Business context and reporting period
The supplied filing is Predictive Oncology Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2020—not a filing identified as Axe Compute Inc. The company combines precision-medicine and contract research activities, including Helomics, with sales of the STREAMWAY medical fluid-disposal system. Management said it intended to focus resources on precision medicine.
Key financial results and position
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Revenue | $182,784 in 2020; $286,151 in 2019 | $477,727 in 2020; $541,392 in 2019 |
| Gross margin | $97,523; 53% in 2020 vs. 59% in 2019 | $299,809; 63% in 2020 vs. 65% in 2019 |
| Net income (loss) | $(3,577,378) in 2020 vs. $1,465,104 in 2019 | $(8,106,695) in 2020 vs. $(1,828,080) in 2019 |
| Operating cash flow | $(6,721,084) used in the first half of 2020 vs. $(4,045,495) in the first half of 2019 |
- At June 30, cash was $3.394 million; current assets were $4.329 million and current liabilities were $14.652 million, a working-capital deficit of about $10.323 million.
- Notes payable, net of discounts, were $4.412 million. The company separately reported outstanding debt, accrued interest and penalties totaling $5.467 million at June 30. After subsequent extensions, it estimated $5.984 million payable September 30, 2020, including assumed interest and a 20% repayment premium, subject to conversion or further extension.
- Total assets were $27.496 million, total liabilities $15.805 million, and stockholders’ equity $11.691 million. Accumulated deficit was $90.605 million.
- Financing activities provided $9.874 million net in the first half, lifting cash from $150,831 at year-end 2019. Financing included debt, equity-line sales, offerings and warrant exercises.
Material changes versus prior comparable periods
- Revenue declined 36% year over year in the second quarter and 12% in the first half. The company sold one STREAMWAY unit in Q2 2020 versus seven in Q2 2019, and six in the first half versus 14.
- First-half operating expenses rose overall: general and administrative expense increased $1.232 million, partly offset by lower operations and sales and marketing expenses. Management attributed the G&A increase mainly to salaries and staffing, including in Helomics, and severance costs.
- The first-half 2020 net loss included a $1.290 million gain associated with the Soluble Therapeutics/BioDtech asset purchase. Q2 2019 net income included a $6.164 million gain on revaluation of an equity-method investment and a $1.222 million gain on Helomics cash advances; those gains did not recur in 2020.
- Common shares outstanding increased from 4,056,652 at December 31, 2019 to 13,190,787 at June 30, 2020, reflecting financing, conversions and other issuances. The filing reports 15,213,188 shares outstanding as of August 10, 2020.
Outlook, risks and unusual items
- Going concern: The company stated that recurring losses, negative operating cash flows, near-term debt maturities and dependence on additional financing raise substantial doubt about its ability to continue as a going concern for one year after issuance. It said additional financing was needed and that obtaining it was not probable; no assurance was given that financing would be available on acceptable terms.
- COVID-19: Management cited supplier relocation and parts delays, reduced on-site staffing, slower production, limits on hospital sales visits, slower receivable collections, and suppliers requiring pre-delivery deposits. The company warned of continuing material adverse effects.
- Financing and dilution: The $15 million equity line had $12.811 million remaining available at June 30, subject to conditions and market limitations. Further equity financing could materially dilute shareholders. Secured notes are backed by company and subsidiary assets.
- Acquisitions: In May, the company acquired substantially all assets of Soluble and BioDtech for shares and waiver of claims, recognizing $1.493 million in fixed assets and a $1.290 million gain on the previously impaired receivable. On July 1, 2020, after quarter-end, it acquired Quantitative Medicine assets, including the CoRE platform, for shares with a stated market value of $1.750 million.
- Other notable items: The company received a $541,867 Paycheck Protection Program loan; forgiveness was uncertain. It reported a material weakness in internal control over financial reporting related to insufficient accounting resources for complex transactions; remediation efforts were underway. No formal revenue or earnings guidance is provided in the supplied filing text.
Most important facts for investors to verify
- Confirm the issuer identity: the supplied 10-Q is for Predictive Oncology Inc. (POAI), not Axe Compute Inc.
- Review the September 30, 2020 debt payment estimate, subsequent extensions, premiums, collateral and any later conversions or refinancing.
- Assess the company’s cash runway, financing availability and dilution risk, including the actual accessibility of the equity line.
- Track revenue generation and cash use in Helomics/precision medicine, STREAMWAY unit sales, and whether the acquisitions produce expected commercial results.
- Follow COVID-19 operating effects, PPP loan forgiveness status, and remediation of the disclosed material weakness.