NOTE

– CONVERTIBLE DEBT AND DERIVATIVE LIABILITY

Effective

September 28, 2018,

the Company issued convertible secured promissory notes to

two

private investors in the original principal amount of an aggregate

$2,297,727

(the “bridge loan”). The Company has loaned

one

-half of the net proceeds to Helomics. The Company and Helomics have granted to each of the investors a security interest in their assets to secure repayment of the bridge loan. The securities purchase agreements with the investors also provided for a

second

investment of an aggregate of

$500,000

by the investors at the consummation of the Merger transaction with Helomics; however, the investors and the Company have agreed that the investors will

not

make the

second

investment. As additional consideration for the investment, the Company issued an aggregate

650,000

shares of its common stock (the “Inducement Shares”) to the investors or their affiliates plus warrants to acquire up to an aggregate

1,071,776

shares of the Company’s common stock at an exercise price of

$1.155

per share. Each warrant is exercisable by the investor beginning on the

six

-month anniversary of the effective date through the

fifth

-year anniversary thereof.

The bridge loan accrues interest at a rate of

per annum (with

twelve

months of interest guaranteed). The bridge loan is due on

September 28, 2019.

Upon the earlier to occur of an event of default or the filing of certain registration statements, each investor will have the right at any time thereafter to convert all or any part of its bridge loan into shares of the Company’s common stock at a conversion price which is equal to the lesser of: (i)

$1.00

and (ii)

70%

of the lowest volume-weighted average price (the “VWAP”) of the Company’s common stock during the

-trading day period ending on either the last complete trading day prior to the conversion date, or the conversion date (“Conversion Shares”). The number of Conversion Shares that

may

be issued is subject to an exchange cap such that the sum of (a) the total number of Conversion Shares plus (b) the number of Inducement Shares is limited to an aggregate

2,678,328

shares.

Management has concluded the conversion feature is an embedded derivative that is required to be bifurcated and separately presented as a liability on the balance sheet. The embedded derivative’s value was determined using

70%

of the VWAP for the

trading days preceding the balance sheet date, and assuming conversion on that date as management believed it is probable that the bridge loan will be convertible based on management’s expectation that additional financing will be required. The derivative liability initially recorded in

September 2018

was

$645,008.

The Company has recognized changes in the fair value of the derivative as unrealized gains and losses. The Company recognized an unrealized loss for the corresponding change in fair value of

$19,408

for the

three

-month period ended

March 31, 2019.

The fair value of the derivative liability as of

March 31, 2019

was

$292,153.

The Company accounted for the warrants by deriving the Black-Scholes value ascertained with a discount rate of

2.94%

over

five

years with a

59%

volatility rate and a calculated value per warrant of

.5361

resulting in a fair value of

$574,631.

Management concluded that the warrants and Inducement Shares qualify for equity classification. The proceeds from the bridge loan were allocated between the convertible note, warrants, and inducement shares based on the relative fair value of the individual elements.

Effective

February 7, 2019,

the Company entered into a Forbearance Agreement with each of the bridge loan investors pursuant to which, among other things, the investors agreed to forbear on their rights to accelerate the bridge loan based on an event of default and a claimed event of default. In connection with such forbearance, the Company issued Amended and Restated Senior Secured Promissory Notes that replaced the original agreement and, among other things, increased the aggregate principal amount of its indebtedness to the investors by

$344,659

to a balance of

$2,642,387.

Additionally, the investors received

166,667

inducement shares of the Company’s common stock, par value

$0.01

per share, valued at

$158,350,

increasing common stock and additional paid-in capital.

March 2019,

one

of the bridge loan investors twice converted a portion of the principal balance of the note. The investor converted

$90,000

from the principal balance and received

159,854

shares of the Company’s common stock. Additionally, pursuant to the bridge loan agreement, as a result of the

two

public offerings a portion of the principal balance was reduced by

$93,826.

The value of the embedded derivative from the bridge loan as well as the derivative included in the note payable agreements with the Company’s CEO (See – Note

) were based upon level

inputs – see the Fair Value Caption in Note

The flow table below discloses all changes in value of those derivative liabilities during the

three

-month period ended

March 31, 2019.

Derivative Liability Balance at December 31, 2018				Derivative Instrument Issued				Loss Recognized to Revalue Derivative Instrument at Fair Value				Adjustments to Derivative Liability for Warrants Issued				Derivative Liability Balance at March 31, 2019
$	272,745				69,722				19,408				8,665			$	353,210