OncoCyte Corp (Form: 8-K, Received: 05/12/2020 16:43:52)

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): May 7, 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

Any statements that are not historical fact (including, but not limited to statements that contain words such as “may,” “will,” “believes,” “plans,” “intends,” “anticipates,” “expects,” “estimates”) should also be considered to be forward-looking statements. Additional factors that could cause actual results to differ materially from the results anticipated in these forward-looking statements are contained in OncoCyte Corporation’s Annual Report on Form 10-K and Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission (“SEC”) under the heading “Risk Factors” and in other filings that Oncocyte may make with the SEC. Undue reliance should not be placed on these forward-looking statements which speak only as of the date they are made, and the facts and assumptions underlying these statements may change. Except as required by law, Oncocyte disclaims any intent or obligation to update these forward-looking statements.

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

The information in Item 2.02 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.

Item 1.01 - Entry Into a Material Definitive Agreement

The information reported in Item 5.02 is incorporated by reference into this Item 1.01.

Item 2.02 - Results of Operations and Financial Condition

On May 12, 2020, Oncocyte issued a press release announcing its financial results for the three months ended March 31, 2020. A copy of the press release is attached as Exhibit 99.1, which, in its entirety, is incorporated herein by reference.

Item 5.02 - Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On May 7, 2020, we entered into Acknowledgement and Agreements (the “Deferral Agreements”), pursuant to our compensation deferral program, with our executive officers and our directors who are not Oncocyte employees, pursuant to which our executive officers have agreed to defer a portion of their salary (including a bonus deferral in the case of our Chief Executive Officer), and the directors have agreed to defer a portion of their director fees, during the period May 11 through December 4, 2020.

Ronald Andrews, our Chief Executive Officer, has agreed to defer 30% of his base salary, and $186,240 of a discretionary bonus that otherwise would have been payable in cash. Mr. Andrews’ deferred salary amounts will bear interest at 10% per annum, and his deferred bonus will bear interest at 6% per annum. Mr. Andrews has also agreed to accept restricted stock units (“RSUs”) for 106,221 shares of common stock under our 2018 Equity Incentive Plan (the “Incentive Plan”) in lieu of $279,360 in cash as part of his discretionary bonus, without application of the deferred payment and interest provisions of his Deferral Agreement so that the RSUs will not be part of his “deferral payment” described below. The 106,221 shares of RSUs were determined based on the cash payable value of $279,360 divided by the $2.63 per share closing price of Oncocyte common stock as quoted on the NYSE American on May 7, 2020. The RSUs will vest on May 7, 2021, the anniversary of the grant date.

Mitchell Levine, our Chief Financial Officer, and Lyndal Hesterberg, our Chief Scientific Officer, each agreed to defer 20% of his base salary, which will bear interest at 6% per annum.

We will pay Messrs. Andrews, Levine, and Hesterberg their deferred salary, and Mr. Andrews’ deferred bonus, plus accrued interest (“the deferral payment”) on a date we determine but not later than the first to occur of (i) December 31, 2020, (ii) the termination of the executive’s employment by us without cause, or (iii) a change in control of Oncocyte as defined in our Incentive Plan. The deferral payment may be settled with cash, Oncocyte common stock, or a combination of cash and common stock, provided that not less than 40% will be settled by a cash payment. If shares of common stock are issued in lieu of cash, the number of shares issued shall be calculated based on the “fair market value” of our common stock determined in accordance with our Incentive Plan.

The foregoing description of the Deferral Agreements is a summary only, does not purport to be complete, and is qualified in all respects by the full terms of the Deferral Agreements which are filed as exhibits to this Report.

Item 9.01 - Financial Statements and Exhibits.

Exhibit Number		Description

10.1		Acknowledgement and Agreement, dated May 7, 2020, between OncoCyte Corporation and Ronald Andrews

10.2		Acknowledgement and Agreement, dated May 7, 2020, between OncoCyte Corporation and Mitchell Levine

10.3		Acknowledgement and Agreement, dated May 7, 2020, between OncoCyte Corporation and Lyndal Hesterberg

99.1		Press release dated May 12, 2020

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: May 12, 2020	By:	/s/ Mitchell Levine
		Mitchell Levine
		Chief Financial Officer

Exhibit 10.1

ACKNOWLEDGEMENT AND AGREEMENT

This ACKNOWLEDGEMENT AND AGREEMENT (the “Agreement”) is effective as of May 7, 2020, by and between, Oncocyte Corporation (the “Company”) and Ronnie Andrews, an individual (“Participant”), with reference to the following facts:

RECITALS

WHEREAS, the Company is facing, and is expected to continue to face, economic hardship due to the COVID-19 pandemic;

WHEREAS, Participant and the Company have mutually agreed to defer some or all of Participant’s compensation to a future date upon the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the mutual promises and the representations and warranties contained in this Agreement, incorporating the recitals above, and for other good and valuable consideration, the receipt and sufficiency of which is acknowledged by the parties, the parties hereby covenant and agree as follows:

AGREEMENT

1. Base Compensation Deferral. Notwithstanding any provision of Participant’s employment agreement or service agreement with the Company, Participant hereby agrees to defer (“Deferral”) Thirty Percent (30%) of Participant’s base salary (or $5,538.46/per pay period) for each of the Company’s regular payroll periods between May 11, 2020 and December 4, 2020 and the entire Cash Bonus Payment, as defined below (total deferred amount, “Deferred Compensation” and period between May 11, 2020 and December 4, 2020, the “Short-Term Deferral Period”). The Company shall pay to Participant the total value of Participant’s total Deferred Compensation, plus interest (“Interest”) accruing (from the date Deferred Compensation was otherwise due to be paid until the date it is actually paid) at an annual rate of Ten Percent (10%), except for Cash Bonus Payment deferral, which shall accrue interest at a rate of Six Percent (6%) (collectively, the “Deferral Amount”), no later than the Final Payment Date, as defined below. Upon the termination of the Short-Term Deferral Period, Participant’s base salary shall be reinstated.

2. Payment Method. As payment of the Deferral Amount, Company shall pay at least Forty Percent (40%) of such Deferral Amount (which shall be deemed the portion of the Deferral Amount that includes accrued Interest) in cash. The remaining Sixty Percent (60%) of the Deferral Amount may be paid to Participant in (i) cash; (ii) shares of the Company’s common stock; or (iii) some combination thereof, as requested by the Participant at the time of payment and approved by the Compensation Committee of the Company’s Board of Directors (the “Committee”). For the purposes of any portion of the Deferral Amount which is paid in shares of the Company’s common stock, the value of the Company’s shares of common stock on the payment date shall be their Fair Market Value, as determined under the Company’s 2018 Equity Incentive Plan (the “Plan”).

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3. No Effect On Payments For Ancillary Services. Participant and the Company acknowledge and agree that to the extent any compensation or benefit (including any bonus entitlement and severance entitlement) is calculated by reference to Participant’s base salary (other than Company’s contributions to its Oncocyte 401(k) plan), such compensation or benefit shall be calculated without taking into account the Deferral (i.e., taking into account Participant’s original base salary. Notwithstanding anything to the contrary in any Participant’s employment agreement or service agreement, as applicable, Participant acknowledges and agrees that Good Reason (or any similar term, in each case, as such term is defined in the Participant’s employment agreement or service agreement, as applicable, or any other agreement or arrangement by and between the Participant and the Company or any of its affiliates) shall not be triggered, and Participant shall not have the right to terminate Participant’s service relationship with the Company for Good Reason, solely as a result of the occurrence of the Deferral. In addition, Deferral shall not give rise to any claim by Participant for constructive termination.

4. Final Payment Date. The Deferral Amount shall be paid to Participant on such date as determined by the Committee, provided that it shall be paid no later than (i) December 31, 2020, (ii) Participant’s service with the Company is terminated by the Company without cause; or (iii) two business days following the Company undergoing a Change of Control, as defined in the Plan (the earlier of such events, a “Final Payment Date”).

5. Section 409A. The parties intend that this Agreement, as well as the payments and benefits under this Agreement, shall be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) or, if not so exempt, shall be treated in a manner which complies with the requirements of Section 409A, and the parties intend that this Agreement be construed and administered in accordance with such intention. In the event that the parties determine that the terms of this Agreement need to be modified in order to comply with Section 409A, the parties shall cooperate reasonably to do so in a manner intended to best preserve the economic benefits of this Agreement. The Company makes no representation that any or all of the payments or benefits described in this Agreement will be exempt from or comply with Section 409A and makes no undertaking to preclude Section 409A from applying to any such payment. Participant shall be solely responsible for the payment of any taxes and penalties incurred under Section 409A.

6. Amendment. This Agreement cannot be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge or termination is sought. The execution of any amendment to this Agreement by all parties hereto shall establish that such execution was made in accordance with any applicable requirements for approval.

7. Entire Agreement. This Agreement, contains the entire agreement of the parties and supersedes any prior written or oral agreements between them respecting the subject matter contained in the Agreement.

8. Bonus. Reference is made to Service’s Provider’s Employment Agreement with the Company, dated June 4, 2019, as amended (“Employment Agreement”). As is provided in Section 4(b) of the Employment Agreement, the payment of a bonus for any year is discretionary, the bonus is not earned until paid, may be paid in any form selected by the Board of Directors or the Compensation Committee of the Company, and Participant must be employed on the payment date to be eligible to earn the bonus. Participant’s bonus for 2019, shall be earned and paid as follows: 1. Participant shall receive $186,240 as part of Deferred Compensation (“Cash Bonus Payment”) subject to the terms and conditions of this Agreement (for purposes of Interest accrual, Cash Bonus Payment shall be deemed otherwise due to be paid on June 19, 2020 and shall be deemed vested as of such date); and (2) on or about the date hereof, Participant will be granted 106,221 (equivalent to $279,360) restricted stock units pursuant to the terms and subject to the conditions set forth in the Restricted Stock Unit Agreement, substantially in the form attached hereto as Exhibit A, and the Company’s 2018 Equity Incentive Plan. Participant acknowledges and agrees that he is not entitled to receive any other bonus payments for 2019 under Section 4(b) of the Employment Agreement.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the parties have executed this Participant Service Agreement to be effective as of the date first set forth above.

COMPANY:

Oncocyte Corporation

	By:
	Name:
	Its:

PARTICIPANT:


Ronnie Andrews

[Signature Page to ACKNOWLEDGEMENT AND AGREEMENT]

Exhibit 10.2

ACKNOWLEDGEMENT AND AGREEMENT

This ACKNOWLEDGEMENT AND AGREEMENT (the “Agreement”) is effective as of May 7, 2020, by and between, Oncocyte Corporation (the “Company”) and Mitch Levine, an individual (“Participant”), with reference to the following facts:

RECITALS

WHEREAS, the Company is facing, and is expected to continue to face, economic hardship due to the COVID-19 pandemic;

WHEREAS, Participant and the Company have mutually agreed to defer some or all of Participant’s compensation to a future date upon the terms and conditions hereinafter set forth.

AGREEMENT

1. Base Compensation Deferral. Notwithstanding any provision of Participant’s employment agreement or service agreement with the Company, Participant hereby agrees to defer (“Deferral”) Twenty Percent (20%)of Participant’s base salary (or $2,745.35/per pay period) for each of the Company’s regular payroll periods between May 11, 2020 and December 4, 2020 (total deferred amount, “Deferred Compensation” and period between May 11, 2020 and December 4, 2020, the “Short-Term Deferral Period”). The Company shall pay to Participant the total value of Participant’s total Deferred Compensation, plus interest (“Interest”) accruing (from the date Deferred Compensation was otherwise due to be paid until the date it is actually paid) at an annual rate of Six Percent (6%) (collectively, the “Deferral Amount”), no later than the Final Payment Date, as defined below. Upon the termination of the Short-Term Deferral Period, Participant’s base salary shall be reinstated.

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IN WITNESS WHEREOF, the parties have executed this Participant Service Agreement to be effective as of the date first set forth above.

COMPANY:

Oncocyte Corporation

	By:
	Name:
	Its:

PARTICIPANT:


Mitch Levine

[Signature Page to ACKNOWLEDGEMENT AND AGREEMENT]

Exhibit 10.3

ACKNOWLEDGEMENT AND AGREEMENT

This ACKNOWLEDGEMENT AND AGREEMENT (the “Agreement”) is effective as of May 7, 2020, by and between, Oncocyte Corporation (the “Company”) and Lyndal Hesterberg, an individual (“Participant”), with reference to the following facts:

RECITALS

WHEREAS, the Company is facing, and is expected to continue to face, economic hardship due to the COVID-19 pandemic;

WHEREAS, Participant and the Company have mutually agreed to defer some or all of Participant’s compensation to a future date upon the terms and conditions hereinafter set forth.

AGREEMENT

1. Base Compensation Deferral. Notwithstanding any provision of Participant’s employment agreement or service agreement with the Company, Participant hereby agrees to defer (“Deferral”) Twenty Percent (20%)of Participant’s base salary (or $2,671.38/per pay period) for each of the Company’s regular payroll periods between May 11, 2020 and December 4, 2020 (total deferred amount, “Deferred Compensation” and period between May 11, 2020 and December 4, 2020, the “Short-Term Deferral Period”). The Company shall pay to Participant the total value of Participant’s total Deferred Compensation, plus interest (“Interest”) accruing (from the date Deferred Compensation was otherwise due to be paid until the date it is actually paid) at an annual rate of Six Percent (6%) (collectively, the “Deferral Amount”), no later than the Final Payment Date, as defined below. Upon the termination of the Short-Term Deferral Period, Participant’s base salary shall be reinstated.

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IN WITNESS WHEREOF, the parties have executed this Participant Service Agreement to be effective as of the date first set forth above.

COMPANY:

Oncocyte Corporation

	By:
	Name:
	Its:

PARTICIPANT:


Lyndal Hesterberg

[Signature Page to ACKNOWLEDGEMENT AND AGREEMENT]

Exhibit 99.1

ONCOCYTE PROVIDES CORPORATE UPDATE AND REPORTS FIRST QUARTER 2020 FINANCIAL RESULTS

Announced Final Medicare LCD from Palmetto for DetermaRx™, Potentially Establishing Medicare Coverage for up to 70% of Eligible Early-Stage NSCLC Patients

Signed First Strategic International Collaboration for DetermaRx with CORE, a Leading Molecular Reference Lab in India, the Middle East and Africa

DetermaDx™ Clinical Validation Results On-Track for End of Q2 2020

Growing Pharma Services Opportunity with Full Suite of Molecular Analyses to Support Drug Development

Conference Call Today, May 12, at 4:30 PM EDT

IRVINE, Calif., May 12, 2020 — Oncocyte Corporation (NYSE American: OCX), a molecular diagnostics company with a mission to provide actionable answers at critical decision points across the cancer care continuum, today reported financial and operating results for the first quarter ended March 31, 2020, and provided a corporate update.

“Oncocyte has built remarkable momentum in 2020, and we have continued our strong execution across our programs to provide patients and doctors with actionable answers with the potential to improve outcomes,” said Ron Andrews, Chief Executive Officer of Oncocyte. “We were thrilled to announce the recent final Medicare LCD from Palmetto, establishing Medicare coverage for DetermaRx™, the first and only test for chemotherapy benefit prediction in patients with surgically resected early stage NSCLC. This is an incredibly important milestone for Oncocyte as it may lead to Medicare reimbursement for up to 70% of eligible early-stage NSCLC patients, and also is the first step in securing broader reimbursement with private payers that typically follow CMS decisions. Our onboarding of new sites continues at a rapid pace, despite the COVID-19 pandemic, and we are excited to have expanded the reach of DetermaRx to , India, the Middle East and Africa.”

Mr. Andrews continued, “We have also advanced DetermaIO^™, our immunotherapy response prediction test, to commercial availability for research use only, and look forward to moving forward with opportunities in pharma services for immunotherapy trials, while also uncovering the potential utility of this test more broadly for clinical use in lung cancer and other types of solid tumors. These accomplishments, in combination with our on-track progress with DetermaRx, DetermaDx™ Clinical Validation and our expanding offerings for pharma services, make it clear that Oncocyte has reached a new era in its transformation to a leader in molecular diagnostics in lung cancer.

Recent Corporate Highlights

●

DetermaRx

	○	Announced final Medicare local coverage determination (LCD) from Palmetto potentially establishing Medicare coverage for up to 70% of eligible early-stage lung cancer patients
	○	Announced commercial availability in January and now have 20 sites onboarded including a number of large healthcare systems
	○	Expanded international availability through a distribution agreement with CORE Diagnostics, providing commercial availability of DetermaRx™ in India, the Middle East and Africa
	○	Successfully pivoted to virtual physician engagement due to COVID-19 and continued efforts to increase adoption of DetermaRx with over 1,500 participants in online physician education programs
	○	ATS 2020 International Conference abstract selected for oral presentation with long-term follow-up data from a 195-patient study demonstrating the clinical utility of DetermaRx in identifying high-risk cancers that can recur rapidly if untreated, as well as the potential to safely reduce follow-up for low-risk patients to conserve healthcare resources and limit patient stress
	○	Abstract accepted for the 2020 ASCO Virtual Meeting detailing potential significant health economic savings provided by DetermaRx

●

DetermaIO

	○	Completed CLIA validation of DetermaIO
	○	Announced commercial launch for research use only as a reliable and robust option for academic research and biopharma companies
	○	Advancing pharma services opportunities, including immunotherapy trials and development of companion diagnostics in lung cancer and other solid tumors
	○	Abstract accepted for presentation at the 2020 ASCO Virtual Meeting highlighting the potential utility of DetermaIO in triple-negative breast cancer (TNBC), in addition to NSCLC

●

DetermaDx

	○	Announced successful completion of CLIA Validation Study
	○	Clinical Validation study on-track for completion in Q2 2020
		ATS 2020 International Conference abstract selected for oral presentation with data highlighting clinical features of the IRENE (Immune Response for Nodule Evaluation) Study population, a 2,903-patient sample biobank from 62 sites across the U.S. The study identified significant differences in the management of pulmonary nodules including different rates of invasive procedures across the academic, community and Veterans Affairs settings. These findings highlight the clinical decision challenge in managing the use of invasive biopsies for lung nodule diagnosis that DetermaDx has the potential to address.

●

Pharma Services

	○	Re-launch of pharma services offering with full suite of molecular analyses including tissue and blood-based technologies, proprietary platforms such as DetermaIO and TNBCType Assay, as well as custom next-generation sequencing and PCR services including whole exome sequencing, RNA-seq and targeted mutation panels
	○	With collaborators from MD Anderson Cancer Center, announced the peer-reviewed publication in PLOS One with data demonstrating the utility of the TNBCType Assay to inform triple-negative breast cancer drug development by identifying the most suitable cell lines to help biopharma and academic researchers develop new treatments

●

Financial and Corporate

	○	In April, Oncocyte successfully completed a $10.7 million registered offering of common shares, priced at the market, directly with fundamentally driven, healthcare focused institutional investors. This transaction builds on the successful $7.6 million registered offering in January, further strengthening Oncocyte’s balance sheet to support the continued commercialization of DetermaRx and DetermaIO, as well as the continued development of DetermaDx and other programs.
	○	Moved Oncocyte’s administrative and executive headquarters to Orange County, California, in January 2020 with ongoing plans to construct a clinical diagnostic and research laboratory to eventually have full service labs on the west and east coasts.

First Quarter 2020 Financial Highlights

At March 31, 2020, Oncocyte had cash, cash equivalents and marketable securities of $16.9 million as compared to $22.5 million at December 31, 2019. In April 2020, Oncocyte completed a $10.7 million registered offering of common shares, priced at the market.

Prior to January 1, 2020, Oncocyte had no revenues. During the current quarter, Oncocyte commercialized DetermaRx™ and completed the acquisition of Insight Genetics, providing sources of revenue generation and other commercial opportunities for the first time since the company’s inception.

Under U.S. accounting principles, Oncocyte will be able to recognize revenues on an accrual basis of accounting once it has contracts for reimbursement from third-party payers or a history of experience of cash collections for the tests performed, or both. Until that time, Oncocyte expects to recognize revenue for tests performed on a cash basis. Accordingly, Oncocyte will incur and accrue cost of revenues and other operating expenses related to its diagnostic tests, including DetermaRx™.

Beginning on January 31, 2020, Oncocyte’s consolidated financial statements and results also include the results from its wholly owned subsidiary, Insight Genetics, which Oncocyte acquired on that date.

For the first quarter ended March 31, 2020, Oncocyte reported a net loss of $7.7 million, or $(0.13) per share, as compared to $3.9 million, or $(0.08) per share, for the first quarter ended March 31, 2019.

Operating losses, as reported, for the first quarter of 2020 were $8.4 million, an increase of $4.4 million from $4.0 million as compared to the first quarter of 2019; and operating losses, on an adjusted basis, were $7.4 million, an increase of $4.2 million from $3.2 million as compared to the first quarter of 2019.

Oncocyte has provided a reconciliation between GAAP and non-GAAP operating losses in the financial tables, included with this earnings release, which it believes is helpful in understanding its ongoing operations.

Research and development expenses for first quarter of 2020 were $2.2 million as compared to $1.3 million for the same period in 2019, an increase of $0.9 million. The increase was primarily attributable to personnel and laboratory related expenses for clinical validation activities related to DetermaDx™.

General and administrative expenses for the first quarter of 2020 were $4.6 million, as compared to $2.4 million for the same period in 2019, an increase of $2.2 million. The increase was mainly due to personnel and related expenses; investment banking expenses; legal, business development, investor relations expenses; and noncash stock-based compensation expenses due to additional equity grants. As noted above, Oncocyte transitioned from the Lineage Cell Therapeutics (formerly BioTime) Shared Services agreement in the latter half of 2019, and established its own administrative, human resources, legal, finance and accounting functions and teams. This transition also includes the termination of the Shared Facilities agreement with Lineage as of December 31, 2019. In addition, Oncocyte moved its administrative and executive headquarters to Orange County, California, in January 2020 with ongoing plans to construct a clinical diagnostic and research laboratory to eventually have full service labs on the west and east coasts.

Sales and marketing expenses for the three months ended March 31, 2020, were $1.5 million, as compared to $0.2 million for the same period in 2019, an increase of $1.3 million. The increase was primarily due to ramping up in sales and marketing activities, including key hires, for commercialization of DetermaRx™.

Cash used in operations was approximately $6.9 million for the first quarter of 2020 as compared to approximately $6.7 million during the first quarter of 2019, which is in line with Oncocyte’s expectations as the first quarter of each year is generally the largest cash use quarter of the year due to the timing of payments of annual merit increases and other payments. Oncocyte also paid some nonrecurring, acquisition-related legal and other costs of approximately $0.5 million in the first quarter of 2020.

Conference Call

The Company will host a conference call today, May 12, 2020, at 4:30 pm EDT / 1:30 pm PDT to discuss the results along with recent corporate developments.

The dial-in number in the U.S./Canada is 877-407-9716; for international participants, the number is 201-493-6779. For all callers, please refer to Conference ID 13703079. To access the live webcast, go to the investor relations section on the Company’s website, or by clicking here: http://public.viavid.com/index.php?id=139620.

About Oncocyte Corporation

Oncocyte is a molecular diagnostics company whose mission is to provide actionable answers at critical decision points across the cancer care continuum, with the goal of improving patient outcomes by accelerating and optimizing diagnosis and treatment. The Company recently launched DetermaRx™, a treatment stratification test that enables the identification of early-stage lung cancer patients at high risk for recurrence post-resection, allowing them to be treated when their cancer may be more responsive to adjuvant chemotherapy. DetermaDx™, the company’s liquid biopsy test in development, utilizes a proprietary immune system interrogation approach to clarify if a patients’ lung nodules are benign, which may enable them to avoid potentially risky invasive diagnostic procedures. Oncocyte is also developing DetermaIO™, a gene expression test that identifies patients more likely to respond to checkpoint immunotherapies. DetermaDx, DetermaRx and DetermaIO are trademarks of Oncocyte Corporation.

Oncocyte Forward Looking Statements

Oncocyte cautions you that this press release contains 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, but are not limited to, those pertaining to the commercial launch of DetermaRx, development of DetermaDx and DetermaIO, unexpected expenditures or assumed liabilities or other unanticipated difficulties resulting from acquisitions, implementation and results of research, development, clinical trials and studies, commercialization plans, future financial and/or operating results, and future opportunities for Oncocyte, along with 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 our financial and operational results, risks inherent in the development and/or commercialization of potential diagnostic tests or products, uncertainty in the results of clinical trials or regulatory approvals, the capacity of our third-party supplied blood sample analytic system to provide consistent and precise analytic results on a commercial scale, potential interruptions to our supply chain, the need and ability to obtain future capital, maintenance of intellectual property rights, and the need to obtain third party reimbursement for patients’ use of any diagnostic tests we commercialize, and risks inherent in acquisitions such as failure to realize anticipated benefits, unexpected expenditures or assumed liabilities, unanticipated difficulties in conforming business practices including accounting policies, procedures and internal controls, greater than estimated allocations of resources to develop and commercialize technologies, or 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 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. 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.

Investor Contact

Bob Yedid

LifeSci Advisors, LLC

646-597-6989

bob@lifesciadvisors.com

Media Contact

Cait Williamson, Ph.D.

LifeSci Communications, LLC

646-751-4366

cait@lifescicomms.com

ONCOCYTE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

	March 31, 2020			December 31, 2019
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	16,577		$	22,072
Accounts Receivable		13			-
Marketable equity securities		325			379
Prepaid expenses and other current assets		1,224			505
Total current assets		18,139			22,956

NONCURRENT ASSETS
Right-of-use assets, machinery and equipment, net		4,298			3,728
Equity method investment in Razor		10,635			10,964
Goodwill		9,187			-
Intangibles, net		15,075			-
Deposits and other noncurrent assets		2,169			2,211
TOTAL ASSETS	$	59,503		$	39,859

LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Amount due to Lineage and affiliates	$	-		$	6
Accounts payable		1,635			469
Accrued expenses and other current liabilities		3,420			2,610
Loan payable, current		1,500			1,125
Right-of-use and financing lease liabilities, current		373			230
Total current liabilities		6,928			4,440

NONCURRENT LIABILITIES
Loan payable, net of deferred financing costs, noncurrent		1,565			1,905
Financing lease and right of use liabilities, noncurrent		3,097			2,676
Contingent consideration liabilities		11,130			-
Deferred tax liability		158			-
TOTAL LIABILITIES		22,878			9,021

SHAREHOLDERS’ EQUITY
Preferred stock, no par value, 5,000 shares authorized; none issued and outstanding		-			-
Common stock, no par value, 85,000 shares authorized; 62,484 and 57,032 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively		138,102			124,583
Accumulated other comprehensive loss		-			-
Accumulated deficit		(101,477	)		(93,745	)
Total shareholders’ equity		36,625			30,838
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	59,503		$	39,859

ONCOCYTE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

	Three Months Ended March 31,
	2020			2019
REVENUE
Total revenue	$	16		$	-

TOTAL COSTS AND OPERATING EXPENSES
Cost of revenue		173			-
Research and development		2,159			1,343
General and administrative		4,625			2,449
Sales and marketing		1,490			205
Total costs and operating expenses		8,447			3,997

Loss from operations		(8,431	)		(3,997	)

OTHER INCOME (EXPENSES), NET
Interest expense, net		(22	)		(19	)
Unrealized gain (loss) on marketable equity securities		(53	)		178
Pro rata loss from equity method investment in Razor		(329	)		-
Other income (expenses), net		8			(26	)
Total other income (expenses), net		(396	)		133

LOSS BEFORE INCOME TAXES		(8,827	)		(3,864	)

Income tax benefit		1,095			-

NET LOSS	$	(7,732	)	$	(3,864	)

Net loss per share; basic and diluted	$	(0.13	)	$	(0.08	)

Weighted average shares outstanding; basic and diluted		61,459			46,647

ONCOCYTE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

(UNAUDITED)

	Three Months Ended March 31,
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(7,732	)	$	(3,864	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense		60			110
Amortization of intangible assets		15			-
Amortization of right-of-use assets and liabilities		152			-
Pro rata loss from equity method investment in Razor		329			-
Amortization of prepaid maintenance		36			9
Stock-based compensation		937			686
Unrealized (gain) loss on marketable equity securities		53			(178	)
Amortization of debt issuance costs		35			12
Deferred income tax benefit		(1,095	)		-
Other		-			26
Changes in operating assets and liabilities:
Accounts receivable		8			-
Amount due to Lineage and affiliates		(6	)		(2,101	)
Prepaid expenses and other assets		(909	)		(950	)
Accounts payable and accrued liabilities		1,247			(468	)
Net cash used in operating activities		(6,870	)		(6,718	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Insight Genetics, net of cash acquired		(6,189	)		-
Purchase of equipment		(44	)		(7	)
Security deposit and other		42			54
Net cash provided by (used in) investing activities		(6,191	)		47

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options		-			943
Proceeds from sale of common shares		7,597			40,250
Financing costs to issue common shares		(1	)		(2,965	)
Common shares received and retired for employee taxes paid		(14	)		-
Repayment of loan payable		-			(200	)
Repayment of financing lease obligations		(17	)		(134	)
Net cash provided by financing activities		7,565			37,894

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		(5,496	)		31,223
CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
At beginning of the period		23,773			8,034
At end of the period	$	18,277		$	39,257

Non-GAAP Financial Measures

This earnings release includes loss from operations prepared in accordance with accounting principles generally accepted in the United States (GAAP) and includes certain historical non-GAAP adjustments to operating expenses. In particular, Oncocyte has provided non-GAAP total loss from operations, adjusted to exclude noncash stock-based compensation and depreciation and amortization expenses. Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable financial measures prepared in accordance with GAAP. However, Oncocyte believes the presentation of non-GAAP total loss from operations, when viewed in conjunction with our GAAP total loss from operations, is helpful in understanding Oncocyte’s ongoing operations and its programs.

Furthermore, management uses these non-GAAP financial measures in the aggregate to establish budgets and operational goals, to manage Oncocyte’s business and to evaluate its performance and its programs.

OncoCyte Corporation

Reconciliation of Non-GAAP Financial Measure

Adjusted Loss from Operations

	Amounts In Thousands
	Three Months Ended
	March 31,
	2020			2019
	(unaudited)
GAAP loss from operations - as reported	$	(8,431	)	$	(3,997	)
Stock-based compensation expense		937			686
Depreciation and amortization expense		111			119
Non-GAAP loss from operations, as adjusted	$	(7,383	)	$	(3,192	)