Item 1.01. Entry into a Material Definitive Agreement.
Merger Agreement
On June 28, 2018, Precision Therapeutics Inc. (the “Company” or “Precision”) entered
into an Agreement and Plan of Merger (the “Merger Agreement”) with Helomics Acquisition, Inc., a wholly owned subsidiary
of the Company (“Merger Sub”), and Helomics Holding Corporation (“Helomics”). The Merger (as defined below)
will provide the Company with full access to Helomics’ suite of Artificial Intelligence (AI), precision diagnostic and integrated
CRO capabilities, which improve patient care and advance the development of innovative clinical products and technologies for the
treatment of cancers.
The Merger Agreement contemplates a reverse triangular merger with Helomics surviving the merger with Merger
Sub 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.
860,000 shares of the merger consideration are to be held in escrow for 18 months to satisfy indemnification claims. Helomics’
management team is expected to remain in their respective leadership positions at Helomics and to manage the existing TumorGenesis
operations.
Helomics currently has outstanding $7.6 million in promissory notes, and warrants to purchase 23.7 million shares
at an exercise price of $1.00 per share of Helomics common stock held by the investors in the notes. 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. The common stock issuable upon exercise of the Company warrants will be registered in connection with
the Merger).
In addition, Helomics 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.
The Merger Agreement also obligates the Company
to approve, prior to the closing of the Merger, the grant of stock options exercisable for an aggregate of 900,000 shares of common
stock in the Company under the Company’s existing equity plan to the employees and consultants of Helomics designated by
Helomics, according to the allocation determined by Helomics in good faith consultation with the Company.
Completion of the Merger is also subject to
(i) customary closing conditions including the approval of the Merger by the stockholders of both companies, (ii) certain materiality-based
exceptions, (iii) the accuracy of the representations and warranties made by, and the compliance or performance of the obligations
of, each of the Company and Helomics set forth in the Merger Agreement, (iv) satisfactory results of the Company’s due diligence
of Helomics, and (v) satisfactory results of Helomics’ due diligence of the Company.
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.
The Merger Agreement is attached to this report
as Exhibit 2.1 and incorporated herein by reference. The foregoing description of the Merger Agreement and the transactions contemplated
and effected thereby is not complete and is qualified in its entirety by the contents of the actual Merger Agreement.
Additional Information and Where to Find It
This communication does not constitute
an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. This communication
may be deemed to be solicitation material in respect of the proposed transaction between Precision and Helomics. In connection
with the proposed transaction, Precision intends to file a registration statement on Form S-4, containing a proxy statement/prospectus
(the “S-4”) with the Securities and Exchange Commission (“SEC”). This communication is not a substitute
for the registration statement, definitive proxy statement/prospectus or any other documents that Precision may file with the
SEC or that Precision or Helomics may send to their respective securityholders in connection with the proposed transaction.
SECURITYHOLDERS OF HELOMICS ARE URGED
TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE PROXY STATEMENT/PROSPECTUS, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTION.
Investors and security holders will be able to obtain copies
of the S-4, including the proxy statement/prospectus, and other documents filed with the SEC (when available) free of charge at
the SEC’s website, http://www.sec.gov after they are filed. Copies of documents filed with the SEC by Precision
will be made available free of charge on Precision’s website at
www.precisiontherapeutics.com
.