Precision Therapeutics Inc. (not Axe Compute Inc.) — Q1 2018 Form 10-Q
The supplied filing is for Precision Therapeutics Inc., formerly Skyline Medical Inc.; it does not identify Axe Compute Inc. as the registrant. It covers the quarter ended March 31, 2018 and was signed May 15, 2018. Precision sells STREAMWAY surgical-fluid management systems and related consumables, and is expanding into contract research and precision oncology businesses.
Financial performance and liquidity
| Metric | Q1 2018 | Q1 2017 / comparison |
|---|---|---|
| Revenue | $411,593 | $175,166; up 135% |
| Cost of goods sold | $117,343 | $36,992 |
| Gross profit and margin | $294,250; about 71% | $138,174; about 79% |
| Operating expenses | $2,054,272 | $1,480,021 |
| Net loss and diluted loss per share | $1,760,022; $0.15 | $1,341,847; $0.21 per share |
| Cash used in operating activities | $1,694,318 | $1,156,208 |
At March 31, 2018, cash and cash equivalents were $2.233 million, current assets $3.123 million, current liabilities $783,604, total assets $5.999 million, and total liabilities $783,604. Working capital was approximately $2.339 million. The balance sheet reports no debt liability; the filing does not provide a separate total-debt figure. There was no interest expense in either comparative quarter. The company reported an accumulated deficit of $56.525 million and stated that operating cash outflow was running at approximately $385,000 per month, with Q1 higher because of unusual expenses.
Changes and notable transactions
- Revenue rose 135%, with 16 STREAMWAY unit sales reported for Q1. The company said it had sold 123 units through March and two more afterward.
- Gross margin declined from about 79% to 71%, which management attributed to higher costs; it anticipated potential purchasing discounts if sales volume grows.
- Operating expenses increased about $574,000. Sales and marketing expense rose about $403,000, including increased sales-force costs and $115,000 for a new website. G&A increased about $84,000, including offering-related and investor-relations costs; operations expense increased about $87,000.
- Financing activities provided $3.015 million, chiefly from the January public offering and its over-allotment. The offering issued 2.9 million units at $0.95 per unit; common shares outstanding rose to 11,804,073 by March 31 from 6,943,283 at year-end.
- The company converted $500,000 of Helomics notes into an equity interest and reported a 25% stake. An April 20, 2018 non-binding letter of intent proposed acquiring the remaining Helomics ownership, with 7.5 million Precision shares contemplated as consideration, plus release of the previously issued 1.1 million shares subject to escrow terms.
Outlook, risks, and contingencies
There is no formal revenue or earnings guidance. Management expects STREAMWAY sales to grow as hospitals approve and order units, and is expanding sales coverage; these expectations depend on customer adoption. The company also plans to invest in TumorGenesis and other new business areas, including approximately $70,000 per month in TumorGenesis launch expenses.
Management stated that recurring losses, negative operating cash flows, and the need to raise significant additional capital create substantial doubt about the company’s ability to continue as a going concern. It warned that further financing may be dilutive or unavailable on acceptable terms. It also cautioned that Helomics and CytoBioscience advances may not be repaid and that investments in new businesses may not generate returns. The Helomics transaction remains subject to due diligence, definitive agreements, approvals, and other closing conditions; completion is uncertain. The company reported no legal proceedings and no off-balance-sheet arrangements. Disclosure controls were assessed as effective at March 31, 2018.
Key facts for investors to verify
- Confirm the filing entity: the provided 10-Q is for Precision Therapeutics Inc., not Axe Compute Inc.
- Assess cash runway, monthly operating burn, and the timing and terms of any additional financing.
- Verify STREAMWAY unit sales, hospital adoption, revenue conversion, and whether margins improve with volume.
- Review dilution from shares, options, and warrants, including the January offering and potential future equity financing.
- Check the status, final terms, financing needs, and due-diligence findings for the proposed Helomics merger.
- Evaluate collectability of the CytoBioscience and Helomics receivables and the expected returns on strategic investments.