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): January 10, 2020

 

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		NYSE American

 

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. ☒

 

 

 

Forward-Looking Statements

 

OncoCyte Corporation cautions you that this Current Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 concerning, but not limited to, the Company’s proposed acquisition, through a newly-formed subsidiary, of Insight Genetics, Inc., a Tennessee corporation (“Insight”), and the effects of the merger. The proposed merger described in this Current Report has not, and may not, close. All statements that are not historical facts (including, but not limited to statements that contain words such as “will,” “likely,” “may,” “believes,” “plans,” “anticipates,” “expects,” “estimates,” “intends,” “seeks,” “designs,” “develops,” “would,” “future,” “can,” “could,” “project,” “potential,” and similar expressions) are forward-looking statements. Factors that could cause or contribute to changes in the forward-looking statements include, but are not limited to (i) failure to satisfy the conditions to the completion of the acquisition on the anticipated schedule, or at all, (ii) failure to realize the anticipated benefits of the acquisition, (iii) unexpected expenditures or assumed liabilities that may be incurred as a result of the acquisition, (iv) unanticipated difficulties in conforming business practices, including accounting policies, procedures, internal controls, and financial records of Insight with OncoCyte, (v) inability to accurately forecast the performance of Insight resulting in unforeseen adverse effects on OncoCyte’s operating results, (vi) synergies between Insight and OncoCyte being estimates which may be materially different from actual results, (vii) failure to retain or integrate Insight personnel, (viii) greater than estimated allocations of company resources to develop and commercialize Insight technologies, or (ix) failure to maintain any laboratory accreditation or certification. Forward-looking statements involve risks and uncertainties, including, without limitation, risks inherent in the development and commercialization of potential diagnostic tests or products, uncertainty in the results of clinical trials, changes to regulatory requirements, the need and ability to obtain future capital, protection of trade secrets and maintenance of other intellectual property rights, and the need to obtain third party reimbursement for patients’ use of any diagnostic tests we commercialize. 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 on 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. 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.

 

References to “OncoCyte,” “we,” “us,” and “our” are references to OncoCyte Corporation.

 

The information contained in Item 7.01 of this Report and the exhibits attached hereto 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 liabilities 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.

 

Item 1.01 Entry into a Material Definitive Agreement.

 

Merger Agreement with Insight Genetics

 

On January 10, 2020, OncoCyte Corporation, a California corporation (the “Company” or “OncoCyte”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Cancer DX Sub, Inc., a Tennessee corporation and a wholly-owned subsidiary of OncoCyte (“Merger Sub”), Insight Genetics, Inc., a Tennessee corporation (“Insight”), the shareholders party to the Merger Agreement (the “Shareholders”) and the equityholder representative. Pursuant to the Merger Agreement, Merger Sub will be merged with and into OncoCyte (the “Merger”) with OncoCyte surviving the Merger. OncoCyte’s board of directors and Insight’s board of directors have approved the Merger Agreement.

 

Merger Consideration

 

If the Merger is completed, OncoCyte will deliver closing consideration of $7 million in cash and $5 million of OncoCyte common shares, subject to a holdback for indemnity claims not to exceed ten percent of the total closing consideration, or $700,000 of cash and $500,000 of OncoCyte common shares (the “Holdback Consideration”), less deductions for transaction expenses and other liabilities. The value of the newly issued shares will be determined based on the average closing price of OncoCyte common shares on the New York Stock Exchange American during the five trading days immediately preceding the date of the Merger Agreement, which is approximately 1.9 million shares of OncoCyte common stock before the ten percent Holdback Consideration of OncoCyte shares. The Holdback Consideration will be released within 60 days after December 31, 2020, unless OncoCyte provides notice of a claim.

 

 

Earnout Consideration

 

As additional consideration for Insight’s shareholders, the Merger Agreement provides for OncoCyte to pay a ten-year revenue share of not more than ten percent of net collected revenues for current Insight pharma service offerings and a tiered revenue share percentage of net collected revenues through the end of the lifecycle if certain new cancer tests are developed and commercialized using Insight technology.

 

Milestones

 

OncoCyte may pay contingent consideration of up to $6.0 million, in any combination of cash or OncoCyte common shares, if certain milestones are achieved, which consist of a $1.5 million clinical trial completion and data publication milestone, $3.0 million for an affirmative final local coverage determination from Centers for Medicare and Medicaid Services (“CMS”) for a specified lung cancer test, and up to $1.5 million for achieving specified CMS reimbursement milestones.

 

Representations and Warranties, Pre-Closing Covenants, Closing Conditions and Termination Provisions

 

The Merger Agreement includes representations, warranties and covenants of OncoCyte, Insight and Merger Sub made solely for the purposes of the Merger Agreement and which may be subject to important qualifications and limitations agreed to by OncoCyte, Insight and Merger Sub in connection with the negotiated terms of the Merger Agreement.

 

The Merger Agreement also contains pre-closing covenants, including the obligation of Insight and its subsidiary to conduct business in the ordinary course in a manner consistent with past practice and to refrain from taking specified actions without the consent of OncoCyte.

 

The completion of the Merger is subject to the satisfaction or waiver of closing conditions, including: (i) the absence of any applicable law or order that prohibits completion of the Merger, (ii) performance in all material respects of the obligations required to be performed by the other party pursuant to the Merger Agreement at or prior to the completion of the Merger, (iii) the accuracy of certain representations and warranties made in the Merger Agreement by the other party, subject to certain knowledge or materiality qualifications, (iv) no Shareholders entitled to vote on the Merger will have provided notice of exercise of their dissenter’s rights, and (v) Insight will have placed its trade secrets in escrow with a mutually agreed upon escrow company and will have provided OncoCyte or its legal counsel with access to Insight’s trade secrets and other intellectual property.

 

The Merger Agreement also includes termination provisions for both OncoCyte and Insight, including the right to terminate by mutual consent and the right of either party to terminate the Merger Agreement if the closing has not occurred on or prior to March 31, 2020.

 

The foregoing summary of the Merger Agreement and the transactions contemplated by the Merger Agreement does not purport to be complete. It is not intended to provide any other factual information about OncoCyte, Insight and Merger Sub, or to modify or supplement any factual disclosures about OncoCyte in its public reports filed with the SEC.

 

Registration Rights

 

Pursuant to the Merger Agreement, OncoCyte agreed to file a registration statement with the SEC covering the resale the shares of common stock issued in connection with the Merger within six months following the closing.

 

Related Persons

 

In October 2015, Insight issued a convertible promissory note in the original principal amount of $3,050,000 and a warrant for 1,525,000 shares, with a warrant exercise price of $0.01 to IG Investors, LLC (“IG Investors”). Our President and Chief Executive Officer and board member, Ron A. Andrews, owns a membership interest in IG Investors, and formerly served on Insight’s board from June 2015 to August 2019. In his capacity as a member of IG Investors, under the original terms of the convertible promissory note, we estimate that Mr. Andrews will receive $0.7 million in cash upon the closing of the Merger, as he has agreed to forfeit $0.4 million in additional consideration that would otherwise be due to him under the terms of the promissory note. Mr. Andrews has also agreed to re-assign his membership interest to IG Investors, and to cancel his rights under the warrants and will not receive any additional merger or earnout consideration. Mr. Andrews will not receive any OncoCyte common shares in connection with the Merger.

 

 

Item 3.02 Unregistered Sales of Equity Securities.

 

The disclosure in Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference. Any common stock issued in connection with the Merger Agreement will be issued in a private placement transaction, in reliance upon exemptions from registration requirements pursuant to Section 4(a)(2) under the Securities Act of 1933, as amended, and the rules promulgated thereunder.

 

Item 7.01 Regulation FD Disclosure.

 

On January 10, 2020, OncoCyte issued (i) a press release announcing the entry into the Merger Agreement, a copy of which is attached and furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated into this Item 7.01 by reference, and (ii) a company presentation including information about the Merger, a copy of which is attached and furnished as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated into this Item 7.01 by reference.

 

Item 9.01 Financial Statements and Exhibits.

 

Exhibit Number		Description
99.1		Press Release dated January 10, 2020
99.2		Informational slide presentation

 

 

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: January 10, 2020	By:	/s/ Mitchell Levine
		Mitchell Levine
		Chief Financial Officer