NET LOSS AVAILABLE TO COMMON STOCKHOLDERS | $ | (10,128 | ) | $ | (499 | ) | $ | (19,815 | ) | $ | (3,106 | ) | ||||
| BASIC AND DILUTED LOSS PER COMMON SHARE | $ | (1.36 | ) | $ | (1.15 | ) | $ | (6.96 | ) | $ | (7.23 | ) | ||||
| BASIC AND DILUTED WEIGHTED-AVERAGE SHARES OF COMMON STOCK OUTSTANDING | 7,430,741 | 435,060 | 2,846,221 | 429,851 |
PRECIPIO, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
| Nine Months Ended September 30, | ||||||||
| 2017 | 2016 | |||||||
| CASH FLOWS USED IN OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (10,719 | ) | $ | (1,251 | ) | ||
| Adjustments to reconcile net loss to net cash flows used in operating activities: | ||||||||
| Depreciation and amortization | 395 | 99 | ||||||
| Amortization of deferred financing costs and debt discount | 1,898 | 31 | ||||||
| Loss on extinguishment of debt and induced conversion of convertible bridge notes | 1,391 | |||||||
| Gain on settlement of liability | (647 | ) | ||||||
| Stock-based compensation and change in liability of stock appreciation rights | 33 | 9 | ||||||
| Merger advisory fees | 2,676 | |||||||
| Impairment of goodwill | 1,015 | |||||||
| Provision for losses on doubtful accounts | 168 | 309 | ||||||
| Capitalized PIK interest on convertible bridge notes | 85 | |||||||
| Warrant revaluation | 3 | |||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (129 | ) | (314 | ) | ||||
| Inventories | 15 | (12 | ) | |||||
| Other assets | 30 | (27 | ) | |||||
| Accounts payable | 484 | 58 | ||||||
| Accrued expenses and other liabilities | (1,094 | ) | 371 | |||||
| Net cash used in operating activities | (4,481 | ) | (642 | ) | ||||
| CASH FLOWS PROVIDED BY INVESTING ACTIVITIES: | ||||||||
| Cash acquired in business combination | 101 | |||||||
| Net cash provided by investing activities | 101 | |||||||
| CASH FLOWS PROVIDED BY FINANCING ACTIVITIES: | ||||||||
| Principal payments on capital lease obligations | (34 | ) | (29 | ) | ||||
| Issuance of preferred stock | 5,380 | |||||||
| Payment of deferred financing costs | (25 | ) | (10 | ) | ||||
| Proceeds from exercise of warrants | 25 | |||||||
| Proceeds from long-term debt | 315 | 175 | ||||||
| Proceeds from convertible bridge notes | 1,365 | 455 | ||||||
| Principal payments on convertible bridge notes | (1,500 | ) | ||||||
| Principal payments on long-term debt | (816 | ) | (116 | ) | ||||
| Net cash flows provided by financing activities | 4,710 | 475 | ||||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | 330 | (167 | ) | |||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 51 | 235 | ||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 381 | $ | 68 | ||||
| SUPPLEMENTAL CASH FLOW INFORMATION | ||||||||
| Cash paid during the period for interest | $ | 65 | $ | 48 | ||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION | ||||||||
| Purchases of equipment financed through capital lease | 49 | |||||||
| Preferred unit dividend financed through exchange agreement | 433 | |||||||
| Convertible bridge notes exchanged for long-term debt | 680 | |||||||
| Series A and B preferred exchanged for long-term debt | 1,715 | |||||||
| Conversion of bridges loans plus interest into common stock | 1,787 | |||||||
| Conversion of senior and junior notes plus interest into preferred stock and common stock | 4,771 | |||||||
| Deferred debt issuance cost | 64 | |||||||
| Beneficial conversion feature on issuance of bridge notes | 1,856 | |||||||
| Accrued merger cost | 10 | |||||||
| Issuance of warrants in conjunction with issuance of side agreement | 487 | |||||||
| Purchases of equipment financed through accounts payable | 20 |