UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2016

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from___________ to __________

Commission file number 1-37648

OncoCyte Corporation
 (Exact name of registrant as specified in its charter)
California
 
27-1041563
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)

1010 Atlantic Avenue, Suite 102
Alameda, California 94501
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code
(510) 775-0515

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    ☒ Yes    ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer
☐
 
Accelerated filer
☐
Non-accelerated filer
☒
(Do not check if a smaller reporting company)
Smaller reporting company
☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ☐ Yes ☒ No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

As of August 10, 2016, there were outstanding 25,431,174 shares of common stock, no par value.
 
PART 1--FINANCIAL INFORMATION

Statements made in this Report that are not historical facts may constitute forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those discussed. Such risks and uncertainties include but are not limited to those discussed in this Report under Item 1 of the Notes to Financial Statements, and under Risk Factors in this Report. Words such as “expects,” “may,” “will,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” and similar expressions identify forward-looking statements.

References to “OncoCyte,” “our” or “we” means OncoCyte Corporation.

The description or discussion, in this Form 10-Q, of any contract or agreement is a summary only and is qualified in all respects by reference to the full text of the applicable contract or agreement.
 
2
Item 1. Financial Statements
 
ONCOCYTE CORPORATION
CONDENSED BALANCE SHEETS
(IN THOUSANDS)

   
June 30,
2016
(Unaudited)
   
December 31,
2015
(Note 1)
 
ASSETS
           
CURRENT ASSETS
           
Cash and cash equivalents
 
$
4,000
   
$
7,996
 
BioTime shares held as available-for-sale securities, at fair value
   
1,617
     
2,541
 
Prepaid expenses and other current assets
   
129
     
388
 
Total current assets
   
5,746
     
10,925
 
                 
NONCURRENT ASSETS
               
Intangible assets, net
   
1,109
     
1,230
 
Equipment and furniture, net
   
515
     
576
 
Deposits
   
54
     
-
 
TOTAL ASSETS
 
$
7,424
   
$
12,731
 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
CURRENT LIABILITIES
               
Amount due to parent, BioTime
 
$
1,688
   
$
807
 
Amount due to affiliates
   
151
     
40
 
Accounts payable
   
192
     
285
 
Accrued expenses and other current liabilities
   
509
     
1,182
 
Capital lease liability, current portion
   
173
     
-
 
Total current liabilities
   
2,713
     
2,314
 
Capital lease liability, net of current portion
   
244
     
-
 
TOTAL LIABILITIES
   
2,957
     
2,314
 
                 
Commitments and contingencies (see Note 8)
               
                 
STOCKHOLDERS’ EQUITY
               
Preferred stock, no par value, 5,000 shares authorized; none issued and outstanding
   
-
     
-
 
Common stock, no par value, 50,000 shares authorized; 25,431 and 25,391 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively
   
35,345
     
34,901
 
Accumulated other comprehensive loss on available-for-sale securities
   
(1,273
)
   
(350
)
Accumulated deficit
   
(29,605
)
   
(24,134
)
Total stockholders’ equity
   
4,467
     
10,417
 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 
$
7,424
   
$
12,731
 

The accompanying notes are an integral part of these unaudited condensed financial statements.
 
3
ONCOCYTE CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

   
Three Months Ended
June 30,
   
Six Months Ended
June 30,
 
   
2016
   
2015
   
2016
   
2015
 
EXPENSES:
                       
Research and development
 
$
(1,195
)
 
$
(886
)
 
$
(2,884
)
 
$
(2,004
)
General and administrative
   
(1,337
)
   
(519
)
   
(2,580
)
   
(769
)
Total operating expenses
   
(2,532
)
   
(1,405
)
   
(5,464
)
   
(2,773
)
                                 
Loss from operations
   
(2,532
)
   
(1,405
)
   
(5,464
)
   
(2,773
)
                                 
OTHER INCOME (EXPENSES), NET
                               
Interest income (expense), net
   
(11
)
   
(6
)
   
(7
)
   
(7
)
Total other income (expenses), net
   
(11
)
   
(6
)
   
(7
)
   
(7
)
                                 
NET LOSS
 
$
(2,543
)
 
$
(1,411
)
 
$
(5,471
)
 
$
(2,780
)
                                 
Basic and diluted net loss per share
 
$
(0.10
)
 
$
(0.07
)
 
$
(0.22
)
 
$
(0.13
)
                                 
Weighted average common shares outstanding: basic and diluted
   
25,427
     
21,200
     
25,411
     
21,200
 

The accompanying notes are an integral part of these unaudited condensed financial statements.
 
4
ONCOCYTE CORPORATION
CONDENSED STATEMENTS OF COMPREHENSIVE LOSS
(IN THOUSANDS)
(UNAUDITED)

   
Three Months Ended
June 30,
   
Six Months Ended
June 30,
 
   
2016
   
2015
   
2016
   
2015
 
NET LOSS
 
$
(2,543
)
 
$
(1,411
)
 
$
(5,471
)
 
$
(2,780
)
Other comprehensive loss, net of tax:
   
 
     
 
     
 
     
 
 
Unrealized loss on BioTime shares held as available-for-sale securities
   
(161
)
   
(1,179
)
   
(923
)
   
(88
)
COMPREHENSIVE LOSS
 
$
(2,704
)
 
$
(2,590
)
 
$
(6,394
)
 
$
(2,868
)

The accompanying notes are an integral part of these unaudited condensed financial statements.
 
5
ONCOCYTE CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

   
Six Months Ended
June 30,
 
   
2016
   
2015
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net loss
 
$
(5,471
)
 
$
(2,780
)
Adjustments to reconcile net loss to net cash used in operating activities:
               
Depreciation expense
   
54
     
21
 
Amortization of intangible assets
   
121
     
121
 
Stock-based compensation
   
361
     
151
 
Contingently issuable warrant expense to investors
   
-
     
65
 
Changes in operating assets and liabilities:
               
Amount due to parent, BioTime
   
881
     
1,373
 
Amount due to affiliates
   
111
     
(150
)
Prepaid expenses and other current assets
   
259
     
67
 
Accounts payable and accrued liabilities
   
(290
)
   
(16
)
Net cash used in operating activities
   
(3,974
)
   
(1,148
)
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Purchase of equipment
   
(10
)
   
(11
)
Security deposit
   
(54
)
   
-
 
Net cash used in investing activities
   
(64
)
   
(11
)
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Proceeds from exercise of options
   
82
     
-
 
Proceeds from issuance of common shares
   
-
     
3,300
 
Repayment of capital lease obligation
   
(40
)
   
-
 
Net cash provided by financing activities
   
42
     
3,300
 
                 
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
   
(3,996
)
   
2,141
 
CASH AND CASH EQUIVALENTS:
               
At beginning of the period
   
7,996
     
257
 
At end of the period
 
$
4,000
   
$
2,398
 

The accompanying notes are an integral part of these unaudited condensed financial statements.
 
6
ONCOCYTE CORPORATION
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
(UNAUDITED)

1. Organization, Basis of Presentation and Liquidity

OncoCyte Corporation (“OncoCyte”) was incorporated in 2009 in the state of California and is a majority-owned subsidiary of BioTime, Inc. (“BioTime”), a publicly traded biotechnology company focused in the field of regenerative medicine. OncoCyte is developing molecular cancer diagnostics utilizing a discovery platform that focuses on identifying genetic markers broadly expressed in numerous types of cancer. OncoCyte is presently focusing its efforts on developing diagnostic tests for use in detecting a variety of cancers including lung, bladder, and breast cancers.

Basis of presentation

The financial statements presented herein, and discussed below, have been prepared on a stand-alone basis. The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Commission. In accordance with those rules and regulations certain information and footnote disclosures normally included in comprehensive financial statements have been condensed or omitted pursuant to such rules and regulations. The balance sheet as of December 31, 2015 was derived from the audited financial statements at that date, but does not include all the information and footnotes required by GAAP. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in OncoCyte’s Annual Report on Form 10-K for the year ended December 31, 2015.

The accompanying interim condensed financial statements, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of OncoCyte’s financial condition and results of operations. The condensed results of operations are not necessarily indicative of the results to be expected for any other interim period or for the entire year.

BioTime has consolidated the results of OncoCyte into BioTime’s consolidated results based on BioTime’s ability to control OncoCyte’s operating and financial decisions and policies through its majority ownership of OncoCyte common stock throughout the periods presented. BioTime owned 57.7% of the outstanding common stock of OncoCyte at June 30, 2016 and December 31, 2015.

To the extent OncoCyte does not have its own employees or human resources for its operations, BioTime or BioTime subsidiaries provide certain employees for administrative or operational services, as necessary, for the benefit of OncoCyte (see Note 4). Accordingly, BioTime allocates expenses such as salaries and payroll related expenses incurred and paid on behalf of OncoCyte based on the amount of time that particular employees devote to OncoCyte affairs. Other expenses such as legal, accounting, marketing, travel, and entertainment expenses are allocated to OncoCyte to the extent that those expenses are incurred by or on behalf of OncoCyte. BioTime also allocates certain overhead expenses such as rent, insurance, internet and telephone expenses based on a percentage determined by management. These allocations are made based upon activity-based allocation drivers such as time spent, percentage of square feet of office or laboratory space used, and percentage of personnel devoted to OncoCyte’s operations or management. Management evaluates the appropriateness of the percentage allocations on a quarterly basis and believes that this basis for allocation is reasonable.

OncoCyte grants stock options to employees of BioTime, or employees of other BioTime subsidiaries who perform services for OncoCyte, and OncoCyte recorded stock-based compensation expense in the accompanying condensed statements of operations for these services performed in the periods presented.
 
7
Liquidity

For all periods presented, OncoCyte had generated no revenues. Since inception, OncoCyte has financed its operations through the sale of its common stock to its shareholders, including BioTime, loans from BioTime and other BioTime affiliates, and sales of BioTime common shares that OncoCyte holds as available-for-sale securities. OncoCyte has incurred operating losses and negative cash flows since inception, and had an accumulated deficit of $29.6 million and $24.1 million at June 30, 2016 and December 31, 2015, respectively.

OncoCyte plans to continue to invest significant resources in research and development in the field of cancer molecular diagnostics. OncoCyte expects to continue to incur operating losses and negative cash flows. The unavailability or inadequacy of financing to meet future capital needs could force OncoCyte to modify, curtail, delay, or suspend some or all aspects of its planned operations. Sales of additional equity securities could result in the dilution of the interests of its shareholders. OncoCyte will need to obtain additional debt or equity capital in order to finance its operations. OncoCyte cannot assure that such financing will be available on favorable terms, if at all.

As of June 30, 2016, OncoCyte had $4.0 million in cash and cash equivalents and held BioTime shares available-for-sale, valued at $1.6 million, which OncoCyte may use for working capital purposes, as necessary. Based on cash and available-for-sale securities currently on hand and projected rates of expenditure, OncoCyte believes that it will be able to fund ongoing operations through December 31, 2016 but would need to raise additional capital to establish a diagnostic testing laboratory and to commercialize any of the cancer diagnostic tests that it is developing.

2. Summary of Significant Accounting Policies

Net loss per common share

The computations of basic and diluted net loss per share of common stock are as follows (in thousands, except per share amounts):

 
Six Months Ended
June 30,
(Unaudited)
 
 
2016
 
2015
 
Net loss
 
$
(5,471
)
 
$
(2,780
)
Weighted average common shares outstanding – basic and diluted
   
25,411
     
21,200
 
Net loss per share – basic and diluted
 
$
(0.22
)
 
$
(0.13
)

The following common stock equivalents were excluded from the computation of diluted net loss per share of common stock for the periods presented because including them would have been antidilutive (in thousands):

 
Six Months Ended
June 30,
(Unaudited)
 
   
2016
   
2015
 
Stock options
   
2,803
     
2,445
 
 
8
Recent accounting pronouncements

In August 2014, the FASB issued ASU No. 2014-15, "Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern". ASU No. 2014-15 defines management's responsibility to assess an entity's ability to continue as a going concern, and to provide related footnote disclosures in certain circumstances. I n connection with preparing financial statements for each annual and interim reporting period, ASU No. 2014-15 requires that an entity’s management evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). ASU No. 2014-15 is effective for annual and interim reporting periods ending after December 15, 2016. Early adoption is permitted. OncoCyte has not elected early adoption and believes the impact of the adoption of ASU No. 2014-15 could have a material adverse impact on OncoCyte’s financial statements.

3. Selected Balance Sheet Components

Prepaid expenses and other current assets

As of June 30, 2016 and December 31, 2015, prepaid expenses and other current assets were comprised of the following (in thousands):

   
June 30, 2016
(Unaudited)
   
December 31,
2015
 
Prepaid license fees
 
$
17
   
$
19
 
Outside research
   
-
     
366
 
Insurance
   
27
     
-
 
Other prepaid expenses and current asset
   
85
     
3
 
Prepaid expenses and other current assets
 
$
129
   
$
388
 

Accrued expenses and other current liabilities

As of June 30, 2016 and December 31, 2015, accrued expenses and other current liabilities were comprised of the following (in thousands):

   
June 30, 2016
(Unaudited)
   
December 31,
2015
 
Accrued bonuses and payroll related expenses
 
$
163
   
$
325
 
Other accrued expenses
   
346
     
857
 
Accrued expenses and other current liabilities
 
$
509
   
$
1,182
 

Intangible assets, net

As of June 30, 2016 and December 31, 2015, intangible assets were comprised of the following (in thousands):

   
June 30, 2016
(Unaudited)
   
December 31,
2015
 
Intangible assets
 
$
2,419
   
$
2,419
 
Accumulated amortization
   
(1,310
)
   
(1,189
)
Intangible assets, net
 
$
1,109
   
$
1,230
 

Amortization expense amounted to $121,000 for the six months ended June 30, 2016 and 2015, respectively.
 
9
Equipment and furniture, net

As of June 30, 2016 and December 31, 2015, equipment and furniture were comprised of the following (in thousands):

   
June 30, 2016
(Unaudited)
   
December 31,
2015
 
Equipment and furniture
 
$
743
   
$
750
 
Accumulated depreciation
   
(228
)
   
(174
)
Equipment and furniture, net
 
$
515
   
$
576
 
 
On April 7, 2016, OncoCyte entered into a lease schedule under a Master Lease Line Agreement for certain equipment costing approximately $458,000 (see Note 8), requiring payments of $14,442 per month over 36 months. OncoCyte has accounted for this lease as a capital lease in accordance with ASC 840, Leases , due to the net present value of the payments under the lease approximating the fair value of the equipment at inception of the lease, or approximately $458,000.
 
4. Related Party Transactions
 
Shared Facilities and Service Agreement

On October 8, 2009, OncoCyte and BioTime executed a Shared Facilities and Services Agreement (“Shared Facilities Agreement”). Under the terms of the Shared Facilities Agreement, BioTime will allow OncoCyte to use its premises and equipment located at Alameda, California for the sole purpose of conducting business. BioTime will also provide accounting, billing, bookkeeping, payroll, treasury, payment of accounts payable, and other similar administrative services to OncoCyte. BioTime may also provide the services of attorneys, accountants, and other professionals who may also provide professional services to BioTime and its other subsidiaries. BioTime will also provide OncoCyte with the services of its laboratory and research personnel, including BioTime employees and contractors, for the performance of research and development work for OncoCyte at the premises.

BioTime charges OncoCyte a Use Fee for services received and usage of facilities, equipment, and supplies. For each billing period, BioTime prorates and allocates costs incurred, as applicable, to OncoCyte, such costs include services of Bio Time employees, equipment, insurance, lease, professional, software, supplies and utilities. Allocation depends on key cost drivers including actual documented use, square footage of facilities used, time spent, costs incurred by or for OncoCyte, or upon proportionate usage by BioTime and OncoCyte, as reasonably estimated by BioTime (collectively “Use Fees”). BioTime, at its discretion, has the right to charge OncoCyte a 5% markup on such allocated costs although BioTime has not elected to charge this markup since the inception of the Shared Facilities Agreement. The allocated cost of BioTime employees and contractors who provide services is based upon records maintained of the number of hours of such personnel devoted to the performance of services.

The Use Fee is determined and invoiced to OncoCyte on a quarterly basis for each calendar quarter of each calendar year. If the Shared Facilities Agreement terminates prior to the last day of a billing period, the Use Fee will be determined for the number of days in the billing period elapsed prior to the termination of the Shared Facilities Agreement. Each invoice will be payable in full by OncoCyte within 30 days after receipt. Any invoice, or portion thereof, not paid in full when due will bear interest at the rate of 15% per annum until paid, unless the failure to make a payment is due to any inaction or delay in making a payment by BioTime employees from OncoCyte funds available for such purpose, rather than from the unavailability of sufficient funds legally available for payment or from an act, omission, or delay by any employee or agent of OncoCyte. Through June 30, 2016 BioTime has not charged OncoCyte any interest.

In addition to the Use Fees, OncoCyte will reimburse BioTime for any out of pocket costs incurred by BioTime for the purchase of office supplies, laboratory supplies, and other goods and materials and services for the account or use of OncoCyte, provided that invoices documenting such costs are delivered to OncoCyte with each invoice for the Use Fee. Furthermore, BioTime will have no obligation to purchase or acquire any office supplies or other goods and materials or any services for OncoCyte, and if any such supplies, goods, materials or services are obtained for OncoCyte, BioTime may arrange for the suppliers thereof to invoice OncoCyte directly.
 
10
The Shared Facilities Agreement will remain in effect, unless either party gives the other party written notice stating that the Shared Facilities Agreement will terminate on December 31 of that year, or unless the agreement otherwise terminated under another provision of the agreement.

In aggregate, BioTime allocated and charged such Use Fees to OncoCyte approximating $381,000 and $243,000 included in general and administrative expenses, and $393,000 and $302,000 included in research and development expenses included in the statements of operations for the six months ended June 30, 2016 and 2015, respectively.

As of June 30, 2016 and December 31, 2015, OncoCyte had $1.8 million and $847,000 payable to BioTime and affiliates included in current liabilities in connection with the costs incurred under the Shared Facilities Agreement. Since these amounts are due and payable in 30 days of being invoiced, the payables are classified as current liabilities for all periods presented.
 
Master Lease Line Agreement

On April 7, 2016, OncoCyte entered into a Master Lease Line Agreement (the “Lease Agreement”) with an unrelated financing company for the purchase and financing of certain equipment. BioTime was named as a co-lessee under the Lease Agreement. If OncoCyte raises equity financing greater than $10 million, the lessor will release BioTime from the Lease Agreement as a co-lessee. See Note 8.

5. Shareholders’ Equity

Preferred Stock

OncoCyte is authorized to issue up to 5,000,000 shares of no par value preferred stock. As of June 30, 2016, no preferred shares were issued or outstanding.

Common Stock

During the six months ended June 30, 2016, 40,207 shares of common stock were issued upon the exercise of stock options, from which OncoCyte received approximately $82,000 in cash proceeds.

6. Stock-based Compensation

Options Granted

OncoCyte has adopted a Stock Option Plan (the “Plan”) under which 4,000,000 shares of common stock are authorized for the grant of stock options or the sale of restricted stock. The Plan also permits OncoCyte to issue such other securities as its Board of Directors or the Compensation Committee administering the Plan may determine.

As of June 30, 2016, 1,154,084 shares of common stock were available for future grants under the Plan.

A summary of OncoCyte stock option activity under the Plan and related information follows (in thousands except weighted average exercise price):

Options
 
Shares
Available for
Grant
   
Number of
Options
Outstanding
   
Weighted
Average
Exercise
Price
 
Outstanding at December 31, 2015
   
1,757
     
2,240
   
$
2.03
 
Options granted
   
(637
)
   
637
     
3.06
 
Options exercised
   
-
     
(40
)
   
2.06
 
Options forfeited
   
5
     
(5
)
   
-
 
Options cancelled
   
29
     
(29
)
   
2.20
 
Outstanding at June 30, 2016
   
1,154
     
2,803
   
$
2.26
 
Exercisable at June 30, 2016
           
1,317
   
$
1.82
 

There were 40,207 stock options exercised during the six months ended June 30, 2016.
 
11
OncoCyte recorded stock-based compensation expense in the following categories on the accompanying condensed statements of operations for the six months ended June 30, 2016 and 2015 (in thousands):

 
Six Months Ended
June 30,
(Unaudited)
 
   
2016
   
2015
 
Research and development
 
$
96
   
$
74
 
General and administrative
   
265
     
77
 
Total stock-based compensation expense
 
$
361
   
$
151
 

The assumptions that were used to calculate the grant date fair value of OncoCyte’s employee and non-employee stock option grants for the six months ended June 30, 2016 and 2015 were as follows.
 
   
2016
   
2015
 
Expected life (in years)
   
6.36
     
6.07
 
Risk-free interest rates
   
1.37
%
   
1.73
%
Volatility
   
70.42
%
   
73.02
%
Dividend yield
   
-
%
   
-
%

Stock-based compensation expense is recognized based on awards that are ultimately expected to vest, and as a result, the amount has been reduced by estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures are estimated based on OncoCyte’s historical experience and future expectations.

The determination of stock-based compensation is inherently uncertain and subjective and involves the application of valuation models and assumptions requiring the use of judgment. If OncoCyte had made different assumptions, its stock-based compensation expense and net loss for the six months ended June 30, 2016 and 2015 may have been significantly different.

There was no net income tax benefit recognized in the statements of operations for stock-based compensation expense for non-qualified stock options, as OncoCyte fully offset net deferred tax assets with a valuation allowance (see Note 7). In addition, OncoCyte does not recognize deferred income taxes for incentive stock option compensation expense, and records a tax deduction only when a disqualified disposition has occurred.

7. Income Taxes

The provision for income taxes is determined using an estimated annual effective tax rate. The effective tax rate may be subject to fluctuations during the year as new information is obtained, which may affect the assumptions used to estimate the annual effective tax rate, including factors such as valuation allowances against deferred tax assets, the recognition or de-recognition of tax benefits related to uncertain tax positions, if any, and changes in or the interpretation of tax laws in jurisdictions where OncoCyte conducts business.

Due to losses incurred for all periods presented, OncoCyte did not record any provision or benefit for income taxes.

A valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets will not be realized. OncoCyte established a full valuation allowance for all periods presented due to the uncertainty of realizing future tax benefits from its net operating loss carryforwards and other deferred tax assets.
 
12
8. Commitments and Contingencies

Master Lease Line Agreement

On April 7, 2016, OncoCyte entered into the Lease Agreement with an unrelated financing company for the purchase and financing of certain equipment. OncoCyte may use up to $875,000 for purchases of equipment financed by this Lease Agreement between March 29, 2016 through March 28, 2017, the expiration date of the availability of funds under the Lease Agreement. Each lease schedule OncoCyte enters into under the Lease Agreement must be in minimum increments of $50,000 each with a 36-month lease term, collateralized by the equipment financed under the lease schedule; each lease schedule requires a deposit for the first and last payment under that schedule. Monthly payments will be determined using a lease factor approximating an interest rate of 10% per annum. At the end of each lease schedule under the Lease Agreement, assuming no default has occurred, OncoCyte may either return the equipment financed under the schedule for a restocking fee of 7.5% of the original cost of the equipment or purchase the equipment from the financing company at a fair value not less than 12.5% of the original cost of the equipment. BioTime was named as a co-lessee under the Lease Agreement. If OncoCyte raises equity financing greater than $10 million, the lessor will release BioTime from the Lease Agreement as a co-lessee.

On April 7, 2016, OncoCyte entered into a lease schedule under the Lease Agreement for certain equipment costing approximately $458,000, requiring payments of $14,442 per month over 36 months. OncoCyte has accounted for this lease as a capital lease in accordance with ASC 840, Leases , due to the net present value of the payments under the lease approximating the fair value of the equipment at inception of the lease, or approximately $458,000. The payments under the lease schedule will be amortized to capital lease obligations and interest expense using the interest method at an imputed rate of approximately 10% per annum. As of June 30, 2016, there was approximately $417,000 available under the Lease Agreement for purchases and financing of equipment.

Litigation – General

OncoCyte will be subject to various claims and contingencies in the ordinary course of its business, including those related to litigation, business transactions, employee-related matters, and others. When OncoCyte is aware of a claim or potential claim, it will assess the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of the loss can be reasonably estimated, OncoCyte will record a liability for the loss. If the loss is not probable or the amount of the loss cannot be reasonably estimated, OncoCyte will disclose the claim if the likelihood of a potential loss is reasonably possible and the amount involved could be material. OncoCyte is not presently a party to any litigation.

Employment Contracts

OncoCyte has entered into employment contracts with certain executive officers. Under the provisions of the contracts, OncoCyte may be required to incur severance obligations for matters relating to changes in control, as defined, and involuntary terminations.

Indemnification

In the normal course of business, OncoCyte may provide indemnification of varying scope under OncoCyte’s agreements with other companies or consultants, typically OncoCyte’s clinical research organizations, investigators, clinical sites, suppliers and others. Pursuant to these agreements, OncoCyte will generally agree to indemnify, hold harmless, and reimburse the indemnified parties for losses and expenses suffered or incurred by the indemnified parties arising from claims of third parties in connection with the use or testing of OncoCyte’s diagnostic tests. Indemnification provisions could also cover third party infringement claims with respect to patent rights, copyrights, or other intellectual property pertaining to OncoCyte’s diagnostic tests. The term of these indemnification agreements will generally continue in effect after the termination or expiration of the particular research, development, services, or license agreement to which they relate. The potential future payments OncoCyte could be required to make under these indemnification agreements will generally not be subject to any specified maximum amounts. Historically, OncoCyte has not been subject to any claims or demands for indemnification. OncoCyte also maintains various liability insurance policies that limit OncoCyte’s financial exposure. As a result, OncoCyte management believes that the fair value of these indemnification agreements is minimal. Accordingly, OncoCyte has not recorded any liabilities for these agreements as of June 30, 2016 and December 31, 2015.
 
13
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The matters addressed in this Item 2 that are not historical information constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, including statements about any of the following: any projections of earnings, revenue, cash, effective tax rate, use of net operating losses, or any other financial items; the plans, strategies and objectives of management for future operations or prospects for achieving such plans, and any statements of assumptions underlying any of the foregoing. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” “seeks,” “estimates,” and similar expressions are intended to identify forward-looking statements. While OncoCyte may elect to update forward-looking statements in the future, it specifically disclaims any obligation to do so, even if the OncoCyte estimates change and readers should not rely on those forward-looking statements as representing OncoCyte views as of any date subsequent to the date of the filing of this Quarterly Report. Although we believe that the expectations reflected in these forward-looking statements are reasonable, such statements are inherently subject to risks and OncoCyte can give no assurances that its expectations will prove to be correct. Actual results could differ materially from those described in this report because of numerous factors, many of which are beyond the control of OncoCyte. A number of important factors could cause the results of the company to differ materially from those indicated by such forward-looking statements, including those detailed under the heading “Risk Factors” in Part I, Item 1A of OncoCyte Form 10-K for the year ended December 31, 2015.

The following discussion should be read in conjunction with OncoCyte’s interim condensed financial statements and the related notes provided under “Item 1- Financial Statements” above.

Critical Accounting Policies

This Management's Discussion and Analysis of Financial Condition and Results of Operations discusses and analyzes data in our unaudited condensed interim financial statements, which we have prepared in accordance with U.S. generally accepted accounting principles. Preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Senior management has discussed the development, selection and disclosure of these estimates with the Audit Committee of our Board of Directors. Actual conditions may differ from our assumptions and actual results may differ from our estimates.

An accounting policy is deemed critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably likely to occur could materially impact the financial statements. Management believes that there have been no significant changes during the six months ended June 30, 2016 to the items that we disclosed as our critical accounting policies and estimates in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2015.
 
14
Results of Operations

Comparison of three and six months ended June 30, 2016 and 2015

The following tables show our operating expenses for the three and six months ended June 30, 2016 and 2015 (in thousands).

 
Three Months Ended
June 30,
 
$ Increase
 
% Increase
 
 
2016
 
2015
         
Research and development expenses
 
$
1,195
   
$
886
   
$
+309
     
+34.9
%
General and administrative expenses
   
1,337
     
519
     
+818
     
+157.6
%

 
Six Months Ended
June 30,
 
$ Increase
 
% Increase
 
 
2016
 
2015
         
Research and development expenses
 
$
2,884
   
$
2,004
   
$
+880
     
+43.9
%
General and administrative expenses
   
2,580
     
769
     
+1,811
     
+235.5
%

Research and development expenses

The following table shows the approximate amounts and percentages of our total research and development expenses of $2.9 million and $2.0 million allocated to our primary research and development projects during the six months ended June 30, 2016 and 2015, respectively (in thousands).

   
Amount (1)
   
Percent
 
Program
 
2016
   
2015
   
2016
   
2015
 
                         
General
 
$
747
   
$
632
     
25.9
%
   
31.5
%
Bladder cancer confirmatory diagnostic
   
270
     
576
     
9.4
%
   
28.7
%
Breast cancer confirmatory diagnostic
   
286
     
685
     
9.9
%
   
34.2
%
Lung cancer confirmatory diagnostic
   
1,489
     
73
     
51.6
%
   
3.6
%
Diagnostics laboratory
   
85
     
17
     
3.0
%
   
0.9
%
COLX
   
7
     
17
     
0.2
%
   
0.9
%
Prostate cancer confirmatory diagnostic
   
-
     
4
     
-
%
   
0.2
%
Total
 
$
2,884
   
$
2,004
     
100
%
   
100
%

(1) Amount also includes certain general research and development expenses, such as laboratory supplies, laboratory expenses, rent allocated, and insurance allocated to research and development expenses, incurred directly by BioTime on behalf of OncoCyte and allocated to OncoCyte under the Shared Facilities Agreement.

Research and development expenses for the six months ended June 30, 2016 increased to $2.9 million from $2.0 million for the same period in 2015. The increases in research and development expenses during 2016 are primarily attributable to the following increases: $320,000 of outside research services, $214,000 of laboratory expenses, $139,000 of scientific consulting services, $113,000 of clinical trial expenses and $55,000 of business development expenses.

We increased our research and development expenses for the development of our lung cancer diagnostic test, and reduced our research and development expenses for our other cancer diagnostic tests, during the six months ended June 30, 2016 compared to the same period of 2015, reflecting our prioritization of the development of the lung cancer test. We expect to continue to incur a significant amount of research and development expenses during the foreseeable future.
 
15
General and administrative expenses

General and administrative expenses for the six months ended June 30, 2016 increased to $2.6 million from $769,000 for the same period in 2015. The increase in general and administrative expenses during 2016 is primarily attributable to the following increases: $400,000 of salaries and payroll related expenses allocated to general and administrative expenses, $276,000 of general consulting expenses, $201,000 of general and administrative expenses allocated to us by BioTime, $188,000 of stock based compensation expenses, $187,000 of transfer agent, stock listing and SEC filing expenses, $171,000 of accounting and audit related expenses, $169,000 of legal expenses and $98,000 of marketing research expenses. These increases are primarily as a result of increased staffing, including both management and consulting personnel, salary increases for our executive officers, and increased compliance costs related to being a publicly traded company.

Income taxes

Due to our losses incurred for all periods presented, we did not record any provision or benefit for income taxes.

A valuation allowance will be provided when it is more likely than not that some portion of the deferred tax assets will not be realized. OncoCyte established a full valuation allowance for all periods presented due to the uncertainty of realizing future tax benefits from its net operating loss carryforwards and other deferred tax assets.

Liquidity and Capital Resources

At June 30, 2016, we had $4.0 million of cash and cash equivalents and held BioTime common shares as available-for-sale securities valued at $1.6 million.

Based on cash and other liquid assets currently on hand and projected rates of expenditure we believe that we will be able to fund our ongoing operations through December 31, 2016. However, we may require additional capital during 2016 if based on the results of our research and development efforts we determine to build and obtain certification of a diagnostic laboratory and commence developing a sales and marketing team during the current year to commercialize our first diagnostic test.

We will need to obtain additional debt or equity capital in order to finance our operations. We cannot assure that such financing will be available on favorable terms, if at all. Since inception, we have financed our operations through the sale of our common stock to our shareholders, loans from BioTime and BioTime affiliated entities, and the sale of BioTime common shares. The amount of revenue that may be earned through the licensing and sale of our diagnostic tests and technology, if any revenue is earned at all, the timing of the receipt of diagnostic test sales revenues, license fees, and royalty payments, if any at all, are uncertain. The unavailability or inadequacy of financing or revenues to meet our capital needs could force us to modify, curtail, delay, or suspend some or all aspects of our planned operations. Sales of additional equity securities could result in the dilution of the interests of our shareholders.
 
16
Cash used in operations

During the six months ended June 30, 2016 and 2015, our total research and development expenditures were $2.9 million and $2.0 million, respectively, and our general and administrative expenditures were $2.6 million and $769,000, respectively. Net loss for the six months ended June 30, 2016 and 2015 amounted to $5.5 million and $2.8 million, respectively. Net cash used in operating activities during these periods amounted to $4.0 million and $1.1 million, respectively. The amount by which our net loss exceeded net cash used in our operations during 2016 is primarily due to the following: $881,000 in amounts owed to BioTime; $361,000 in noncash stock-based compensation to employees, consultants and independent directors; $259,000 in prepaid expenses and other current assets; $175,000 in amortization of intangible assets and depreciation of equipment and furniture; and $111,000 in amount due from affiliates. This overall difference was offset to some extent by a decrease of $290,000 in accounts payable and accrued expenses.

Cash provided by investing activities

During the six months ended June 30, 2016 and 2015, we paid $54,000 and $0, respectively in security deposits and $10,000 and $11,000, respectively, for purchases of machinery and equipment.

Cash provided by financing activities

During the six months ended June 30, 2016, we received $82,000 in cash from the exercise of stock options. During the same period in 2015, we issued 1,500,000 shares of common stock for $3.3 million cash, or $2.20 per share.

Off-Balance Sheet Arrangements

As of June 30, 2016 and December 31, 2015, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes in our qualitative and quantitative market risk since the disclosure in our Annual Report on Form 10 ‑ K for the year ended December 31, 2015.
                         
Available for sale securities at fair value
                                
We hold 619,706 BioTime common shares at fair value, therefore our available-for-sale investment value is subject to changes in the stock price of BioTime. BioTime common shares trade on the NYSE MKT under the ticker “BTX”. As of June 30, 2016, the 52 week high/low stock price per share range for BioTime was $2.02 - $4.51.
                                  
Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

It is management’s responsibility to establish and maintain adequate internal control over all financial reporting pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 (“Exchange Act”). Our management, including our principal executive officer and principal financial officer, have reviewed and evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Following this review and evaluation , the principal executive officer and principal financial officer determined that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to management, including our principal executive officer, and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls

There were no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
17
PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may be involved in routine litigation incidental to the conduct of our business. We are not presently involved in any material litigation or proceedings, and to our knowledge no such litigation or proceedings are contemplated.

Item 1A. Risk Factors

Our business is subject to various risks, including those described below. You should consider the following risk factors, together with all of the other information included in this report and the risks described in our Annual Report on Form 10-K for the year ended December 31, 2015, which could materially adversely affect our proposed operations, business prospects, and financial condition, and the value of an investment in our business. There may be other factors that are not mentioned here or of which we are not presently aware that could also affect our business operations and prospects.

We have incurred operating losses since inception and we do not know if we will attain profitability

Since our inception in September 2009, we have incurred operating losses and negative cash flow and we expect to continue to incur losses and negative cash flow in the future. Our net losses for the six months ended June 30, 2016 and for the fiscal years ended December 31, 2015 and 2014 were approximately $5.5 million, $8.7 million and $5.0 million, respectively, and we had an accumulated deficit of approximately $29.6 million and $24.1 million as of June 30, 2016 and December 31, 2015, respectively. Since inception, we have financed our operations through the sale of our common stock, loans from BioTime and BioTime affiliates, and sale of BioTime common shares that we hold as available-for-sale securities. Although BioTime may continue to provide administrative support to us on a reimbursable basis, there is no assurance that BioTime will provide future financing. There is no assurance that we will be able to obtain any additional financing that we may need, or that any such financing that may become available will be on terms that are favorable to us and our shareholders. Ultimately, our ability to generate sufficient operating revenue to earn a profit depends upon our success in developing and marketing or licensing our diagnostic tests and technology.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3 Default Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5 Other Information

None.
 
18
Item 6

Exhibit
Numbers
 
Exhibit Description
3.1  
Articles of Incorporation with all amendments (1)
       
3.2  
Bylaws, as amended (1)
       
10.1  
Second Amendment to License Agreement, dated January 25, 2016, between OncoCyte Corporation and The Wistar Institute of Anatomy and Biology *
       
31  
Rule 13a-14(a)/15d-14(a) Certification *
       
32  
Section 1350 Certification *
       
101
 
Interactive Data File
       
101.INS
 
XBRL Instance Document *
       
101.SCH
 
XBRL Taxonomy Extension Schema *
       
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase *
       
101.LAB
 
XBRL Taxonomy Extension Label Linkbase *
       
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase *
       
101.DEF
 
XBRL Taxonomy Extension Definition Document *

(1) Incorporated by reference to OncoCyte Corporation’s Form 10 12(b) filed on November 23, 2015.

* Filed herewith.
 
19
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, thereunto duly authorized.

 
ONCOCYTE CORPORATION
     
Date: August 11, 2016
/s/ William Annett
 
 
William Annett
 
President and Chief Executive Officer

Date: August 11, 2016
/s/ Russell L. Skibsted
 
 
Russell L. Skibsted
 
Chief Financial Officer
 
 
20
Exhibit 10.1
 
SECOND AMENDMENT TO LICENSE AGREEMENT

This Second Amendment (the "Second Amendment") is made effective as of May 27, 2016 (the "Second Amendment Effective Date"), by and between The Wistar Institute of Anatomy and Biology ("Wistar") and Oncocyte Corporation ("OncoCyte").

BACKGROUND

WHEREAS the parties entered into a License Agreement dated January 22, 2016 (the "License Agreement");

WHEREAS the parties amended the License Agreement by entering into a First Amendment to the License Agreement dated January 25, 2016 (the "First Amendment"); and

WHEREAS now seeking to add an additional patent application to the amended License Agreement the parties wish to enter into this Second Amendment.

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, and intending to be legally bound hereby, the parties hereto agree as follows:

1.           All capitalized terms not expressly defined herein shall have the same meanings assigned to them in the amended License Agreement. Except as expressly amended or modified herein, all other terms and conditions of the amended License Agreement remain in full force and effect.

2.           Exhibit A of the License Agreement shall be deleted in its entirety and replaced with the attached Exhibit A-l included in this Second Amendment.

3.            In consideration of this Second Amendment, Oncocyte shall pay to Wistar a one-time, non-refundable, non-creditable license amendment fee of twenty-five thousand dollars ($25,000 USD) within 30 days of the Second Amendment Effective Date.

4.           This Second Amendment shall be construed by and enforced in accordance with the laws of the Commonwealth of Pennsylvania without regard to its principles of conflicts of law.

5.           This Second Amendment shall become binding when any one or more counterparts hereof, individually or taken together, shall bear the signatures of Wistar and OncoCyte. This Second Amendment may be executed in any number of counterparts, and counterparts may be exchanged by electronic transmission (including by email), each of which shall be deemed an original as against the party whose signature appears thereon, but all of which taken together shall constitute but one and the same instrument.

Second Amendment
Wistar Reference No. LIC15-35-AMD-2
Wistar/Oncocyte
27-May-16
Tech ID No. 16-16
 
Page 1 of 3
IN WITNESS WHEREOF, the parties have caused this First Amendment to be executed by their duly authorized representatives as of the First Amendment Effective Date.
 
THE WISTAR INSTITUTE OF ANATOMY AND BIOLOGY   ONCOCYTE CORPORATION  
         
By:
/s/ Heather Steinman  
By:
/s/ William Annett  
   
Name:
Heather Steinman  
Name:
William Annett  
   
Title:
Vice President for Business Development &  
Title:
CEO  
  Executive Director, Technology Transfer        
The Wistar Institute  
Date:
July 5, 2016  
Date:
May 27, 2016        
 
Second Amendment
Wistar Reference No. LIC15-35-AMD-2
Wistar/Oncocyte
27-May-16
Tech ID No. 16-16
 
Page 2 of 3
EXHIBIT A-l

Licensed Patents

Tech ID
Serial Number
Filing Date
Title
Inventors
15-12
62/163,766
May 19, 2015
Methods and Compositions for Diagnosing or Detecting Lung Cancers
Drs. Louise
Showe, Michael K. Showe, Andrei V. Kossenkov
16-16
To be provided
June,2016
Compositions and Methods for Diagnosing Lung Cancers Using Gene Expression Profiles
Drs. Louise
Showe, Michael K. Showe, Andrei V. Kossenkov
 
Second Amendment
Wistar Reference No. LIC15-35-AMD-2
Wistar/Oncocyte
27-May-16
Tech ID No. 16-16
 
 
Page 3 of 3
Exhibit 31

CERTIFICATIONS

I, William Annett, certify that:

1. I have reviewed this quarterly report on Form 10-Q of OncoCyte Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this periodic report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 11, 2016

/s/ William Annett
 
William Annett
 
Chief Executive Officer
 
 
Exhibit 31
CERTIFICATIONS

I, Russell L. Skibsted, certify that:

1. I have reviewed this quarterly report on Form 10-Q of OncoCyte Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this periodic report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 11, 2016

/s/ Russell L. Skibsted
 
Russell L. Skibsted
 
Chief Financial Officer
 
 
 
Exhibit 32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of OncoCyte Corporation (the “Company”) for the quarter ended June 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we William Annett, Chief Executive Officer, and Russell L. Skibsted, Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 11, 2016

/s/ William Annett
 
William Annett
 
Chief Executive Officer
 
   
/s/ Russell L. Skibsted
 
Russell L. Skibsted
 
Chief Financial Officer