NOTE

– HELOMICS ACQUISITION

The Company acquired

25%

of the capital stock of Helomics, in transactions in the

first

quarter of

2018.

April 4, 2019, (

the “Acquisition Date”), the Company completed a forward triangular merger with Helomics Acquisition Inc., a wholly-owned subsidiary of the Company and Helomics, acquiring the remaining

75%

of the capital stock of Helomics.

Helomics’ precision medicine services are designed to use artificial intelligence and a comprehensive disease database to improve the effectiveness of cancer therapy. Helomics’ precision oncology services are based on its D-CHIP diagnostic platform, which combines a database of genomic and drug response profiles from over

149,000

tumors with an artificial intelligence based searchable bioinformatics platform. Once a patient’s tumor is excised and analyzed, the D-CHIP platform compares the tumor profile with its database, and using its extensive drug response data, provides a specific therapeutic roadmap.

The acquisition of Helomics was accounted for as a business combination using the acquisition method of accounting. This method requires, among other things, that assets acquired and liabilities assumed be recognized at fair value as of the acquisition date. The fair value for the assets acquired and the liabilities assumed are based on information knowable and determined by management as of the date of this filing. The Company incurred

$656,615

in acquisition costs predominantly in legal and audit expenses.

The fair value of the consideration transferred in the acquisition has

five

components totaling

$26,711,791.

The following table summarizes the acquisition date fair values of assets acquired and liabilities assumed and the consideration transferred:

Value of shares to Helomics shareholders (i)	$	5,612,250
Value of Helomics notes receivable forgiven (ii)		2,210,381
Value of shares to extinguish debt (iii)		6,463,309
Value of warrants issued (iv)		6,261,591
Gain on revaluation of equity method investment (v)		6,164,260
Fair value of the consideration	$	26,711,791

Less assets acquired:
Cash & cash equivalents		248,102
Accounts receivable		207,769
Inventory		17,727
Prepaid expenses		15,321
Fixed assets, net		1,749,080
Intangible assets		3,725,000
Lease right of use assets		780,594

Plus liabilities assumed:
Accounts payable		2,374,596
Note Payable		303,333
Accrued expenses		363,569
Lease Liability – Net of Long-term Portion		422,126
Lease liability		358,468
Total assets acquired and liabilities assumed		(2,921,501	)

Goodwill	$	23,790,290

(i) Upon the acquisition, all outstanding shares of Helomics stock

not

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

4,000,000

shares of common stock and

3,500,000

shares of Series D Convertible Preferred Stock of the Company. The fair value of these shares on the date of issuance was

$5,612,250;

(ii) the Company forgave notes and interest due from Helomics relating to previous cash advances equaling

$2,210,381;

(iii) the Company eliminated debt owed by Helomics to noteholders by issuing

8,637,323

shares of common stock to the noteholders, the value of the shares was

$6,463,309;

(iv) the Company issued

14,245,063

warrants in exchange for warrants to purchase

23,741,772

shares of Helomics common stock to the Helomics noteholders agreeing to extinguish or extend their notes. An additional

597,000

warrants were exchanged for warrants held by other parties; the total consideration of all the exchanged warrants was valued by using the Black Scholes method and equaled

$6,261,591;

and, (v) as the Company’s acquisition of Helomics was a business combination achieved in stages, the initial

25%

purchase of Helomics in

2018

was required to be revalued at current fair value on the Acquisition Date. Immediately prior to the Acquisition Date the recorded value of the equity method investment was zero. On the Acquisition Date the Company determined the fair value of the previous equity method investment was

$6,164,260

and recorded a gain for the same amount in order to recognize the investment at its fair value. The gain was calculated as the difference between the implied fair value of the Company’s previous equity method investment in Helomics and the recorded book value immediately prior to the acquisition date. The implied fair value was calculated based on the purchase consideration exchanged to acquire the remaining

75%

of Helomics and factoring a

10%

discount for lack of control.

The fair values of all common and preferred shares issued as consideration in the transaction was determined using the closing bid price of the Company’s common stock on

April 4, 2019.

The Company did

not

legally assume the debt extinguished on the day of the acquisition, however

three

noteholders did

not

exchange their notes for shares, and the holders agreed to extend such notes, representing

$303,333

in principal, to be due

days from the acquisition date. This portion of the debt was assumed by the Company. In order to receive the extension, the Company agreed to issue

583,003

warrants to the noteholders at an exercise price of

$1.00

per share. The warrants were accounted for under the Black Scholes accounting method.

Identifiable Intangible Assets

The Company acquired intangible assets related to trademarks for the acquired Helomics trade name with an estimated fair market value of

$398,000.

The Company expects to employ the Helomics trade name for the foreseeable future. The fair values of the assets were determined by the relief-from-royalty method under the income approach.

The Company acquired intangible assets with a useful life of

three

years and an estimated value of

$445,000

related to customer relationships stemming from stable and predictable cash flow streams associated with customers. Helomics’ customer base includes contract research partnerships with pharmaceutical, diagnostic, biotechnology, and research companies. Helomic’s existing customers are all within its CRO services business line. The customer relationships were valued using the with and without method under the income approach.

The Company acquired intangible assets with a useful life of

years and an estimated value of

$2,882,000

related to developed technology stemming from the D-CHIP diagnostic platform and underlying tumor database. Since the D-CHIP platform and underlying database was identified as the primary asset, this technology was valued using the multi-period excess earnings method under the income approach.

The acquisition costs related to the intangible assets are presented in legal and accounting expenses within general and administrative expenses in the statement of net loss.

Goodwill

The

$23,790,290

goodwill represents the excess of the consideration transferred over the fair values of assets acquired and liabilities assumed and represents the future economic benefits and synergies arising from the transaction.

None

of the goodwill is deductible for income tax purposes. Goodwill was allocated to the

three

Helomics segments.

Financial Results

The financial results of Helomics since the acquisition date have been included in the Company’s unaudited condensed consolidated statements of net loss for the quarter.

Pro Forma

The following pro forma information presents the combined results of operations of Predictive Oncology and Helomics as if the acquisition of Helomics had been completed on

January 1, 2019,

with adjustments to give effect to pro forma events that are directly attributable to the acquisition. The acquisition occurred on

April 4, 2019,

therefore, there is

difference between the pro-forma and amounts reported herein for the

three

-month period ended

September 30, 2019.

	Nine Months Ended September 30, 2019
Revenue	$	1,110,148
Net loss attributable to Predictive	$	7,249,123

The primary adjustments include the deduction of the original depreciation and amortization and the inclusion of the revalued depreciation and amortization for Helomics tangible and intangible assets. The unaudited pro forma results do

not

reflect any operating efficiencies or potential cost savings which

may

result from the consolidation of operations. Accordingly, these unaudited pro forma results are presented for informational purposes only and are

not

necessarily indicative of what the actual results of operations of the combined company would have been if the acquisition had occurred at the beginning of those respective time periods, nor are they indicative of future results of operations.

There are certain portions of purchase accounting, specifically Section

382

for

Tax Loss Carryforwards

, which take place after a company has undergone a shift in ownership, that the Company has

not

completed yet and

may

have a significant impact on the financial statements.