Predictive Oncology (POAI) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Unaudited Condensed Consolidated Financial Statements The company's Q1 2025 financial position improved due to financing activities, increasing cash and reducing stockholders' deficit, despite ongoing net losses, increased revenue, and reduced operating expenses, with divested segments now discontinued operations and a 'going concern' risk persisting Condensed Consolidated Balance Sheets As of March 31, 2025, cash and cash equivalents significantly increased to $3.1 million due to financing, total assets grew to $5.9 million, liabilities to $6.0 million, and stockholders' deficit improved to ($145,796) Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $3,087,588 | $611,822 | | Total current assets | $3,486,024 | $2,225,918 | | Total assets | $5,868,251 | $4,972,517 | | Liabilities & Stockholders' Deficit | | | | Total current liabilities | $4,609,043 | $3,593,401 | | Total liabilities | $6,014,047 | $5,175,127 | | Total stockholders' deficit | ($145,796) | ($202,610) | Condensed Consolidated Statements of Net Loss Q1 2025 saw revenue increase to $110,310 and operating expenses sharply reduced by over $1.2 million, resulting in a smaller net loss of $2.4 million, or ($0.34) per share, compared to $4.2 million, or ($1.04) per share, in Q1 2024 Statement of Net Loss Comparison (Unaudited, Three Months Ended March 31) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Revenue | $110,310 | $4,858 | | Gross profit (loss) | $65,192 | ($17,575) | | Total operating expenses | $2,352,239 | $3,564,459 | | Loss from continuing operations | ($2,285,416) | ($3,564,105) | | Net (loss) | ($2,442,873) | ($4,218,843) | | Net (loss) per share | ($0.34) | ($1.04) | Condensed Consolidated Statements of Stockholders' Equity (Deficit) Q1 2025 stockholders' deficit decreased to ($145,796) from ($202,610), driven by common share issuances from warrant exercises, a direct offering, and a Renovaro agreement, which boosted paid-in capital, partially offset by the $2.4 million net loss - Issuance of shares from warrant exercises, a Registered Direct Offering, and the Renovaro Extension Agreement added approximately $2.5 million to equity before being offset by the quarterly net loss[12] Condensed Consolidated Statements of Cash Flows Q1 2025 net cash used in continuing operations decreased to $0.99 million, while financing activities generated $2.5 million and discontinued operations provided $0.85 million, leading to a net cash increase of $2.37 million Cash Flow Comparison (Unaudited, Three Months Ended March 31) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash (used in) continuing operating activities | ($985,840) | ($2,709,688) | | Net cash provided by (used in) continuing financing activities | $2,499,687 | ($112,372) | | Net cash provided by (used in) discontinued operations | $854,494 | ($706,332) | | Net increase (decrease) in cash | $2,368,341 | ($3,531,424) | | Cash and cash equivalents at end of period (continuing ops) | $3,087,588 | $4,734,628 | Notes to Condensed Consolidated Financial Statements Notes detail the company's AI oncology focus, the terminated Renovaro merger, discontinued Eagan and Birmingham segments, substantial 'going concern' doubt due to recurring losses and capital needs, and Nasdaq non-compliance for stockholders' equity - The company's business is focused on applying AI to oncology drug discovery using a proprietary biobank of over 150,000 tumor samples[18] - A proposed merger with Renovaro, Inc. was terminated on March 31, 2025, after a letter of intent expired without a definitive agreement[20] - The company has incurred significant recurring losses, resulting in an accumulated deficit of $182.9 million as of March 31, 2025, conditions that raise substantial doubt about the company's ability to continue as a going concern[24] - The former Eagan operating segment (STREAMWAY System) was sold on March 14, 2025, and is now reported as a discontinued operation, along with the previously discontinued Birmingham segment[21][42] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's strategic shift to AI oncology post-divestiture, noting Q1 2025 revenue growth and expense reduction, but emphasizes critical financial condition, recurring losses, and 'going concern' doubt requiring additional financing Recent Developments Recent developments include the termination of the Renovaro merger and subsequent lawsuit, alongside the sale of the STREAMWAY® product line to DeRoyal Industries for $625,000 plus assumed liabilities - The binding letter of intent with Renovaro for a merger terminated on March 31, 2025, and on April 3, 2025, the Board decided to discontinue merger discussions[78] - On May 8, 2025, Renovaro filed a lawsuit against the company in Delaware Chancery Court, which the company believes is without merit and plans to contest vigorously[78] - The company sold its STREAMWAY® product line to DeRoyal Industries, Inc. for $625,000 plus the assumption of certain liabilities on March 14, 2025[80] Results of Operations Q1 2025 continuing operations revenue increased to $110,310 due to a 3D model project, while operating expenses significantly decreased across G&A, R&D, and Sales & Marketing, driven by reduced headcount and professional fees Operating Results Comparison (Continuing Operations, Three Months Ended March 31) | Line Item | 2025 | 2024 | Difference | | :--- | :--- | :--- | :--- | | Revenue | $110,310 | $4,858 | $105,452 | | General and administrative expenses | $1,828,200 | $2,325,664 | ($497,464) | | Operations, research and development expenses | $520,406 | $630,085 | ($109,679) | | Sales and marketing expenses | $3,633 | $608,710 | ($605,077) | - The increase in revenue was primarily due to the completion of a tumor-specific 3D model in Q1 2025, with no comparable completion in Q1 2024[89] - The decrease in sales and marketing expenses was mainly due to lower employee compensation, including severance for a former executive recorded in 2024, and a reduction in headcount[93] Liquidity and Capital Resources The company's liquidity is critical, with substantial 'going concern' doubt due to recurring losses and negative operating cash flow, despite $3.1 million cash and $2.5 million raised in Q1 2025, necessitating significant additional capital to meet $4.6 million short-term obligations - The company has incurred significant recurring losses, has an accumulated deficit of $182.9 million, and does not expect to generate sufficient operating revenue to sustain operations in the near term[99] - These conditions raise substantial doubt about the company's ability to continue as a going concern within one year[99] - In Q1 2025, the company raised capital through a Registered Direct Offering (gross proceeds of $545,004) and a share subscription agreement with Renovaro ($500,000)[102][104] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section is not required for the reporting period - Disclosure for this item is not required[107] Item 4. Controls and Procedures Management, including the CEO and Interim CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2025, with no material changes to the company's internal control over financial reporting during the quarter - Based on an evaluation as of March 31, 2025, the Chief Executive Officer and Interim Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[109] - No changes in internal control over financial reporting occurred during Q1 2025 that materially affected, or are reasonably likely to materially affect, internal controls[110] PART II. OTHER INFORMATION Item 1. Legal Proceedings Management reports no pending legal proceedings likely to materially adversely affect financial position, results, or cash flows, though this should be considered with risk factors disclosing a recent Renovaro lawsuit - The company states that there are no pending legal proceedings that management believes are likely to result in a material adverse effect[112] Item 1A. Risk Factors New risks include a costly lawsuit from Renovaro following merger termination and non-compliance with Nasdaq's minimum stockholders' equity requirement, posing a material delisting risk - On May 8, 2025, Renovaro filed a lawsuit alleging breach of contract after merger discussions were discontinued, and while the company intends to contest the lawsuit, litigation can be costly and divert management's attention[114] - The company received a notice from Nasdaq on November 20, 2024, for non-compliance with the minimum stockholders' equity requirement of $2.5 million[116] - There is a risk the company may not regain compliance with Nasdaq's listing requirements, which could lead to delisting and severely impair the stock's liquidity[117][118] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds On March 13, 2025, the company privately sold 467,290 unregistered common shares to Renovaro, Inc. for $500,000 at $1.07 per share, exempt from Securities Act registration - Pursuant to a share subscription agreement, the company sold 467,290 unregistered common shares to Renovaro for $500,000[121] - The transaction closed on March 17, 2025, and was exempt from registration under Section 4(a)(2) of the Securities Act[121] Item 3. Defaults Upon Senior Securities None reported - None[122] Item 4. Mine Safety Disclosures Not applicable - Not applicable[123] Item 5. Other Information Not applicable - Not applicable[124] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including agreements related to the Renovaro letter of intent, the DeRoyal asset purchase, and the registered direct offering, as well as required officer certifications - The report includes a list of exhibits filed, such as the Letter of Intent with Renovaro, the Asset Purchase Agreement with DeRoyal, and various officer certifications[125]