UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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PREDICTIVE ONCOLOGY INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the appropriate
box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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Proposed maximum aggregate value of transaction:
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Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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Filing Party:
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Date Filed:
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PREDICTIVE ONCOLOGY INC.
2915 Commers Drive, Suite 900
Eagan, Minnesota 55121
Telephone: (651) 389-4800
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held on October 23, 2019
Dear Stockholder:
You are cordially invited to attend the
Special Meeting of Stockholders (the “Special Meeting”) of Predictive Oncology Inc. (the “Company”) on
October 23, 2019, at 3:00 PM (Central Time) at the offices of the Company’s counsel, Maslon LLP, 3300 Wells Fargo Center,
90 South Seventh Street, Minneapolis, MN 55402 for the following purposes:
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To approve an amendment of the Company’s certificate of
incorporation to effect a reverse stock split of the outstanding shares of its common stock at a ratio of not less than one-for-two
(1:2) and not more than one-for-fifteen (1:15), with the exact ratio to be set at a whole number within this range as determined
by our Board of Directors; (the “Reverse Split Proposal”);
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To approve, pursuant to Nasdaq Listing Rule 5635, the issuance
of shares of common stock of the Company in excess of applicable share caps upon conversion of the outstanding shares of Series
E Convertible Preferred Stock (“Series E Preferred Stock”) (the “Series E Proposal”);
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To approve, pursuant to Nasdaq Listing Rule 5635, the issuance
of shares of common stock of the Company pursuant to a contemplated equity line of credit arrangement (the “Equity Line Proposal”);
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To approve a proposal to adjourn the Special Meeting, if necessary, to solicit additional proxies for approval of the Reverse Split Proposal, the Series E Proposal and/or the Equity Line Proposal, as applicable, in the event that there are not sufficient votes at the time of the Special Meeting to approve any such proposal.
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These items of business are more fully described
in the proxy statement accompanying this Notice.
For key information to consider before
you vote, please see “QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING” beginning on page 1 of this proxy
statement.
The record date for the Special Meeting
is September 23, 2019. Only stockholders of record at the close of business on that date are entitled to vote at the meeting or
any adjournment thereof, or by proxy.
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By Order of the Board of Directors,
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Sincerely,
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/s/ Carl Schwartz
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Carl Schwartz
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Chief Executive Officer
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Eagan, Minnesota
September 30, 2019
You are cordially invited to attend the meeting in person.
Whether or not you expect to attend the meeting, please vote your shares. You may submit your proxy card or voting instruction
card by completing, signing, dating and mailing your proxy card or voting instruction card in the envelope provided or vote by
facsimile, email or over the Internet as instructed in the proxy statement. Any stockholder attending the meeting may vote in person,
even if you already returned a proxy card or voting instruction card and intend to change your original vote. Please note, however,
that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must obtain
a legal proxy issued in your name from that record holder.
IMPORTANT NOTICE REGARDING THE AVAILABILITY
OF PROXY MATERIALS FOR THE
STOCKHOLDER MEETING TO BE HELD ON OCTOBER 23, 2019:
The Proxy Statement is
available at http://investors.skylinemedical.com
TABLE
OF CONTENTS
QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING
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1
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PROPOSAL 1: APPROVAL OF REVERSE STOCK SPLIT
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PROPOSAL 2: TO APPROVE, PURSUANT TO NASDAQ LISTING RULE 5635, THE ISSUANCE OF
SHARES OF COMMON STOCK OF THE COMPANY IN EXCESS OF APPLICABLE SHARE CAPS UPON CONVERSION OF THE OUTSTANDING SHARES OF SERIES
E PREFERRED
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PROPOSAL 3: APPROVAL, PURSUANT TO NASDAQ LISTING RULE 5635(d), OF THE ISSUANCE OF COMMON
STOCK PURSUANT TO AN EQUITY LINE OF CREDIT ARRANGEMENT
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PROPOSAL 4: APPROVAL OF ADJOURNMENT
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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APPENDIX A: FORM OF CERTIFICATE OF AMENDMENT TO OUR CERTIFICATE OF INCORPORATION
TO EFFECT A REVERSE STOCK SPLIT
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APPENDIX B: CERTIFICATE OF DESIGNATION WITH RESPECT TO SERIES E CONVERTIBLE
PREFERRED STOCK
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PREDICTIVE ONCOLOGY INC.
2915 Commers Drive, Suite 900
Eagan, Minnesota 55121
Telephone: (651) 389-4800
PROXY STATEMENT
FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 23, 2019
QUESTIONS AND ANSWERS ABOUT THESE PROXY
MATERIALS AND VOTING
Why am I receiving these materials?
We have sent you this proxy statement and
the enclosed proxy card because the Board of Directors (the “Board of Directors” or the “Board”) of Predictive
Oncology Inc. (the “Company”) is soliciting your proxy to vote at the Special Meeting of Stockholders (the “Special
Meeting”) to be held at the offices of the company’s counsel, Maslon LLP on October 23, 2019, at 3:00 PM (Central Time),
including any adjournments or postponements of the Special Meeting. You are invited to attend the Special Meeting to vote on the
proposal described in this proxy statement. However, you do not need to attend the meeting to vote your shares. Instead, you may
simply complete, sign and return the enclosed proxy card, or follow the instructions below to submit your proxy by facsimile, email
or on the Internet.
The Company intends to mail this proxy statement
and accompanying proxy card on or about September 30, 2019, to all stockholders of record entitled to vote at the Special Meeting.
Who can vote at the Special Meeting?
Only stockholders of record at the close of business on September 23, 2019, will be entitled to vote at the
Special Meeting. On the record date, there were 31,258,932 shares of common stock of the Company outstanding and entitled to vote.
On the record date, there were 256 shares of Series E Convertible Preferred Stock (“Series E Preferred Stock”) outstanding,
each of which is entitled to 15,625 votes.
Stockholder of Record: Shares Registered
in Your Name
If on September 23, 2019, your shares were
registered directly in your name with the Company’s transfer agent, Corporate Stock Transfer, Inc., then you are a stockholder
of record. As a stockholder of record, you may vote in person at the meeting or vote by proxy. Whether or not you plan to attend
the meeting, we urge you to vote your shares by completing, signing, dating and mailing your proxy card in the envelope provided
or vote by proxy via facsimile, email or on the Internet as instructed below to ensure your vote is counted.
Beneficial Owner: Shares Registered
in the Name of a Broker or Bank
If on September 23, 2019, your shares were
held, not in your name, but rather in an account at a brokerage firm, bank, dealer, or other similar organization, then you are
the beneficial owner of shares held in “street name” and these proxy materials are being forwarded to you by that organization.
The organization holding your account is considered to be the stockholder of record for purposes of voting at the Special Meeting.
As a beneficial owner, you have the right to direct your broker or other agent regarding how to vote the shares in your account.
You are also invited to attend the Special Meeting. However, since you are not the stockholder of record, you may not vote your
shares in person at the meeting unless you request and obtain a valid legal proxy from your broker or other agent.
What am I voting on?
There are four (4) matters scheduled for
a vote:
Proposal 1: To approve an
amendment of the Company’s certificate of incorporation to effect a reverse stock split of the outstanding shares of its
common stock at a ratio of not less than one-for-two (1:2) and not more than one-for-fifteen (1:15), with the exact ratio to be
set at a whole number within this range as determined by our Board of Directors; (the “Reverse Split Proposal”).
Proposal 2: To approve, pursuant
to Nasdaq Listing Rule 5635, the issuance of shares of common stock of the Company in excess of applicable share caps upon conversion
of the outstanding shares of Series E Convertible Preferred Stock (“Series E Preferred Stock”) (the “Series E
Proposal”).
Proposal 3: To approve, pursuant
to Nasdaq Listing Rule 5635, the issuance of shares of common stock of the Company pursuant to a contemplated equity line of credit
arrangement (the “Equity Line Proposal”).
Proposal 4: To approve a proposal
to adjourn the Special Meeting, if necessary, to solicit additional proxies for approval of the Reverse Split Proposal, the Series
E Proposal and/or the Equity Line Proposal, as applicable, in the event that there are not sufficient votes at the time of the
Special Meeting to approve any such proposal.
Why has the Board of Directors recommended that you vote
“FOR” Proposal 1 to effect a reverse stock split of the Company’s common stock?
Stockholder approval to effect a reverse
stock split will give the Board the ability to prevent our stock from being delisted from The Nasdaq Stock Market LLC (“Nasdaq”)
based on the minimum share price requirement. As described in the Proxy Statement, we received a letter from Nasdaq, informing
us that because the closing bid price for our common stock listed on Nasdaq was below $1.00 for 30 consecutive trading days, we
do not comply with the minimum closing bid price requirement for continued listing on Nasdaq. We must regain compliance with the
minimum closing bid price requirement no later than November 11, 2019.
The Board believes it is likely that the
reverse stock split will be necessary to assure compliance with the Minimum Bid Price Requirement. There is no guarantee that the
price of the Company’s common stock will be sufficient to meet the Minimum Bid Price Requirement, even if there are positive
business developments in the near future that could result in an increase in the trading price of our common stock in the next
few months. The Board considers it very important for the Company to maintain its Nasdaq listing. Delisting could adversely affect
the trading market for the common stock. Further, delisting would adversely affect the Company’s ability to access the capital
markets or pursue acquisitions.
For a more detailed discussion of why you
should vote “FOR” Proposal 2, see “PROPOSAL 2: APPROVAL OF REVERSE STOCK SPLIT.”
How do I vote?
For Proposals 1, 2 and 3, you may vote “For”
or “Against” or abstain from voting. The procedures for voting are as follows:
Stockholder of Record: Shares Registered
in Your Name
If you are a stockholder of record, you
may vote in person at the Special Meeting, vote by proxy using the enclosed proxy card, vote by proxy via facsimile or by email.
Whether or not you plan to attend the meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend
the meeting and vote in person even if you have already voted by proxy.
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To vote using the proxy card, simply complete, sign and date the enclosed proxy card and return it promptly in the envelope provided. If you return your signed proxy card to us before the Special Meeting, we will vote your shares as you direct.
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To vote by email, complete, sign and date the enclosed proxy card and scan and email it to
[address]. Your vote must be received by 4:00 PM Eastern Time (3:00 PM Central Time) on October 22, 2019, to be
counted.
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To vote by internet, please follow the instructions on your proxy card.
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To vote by facsimile, complete, sign and date the enclosed proxy card
and fax it to (303) 282-5800. Your vote must be received by 4:00 PM Eastern Time (3:00 PM Central Time) on October 22, 2019,
to be counted.
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To vote in person, come to the Special Meeting, and we will give you a ballot when you arrive. If you would like directions to the offices of the company’s counsel, Maslon LLP, please call (651) 389-4800.
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Beneficial Owner: Shares Registered
in the Name of Broker or Bank
If you are a beneficial owner of shares
registered in the name of your broker, bank, or other agent, you should receive a proxy card and voting instructions with these
proxy materials from that organization rather than from us. Simply complete and mail the proxy card to ensure that your vote is
submitted to your broker or bank. Alternatively, you may vote over the Internet as instructed by your broker or bank. To vote in
person at the Special Meeting, you must obtain a valid legal proxy from your broker, bank, or other agent. Follow the instructions
from your broker or bank included with these proxy materials, or contact your broker or bank to request a proxy form.
How many votes do I have?
For shares of common stock, on each matter
to be voted upon, you have one vote for each share of common stock you own as of September 23, 2019. For shares of Series E Preferred
Stock, you have 15,625 votes for each share.
What if I return a proxy card but do not make specific choices?
If you return a signed and dated proxy card
without marking any voting selections, your shares will be voted “For” Proposals 1, 2, 3 and 4.
Who is paying for this proxy solicitation?
The Company is paying all expenses relating
to this proxy solicitation. Our directors and employees may solicit proxies in person, by telephone, email or by other means of
communication. Directors and employees will not be paid any additional compensation for soliciting proxies. We may also reimburse
brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners.
What does it mean if I receive more than one proxy card?
If you receive more than one proxy card,
your shares are registered in more than one name or are registered in different accounts. Please complete, sign and return each
proxy card to ensure that all of your shares are voted.
Are proxy materials available on the Internet?
This proxy statement is available at http://investors.skylinemedical.com.
Can I change my vote after submitting my proxy?
Yes. You can revoke your proxy at any time
before the final vote at the Special Meeting. If you are the record holder of your shares, you may revoke your proxy in any one
of three ways:
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You may submit another properly completed proxy card with a later date.
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You may send a timely written notice that you are revoking your proxy to our Secretary at 2915 Commers Drive, Suite 900, Eagan, Minnesota 55121.
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You may attend the Special Meeting to vote in person. Attending the meeting will not, by itself, revoke your proxy.
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If your shares are held by your broker or
bank as a nominee or agent, you should follow the instructions provided by your broker or bank.
How are votes counted?
Votes will be counted by the inspector of
election appointed for the meeting, who will separately count for “For” and “Against” votes, abstentions
and broker non-votes. Abstentions will be counted towards the vote total for each proposal, and will have the same effect as “Against”
votes. Broker non-votes, if any, will have the same effect as “Against” votes for Proposals 1 and 2. In the case of
Proposal 3, broker non-votes will have no effect and will not be counted towards the vote total.
What are “broker non-votes”?
Broker non-votes occur when a beneficial
owner of shares held in “street name” does not give instructions to the broker or nominee holding the shares as to
how to vote on matters deemed “non-routine.” Generally, if shares are held in street name, the beneficial owner of
the shares is entitled to give voting instructions to the broker or nominee holding the shares. If the beneficial owner does not
provide voting instructions, the broker or nominee can still vote the shares with respect to matters that are considered to be
“routine,” but not with respect to “non-routine” matters. Proposals 1, 2 and 3 are matters considered routine
under the NYSE rules.
How many votes are needed to approve each proposal?
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To be approved, Proposal 1 (reverse stock split), must receive a “For” vote from the majority of all shares entitled to vote either in person or by proxy – in other words, a “For” vote from a majority of all outstanding shares of common stock (net of treasury shares). If you “Abstain” from voting, it will have the same effect as an “Against” vote. Broker non-votes, if any, will also have the effect of an “Against” vote.
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To be approved, Proposals 2, 3 and 4 must receive a “For” vote from the majority of all shares present and entitled to vote on the matter, either in person or by proxy. If you “Abstain” from voting, it will have the same effect as an “Against” vote. Broker non-votes, if any, will have no effect.
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What is the quorum requirement?
A quorum of stockholders is necessary to hold a valid meeting. A quorum will be present if stockholders
holding at least a majority of the outstanding shares of capital stock entitled to vote are present at the meeting in person or
represented by proxy. On the record date, there were 31,258,932 shares of common stock outstanding and entitled to vote. On the
record date, there were 256 shares of Series E Preferred Stock outstanding and entitled to vote; each such share currently has
15,625 votes, for an aggregate 4,000,000 votes. See Proposal 2 – Terms of Series E Stock. Thus, the holders of shares with
an aggregate 17,629,467 votes must be present in person or represented by proxy at the meeting to have a quorum.
Your shares will be counted towards the
quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other nominee) or if you vote
in person at the meeting. Abstentions and broker non-votes will be counted towards the quorum requirement. If there is no quorum,
the holders of a majority of shares present at the meeting in person or represented by proxy, or the chairman of the meeting, may
adjourn the meeting to another date.
How can I find out the results of the voting at the Special
Meeting?
Preliminary voting results will be announced
at the Special Meeting. Final voting results will be published in a Current Report on Form 8-K, which we will file within four
business days after the meeting.
PROPOSAL 1
APPROVAL OF REVERSE STOCK SPLIT
Our Board of Directors has approved a proposal
to amend our certificate of incorporation to effect a reverse stock split of the Company’s common stock, as described below
(the “Reverse Stock Split”). The Reverse Stock Split amendment proposal permits (but does not require) the Board of
Directors to effect a reverse stock split of the Company’s common stock by a ratio of not less than one-for-two (1:2) and
not more than one-for-fifteen (1:15), as described below. The form of certificate of amendment (the “Amendment”) to
effect the Reverse Stock Split is attached as Appendix A to this proxy statement.
Background and Reasons for the Reverse Stock Split
On November 16, 2018, the Company received
a letter from the Listing Qualifications Department (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”)
informing the Company that because the closing bid price for its common stock listed on Nasdaq was below $1.00 for 30 consecutive
trading days, the Company does not comply with the minimum closing bid price requirement for continued listing on The Nasdaq Capital
Market under Nasdaq Marketplace Rule 5550(a)(2), requiring a minimum bid price of $1.00 per share (the “Minimum Bid Price
Requirement”). The notification had no immediate effect on the listing of the Company’s common stock.
In accordance with Nasdaq’s Marketplace
Rule 5810(c)(3)(A), we had a period of 180 calendar days, or until May 15, 2019, to regain compliance with the Minimum Bid Price
Requirement. However, the bid price of the Company’s common stock did not close at or above $1.00 per share for a minimum
of 10 consecutive business days, and therefore the Company did not regain compliance with the Minimum Bid Price Requirement by
May 15, 2019. On May 16, 2019, Nasdaq notified the Company that while the Company had not regained compliance with the Minimum
Bid Price Requirement, it was eligible for an additional 180-day grace period, or until November 11, 2019, to regain compliance.
Nasdaq’s determination was based on the Company having met the continued listing requirement for market value of publicly
held shares and all other applicable requirements for initial listing on The Nasdaq Capital Market, with the exception of the Minimum
Bid Price Requirement, and on the Company’s written notice to Nasdaq of its intention to cure the deficiency during the second
compliance period, by effecting a reverse stock split, if necessary.
If at any time before November 11, 2019,
the bid price of the Company’s common stock closes at or above $1.00 per share for a minimum of 10 consecutive business days,
Nasdaq will provide written notification that the Company has achieved compliance with the Minimum Bid Price Requirement. If this
does not occur, the Staff will notify the Company that its securities will be delisted. In the event of such notification, the
Company may appeal the Staff’s determination to delist its securities, but there can be no assurance the Staff would grant
the Company’s request for continued listing.
The Board believes it is likely that the
Reverse Stock Split will be necessary to assure compliance with the Minimum Bid Price Requirement. The Board considers it very
important for the Company to maintain its Nasdaq listing. Delisting could adversely affect the trading market for the common stock.
Further, delisting would adversely affect the Company’s ability to access the capital markets or pursue acquisitions.
Other Potential Benefits of Reverse Stock Split
In addition to helping regain compliance
with the Minimum Bid Price Requirement, we believe that the Reverse Stock Split will make our common stock more attractive to a
broader range of institutional and other investors, as we have been advised that the current market price of our common stock may
affect its acceptability to certain institutional investors, professional investors and other members of the investing public.
Many brokerage houses and institutional investors have internal policies and practices that either prohibit them from investing
in low-priced stocks or tend to discourage individual brokers from recommending low-priced stocks to their customers. In addition,
some of those policies and practices may function to make the processing of trades in low-priced stocks economically unattractive
to brokers. Moreover, because brokers’ commissions on low-priced stocks generally represent a higher percentage of the stock
price than commissions on higher-priced stocks, the current average price per share of common stock can result in individual stockholders
paying transaction costs representing a higher percentage of their total share value than would be the case if the share price
were substantially higher. We believe that the Reverse Stock Split will make our common stock a more attractive and cost-effective
investment for many investors, which will enhance the liquidity of the holders of our common stock.
Reducing the number of outstanding shares
of our common stock through the Reverse Stock Split is intended, absent other factors, to increase the per share market price of
our common stock. However, other factors, such as our financial results, market conditions and the market perception of our business
may adversely affect the market price of our common stock. As a result, there can be no assurance that the Reverse Stock Split,
if completed, will result in the intended benefits described above, that the market price of our common stock will increase (proportionately
to the reduction in the number of shares of our common stock after the Reverse Stock Split or otherwise) following the Reverse
Stock Split or that the market price of our common stock will not decrease in the future. Accordingly, the total market capitalization
of our common stock after the Reverse Stock Split could be lower or higher than the total market capitalization before the Reverse
Stock Split.
Reverse Stock Split Proposal
The Reverse Stock Split Proposal permits
(but does not require) the Board of Directors to effect a reverse stock split of the Company’s common stock by a ratio of
not less than one-for-two (1:2) and not more than one-for-fifteen (1:15), with the exact ratio to be set at a whole number within
this range as determined by the Board of Directors in its sole discretion, in any case no later than March 31, 2020. We believe
that enabling the Board of Directors to set the ratio within the stated range will provide us with the flexibility to implement
the Reverse Stock Split in a manner designed to maximize the anticipated benefits for our stockholders. In determining a ratio,
if any, the Board of Directors may consider, among other things, factors such as:
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the continued listing requirements of The Nasdaq Capital Market;
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the historical trading price and trading volume of our common stock;
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the number of shares of our common stock outstanding;
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the then-prevailing trading price and trading volume of our common stock and the anticipated impact of the Reverse Stock Split on the trading market for our common stock;
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the anticipated impact of a particular ratio on our ability to reduce administrative and transactional costs; and
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prevailing general market and economic conditions.
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The Board of Directors reserves the right
to elect to abandon the Reverse Stock Split, even after stockholder approval, including any or all proposed reverse stock split
ratios, if it determines, in its sole discretion, that the Reverse Stock Split is no longer in our best interests and the best
interests of our stockholders.
Depending on the ratio for the Reverse Stock
Split determined by the Board of Directors, no less than two and no more than fifteen shares of existing common stock, as determined
by the Board of Directors, will be combined into one share of common stock. The Amendment, if any, will include only the reverse
stock split ratio determined by the Board of Directors to be in the best interests of our stockholders and all of the other proposed
amendments at different ratios will be abandoned.
If the Reverse Stock Split is effected,
the authorized common stock will not be changed from 100 million shares, even though the Reverse Stock Split will reduce the number
of outstanding shares of common stock, and will likewise cause a reduction in the number of shares of common stock reserved for
issuance under outstanding stock options, warrants and convertible securities. Therefore, the Reverse Stock Split will effectively
increase the amount of shares of common stock available for issuance. Currently, the Company has 100 million authorized shares
of common stock, 31,258,932 shares of common stock outstanding, and a total of 35,905,051 shares of common stock reserved for issuance
under outstanding stock options, warrants and preferred stock (including the Assumed Series E Conversion Amount (as defined below)).
If the Board of Directors elected to implement the Reverse Stock Split at a ratio of 1:10, there would be 100 million authorized
shares of common stock 3,125,893 shares of common stock outstanding, and a total of 3,590,505 shares of common stock reserved for
issuance under outstanding stock options, warrants and preferred stock (including the Assumed Series E Conversion Amount). The
“Assumed Series E Conversion Amount” is 4,549,860 shares of common stock, based on (i) the ratio of 0.056857% of the
then-outstanding common stock being issuable upon the conversion of each share of Series E Preferred Stock; (ii) 256 shares of
Series E Preferred Stock outstanding as of September 5, 2019; and (iii) 31,258,932 shares of common stock outstanding as of August
13, 2019.
Procedure for Implementing the Reverse Stock Split
If stockholder approval is obtained to effect
the Reverse Stock Split, the Board will have the authority to implement the Reverse Stock Split on or before March 31, 2020. However,
the Board of Directors reserves the right to elect not to proceed with the Reverse Stock Split if, at any time prior to filing
the amendment to the Certificate of Incorporation, the Board of Directors, in its sole discretion, determines that it is no longer
in our best interests and the best interests of our stockholders to proceed with the Reverse Stock Split. The Reverse Stock Split
will become effective upon the filing of a certificate of amendment to the Certificate of Incorporation with the Secretary of State
of the State of Delaware. The exact timing of the filing of the certificate of amendment that will effect the Reverse Stock Split
will be determined by the Board of Directors based on its evaluation as to when such action will be the most advantageous to us
and our stockholders.
Effect of the Reverse Stock Split on Holders of Outstanding
Common Stock
Depending on the ratio for the Reverse Stock Split determined by the Board of Directors, a minimum of two and a
maximum of fifteen shares of existing common stock will be combined into one new share of common stock. Based on 31,258,932 shares
of common stock issued and outstanding as of September 23, 2019, immediately following the Reverse Stock Split, the Company would
have approximately 15,629,466 shares of common stock issued and outstanding (without giving effect to rounding for fractional shares)
if the ratio for the Reverse Stock Split is one-for-two (1:2), and approximately 2,083,929 shares of common stock issued and outstanding
(without giving effect to rounding for fractional shares) if the ratio for the Reverse Stock Split is one-for-fifteen (1:15). Any
other ratio selected within such range would result in a number of shares of common stock issued and outstanding (without giving
effect to rounding for fractional shares) following the transaction between approximately 15,629,466 and 2,083,929 shares. Fractional
shares will not be issued. Instead, we will issue a full share of post-Reverse Stock Split common stock to any stockholder who
would have been entitled to receive a fractional share of common stock as a result of the Reverse Stock Split.
The actual number of shares issued after
giving effect to the Reverse Stock Split, if implemented, will depend on the reverse stock split ratio that is ultimately determined
by the Board of Directors.
The Reverse Stock Split will affect all
holders of our common stock uniformly and will not affect any stockholder’s percentage ownership interest in us, except to
the extent the Reverse Stock Split would result in fractional shares, as described above. In addition, the Reverse Stock Split
will not affect any stockholder’s proportionate voting power, except to the extent the Reverse Stock Split would result in
fractional shares, as described above.
The Reverse Stock Split may result in some
stockholders owning “odd lots” of less than 100 shares of common stock. Odd lot shares may be more difficult to sell,
and brokerage commissions and other costs of transactions in odd lots are generally somewhat higher than the costs of transactions
in “round lots” of even multiples of 100 shares.
After the Reverse Stock Split is effective,
our common stock will have new Committee on Uniform Securities Identification Procedures (CUSIP) numbers, which are numbers used
to identify our equity securities, and stock certificates with the older CUSIP numbers will need to be exchanged for stock certificates
with the new CUSIP numbers by following the procedures described below. After the Reverse Stock Split, we will continue to be subject
to the periodic reporting and other requirements of the Exchange Act. Assuming that the Company’s meets the Minimum Bid Requirement,
we expect that our common stock will continue to be quoted on The Nasdaq Capital Market under the symbol “POAI.”
Beneficial Holders of Common Stock (i.e., stockholders who
hold in street name)
Upon the implementation of the Reverse Stock
Split, we intend to treat shares held by stockholders through a bank, broker, custodian or other nominee in the same manner as
registered stockholders whose shares are registered in their names. Banks, brokers, custodians or other nominees will be instructed
to effect the Reverse Stock Split for their beneficial holders holding our common stock in street name. However, these banks, brokers,
custodians or other nominees may have different procedures than registered stockholders for processing the Reverse Stock Split.
Stockholders who hold shares of our common stock with a bank, broker, custodian or other nominee and who have any questions in
this regard are encouraged to contact their banks, brokers, custodians or other nominees.
Registered “Book-Entry” Holders of Common Stock
(i.e., stockholders that are registered on the transfer agent’s books and records but do not hold stock certificates)
Certain of our registered holders of common
stock may hold some or all of their shares electronically in book-entry form with the transfer agent. These stockholders do not
have stock certificates evidencing their ownership of the common stock. They are, however, provided with a statement reflecting
the number of shares registered in their accounts.
Stockholders who hold shares electronically
in book-entry form with the transfer agent will not need to take action (the exchange will be automatic) to receive shares of post-Reverse
Stock Split common stock.
Holders of Certificated Shares of Common Stock
Stockholders holding shares of our common
stock in certificated form will be sent necessary instructions by our transfer agent after the Split Effective Time indicating
how a stockholder should surrender his, her or its certificate(s) representing shares of our common stock (the “Old Certificates”)
to the transfer agent in exchange for certificates representing the appropriate number of whole shares of post-Reverse Stock Split
common stock (the “New Certificates”). No New Certificates will be issued to a stockholder until such stockholder has
surrendered all Old Certificates to our transfer agent in accordance with its instructions. No stockholder will be required to
pay a transfer or other fee to exchange his, her or its Old Certificates. Stockholders will then receive a New Certificate(s) representing
the number of whole shares of common stock that they are entitled as a result of the Reverse Stock Split. Until surrendered, we
will deem outstanding Old Certificates held by stockholders to be cancelled and only to represent the number of whole shares of
post-Reverse Stock Split common stock to which these stockholders are entitled. Any Old Certificates submitted for exchange, whether
because of a sale, transfer or other disposition of stock, will automatically be exchanged for New Certificates. If an Old Certificate
has a restrictive legend on the back of the Old Certificate(s), the New Certificate will be issued with the same restrictive legends
that are on the back of the Old Certificate(s).
Stockholders should not destroy any
stock certificate(s) and should not submit any stock certificate(s) until requested to do so.
Effect of the Reverse Stock Split on Employee Plans, Options,
Restricted Stock Awards and Units, Warrants, and Convertible or Exchangeable Securities
Based upon the reverse stock split ratio
determined by the Board of Directors, proportionate adjustments are generally required to be made to the per share exercise price
and the number of shares issuable upon the exercise or conversion of all outstanding options, warrants, convertible or exchangeable
securities entitling the holders to purchase, exchange for, or convert into, shares of common stock. This would result in approximately
the same aggregate price being required to be paid under such options, warrants, convertible or exchangeable securities upon exercise,
and approximately the same value of shares of common stock being delivered upon such exercise, exchange or conversion, immediately
following the Reverse Stock Split as was the case immediately preceding the Reverse Stock Split. The number of shares deliverable
upon settlement or vesting of restricted stock awards will be similarly adjusted. The number of shares reserved for issuance pursuant
to these securities will be proportionately based upon the reverse stock split ratio determined by the Board of Directors.
Accounting Matters
This proposed amendment to the Certification
of Incorporation will not affect the par value of our common stock per share. As a result, as of the time the Reverse Stock Split
is effective, the stated capital attributable to common stock and the additional paid-in capital account on our balance sheet will
not change due to the Reverse Stock Split. Reported per share net income or loss will be higher because there will be fewer shares
of common stock outstanding.
Material Federal Income Tax Consequences of the Reverse Stock
Split
The following is a general summary of the
material U.S. federal income tax consequences of the Reverse Stock Split to holders of our common stock. This summary is for general
information only, is not tax advice, and is not intended to constitute a complete description of all tax consequences relating
to the Reverse Stock Split.
Unless otherwise specifically indicated
herein, this summary addresses the tax consequences only to a beneficial owner of our common stock that is a U.S. holder. For purposes
of this discussion, the term “U.S. holder” means a beneficial owner of our common stock, that is, for U.S. federal
income tax purposes:
· an
individual who is a citizen or resident, as defined in Code Section 7701(b), of the United States;
· a
corporation or partnership, or other entity treated as a corporation or partnership for U.S. federal income tax purposes, created
or organized in or under the laws of the United States, or any state thereof, or the District of Columbia;
· an
estate, the income of which is subject to U.S. federal income tax regardless of its source; or
· a
trust if (1) a court within the United States is able to exercise primary supervision over the administration of the trust and
one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) it has a valid election in
effect under applicable Treasury Regulations to be treated as a U.S. person.
This summary does not address all of the
tax consequences that may be relevant to any particular investor, including tax considerations that arise from rules of general
application to all taxpayers or to certain classes of taxpayers or that are generally assumed to be known by investors. This summary
also does not address the tax consequences to (i) persons that may be subject to special tax treatment under U.S. federal income
tax law, such as banks, insurance companies, thrift institutions, regulated investment companies, real estate investment trusts,
tax-exempt organizations, U.S. expatriates, persons subject to the alternative minimum tax, traders in securities that elect to
mark to market and dealers in securities or currencies, (ii) persons that hold our common stock as part of a position in a “straddle”
or as part of a “hedging,” “conversion” or other integrated investment transaction for federal income tax
purposes, or (iii) persons hold our common stock as other than “capital assets” within the meaning of Section 1221
of the Code. If a partnership (or other entity classified as a partnership for U.S. federal income tax purposes) is the beneficial
owner of our common stock, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status
of the partner and the activities of the partnership. Partnerships that hold our common stock, and partners in such partnerships,
should consult their own tax advisors regarding the U.S. federal income tax consequences of the Reverse Stock Split.
The information in this summary is based
on the provisions of the Internal Revenue Code of 1986, as amended, final and temporary U.S. Treasury regulations, administrative
interpretations and practices of the Internal Revenue Service, including its practices and policies as endorsed in private letter
rulings, which are not binding on the Internal Revenue Service except in the case of the taxpayer to whom a private letter ruling
is addressed, and existing judicial authority, all as in effect as of the date of this Information Statement. Future legislation,
regulations, administrative interpretations, and court decisions could change current law or adversely affect existing interpretation
of current law. Any change could apply retroactively. We have not obtained any rulings from the Internal Revenue Service concerning
the tax treatment of the Reverse Stock Split. Thus, it is possible that the Internal Revenue Service could challenge the statements
in this summary, which do not bind the Internal Revenue Service or the courts, and that a court could agree with the Internal Revenue
Service.
PLEASE CONSULT YOUR OWN TAX ADVISOR REGARDING
THE U.S. FEDERAL, STATE, LOCAL, AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT IN YOUR PARTICULAR CIRCUMSTANCES
UNDER THE INTERNAL REVENUE CODE AND THE LAWS OF ANY OTHER TAXING JURISDICTION.
The Reverse Stock Split should be treated
as a recapitalization for U.S. federal income tax purposes. Therefore, a stockholder generally will not recognize gain or loss
on the reverse stock split, except for a stockholder receiving an additional share of common stock in lieu of a fractional share
(as described below). The aggregate tax basis of the post-split shares received will be equal to the aggregate tax basis of the
pre-split shares exchanged therefore, excluding the basis of the fractional share, and the holding period of the post-split shares
received will include the holding period of the pre-split shares exchanged.
No gain or loss will be recognized by us
as a result of the Reverse Stock Split. A stockholder who receives one whole share of common stock in lieu of a fractional share
generally may recognize gain in an amount not to exceed the excess of the fair market value of such share over the fair market
value of the fractional share to which the stockholder was otherwise entitled. Our view regarding the tax consequences of the Reverse
Stock Split is not binding on the Internal Revenue Service or the courts. Accordingly, each stockholder should not rely on the
foregoing and should consult with his or her own tax advisor with respect to all of the potential tax consequences to him or her
of the Reverse Stock Split.
Stockholder Vote Required
In order to be approved,
Proposal 1 must be approved by a majority of shares entitled to vote either in person or by proxy at the Special Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS
VOTE “FOR” THIS PROPOSAL TO APPROVE THE AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT
OF THE COMPANY’S COMMON STOCK.
PROPOSAL 2
TO APPROVE, PURSUANT TO NASDAQ LISTING
RULE 5635, THE ISSUANCE OF SHARES OF COMMON STOCK OF THE COMPANY IN EXCESS OF APPLICABLE SHARE CAPS UPON CONVERSION OF THE OUTSTANDING
SHARES OF SERIES E PREFERRED STOCK (THE “SERIES E PROPOSAL”)
On June 13, 2019, the Company filed with
the Secretary of State of the State of Delaware a Certificate of Designation of Preferences, Rights and Limitations of Series E
Convertible Preferred Stock, par value $0.01 per share (the “Series E Stock”) (the “Certificate”) and began
a private placement of the Series E Stock. As of September 5, 2019, the Company has sold 256.0 shares of Series E Stock for a total
purchase price of $2,560,000.
As more fully described below, because our
common stock is listed on the Nasdaq Capital Market, we are subject to Nasdaq’s rules and regulations. In certain circumstances,
if we issue shares of common stock or securities convertible into shares of common stock, that has or will have upon issuance voting
power equal to or in excess of 20% of the voting power outstanding before the issuance of stock or securities convertible into
or exercisable for shares of common stock, or the number of shares of common stock to be issued is or will be equal to or in excess
of 20% of the number of shares of common stock outstanding before the issuance of the securities, we are required to obtain stockholder
approval. Consistent with this requirement, the conversion of shares of Series E Stock is subject to the Nasdaq Share Cap (as defined
below) and the Individual Holder Share Cap (as defined below), each of which limits the number of shares of common stock that can
be issued upon conversion unless the Company obtains stockholder approval. The approval of Proposal 2 will eliminate the Nasdaq
Share Cap and the Individual Holder Share Cap and allow for full conversion of the Series E Stock, if converted.
Nasdaq Listing Rule 5635(d)
Nasdaq Listing Rule 5635(d) requires stockholder
approval prior to the issuance of securities in connection with a transaction other than a public offering involving the sale,
issuance or potential issuance by the Company of common stock (or securities convertible into or exercisable for common stock)
at a price less than the greater of book or market value which equals 20% or more of common stock or 20% or more of the voting
power outstanding before the issuance; or the sale, issuance or potential issuance by the Company of common stock (or securities
convertible into or exercisable for common stock) equal to 20% or more of the common stock or 20% or more of the voting power outstanding
before the issuance for less than the greater of book or market value of the stock.
As described more fully below, the conversion
ratio of the Series E Stock (absent the Nasdaq Share Cap) is based on a percentage of the future number of outstanding shares of
common stock. Therefore, the price of the common stock upon conversion cannot be determined, and stockholder approval is required
before the conversion can be permitted to result in the issuance of 20% or more of the outstanding shares of common stock as of
June 12, 2019, the day before the first date of issuance of the Series E Stock. As a result, the Nasdaq Share Cap was calculated
to ensure that, upon the issuance of all 350 authorized shares of Series E Stock, the shares issued upon conversion cannot exceed
19.9% of the outstanding shares as of June 12, 2019.
Terms of Series E Stock
The Certificate authorizes 350 shares of
Series E Stock (“Series E Shares”) and establishes the rights and preferences of Series E Stock, as follows:
Each Series E Share will have a liquidation
value of $10,000. Upon liquidation, dissolution or winding up of the Corporation, the Series E Shares shall rank senior to the
Series B Preferred Stock, Series D Preferred Stock and common stock. The Series E Shares shall not have dividend rights, and therefore
no dividends will accrue on the Series E Shares.
Commencing on December 13, 2019 (six months
after the date of first issuance), each Series E Share will be convertible into 0.056857% of the Company’s issued and outstanding
shares of common stock immediately prior to conversion (rounded down to the nearest whole share), subject to the limitations below.
On the date that is twelve months after the Final Closing (as defined in the Certificate), the Company has the option to automatically
convert the Series E Shares into shares of the Company’s common stock, upon the same terms as the optional conversion, subject
to the limitations below.
Notwithstanding the foregoing, if the total
number of shares issuable upon conversion of all Series E Shares exceeds 19.9% of the Company’s issued and outstanding common
stock immediately prior to the Initial Closing (the “Nasdaq Share Cap”) (such excess, the “Excess Conversion
Shares”), then (i) only the portion of any Series E Share will be converted that results in the issuance of 0.056857% of
the NASDAQ Share Cap (rounded down to the nearest whole share), and (ii) the portion of such Series E Share that would otherwise
remain outstanding as a fractional share will be redeemed by the Company with funds legally available therefor, for a price equal
to the market price of the common stock on the conversion date multiplied by 0.056857% of the Excess Conversion Shares. The limitation
in this paragraph will not apply if the Company obtains stockholder approval to issue the Excess Conversion Shares as required
by the Nasdaq’s Marketplace Rules, which the Company is seeking in this Proposal 2.
Further, if on the date of any conversion,
the total number of conversion shares issuable to a converting Holder would result in such Holder beneficially owning in excess
of 19.9% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of such shares of
Common Stock (the “Individual Holder Share Cap”) (such excess, the “Individual Excess Conversion Shares”),
then the Company shall deliver, in lieu of any Individual Excess Conversion Shares, an amount of cash per Individual Excess Conversion
Share equal to the market price of the Common Stock on the Conversion Date, unless stockholder approval is obtained as required
by the Nasdaq’s Marketplace Rules, which the Company is seeking in this Proposal 2.
The Company may redeem the Series E Stock
on 10 days’ notice at 130% of the face value. Prior to redemption, the holders may convert their shares upon the same terms
as the optional conversion.
In the event of a change of control of the
Company (meaning an acquisition of 30% or more of the Company’s issued common shares by a single party/parties acting in
concert) before the first anniversary of the Final Closing, the Company may compel holders to exercise the conversion rights of
the Series E Share(s) at a time of Company’s choosing, upon the same terms as the optional conversion.
The Series E Shares will vote with the common
stock as a single class on all matters submitted to a vote of stockholders of the Corporation other than any proposal to approve
the issuance of the Excess Conversion Shares or any Individual Excess Conversion Shares. The Series E Shares will vote on an as-converted
to common stock basis, taking into account the conversion limitations resulting from the Nasdaq Share Cap and the Individual Holder
Share Cap, if and as applicable; however, the number of votes per Series E Share will not exceed 15,625.
Effect of Approval of the Series E Proposal
If Proposal 2 is approved, then the Company
may issue the Excess Conversion Shares and any Individual Excess Conversion Shares, and any conversion of the Series E Shares will
not be limited by the Nasdaq Share Cap or the Individual Holder Share Cap.
If Proposal 2 is not approved, then Company
will not be permitted to issue the Excess Conversion Shares and any Individual Excess Conversion Shares. In the event of a conversion
that would otherwise result in issuance of Excess Conversion Shares or any Individual Excess Conversion Shares, any such conversion
would require the Company to pay cash in lieu of such shares as set forth in the Certificate. If the conversion is at the option
of the holder, this could require the Company to make cash payments (if funds are legally available therefor) at a time when this
would be disadvantageous to the Company. A conversion at the company’s option would also require cash payment, which would
make it impracticable to convert in certain circumstances when it might be to our advantage.
If Proposal 2 is approved, it may result
in issuances of more shares of common stock than would occur if the Nasdaq Share Cap and the Individual Holder Share Cap were applicable.
This could cause significant dilution to our stockholders’ ownership, voting power and right to participate in dividends
or other payments from future earnings, if any, and could cause a decline in the market price of our common stock. In addition
to the foregoing, the increase in the number of shares of common stock issued in connection with the conversion of the January
Notes may have an incidental anti-takeover effect in that the additional shares of common stock issued could dilute the stock ownership
of parties seeking to obtain control of the Company. The increased number of issued shares could discourage the possibility of,
or render more difficult, certain mergers, tender offers, proxy contests or other change of control or ownership transactions.
However, we currently know of no specific effort to accumulate our securities or to gain control of the Company by means of a merger,
tender offer, solicitation in opposition to management or otherwise.
Stockholder Vote Required
In order to be approved, Proposal 2 must
be approved by a majority of shares present and entitled to vote either in person or by proxy at the Special Meeting. Abstentions
will have the same effect as a vote against Proposal 2, but broker non-votes will not affect the outcome of this proposal. The
Series E Shares are not entitled to vote on this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS
VOTE “FOR” THIS PROPOSAL.
PROPOSAL
3
APPROVAL, PURSUANT TO NASDAQ LISTING
RULE 5635(d), OF THE ISSUANCE OF COMMON STOCK PURSUANT TO AN EQUITY LINE OF CREDIT ARRANGEMENT
We intend to enter into an equity line
of credit arrangement (the “Equity Line”) under a securities purchase agreement (the “Purchase Agreement”)
pursuant to which an investor (the “Investor”) would to purchase from us up to an aggregate of $15.0 million worth
of our common stock. We have had discussions with potential investors in such an arrangement but have not decided on the identity
of the Investor. Any such arrangement would be subject to final agreement on the terms of the Purchase Agreement, additional due
diligence by the Investor and other conditions. We will enter into the Purchase Agreement on or before March 31, 2020.
The Nasdaq staff has advised the Company
of its position that the equity line of credit would be aggregated with the Series E Financing pursuant to Nasdaq Listing Rule
5635(d), which requires stockholder approval to sell shares of common stock in excess of 20% of the Company’s issued and
outstanding shares of common stock, unless such sales satisfy certain requirements. In order to ensure compliance with Listing
Rule 5635(d), the Company is seeking stockholder approval at the special meeting of the issuance of common stock pursuant to the
Equity Line, assuming that the Company enters into the Equity Line, subject to a limitation of 50,000,000 shares (further adjusted
to reflect the Reverse Stock Split, if effected) of common stock without further stockholder approval as described below. For
example, if the Reverse Stock Split is effected at a ratio of 1:10, the above limitation will be 5,000,000 post-reverse split
shares without further stockholder approval.
Under the terms and subject to the conditions
of the Purchase Agreement, we would have the right, but not the obligation, to sell to the Investor, and the Investor would be
obligated to purchase up to $15.0 million worth of shares of common stock. Such sales of common stock by us, if any, would be
subject to certain limitations, and could occur from time to time, at our sole discretion, over a period of 36 months beginning
on the date on which the conditions to commencement of sales under the Purchase Agreement are satisfied. These conditions would
likely include that a registration statement covering the resale by the Investor of the shares issuable under the Purchase Agreement
shall have been declared effective by the Securities and Exchange Commission. We believe that we will be required to issue to
the Investor shares of common stock with a market value in the range of 2% to 3% of the maximum amount of purchases under the
Equity Line (the “Commitment Shares”).
Followingthe Commencement Date, under the
Purchase Agreement, we will have the right to direct the Investor to purchase shares of common stock from us, subject to certain
price and volume requirements. Generally, the price will reflect a 9% discount to the lesser of (i) the lowest traded price in
the 10 trading days prior to the date the Company requests the sale of shares or (ii) the closing bid price on the date the shares
are delivered. Under certain circumstances, the Company will have the right to request additional sales on the same date or one
of the two subsequent days, at a price that reflects a 9% discount to the lesser of (i) the lowest traded price in the 10 days
prior to the date the Company requests the sale of shares, (ii) the volume weighted average trading price on the date the shares
are delivered or (iii) the closing bid price on the date the shares are delivered.
As a result of our listing on The Nasdaq
Capital Market, issuances of our common stock are subject to the Nasdaq Marketplace Rules, including Rule 5635(d), which requires
us to obtain stockholder approval prior to the issuance of securities in connection with a transaction, other than a public offering,
involving the sale, issuance or potential issuance by us of more than 19.99 percent of our outstanding shares of our common stock
(or securities convertible into or exercisable for shares of our common stock) at a price less than the lower of (i) the closing
price (as reflected on Nasdaq.com) immediately preceding the signing of the binding agreement (the “Applicable Closing Price”),
or (ii) the average closing price of the common stock (as reflected on Nasdaq.com) for the five trading days immediately preceding
the signing of the binding agreement (the “Nasdaq 20% Rule”). The Nasdaq staff has advised the Company of its position
that the equity line of credit would be aggregated with the Series E Financing pursuant to the Nasdaq 20% Rule. In order to ensure
compliance with Listing Rule 5635(d), the Company is seeking stockholder approval at the special meeting of the issuance of common
stock pursuant to the Equity Line, assuming that the Company enters into the Equity Line. We are seeking stockholder approval
for the issuance of up to 50,000,000 shares (further adjusted to reflect the Reverse Stock Split, if effected) of our common stock
under the Purchase Agreement if entered into, including the Commitment Shares. We would seek additional stockholder approval before
issuing more than such 50,000,000 shares (further adjusted to reflect the Reverse Stock Split, if effected).
Reasons for Transaction and
Effect on Current Stockholders
The Board of Directors has determined that
the Equity Line would be in the best interests of the Company and its stockholders because the right to sell shares to the Investor
would provide the Company with a reliable source of capital and the ability to access that capital when and as needed. The Purchase
Agreement would not affect the rights of the holders of outstanding common stock, but the sale of shares to the Investor pursuant
to the terms of the Purchase Agreement would have a dilutive effect on the existing stockholders, including the voting power and
economic rights of the existing stockholders.
Effect of Approval
Upon obtaining the stockholder approval
requested in this Proposal 1, we would no longer be bound by the Nasdaq 20% Rule restriction on issuances of common stock to the
Investor. If this Proposal 1 is approved by our stockholders, we would be able to issue shares to the Investor at a price lower
than the Applicable Closing Price. The number of shares of common stock that we may issue would fluctuate from time to time based
on the price of our common stock. We would seek additional stockholder approval before issuing more than such 50,000,000 shares
(further adjusted to reflect the Reverse Stock Split, if effected).We would also seek additional stockholder approval before agreeing
to any increase in the value of the shares of common stock we may issue to the Investor above $15.0 million.
In addition, the additional shares that
we could issue to the Investor, if we enter into the Equity Line, will result in greater dilution to existing stockholders and
may result in a decline in our stock price or greater price volatility.
Each additional share of common stock that
would be issuable to the Investor would have the same rights and privileges as each share of our currently authorized common stock.
Stockholder Vote Required
In order to be approved, Proposal 3 must
be approved by a majority of shares present and entitled to vote either in person or by proxy at the Special Meeting. Abstentions
will have the same effect as a vote against Proposal 3, but broker non-votes will not affect the outcome of this proposal. The
Series E Shares are not entitled to vote on this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS
VOTE “FOR” THIS PROPOSAL.
PROPOSAL 4
APPROVAL OF ADJOURNMENT OF SPECIAL MEETING,
if necessary, to solicit additional proxies in the event that there are not sufficient
votes at the time of the Special Meeting to approve ANY OF the proposal to effect a reverse stock split (Proposal 1), THE series
e stock proposal (proposal 2) and/or the equity line proposal (proposal 3).
In the event that there
are not sufficient votes to constitute a quorum or to approve both the proposal to effect a reverse stock split (Proposal 1) at
the Special Meeting, any of the proposal to effect the Reverse Stock split (Proposal 1),
the Series E Stock Proposal (Proposal 2) and/or the Equity Line Proposal (Proposal 3), such proposals could not be approved unless
such meeting was adjourned to a later date or dates in order to permit further solicitation of proxies. In order to allow proxies
that have been received by us at the time of the Special Meeting to be voted for adjournment, you are being asked to consider a
proposal to approve the adjournment of the annual meeting, if necessary or appropriate, including to permit further solicitation
of proxies if necessary to obtain additional votes in favor of any or all of such proposals. If there are sufficient votes to constitute
a quorum and approve all of Proposals 1, 2 and 3, proposal to effect a reverse stock split (Proposal 1) at the Special Meeting,
the chairman of the Special Meeting may determine that no action will be taken on this proposal to adjourn.
If there are sufficient
votes at the Special Meeting to approve one or more of Proposals 1, 2 and 3 and this Proposal 4 is approved, but there are not
sufficient votes to approve one or more of the proposals, the chairman of the Special Meeting intends to declare that any of the
proposals have been approved and to then adjourn the meeting for the purpose of soliciting additional proxies to obtain the approval
of such other proposals.
Stockholder Vote Required
In order to be approved, Proposal 4 must
be approved by a majority of shares present and entitled to vote either in person or by proxy at the Special Meeting. Abstentions
will have the same effect as a vote against Proposal 4, but broker non-votes will not affect the outcome of this proposal. The
Series E Shares are not entitled to vote on this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS
VOTE “FOR” THIS PROPOSAL.
PRINCIPAL STOCKHOLDERS OF PREDICTIVE
The following table sets forth certain
information with respect to the beneficial ownership of Predictive common stock as of September 23, 2019 (except where otherwise
indicated) for:
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each person, or group of affiliated persons, who are known by Predictive to beneficially own more than 5% of the outstanding shares of Predictive common stock;
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each of the Precision directors;
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each of the Predictive named executive officers, as identified in Precision’s Annual Report on Form 10-K filed with the SEC on April 1, 2019; and
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all the current directors and executive officers of Predictive as a group.
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The number of shares owned, total
shares beneficially owned, and the percentage of common stock beneficially owned below assumes 31,258,932 shares of Precision
common stock outstanding on September 23, 2019.
Beneficial ownership is determined under
SEC rules and includes sole or shared power to vote or dispose of shares of Precision common stock. The number and percentage of
shares beneficially owned by a person or entity also include shares of common stock subject to stock options that are currently
exercisable or become exercisable within 60 days of September 23, 2019. However, these shares are not deemed to be outstanding
for the purpose of computing the percentage of shares beneficially owned of any other person or entity. Except as indicated in
footnotes to the table below or, where applicable, to the extent authority is shares by spouses under community property laws,
the beneficial owners named in the table have, to Predictive’s knowledge, sole voting and dispositive power with respect
to all shares of common stock shown to be beneficially owned by them.
Unless otherwise indicated, the address
for each stockholder listed is: 2915 Commers Drive, Suite 900, Eagan, Minnesota 55121.
Name of Beneficial Owner
|
|
Amount and
Nature of
Beneficial
Ownership(1)
|
|
Percent
of
Class
|
|
|
|
|
|
Officers and Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Johnson (2)
|
|
|
492,078
|
|
|
|
1.55
|
%
|
|
|
|
|
|
|
|
|
|
Bob Myers (3)
|
|
|
371,789
|
|
|
|
1.18
|
%
|
|
|
|
|
|
|
|
|
|
Thomas J. McGoldrick (4)
|
|
|
469,411
|
|
|
|
1.48
|
%
|
|
|
|
|
|
|
|
|
|
Andrew Reding (5)
|
|
|
396,842
|
|
|
|
1.25
|
%
|
|
|
|
|
|
|
|
|
|
Carl Schwartz (6)
|
|
|
2,707,826
|
|
|
|
8.03
|
%
|
|
|
|
|
|
|
|
|
|
Tim Krochuk (7)
|
|
|
379,240
|
|
|
|
1.20
|
%
|
|
|
|
|
|
|
|
|
|
J. Melville Engle (8)
|
|
|
353,187
|
|
|
|
1.12
|
%
|
|
|
|
|
|
|
|
|
|
Richard Gabriel (9)
|
|
|
337,432
|
|
|
|
1.07
|
%
|
|
|
|
|
|
|
|
|
|
Gerald Vardzel Jr.(10)
|
|
|
1,016,551
|
|
|
|
3.24
|
%
|
|
|
|
|
|
|
|
|
|
All directors and executive officers as a group (9 persons)
|
|
|
6,032,278
|
|
|
|
16.48
|
%
|
|
|
|
|
|
|
|
|
|
Robert D. Keyser, Jr.
|
|
|
2,114,320
|
(11)
|
|
|
6.76
|
%
|
Dawson James Securities, Inc.
|
|
|
|
|
|
|
|
|
Auxol Capital LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R. Douglas Armstrong
|
|
|
2,114,320
|
(11)
|
|
|
6.76
|
%
|
Dawson James Securities, Inc.
|
|
|
|
|
|
|
|
|
Auxol Capital LLC
|
|
|
|
|
|
|
|
|
|
(1)
|
Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding.
|
|
(2)
|
Effective August 1, 2018 Mr. Johnson is no longer the Chief Operating Officer of Predictive Oncology Inc., and effective August 1, 2019 Mr. Johnson is no longer an employee of Predictive Oncology Inc. His beneficial ownership includes 876 shares of common stock, and 491,202 shares that are exercisable within 60 days of September 15, 2019.
|
|
(3)
|
Includes 761 shares of common stock, and 371,028 shares that are exercisable within 60 days of September 15, 2019.
|
|
(4)
|
Includes 64 shares of common stock, and 469,347 shares that area exercisable within 60 days of September 15, 2019.
|
|
(5)
|
Includes 53 shares of common stock, and 396,789 shares that are exercisable within 60 days of September 15, 2019.
|
|
(6)
|
Includes 240,698 shares of common stock, and 2,463,528 shares that are exercisable within 60 days of September 15, 2019.
|
|
(7)
|
Includes 379,240 shares that are exercisable within 60 days of September15, 2019.
|
|
(8)
|
Includes 353,187 shares that are exercisable within 60 days of September 15, 2019.
|
|
(9)
|
Includes 10,000 shares of common stock, 327,432 shares that are exercisable within 60 days of September 15, 2019.
|
|
|
|
|
(10)
|
Includes 915,711 shares of common stock, 100,840 shares that are exercisable within 60 days of September 15, 2019.
|
|
|
|
|
(11)
|
Based on information contained in a Schedule
13D filed by each of Messrs. Keyser and Armstrong and such entities on April 24, 2019 (the “Schedule 13Ds”), each such
individual directly beneficially owns 633,052 shares of common stock, and each such individual shares the power to vote or direct
the vote and the power to dispose or direct the disposition of 1,103,660 shares beneficially owned by Dawson James Securities,
Inc. and 377,607 shares beneficially owned by Auxol Capital LLC. Such calculations do not include shares of Series D Convertible
Preferred Stock held by such persons or entities and deposited in escrow, as described in the Schedule 13Ds.
|
OTHER MATTERS
As of the date of this proxy statement,
management does not intend to present any other items of business at the Special Meeting other than the proposals described above.
|
By Order of the Board of Directors
|
|
|
|
/s/ Carl Schwartz
|
|
|
|
Carl Schwartz
|
|
Chief Executive Officer
|
Eagan, Minnesota
September 30, 2019
PREDICTIVE ONCOLOGY INC.
SPECIAL MEETING OF STOCKHOLDERS
October 23, 2019
3:00 PM (Central Time)
At the offices of
Maslon LLP
3300 Wells Fargo Center
90 South Seventh Street
Minneapolis, Minnesota 55402
IMPORTANT NOTICE REGARDING THE AVAILABILITY
OF PROXY MATERIALS FOR THE
SPECIAL MEETING OF STOCKHOLDERS TO BE
HELD ON OCTOBER 23, 2019:
The Proxy Statement of Predictive Oncology
Inc. is available at
http://investors.skylinemedical.com
Predictive Oncology Inc.
|
|
2915 Commers Drive, Suite 900
|
|
Eagan, Minnesota 55121
|
PROXY
|
|
|
This proxy is solicited by the Board
of Directors for use at the Special Meeting on October 23, 2019.
The shares of common stock you hold in
your account will be voted as you specify on the reverse side.
If no choice is specified, the proxy
will be voted “FOR” Proposals 1, 2, 3 and 4.
The undersigned hereby appoints CARL
SCHWARTZ AND BOB MYERS, and each of them individually, with full power of substitution, as Proxies to represent and vote, as
designated below, all shares of common stock of Predictive Oncology Inc. (the “Company”) registered in the name of
the undersigned at the Special Meeting of Stockholders of the Company to be held at the offices of the Company’s counsel,
Maslon LLP, 3300 Wells Fargo Center, 90 South Seventh Street, Minneapolis, Minnesota 55402 at 3:00 PM (Central Time) on October
23, 2019 (if you need directions to the Special Meeting, please contact the Company at (651) 389-4800), and at any adjournment
or postponement thereof, and the undersigned hereby revokes all proxies previously given with respect to the meeting.
See reverse for voting instructions
VOTE BY MAIL
Mark, sign and date your proxy card and
return it in the postage-paid envelope we’ve provided.
Please detach here
The Board of Directors unanimously recommends
a vote “FOR” Proposals 1, 2 and 3.
|
|
|
|
|
|
|
|
|
|
|
1.
|
To approve an amendment of the Company’s
certificate of incorporation to effect a reverse stock split of the outstanding shares of its common stock at a ratio of not less
than one-for-two (1:2) and not more than one-for-fifteen (1:15), with the exact ratio to be set at a whole number within this range
as determined by our Board of Directors; (the “Reverse Split Proposal”);
|
|
☐
|
FOR
|
|
☐
|
AGAINST
|
|
☐
|
ABSTAIN
|
|
|
|
|
|
|
|
|
|
|
|
2.
|
To approve, pursuant to Nasdaq Listing
Rule 5635, the issuance of shares of common stock of the Company in excess of applicable share caps upon conversion of the outstanding
shares of Series E Convertible Preferred Stock (“Series E Preferred Stock”) (the “Series E Proposal”);
|
|
☐
|
FOR
|
|
☐
|
AGAINST
|
|
☐
|
ABSTAIN
|
|
|
|
|
|
|
|
|
|
|
|
3.
|
To approve, pursuant to Nasdaq Listing
Rule 5635, the issuance of shares of common stock of the Company pursuant to a contemplated equity line of credit arrangement (the
“Equity Line Proposal”);
|
|
☐
|
FOR
|
|
☐
|
AGAINST
|
|
☐
|
ABSTAIN
|
4.
|
To approve a proposal to adjourn the Special
Meeting, if necessary, to solicit additional proxies for approval of the Reverse Split Proposal, the Series E Proposal and/or the
Equity Line Proposal, as applicable, in the event that there are not sufficient votes at the time of the Special Meeting to approve
any such proposal.
|
|
☐
|
FOR
|
|
☐
|
AGAINST
|
|
☐
|
ABSTAIN
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIS PROXY WHEN PROPERLY EXECUTED WILL
BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED FOR EACH OF PROPOSALS 1, 2, 3 AND 4.
Address Change? Mark Box
☐
Indicate changes below:
|
Date __________________________________
|
|
|
|
|
|
|
|
Signature(s) in Box
PLEASE DATE AND SIGN ABOVE exactly
as name appears at the left indicating, where appropriate, official position or representative capacity. For stock held
in joint tenancy, each joint tenant should sign.
|
APPENDIX A
FORM
OF CERTIFICATE OF AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT
CERTIFICATE OF AMENDMENT
TO THE CERTIFICATE OF INCORPORATION
OF
PREDICTIVE ONCOLOGY INC.
(A Delaware Corporation)
Pursuant to Section 242 of the Delaware
General Corporation Law, the undersigned, being the Chief Financial Officer of Predictive Oncology Inc., a corporation organized
and existing under the laws of the State of Delaware (the “Corporation”), does hereby certify that the following
resolutions were adopted by the Corporation’s Board of Directors and its stockholders as hereinafter described:
RESOLVED: Section 4.1 of the Certificate
of Incorporation, as amended, of this Corporation is hereby amended and replaced with the following:
4.1 The total number of shares of stock
that the Corporation shall have authority to issue is one hundred million (100,000,000) shares of common stock, having a par value
of one cent ($0.01) per share (“Common Stock”); and twenty million (20,000,000) shares of preferred stock, with a par
value of one cent ($0.01) per share (“Preferred Stock”).
FURTHER RESOLVED: Section 4 of the
Certificate of Incorporation, as amended, of this Corporation is hereby amended by adding the following:
4.6 On the date of the effective date of
this Certificate of Amendment, the Corporation will effect a reverse stock split (the “Reverse Stock Split”) of its
outstanding Common Stock pursuant to which every ___________ (___) issued and outstanding shares of the Corporation’s Common
Stock, par value $0.01 (the “Old Common Stock”) shall be reclassified and converted into one (1) validly issued, fully
paid and non-assessable share of Common Stock, par value $0.01 (the “New Common Stock”). Each certificate representing
shares of Old Common Stock shall thereafter represent the number of shares of New Common Stock into which the shares of Old Common
Stock represented by such certificate were reclassified and converted hereby. No fractional shares of the Corporation’s Common
Stock shall be issued as a result of the Reverse Stock Split. If the Reverse Stock Split would result in the issuance of any fractional
share, the Corporation shall issue one whole share in lieu of the fractional share.
FURTHER RESOLVED:
That the effective date of this Certificate of Amendment shall be ______________, 2019.
The foregoing resolution
and this Certificate of Amendment were adopted by the Board of Directors of the Corporation pursuant to board resolution approved
as of ___________, 2019, in accordance with Section 141 of the Delaware General Corporation Law, and of holders of a majority of
the outstanding shares of the Corporation’s voting stock at a meeting of stockholders held on ________________, 2019 in accordance
with Section 242 of the Delaware General Corporation Law.
IN WITNESS WHEREOF, the undersigned,
being the _______________ of this Corporation, has executed this Certificate of Amendment to the Corporation’s Certificate
of Incorporation, as amended, as of ______________, 2019.
|
PREDICTIVE ONCOLOGY INC.
|
|
|
|
By:
|
|
|
|
Bob Myers, Chief Financial Officer
|
APPENDIX B
PREDICTIVE ONCOLOGY INC.
CERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS OF
SERIES E CONVERTIBLE PREFERRED STOCK
PURSUANT TO SECTION 151 OF THE
DELAWARE GENERAL CORPORATION LAW
Effective June 13, 2019
Pursuant to Section 151
of the General Corporation Law of the State of Delaware, Predictive Oncology Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware, in accordance with the provisions of Section 103 thereof, does hereby submit
the following:
The undersigned, Carl
Schwartz and Bob Myers, do hereby certify that:
1. They
are the Chief Executive Officer and Chief Financial Officer, respectively, of Predictive Oncology Inc., a Delaware corporation
(the “Corporation”).
2. The
following resolutions were duly adopted by the board of directors of the Corporation (the “Board”):
WHEREAS, the Certificate
of Incorporation of the Corporation, as amended, authorizes the issuance of up to 20,000,000 shares of preferred stock, par value
$0.01 per share, of the Corporation (“Preferred Stock”) in one or more series, and expressly authorizes the
Board, subject to limitations prescribed by law, to provide, out of the unissued shares of Preferred Stock, for series of Preferred
Stock, and, with respect to each such series, to establish and fix the number of shares to be included in any series of Preferred
Stock and the designation, rights, preferences, powers, restrictions and limitations of the shares of such series; and
WHEREAS, it is the
desire of the Board to establish and fix the number of shares to be included in a new series of Preferred Stock and the designation,
rights, preferences and limitations of the shares of such new series.
NOW, THEREFORE, BE
IT RESOLVED, that the Board does hereby provide for a series of Preferred Stock and does hereby in this Certificate of Designation
(the “Certificate of Designation”) establish and fix and herein state and express the designation, rights, preferences,
powers, restrictions and limitations of such series of Preferred Stock as follows:
1. Designation,
Amount and Par Value. A series of preferred stock is hereby designated as Series E Convertible Preferred Stock, par value $0.01
per share (the “Series E Preferred Stock”), and the number of shares so designated shall be up to three hundred
fifty- (350) (which shall not be subject to increase without the written consent of the holders of a majority of the then issued
and outstanding shares of Series E Preferred Stock (each, a “Holder” and collectively, the “Holders”)).
2. Dividends.
The Holders shall have no right to receive dividends on the shares of Series E Preferred Stock.
3. Liquidation.
In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary (a “Liquidation
Event”), the Holders of Series E Preferred Stock shall be entitled to be paid out of the funds and assets of the Corporation
that may be legally distributed to the Corporation's stockholders an amount equal to $10,000 per share of Series E Preferred Stock
(the “Liquidation Value”). If, upon any Liquidation Event, the assets of the Corporation available for distribution
to the Holders of the Series E Preferred Stock and the holders of any class or series of capital stock of the Corporation currently
existing and hereafter created specifically ranking on parity with the Series E Preferred Stock upon a Liquidation Event (“Pari
Passu Securities”) are insufficient to pay the full Liquidation Value or other liquidation payment to such holders, the
Holders of the Series E Preferred Stock and the holders of Pari Passu Securities shall share with equal priority and pro rata in
any such distribution in proportion to the full amounts to which they would otherwise be respectively entitled. After payment of
the full Liquidation Value to which each Holder of Series E Preferred Stock is entitled, such Holder will not be entitled to any
further participation as such in any distribution of assets of the Corporation in respect of the Series E Preferred Stock.
4. Conversion.
(a) At
any time on or after the six month anniversary of the Initial Closing Date, the Holders shall have the right, but not the obligation,
from time to time, in whole or in part, to convert each share of Series E Preferred Stock held by such Holder into such number
of fully paid and nonassessable shares of common stock, $0.01 par value per share, of the Corporation (the “Common Stock”)
equal to 0.056857% of the shares of Common Stock issued and outstanding immediately prior to giving effect to such conversion (the
“Conversion Rate”); provided, that (i) except as otherwise provided in paragraph 4(c), a Holder shall
only have the right to convert whole shares of Series E Preferred Stock, and (ii) any conversion under this paragraph 4(a) will
be subject to the limitations and other terms set forth in paragraphs 4(c) and 4(d). The Holders may exercise their conversion
rights hereunder by delivering to the Corporation, during regular business hours at the principal office of the Corporation, the
certificate(s) representing the shares of Series E Preferred Stock being converted hereunder, duly endorsed for transfer to the
Corporation, and accompanied by a written notice stating that the Holder elects to convert such shares. Each conversion shall be
deemed to have been effected on the date when such delivery is made (the “Voluntary Conversion Date”).
(b) At
least ten business days before the one year anniversary of the Initial Closing Date, the Corporation may deliver a notice to all
Holders to cause the Holders to convert their Series E Preferred Stock, in whole or in part, at the Conversion Rate on the one
year anniversary of the Initial Closing Date (the “Forced Conversion Date” and together with the Voluntary Conversion
Date, the “Conversion Date”); provided, that any such conversion will be subject to the limitations and
other terms set forth in paragraphs 4(c) and 4(d). If the Company exercises this option, the shares of Series E Preferred Stock
being converted will automatically convert simultaneously. If fewer than all of the outstanding shares of Series E Preferred Stock
are being converted, a portion of the shares held by each Holder will be converted on a pro rata basis. Upon request of the Corporation,
the Holders shall deliver to the Corporation, promptly following the Forced Conversion Date, during regular business hours at the
principal office of the Corporation, the certificate(s) representing the shares of Series E Preferred Stock being converted hereunder,
duly endorsed for transfer to the Corporation. Any such conversion shall be applied ratably to all of the Holders based on the
number of shares of Series E Preferred Stock held by the Holders on the Forced Conversion Date.
(c) The
shares of Common Stock issued or issuable upon any conversion of shares of Series E Preferred Stock pursuant to this Section 4
are referred to as “Conversion Shares.” Notwithstanding the foregoing, if on any Voluntary Conversion Date or
Forced Conversion Date, the total number of Conversion Shares issuable upon outstanding shares of Series E Preferred Stock, when
added to all Conversion Shares previously issued upon prior conversion of Series E Preferred Stock, exceeds 19.9% of the Company’s
issued and outstanding Common Stock immediately prior to the date on which shares of Series E Preferred Stock are first issued
(the “Initial Closing Date”) (the “NASDAQ Share Cap”) (such excess, the “Excess
Conversion Shares”), then (i) only the portion of each share of Series E Preferred Stock will be converted that results
in the issuance of 0.056857% of the NASDAQ Share Cap (rounded down to the nearest whole share), and (ii) the portion of such share
of Series E Preferred Stock that would otherwise remain outstanding as a fractional share will be redeemed by the Corporation with
funds legally available therefor, for a price equal to the market price of the Common Stock on the Conversion Date multiplied by
0.056857% of the Excess Conversion Shares. The limitation in this paragraph 4(c) will not apply if the Company obtains stockholder
approval to issue the Excess Conversion Shares as required by the NASDAQ’s Marketplace Rules, provided that such approval
is in accordance with NASDAQ Stock Market Rule 5635 (or its successor).
(d) No
Holder shall have the right to acquire Conversion Shares, and the Company shall not be required or permitted to issue Conversion
Shares to such Holder, in excess of such Holder’s Individual Holder Share Cap. If on any Voluntary Conversion Date or Forced
Conversion Date, the total number of Conversion Shares issuable to a converting Holder would result in such Holder beneficially
owning in excess of 19.9% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of
such shares of Common Stock (the “Individual Holder Share Cap”) (such excess, the “Individual Excess
Conversion Shares”), then the Company shall deliver, in lieu of any Individual Excess Conversion Shares, an amount of
cash per Individual Excess Conversion Share equal to the market price of the Common Stock on the Conversion Date. The limitation
in this paragraph 4(d) will not apply if the Company obtains stockholder approval to issue the Individual Excess Conversion Shares
as required by the NASDAQ’s Marketplace Rules, provided that such approval is in accordance with NASDAQ Stock Market Rule
5635 (or its successor). If the conversion limitation contained in this paragraph 4(d) applies, the determination of whether and
the extent to which such limitation applies to a particular Holder shall be in the discretion of such Holder, and the delivery
of written notice of conversion pursuant to paragraph 4(a), or failure to object to a notice of forced conversion under paragraph
4(b), shall be deemed to be the Holder’s determination of the extent to which such Holder’s Series E Preferred Stock
may be converted. For purposes of this paragraph 4(d), in determining the number of outstanding shares of Common Stock, a Holder
may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual
report filed with the Securities and Exchange Commission, as the case may be, (B) a more recent public announcement by the Company
or (C) a more recent written notice by the Company or its transfer agent setting forth the number of shares of Common Stock outstanding.
Upon the written or oral request of a Holder, the Company shall promptly confirm orally and in writing to the Holder the number
of shares of Common Stock then outstanding.
(e) As
promptly as practicable after the Conversion Date, but not later than three (3) business days thereafter, the Corporation shall
issue and deliver to each converting Holder a certificate(s) representing the shares of Common Stock issuable upon such conversion.
In the event of a conversion of portion of a certificate of Series E Preferred Stock, the Corporation shall issue and deliver to
the Holder of such certificate a new certificate covering the number of shares of Series E Preferred Stock representing the unconverted
portion thereof.
(f) No
fractional shares of Common Stock or scrip shall be issued upon conversion of shares of Series E Preferred Stock. Instead of any
fractional shares of Common Stock which would otherwise be issuable upon conversion of any shares of Series E Preferred Stock,
the Corporation shall pay a cash adjustment in respect of such fractional interest. If such fractional interest is a result of
the NASDAQ Share Cap, the cash payment shall be as described in paragraph 4(c). Otherwise, any cash adjustment relating to fractional
shares shall be equal to the fair market value of such fractional interest as determined by the Board.
(g) The
Corporation shall pay any and all issue and other taxes that may be payable in respect of any issue or delivery of shares of Common
Stock upon conversion of any shares of Series E Preferred Stock. The Corporation shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than
that in which the shares of Series E Preferred Stock so converted were registered, and no such issue or delivery shall be made
unless and until the person requesting such issue has paid to the Corporation the amount of any such tax, or has established, to
the satisfaction of the Corporation, that such tax has been paid.
(h) The
Corporation shall at all times reserve and keep available, out of its authorized but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of the Series E Preferred Stock, the full number of shares of Common Stock deliverable
upon the conversion of all issued and outstanding shares of Series E Preferred Stock.
(i) All
shares of Common Stock which shall be issued upon conversion of the shares of Series E Preferred Stock hereunder will, upon issuance
by the Corporation, be validly issued, fully paid and nonassessable, and free from all taxes, liens and charges with respect to
the issuance thereof.
(j) In
the event of a change of control of the Corporation (meaning any “person” or “group” (as these terms are
used for purposes of Sections 13(d) and 14(d) of the Exchange Act and the rules and regulations promulgated thereunder), is or
shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 30%
of the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Corporation on or before the first
anniversary of the Initial Closing Date, the Corporation may compel the Holders to convert all outstanding shares of Series E Preferred
Stock into Common Stock in a mandatory conversion in the manner described in paragraph 4(b), with the Forced Conversion Date to
be a date within twenty business days after the effective date of the change of control.
5. Notice
of Certain Events. At least ten business days before the record date for any dividend or distribution payable on the Common
Stock (other than a dividend or distribution payable solely in shares of Common Stock), the Corporation shall give written notice
of such dividend or distribution to all Holders of the Series E Preferred Stock.
6. Optional
Redemption. The Company may redeem the Series E Preferred Stock on ten days written notice for a cash redemption price equal
to 130% of the original purchase price per share. Prior to redemption, the Holders may convert their shares on the terms set forth
in paragraph 4(a) for an optional conversion, and any such conversion will be subject to the limitations and other terms set forth
in paragraph 4(c).
7. Maturity.
The Series E Preferred Stock has no maturity date and no sinking fund has been established for the retirement or redemption of
Series E Preferred Stock.
8. Rank. With
respect to payment distribution of assets upon a Liquidation Event, the Series E Preferred Stock shall rank senior to the Series
B Preferred Stock, the Series D Preferred Stock and the Common Stock.
9. Voting
Rights.
(a) Without
limiting any rights provided to the holders of shares of Series E Preferred Stock under the General Corporation Law of the State
of Delaware, the holders of shares of Series E Preferred Stock shall be entitled to vote as a single class with the holders of
the Common Stock on all matters submitted to a vote of stockholders of the Corporation; provided, however, that the Series E Preferred
Stock is not entitled to vote on any proposal to approve the issuance of the Excess Conversion Shares or the Individual Excess
Conversion Shares, in each case as required by the NASDAQ’s Marketplace Rules (it being further acknowledged that Conversion
Shares outstanding on the record date for such approval, if any, will not be taken into account in tabulating the results of such
vote).
(b) Each
share of Series E Preferred Stock shall entitle the holder thereof to the number of votes equal to the lesser of (i) the number
of full shares of Common Stock into which such share of Series E Preferred Stock could then be converted (taking into account,
for the avoidance of doubt, the conversion restrictions in paragraphs 4(c) and 4(d) resulting from the Nasdaq Share Cap and the
Individual Holder Share Cap, if and as applicable) at the record date for the determination of the stockholders entitled to vote
on such matters or, if no such record date is established, at the date such vote is taken or any written consent of stockholders
is first executed, or (ii) 15,625 votes.
(c) Further,
as long as any shares of Series E Preferred Stock are issued and outstanding, the Corporation shall not, without the affirmative
vote of the Holders of a majority of the then issued and outstanding shares of the Series E Preferred Stock, (a) alter or change
adversely the powers, preferences or rights given to the Series E Preferred Stock or alter or amend this Certificate of Designation,
(b) amend its certificate of incorporation or other organizational documents in any manner that adversely affects any rights of
the Holders, (c) increase the number of authorized shares of the Series E Preferred Stock or (d) enter into any agreement with
respect to any of the foregoing.
10. Miscellaneous.
(a) Notices.
Any and all notices or other communications or deliveries to be provided by the Corporation hereunder shall be in writing and delivered
personally, by facsimile, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile
number or address of such Holder appearing on the books of the Corporation.
(b) Lost
or Mutilated Series E Preferred Stock Certificate. If a Holder’s Series E Preferred Stock certificate shall be mutilated,
lost, stolen or destroyed, the Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of
a mutilated certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the
shares of Series E Preferred Stock so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft
or destruction of such certificate, and of the ownership hereof reasonably satisfactory to the Corporation.
(c) Waiver.
Any waiver by the Corporation or a Holder of a breach of any provision of this Certificate of Designation shall not operate as
or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Certificate
of Designation or a waiver by any other Holders. The failure of the Corporation or a Holder to insist upon strict adherence to
any term of this Certificate of Designation on one or more occasions shall not be considered a waiver or deprive that party (or
any other Holder) of the right thereafter to insist upon strict adherence to that term or any other term of this Certificate of
Designation on any other occasion. Any waiver by the Corporation or a Holder must be in writing.
11. Effective
Date. The Certificate of Designation shall be effective on June 13, 2019 upon the filing of the Certificate of Designation
with the Secretary of State of Delaware.
RESOLVED,
FURTHER, that the Chairman of the Board, the president or any vice-president, and the secretary or any assistant secretary, of
the Corporation be and they hereby are authorized and directed to prepare and file this Certificate of Designation of Preferences,
Rights and Limitations in accordance with the foregoing resolution and the provisions of Delaware law.
[Signature page follows]
[Signature page to Certificate of Designation]
IN WITNESS WHEREOF,
the undersigned have executed this Certificate of Designation effective as of the date set forth above.
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/s/ Carl Schwartz
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Carl Schwartz, Chief Executive Officer of Predictive Oncology Inc.
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/s/ Bob Myers
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Bob Myers, Chief Financial Officer of Predictive Oncology Inc.
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B-7
Precision Therapeutics Inc. (NASDAQ:AIPT)
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Precision Therapeutics Inc. (NASDAQ:AIPT)
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