Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2019

Basis of Accounting, Policy [Policy Text Block]

Nature of Operations and Continuance of Operations

Precision Therapeutics Inc., (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 its Certificate of Incorporation to change the corporate name from Skyline Medical Inc. to Precision Therapeutics Inc., effective

February 1, 2018.

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

February 2, 2018.

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

As of

March 31, 2019,

the Company had

17,360,144

shares of common stock outstanding, par value

$.01

per share. The Company is a healthcare company that provides personalized medicine solution and medical devices in

two

main areas: (

) precision medicine, which aims to apply artificial intelligence to personalized medicine and drug discovery; and (

) 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 proprietary cleaning fluid and filters to users of its systems. In

April 2009,

the Company received

510

(k) clearance from the Food and Drug Administration (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. On

April 4, 2019,

the Company completed the acquisition and is now the sole owner of Helomics – see Note

10.

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., to develop the next generation, patient derived tumor models for precision cancer therapy and drug development. TumorGenesis Inc., formed during the

first

quarter of

2018,

is presented as part of the unaudited condensed 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

$66,401,129.

The Company does

not

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

first

quarter the Company incurred negative cash flows from operations. 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

$1,124,730

as of

March 31, 2019

and needs to raise significant additional capital to meet its operating needs, pay debt obligations coming due, and fund 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

$5.0

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

Since inception to

March 31, 2019,

the Company has raised approximately

$38,970,000

in equity and

$9,120,000

in debt financing. Equity raises include: a

January 2018

public offering with net proceeds of

$2,475,000;

and

March 2019

public offerings with net proceeds of

$1,112,000

and

$1,053,000.

Included in debt financing were raises in

September 2018

on senior secured promissory notes with net proceeds of

$1,815,000.

November 2018,

the Company received a loan from the CEO for

$370,000.

February 2019,

the Company received a loan from the CEO for

$950,000,

and in

March 2019

the Company received a loan from the CEO for

$300,000.

Interim Financial Statements, Policy [Policy Text Block]

Interim Financial Statements

The Company has prepared the unaudited interim financial statements and related unaudited financial information in the footnotes in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. These interim financial statements reflect all adjustments consisting of normal recurring accruals, which in the opinion of management, are necessary to present fairly the Company’s position, the results of its operations and its cash flows for the interim periods. These interim financial statements reflect all intercompany eliminations. These interim financial statements should be read in conjunction with the annual financial statements and the notes thereto contained in the Annual Report on Form

-K filed with the SEC on

April 1, 2019.

The nature of the Company’s business is such that the results of any interim period

may

not

be indicative of the results to be expected for the entire year.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Developments

Accounting Policies and Estimates

The presentation of financial statements in conformity with GAAP 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.

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 the standard on

January 1, 2019,

using the transition relief to the modified retrospective approach, presenting prior year information based on the previous standard. Upon adoption, the Company recognized

$353,007

of lease right-of-use (ROU) assets and liabilities for operating leases on its condensed consolidated balance sheet, of which,

$79,252

were classified as current liabilities. The adoption of ASU

2016

did

not

have a material impact on the Company’s consolidated results of operations or cash flows.

The Company leases facilities under long-term operating leases that are non-cancelable and expire on various dates. At the lease commencement date, lease ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term, which includes all fixed obligations arising from the lease contract. If an interest rate is

not

explicit in a lease, the Company utilizes its incremental borrowing rate for a period that closely matches the lease term.

See Note

– Leases

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 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 Codification (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 was determined based on Level

inputs.

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:

	March 31, 2019		December 31, 2018

Finished goods	$	88,849	$	58,701
Raw materials		139,183		127,003
Work-In-Process		60,991		55,362
Total	$	289,023	$	241,066

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. Estimated useful asset life by classification is as follows:

	Years
Computers and office equipment	3	-	7
Leasehold improvements		3
Manufacturing tooling	3	-	7
Demo equipment		3

The Company’s fixed assets consist of the following:

	March 31, 2019		December 31, 2018
Computers and office equipment	$	205,758	$	204,903
Leasehold improvements		140,114		140,114
Manufacturing tooling		108,955		108,955
Demo equipment		74,529		85,246
Total		529,356		539,218
Less: Accumulated depreciation		380,647		358,765
Total Fixed Assets, Net	$	148,709	$	180,453

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

$21,882

in the

three

months ended

March 31, 2019

and was

$14,496

for the

three

months ended

March 31, 2018.

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

Intangible Assets

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

$17,644

in the

three

months ended

March 31, 2019

and was

$3,671

in the

three

months ended

March 31, 2018.

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.

Income Tax, Policy [Policy Text Block]

Income Taxes

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.

There is

income tax provision in the accompanying statements of net loss due to the cumulative operating losses that indicate a

100%

valuation allowance for the deferred tax assets and state income taxes is appropriate.

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.

Tax years subsequent to

2015

remain open to examination by federal and state tax authorities.

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 for cash amounts held in a single institution that are in excess of amounts issued by the Federal Deposit Insurance Corporation.

Segment Reporting, Policy [Policy Text Block]

Segments

The Company has

two

operating segments; domestic and international sales. The segment revenues and net losses for the

three

-month period ended

March 31, 2019

are described in the table below. Substantially all of the Company’s revenues and expenses in the prior year were related to the domestic segment.

	Domestic			International			Totals
Revenue	$	219,660		$	35,581		$	255,241
Segment Loss	$	(887,831	)	$	(84,569	)	$	(972,400	)

Reconciliation of Segment Loss

Description	Amounts
Domestic loss	$	887,831
International loss		84,569
Corporate losses		2,320,784
Total	$	3,293,184

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.