NOTE

– STOCKHOLDERS’ EQUITY, STOCK OPTIONS AND WARRANTS

2018

Firm Commitment Public Offering

January 2018,

the Company completed a firm commitment underwritten public offering of

2,900,000

Units at an offering price of

$0.95

per Unit, with each Unit consisting of

one

share of the Company’s common stock and

0.3

of a Series E Warrant, with each whole Series E Warrant purchasing

one

share of common stock at an exercise price of

$1.00

per whole share. The shares of Common Stock and Series E Warrants were immediately separable and were issued separately. Gross proceeds were approximately

$2,755,000,

before deducting expenses. The Company granted the underwriter a

-day option to purchase an additional (i) up to

290,000

additional shares of Common Stock at the public offering price per Unit less the price of the Series E Warrant included in the Units and less the underwriting discount and/or (ii) additional Series E Warrants to purchase up to

87,000

additional shares of common stock at a purchase price of

$0.001

per Series E Warrant to cover over-allotments, if any. On

February 21, 2018,

the underwriter exercised on

215,247

shares of common stock, par value

$0.01,

$0.9497

per share as described in the Underwriting Agreement. The Company received net proceeds of

$188,066

after deductions of

$16,354

representing the underwriter’s discount of

of the purchase price of the shares.

Share Exchange Agreement With Helomics

January 11, 2018,

the Company entered into a share exchange agreement with Helomics Holding Corporation (“Helomics”). Pursuant to the share exchange agreement, Helomics issued

2,500,000

shares of its Series A Preferred Stock in exchange for

1,100,000

shares of common stock. Under the share exchange agreement, in

March 2018

the Company converted

$500,000

in secured notes into another

of Helomics’ outstanding shares, which resulted in the Company owning

25%

of Helomics outstanding stock. The secured notes are related to the Company’s previous loans of

$500,000

to Helomics. The

1,100,000

shares are being held in escrow by Corporate Stock Transfer, Inc. as escrow agent. While the Precision Therapeutic shares are held in escrow, they will be voted as directed by the Company’s board of directors and management. The Precision Therapeutic shares will be released to Helomics following a determination that Helomics’ revenues in any

-month period have been equal or greater than

$8,000,000.

The Helomics Preferred Stock issued to the Company is convertible into an aggregate of

20%

of the outstanding capital stock of Helomics. In addition, the terms of the Helomics Preferred Stock include certain protective provisions that require consent of the Company before Helomics

may

take certain actions, including issuing preferred stock senior to the Helomics Preferred Stock or entering into fundamental corporate transactions. The Company also has certain anti-dilution protections and the right to receive dividends.

Merger Agreement with Helomics

June 28, 2018,

the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Helomics and certain other entities. The Merger Agreement contemplates a reverse triangular merger with Helomics surviving the merger and becoming a wholly-owned operating subsidiary of the Company (the “Merger”). At the time of the Merger, all outstanding shares of Helomics stock

not

already held by the Company will be converted into the right to receive a proportionate share of

7.5

million shares of newly issued common stock in the Company (“Merger Shares”), in addition to the

1.1

million shares of the Company’s common stock already issued to Helomics for the Company’s initial

20%

ownership in Helomics. Additionally,

860,000

shares of the merger consideration are to be held in escrow for

months to satisfy indemnification claims. Helomics currently has outstanding

$7.6

million in promissory notes and warrants to purchase

18.7

million shares at an exercise price of

$1.00

per share of Helomics common stock held by the investors in the promissory notes. As a result of the Merger, the holders of said promissory notes and warrants would be entitled to additional warrants to purchase up to

5.0

million additional shares of Helomics common stock at an exercise price of

$1.00

per share. Helomics agrees to use commercially reasonable efforts to cause the holder of each such promissory note to enter into an agreement whereby such holder agrees that, effective upon the closing of the Merger, (a) all or a certain portion of the indebtedness evidenced by such promissory note shall be converted into common stock in the Company, (b) all of such holder’s Helomics’ warrants shall be converted into warrants of the Company, and (c) the unconverted portion of said indebtedness shall be converted into a promissory note issued by the Company dated as of the closing of the Merger. The Merger is expressly conditioned on the holders of at least

75%

of the

$7.6

million in outstanding Helomics promissory notes agreeing to such an exchange (and the parties contemplate that each Helomics warrant will be exchanged for a Company warrant at a ratio of

0.6

Precision warrants for each Helomics warrant, with an exercise price of

$1.00

per share. If all holders of such notes agreed to the exchange with respect to the full balance of the notes, such holders would receive an aggregate estimated

23.7

million shares of the Company’s common stock and warrants to purchase an additional

14.2

million shares of the Company’s common stock at

$1.00

per share. In addition, Helomics currently has

995,000

warrants held by other parties at an exercise price of

$0.01

per share of Helomics common stock. It is contemplated that these warrants will be exchanged at the time of the closing of the Merger for warrants to purchase

597,000

shares of Precision common stock at

$0.01

per share.

Completion of the Merger is subject to customary closing conditions including the approval of the Merger by the stockholders of both companies and other conditions. The Merger Agreement likewise contains customary representations, warranties and covenants, including covenants obligating each of the Company and Helomics to continue to conduct their respective businesses in the ordinary course, and to provide reasonable access to each other’s information. Finally, the Merger Agreement contains certain termination rights in favor of each of the Company and Helomics.

Increases in Authorized Shares

At a special meeting of the stockholders on

January 29, 2017,

the stockholders approved a proposal to increase the number of authorized shares of common stock from

8,000,000

shares to

24,000,000

shares of common stock under the Company’s certificate of incorporation.

At the annual meeting on

December 28, 2017,

the stockholders approved a proposal to increase the number of authorized shares of common stock from

24,000,000

50,000,000

shares of common stock,

$0.01

par value. The amendment to the certificate of incorporation to affect this increase was filed on

January 2, 2018.

Equity Incentive Plan

The Company has an equity incentive plan, which allows issuance of incentive and non-qualified stock options to employees, directors and consultants of the Company, where permitted under the plan. The exercise price for each stock option is determined by the Board of Directors. Vesting requirements are determined by the Board of Directors when granted and currently range from immediate to

three

years. Options under this plan have terms ranging from

three

ten

years.

Accounting for share-based payment

The Company uses the Black-Scholes option valuation model which requires the input of significant assumptions including an estimate of the average period of time employees will retain vested stock options before exercising them, the estimated volatility of the Company's common stock price over the expected term, the expected dividend rate, the risk-free interest rate, and forfeiture taken at occurrence. Changes in the assumptions can materially affect the estimate of fair value of stock-based compensation and, consequently, the related expense recognized. The assumptions the Company uses in calculating the fair value of stock-based payment awards represent the Company's best estimates, which involve inherent uncertainties and the application of management's judgment. As a result, if factors change and the Company uses different assumptions, the Company's equity-based compensation expense could be materially different in the future.

Since the Company's common stock has

significant public trading history, and the Company has experienced

significant option exercises in its history, the Company is required to take an alternative approach to estimating future volatility and estimated life and the future results could vary significantly from the Company's estimates. The Company compiled historical volatilities over a period of

years of

small-cap medical companies traded on major exchanges and

mid-range medical companies on the OTC Bulletin Board and combined the results using a weighted average approach. In the case of ordinary options to employees the Company determined the expected life to be the midpoint between the vesting term and the legal term. In the case of options or warrants granted to non-employees, the Company estimated the life to be the legal term unless there was a compelling reason to make it shorter.

When an option or warrant is granted in place of cash compensation for services, the Company deems the value of the service rendered to be the value of the option or warrant. In most cases, however, an option or warrant is granted in addition to other forms of compensation and its separate value is difficult to determine without utilizing an option pricing model. For that reason the Company also uses the Black-Scholes option-pricing model to value options and warrants granted to non-employees, which requires the input of significant assumptions including an estimate of the average period the investors or consultants will retain vested stock options and warrants before exercising them, the estimated volatility of the Company's common stock price over the expected term, the number of options and warrants that will ultimately be forfeited before completing vesting requirements, the expected dividend rate and the risk-free interest rate. Changes in the assumptions can materially affect the estimate of fair value of stock-based consulting and/or compensation and, consequently, the related expense recognized.

Since the Company has limited trading history in its stock and

first

-hand experience with how its investors and consultants have acted in similar circumstances, the assumptions the Company uses in calculating the fair value of stock-based payment awards represent its best estimates, which involve inherent uncertainties and the application of management's judgment. As a result, if factors change and the Company uses different assumptions, the Company's equity-based consulting and interest expense could be materially different in the future.

Valuation and accounting for options and warrants

The Company determines the grant date fair value of options and warrants using a Black-Scholes option valuation model based upon assumptions regarding risk-free interest rate, expected dividend rate, volatility and estimated term.

January 15, 2018,

the Company issued inducement stock options in accordance with NASDAQ listing rule for

50,000

shares of common stock, par value

$0.01

$0.97

per share to the Company’s newly hired International Vice President of Sales. The options will vest in

four

equal increments: on the first, second,

third

and

fourth

quarters of the hiring date anniversary.

March 12, 2018,

the Company issued inducement stock options in accordance with NASDAQ rule for

111,112

shares of common stock, par value

$0.01

$1.35

per share to the Company’s newly hired Vice President of Sales and Marketing. The options will vest in

four

equal increments: on the first, second,

third

and

fourth

quarters of the hiring date anniversary.

For grants of stock option and warrants in

2018

the Company used

2.33%

3.00%

risk free interest rate,

dividend rate,

59%

66%

volatility and estimated terms of

years. Value computed using these assumptions ranged from

$0.4816

$1.0044

per share.

The following summarizes transactions for stock options and warrants for the periods indicated:

	Stock Options					Warrants
	Number of Shares			Average Exercise Price		Number of Shares			Average Exercise Price
Outstanding at December 31, 2016		165,643		$	11.22		871,101		$	52.22

Issued		2,612,070			1.45		1,082,946			1.49
Expired		(12,730	)		10.39		(2,790	)		281.46
Exercised		-			-		-			-

Outstanding at December 31, 2017		2,764,983		$	2.00		1,951,257		$	23.74

Issued		482,402			1.11		957,000			1.00
Expired		(127,130	)		2.22		(10,706	)		199.55
Exercised		-			-		(341,169	)		1.00

Outstanding at June 30, 2018		3,120,255		$	1.85		2,556,382		$	5.97

June 30, 2018,

2,154,442

stock options are fully vested and currently exercisable with a weighted average exercise price of

$2.05

and a weighted average remaining term of

9.40

years. There are

2,556,382

warrants that are fully vested and exercisable. Stock-based compensation recognized for the

six

months ended

June 2018

and

June 2017

was

$460,368

and $(

18,276

), respectively. The Company has

$997,772

of unrecognized compensation expense related to non-vested stock options that are expected to be recognized over the next

months.

The following summarizes the status of options and warrants outstanding at

June 30, 2018:

Range of Prices		Shares		Weighted Remaining Life
Options
$	0.91		10,000		9.80
$	0.965		3,000		9.88
$	0.97		191,753		9.52
$	1.01		124,358		9.51
$	1.10		22,730		9.76
$	1.13		143,807		10.00
$	1.35		111,112		9.71
$	1.454		17,200		9.26
$	1.47		2,373,226		8.99
$	2.10		14,286		8.76
$	2.25		293		8.16
$	2.42		20,640		8.14
$	2.80		57,145		8.51
$	3.75		3,998		8.01
$	4.125		3,636		8.26
$	4.1975		7,147		8.22
$	4.25		3,529		7.76
$	5.125		3,902		8.19
$	65.75		190		7.32
$	73.50		1,157		7.51
$	77.50		2,323		7.01
$	80.25		187		7.26
$	86.25		232		6.76
$	131.25		81		4.19
$	148.125		928		4.72
$	150.00		1,760		4.13
$	162.50		123		6.51
$	206.25		121		6.26
$	248.4375		121		5.04
$	262.50		130		5.04
$	281.25		529		4.55
$	318.75		3		4.86
$	346.875		72		5.76
$	431.25		306		5.69
$	506.25		188		5.51
$	596.25		42		5.25

			3,120,255

Warrants
$	1.00		1,372,828		4.36
$	1.07		697,946		4.35
$	2.25		385,000		3.57
$	123.75		94,084		2.17
$	243.75		2,529		1.10
$	309.375		2,850		1.11
$	309.50		222		1.36
$	506.25		59		0.63
$	609.375		862		0.60
			2,556,382

At the annual meeting on

December 28, 2017,

the stockholders approved an amendment to the Company’s

2012

Plan to (i) increase the reserve of shares of common stock authorized for issuance thereunder to

5,000,000,

(ii) increase certain threshold limits for grants, and (iii) to re-approve the performance goals thereunder. As described in the Company’s definitive proxy statement filed with the SEC on

December 4, 2017,

amendments to the

2012

Plan were considered at the

2016

annual meeting on

July 28, 2016

but were

not

approved by the required vote. For options to purchase approximately

2.5

million shares granted after the

2016

annual meeting, the grantees agreed

not

to exercise the options prior to further stockholder approval of an increase in the reserve under the

2012

Plan. As a result of the stockholder approval of the amendments at the

2017

annual meeting, these restrictions on exercise were removed on

December 28, 2017.

Due to the removal of this restriction on exercise, the Company recognized a non-cash charge for compensation expense of approximately

$1.9

million in the

fourth

quarter of

2017.

Stock Options and Warrants Granted by the Company

The following table is the listing of stock options and warrants as of

June 30, 2018

by year of grant:

Stock Options:
Year	Shares		Price
2011		173		$281.25
2012		1,841	131.25	–	150.00
2013		1,553	148.13	–	596.25
2014		836	162.50	–	431.25
2015		4,088	65.75	–	86.25
2016		100,292	2.25	–	5.13
2017		2,529,070	1.01	–	2.10
2018		482,402	0.91	–	1.35
Total		3,120,255	$0.91	–	$596.25

Warrants:
Year	Shares		Price
2014		6,455	$243.75	–	$609.38
2015		94,151	0.00	–	243.75
2016		504,666		1.00
2017		1,082,946	1.07	–	2.25
2018		868,164		1.00
Total		2,556,382	$0.00	–	$609.38