Welcome to the Precipio Shareholder -- Third Quarter 2021 Shareholder Update Conference Call. All participants will be in listen-only mode. [Operator Instructions]. Please note that the conference is being recorded. Statements made during this call may contain forward-looking statements about our business.

We should not place undue reliance on forward-looking statements as these statements are based upon our current expectations, forecasts, and assumptions, and are subject to significant risks and uncertainties.

These statements may be identified by words such as may, will, should, could, expect, intend, plan, anticipate, believe, estimate, predict, potential, forecast, continue, or the negative of these terms or other words or terms of similar meaning.

Risks and uncertainties that could cause our actual results to differ materially from those set forth in any forward-looking statements include, but are not limited to the matters listed under Risk Factors in our annual report on Form 10-K for the year ended December 31, 2020, which is on file with the Securities and Exchange Commission, as well as other risks detailed in our subsequent filings with the Securities and Exchange Commission.

These reports are available at www.sec.gov.

Statements and information, including forward-looking statements, speak only to the date that they are provided unless an earlier date is indicated and we do not undertake any obligation to publicly update any statements or information, including forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Now, let me hand over the call to Ilan Danieli, Precipio's CEO..

Thank you, Grant. Good afternoon, everyone. And thank you for joining our Q3 2021 shareholder call. My goal on this call is to give you an insight as to how we experienced the recent quarter. We are what you read in our financial statements that were filed last week. And to give you some insight into how we see the future.

Let me start by saying we had a rough quarter, we experienced several challenges, we dealt with them and they've overcome them. With these challenges, they start seeing their passion, dedication and commitment to our cause. And to the business. I believe we're coming out of this quarter stronger, and with more determination to succeed.

Let me begin by providing an insight to each of our business segments, and then share with you some of the exciting outlook for our company going forward. Let's start with our clinical pathology services. This quarter was the first quarter where we didn't experience the growth we saw in prior quarters.

For the nine months ending September 30, 2021, year-over-year, audited revenues of $6.4 million, have increased to $2.3 million or 55% from 2020. That's a great accomplishment. And in Q3, our case volume and revenues were relatively flat, not great.

As in any complex situation, there is rarely one single cause that could be identified as sole driver of a problem.

Like many companies around the globe, we too have to deal with supply chain issues, unreliable courier services, which we depend on and envision internal lab operational issues, which ultimately translated into service issues to our customers. The challenges resulted in us losing several customers.

Fortunately, none of them large enough that our revenue declined. But nonetheless, it resulted in us not achieving the growth we've demonstrated previously. And nobody likes losing a customer. Certainly not us. So our team stepped up.

And we worked hard to resolve the issues with our mission in mind, which is first and foremost providing the most accurate diagnosis to ensure proper patient care, alongside our goal of providing our customers with the service they become accustomed to. With that in mind, we work hard to address those issues.

Today, in Q4, I'm pleased to report the operational issues have been resolved. In addition, we've revamped our sales process and these steps together are starting to produce greater results. I was proud to watch our team step up, embrace the problems head on and work hard to fix them.

I believe that company's management of teams are measured not when everything is going smoothly, but rather when challenges arise. And the way in which these challenges are addressed. Our team performed outstandingly this proves just once again what we already knew that there is nothing that as a team we cannot overcome.

On the product side of the business, this quarter was a successful quarter for speedy trial. As previously announced in August, we signed an agreement with AON, a large oncology practice to onboard. This account was introduced to us by our strategic Partner AON Solutions.

We did a great job at bringing this customer to the table and helping to close the deal. Today, AON was the largest customer we on boarded and our team made sure the onboarding. We conducted outside training for the lab team, and work with them to ensure a smooth and successful launch.

I'm pleased to announce that as of last week, AON went live with HemeScreen. Now, like in any process when onboarding new products, there could be bumps along the way. I'd like to share with you a small example of our team's dedication to our customer success. Our shipment of reagents to AON is worth 100s of 1000s of dollars.

And they're shipped on dry ice so that they can remain frozen until the reagents arrive at the customer site and are safely placed in the customer's freezer. Given several mishaps with FedEx on the pathology services side, we weren't going to take the risk of our very first shipment to our largest customer.

Driving the reagent by car isn't enough to give it a distance. So one of our managers graciously volunteered to fly down with a doctor reagent and his luggage, and personally deliver them to the customer. Now this may not sound like a big deal, but this is not typical in our industry.

And our laboratory is well experienced in receiving reagents from other vendors that are either fired or out of temperature side, not with Precipio. Without hesitation, our team members rose to the occasion and got the job done. This is a major customer with significant expected revenue and gross margins that will impact our business.

Once running at full theme AON on its own, is expected to reduce our cash burn by approximately 25%. AON is also very good, a very visible customer. And we're actively working to onboard numerous other sizable customers and to grow this part of our business with continued impact on revenue and profitability.

Now I know we haven't discussed IV-Cell for a while and until today, the reality is there hasn't been a record. Unlike our pathology services, we're limited access to allow this kind of business or with HemeScreen where we're still able to present the concept and onboard customers.

With IV-Cell, the onboarding process really requires hands on in-person work together at the client site. Given the ongoing disarray of laboratories due to COVID, this really wasn't possible. Having said that we've not given up and in fact, I'm pleased to say that we are making progress with several accounts.

And I hope to have some good news early next year. We still believe that IV-Cell is a groundbreaking technology, and we see the impact to patient care in our laboratory every day. With persistence, I anticipate that we will win customers and then ultimately other laboratories worldwide will benefit from this technology.

From an organizational perspective, we're in the process of re-organizing our company. And starting next year, we will have two divisions. The first is our clinical diagnostic services division, which includes our pathology sales team and our lab operations. This division has two purposes.

The first and foremost is to deliver on our mission to battle the problem with diagnosis. From our proprietary processes and technologies to our expert academic pathologists, we continue to demonstrate an unparalleled level of quality and accuracy that impact patient care.

This is the core of who we are as a company, and this will always remain the heart of our businesses. The second purpose of this division is to provide a breeding ground for new technology.

Both HemeScreen and IV-Cell were born out of the identification of operational and clinical deficiencies in the way laboratories operate, and our desire to improve these efficiencies and provide better patient care. Therefore, our laboratory serves a dual purpose. One is to provide clinical results to our customers.

And the second is to support our R&D team in continuing to identify, examine and develop technologies for laboratories. The second division is our diagnostics product division. This division will include our R&D team, and the products commercial arm that will be bringing these technologies such as HemeScreen and IV-Cell and others to the market.

We believe that this division is going to be the primary growth engine and profitability contributor for the company going forward due to several factors. First off, this is a B2B business that does not require the customer to repeatedly make decisions to use our product.

Once the lab is onboarded and validated our product, it's difficult to unseat the incumbent, especially when our technology is superior to competing products at the market. From the company's perspective, this means our recurring revenue stream with relatively minimal sales and technical support effort require.

Second, this is a higher margin business do the economics of the product. And lastly, this is a highly scalable business. Spending less than $50,000, we've recently set up a full production facilities that can scale up to produce 25x the volume of products we currently produce.

All these factors have a direct impact on company's revenues, as well as gross margins and profitability. It is our intention to continue to invest more in R&D and build our pipeline of products.

With a methodical and disciplined process to evaluate new technologies against market needs, I can already visualize doubling our product portfolio next year, and bring it to market new, exciting and clinically impactful technologies with knowledge to provide better economic, and operational benefits to our customers, but also support our core mission of eradicating this diagnosis, and providing the diagnostic tools to ensure the highest level of accuracy for patients.

I want to take a few moments to discuss our IR strategy. I know many of you have been disappointed in the decline of the share price over the last quarter, and the lack of news. So by hopefully you can see that neither of these mirror the actual activity going on in the company and then we've made tremendous progress.

As insiders, we have the benefit of seeing how our company is advancing and making huge strides towards success. But sometimes, you just need to hunker down, keep your head in the game and focus. And that can result in less communication to the outside world as we just focus on our work and let the results speak for itself.

In the past, we've seen press releases make the stock moves up all the way to return to its previous position relatively quickly. This volatility is not good for the company, nor its existing shareholders. And there's a third of this institution that is not good for our institutional investors.

As our company grows, our goal is to transition from a micro-cap company to a more mature company that can attract and earn the support of long-term, large institutional investors.

That in addition of course, to the ongoing performance, which ensures stability, and continuous long-term growth of the share price, and reduce volatility for the share price and of course to our shareholders.

I would argue that if previously, the share price was not a reflection of the company value and our accomplishments, hopefully with the results that we've shared today, you could see that that's even more true.

Let me give you a few anecdotal financial points to support that, for the nine months ended September 30 2021, our audited revenues of $6.4 million has increased by 55% or $2.3 million for the same period last year.

The company also reported increased gross profit of $1.1 million and reported gross margins of $0.27, both a 60% to 80% improvement in the same period in 2020. There are other financial measures, they're just as important.

Allowance for doubtful accounts has dropped from around 25% to below 10% as well as a significant improvements in DSO, days of sales outstanding from above 100 days to below 30 days. All those have significant cash impact to the company and demonstrate substantial and continuous improvements in the right direction for us.

These are some of the financial metrics that institutional investors look at that demonstrate that a company is on its way to becoming a high performance. In summary, we had a challenging quarter which we overcame.

We are stronger, our team is more resilient, and our business will benefit from the learning we experienced as we overcome these challenges. I'm proud to be a part of this team and support them as they translate the dedication and commitment to the ongoing improvement for the business.

Our goal is currently see changes into financial problems and shareholder value for you, our shareholders. We have a unique business model that combines the values of the clinical lab with technological capabilities developed real world solution to true political challenges.

I have no doubt that continued support our diagnostic services division while allocating resources to our Diagnostic Products Division, and building a strong team to execute on these technologies and those in the pipeline will result in real enterprise value for our company and for you, our shareholders.

We have some amazing concepts we're working on that I'm eagerly awaiting the moment when I could share those with you and enable you to share to be part of the community. With that, I want to wish our shareholders and their families a happy holiday season.

I wish you that while you remain our shareholders, you and your loved ones will never require our services and to those who rely on us to provide the quality and accuracy and to deliver on our mission, know that we're as always committed to that goal. Thank you all for your support. And have a great evening. We'll see you next year..

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..

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