Filing and reporting period
The supplied filing is Precision Therapeutics Inc.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2018, filed November 14, 2018. This does not match the request metadata naming Axe Compute Inc.; confirm the issuer before relying on this summary. Precision reported under ticker AIPT and described businesses in STREAMWAY surgical-fluid management, precision medicine, and TumorGenesis.
Financial performance and position
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue, 2018 | $329,930 | $1,100,108 |
| Revenue, 2017 | $152,535 | $434,523 |
| Gross margin dollars, 2018 | $246,924 | $790,788 |
| Net loss, 2018 | $2,506,869 | $6,640,301 |
| Net loss, 2017 | $992,095 | $4,877,542 |
| Loss per share, 2018 | $(0.19) | $(0.55) |
- Revenue rose 116% for the quarter and 153% for the nine-month period year over year. STREAMWAY unit sales were 10 versus 2 in the quarter and 35 versus 3 year to date.
- Management reported nine-month gross margin of approximately 72%, down from 80% in 2017, citing higher costs. Operating expenses were $5.82 million for the nine months, versus $5.22 million.
- The nine-month loss included a $1.61 million equity-method loss on Helomics. Helomics reported a $6.83 million nine-month net loss; its third-quarter CRO and D-CHIP offerings generated approximately $31,000 in revenue.
- Net cash used in operations was $4.07 million, compared with $3.14 million in 2017. Investing activities used $96,184 and financing provided $3.61 million. Cash and cash equivalents were $209,891 at September 30, including approximately $53,000 in cash equivalents according to management.
- At September 30, current assets were $3.11 million and total liabilities were $2.39 million. The balance sheet showed a bridge-loan note payable of $1.00 million net of a $1.29 million discount, and a $645,008 derivative liability. The company reported an accumulated deficit of $61.41 million.
Material changes, outlook, and risks
- Going concern and funding: The filing states there is substantial doubt about the company’s ability to continue as a going concern for one year after issuance. It reported operating cash use of approximately $452,000 per month and said significant additional capital would be required. No specific financial guidance was provided.
- Bridge financing: A secured convertible financing had an effective date of September 28 but closed October 3. The company recorded $1.815 million of net proceeds as a loan receivable at September 30; management said half was advanced to Helomics. The notes carry 8% interest, mature in 12 months, and include conversion at the lesser of $1.00 or 70% of the lowest 20-trading-day VWAP, subject to an exchange cap. The financing also included inducement shares and warrants.
- Proposed Helomics merger: An October 26 amended agreement revised consideration to 4.0 million common shares and 3.5 million Series D preferred shares, in addition to 1.1 million common shares previously issued. Closing remained conditional, including shareholder approvals, due diligence, and agreements from holders of at least 75% of Helomics’ $7.6 million notes to exchange or convert obligations. The filing describes substantial potential additional share and warrant issuance and increased post-merger cash needs.
- Receivable exposure: CytoBioscience had not paid scheduled interest for August through October and was reported in default by its parent. Precision had advanced $1.07 million; management had not recorded a reserve but warned that a future reserve or write-off could be significant. Precision also advanced Helomics funds, including $907,500 in October.
- Management outlook and key risks: Management expected increased sales staffing to support future STREAMWAY revenue and anticipated more substantial Helomics CRO and D-CHIP revenue in the fourth quarter, potentially reducing Helomics’ losses. These were expectations, not firm guidance. Risks include continued operating losses, financing availability and dilution, merger completion and integration, Helomics’ losses and funding needs, customer adoption, competition, regulatory requirements, and intellectual-property protection.
- The company reported effective disclosure controls as of September 30, 2018, no material change in internal control over financial reporting during the quarter, and no legal proceedings reported in this filing.
Important facts for investors to verify
- Confirm the correct issuer: the supplied 10-Q is for Precision Therapeutics Inc., not Axe Compute Inc.
- Verify post-quarter cash, the bridge-loan closing and terms, and how much financing was advanced to Helomics.
- Track the Helomics merger’s closing conditions, revised consideration, debt and warrant exchanges, and resulting dilution.
- Assess collectability of the CytoBioscience note and Helomics advances; the filing’s MD&A gives accounts receivable of $238,958, while the balance sheet reports $238,598.
- Monitor cash burn, additional financing needs, STREAMWAY sales and margins, and whether Helomics’ new revenue materially improves its results.