Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2019

Basis of Accounting, Policy [Policy Text Block]

Nature of Operations and Continuance of Operations

Predictive Oncology 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 traded under the ticker symbol “AIPT,” effective

February 2, 2018.

June 10, 2019,

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 Precision Therapeutics Inc. to Predictive Oncology Inc., trading under the new ticker symbol “POAI,” effective

June 13, 2019.

Skyline Medical (“Skyline”) remains as an incorporated division of Predictive Oncology Inc. On

October 28, 2019,

the Company completed a

one

-for-

ten

reverse stock split that was effective for trading purposes on

October 29, 2019.

All numbers of shares and per-share amounts in this report have been adjusted to reflect the reverse stock split (“Reverse Split”).

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 (

) 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.

April 4, 2019,

the Company completed the Helomics Holding Corporation (“Helomics”) acquisition. 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’s wholly-owned subsidiary, TumorGenesis Inc., is developing 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 Company has incurred recurring losses from operations and has an accumulated deficit of

$68,944,537.

The Company does

not

expect to generate sufficient operating revenue to sustain its operations in the near-term. Year-to-date the Company has 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

$98,599

as of

September 30, 2019

and needs to raise significant additional capital to meet its operating needs and pay debt obligations coming due. The Company intends to raise these funds through equity or debt financing that

may

include public offerings, private placements, alternative offerings, or other means. In the

third

quarter of

2019,

the Company raised

$1,562,840

in net proceeds from a private placement of convertible preferred stock and

$25,000

in debt financing from the Company’s CEO. The Company also completed a public offering which raised in

$2,811,309

net proceeds in

October 2019 (

see Note

). In addition, in

October 2019,

the Company entered into a purchase agreement for an equity line under which it can raise up to

$15,000,000

over a

three

-year period, subject to certain prior conditions. Despite these sources of funding, the Company will need to obtain additional financing in order to fund operations. 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 accompanying financial statements have been prepared assuming the Company will continue as a going concern and do

not

include any adjustments that might result from the outcome of this uncertainty.

Interim Financial Statements, Policy [Policy Text Block]

Interim Financial Statements

The Company has prepared the financial statements and related unaudited financial information in the footnotes in accordance with accounting principles generally accepted in the United States of America (“U.S. 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

The Company has reviewed all recently issued accounting pronouncements and has determined that they are either

not

applicable or are

not

expected to have a material impact on its financial statements.

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 was effective for fiscal years and interim periods within those fiscal years beginning after

December 15, 2018.

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.

Accounting Policies and Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities at the date of the financial statements during the reporting period. Actual results could materially differ from those estimates.

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. 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:

	September 30, 2019		December 31, 2018

Finished goods	$	62,696	$	58,701
Raw materials		86,413		127,003
Work-In-Process		61,241		55,362
Total	$	210,350	$	241,066

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

Fixed Assets

Fixed assets are stated at cost less accumulated depreciation. Depreciation of fixed assets 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		2
Manufacturing tooling	3	-	7
Demo equipment		3
Laboratory equipment		4

The Company’s fixed assets consist of the following:

	September 30, 2019		December 31, 2018
Computers and office equipment	$	504,556	$	204,903
Leasehold improvements		188,014		140,114
Manufacturing tooling		108,955		108,955
Demo equipment		73,051		85,246
Laboratory equipment		1,401,210		-
Total		2,275,786		539,218
Less: Accumulated depreciation		642,036		358,765
Total Fixed Assets, Net	$	1,633,750	$	180,453

The large fluctuation in fixed assets is due to the Helomics acquisition. 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 expense as incurred.

Depreciation expense was

$130,848

and

$284,150

in the

three

and

nine

-month periods ended

September 30, 2019

and was

$26,120

and

$59,442

for the

three

and

nine

-month periods ended

September 30, 2018.

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

Intangible Assets

Finite-lived intangible assets consist of patents and trademarks, licensing fees, developed technology, and customer relationships, and are amortized over their estimated useful life. The tradename is an indefinite-lived intangible asset and is

not

amortized. Amortization expense was

$93,421

and

$199,481

in the

three

and

nine

-month periods ended

September 30, 2019

and was

$38,387

and

$46,127

in the

three

and

nine

-month periods ended

September 30, 2018.

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

360

—

Property, Plant and Equipment

, whenever events or changes in circumstances indicate the carrying amount

may

not

be recoverable. 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.

The large fluctuation in intangible assets during

2019

was due to the Helomics acquisition.

The components of intangible assets were as follows:

	9/30/2019							12/31/2018
	Gross Carrying Costs		Accumulated Amortization			Net Carrying Amount		Gross Carrying Costs		Accumulated Amortization			Net Carrying Amount
Patents & Trademarks	$	336,722	$	(191,950	)	$	144,772	$	318,304	$	(182,559	)	$	135,745
Licensing Fees		877,500		(92,625	)		784,875		877,500		(48,750	)		828,750
Developed Technology		2,882,000		(72,048	)		2,809,952		-		-			-
Customer Relationships		445,000		(74,166	)		370,834		-		-			-
Tradename		398,000		-			398,000		-		-			-
Total	$	4,939,222	$	(430,789	)	$	4,508,433	$	1,195,804	$	(231,309	)	$	964,495

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

September 30, 2019:

Year ending December 31,	Expense
2019		90,985
2020		363,941
2021		363,941
2022		265,053
2023		215,609
Thereafter		2,810,904
Total		4,110,433

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

Goodwill

In accordance with ASC -

350,

Intangibles – Goodwill and Other,

goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred and the fair value of net assets acquired and represents the future economic benefits that the Company expects to achieve as a result of the acquisition. Goodwill is an indefinite-lived asset and is

not

amortized. Goodwill is

not

expected to be deductible for tax purposes. To determine whether goodwill is impaired, annually or more frequently if needed, the Company performs a multi-step impairment test. The Company

first

assesses qualitative factors to determine if it is more likely than

not

that the carrying value of a reporting unit exceeds its estimated fair value. The Company

may

also elect to skip the qualitative testing and proceed directly to the quantitative testing. When performing quantitative testing, the Company

first

estimates the fair values of its reporting units using discounted cash flows. To determine fair values, the Company must make assumptions about a wide variety of internal and external factors. Significant assumptions used in the impairment analysis include financial projections of free cash flow (including significant assumptions about operations, capital requirements and income taxes), long-term growth rates for determining terminal value and discount rates. Comparative market multiples are used to corroborate the results of the discounted cash flow test. If the fair value is less than the carrying value of the reporting unit, then the implied value of goodwill would be calculated and compared to the carrying amount of goodwill to determine whether goodwill is impaired. The Company did

not

have goodwill in

2018;

therefore,

impairment test was required. Based on qualitative factors as of

September 30, 2019,

it is more likely than

not

that goodwill is

not

impaired. The Company will conduct the

2019

goodwill impairment testing in the

fourth

quarter of

2019.

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.

Under Internal Revenue Code Section

382

certain stock transactions which significantly change ownership could limit amount of net operating carryforwards that

may

be utilized on an annual basis to offset taxable income in future periods. The Company has

not

yet performed an analysis of the annual net operating loss carryforwards and limitations that are available to be used against taxable income. Consequently, the limitation, if any, could result in the expiration of the Company’s loss carryforwards before they can be utilized. The Company has

not

analyzed net operating loss carryforwards under Section

382

to date. As a result of the Helomics acquisition, there

may

be significant limitation to the net operating loss. The Company intends to complete a Section

382

analysis in early

2020.

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

five

operating segments: domestic sales, international sales, clinical testing revenue, contract research (“CRO”) revenue, and D-CHIP, formerly known as diagnostic revenue. The revenues earned in the diagnostic, clinical testing and CRO segments are immaterial to the total revenues earned and are currently represented in corporate/other in the table below. The segment revenues and segment net losses for the

three

and

nine

-month periods ended

September 30, 2019

are described in the table below. There are significant changes in the Company’s assets relating to the Helomics acquisition specifically in the corporate/other segment for intangibles, tangible fixed assets, and goodwill. In

2018,

substantially all the Company assets, revenues, and expenses were located or derived from operations in the United States and recorded under the domestic revenue segment.

	Three Months Ended September 30,												Nine Months Ended September 30,
	2019												2019
	Domestic			International			Corporate/Other			Total			Domestic			International			Corporate/Other			Total

Revenue	$	455,878		$	40,006		$	26,812		$	522,696		$	934,621		$	77,051		$	52,416		$	1,064,088

Segment Loss	$	(838,742	)	$	(92,398	)	$	(3,077,372	)	$	(4,008,512	)	$	(2,697,338	)	$	(289,492	)	$	(2,849,762	)	$	(5,836,592	)

	September 30, 2019										December 31, 2018
	Domestic			International			Corporate/Other		Total		Domestic		International		Corporate/Other			Total
Net Assets	$	(284,805	)	$	(10,387	)	$	21,008,855	$	20,713,663	$	628,451	$	41,377	$	(616,356	)	$	53,472

Risks and Uncertainties Policy [Policy Text Block]

Risks and Uncertainties

The Company is subject to risks common to companies in the medical device and biopharmaceutical industries, 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 Food and Drug Administration (“FDA”), Clinical Laboratory Improvement Amendments (“CLIA”), and other governmental agencies.