Workflow
Predictive Oncology (POAI) - 2024 Q4 - Annual Report
POAIPredictive Oncology (POAI)2025-03-31 20:00

Drug Discovery and Development - The company operates a proprietary biobank of over 150,000 tumor samples to enhance drug discovery and increase the probability of drug compound success [14]. - The PEDAL platform, an AI-driven solution, aims to provide high-confidence drug-response predictions and is designed to improve clinical success rates in drug development [24][42]. - The company’s 3D tumor-specific models are utilized for oncology drug discovery, providing drug response predictions with high correlation to clinical outcomes [29]. - The AI-driven models address a key unmet need in the pharmaceutical and biotech industries for actionable insights into cancer treatment [27]. - The company aims to leverage its unique historical database to enhance drug discovery and improve patient outcomes through its proprietary solutions [25][28]. - The global market for AI in drug development is expected to grow due to increasing demand for efficient and accurate drug discovery processes [41]. - The company has a competitive advantage due to access to a unique biobank with tumor drug responses and genomics data, which enhances drug response prediction capabilities [48]. - It is estimated that 90-95% of oncology drug compounds fail between the first human dose and commercial launch, highlighting the challenges in drug discovery [47]. - The company holds exclusive worldwide licenses for its CORE computational drug discovery platform, protected by multiple patents [56]. - The 3D modeling technology replicates the human tumor microenvironment, providing high correlation with clinical responses and enhancing drug testing accuracy [57]. Financial Performance - Revenue for the year ended December 31, 2024, was 1,623,817,aslightdecreaseof1,623,817, a slight decrease of 3,880 compared to 1,627,697in2023[192].−Thecompanyincurrednetlossesof1,627,697 in 2023 [192]. - The company incurred net losses of 12,664,388 and 13,983,967fortheyearsendedDecember31,2024,and2023,respectively[188].−AsofDecember31,2024,thecompanyhadanaccumulateddeficitof13,983,967 for the years ended December 31, 2024, and 2023, respectively [188]. - As of December 31, 2024, the company had an accumulated deficit of 180,426,271, up from 167,761,883asofDecember31,2023[188].−TheEagansegmentcontributed95167,761,883 as of December 31, 2023 [188]. - The Eagan segment contributed 95% and 70% of the company's revenues from continuing operations for the years ended December 31, 2024, and 2023, respectively [185]. - Cost of sales increased to 826,137 in 2024 from 609,212in2023,resultinginagrossprofitmargindeclineto49609,212 in 2023, resulting in a gross profit margin decline to 49% from 64% [193]. - General and administrative expenses decreased by 961,025 to 7,419,892in2024,primarilyduetoloweremployee−relatedexpensesandlegalfees[194].−Operationsexpensesdecreasedby7,419,892 in 2024, primarily due to lower employee-related expenses and legal fees [194]. - Operations expenses decreased by 417,120 to 2,851,045in2024,mainlyduetoreducedemployee−relatedcostsandlowerresearchanddevelopmentexpenses[195].−Salesandmarketingexpensesdecreasedby2,851,045 in 2024, mainly due to reduced employee-related costs and lower research and development expenses [195]. - Sales and marketing expenses decreased by 20,926 to 1,466,213in2024,attributedtoreducedstaff−relatedexpensesandchangesincommissionstructure[196].−Otherincomedecreasedto1,466,213 in 2024, attributed to reduced staff-related expenses and changes in commission structure [196]. - Other income decreased to 89,367 in 2024 from 152,685in2023,primarilyduetolowercashbalancesearninginterest[197].−Netcashusedinoperatingactivitieswas152,685 in 2023, primarily due to lower cash balances earning interest [197]. - Net cash used in operating activities was 10,974,568 in 2024, a decrease from 11,784,070in2023,duetolowercashoperatinglosses[201].−Cashandcashequivalentsdecreasedby11,784,070 in 2023, due to lower cash operating losses [201]. - Cash and cash equivalents decreased by 7,994,732 to 734,673asofDecember31,2024[200].−Thecompanyincurredanaccumulateddeficitof734,673 as of December 31, 2024 [200]. - The company incurred an accumulated deficit of 180,426,271 as of December 31, 2024, raising concerns about its ability to continue as a going concern [205]. Strategic Initiatives and Transactions - A strategic cost savings initiative was implemented, resulting in the discontinuation of the Birmingham laboratory segment, which was reported as discontinued operations in Q3 2024 [16]. - The company entered into a binding letter of intent with Renovaro, Inc. for a stock exchange transaction, with a minimum fundraising requirement of 15millionbyRenovaro[17][18].−ThecompanydivesteditsEagansegment,includingtheSTREAMWAY®System,asofMarch14,2025,whichwasinvolvedinautomatedmedicalfluidwastemanagement[19][38].−ThedivestitureoftheSTREAMWAYproductlineresultedinasignificantdecreaseinrevenue,contributing9515 million by Renovaro [17][18]. - The company divested its Eagan segment, including the STREAMWAY® System, as of March 14, 2025, which was involved in automated medical fluid waste management [19][38]. - The divestiture of the STREAMWAY product line resulted in a significant decrease in revenue, contributing 95% and 70% of revenues from continuing operations for the years ended December 31, 2024 and 2023, respectively [79]. - The proposed acquisition by Renovaro is subject to satisfactory due diligence and further negotiation, with no assurance of completion [70]. - The company raised 3.58 million in net proceeds through an at-the-market offering in May 2024 and 1.0millioninJuly2024throughcashexercisesofcertainoutstandingwarrants[78].−OnJanuary1,2025,thecompanyenteredintoabindingletterofintentforPredictiveOncologytobeacquiredbyRenovaroinexchangeforpreferredstock[180].−Thecompanyraisedapproximately1.0 million in July 2024 through cash exercises of certain outstanding warrants [78]. - On January 1, 2025, the company entered into a binding letter of intent for Predictive Oncology to be acquired by Renovaro in exchange for preferred stock [180]. - The company raised approximately 545,004 from a registered direct offering of 363,336 shares at a price of 1.50pershareonFebruary19,2025[182].RegulatoryandComplianceRisks−Thecompanyissubjecttoextensiveandfrequentlychangingregulations,whichcouldimpactitsoperationsandfinancialperformance[60].−TheFDAModernizationAct2.0isexpectedtoincreasetheuseofnon−animaltestingmethods,whichmayleadtomarketgrowthduetomoreefficientandpredictivemodels[44].−RegulatoryscrutinyfromtheFDAandotherauthoritiesisintense,withpotentialconsequencesfornon−complianceincludingfinesandoperationalrestrictions[113].−ProposedchangestoFDAregulationsonLaboratoryDevelopedTests(LDTs)couldresultinsubstantialcostsanddelaysforthecompany[115].−Compliancewithnumerousfederalandstateregulationsiscostlyandtime−consuming,withrisksofsignificantpenaltiesforviolations[119].−Thecompanyissubjecttostrictlaboratorylicensingrequirements,andfailuretocomplycoulddisruptoperationsandadverselyaffectfinancialperformance[118].−Liabilityforhazardousmaterialsusedinoperationscouldleadtosignificantdamagesandremediationcosts,impactingfinancialstability[121].−Thecompanyissubjecttoevolvinghealthcareregulations,whichcouldadverselyaffectitsfinancialconditionandoperations[123].OperationalChallenges−Thecompanyreliesonsolesuppliersforcertainmaterials,whichposesariskofinterruptionsinmoleculardiagnostictestprocessingifthesesuppliersfail[52].−Thecompanyhaslimitedoperatinghistoryindrugdiscoveryanddevelopment,makingitdifficulttoevaluateperformanceandfutureprospects[86].−Thecompanyhascommittedsignificantcapitaltodevelopingdrugdiscoverysolutionsandmayneedtoraiseadditionalcapitaltocontinuetheseinvestments[87].−Scalingoperationsformoleculardiagnostictestsmayfacechallenges,potentiallyleadingtosupplyinterruptionsandlimitingrevenuegrowth[93].−Difficultiesinmeetingmarketdemandorqualitystandardscouldharmthecompany′sreputationandfuturebusinessprospects[95].−Thecompanyfacesrisksrelatedtoemployeeretentionandpotentialdisruptionstobusinessrelationshipsduringtheacquisitionprocess[71].−Thecompanyisdependentonkeyexecutiveofficers,andlosingthemcouldimpedebusinessplansandgrowthstrategies[96].IntellectualPropertyandCybersecurity−Intellectualpropertyrightsarecrucialforthecompany′soperations,andfailuretoprotecttheserightscouldadverselyaffectcompetitivepositioning[99].−Changesinpatentlawandpotentialpatenttermlimitationscouldimpactthecompany′sabilitytoenforcepatentrightsandreducerevenuefromproducts[105].−TheimplementationoftheAIAhasincreaseduncertaintiesandcostsrelatedtopatentapplicationsandenforcement,affectingbothexistingandfuturepatents[108].−ChangesinU.S.patentlawscouldweakentheabilitytoobtainandenforcepatents,withpotentialadverseeffectsonbusinessoperations[109].−Thecompanymayfaceclaimsregardingthewrongfuluseofconfidentialinformation,whichcouldleadtosignificantlegalexpensesanddistractmanagement[110].−Enforcementofintellectualpropertyrightsmaybechallenginginforeignjurisdictions,particularlyindevelopingcountries,impactingtheabilitytostoppatentinfringements[111].−TheintroductionoftheUnifiedPatentCourtinEuropecouldleadtovulnerabilitiesinpatentenforcement,withpotentialforwidespreadrevocationchallenges[112].−Cybersecurityrisksareacriticalconcern,withmeasuresinplacetoprotectsensitivedataandrespondtoincidents,althoughbreachescouldstilldisruptoperationsandharmreputation[150][155].−Thecompany′scybersecurityprogramincludesgovernance,technicalsafeguards,employeeeducation,andthird−partyriskmanagementtomitigatethreats[156][157].−TheSeniorDirectorofITandCybersecurityleadseffortstomonitorandrespondtocybersecuritythreats,ensuringcompliancewithsecuritystandardsandeffectiveincidentmanagement[160].StockandMarketRisks−ThecompanyreceivedanoticefromNasdaqonNovember20,2024,indicatingthatitsstockholders′equityof1.50 per share on February 19, 2025 [182]. Regulatory and Compliance Risks - The company is subject to extensive and frequently changing regulations, which could impact its operations and financial performance [60]. - The FDA Modernization Act 2.0 is expected to increase the use of non-animal testing methods, which may lead to market growth due to more efficient and predictive models [44]. - Regulatory scrutiny from the FDA and other authorities is intense, with potential consequences for non-compliance including fines and operational restrictions [113]. - Proposed changes to FDA regulations on Laboratory Developed Tests (LDTs) could result in substantial costs and delays for the company [115]. - Compliance with numerous federal and state regulations is costly and time-consuming, with risks of significant penalties for violations [119]. - The company is subject to strict laboratory licensing requirements, and failure to comply could disrupt operations and adversely affect financial performance [118]. - Liability for hazardous materials used in operations could lead to significant damages and remediation costs, impacting financial stability [121]. - The company is subject to evolving healthcare regulations, which could adversely affect its financial condition and operations [123]. Operational Challenges - The company relies on sole suppliers for certain materials, which poses a risk of interruptions in molecular diagnostic test processing if these suppliers fail [52]. - The company has limited operating history in drug discovery and development, making it difficult to evaluate performance and future prospects [86]. - The company has committed significant capital to developing drug discovery solutions and may need to raise additional capital to continue these investments [87]. - Scaling operations for molecular diagnostic tests may face challenges, potentially leading to supply interruptions and limiting revenue growth [93]. - Difficulties in meeting market demand or quality standards could harm the company's reputation and future business prospects [95]. - The company faces risks related to employee retention and potential disruptions to business relationships during the acquisition process [71]. - The company is dependent on key executive officers, and losing them could impede business plans and growth strategies [96]. Intellectual Property and Cybersecurity - Intellectual property rights are crucial for the company's operations, and failure to protect these rights could adversely affect competitive positioning [99]. - Changes in patent law and potential patent term limitations could impact the company's ability to enforce patent rights and reduce revenue from products [105]. - The implementation of the AIA has increased uncertainties and costs related to patent applications and enforcement, affecting both existing and future patents [108]. - Changes in U.S. patent laws could weaken the ability to obtain and enforce patents, with potential adverse effects on business operations [109]. - The company may face claims regarding the wrongful use of confidential information, which could lead to significant legal expenses and distract management [110]. - Enforcement of intellectual property rights may be challenging in foreign jurisdictions, particularly in developing countries, impacting the ability to stop patent infringements [111]. - The introduction of the Unified Patent Court in Europe could lead to vulnerabilities in patent enforcement, with potential for widespread revocation challenges [112]. - Cybersecurity risks are a critical concern, with measures in place to protect sensitive data and respond to incidents, although breaches could still disrupt operations and harm reputation [150][155]. - The company's cybersecurity program includes governance, technical safeguards, employee education, and third-party risk management to mitigate threats [156][157]. - The Senior Director of IT and Cybersecurity leads efforts to monitor and respond to cybersecurity threats, ensuring compliance with security standards and effective incident management [160]. Stock and Market Risks - The company received a notice from Nasdaq on November 20, 2024, indicating that its stockholders' equity of 1,966,969 was below the required minimum of $2.5 million [131]. - The company submitted a plan to Nasdaq on January 6, 2025, to regain compliance with the Stockholders' Equity Requirement, citing a proposed merger with Renovaro [131]. - The company executed a 20-for-1 reverse stock split on April 23, 2023, which resulted in a significant increase in stock price and regained compliance with Nasdaq's Minimum Bid Price Requirement [129]. - The company has no plans to pay cash dividends in the foreseeable future, intending to retain earnings for business development and expansion [138]. - The company was notified on September 19, 2024, that it did not meet the Minimum Bid Price Requirement, with a deadline to regain compliance by March 18, 2025 [130]. - The company may face additional costs if the exclusive forum provision in its certificate of incorporation is found to be unenforceable [126]. - The company may experience dilution from future equity offerings, which could negatively impact the price of its common stock [135]. - The company has been granted extensions by Nasdaq to regain compliance with listing requirements, contingent upon the completion of its merger with Renovaro [131]. - The board of directors has the authority to issue up to 20 million shares of preferred stock, with 2,300,000 designated as series B convertible preferred stock, of which only 79,246 shares are currently outstanding [139]. - The company's stock price may experience significant volatility, influenced by factors beyond its control, potentially leading to substantial investment losses [140]. - Business disruptions from geopolitical events, pandemics, or natural disasters could negatively impact operations, revenue, and costs, with uncertain financial implications [143].