Predictive Oncology Inc. (Form: 10-Q, Received: 08/19/2019 17:25:49)

Item 1. Condensed Consolidated Financial Statements

PREDICTIVE ONCOLOGY INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30, 2019			December 31, 2018

ASSETS
Current Assets:
Cash and Cash Equivalents	$	69,557		$	162,152
Accounts Receivable		299,046			232,602
Notes Receivable (inclusive of $0 and $452,775 in advances to Helomics; net of $787,524 allowance for credit losses as of June 30, 2019)		250,000			497,276
Inventories		320,876			241,066
Prepaid Expense and other assets		154,523			318,431
Total Current Assets		1,094,002			1,451,527

Notes Receivable		-			1,112,524
Fixed Assets, net		1,769,813			180,453
Intangibles, net		4,591,872			964,495
Lease Right-of-Use Assets		1,005,525			-
Goodwill		23,790,290			-
Total Assets	$	32,251,502		$	3,708,999

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable	$	3,538,832		$	445,689
Notes Payable –Net of Discounts of $573,155 and $1,032,814		3,808,751			1,634,914
Accrued Expenses		1,035,501			1,279,114
Derivative Liability		541,599			272,745
Deferred Revenue		29,706			23,065
Lease Liability – Net of Long-term Portion		501,427			-
Total Current Liabilities		9,455,816			3,655,527

Lease Liability		504,098			-

Total Liabilities		9,959,914			3,655,527

Stockholders’ Equity:
Series E Convertible Preferred Stock, $.01 par value, 350 shares authorized, 83.4 and 0 shares outstanding (Liquidation value $843,000)		1			-
Series B Convertible Preferred Stock, $.01 par value, 20,000,000 shares authorized, 79,246 and 79,246 outstanding		792			792
Series D Convertible Preferred Stock, $.01 par value, 20,000,000 shares authorized, 3,500,000 and 0 outstanding		35,000			-
Common Stock, $.01 par value, 100,000,000 shares authorized, 30,974,761 and 14,091,748 outstanding		309,747			140,917
Additional paid-in capital		86,882,073			63,019,708
Accumulated Deficit		(64,936,025	)		(63,107,945	)

Total Stockholders' Equity		22,291,588			53,472

Total Liabilities and Stockholders' Equity	$	32,251,502		$	3,708,999

See Notes to Condensed Consolidated Financial Statements

PREDICTIVE ONCOLOGY INC.

CONDENSED CONSOLIDATED STATEMENTS OF NET LOSS

(Unaudited)

	Three Months Ended						Six Months Ended
	2019			2018			2019			2018
Revenue	$	286,151		$	358,586		$	541,392		$	770,179
Cost of goods sold		118,390			108,970			192,106			226,314
Gross margin		167,761			249,616			349,286			543,865
General and administrative expense		3,310,368			729,528			4,808,314			1,945,670
Operations expense		1,271,258			378,906			1,737,824			666,496
Sales and marketing expense		685,029			554,084			1,239,245			1,104,623
Total operating loss		(5,098,894	)		(1,412,902	)		(7,436,097	)		(3,172,924	)
Gain on revaluation of cash advances to Helomics		1,222,244			-			1,222,244			-
Other income		(3,223	)		-			50,209			-

Other Expense		819,283			-			1,389,059			-
Loss on equity method investment		-			960,508			439,637			960,508
Gain on revaluation of equity method investment		6,164,260			-			6,164,260			-
Net income/(loss)	$	1,465,104		$	(2,373,410	)	$	(1,828,080	)	$	(4,133,432	)
Deemed dividend on Series E Convertible Preferred Stock		20,398			-			20,398			-
Net income/(loss) attributable to common shareholders per common shares – basic and diluted	$	1,444,706		$	(2,373,410	)	$	(1,848,478	)	$	(4,133,432	)

Gain/(loss) per common share - basic	$	0.05		$	(0.20	)	$	(0.08	)	$	(0.36	)
Gain/(loss) per common share – diluted	$	0.02		$	(0.20	)	$	(0.08	)	$	(0.36	)

Weighted average shares used in computation - basic		29,609,373			11,878,490			22,747,544			11,632,221
Weighted average shares used in computation - diluted		60,070,783			11,878,490			22,747,544			11,632,221

See Notes to Condensed Consolidated Financial Statements

PREDICTIVE ONCOLOGY INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

											Common Stock
	Preferred Stock		# Shares Preferred C		# Shares Preferred B		# Shares Preferred D		# Shares Preferred E		Shares		Amount		Additional Paid-in Capital		Accumulated Deficit			Total
Balance at 4/1/2018	$	792		-		79,246		-				11,804,073	$	118,040	$	61,622,067	$	(56,525,066	)	$	5,215,833
E Warrant exercises pursuant to S-3 public offering at $1.00 exercise price per share												33,040		330		32,710					33,040
Re-priced warrant exercise pursuant to 2016 private investment												252,333		2,523		249,810					252,333
Vesting Expense																233,982					233,982
Net loss																		(2,373,410	)		(2,373,410	)
Balance at 6/30/2018	$	792		-		79,246		-		-		12,089,446	$	120,893	$	62,138,569	$	(58,898,476	)	$	3,361,778
Balance at 4/1/2019	$	792		-		79,246		-		-		17,360,144	$	173,601	$	66,296,741	$	(66,401,129	)	$	70,005
Shares issued pursuant to note conversions - bridge loan												398,734		3,987		144,584					148,571
Warrants issued pursuant to CEO note payable																23,550					23,550
Stock issued for Helomics acquisition		35,000						3,500,000				4,000,000		40,000		5,537,250					5,612,250
Stock issued to extinguish debt as part of Helomics purchase consideration												8,637,323		86,373		6,376,936					6,463,309

Issuance of warrants as Helomics purchase consideration																6,261,591					6,261,591
Exercise of warrants												578,560		5,786							5,786
Issuance of Series E Preferred shares		1								84						743,559					743,560
Vesting expense														.		1,380,620					1,380,620
Issuance of Noteholders’ warrants																117,241					117,241
Net income																		1,465,104			1,465,104
Balance at 6/30/2019	$	35,793		-		79,246		3,500,000		84		30,974,761	$	309,747	$	86,882,073	$	(64,936,025	)	$	22,291,588

													Common Stock
	Preferred Stock			# Shares Preferred C			# Shares Preferred B		# Shares Preferred D		# Shares Preferred E		Shares		Amount		Additional Paid-in Capital		Accumulated Deficit			Total
Balance at 1/1/2018	$	7,271			647,819			79,246						6,943,283	$	69,432	$	57,380,256	$	(54,765,045	)	$	2,691,913
Preferred conversion to common shares pursuant to private placement agreement		(6,479	)		(647,819	)								589,747		5,897		582
Shares issued pursuant to S-3 public offering														2,900,000		29,000		2,726,087					2,755,087
Investment in Subsidiary pursuant to Helomics 20% acquisition														1,100,000		11,000		1,031,250					1,042,250
E Warrant exercises pursuant to S-3 public offering at $1.00 exercise price per share														88,836		888		87,948					88,836
Shares issued pursuant to S-3 public offering over-allotment option at $0.9497 exercise price per share														215,247		2,153		202,268		1			204,422
Re-priced warrant exercise pursuant to 2016 private investment														252,333		2,523		249,810					252,333
Vesting Expense																		460,368					460,368
Net loss																				(4,133,432	)		(4,133,432	)
Balance at 6/30/2018	$	792						79,246						12,089,446	$	120,893	$	62,138,569	$	(58,898,476	)	$	3,361,778
Balance at 1/1/2019	$	792						79,246						14,091,748	$	140,917	$	63,019,708	$	(63,107,945	)	$	53,472
Investment by CEO														78,125		781		49,219					50,000
Shares issued in forbearance agreement														166,667		1,666		156,683					158,349
Shares issued pursuant to S-3 public offering														2,863,750		28,638		2,401,071					2,429,709
Shares issued pursuant to note conversions - bridge loan														558,588		5,586		232,987					238,573
Warrants issued pursuant to CEO note payable																		341,608					341,608
Stock issued for Helomics acquisition		35,000								3,500,000				4,000,000		40,000		5,537,250					5,612,250
Stock issued to extinguish debt as part of Helomics purchase consideration														8,637,323		86,373		6,376,936					6,463,309
Issuance of warrants as Helomics purchase consideration																		6,261,591					6,261,591
Exercise of warrants														578,560		5,786							5,786
Issuance of Series E Preferred Shares		1										84						743,559					743,560
Vesting expense																.		1,644,220					1,644,220
Issuance of noteholders warrants																		117,241					117,241

Net loss																				(1,828,080	)		(1,828,080	)
Balance at 6/30/2019	$	35,793						79,246		3,500,000		84		30,974,761	$	309,747	$	86,882,073	$	(64,936,025	)	$	22,291,588

See Notes to Condensed Consolidated Financial Statements

PREDICTIVE ONCOLOGY INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended June 30,
	2019			2018
Cash flow from operating activities:
Net loss	$	(1,828,080	)	$	(4,133,432	)
Adjustments to reconcile net loss to net cash used in operating activities:
Recognition of credit loss on notes receivable		795,353			-
Accrued interest revenue		(42,746	)		-
Loss on equity method investment		439,637			960,508
Gain on revaluation of equity method investment		(6,164,260	)		-
Depreciation and amortization		259,362			41,062
Vesting expense for stock options		1,644,220			460,368
Amortization of debt discount		1,068,256			-
Loss on valuation of equity-linked instruments		231,348			-
Gain on revaluation of cash advances to Helomics		(1,222,244	)		-
Changes in assets and liabilities:
Accounts receivable		141,325			(177,828	)
Inventories		(55,665	)		20,385
Prepaid expense and other assets		66,989			14,490
Accounts payable		718,483			25,126
Accrued expenses		(104,114	)		(329,889	)
Deferred revenue		6,641			11,679
Net cash used in operating activities:		(4,045,495	)		(3,107,531	)
Cash flow from investing activities:
Redemption of certificates of deposit		-			244,971
Advance on notes receivable		(975,000	)		(42,524	)
Cash received from notes receivable		154,418			-
Cash received in Helomics Acquisition		248,102			-
Purchase of fixed assets		-			(129,990	)
Acquisition of intangibles		(8,433	)		(27,524	)
Net cash (used in) provided by investing activities:		(580,913	)		44,933

Cash flow from financing activities:
Extinguishment of convertible debt		(220,241	)		-
Proceeds from debt issuance		1,525,000			-
Proceeds from exercise of warrants into common stock		5,786			341,169
Proceeds from issuance of Series E convertible preferred stock		743,560			-
Issuance of common stock		2,479,708			2,959,509
Net cash provided by financing activities		4,533,813			3,300,678

Net decrease in cash and cash equivalents		(92,595	)		238,080
Cash at beginning of period		162,152			766,189
Cash at end of period	$	69,557		$	1,004,269
Non-cash transactions:
Bridge loan conversion into common stock	$	238,573		$	-
Forbearance settlement bridge loan		503,009			-
Additional warrants issued pursuant to CEO note payable		32,215			-
Consideration given for acquisition of Helomics		26,711,791			1,542,250
Conversion of preferred stock to common stock		-			6,479

See Notes to Condensed Consolidated Financial Statements

PREDICTIVE ONCOLOGY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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. On 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., effective June 10, 2019. Because of this change, the Company’s common stock traded under the new ticker symbol “POAI,” effective June 13, 2019. Skyline Medical (“Skyline”) remains as an incorporated division of Predictive Oncology Inc.

As of June 30, 2019, the Company had 30,974,761 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: (1) precision medicine, which aims to apply artificial intelligence to personalized medicine and drug discovery; and (2) 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.

On April 4, 2019, the Company completed the Helomics Holding Corporation (“Helomics”) acquisition – (see Note 2). 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 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 $64,936,025. 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 no 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 $69,557 as of June 30, 2019 and needs to raise significant additional capital to meet its operating needs including the operating needs of the acquired Helomics business and pay debt obligations coming due; 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 will attempt to raise these funds through equity or debt financing that may include public offerings, private placements, alternative offerings or other means. The public offerings may include sales through the Company’s shelf registration statement on Form S-3, with which the Company has raised approximately $2,100,000 in net proceeds in early 2019. The Company is currently permitted to raise up to approximately $4,300,000 in additional gross proceeds, under this shelf registration statement in public offerings, subject to market factors and other limitations. In June 2019, the Company raised $776,000 in net proceeds from a private placement of convertible preferred stock. Subsequent to June 30, 2019 to date the private placement raised an additional $1,238,800 in net proceeds, and the Company authorized up to a total of $3,500,000 in preferred stock.

In the quarter ended June 30, 2019, the Company has raised $776,000 in net proceeds in equity from a private placement and $275,000 in debt financing from the Company CEO. Despite these sources of funding, the Company, will need to obtain financing in order to fund operations.

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 10-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.

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.

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 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 2016-02 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 8 – Leases.

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 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.

Inventories

Inventories are stated at the net realizable value, with cost determined on a first-in, first-out basis. Inventory balances are as follows:

	June 30, 2019		December 31, 2018

Finished goods	$	150,340	$	58,701
Raw materials		91,437		127,003
Work-In-Process		79,099		55,362
Total	$	320,876	$	241,066

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		2
Manufacturing tooling	3	-	7
Demo equipment		3
Laboratory equipment		4

The Company’s fixed assets consist of the following:

	June 30, 2019		December 31, 2018
Computers and office equipment	$	505,728	$	204,903
Leasehold improvements		188,014		140,114
Manufacturing tooling		108,955		108,955
Demo equipment		77,973		85,246
Laboratory equipment		1,401,210		-
Total		2,281,880		539,218
Less: Accumulated depreciation		512,067		358,765
Total Fixed Assets, Net	$	1,769,813	$	180,453

The large fluctuation in fixed assets is due to the Helomics acquisition (see Note 2). 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 $131,420 and $153,302 in the three and six months ended June 30, 2019 and was $18,825 and $33,321 for the three and six months ended June 30, 2018.

Intangible Assets

Intangible assets consist of trademarks, patent costs, license fees, customer relationships and developed technology. Amortization expense was $88,416 and $106,060 in the three and six months ended June 30, 2019 and was $4,070 and $7,741 in the three and six months ended June 30, 2018. The Company reviews 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. The Company’s intangible assets are currently solely the costs of obtaining licensing fees, trademarks, patents, tradename, customer relations and developed technology. The intangibles are both lived, assets amortized over a useful life, and indefinite lived, assets which are not amortized, but receive annual impairment testing. 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 is due to the Helomics acquisition (see Note 2).

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

	6/30/2019							12/31/2018
	Gross Carrying Costs		Accumulated Amortization			Net Carrying Amount		Gross Carrying Costs		Accumulated Amortization			Net Carrying Amount
Patents & Trademarks	$	326,740	$	(188,698	)	$	138,042	$	318,303	$	(182,558	)	$	135,745
Licensing Fees		877,500		(78,000	)		799,500		877,500		(48,750	)		828,750
Developed Technology		2,882,000		(34,823	)		2,847,177		-		-			-
Customer Relationships		445,000		(35,847	)		409,153		-		-			-
Tradename		398,000		-			398,000		-		-			-
Total	$	4,929,240	$	(337,368	)	$	4,591,872	$	1,195,803	$	(231,308	)	$	964,495

The following table outlines the estimated future amortization expense related to intangible assets held as of June 30, 2019

Year ending	Expense
2019		181,748
2020		363,497
2021		363,497
2022		264,609
2023		215,165
Thereafter		3,203,356
Total		4,591,872

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. Purchased goodwill is not expected to be deductible for tax purposes and is not amortized over its indefinite useful life. To determine whether goodwill is impaired, annually or more frequently if needed, the Company performs a multi-step impairment test. The Company may first 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 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, no impairment test was required, but the Company will conduct the 2019 testing in the second half of 2019.

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 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 no 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

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.

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 no credit risk concentration for cash amounts held in a single institution that are in excess of amounts issued by the Federal Deposit Insurance Corporation.

Segments

The Company has five operating segments: domestic sales, international sales, diagnostic revenue, CRO revenue and clinical testing revenue. The revenues earned in diagnostic, CRO and clinical testing are immaterial to the total revenues earned and are currently represented in Other Revenue in the table below. The segment revenues and net losses for the three-month and six-month periods ended June 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 other segment for intangibles, tangible fixed assets and goodwill (see Note 2). 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 June 30,										Six Months Ended June 30,
	2019										2019
	Domestic			International			Corporate/ Other		Total		Domestic			International			Corporate/ Other		Total


Revenue	$	259,082		$	1,464		$	25,605	$	286,151	$	478,743		$	37,044		$	25,605	$	541,392


Segment Gain/(Loss)	$	(917,754	)	$	(97,552	)	$	2,480,410	$	1,465,104	$	(1,859,477	)	$	(196,213	)	$	227,610	$	(1,828,080	)

	Net Assets as of,
	June 30, 2019								December 31, 2018
	Domestic		International		Corporate/ Other		Total		Domestic		International		Corporate/ Other			Total
Net Assets	$	741,497	$	34,841	$	21,515,250	$	22,291,588	$	628,451	$	41,377	$	(616,356	)	$	53,472

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 FDA, Clinical Laboratory Improvement Amendments (“CLIA”), and other governmental agencies.

NOTE 2 – HELOMICS ACQUISITION

The Company acquired 25% of the capital stock of Helomics, in transactions in the first quarter of 2018. On April 4, 2019, (the “Acquisition Date”), 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.

Helomics’ precision medicine services are designed to use artificial intelligence and a comprehensive disease database to improve the effectiveness of cancer therapy. 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.

The acquisition of Helomics was accounted for as a business combination using the acquisition method of accounting. This method requires, among other things, that assets acquired and liabilities assumed be recognized at fair value as of the acquisition date. The fair value for the assets acquired and the liabilities assumed are based on information knowable and determined by management as of the date of this filing. The Company incurred $656,615 in acquisition costs predominantly in legal and audit expenses.

The fair value of the consideration transferred in the acquisition has five components totaling $26,711,791. The following table summarizes the acquisition date fair values of assets acquired and liabilities assumed and the consideration transferred:

Value of shares to Helomics shareholders	$	5,612,250
Value of Helomics notes receivable forgiven		2,210,381
Value of shares to extinguish debt		6,463,309
Value of warrants issued		6,261,591
Gain on revaluation of equity method investment		6,164,260
Fair value of the consideration	$	26,711,791

Less assets acquired:
Cash & cash equivalents		248,102
Accounts receivable		207,769
Inventory		17,727
Prepaid expenses		15,321
Fix assets, net		1,749,080
Intangible assets		3,725,000
Lease right of use assets		780,594

Plus liabilities assumed:
Accounts payable		2,374,596
Note Payable		303,333
Accrued expenses		363,569
Lease Liability – Net of Long-term Portion		422,126
Lease liability		358,468

Total assets acquired and liabilities assumed		(2,921,501	)

Goodwill	$	23,790,290

(i) Upon the acquisition, all outstanding shares of Helomics stock not already held by the Company were converted into the right to receive a proportionate share of 4,000,000 shares of common stock and 3,500,000 shares of Series D Convertible Preferred Stock of the Company. The fair value of these shares on the datge of issuance was $5,612,250; (ii) the Company forgave notes and interest due from Helomics relating to previous cash advances equaling $2,210,381; (iii) the Company eliminated debt owed by Helomics to noteholders by issuing 8,637,323 shares of common stock to the noteholders, the value of the shares was $6,463,309; (iv) the Company issued 14,245,063 warrants in exchange for warrants to purchase 23,741,772 shares of Helomics common stock to the Helomics noteholders agreeing to extinguish or extend their notes. An additional 597,000 warrants were exchanged for warrants held by other parties; the total consideration of all the exchanged warrants was valued by using the Black Scholes method and equaled $6,261,591; and, (v) as the Company’s acquisition of Helomics was a business combination achieved in stages, the initial 25% purchase of Helomics in 2018 was required to be revalued at current fair value on the Acquisition Date. Immediately prior to the Acquisition Date the recorded value of the equity method investment was zero. On the Acquisition Date the Company determined the fair value of the previous equity method investment was $6,164,260 and recorded a gain for the same amount in order to recognize the investment at its fair value. The gain was calculated as the difference between the implied fair value of the Company’s previous equity method investment in Helomics and the recorded book value immediately prior to the acquisition date. The implied fair value was calculated based on the purchase consideration exchanged to acquire the remaining 75% of Helomics and factoring a 10% discount for lack of control.

The fair values of all common and preferred shares issued as consideration in the transaction was determined using the closing bid price of the Company’s common stock on April 4, 2019.

The Company did not legally assume the debt extinguished on the day of the acquisition, however three noteholders did not exchange their notes for shares, and the holders agreed to extend such notes, representing $303,333 in principal, to be due 90 days from the acquisition date. This portion of the debt was assumed by the Company. In order to receive the extension, the Company agreed to issue 583,003 warrants to the noteholders at an exercise price of $1.00 per share. The warrants were accounted for under the Black Scholes accounting method.

Identifiable Intangible Assets

The Company acquired intangible assets related to trademarks for the acquired Helomics trade name with an estimated fair market value of $398,000. The Company expects to employ the Helomics trade name for the foreseeable future. The fair values of the assets were determined by the relief-from-royalty method under the income approach.

The Company acquired intangible assets with a useful life of three years and an estimated value of $445,000 related to customer relationships stemming from stable and predictable cash flow streams associated with customers. Helomics’ customer base includes contract research partnerships with pharmaceutical, diagnostic, biotechnology, and research companies. Helomic’s existing customers are all within its CRO services business line. The customer relationships were valued using the with and without method under the income approach.

The Company acquired intangible assets with a useful life of 20 years and an estimated value of $2,882,000 related to developed technology stemming from the D-CHIP diagnostic platform and underlying tumor database. Since the D-CHIP platform and underlying database was identified as the primary asset, this technology was valued using the multi-period excess earnings method under the income approach.

The acquisition costs related to the intangible assets are represented in legal and accounting expenses within general and administrative expenses in the statement of net loss.

Goodwill

The $23,790,290 goodwill represents the excess of the consideration transferred over the fair values of assets acquired and liabilities assumed and represents the future economic benefits and synergies arising from the transaction. None of the goodwill is deductible for income tax purposes. Goodwill was allocated to the three Helomics segments.

Financial Results

The financial results of Helomics since the acquisition date have been included in the Company’s unaudited condensed consolidated statements of net loss for the quarter.

Pro Forma

The following pro forma information presents the combined results of operations of Predictive and Helomics as if the acquisition of Helomics had been completed on January 1, 2018, with adjustments to give effect to pro forma events that are directly attributable to the acquisition:

	Three Months Ended June 30, 2019
Revenue	$	286,376
Net gain attributable to Predictive	$	1,399,809

	Six Months Ended June 30, 2019
Revenue	$	587,452
Net loss attributable to Predictive	$	3,240,611

The primary adjustments include the deduction of the original depreciation and amortization and the inclusion of the revalued depreciation and amortization for Helomics tangible and intangible assets. The unaudited pro forma results do not reflect any operating efficiencies or potential cost savings which may result from the consolidation of operations. Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the acquisition had occurred at the beginning of those respective time periods, nor are they indicative of future results of operations.

There are certain portions of purchase accounting, specifically Section 382 for Tax Loss Carryforwards , which take place after a company has undergone a shift in ownership, that the Company has not completed yet and may have a significant impact on the financial statements.

NOTE 3 – 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 the accounting policy to exclude sales taxes from revenue and expenses.

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, 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.

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: (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 30 to 60 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 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 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.

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 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 now 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 one point in time when test reports are delivered. This revenue stream is reported under the Clinical Revenue segment (see Note 1).

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 consideration than it originally estimated for a contract with a patient, it will account for the change as an increase to the estimate of the transaction price, provided that such downward adjustment does not result in a significant reversal of cumulative revenue recognized.

The Company recognizes revenue for 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.

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, we allocate 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 30 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 CRO Revenue segment (see Note 1).

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.

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 no 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.

Contract Balances

The Company records a receivable when it has an unconditional right to receive consideration after the performance obligations are satisfied. As of June 30, 2019, and December 31, 2018, accounts receivable totaled $299,046 and $232,602, respectively.

The Company deferred revenues related primarily to maintenance plans and CRO revenue of $29,706 and $23,065 as of June 30, 2019 and December 31, 2018, respectively.

Practical Expedients

The Company has elected the practical expedient not to determine whether contracts with customers contain significant financing components as well as the practical expedient to recognize shipping and handling costs at point of sale.

NOTE 4 – STOCKHOLDERS’ EQUITY, STOCK OPTIONS AND WARRANTS

Series D Preferred Shares

The Company issued 3.5 million shares of new Series D preferred stock to Helomics as part of the acquisition. Each share of Series D preferred stock is subject to automatic conversion, whereby each such share converts automatically on a 1:1 basis into a share of the Company’s common stock upon the earlier of (i) the consummation of any fundamental transaction (e.g., a consolidation or merger, the sale or lease of all or substantially all of the assets of Predictive or the purchase, tender or exchange offer of more than 50% of the outstanding shares of voting stock of Predictive) or (ii) the one-year anniversary of the issuance date, which will be April 4, 2020.

Series E Convertible Preferred Stock

In June 2019, the Company entered into a securities purchase agreement with investors for shares of Series E Convertible Preferred Stock for an aggregate purchase price of $843,000 in a private placement. The Company amended its Certificate of Incorporation to authorize the issuance of 350 preferred shares and establishes the rights and preferences of the Preferred Shares. The Series E Convertible Preferred Stock included a contingent beneficial conversion amount of $107,935, representing the intrinsic value of the shares at the time of issuance. The Company determined the Series E Convertible Preferred Stock should be classified as permanent equity and at the Company is accreting the beneficial conversion feature amount to the earliest redemption date of six months after the Initial Closing of the Series E Convertible Preferred Stock. As of June 30, 2019, all shares of the Series E Convertible Preferred Stock issued remain outstanding.

Each Preferred Share Holder shall have the right at the Company’s option to be converted into 0.056857% of the issued and outstanding shares of common stock immediately prior to conversion for each share of Series E Convertible Preferred Stock beginning six months after issuance. On the date that is 12 months after the Initial Closing Date, the Company has the option to convert the Preferred Shares into common stock upon the same terms and limitations as the above optional conversion.

Net Loss Attributable to common shareholders

The net loss attributable to common shareholders for the six and three months ended June 30, 2019, reflects increases for net deemed dividends to Series E Convertible Preferred Shareholders provided in connection with various closings totaling $843,000 of the private placement of Series E Convertible Preferred Stock in June of 2019 of $20,398, representing the accretion of the beneficial conversion feature amount. The Series E Convertible Preferred Stock is not currently redeemable due to the contingency has not been met as of June 30, 2019 but is probable the preferred stock will be redeemable in the future. The earliest potential redemption based on solely a passage of time is December 12, 2019 and, therefore, the carrying amount of the Series E Convertible Preferred Stock shall be accreted from the commitment date to the redemption price as a deemed dividend. Since the Company does not have retained earnings, the amortization of the Series E Convertible Preferred Stock discount was recorded as a deemed dividend through additional paid-in capital and net loss attributable to common shareholders in calculating basic and diluted loss per common share (see Note 7).

Equity Incentive Plan

The Company has an equity incentive plan, which allows issuance of incentive and non-qualified stock options to employees, directors and consultants of the Company, where permitted under the plan. The exercise price for each stock option is determined by the Board of Directors. Vesting requirements are determined by the Board of Directors when granted and currently range from immediate to three years. Options under this plan have terms ranging from three to ten years.

Valuation and accounting for 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.

For grants of stock option and warrants issued during the quarter ended June 30, 2019, the Company used 1.93% to 2.55% risk free interest rate, 0% dividend rate, 78.6% volatility and estimated terms of 5 to 10 years. Value computed using these assumptions ranged from $0.3044 to $.6060 per share.

The following summarizes transactions for stock options and warrants for the periods indicated:

	Stock Options					Warrants
	Number of Shares			Average Exercise Price		Number of Shares			Average Exercise Price
Outstanding at December 31, 2017		2,764,983		$	2.00		1,951,257		$	23.74

Issued		1,098,858			1.01		2,336,154			1.07
Expired		(194,564	)		2.00		(10,706	)		199.55
Exercised		-			-		(650,062	)		1.00

Outstanding at December 31, 2018		3,669,277		$	1.70		3,626,643		$	4.17

Issued		3,731,868			0.72		17,212,545			0.95
Expired		(101,397	)		2.00		(919	)		603.89
Exercised		-			-		(578,560	)		0.01

Outstanding at June 30, 2019		7,299,748		$	1.20		20,259,709		$	1.67

Stock-based compensation recognized for the three and six months ended June 30, 2019 was $1,380,620 and $1,644,220, respectively, and for the three and six months ended June 30, 2018 was $233,981 and $460,368, respectively. The Company has $723,870 of unrecognized compensation expense related to non-vested stock options that are expected to be recognized over the next 16 months.

On April 4, 2019, the Company issued 1,908,500 stock options for common stock, par value $0.01, to current employees and directors from the Skyline, Skyline Europe and corporate divisions. Additionally, on April 4, 2019, the Company issued 1,050,004 stock options for common stock, par value $0.01, to new employees as a result of the Helomics acquisition.

NOTE 5 – NOTES RECEIVABLE

The Company has a secured promissory note receivable from CytoBioscience for $1,112,524, plus interest paid monthly at the per annum rate of (8%) on the principal amount. Unpaid principal and unpaid accrued interest on the note are due and payable on February 28, 2020. In 2019, CytoBioscience and its parent company, InventaBioTech, paid interest in the first quarter due through April 2019. The Company has not received any payments from CytoBioscience since the first quarter. The Company has evaluated the feasibility of repayment, including direct conversation with the CEO and former CEO of CytoBioscience, and has concluded that recovery of the note is in doubt. The Company has a Confession of Judgement signed by CytoBioscience and has filed with the courts. The Company has secured the note with lab equipment originally valued at $1,290,000. Based on management’s judgements, the Company believes it will be able to raise $250,000 through the sale of this equipment and has recorded a reserve for the difference. Management has concluded that it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the receivable.

As of April 3, 2019, the Company had a principal balance of $2,140,013, plus interest of $70,369 due from Helomics. Upon completion of the merger with Helomics all intercompany notes were eliminated; (see Note 2).

NOTE 6 – CONVERTIBLE DEBT AND DERIVATIVE LIABILITY

Effective September 28, 2018, the Company issued convertible secured promissory notes to two private investors in the original principal amount of an aggregate $2,297,727 (the “bridge loan”).

The bridge loan accrues interest at a rate of 8% per annum (with twelve months of interest guaranteed). The bridge loan is due on September 28, 2019. Upon the earlier to occur of an event of default or the filing of certain registration statements, each investor will have the right at any time thereafter to convert all or any part of its bridge loan into shares of the Company’s common stock at a conversion price which is equal to the lesser of: (i) $1.00 and (ii) 70% of the lowest volume-weighted average price (the “VWAP”) of the Company’s common stock during the 20-trading day period ending on either the last complete trading day prior to the conversion date, or the conversion date (“Conversion Shares”). The number of Conversion Shares that may be issued is subject to an exchange cap such that the sum of (a) the total number of Conversion Shares plus (b) the number of Inducement Shares is limited to an aggregate 2,678,328 shares.

Management has concluded the conversion feature is an embedded derivative that is required to be bifurcated and separately presented as a liability on the balance sheet. The embedded derivative’s value was determined using 70% of the VWAP for the 20 trading days preceding the balance sheet date, and assuming conversion on that date as management believed it is probable that the bridge loan will be convertible based on management’s expectation that additional financing will be required. The Company recognized an unrealized loss in other expenses on the statements of net loss for the corresponding change in fair value of $231,348 for the six-month period ended June 30, 2019. The fair value of the derivative liability as of June 30, 2019 was $504,092.

In the second quarter one of the bridge loan investors thrice converted a portion of the principal balance of the note. The investor converted $148,573 from the principal balance and received 398,734 shares of the Company’s common stock. The principal balance remaining for the investor is $325,278.

The value of the embedded derivative from the bridge loan as well as the derivative included in the note payable agreements with the Company’s CEO (See Note 9) were based upon level 3 inputs – see the Fair Value Caption in Note 1. The table below discloses all changes in value of those derivative liabilities during the six-month period ended June 30, 2019.

Derivative Liability Balance at December 31, 2018				Derivative Instrument Issued				Loss Recognized to Revalue Derivative Instrument at Fair Value				Adjustments to Derivative Liability for Warrants Issued				Derivative Liability Balance at June 30, 2019
$	272,745				69,722				231,347				32,215			$	541,599

NOTE 7 - LOSS PER SHARE

The following table presents the shares used in the basic and diluted loss per common share computations:

	Three Months Ended June 30					Six Months Ended June 30
	2019		2018			2019			2018
Numerator
Net gain/(loss) attributable to common shareholder per common share basic and diluted calculation	$	1,444,706	$	(2,373,410	)	$	(1,848,478	)	$	(4,133,432	)

Net gain/(loss)		1,444,706		(2,373,410	)		(1,848,478	)		(4,133,432	)
Denominator:
Weighted average common shares outstanding-basic		29,609,373		11,878,490			22,747,544			11,632,221

Effect of diluted stock options, warrants and preferred stock (1)		30,461,410		-			-			-

Weighted average common shares outstanding-diluted		60,070,783		11,878,490			22,747,544			11,632,221

Gain/(Loss) per common share - basic	$	0.05	$	(0.20	)	$	(0.08	)	$	(0.36	)
Gain/(loss) per common share - diluted	$	0.02	$	(0.20	)	$	(0.08	)	$	(0.36	)

(1) The number of shares underlying options and warrants outstanding as of June 30, 2019 and June 30, 2018 are 27,559,457 and 5,676,637, respectively. The number of shares underlying the convertible debt as of June 30, 2019 and June 30, 2018 is 1,303,073 and zero, respectively. The number of shares underlying the preferred stock Series C as of June 30, 2019 and June 30, 2018 is 79,246. The number of shares underlying the preferred stock Series D as of June 30, 2019 and June 30, 2018 is 35,000 and zero, respectively. The number of shares underlying the preferred stock Series E as of June 30, 2019 and June 30, 2018 is 1,484,634 and zero, respectively. The effect of the shares that would be issued upon exercise of such options, warrants, convertible debt and preferred stock has been excluded from the calculation of diluted loss per share because those shares are anti-dilutive.

NOTE 8 – LEASES

The Company’s corporate offices are located at 2915 Commers Drive, Suite 900, Eagan, Minnesota 55121. On November 22, 2017, the Company signed a second amendment to its lease last amended on January 28, 2013. The lease as amended has a three-year term effective February 1, 2018 ending January 31, 2021. The Company leases 5,773 square feet at this location, of which 2,945 square feet is used for office space and 2,828 is used for manufacturing.

Skyline Medical Europe’s offices are located at 9 Chemin de la Fraite – 1380 Ohain, Belgium. The lease agreement was signed April 24, 2018 and started on June 15, 2018. The Company leases around 2,000 square feet at this location, 750 of which is used for storage and 1,250 for office space. The lease is effective through June 14, 2027.

Helomics’ offices are located at 91 43 ^rd Street, Pittsburgh, Pennsylvania. On October 17, 2017, the Company signed a second amendment to its lease last amended on February 28, 2016. The lease, as amended, has a three-year term effective February 1, 2018, ending January 31, 2021. The Company leases 17,417 square feet at this location, of which approximately 1,000 square feet are used for office space and 16,417 square feet is used for laboratory operations. The Company expects that this space will be adequate for its current office and laboratory needs.

Lease expense was $153,923 and $183,135 for the three months and six months ended on June 30, 2019 and $19,936 and $37,179 for the three and six months ended on June 30, 2018, respectively.

The following table summarizes other information related to the Company’s operating leases:

	June 30, 2019
Weighted average remaining lease term – operating leases in years		3.19
Weighted average discount rate – operating leases		8	%

The Company’s rent obligation for the next five years are as follows:

2019	$	259,700
2020		520,981
2021		118,976
2022		43,403
2023		44,271
2024 and thereafter		157,932
Total lease payments		1,145,263
Less interest		139,738
Present value of lease liabilities	$	1,005,525

NOTE 9 – RELATED PARTY TRANSACTIONS

The Audit Committee has the responsibility to review and approve all transactions to which a related party and the Company may be a party prior to their implementation, to assess whether such transactions meet applicable legal requirements.

One of the Company’s directors, Richard L. Gabriel, is the Chief Operating Officer and serves as a director of GLG Pharma (“GLG”). Another Company director, Tim Krochuk, is on the supervisory board for GLG. The Company and GLG have a partnership agreement with Helomics for the purpose of bringing together their proprietary technologies to build out personalized medicine platform for the diagnosis and treatment of women’s cancer. There has been no revenue or expenses generated by this partnership to date.

On May 1, 2019, Mr. Gabriel executed a one-year contract with renewable three-month periods to continue as Chief Operating Officer for TumorGenesis. Mr. Gabriel will receive $13,500 in monthly cash payments.

On May 21, 2019, the Company issued a third and restated common stock purchase warrant to Dr. Schwartz the Company’s CEO for value received in connection with the funding of all or a portion of the purchase price of his second amended and restated promissory note in the principal amount of $1,620,000. The Company issued an additional 34,518 warrants to Dr. Schwartz under the agreement in the second quarter, which reduced the value of the derivative liability by $32,215. As of June 30, 2019, the recorded derivative liability related to the agreement is $36,507. On May 9, 2019, Dr. Schwartz advanced $75,000 to the Company, on May 30, 2019, he advanced $200,000 to the Company, and on July 15, 2019 he advanced $25,000 to the Company. The loan earns 8% interest and is due on September 13, 2019, pursuant to the Amended and Restated Promissory Note. The loan is not connected to the previous note payable due to Dr. Schwartz and does not affect the warrant calculations regarding that notes interest.

NOTE 10 – SUBSEQUENT EVENTS

Related Party Transactions

On July 15, 2019, Dr. Schwartz advanced an additional $25,000 to the Company. The advance is being consolidated with the two previous advances from May 2019 and June 2019. The three advances earn 8% interest and are due on September 13, 2019.

Private Placement Funding

On June 13, 2019, the Company initiated a Series E convertible preferred stock private placement (see Note 4). Prior to quarter end the Company received $776,000 in net proceeds. Subsequent to the quarter’s end the Company has received an additional $1,238,800 in net proceeds. The private placement is ongoing and more funds are expected capping at $3,500,000 in gross proceeds.

Skyline Restructuring

In July 2019, the Company reduced its employed staff in the Skyline Medical division by ten people. As a result, severance pay recorded was $300,673. The majority of that amount, $247,500, is due to one individual who has accepted severance payments in 24 equal installments paid bi-monthly over the course of the next twelve months.

The Company continues to operate, both selling and maintaining, the STREAMWAY System and its disposable cleaning solution and bi-furcated filters.

Delaware		83-4360734
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

2915 Commers Drive, Suite 900		Eagan, Minnesota 55121
(Address of principal executive offices)		(Zip Code)

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☒
	Emerging growth company ☐

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value	POAI	Nasdaq Capital Market

	Page No.
PART I. FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements	4

Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018	4

Condensed Consolidated Statements of Net Loss for the three and six-month periods ended June 30, 2019 and June 30, 2018	5

Condensed Consolidated Statements of Stockholders’ Equity for the three and six-month periods ended June 30, 2019 and June 30, 2018	6

Condensed Consolidated Statements of Cash Flows for the six-month periods ended June 30, 2019 and June 30, 2018	7

Notes to Condensed Consolidated Financial Statements	8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3. Quantitative and Qualitative Disclosures About Market Risk	33

Item 4. Controls and Procedures	34

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	34

Item 1A. Risk Factors	34

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	56

Item 3. Defaults Upon Senior Securities	56

Item 4. Mine Safety Disclosures	56

Item 5. Other Information	56

Item 6. Exhibits	56

Signatures	57

Exhibit Index	58

	•	The Company will not be able to continue operating without additional financing,
	•	Current negative operating cash flows;
	•	The terms of any further financing, which may be highly dilutive and may include onerous terms;
	•	Risks related to the recent Merger with Helomics; possible failure to realize anticipated benefits of the Merger; costs associated with the Merger may be higher than expected; the Merger may result in the disruption of the Company’s and Helomics’ existing businesses; and distraction of management and diversion of resources; delay in completion of the merger may significantly reduce the expected benefits;
	•	Risks related to our partnerships with other companies, including the need to negotiate the definitive agreements; possible failure to realize anticipated benefits of these partnerships; and costs of providing funding to our partner companies, which may never be repaid or provide anticipated returns.
	•	Risk that we will be unable to protect our intellectual property or claims that we are infringing on others’ intellectual property;
	•	The impact of competition, the obtaining and maintenance of any necessary regulatory clearances applicable to applications of the Company’s technology;
	•	Inability to attract or retain qualified senior management personnel, including sales and marketing personnel;
	•	Risk that we never become profitable if our product is not accepted by potential customers;
	•	Possible impact of government regulation and scrutiny;
	•	Unexpected costs and operating deficits, and lower than expected sales and revenues, if any;
	•	Adverse results of any legal proceedings;
	•	The volatility of our operating results and financial condition, and,
	•	Other specific risks that may be alluded to in this report.


(Former name, former address and former fiscal year, if changed since last report)

	Three Months Ended June 30										Six Months Ended June 30
	2019		2018		$ Difference			% Difference			2019		2018		$ Difference			% Difference
Revenue	$	286,151	$	358,586	$	(72,435	)		-20	%	$	541,392	$	770,179	$	(228,787	)		-30	%

	•	failure to successfully manage relationships with customers and other important relationships;
	•	failure of customers to continue using the services of the combined company;
	•	difficulties in successfully integrating the management teams and employees of Predictive and Helomics;
	•	challenges encountered in manager larger operations;
	•	losses of key employees;
	•	failure to manage the growth and growth strategies of Predictive and Helomics;
	•	diversion of the attention of management from other ongoing business concerns;
	•	incompatibility of technologies and systems;
	•	impairment charges incurred to write down the carrying amount of intangible assets generated as a result of the Merger; and
	•	incompatibility of business cultures.

	•	expend significant funds to conduct substantial research and development;

	•	conduct successful analytical and clinical studies;
	•	scale Helomics’ laboratory processes to accommodate new molecular diagnostic tests; and
	•	build the commercial infrastructure to market and sell new molecular diagnostic tests.

	•	The Food, Drug and Cosmetic Act, as supplemented by various other statutes;
	•	The Prescription Drug Marketing Act of 1987, the amendments thereto, and the regulations promulgated thereunder and contained in 21 C.F.R. Parts 203 and 205, or the PDMA;
	•	CLIA and State licensing requirements;
	•	Manufacturing and promotion laws;
	•	Medicare billing and payment regulations applicable to clinical laboratories;
	•	The Federal Anti-Kickback Statute, which prohibits knowingly and willfully offering, paying, soliciting, or receiving remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing, arranging for, or recommending of an item or service that is reimbursable, in whole or in part, by a Federal healthcare program;
	•	The Federal Stark physician self-referral law (and state equivalents), which prohibits a physician from making a referral for certain designated health services covered by the Medicare program, including laboratory and pathology services, if the physician or an immediate family member has a financial relationship with the entity providing the designated health services, unless the financial relationship falls within an applicable exception to the prohibition;

	•	The Federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which established comprehensive federal standards with respect to the privacy and security of protected health information and requirements for the use of certain standardized electronic transactions, and amendments made in 2013 to HIPAA under the Health Information Technology for Economic and Clinical Health Act, which strengthen and expand HIPAA privacy and security compliance requirements, increase penalties for violators, extend enforcement authority to state attorneys general, and impose requirements for breach notification;
	•	The Federal Civil Monetary Penalties Law, which prohibits, among other things, the offering or transfer of remuneration to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state healthcare program, unless an exception applies;
	•	The Federal False Claims Act, which imposes liability on any person or entity that, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment to the federal government;
	•	Other Federal and State fraud and abuse laws, prohibitions on self-referral, fee-splitting restrictions, prohibitions on the provision of products at no or discounted cost to induce physician or patient adoption, and false claims acts, which may extend to services reimbursable by any third-party payor, including private insurers;
	•	The prohibition on reassignment of Medicare claims, which, subject to certain exceptions, precludes the reassignment of Medicare claims to any other party;
	•	The rules regarding billing for diagnostic tests reimbursable by the Medicare program, which prohibit a physician or other supplier from marking up the price of the technical component or professional component of a diagnostic test ordered by the physician or other supplier and supervised or performed by a physician who does not “share a practice” with the billing physician or supplier; and

	•	State laws that prohibit other specified practices related to billing such as billing physicians for testing that they order, waiving coinsurance, co-payments, deductibles, and other amounts owed by patients, and billing a State Medicaid program at a price that is higher than what is charged to other payors.

	•	differences between the list price for Helomics’ molecular diagnostic tests and the reimbursement rates of payors;
	•	compliance with complex Federal and State regulations related to billing Medicare;
	•	disputes among payors as to which party is responsible for payment;
	•	differences in coverage among payors and the effect of patient co-payments or co-insurance;
	•	differences in information and billing requirements among payors;
	•	incorrect or missing billing information; and
	•	the resources required to manage the billing and claims appeals process.

	PREDICTIVE ONCOLOGY INC.

Date: August 19, 2019	By:	/s/ Carl Schwartz
		Carl Schwartz
		Chief Executive Officer

Date: August 19, 2019	By:	/s/ Bob Myers
		Bob Myers
		Chief Financial Officer

Exhibit No.		Description

3.1		Certificate of Amendment of the Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Form 8-K filed on June 13, 2019)

3.2		Second Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to Form 8-K filed on June 13, 2019)

3.3		Certificate of Designation of Preferences, Rights and Limitations of Series E Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to Form 8-K filed on June 19, 2019)

4.1		Third Amended and Restated Common Stock Purchase Warrant issued to Carl Schwartz (incorporated by reference to Exhibit 4.1 to Form 8-K filed on May 23, 2019)

10.1		Consulting Agreement by and between the Company and Richard Gabriel (incorporated by reference to Exhibit 10.1 to Form 8-K filed on May 8, 2019)

10.2*		Form of Amended and Restated Promissory Note payable to Carl Schwartz

10.3*		Form of Amended and Restated Employment Agreement with Carl Schwartz

10.4		Securities Purchase Agreement between the Company and certain purchasers of Series E Convertible Preferred Stock (incorporated by reference to Exhibit 10.1 to Form 8-K filed on July 11, 2019)

31.1*		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*		XBRL Instance Document**
101.SCH*		XBRL Extension Schema Document**
101.CAL*		XBRL Extension Calculation Linkbase Document**
101.DEF*		XBRL Extension Definition Linkbase Document**
101.LAB*		XBRL Extension Labels Linkbase Document**
101.PRE*		XBRL Extension Presentation Linkbase Document**

Date August 19, 2019	/s/ Bob Myers
	Bob Myers
	Chief Financial Officer