Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2020

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.

The Company is a healthcare company that provides personalized medicine solutions 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 sells proprietary cleaning fluid and filters to users of its systems.

In addition, the Company’s wholly-owned subsidiary, TumorGenesis Inc. (“TumorGenesis”), is developing the next generation, patient-derived tumor models for precision cancer therapy and drug development. TumorGenesis is presented as part of the condensed consolidated financial statements and is included in corporate in the Company’s segment reporting.

During the

first

quarter of

2018,

the Company acquired

25%

of the capital stock of Helomics Holding Corporation (“Helomics”). On

April 4, 2019,

the Company completed a forward triangular merger with Helomics Acquisition Inc., a wholly-owned subsidiary of the Company and Helomics, acquiring the remaining

75%

of the capital stock of Helomics.

The Company has incurred recurring losses from operations and has an accumulated deficit of

$87,028,028.

The Company does

not

expect to generate sufficient operating revenue to sustain its operations in the near-term. During fiscal year

2019

and the

first

quarter of

2020,

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. These conditions raise substantial doubts about the Company’s ability to continue as a going concern. The Company had cash and cash equivalents of

$3,056,243

as of

March 31, 2020

and needs to raise significant additional capital to meet its operating needs and pay debt obligations coming due. Outstanding debt, including accrued interest and penalties, totaled

$7,788,706

as of

March 31, 2020,

all of which is due within

six

months. Debt is secured by all assets of the Company and its subsidiaries. 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

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 market conditions including trading volume and stock price. Given the limitations in place, there is

guarantee that the Company will be able to raise the full amount available under the equity line over the course of the

three

-year period. In the

first

quarter of

2020,

the Company completed various debt and equity financings and raised net proceeds of

$5,910,903,

that is net of repayments. Despite these sources of funding, it is

not

probable the Company will be able to obtain additional financing in order to fund operations. Therefore, there is substantial doubt about the Company’s ability to continue as a going concern for

one

year after the date that the condensed consolidated financial statements are issued. The accompanying condensed consolidated 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.

Effect of Covid-19 Pandemic [Policy Text Block]

Coronavirus Outbreak

March 2020,

the World Health Organization declared the recent spread of COVID-

to be a global pandemic. In response to the crisis, emergency measures have been imposed by governments worldwide, including mandatory social distancing and the shutdown of non-essential businesses. These measures have adversely impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. While it is

not

currently possible to estimate the duration and severity of the COVID-

pandemic or the adverse economic impact resulting therefrom, our business and operations have been and will likely continue to be materially and adversely affected. For example, our contract manufacturer for the STREAMWAY® System has been forced to change locations, thereby delaying our order fulfillment for parts. We have also reduced on-site staff at several of our facilities, resulting in delayed production, less efficiency, and our sales staff is unable to visit with hospital administrators who are our customers and potential customers. In addition, COVID-

has impacted the Company’s capital and financial resources, including our overall liquidity position and outlook. For instance, our accounts receivable have slowed while our suppliers continue to ask for pre-delivery deposits. Although we have received a Paycheck Protection Loan pursuant to the CARES Act which will help fund immediate payroll costs, we

may

not

be able to access necessary additional capital given the current condition of the financial markets. Further, there is

assurance that we will be able to obtain forgiveness of this loan. Thus, if COVID-

continues to spread or the response to contain the virus is unsuccessful, we

may

continue to experience a material adverse effect on our business, financial condition, results of operations, cash flows and stock price.

Interim Financial Statements, Policy [Policy Text Block]

Interim Financial Statements

The Company has prepared the condensed consolidated 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 condensed consolidated financial statements. These interim condensed consolidated 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 condensed consolidated financial statements reflect all intercompany eliminations. These interim condensed consolidated financial statements should be read in conjunction with the annual consolidated financial statements and the notes thereto contained in the Annual Report on Form

-K filed with the SEC on

April 1, 2020.

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.

Use of Estimates, Policy [Policy Text Block]

Accounting Policies and Estimates

The preparation of condensed consolidated 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 condensed consolidated financial statements during the reporting period. Actual results could materially differ from those estimates.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand. The Company had

cash equivalents as of

March 31, 2020

and

December 31, 2019.

Fair Value Measurement, Policy [Policy Text Block]

Fair Value Measurements

As outlined in

Financial Accounting Standards Board Accounting Standards Codification (“ASC”)

–

820,

Fair Value Measurement

, 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 standard 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 consist of cash and cash equivalents, was determined based on Level

inputs. The fair values of the Company’s derivative liabilities were determined based on Level

inputs. See

Note

– Notes Payable – Derivatives

Inventory, Policy [Policy Text Block]

Inventories

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

first

-in,

first

-out basis.

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 (1)		5
Manufacturing tooling	3	-	7
Demo equipment		3
Laboratory equipment		4

(

)

Leasehold improvements are depreciated over the shorter of the useful life or the remaining lease term.

Upon retirement or sale of fixed assets, 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.

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. Accumulated amortization is included in intangibles, net in the accompanying consolidated balance sheets.

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 Company reviews its other intangible assets in accordance with ASC

350—

Intangibles—Goodwill and Other

. Under this topic, intangible assets determined to have an indefinite useful life are

not

amortized but are tested for impairment annually or more often if an event or circumstances indicate that an impairment loss has been incurred. Our impairment testing as of

December 31, 2019

resulted in

$770,250

of impairment charges to our intangible assets. The Company concluded there was

impairment of its intangible assets as of

March 31, 2020.

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. Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination. Goodwill is an indefinite-lived asset and is

not

amortized. Goodwill is tested for impairment annually at the reporting unit level or whenever events or circumstances present an indication of impairment.

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

has the option to assess 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 is required to 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 including the rate of future revenue growth, 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. These assumptions require significant judgement. 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. Our annual impairment test as of

December 31, 2019

resulted in

$8,100,000

of impairment charges related to our goodwill. Consistent with policy, as of

March 31, 2020,

the Company completed a qualitative review of factors that indicated a possible impairment of goodwill; however, the Company determined that the Company’s overall market capitalization exceeded its carrying value, and the Company’s ability to successfully close a private placement of

$1,930,101

net proceeds shortly after quarter-end are each indicators of continued investor interest in the Company as well as possible undervaluation by the market. Based on these qualitative factors, as of

March 31, 2020,

it is more likely than

not

that goodwill is

not

further impaired.

Revenue from Contract with Customer [Policy Text Block]

Revenue Recognition

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 an accounting policy to exclude sales taxes from revenue and expenses and to recognize shipping and handling costs at point of sale. The Company has elected a practical expedient and does

not

recognize financing components for contracts with customers containing customary terms for

one

year or less.

Revenue from Product Sales

The Company has medical device revenue consisting primarily of sales of the STREAMWAY System, as well as sales of the proprietary cleaning fluid and filters for use with the STREAMWAY System. This revenue stream is reported within both the domestic and international revenue segments. The Company sells its medical device 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, and 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 acceptance of its Terms and Conditions to be a customer’s contract in all cases.

Product sales for medical devices 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: (

) the Company has transferred physical possession of the products, (

) the Company has a present right to payment, (

) the customer has legal title to the products, and (

) 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 for the medical devices 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 relevant

one

-year period) as maintenance services are available. 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 for medical devices 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. This revenue stream is reported under the domestic and international sales segments.

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 product sales contracts do

not

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

Warranty

The Company generally provides

one

-year warranties against defects in materials and workmanship on product sales and will either repair the products or provide replacements at

charge to customers. As they are considered assurance-type warranties, the Company does

not

account for them as separate performance obligations. Warranty reserve requirements are based on a specific assessment of the products sold with warranties where a customer asserts a claim for warranty or a product defect.

Revenue from Clinical Testing

The Precision Oncology Insights are clinic diagnostic testing comprised of the Company’s ChemoFx and BioSpeciFx tests. The ChemoFx test determines how a patient’s tumor specimen reacts to a panel of various chemotherapy drugs, while the BioSpeciFx test evaluates the expression of a particular gene related to a patient’s tumor specimen. Revenues are recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The estimated uncollectible amounts are generally considered implicit price concessions that are a reduction in revenue. Helomics payments terms vary by the agreements reached with insurance carriers and Medicare. The Company’s performance obligations are satisfied at a point in time when test reports are delivered.

For service revenues, the Company estimates the transaction price which is the amount of consideration it expects to be entitled to receive in exchange for providing services based on its historical collection experience using a portfolio approach as a practical expedient to account for patient contracts as collective groups rather than individually. The Company monitors its estimates of transaction price to depict conditions that exist at each reporting date. If the Company subsequently determines that it will collect more or less consideration than it originally estimated for a contract with a patient, it will account for the change as an increase or decrease to the estimate of the transaction price, provided that such adjustment does

not

result in a significant reversal of cumulative revenue recognized.

The Company recognizes revenue from these patients when contracts as defined in ASC

606,

Revenue from Contracts with Customers

are established at the amount of consideration to which it expects to be entitled or when the Company receives substantially all of the consideration subsequent to the performance obligations being satisfied. The Company’s standard payment terms for hospital and patient direct bill is

days after invoice date. This revenue stream is reported under the Helomics segment.

CRO Revenue

Contract revenues are generally derived from studies conducted with biopharmaceutical and pharmaceutical companies. The specific methodology for revenue recognition is determined on a case-by-case basis according to the facts and circumstances applicable to a given contract. The Company typically uses an input method that recognizes revenue based on the Company’s efforts to satisfy the performance obligation relative to the total expected inputs to the satisfaction of that performance obligation. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation on the basis of the standalone selling price of each distinct good or service in the contract. Advance payments received in excess of revenues recognized are classified as deferred revenue until such time as the revenue recognition criteria have been met. Payment terms are net

from the invoice date, which is sent to the customer as the Company satisfies the performance obligation relative to the total expected inputs to the satisfaction of that performance obligation. This revenue stream is reported under the Helomics segment.

Contract Balances

The Company records a receivable when it has an unconditional right to receive consideration after the performance obligations are satisfied. As of

March 31, 2020,

and

December 31, 2019,

accounts receivable totaled

$269,777

and

$297,055,

respectively.

The Company’s deferred revenues related primarily to maintenance plans as of

March 31, 2020

and

December 31, 2019

were

$44,129

and

$40,384,

respectively.

Valuation and Accounting for Stock Options and Warrants, Policy [Policy Text Block]

Valuation and accounting for stock options and warrants

The Company determines the grant date fair value of options and warrants using a Black-Scholes option valuation model based upon assumptions regarding risk-free interest rate, expected dividend rate, volatility and estimated term.

The fair value of each option grant is estimated on the grant date using the Black-Scholes option valuation model with the following assumptions:

	Three Months Ended March 31,
	2020			2019
	Stock Options
Expected dividend yield		0.0%			0.0%
Expected stock price volatility		82.6%			79.8%
Risk-free interest rate	0.70%	-	1.57%	2.41%	-	2.76%
Expected life (years)		10			10
	Warrants
Expected dividend yield		0.0%			0.0%
Expected stock price volatility		82.6%			79.8%
Risk-free interest rate	0.54%	-	0.79%	2.50%	-	2.58%
Expected life (years)	2	-	5.5		5

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 condensed consolidated 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.

During

2020

and

2019,

the Company believes it experienced an ownership change as defined in Section

382

of the Internal Revenue Code which will limit the ability to utilize the Company’s net operating losses (NOLs). The Company

may

have experienced additional ownership changes in earlier years further limiting the NOL carry-forwards that

may

be utilized. The Company has

not

yet completed a formal Section

382

analysis. The general limitation rules allow the Company to utilize its NOLs subject to an annual limitation that is determined by multiplying the federal long-term tax-exempt rate by the Company’s value immediately before the ownership change.

Tax years subsequent to

2016

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 a credit risk of

$2,744,429

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

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.

Business Combinations Policy [Policy Text Block]

Acquisition activities

Proposed Acquisition of Quantitative Medicine

January 24, 2020,

the Company announced that it has signed a letter of intent to acquire Quantitative Medicine (“QM”). QM is a biomedical analytics and computational biology company that has developed a novel, computational drug discovery platform called CoRE. CoRE is designed to dramatically reduce the time, cost, and financial risk of discovering new therapeutic drugs by predicting the main effects of drugs on target molecules that mediate disease. Completion of the transaction, which is expected to be completed in the

second

quarter of

2020,

is subject to the negotiation of a definitive agreement and other terms and conditions.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

The Company considers the applicability and impact of all Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board (the “FASB”). Recently issued ASUs

not

listed below either were assessed and determined to be

not

applicable or are currently expected to have

impact on the consolidated financial statements of the Company.

June 2016,

the FASB issued ASU

2016

13,

“Financial Instruments – Credit Losses.” This ASU added a new impairment model (known as the current expected credit loss (“CECL”) model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses. The CECL model applies to most debt instruments, trade receivables, lease receivables, financial guarantee contracts, and other loan commitments. The CECL model does

not

have a minimum threshold for recognition of impairment losses and entities will need to measure expected credit losses on assets that have a low risk of loss. As a smaller reporting company pursuant to Rule

12b

of the Securities Exchange Act of

1934,

as amended, these changes become effective for the Company on

January 1, 2023.

Management is currently evaluating the potential impact of these changes on the consolidated financial statements of the Company.