NOTE

– STOCKHOLDERS’ EQUITY, STOCK OPTIONS AND WARRANTS

Series D Preferred Shares

The Company issued

3.5

million shares of new Series D preferred stock to Helomics as part of the acquisition. Each share of Series D preferred stock is subject to automatic conversion, whereby each such share converts automatically on a

1:1

basis into a share of the Company’s common stock upon the earlier of (i) the consummation of any fundamental transaction (e.g., a consolidation or merger, the sale or lease of all or substantially all of the assets of Predictive or the purchase, tender or exchange offer of more than

50%

of the outstanding shares of voting stock of Predictive) or (ii) the

one

-year anniversary of the issuance date, which will be

April 4, 2020.

Series E Convertible Preferred Stock

June 2019,

the Company entered into a securities purchase agreement with investors for shares of Series E Convertible Preferred Stock for an aggregate purchase price of

$843,000

in a private placement. The Company amended its Certificate of Incorporation to authorize the issuance of

350

preferred shares and establishes the rights and preferences of the Preferred Shares. The Series E Convertible Preferred Stock included a contingent beneficial conversion amount of

$107,935,

representing the intrinsic value of the shares at the time of issuance. The Company determined the Series E Convertible Preferred Stock should be classified as permanent equity and at the Company is accreting the beneficial conversion feature amount to the earliest redemption date of

six

months after the Initial Closing of the Series E Convertible Preferred Stock. As of

June 30, 2019,

all shares of the Series E Convertible Preferred Stock issued remain outstanding.

Each Preferred Share Holder shall have the right at the Company’s option to be converted into

0.056857%

of the issued and outstanding shares of common stock immediately prior to conversion for each share of Series E Convertible Preferred Stock beginning

six

months after issuance. On the date that is

months after the Initial Closing Date, the Company has the option to convert the Preferred Shares into common stock upon the same terms and limitations as the above optional conversion.

Net Loss Attributable to common shareholders

The net loss attributable to common shareholders for the

six

and

three

months ended

June 30, 2019,

reflects increases for net deemed dividends to Series E Convertible Preferred Shareholders provided in connection with various closings totaling

$843,000

of the private placement of Series E Convertible Preferred Stock in

June

2019

$20,398,

representing the accretion of the beneficial conversion feature amount. The Series E Convertible Preferred Stock is

not

currently redeemable due to the contingency has

not

been met as of

June 30, 2019

but is probable the preferred stock will be redeemable in the future. The earliest potential redemption based on solely a passage of time is

December 12, 2019

and, therefore, the carrying amount of the Series E Convertible Preferred Stock shall be accreted from the commitment date to the redemption price as a deemed dividend. Since the Company does

not

have retained earnings, the amortization of the Series E Convertible Preferred Stock discount was recorded as a deemed dividend through additional paid-in capital and net loss attributable to common shareholders in calculating basic and diluted loss per common share (see Note

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.

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.

For grants of stock option and warrants issued during the quarter ended

June 30, 2019,

the Company used

1.93%

2.55%

risk free interest rate,

dividend rate,

78.6%

volatility and estimated terms of

years. Value computed using these assumptions ranged from

$0.3044

$.6060

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, 2017		2,764,983		$	2.00		1,951,257		$	23.74

Issued		1,098,858			1.01		2,336,154			1.07
Expired		(194,564	)		2.00		(10,706	)		199.55
Exercised		-			-		(650,062	)		1.00

Outstanding at December 31, 2018		3,669,277		$	1.70		3,626,643		$	4.17

Issued		3,731,868			0.72		17,212,545			0.95
Expired		(101,397	)		2.00		(919	)		603.89
Exercised		-			-		(578,560	)		0.01

Outstanding at June 30, 2019		7,299,748		$	1.20		20,259,709		$	1.67

Stock-based compensation recognized for the

three

and

six

months ended

June 30, 2019

was

$1,380,620

and

$1,644,220,

respectively, and for the

three

and

six

months ended

June 30, 2018

was

$233,981

and

$460,368,

respectively. The Company has

$723,870

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

months.

April 4, 2019,

the Company issued

1,908,500

stock options for common stock, par value

$0.01,

to current employees and directors from the Skyline, Skyline Europe and corporate divisions. Additionally, on

April 4, 2019,

the Company issued

1,050,004

stock options for common stock, par value

$0.01,

to new employees as a result of the Helomics acquisition.