Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2018

Basis of Accounting, Policy [Policy Text Block]

Nature of Operations and Continuance of Operations

The Company was originally incorporated on

April 23, 2002

in Minnesota as BioDrain Medical, Inc. Effective

August 6, 2013,

the Company changed its name to Skyline Medical Inc. Pursuant to an Agreement and Plan of Merger effective

December 16, 2013,

the Company merged with and into a Delaware corporation with the same name that was its wholly-owned subsidiary, with such Delaware Corporation as the surviving corporation of the merger. On

August 31, 2015,

the Company completed a successful offering and concurrent uplisting to The NASDAQ Capital Market. On

February 1, 2018,

the Company filed with the Secretary of State of Delaware a Certificate of Amendment to the Certificate of Incorporation to change the Company’s corporate name from Skyline Medical Inc. to Precision Therapeutics Inc., effective

February 1, 2018.

Because of this change, the Company’s common stock began trading under the new ticker symbol “AIPT,” effective

February 2, 2018.

Skyline Medical (“Skyline”) remains as an incorporated division of Precision Therapeutics Inc.

As of

December 31, 2018,

the registrant had

14,091,748

shares of common stock, par value

$.01

per share, outstanding. The Company has developed an environmentally safe system for the collection and disposal of infectious fluids that result from surgical procedures and post-operative care. The Company also makes ongoing sales of its proprietary cleaning fluid and filters to users of the STREAMWAY systems. In

April 2009,

the Company received

510

(k) clearance from the FDA to authorize the Company to market and sell its STREAMWAY System products.

The Company acquired

25%

of the capital stock of Helomics Holding Corporation (“Helomics”), in transactions in the

first

quarter of

2018,

and in

April 2018

the Company entered into a letter of intent for a proposed merger transaction to acquire the remaining ownership of Helomics. In

June 2018,

the Company and Helomics entered into a definitive merger agreement – see Note

The Company’s precision medicine services – designed to use artificial intelligence and a comprehensive disease database to improve the effectiveness of cancer therapy – were launched with the Company’s investment in Helomics. Helomics’ precision oncology services are based on its D-CHIP™ diagnostic platform, which combines a database of genomic and drug response profiles from over

149,000

tumors with an artificial intelligence based searchable bioinformatics platform. Once a patient’s tumor is excised and analyzed, the D-CHIP platform compares the tumor profile with its database, and using its extensive drug response data, provides a specific therapeutic roadmap. In addition, the Company has formed a wholly-owned subsidiary, TumorGenesis Inc. (“TumorGenesis”), to develop the next generation, patient derived tumor models for precision cancer therapy and drug development. TumorGenesis, formed during the

first

quarter, is presented as part of the consolidated financial statements (“financial statements”).

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has incurred recurring losses from operations and has an accumulated deficit of

$63,107,945.

The Company does

not

expect to generate sufficient operating revenue to sustain its operations in the near-term. In

2018,

the Company incurred negative operating cash flows of approximately

$441,000

per month. Although the Company has attempted to curtail expenses, there is

guarantee that the Company will be able to reduce these expenses significantly, and expenses

may

need to be higher to prepare product lines for broader sales in order to generate sustainable revenues.

The Company had cash and cash equivalents of

$162,152

as of

December 31, 2018

and needs to raise significant additional capital to meet its operating needs, pay debt obligations coming due, and the continued operating needs of Helomics, therefore there is substantial doubt about the Company’s ability to continue as a going concern for

one

year after the date that the financial statements are issued. The financial statements do

not

include any adjustments that might result from the outcome of this uncertainty. The Company has available financing options including a shelf registration statement on Form S-

with which the Company has raised approximately

$2.1

million in net proceeds in early

2019.

The Company

may

raise up to approximately

$1.7

million in additional gross proceeds in the next calendar year using the shelf registration statement. This amount of available financing will increase to approximately

$6.4

million in additional gross proceeds, once the Helomics acquisition is completed.

Since inception to

December 31, 2018,

the Company raised approximately

$36,490,000

in equity and

$7,870,000

in debt financing. Equity raises include: a

January 2017

public offering of units with gross proceeds to the Company of

$3,937,500;

November 2017

private placement with gross proceeds of

$1,300,000;

and, a

January 2018

public offering with gross proceeds of

$2,755,000.

Included in debt financing were raises in

September 2018

on senior secured promissory notes with net proceeds of

$1,815,000,

and in

November 2018

the Company received a loan from the CEO for

$370,000.

Subsequent to

December 31, 2018,

the Company’s CEO made an additional loan to the Company and made a private investment in the Company’s common stock, which in total, generated an additional

$1,300,000.

The Company has

commitments or contingencies.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Developments

Accounting Policies and Estimates

The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America requires 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 statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

May 2014,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

No.

2014

09,

Revenue from Contracts with Customers (Topic

606

which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The standard’s core principle is that an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted the standard on

January 1, 2018

using the modified retrospective method applied to those contracts which were

not

completed as of

December 31, 2017.

Results for reporting periods beginning

January

2018

are presented under Topic

606,

while prior-period amounts have

not

been retrospectively adjusted and continue to be reported in accordance with Topic

605,

Revenue Recognition

. Based upon the Company’s contracts which were

not

completed as of

December 31, 2017,

the Company was

not

required to make an adjustment to the opening balance of retained earnings as of

January 1, 2018,

and there was

material impact. See Note

for further discussion.

January 2016,

the FASB issued ASU

No.

2016

01,

Financial Instruments-Overall (Subtopic

825

): Recognition and Measurement of Financial Assets and Financial Liabilities

(“ASU

2016

01”

). The standard changes how entities measure certain equity investments and present changes in the fair value of financial liabilities measured under the fair value option that are attributable to their own credit. Under the new guidance, entities will be required to measure equity investments that do

not

result in consolidation and are

not

accounted for under the equity method at fair value and recognize any changes in fair value in net income unless the investments qualify for the new practicability exception. The Company adopted the standard as of

January 1, 2018.

As of

December 31, 2018,

there is

material impact on the Company’s financial statements and disclosures.

February 2016,

the FASB issued ASU

No.

2016

02,

“

Leases (Topic

842

)

” (“ASU

2016

02”

), which requires lessees to put most leases on their balance sheets but recognize the expenses on their income statements in a manner similar to current practice. The standard states that a lessee would recognize a lease liability for the obligation to make lease payments and a right-to-use asset for the right to use the underlying asset for the lease term. The standard is effective for fiscal years and interim periods within those fiscal years beginning after

December 15, 2018.

Early adoption is permitted. The Company adopted ASU

2016

January 1, 2019,

using the transition relief to the modified retrospective approach, presenting prior year information based on the previous standard. The adoption resulted in

material impact to the Company’s balance sheet, results of operations, equity or cash flows.

August 2016,

the FASB issued ASU

No.

2016

15,

Statement of Cash Flows (Topic

230

): Classification of Certain Cash Receipts and Cash Payments,

to address diversity in how certain cash receipts and cash payments are presented and classified in the statements of cash flows. The amendments are effective for public business entities for fiscal years beginning after

December 15, 2017,

and interim periods within those fiscal years. The amendments should be applied using a retrospective transition method to each period presented. If retrospective application is impractical for some of the issues addressed by the update, the amendments for those issues would be applied prospectively as of the earliest date practicable. Early adoption is permitted, including adoption in an interim period. The Company adopted the standard as of

January 1, 2018.

As of

December 31, 2018,

there is

material impact on the Company’s financial statements and disclosures.

Impairment or Disposal of Long-Lived Assets, Including Intangible Assets, Policy [Policy Text Block]

Valuation of Intangible Assets

The Company reviews identifiable intangible assets for impairment in accordance with ASC

360

— Intangibles —Goodwill and Other, whenever events or changes in circumstances indicate the carrying amount

may

not

be recoverable. The Company’s intangible assets are definite lived and currently solely the costs of obtaining licensing fees, trademarks, and patents. Events or changes in circumstances that indicate the carrying amount

may

not

be recoverable include, but are

not

limited to, a significant change in the medical device marketplace and a significant adverse change in the business climate in which the Company operates.

Advertising Costs, Policy [Policy Text Block]

Advertising

Advertising costs are expensed as incurred. Advertising expenses were

$43,548

2018

and

$37,060

2017.

Research and Development Expense, Policy [Policy Text Block]

Research and Development

Research and development costs are charged to operations as incurred. Research and development costs were approximately

$526,000

and

$289,000

for

2018

and

2017,

respectively.

Revenue from Contract with Customer [Policy Text Block]

Revenue Recognition

The Company’s revenue consists primarily of sales of the STREAMWAY System, as well as sales of the proprietary cleaning fluid and filters for use with the STREAMWAY System. The Company sells its products directly to hospitals and other medical facilities using employed sales representatives and independent contractors. Purchase orders, which are governed by sales agreements in all cases, state the final terms for unit price, quantity, shipping and payment terms. The unit price is considered the observable stand-alone selling price for the arrangements. The Company sales agreement, Terms and Conditions, is a dually executed contract providing explicit criteria supporting the sale of the STREAMWAY System. The Company considers the combination of a purchase order and the Terms and Conditions to be a customer’s contract in all cases.

The Company recognizes revenue when it satisfies a performance obligation by transferring control of the promised goods or services to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Sales taxes are imposed on the Company’s sales to nonexempt customers. The Company collects the taxes from the customers and remits the entire amounts to the governmental authorities. The Company has elected the accounting policy to exclude sales taxes from revenue and expenses.

Product sales consist of a single performance obligation that the Company satisfies at a point in time. The Company recognizes product revenue when the following events have occurred: (a) the Company has transferred physical possession of the products, (b) the Company has a present right to payment, (c) the customer has legal title to the products, and (d) the customer bears significant risks and rewards of ownership of the products. Based on the shipping terms specified in the sales agreements and purchase orders, these criteria are generally met when the products are shipped from the Company’s facilities (“FOB origin”, which is the Company’s standard shipping terms). As a result, the Company determined that the customer is able to direct the use of, and obtain substantially all of the benefits from, the products at the time the products are shipped. The Company

may,

at its discretion, negotiate different shipping terms with customers which

may

affect the timing of revenue recognition. The Company’s standard payment terms for its customers are generally

days after the Company transfers control of the product to its customer. The Company allows returns of defective disposable merchandise if the customer requests a return merchandise authorization from the Company.

Customers

may

also purchase a maintenance plan from the Company, which requires the Company to service the STREAMWAY System for a period of

one

year subsequent to the

one

-year anniversary date of the original STREAMWAY System invoice. The maintenance plan is considered a separate performance obligation from the product sale, is charged separately from the product sale, and is recognized over time (ratably over the

one

-year period) as maintenance services are provided. A time-elapsed output method is used to measure progress because the Company transfers control evenly by providing a stand-ready service. The Company has determined that this method provides a faithful depiction of the transfer of services to its customers.

All amounts billed to a customer in a sales transaction related to shipping and handling, if any, represent revenues earned for the goods provided, and these amounts have been included in revenue. Costs related to such shipping and handling billing are classified as cost of goods sold.

Variable Consideration

The Company records revenue from distributors and direct end customers in an amount that reflects the transaction price it expects to be entitled to after transferring control of those goods or services. The Company’s current contracts do

not

contain any features that create variability in the amount or timing of revenue to be earned.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash Equivalents

The Company considers all highly liquid debt instruments with a maturity of

three

months or less when purchased to be cash equivalents. Cash equivalents are stated at cost, which approximate fair value.

Certificates of Deposit Policy [Policy Text Block]

Certificates of Deposit

Short-term interest-bearing investments are those with maturities of less than

one

year but greater than

three

months when purchased. Certificates with maturity dates beyond

one

year are classified as noncurrent assets. These investments are readily convertible to cash and are stated at cost plus accrued interest, which approximates fair value.

Fair Value Measurement, Policy [Policy Text Block]

Fair Value Measurements

Under generally accepted accounting principles as outlined in the FASB’s

Accounting Standards Certification

(ASC)

820,

fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The accounting standards ASC

820

establishes a

three

-level fair value hierarchy that prioritizes information used in developing assumptions when pricing an asset or liability as follows:

Level

– Observable inputs such as quoted prices in active markets;

Level

– Inputs other than quoted prices in active markets, that are observable either directly or indirectly; and

Level

– Unobservable inputs where there is little or

market data, which requires the reporting entity to develop its own assumptions.

The Company uses observable market data, when available, in making fair value measurements. Fair value measurements are classified according to the lowest level input that is significant to the valuation.

The fair value of the Company’s investment securities, which in

2018

are cash equivalents only, were determined based on Level

inputs.

Receivables, Policy [Policy Text Block]

Receivables

Receivables are reported at the amount the Company expects to collect on balances outstanding. The Company provides for probable uncollectible amounts through charges to earnings and credits to the valuation based on management’s assessment of the current status of individual accounts. Changes to the valuation allowance have

not

been material to the financial statements.

Inventory, Policy [Policy Text Block]

Inventories

Inventories are stated at the net realizable value, with cost determined on a

first

-in,

first

-out basis. Inventory balances are as follows:

	December 31, 2018		December 31, 2017

Finished goods	$	58,701	$	62,932
Raw materials		127,003		141,028
Work-In-Process		55,362		61,085
Total	$	241,066	$	265,045

Property, Plant and Equipment, Policy [Policy Text Block]

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the respective assets. Depreciation is shown in the financial statements under fixed assets, net on the balance sheet, and amortization is shown under intangibles, net on the balance sheet. Estimated useful asset life by classification is as follows:

The Company’s investment in fixed assets consists of the following:

	December 31, 2018		December 31, 2017
Computers and office equipment	$	204,903	$	183,528
Leasehold Improvements		140,114		25,635
Manufacturing Tooling		108,955		108,955
Demo Equipment		85,246		43,368
Total		539,218		361,486
Less: Accumulated Depreciation		358,765		273,770
Total Fixed Assets, Net	$	180,453	$	87,716

Upon retirement or sale, the cost and related accumulated depreciation are removed from the balance sheet and the resulting gain or loss is reflected in operations. Maintenance and repairs are charged to operations as incurred.

Depreciation expense was

$84,995

2018

and

$58,872

2017.

Goodwill and Intangible Assets, Intangible Assets, Policy [Policy Text Block]

Intangible Assets

The components of intangible assets all of which are finite-lived were as follows:

	12/31/2018							12/31/2017
	Gross Carrying Costs		Accumulated Amortization			Net Carrying Amount		Gross Carrying Costs		Accumulated Amortization			Net Carrying Amount
Patents & Trademarks	$	318,304	$	(182,559	)	$	135,745	$	264,032	$	(168,676	)	$	95,356
Licensing Fees		877,500		(48,750	)		828,750		-		-			-
Total	$	1,195,804	$	(231,309	)	$	964,495	$	264,032	$	(168,676	)	$	95,356

The following table outlines the estimated future amortization expense related to intangible assets held as of

December 31, 2018

Year ending	Expense
2019		72,383
2020		72,383
2021		72,383
2022		72,383
2023		72,383
Thereafter		602,580
Total		964,495

Intangible assets consist of trademarks, patent costs and licensing fees. Amortization expense was

$62,633

2018

and

$12,689

2017.

The assets are reviewed for impairment annually, and impairment losses, if any, are charged to operations when identified.

Income Tax, Policy [Policy Text Block]

Income Taxes

December 22, 2017,

the Tax Cuts and Jobs Act of

2017

(Tax Reform Act) was signed into law making significant changes to the Internal Revenue Code. Changes include a reduction in the corporate tax rates, changes to operating loss carry-forwards and carrybacks, and a repeal of the corporate alternative minimum tax. The legislation reduced the U.S. corporate income tax rates from

34%

21%.

As a result of the enacted law, the Company was required to value its deferred tax assets and liabilities at the new enacted rate. There was

income tax impact from the re-measurement due to the

100%

valuation allowance on the Company’s deferred tax assets.

The Company accounts for income taxes in accordance with ASC

740

Income Taxes

(“ASC

740”

). Under ASC

740,

deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and net operating loss and credit carryforwards using enacted tax rates in effect for the year in which the differences are expected to impact taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

The Company reviews income tax positions expected to be taken in income tax returns to determine if there are any income tax uncertainties. The Company recognizes tax benefits from uncertain tax positions only if it is more likely than

not

that the tax positions will be sustained on examination by taxing authorities, based on technical merits of the positions. The Company has identified

income tax uncertainties.

Offering Costs [Policy Text Block]

Offering Costs

Costs incurred which are direct and incremental to an offering of the Company’s securities are deferred and charged against the proceeds of the offering, unless such costs are deemed to be insignificant in which case they are expensed as incurred.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Credit Risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash. The Company places its cash with high credit quality financial institutions and, by policy, generally limits the amount of credit exposure to any

one

financial institution. The Company has

credit risk concentration because there are

funds in excess of insurance limits in a single bank.

Standard Product Warranty, Policy [Policy Text Block]

Product Warranty Costs

2018

and in

2017,

the Company incurred approximately

$10,682

and

$6,209,

respectively in warranty costs.

Segment Reporting, Policy [Policy Text Block]

Segments

The Company operates in

two

segments for the sale of its medical device and consumable products. These segments are its domestic operations and international operations. Substantially all the Company’s assets, revenues, and expenses for the years ended

December 31, 2018

and

2017

were located at or derived from operations in the United States. In

2018

and

2017,

business activity within the Company’s international segment was immaterial.

Risks and Uncertainties Policy [Policy Text Block]

Risks and Uncertainties

The Company is subject to risks common to companies in the medical device industry, including, but

not

limited to, development by the Company or its competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, and compliance with regulations of the FDA and other governmental agencies.

Computers and office equipment

Leasehold improvements

Manufacturing Tooling

Demo Equipment