Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

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, 2018,

the Company had

11,804,073

shares of common stock outstanding, par value

$.01

per share. The Company is a healthcare products and services company that is expanding its business to take advantage of emerging areas of the dynamic healthcare market. 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 FDA to authorize the Company to market and sell its STREAMWAY System products. The Company has acquired

25%

of the capital stock of Helomics Holding Corporation (“Helomics”), a pioneering Contract Research Organization (“CRO”) services company, and the Company has announced that it has a letter of intent for a proposed merger transaction to acquire the remaining ownership of Helomics. 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, is presented as part of the condensed consolidated financial statements.

The accompanying condensed consolidated financial statements (the “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

$56,525,066.

The Company had cash and cash equivalents of

$2,232,803

as of

March 31, 2018

and needs to raise significant additional capital to meet its operating needs, and therefore there is substantial doubt about the Company’s ability to continue as a going concern. The financial statements do

not

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

Since inception to

March 31, 2018,

the Company has raised approximately

$35,840,380

in equity offerings, inclusive of (

1

)

$2,055,000

from a private placement of Series A Convertible Preferred Stock, (

2

)

$13,555,003

from the public offering of Units, (

3

)

$1,739,770

from a registered direct offering, (

4

)

$3,937,500

plus an overallotment of

$358,312

from a firm commitment underwritten public offering, (

5

)

$1,300,000

from a private placement of Series C Convertible Preferred Stock, (

6

)

$2,755,000

from a firm commitment underwritten public offering, and (

7

)

$5,685,000

in debt financing. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.”

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 should be read in conjunction with the annual financial statements and the notes thereto contained in the Form

10

-K filed with the SEC on

April 2, 2018.

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

In

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 after

January 1, 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.

See Note

2

for further discussion.

In

January 2016,

the FASB issued ASU

No.

2016

-

01,

Financial Instruments-Overall (Subtopic

825

-

10

): 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 standard is effective for fiscal years beginning after

December 15, 2017,

including interim periods within those fiscal years. As of

March 31, 2018,

there is

no

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

In

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 is currently evaluating the timing of our adoption and the impact that the updated standard will have on the Company’s financial statements.

On

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 reduces the U.S. corporate income tax rates from

34%

to

21%.

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

The Company reviewed all other significant newly issued accounting pronouncements and determined they are either

not

applicable to its business or that

no

material effect is expected on its financial position and results of operations.

Goodwill and Intangible Assets, Intangible Assets, Indefinite-Lived, Policy [Policy Text Block]

Valuation of Intangible Assets

The Company reviews identifiable intangible assets for impairment annually, or whenever events or changes in circumstances indicate the carrying amount

may

not

be recoverable. The Company’s intangible assets are currently solely the costs of obtaining 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. If such events or changes in circumstances are present, the undiscounted cash flows method is used to determine whether the intangible asset is impaired. Cash flows would include the estimated terminal value of the asset and exclude any interest charges. If the carrying value of the asset exceeds the undiscounted cash flows over the estimated remaining life of the asset, the asset is considered impaired, and the impairment is measured by reducing the carrying value of the asset to its fair value using the discounted cash flows method. The discount rate utilized is based on management’s best estimate of the related risks and return at the time the impairment assessment is made.

Use of Estimates, Policy [Policy Text Block]

Accounting Policies and Estimates

The presentation of financial statements is 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.

Advertising Costs, Policy [Policy Text Block]

Advertising

Advertising costs are expensed as incurred. Advertising expenses were

$4,394

in the

three

months ended

March 31, 2018

and were

$4,271

in the

three

months ended

March 31, 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 expenses were

$94,011

in the

three

months ended

March 31, 2018

and

$84,472

in the

three

months ended

March 31, 2017.

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.

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 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

1

– Observable inputs such as quoted prices in active markets;

Level

2

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

Level

3

– Unobservable inputs where there is little or

no

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

1

inputs.

Inventory, Policy [Policy Text Block]

Inventories

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

first

-in,

first

-out basis. Inventory balances are as follows:

	March 31, 2018		December 31, 2017
Finished goods	$	32,967	$	62,932
Raw materials		183,216		141,028
Work-In-Process		56,373		61,085
Total	$	272,556	$	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. Estimated useful asset life by classification is as follows:

	Years
Computers and office equipment	3	-	7
Leasehold improvements		5
Manufacturing tooling	3	-	7
Demo equipment		3

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

	March 31, 2018		December 31, 2017
Computers and office equipment	$	190,484	$	183,528
Leasehold improvements		41,397		25,635
Manufacturing tooling		108,955		108,955
Demo equipment		53,439		43,368
Total		394,275		361,486
Less: Accumulated depreciation		288,266		273,770
Total Fixed Assets, Net	$	106,009	$	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

$14,496

in the

three

months ended

March 31, 2018,

and was

$15,685

for the

three

months ended

March 31, 2017.

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

Intangible Assets

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

$3,671

in the

three

months ended

March 31, 2018,

and was

$2,888

in the

three

months ended

March 31, 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

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

no

income tax provision in the accompanying statements of operations 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

no

income tax uncertainties.

Tax years subsequent to

2014

remain open to examination by federal and state tax authorities.

Intangible Assets, Finite-Lived, Policy [Policy Text Block]

Patents and Intellectual Property

On

January 25, 2014,

the Company filed a non-provisional Patent Cooperation Treaty (“PCT”) Application

No.

PCT/US2014/013081

claiming priority from the U.S. Provisional Patent Application, number

61756763

which was filed

one

year earlier on

January 25, 2013.

The PCT allows an applicant to file a single patent application to seek patent protection for an invention simultaneously in each of the

148

countries of the PCT, including the United States. Filing this single “international” patent application through the PCT is easier and more cost effective than filing separate applications directly with each national or regional patent office in which patent protection is desired.

The Company’s PCT patent application is for the new model of the surgical fluid waste management system. The Company obtained a favorable International Search Report from the PCT searching authority indicating that the claims in its PCT application are patentable (i.e., novel and non-obvious) over the cited prior art. A feature claimed in the PCT application is the ability to maintain continuous suction to the surgical field while measuring, recording and evacuating fluid to the facility’s sewer drainage system. This provides for continuous operation of the STREAMWAY System unit in suctioning waste fluids, which means that suction is

not

interrupted during a surgical operation, for example, to empty a fluid collection container or otherwise dispose of the collected fluid.

The Company holds the following granted patents in the United States and a pending application in the United States on its earlier models:

US7469727,

US8123731

and U.S. Publication

No.

US20090216205

(collectively, the “Patents”). These Patents will begin to expire on

August 8, 2023.

In

July 2015,

the Company filed an international (PCT) patent application for its fluid waste collection system and received a favorable determination by the International Searching Authority finding that all of the claims satisfy the requirements for novelty, inventive step and industrial applicability.  The Company anticipates that the favorable International Search Report will result in allowance of its various national applications.

The United States Patent Office has assigned application

#14/763,459

to the Company’s previously filed PCT application.

As of

November 22, 2017,

the Company was informed that the European Patent Office has allowed all claims for application

#14743665.3

-

1651,

and has sent a Notice of Intent to Grant. The Company is now in the process of identifying the key European countries that it will validate the patent in.

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 a credit risk concentration because of depositing

$1,984,163

of funds in excess of insurance limits in a single bank.

Segment Reporting, Policy [Policy Text Block]

Segments

The Company operates in

two

segments for the sale of its medical device and consumable products. Substantially all the Company’s assets, revenues, and expenses for the

three

months ended

March 31, 2018

and

2017

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

$26,662

in revenues from sales outside of the United States during

2017

predominantly from the sale of the Company’s

first

System in Canada during

March 2017.

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.