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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date
of Report (date of earliest event reported):
December 15, 2022
Oncocyte Corporation
(Exact
name of registrant as specified in its charter)
California |
|
1-37648 |
|
27-1041563 |
(State
or other jurisdiction |
|
(Commission |
|
(IRS
Employer |
of
incorporation) |
|
File
Number) |
|
Identification
No.) |
15 Cushing
Irvine,
California
92618
(Address
of principal executive offices)
(949)
409-7600
(Registrant’s
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Exchange
Act:
Title
of each class |
|
Trading
Symbol |
|
Name
of each exchange on which registered |
Common Stock, no par value |
|
OCX |
|
The Nasdaq Stock Market LLC |
Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant
under any of the following provisions:
☐ |
Written
communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425) |
|
|
☐ |
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12) |
|
|
☐ |
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b)) |
|
|
☐ |
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c)) |
Indicate
by check mark whether the registrant is an emerging growth company
as defined in Rule 405 of the Securities Act of 1933 (§230.405 of
this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934
(§240.12b-2 of this chapter).
Emerging
growth company
☐
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ☐
Item
1.01 Entry into a Material Definitive Agreement.
On
December 15, 2022, Oncocyte Corporation, a California corporation
(“Oncocyte” or the “Company”), entered into a Stock Purchase
Agreement (the “Agreement”) with Dragon Scientific, LLC, a Delaware
limited liability company (“Buyer”), and Razor Genomics Inc., a
Delaware corporation and wholly-owned subsidiary of Oncocyte
(“Razor”). Pursuant to the Agreement, Oncocyte agreed to sell, and
Buyer agreed to purchase, 3,188,181 shares of common stock of
Razor, which constitutes approximately 70% of the issued and
outstanding equity interests of Razor on a fully-diluted basis.
Following the closing of the transaction (the “Closing”), Oncocyte
will own 1,366,364 shares of common stock of Razor, which will
constitute approximately 30% of the issued and outstanding equity
interests of Razor on a fully-diluted basis.
Razor
holds an exclusive worldwide license from The University of
California San Francisco under certain patent rights applicable to
DetermaRx™, which is used to predict a patient’s risk of cancer
recurrence following surgery and response to chemotherapy in
early-stage lung cancer. In connection with the transaction,
Oncocyte will transfer to Razor all of the assets and liabilities
related to DetermaRx. Oncocyte expects the transaction will allow
it to eliminate development and commercialization costs with
respect to DetermaRx while retaining 30% of any potential upside
from the test.
The
Agreement contains customary representations, warranties and
covenants. The Agreement also contains a covenant not to compete
whereby, for a period of five years after the Closing, Oncocyte and
its subsidiaries have agreed not to, develop, fund, research,
sponsor or otherwise promote any other DetermaRx RNA assay, subject
to certain exceptions. Oncocyte plans to continue its development
and commercialization efforts on other products in its current
portfolio.
The
Agreement provides that it is the goal of the parties that Razor
submit initial findings of the clinical trials involving the
DetermaRx RNA assay prior to the fifth anniversary of the Closing.
In the event that at any time after the fifth anniversary of the
Closing there (a) has not yet been submission of initial findings
of such trial for publication and (b) Razor has ceased to support
ongoing collection of data that will contribute to the publication
of initial findings for greater than six months, then all
intellectual property (as defined in the Agreement) of Razor as of
the Closing will automatically revert to Oncocyte, at no cost. The
Agreement also provides that certain employees of Oncocyte will be
offered employment with Razor effective as of and contingent on the
Closing.
The
Agreement contains customary indemnification provisions pursuant to
which the parties agree to indemnify each other for certain
matters, including, among other things, breaches of certain
representations, warranties and covenants in connection with the
transaction. The obligation of the parties to consummate the
transaction is subject to the satisfaction or waiver of certain
closing conditions, including that the parties have reached a
mutually acceptable arrangement regarding the royalties owed to
certain former shareholders of Razor pursuant to that certain
Sublicense and Distribution Agreement, dated as of September 30,
2019, by and among Razor, Oncocyte, and Encore Clinical, Inc. The
Agreement also contains customary termination rights of the
parties, including the right to terminate upon written notice of
either Buyer or Oncocyte, if either party fails to update the
disclosure schedules or exhibits to the Agreement as of the Closing
in a form mutually satisfactory to each party by February 1, 2023
so long as such party exercised good faith efforts.
In
connection with signing the Agreement, Razor redeemed all of the
outstanding Series A preferred stock of Razor held by Oncocyte. At
the Closing, Oncocyte will enter into (i) a transition services
agreement with Buyer, (ii) a real estate lease agreement with
Razor, (iii) a shareholder agreement of Razor with Buyer, and (iv)
a trademark license agreement with Razor.
The
foregoing description of the Agreement does not purport to be
complete and is qualified in its entirety by reference to the full
text of the Agreement, which is filed as Exhibit 2.1 hereto and
incorporated herein by reference. The representations, warranties
and covenants in the Agreement were made solely for the benefit of
the parties to the Agreement for the purpose of allocating
contractual risk among those parties, and do not establish these
matters as facts. Investors should not rely on the representations,
warranties and covenants as characterizations of the actual state
of facts or condition of Oncocyte or its respective subsidiaries or
affiliates.
Item 2.05 Costs Associated with Exit or Disposal
Activities.
On
December 16, 2022, Oncocyte announced a reduction in force
involving over 40% of its full-time employees (the “Reduction”),
which Oncocyte expects will decrease its annualized headcount
carrying costs by over approximately $10 million, exclusive of
related employee severance and benefit costs (as described further
below). The Reduction began on December 16, 2022 and is expected to
be completed in February 2023.
In
connection with the Reduction, we estimate that we will incur
charges of over approximately $1.0 million related to employee
severance and benefits costs.
Item
5.02 - Departure of Directors or Certain Officers; Election of
Directors; Appointment of Certain Officers; Compensatory
Arrangements of Certain Officers.
Executive Leadership Changes
On
December 16, 2022, Oncocyte issued a press release announcing its
C-suite has been restructured and the positions occupied by Gisela
Paulsen, President and Chief Operating Officer, and Douglas Ross,
Chief Scientific Officer, will be eliminated. A copy of the press
release is filed as Exhibit 99.1 hereto and incorporated herein by
reference.
Chief
Operating Officer Separation and Release Agreement
In
connection with Ms. Paulsen’s separation, the Company and Ms.
Paulsen entered into a separation agreement and general release of
all claims dated December 16, 2022 (the “Paulsen Separation
Agreement”). The Paulsen Separation Agreement provides that Ms.
Paulsen will receive benefits consisting of (i) a cash severance
amount of $207,500.02, which is payable over six (6) months in
substantially equal installments following December 16, 2022 (the
“Paulsen Effective Date”), (iii) accelerated vesting of Ms.
Paulsen’s unvested time-based stock options and restricted stock
unit awards that were scheduled to vest based solely on the passage
of time during the twelve (12) month period following the Paulsen
Effective Date, (iv) accelerated vesting of 175,000
performance-based restricted stock units, and (v) the extension of
the deadline to exercise vested stock options to the earlier to
occur of the one-year anniversary of the Paulsen Effective Date and
on the maximum term under the applicable stock option award
agreement.
As
part of the Paulsen Separation Agreement, Ms. Paulsen agreed to a
general release of all claims against the Company and certain
related entities. The Paulsen Separation Agreement confirms that
(x) certain provisions contained in Ms. Paulsen’s and change in
control and severance plan agreement, effective as of October 4,
2021, and (y) Ms. Paulsen’s employee confidential information and
inventions assignment agreement with the Company, effective October
5, 2021, including a twelve (12) month post-Paulsen Effective Date
non-solicit covenant, in each case, shall remain in full force and
effect. The Paulsen Separation Agreement also contains customary
terms applicable to the departure of an executive of the Company,
including mutual non-disparagement.
Chief
Science Officer Separation and Release Agreement
In
connection with Dr. Ross’ separation, the Company and Dr. Ross
entered into a separation agreement and general release of all
claims dated December 16, 2022 (the “Ross Separation Agreement”).
The Ross Separation Agreement provides that Dr. Ross will receive
benefits, consisting of (i) a cash severance amount of $281,250.06,
which is payable over nine (9) months in substantially equal
installments following December 16, 2022 (the “Ross Effective
Date”), and (ii) a payment of nine (9) months of premium costs of
group health plan continuation coverage in the total amount of
$20,799, which is payable over nine (9) months in substantially
equal installments following the Ross Effective Date.
As
part of the Ross Separation Agreement, Dr. Ross agreed to a general
release of all claims against the Company and certain related
entities. The Ross Separation Agreement confirms that (x) certain
provisions contained in Dr. Ross’ employment agreement with the
Company, dated March 23, 2020, as amended, and change in control
and severance plan agreement, effective as of March 1, 2020,
including a twelve (12) month post-Ross Effective Date non-solicit
covenant, and (y) Dr. Ross employee confidential information and
inventions assignment agreement with the Company, effective March
16, 2020, in each case, shall remain in full force and effect. The
Ross Separation Agreement also contains customary terms applicable
to the departure of an executive of the Company, including mutual
non-disparagement.
In
addition, to ensure a smooth transition, the Company and Dr. Ross
entered into a consulting agreement, dated as of December 16, 2022
(the “Consulting Agreement”), pursuant to which Dr. Ross will
provide non-employee consulting and advisory services to the
Company, on a non-exclusive basis, from December 17, 2022 until
March 31, 2023. The Consulting Agreement provides that in
consideration of the services, on the third business day following
December 17, 2022, Dr. Ross will receive a grant of restricted
stock pursuant to the Company’s 2018 Equity Incentive Plan, as
amended from time to time (the “Plan”), with a grant date fair
market value of $56,250 (as determined in accordance with the
Plan), which restricted stock units shall vest in three equal
monthly installments (with the first installment vesting January on
31, 2023) over the consulting term, subject to Dr. Ross’ continued
compliance with any restrictive covenants by which he may be bound
and continued provision of services on each applicable vesting
date; provided, that if the if the Company terminates the
Consulting Agreement prior to March 31, 2023, any unvested
restricted stock units will vest. Either party may terminate the
Consulting Agreement for any reason upon ten (10) days’ written
notice
The
foregoing descriptions of the Paulsen Separation Agreement, the
Ross Separation Agreement and the Consulting Agreement are not
intended to be complete and are qualified in their entirety by the
Paulsen Separation Agreement, the Ross Separation Agreement and the
Consulting Agreement filed herewith as Exhibits 10.1, 10.2, and
10.3 to this Current Report on Form 8-K and incorporated herein by
reference.
Item
7.01 Regulation FD Disclosure.
On
December 16, 2022, Oncocyte issued a press release announcing
initiatives to focus corporate strategy, a copy of which is
attached hereto as Exhibit 99.1 and is incorporated herein by
reference.
The
information under this Item 7.01 and the accompanying Exhibit 99.1
shall be deemed “furnished” and not “filed” under Section 18 of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”),
or otherwise subject to the liability of that section, and shall
not be incorporated by reference into any filings made by Oncocyte
under the Securities Act of 1933, as amended, or the Exchange Act
except as may be expressly set forth by specific reference in such
filing.
Note
Regarding Forward-Looking Statements.
This
Current Report on Form 8-K includes forward-looking statements. Any
statements that are not historical fact (including, but not limited
to statements that contain words such as “will,” “believes,”
“plans,” “anticipates,” “expects,” “estimates,” “may,” and similar
expressions) are forward-looking statements. These statements
include those pertaining to, among other things, the transactions
contemplated by the Agreement, Oncocyte’s plans with respect to the
development and commercialization of products after the Closing,
the expected decrease in annualized headcount carrying costs and
estimated employee severance and benefits costs associated with the
Reduction, and other statements about the future expectations,
beliefs, goals, plans, or prospects expressed by management.
Forward-looking statements involve risks and uncertainties,
including, without limitation, the potential impact of COVID-19 on
Oncocyte or its subsidiaries’ financial and operational results,
risks inherent in the development and/or commercialization of
diagnostic tests or products, uncertainty in the results of
clinical trials or regulatory approvals, the capacity of Oncocyte’s
third-party supplied blood sample analytic system to provide
consistent and precise analytic results on a commercial scale,
potential interruptions to supply chains, the need and ability to
obtain future capital, maintenance of intellectual property rights
in all applicable jurisdictions, obligations to third parties with
respect to licensed or acquired technology and products, the need
to obtain third party reimbursement for patients’ use of any
diagnostic tests Oncocyte or its subsidiaries commercialize in
applicable jurisdictions, and risks inherent in strategic
transactions such as the potential failure to realize anticipated
benefits, legal, regulatory or political changes in the applicable
jurisdictions, accounting and quality controls, potential greater
than estimated allocations of resources to develop and
commercialize technologies, or potential failure to maintain any
laboratory accreditation or certification. Actual results may
differ materially from the results anticipated in these
forward-looking statements and accordingly such statements should
be evaluated together with the many uncertainties that affect the
business of Oncocyte, particularly those mentioned in the “Risk
Factors” and other cautionary statements found in Oncocyte’s
Securities and Exchange Commission (“SEC”) filings, which are
available from the SEC’s website. You are cautioned not to place
undue reliance on forward-looking statements, which speak only as
of the date on which they were made. The events and circumstances
reflected in Oncocyte’s forward-looking statements may not be
achieved or occur and actual results could differ materially from
those projected in the forward-looking statements. New risk factors
and uncertainties may emerge from time to time, and it is not
possible for management to predict all risk factors and
uncertainties. Oncocyte undertakes no obligation to update such
statements to reflect events that occur or circumstances that exist
after the date on which they were made, except as required by
law.
Item
9.01 Financial Statements and Exhibits.
Exhibit
Number |
|
Description |
2.1 |
|
Stock Purchase Agreement, dated December 15, 2022, by and among
Dragon Scientific, LLC, Oncocyte Corporation and Razor Genomics
Inc. |
|
|
|
10.1 |
|
Separation Agreement and General Release of All Claims, by and
between the Company and Gisela Paulsen, dated December 16,
2022.
|
|
|
|
10.2 |
|
Separation Agreement and General Release of All Claims, by and
between the Company and Douglas Ross, dated December 16,
2022.
|
|
|
|
10.3 |
|
Consulting Agreement, by and between the Company and Douglas Ross,
dated as of December 16, 2022. |
|
|
|
99.1 |
|
Press release announcing Initiatives to Focus Corporate Strategy,
dated December 16, 2022.
|
|
|
|
104 |
|
Cover
Page Interactive Data File (embedded within the Inline XBRL
document) |
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
|
ONCOCYTE
CORPORATION
|
|
|
|
Date:
December 21, 2022 |
By: |
/s/
Anish John |
|
|
Anish
John |
|
|
Chief
Financial Officer |
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