UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
SCHEDULE
14A
(Rule
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
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Definitive
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Definitive
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Soliciting
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OncoCyte
Corporation
(Name
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(Name
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May
__, 2020
Dear
Shareholder:
You
are cordially invited to attend the Annual Meeting of Shareholders of OncoCyte Corporation which will be held on Wednesday, June
17, 2020 at 10:00 a.m. Pacific Time at OncoCyte’s the principal offices 15 Cushing, Irvine, California 92618 or online through
https://web.lumiagm.com/259974801.
The
Notice and Proxy Statement on the following pages contain details concerning the business to come before the meeting and instructions
on how to gain admission to the Annual Meeting in person or online. Management will report on current operations, and there will
be an opportunity for discussion concerning OncoCyte and its activities. Please sign and return your proxy card in the enclosed
envelope to ensure that your shares will be represented and voted at the meeting even if you cannot attend. You are urged to sign
and return the enclosed proxy card even if you plan to attend the meeting.
I
look forward to personally meeting all shareholders who are able to attend.
Albert
P. Parker
Chief
Operating Officer and Secretary
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
To
Be Held June 17, 2020
NOTICE
IS HEREBY GIVEN that the Annual Meeting of Shareholders of OncoCyte Corporation (the “Meeting”) will be held at OncoCyte’s
principal office 15 Cushing, Irvine, California 92618 on Wednesday, June 17, 2020 at 10:00 a.m. Pacific Time for
the following purposes:
1.
To elect six (6) directors to hold office until the next Annual Meeting of Shareholders and until their respective successors
are duly elected and qualified. The nominees of the Board of Directors are: Ronald Andrews, Andrew Arno, Melinda Griffith, Alfred
D. Kingsley, Andrew J. Last, and Cavan Redmond;
2.
To ratify the appointment of OUM & Co. LLP as OncoCyte’s independent registered public accountants for the fiscal year
ending December 31, 2020;
3.
To approve an amendment to our Articles of Incorporation to increase the total number of authorized shares of common stock, no
par value, that we may issue from 85,000,000 shares to 150,000,000 shares (the “Common
Stock Amendment”);
4.
To approve the adjournment of the Meeting if a quorum
is not present or to provide additional time to solicit proxies for approval of the Common Stock Amendment; and
5.
To transact such other business as may properly come before
the Meeting or any adjournments of the Meeting.
The
Board of Directors has fixed the close of business on May 12, 2020 as the record date for determining shareholders entitled to
receive notice of and to vote at the Meeting or any postponement or adjournment of the meeting.
This
year we have made arrangements for our shareholders to attend and participate at the Meeting through an online electronic video
screen communication if they wish at https://web.lumiagm.com/259974801. If you wish to attend the Meeting
in person or online you will need to gain admission in the manner described in the Proxy Statement.
Whether
or not you expect to attend the Meeting in person or online, you are urged to sign and date the enclosed form of proxy
and return it promptly so that your shares may be represented and voted at the Meeting. If you should be present at the
Meeting, your proxy will be returned to you if you so request.
WHETHER
OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SUBMIT YOUR PROXY PROMPTLY BY FOLLOWING THE INSTRUCTIONS ON THE PROXY CARD.
Important
Notice Regarding the Availability of Proxy Materials
for
the Shareholder Meeting to be Held June 17, 2020.
The
Letter to Shareholders, Notice of Meeting and Proxy Statement, and Annual Report on Form 10-K,
are
available at: https://materials.proxyvote.com/68235C
By
Order of the Board of Directors,
Albert
P. Parker
Chief
Operating Officer and Secretary
Irvine,
California
May
___, 2020
PRELIMINARY
PROXY STATEMENT
ANNUAL
MEETING OF SHAREHOLDERS
To
Be Held on Wednesday, June 17, 2020
QUESTIONS
AND ANSWERS ABOUT THE PROXY MATERIALS
AND
THE ANNUAL MEETING
Q:
Why have I received this Proxy Statement?
We are holding our Annual
Meeting of Shareholders (the “Meeting”) for the purposes stated in the accompanying Notice of Annual Meeting, which
include (1) electing directors, (2) ratifying the appointment of our independent registered public accountants; (3) approving
an amendment to our Articles of Incorporation to increase the total number of authorized shares of common stock, no par
value, that we may issue from 85,000,000 shares to 150,000,000 shares (“Common Stock
Amendment Proposal”), and (4) approving an adjournment of the Meeting for up to thirty days if a quorum is not present or
if Oncocyte determines to solicit additional proxies for approval of the Common Stock Amendment Proposal (the “Adjournment
Proposal”). At the Meeting, our management will also report on current operations, and there will be an opportunity
for discussion concerning Oncocyte and its activities. This Proxy Statement contains information about those matters, relevant
information about the Meeting, and other information that we are required to include in a proxy statement under the Securities
and Exchange Commission’s (“SEC”) regulations.
Q:
Who is soliciting my proxy?
The
accompanying proxy is solicited by the Board of Directors of OncoCyte Corporation, a California corporation, for use at the Annual
Meeting of Shareholders to be held at 10:00 a.m. Pacific Time on Wednesday, June 17, 2020 at its principal offices
15 Cushing, Irvine, California 92618 and via an online electronic video screen communication.
Q:
Who is entitled to vote at the Meeting?
Only
shareholders of record at the close of business on May 12, 2020, which has been designated as the “record date,” are
entitled to notice of and to vote at the Meeting. On that date, there were 67,217,906 shares of Oncocyte common stock,
no par value, issued and outstanding, which constitutes the only class of Oncocyte voting securities outstanding.
Q:
What percentage of the vote is required to elect directors or to approve the other matters that are being presented for a vote
by shareholders?
Directors will be elected
by the affirmative vote of a majority of the shares of common stock represented and voting at the Meeting at which a quorum is
present, provided that the shares voting affirmatively also constitute at least a majority of the required quorum. Approval of
the Common Stock Amendment Proposal will require the affirmative vote of a majority of shares of our common stock issued,
outstanding, and entitled to vote on the record date. All other matters to be presented for a vote at the Meeting will require
the affirmative vote of a majority of the shares of common stock present and voting on the matter at the Meeting, provided that
the affirmative vote cast constitutes a majority of a quorum. A quorum consists of a majority of the outstanding shares of common
stock entitled to vote. Notwithstanding the foregoing, if a quorum is not present the Meeting may be adjourned by a vote of a
majority of the shares present in person or by proxy.
Q:
How many votes do my shares represent?
Each
share of Oncocyte common stock is entitled to one vote in all matters that may be acted upon at the Meeting. Under the Company’s
Amended and Restated Bylaws cumulative voting will not be available in the election of directors.
Q:
What are my choices when voting?
In
the election of directors, you may vote for all nominees or you may withhold your vote from one or more nominees. For each other
proposal described in this Proxy Statement, you may vote for the proposal, vote against the proposal, or abstain from voting on
the proposal. Properly executed proxies in the accompanying form that are received at or before the Meeting will be voted in accordance
with the directions noted on the proxies.
Q:
What if I abstain from voting on a matter?
If
you check the “abstain” box in the proxy form, or if you attend the Meeting without submitting a proxy and you abstain
from voting on a matter, or if your shares are subject to a “broker non-vote” on a matter, your shares will be deemed
to have not voted on that matter in determining whether the matter has received an affirmative vote sufficient for approval. Please
see “What if I do not specify how I want my shares voted?” below for additional information about broker non-votes.
Q:
How can I vote at the Meeting?
If
you are a shareholder of record and you attend the Meeting in person, you may vote your shares at the Meeting by completing a
ballot at the Meeting. If you are a shareholder of record and you attend the Meeting online, you may vote your shares at
the Meeting in the manner provided for internet voting. However, if you are a “street name” holder, you may
vote your shares in person or online only if you obtain a signed proxy from your broker or nominee giving you the right to vote
your shares. Please refer to additional information in the “How to Attend the Annual
Meeting” portion of this Proxy Statement.
Even
if you currently plan to attend the Meeting in person or online, we recommend that you also submit your proxy first so that your
vote will be counted if you later decide not to attend the Meeting.
Q:
Can I still attend and vote at the Meeting if I submit a proxy?
You
may attend the Meeting and vote in person or you may attend through online participation whether or not you have previously submitted
a proxy. If you previously gave a proxy, your attendance at the Meeting in person or online will not revoke your proxy unless
you also vote in person at the Meeting or you vote through internet voting during your online participation at the Meeting.
Q:
Can I change my vote after I submit my proxy form?
You
may revoke your proxy at any time before it is voted. If you are a shareholder of record and you wish to revoke your proxy you
must do one of the following things:
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deliver
to the Secretary of Oncocyte a written revocation; or
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deliver
to the Secretary of Oncocyte a signed proxy bearing a date subsequent to the date of the proxy being revoked; or
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attend
the Meeting and vote in person or through internet voting during online participation.
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If
you are a “beneficial owner” of shares “held in street name” you should follow the directions provided
by your broker or other nominee regarding how to revoke your proxy.
Q:
What are the Board of Directors’ recommendations?
The Board of Directors
recommends that our shareholders vote FOR (1) each nominee for election as a director, (2) approval of the appointment
of OUM & Co., LLP as our independent registered public accountants for the fiscal year ending December 31, 2020, (3) approval
of the Common Stock Amendment Proposal, and (4) approval of the Adjournment Proposal.
Q:
What if I do not specify how I want my shares voted?
Shareholders of Record. If you are a shareholder of record and you
sign and return a proxy form that does not specify how you want your shares voted on a matter, your shares will be voted FOR
(1) each nominee for election as a director, (2) approval of the appointment of OUM & Co., LLP as our independent registered
public accountants for the fiscal year ending December 31, 2020, (3) approval of the Common
Stock Amendment Proposal, and (4) approval of the Adjournment Proposal.
Beneficial Owners.
If you are a beneficial owner and you do not provide your broker or other nominee with voting instructions, the broker or other
nominee will determine if it has the discretionary authority to vote on the particular matter. Under the rules of the various
national and regional securities exchanges, brokers and other nominees holding your shares cannot vote in the election of directors,
but may vote on certain matters considered to be routine under such rules, which may include, depending on the applicable rules,
the approval of the appointment of our independent registered public accountants, the Common Stock Amendment Proposal, and the
Adjournment Proposal. If you hold your shares in street name and you do not instruct your broker or other nominee how to vote
on those matters as to which brokers and nominees are not permitted to vote without your instructions, no votes will be cast on
your behalf on those matters. This is generally referred to as a “broker non-vote.”
Q:
What is the difference between holding shares as a shareholder of record and as a beneficial owner?
Shareholder
of Record. You are a shareholder of record if at the close of business on the record date your shares were registered directly
in your name with American Stock Transfer & Trust Company, LLC, our transfer agent.
Beneficial
Owner. You are a beneficial owner if at the close of business on the record date your shares were held in the name of a brokerage
firm or other nominee and not in your name. Being a beneficial owner means that, like most of our shareholders, your shares are
held in “street name.” As the beneficial owner, you have the right to direct your broker or nominee how to vote your
shares by following the voting instructions your broker or other nominee provides. If you do not provide your broker or nominee
with instructions on how to vote your shares, your broker or nominee will be able to vote your shares with respect to some of
the proposals, but not all. Please see “What if I do not specify how I want my shares voted?” above for additional
information.
Q:
What if any matters not mentioned in the Notice of Annual Meeting or this Proxy Statement come up for vote at the Meeting?
The
Board of Directors does not intend to present any business for a vote at the Meeting other than the matters set forth in the accompanying
Notice of Annual Meeting of Shareholders. As of the date of this Proxy Statement, no shareholder has notified us of any other
business that may properly come before the Meeting. If other matters requiring the vote of the shareholders properly come before
the Meeting, then it is the intention of the persons named in the accompanying form of proxy to vote the proxy held by them in
accordance with their judgment on such matters.
The
enclosed proxy confers discretionary authority to vote with respect to any and all of the following matters that may come before
the Meeting: (1) matters that the Board of Directors did not know, a reasonable time before the mailing of the notice of the Meeting,
would be presented at the Meeting; and (2) matters incidental to the conduct of the Meeting.
Q:
Who will bear the cost of soliciting proxies for use at the Meeting?
Oncocyte
will bear all of the costs of the solicitation of proxies for use at the Meeting. In addition to the use of the mails, proxies
may be solicited by a personal interview, telephone, and telegram by our directors, officers, and employees, who will undertake
such activities without additional compensation. Banks, brokerage houses, and other institutions, nominees, or fiduciaries will
be requested to forward the proxy materials to the beneficial owners of the common stock held of record by such persons and entities
and will be reimbursed for their reasonable expense incurred in connection with forwarding such material.
Q:
How can I attend and vote at the Meeting?
If
you plan on attending the Meeting in person or online, please read the “How to
Attend the Annual Meeting” section of this Proxy Statement for information about the documents you will need
to bring with you to gain admission to the Meeting and to vote your shares in person or how to attend and participate in the Meeting
online.
This
Proxy Statement and the accompanying form of proxy are first being sent or given to our shareholders on or about May __, 2020.
ELIMINATING
DUPLICATE MAILINGS
Oncocyte
has adopted a procedure called “householding.” Under this procedure, we may deliver a single copy of this Proxy Statement
and our Annual Report to multiple shareholders who share the same address, unless we receive contrary instructions from one or
more of the shareholders. This procedure reduces the environmental impact of our annual meetings and reduces our printing and
mailing costs. We will deliver separate copies of the Proxy Statement and Annual Report to each shareholder sharing a common address
if they notify us that they wish to receive separate copies. If you wish to receive a separate copy of the Proxy Statement, or
Annual Report, you may contact us by telephone at (949) 409-7600, or by mail at 15 Cushing, Irvine, California 92618. You may
also contact us at the above phone number or address if you are presently receiving multiple copies of the Proxy Statement, and
Annual Report but would prefer to receive a single copy instead.
ELECTION
OF DIRECTORS
At
the Meeting, six (6) directors will be elected to hold office until the next Annual Meeting of Shareholders, and until their successors
have been duly elected and qualified. All of the nominees named below, Ronald Andrews, Andrew Arno, Melinda Griffith, Alfred D.
Kingsley, Andrew Last, and Cavan Redmond, are incumbent directors.
The
vote required vote to elect a director is the affirmative vote of a majority of the shares represented at the Meeting at which
a quorum is present; provided that the affirmative vote cast constitutes a majority of a quorum. It is the intention of the persons
named in the enclosed proxy, unless the proxy specifies otherwise, to vote the shares represented by such proxy FOR the
election of the nominees listed below. In the unlikely event that any nominee should be unable to serve as a director, proxies
may be voted in favor of a substitute nominee designated by the Board of Directors. If you are a beneficial owner of shares held
in street name, your broker or other nominee will not be allowed to vote in the election of directors unless you instruct your
broker or other nominee how to vote on the form that the broker or nominee provided to you.
Directors
and Nominees
The
names and ages of our nominees for election as directors all of whom are incumbent directors, are:
Ronald
Andrews, 60, joined our Board of Directors in April 2018 and has served as our President and Chief Executive Officer since
July 1, 2019. Mr. Andrews is the founder and former principal of the Bethesda Group, a consulting firm that advises companies
in the molecular diagnostics and genomics fields. Prior to founding the Bethesda Group in 2015, Mr. Andrews served as President,
Genetic Sciences Division of Thermo Fisher Scientific from September 2013 to December 2014, and as President, Medical Sciences
Venture for Life Technologies from February 2012 to September 2013 when Life Technologies was acquired by Thermo Fisher. From
2004 to December 2010, Mr. Andrews was the Chief Executive Officer and Vice Chairman of the Board of Clarient, Inc., a cancer
diagnostics company, and from December 2010 to February 2012 he served as CEO of GE Molecular Diagnostics after Clarient was acquired
by GE Healthcare. Mr. Andrews also held management positions with companies in diagnostics and related medical fields, including
Roche Molecular Diagnostics, Immucor, Inc. and Abbott Labs. Mr. Andrews also serves as a director of Oxford ImmunoTec. Mr. Andrews
is also a member of the Board of Governors of CancerLinQ LLC, a wholly-owned non-profit subsidiary of the American Society of
Clinical Oncology.
Mr.
Andrews has over 30 years of experience in the molecular diagnostics and genomics industries, including experience integrating
companies acquired in mergers. He also oversaw the transition of Clarient, Inc. into GE Healthcare and established a strategic
plan to integrate in vivo and in vitro diagnostic tests and expand GE’s presence in oncology.
Andrew
Arno, 60, joined our Board of Directors in June 2015 and has 30 years of experience working with emerging growth companies.
He is currently Vice Chairman of “The Special Equities Group” at Bradley Woods, a privately held investment banking
firm, after serving as a Vice Chairman at Chardan Capital Markets, LLC. From June 2013 until July 2015 Mr. Arno served as Managing
Director of Emerging Growth Equities, an investment bank, and Vice President of Sabr, Inc., a family investment group. He was
previously President of LOMUSA Limited, an investment banking firm. From 2009 to 2012, Mr. Arno served as Vice Chairman and Chief
Marketing Officer of Unterberg Capital, LLC, an investment advisory firm that he co-founded. He was also Vice Chairman and Head
of Equity Capital Markets of Merriman Capital LLC, an investment banking firm, and served on the board of the parent company,
Merriman Holdings, Inc. Mr. Arno currently serves on the boards of directors of Smith Micro Software, Inc. and served as a director
of Asterias Biotherapeutics, Inc. from August 2014 until it was acquired by Lineage Cell Therapeutics, Inc. in March 2019.
Mr.
Arno brings over 30 years’ experience handling a wide range of corporate and financial matters and his background as an
investment banker and strategic advisor to emerging growth companies qualifies him to serve on our Board of Directors.
Melinda
Griffith, 65, joined our Board of Directors in July 2019. Ms. Griffith has been Vice President of Strategic Alliance Management
and Chief Legal Counsel at the Parker Institute for Cancer Immunotherapy since 2016. Since 2015, Ms. Griffith has served as the
Chair of the Board of Directors of Thrive Networks, a non-profit organization supporting healthcare, water and sanitation, and
education projects in Vietnam, Cambodia and Laos. Previously, Ms. Griffith worked at Clarient, Inc., a CLIA-certified cancer testing
lab, where she served as Senior Vice President from 2010 through 2013, as General Counsel from 2010 to 2011, and as Chief Compliance
Officer and head of Business Development and Product Strategy from 2011 to 2013, where she aided the company through the public
tender offer and sale process to GE Healthcare. Ms. Griffith previously served in executive roles at Axys Pharmaceuticals from
1992 to 1995, Genelabs Technologies from 1995 to 1998, Tethys Bioscience from 2008 to 2009, and CardioDx from 2014 to 2015. Additionally,
Ms. Griffith served as the global head of licensing and law for Hoffmann La-Roche’s molecular diagnostic business from 1998
to 2007, where she oversaw the worldwide PCR licensing programs and directed its IP strategy and litigation in U.S. and foreign
courts and agencies. Ms. Griffith directed GE Healthcare’s Congressional and Medicare lobbying efforts to address CMS coverage
and reimbursement determinations for in vitro diagnostic tests from 2011 to 2013, and was on the Board of Directors of
the California Clinical Laboratory Association from 2012 to 2013. Ms. Griffith received a JD from the University of California,
Hastings College of the Law, and a Bachelor of Science degree in Business Administration from the University of California, Berkeley.
She is admitted to practice law in New York and California.
Ms.
Griffith brings to our Board her years of business development and legal experience in advising public and private companies in
the diagnostics and life sciences sectors.
Alfred
D. Kingsley, 77, joined the Board of Directors during September 2009 and served as Chairman of the Board from December 2010
until April 2018. Mr. Kingsley is also the Chairman of the Board of Directors of Lineage Cell Therapeutics, Inc. (Lineage), formerly
BioTime. Mr. Kingsley has been general partner of Greenway Partners, L.P., a private investment firm, and President of Greenbelt
Corp., a business consulting firm, since 1993. Greenbelt Corp. served as Lineage’s financial advisor from 1998 until June
30, 2009. Mr. Kingsley was Senior Vice-President of Icahn and Company and its affiliated entities for more than 25 years. Mr.
Kingsley served as a director of Asterias Biotherapeutics, Inc. from September 2012 until it was acquired by Lineage in March
2019. Mr. Kingsley holds a BS degree in economics from the Wharton School of the University of Pennsylvania, and a J.D. degree
and LLM in taxation from New York University Law School.
Mr.
Kingsley’s long career in corporate finance and mergers and acquisitions includes substantial experience in helping companies
to improve their management and corporate governance, and to restructure their operations in order to add value for shareholders.
As Chairman of the Board of Lineage and formerly of Oncocyte, Mr. Kingsley has been instrumental in structuring their equity and
debt financings and the business acquisitions.
Andrew
J. Last, 60, joined the Board of Directors during December 2015. In April 2019, Dr. Last was appointed as Executive Vice President
and Chief Operating Officer of Bio-Rad Laboratories, Inc. Dr. Last previously served as Chief Commercial Officer at Berkeley Lights
Inc. and as Chief Operating Officer of Intrexon Corporation. From 2010 to 2016, Dr. Last was Executive Vice President and Chief
Operating Officer of Affymetrix. Before joining Affymetrix, Dr. Last served as Vice President, Global and Strategic Marketing
of BD Biosciences and as General Manager of Pharmingen from 2004 to 2010. From 2002 to 2004, Dr. Last held management positions
at Applied Biosystems, Inc., including as Vice President and General Manager from 2003-2004 and Vice President of Marketing 2002-2003.
Earlier in his career, he served in a variety of management positions at other companies, including Incyte Genomics and Monsanto.
Dr. Last holds Ph.D. and MS degrees with specialization in Agrochemical Chemicals and Bio-Aeronautics, respectively, from Cranfield
University, and a BS degree in Biological Sciences from the University of Leicester in the United Kingdom.
Dr.
Last shares with our Board his many years of senior management experience commercializing products internationally in the genomics
and life-sciences industries.
Cavan
Redmond, 59, joined our Board of Directors in August of 2015 and was appointed Chairman of the Board during April 2018. Since
2014, Mr. Redmond has served as Partner for Zarsy, LLC. Mr. Redmond served as Chief Executive Officer of WebMD from May 2012 until
May 2013. From August 2011 until May 2012, Mr. Redmond served as Group President, Animal Health, Consumer Healthcare and Corporate
Strategy of Pfizer Inc., a pharmaceutical company. He served as Pfizer’s Group President, Animal Health, Consumer Healthcare,
Capsugel and Corporate Strategy from December 2010 until August 2011 and as its Senior Vice President and Group President, Pfizer
Diversified Businesses from October 2009 until December 2010. Prior to Pfizer’s acquisition of Wyeth, a pharmaceutical company,
Mr. Redmond served as President, Wyeth Consumer Healthcare and Animal Health Business. Before that, he held the positions of President,
Wyeth Consumer Healthcare from December 2007 until May 2009 and served on Wyeth Parmaceuticals’ Executive Leadership Team.
At Wyeth, Mr. Redmond served as General Manager and Executive Vice President of Wyeth Bioparhma which grew into a leading global
biotech company under his leadership. Mr. Redmond also served as a director of Lineage Cell Therapeutics, Inc. from February 2018
through July 2019 and has served on the boards of directors of The Wistar Institute of Anatomy and Biology and the Arthritis Foundation.
Mr.
Redmond brings to our Board decades of executive pharmaceutical and healthcare experience demonstrating leadership in a diverse
compliment of healthcare areas.
Director
Independence
Our
Board of Directors has determined that Andrew Arno, Melinda Griffith, Andrew Last, and Cavan Redmond, qualify as “independent”
in accordance with Section 803(A) of the NYSE American Company Guide. The members of our Audit Committee meet the additional independence
standards under Section 803(B)(2) of the NYSE American Company Guide and Rule 10A-3 under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), and the members of our Compensation Committee meet the additional independence standards
under Section 805(c)(1) of the NYSE American Company Guide. Our independent directors received no compensation or remuneration
for serving as directors except as disclosed under “CORPORATE GOVERNANCE—Compensation of Directors.” None of
these directors, nor any of the members of their respective families, have participated in any transaction with us that would
disqualify them as “independent” directors under the standards described above.
Ronald
Andrews does not qualify as “independent” because he is our Chief Executive Officer and President. The Board of
Directors has determined that Alfred D. Kingsley does not qualify as “independent” at this time because of his
past service as our Executive Chairman and his service as Chairman of our former parent company Lineage.
CORPORATE
GOVERNANCE
Directors’
Meetings
During
the fiscal year ended December 31, 2019, our Board of Directors met 18 times. None of our current directors attended fewer than
75% of the meetings of the Board and the committees on which they served. Directors are also encouraged to attend our annual meetings
of shareholders, although they are not formally required to do so.
Meetings
of Non-Management Directors
Our
non-management directors meet no less frequently than quarterly in executive session, without any directors who are Oncocyte officers
or employees present. These meetings allow the non-management directors to engage in open and frank discussions about corporate
governance and about our business, operations, finances, and management performance.
Shareholder
Communications with Directors
If
you wish to communicate with the Board of Directors or with individual directors, you may do so by following the procedure described
on our website www.oncocyte.com.
Code
of Ethics
We
have adopted a Code of Business Conduct and Ethics (“Code of Ethics”) that applies to our principal executive officers,
our principal financial officer and accounting officer, our other executive officers, and our directors. The purpose of the Code
of Ethics is to promote (i) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest
between personal and professional relationships; (ii) full, fair, accurate, timely, and understandable disclosure in reports and
documents that we file with or submit to the SEC and in our other public communications; (iii) compliance with applicable governmental
rules and regulations; (iv) prompt internal reporting of violations of the Code of Ethics to an appropriate person or persons
identified in the Code of Ethics; and (v) accountability for adherence to the Code of Ethics. A copy of our Code of Ethics has
been posted on our internet website and can be found at www.oncocyte.com. We intend to disclose any future amendments
to certain provisions of our Code of Ethics, and any waivers of those provisions granted to our principal executive officers,
principal financial officer, principal accounting officer or controller or persons performing similar functions, by posting the
information on our website within four business days following the date of the amendment or waiver.
Board
Leadership Structure
Our
leadership structure bifurcates the roles of Chief Executive Officer and Chairman of the Board. In other words, although our Chief
Executive Officer is a member of our Board, Cavan Redmond currently serves as Chairman of the Board. The Company believes that
the Chairman can provide support and advice to the Chief Executive Officer, and lead the Board in fulfilling its responsibilities.
The Chairman of the Board serves as an active liaison between the Board and our Chief Executive Officer and our other senior management.
The Chairman of the Board also interfaces with our other non-management directors with respect to matters such as the members
and chairs of Board committees, other corporate governance matters, and strategic planning.
The
Board’s Role in Risk Management
The
Board has an active role, as a whole, in overseeing management of the risks of our business. The Board regularly reviews information
regarding our credit, liquidity, and operations, as well as the risks associated with our research and development activities
and our plans to expand our business. The Audit Committee provides oversight of our financial reporting processes and the annual
audit of our financial statements. In addition, the Nominating/Corporate Governance Committee reviews and must approve any business
transactions between Oncocyte and its executive officers, directors, and shareholders who beneficially own 5% or more of our outstanding
shares of common stock.
Hedging
Transactions
We
have adopted an Insider Trading Policy that generally prohibits our employees, including our officers, directors, and their designees
from engaging in short sales of Oncocyte securities (sales of securities that are not then owned), including a “sale against
the box” (a sale with delayed delivery), or other hedging or monetization transactions with respect to Oncocyte securities,
including, but not limited to, through the use of financial instruments such as exchange funds, prepaid variable forwards, equity
swaps, puts, calls, collars, forwards and other derivative instruments.
Committees
of the Board
The
Board of Directors has an Audit Committee, a Compensation Committee, and a Nominating/Corporate Governance Committee, the members
of which are independent in accordance with Section 803(A) of the NYSE American Company Guides. The members of the Audit Committee
meet the additional independence standards under Section 803(B) of the NYSE American Company Guide and Rule 10A-3 under the Exchange
Act. The members of the Compensation Committee must also meet the additional independence standards under Section 805(c)(1) of
the NYSE American Company Guide. We also have a Science & Technology Committee and a Finance and Strategy Committee, the members
of which need not be independent.
Audit
Committee
The
members of the Audit Committee are Andrew Arno (Chair), Andrew J. Last, and Cavan Redmond. Ronald Andrews also served as a member
of the Audit Committee until July 2019. The Audit Committee held six meetings during 2019. The purpose of the Audit Committee
is to recommend the engagement of our independent registered public accountants, to review their performance and the plan, scope,
and results of the audit, and to review and approve the fees we pay to our independent registered public accountants. The Audit
Committee also will review our accounting and financial reporting procedures and controls. The Audit Committee has a written charter
that requires the members of the Audit Committee to be directors who are independent in accordance with Section 803(A) and Section
803(B) of the NYSE American Company Guide and Rule 10A-3 under the Exchange Act. A copy of the Audit Committee Charter has been
posted on our internet website and can be found at www.oncocyte.com.
Our
Board of Directors has determined that Andrew Arno meets the criteria of an “audit committee financial expert” within
the meaning of the SEC’s regulations based on his many years of experience in the investment banking industry, and his audit
committee service at another company, including the evaluation of financial statements.
Compensation
Committee
The
members of the Compensation Committee are Andrew Last, Andrew Arno, and Melinda Griffith (Chair). Ronald Andrews also served as
a member of the Compensation Committee until July 2019. The Compensation Committee met six times during 2019. All of the members
of the Compensation Committee qualify as “independent” in accordance with Section 803(A) and Section 805(c)(1) of
the NYSE American Company Guide. The Compensation Committee oversees our compensation and employee benefit plans and practices,
including executive compensation arrangements and incentive plans and awards of stock options and other equity-based awards under
our equity plans, including our 2018 Equity Incentive Plan. The Compensation Committee will determine or recommend to the Board
of Directors the terms and amount of executive compensation and grants of equity-based awards to executives, key employees, consultants,
and independent contractors. The Chief Executive Officer may make recommendations to the Compensation Committee concerning executive
compensation and performance, but the Compensation Committee makes its own determination or recommendation to the Board of Directors
with respect to the amount and components of compensation, including salary, bonus and equity awards to executive officers, generally
taking into account factors such as company performance, individual performance, and compensation paid by peer group companies.
A copy of the Compensation Committee Charter has been posted on our internet website and can be found at www.oncocyte.com.
Oncocyte
has engaged Marsh & McLennan to provide compensation consulting services and advice to management and the Compensation Committee,
which has generally included market survey information and competitive market trends in employee, executive and directors’
compensation programs. Marsh & McLennan has also made recommendations to the Compensation Committee with respect to pay mix
components such as salary, bonus, equity awards and the target market pay percentiles in which executive compensation should fall
so Oncocyte can be competitive in executive hiring and retention.
Report
of the Audit Committee on the Audit of Our Financial Statements
The
following is the report of the Audit Committee with respect to Oncocyte’s audited financial statements for the year ended
December 31, 2019.
Ronald
Andrews stepped down from the Audit Committee after being appointed President and Chief Executive Officer of the Company.
The
information contained in this report shall not be deemed “soliciting material” or otherwise considered “filed”
with the SEC, and such information shall not be incorporated by reference into any future filing under the Securities Act of 1933,
as amended (the “Securities Act”), or the Exchange Act, except to the extent that Oncocyte specifically incorporates
such information by reference in such filing.
The
members of the Audit Committee held discussions with our management and representatives of OUM & Co., LLP, our independent
registered public accountants, concerning the audit of our financial statements for the year ended December 31, 2019. The independent
public accountants are responsible for performing an independent audit of our financial statements and issuing an opinion on the
conformity of those audited financial statements with generally accepted accounting principles in the United States. The Audit
Committee does not itself prepare financial statements or perform audits, and its members are not auditors or certifiers of Oncocyte’s
financial statements.
The
Audit Committee members reviewed and discussed with management and representatives of the auditors the audited financial statements
contained in our Annual Report on Form 10-K for the year ended December 31, 2019. Our auditors also discussed with the Audit Committee
the adequacy of Oncocyte’s internal control over financial reporting.
The
Audit Committee members discussed with the independent auditors the matters required to be discussed by the applicable requirements
of the Public Company Accounting Oversight Board and the SEC. The Audit Committee received the written disclosures and the letter
mandated by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s
communications with the Audit Committee concerning independence, and discussed with the with the independent accountant the independent
accountant’s independence. Based on the reviews and discussions referred to above, the Audit Committee unanimously approved
the inclusion of the audited financial statements in our Annual Report on Form 10-K for the year ended December 31, 2019, filed
with the Securities and Exchange Commission.
The
Audit Committee also met on a quarterly basis with the auditors during 2019 to review and discuss our financial statements for
the quarter and the adequacy of internal control over financial reporting.
The
Audit Committee: Andrew Arno (Chair), Andrew J. Last, and Cavan Redmond.
Nomination
of Candidates for Election as Directors
Nominating/
Corporate Governance Committee and Nominating Policies and Procedures
The
members of the Nominating/Corporate Governance Committee are Andrew J. Last (Chair), Andrew Arno, and Melinda Griffith. Ronald
Andrews also served on the Nominating/Corporate Governance Committee until July 2019. The Nominating/Corporate Governance Committee
held two meetings during 2019.
The
purpose of the Nominating/Corporate Governance Committee is to recommend to the Board of Directors individuals qualified to serve
as directors and on committees of the Board, and to make recommendations to the Board on issues and proposals regarding corporate
governance matters. The Nominating/Corporate Governance Committee also overseas compliance with, and all requests for waivers
of, our Code of Ethics, and under our Interested Persons Transaction Policy reviews for approval transactions between us and our
executive officers, directors, and shareholders who beneficially own 5% or more of our outstanding shares of common stock.
The
Nominating/Corporate Governance Committee will consider nominees for election as directors proposed by shareholders, provided
that they notify the Nominating/Corporate Governance Committee of the nomination in proper written form, either by personal
delivery or by United States registered mail, to our corporate Secretary at our principal executive offices no earlier than
the close of business on the 120th calendar day and no later than the close of business on the 90th calendar day prior to the
anniversary date of the immediately preceding annual meeting of shareholders. If the current year’s annual meeting is called
for a date that is more than 30 days before or more than 60 days after the anniversary of the immediately preceding annual meeting
of shareholders, notice must be received not later than the close of business on the 10th calendar day following the day on which
we first make a public announcement of the date of the annual meeting of shareholders. To be in proper written form, the notice
from a shareholder must include the information required by our Amended and Restated Bylaws. A copy of the Nominating/Corporate
Governance Committee Charter has been posted on our internet website and can be found at www.oncocyte.com.
The
Board and the Nominating/Corporate Governance Committee have not set any specific minimum qualifications that a prospective nominee
would need in order to be nominated to serve on the Board of Directors. Rather, in evaluating any new nominee or incumbent director,
the Nominating/Corporate Governance Committee will consider whether the particular person has the knowledge, skills, experience,
and expertise needed to manage our affairs in light of the skills, experience, and expertise of the other members of the Board
as a whole. The Committee will also consider whether a nominee or incumbent director has any conflicts of interest with Oncocyte
that might conflict with our Code of Ethics or that might otherwise interfere with their ability to perform their duties in a
manner that is in the best interest of Oncocyte and its shareholders. The Committee will also consider whether including a prospective
director on the Board will result in a Board composition that complies with (a) applicable state corporate laws, (b) applicable
federal and state securities laws, and (c) the rules of the SEC and each stock exchange on which our shares are listed.
The
Board of Directors and the Nominating/Corporate Governance Committee have not adopted specific policies with respect to a particular
mix or diversity of skills, experience, expertise, perspectives, and background that nominees should have. However, the present
Board was assembled with a focus on attaining a Board comprised of people with substantial experience in bioscience, the pharmaceutical
or diagnostic industry, corporate management, and finance. The Board believes that this interdisciplinary approach will best suit
our needs as we work to develop and commercialize cancer diagnostic tests.
Some
of the factors considered by the Committee and the Board in selecting the Board’s nominees for election at the Meeting are
discussed in this Proxy Statement under “ELECTION OF DIRECTORS.”
Because
our principal executive office is located in California, we must comply with recently enacted Section 301.3 of the California
Corporations Code which provides that a publicly held corporation, as defined in Section 301.3, that has its principal executive
offices in California must have at least one female director by the close of 2019, and may be required to have as many as three
female directors by the close of 2021, depending on the authorized number of directors. Failure to comply with Section 301.3 can
lead to the imposition of fines. Our Board of Directors intends to cause us to comply with Section 301.3 by adding qualified women
to our Board of Directors.
DIRECTOR
COMPENSATION
Directors
and members of committees of the Board of Directors who are salaried employees of Oncocyte are entitled to receive compensation
as employees but are not compensated for serving as directors or attending meetings of the Board or committees of the Board. All
directors are entitled to reimbursements for their out-of-pocket expenses incurred in attending meetings of the Board or committees
of the Board.
Non-employee
directors, other than the Chairman of the Board of Directors, received an annual fee of $35,000 in cash during 2019. In addition
to cash fees, non-employee directors received options to purchase 45,000 shares of common stock under our 2018 Equity Incentive
Plan (the “Incentive Plan”) during 2019. In 2019, our Chairman received an annual cash fee of $70,000 and an annual
award of options to purchase 50,000 shares of Oncocyte common stock.
The
annual fee of cash was paid, and the stock options granted vested and became exercisable one year from the date of grant, subject
to the non-employee director’s continued service as a director of Oncocyte or a subsidiary from the date of grant until
the vesting date or, if earlier, until the next annual meeting of shareholders. The options will expire if not exercised ten years
from the date of grant.
Directors
who served on the Audit Committee, the Compensation Committee, the Nominating/Corporate Governance Committee, Science and Technology
Committee or the Finance Committee during 2019 received, in addition to other fees payable to them as directors, the following
annual fees:
|
●
|
Audit
Committee Chairman: $15,000
|
|
●
|
Audit
Committee Member other than Chairman: $7,500
|
|
●
|
Compensation
Committee Chairman: $10,000
|
|
●
|
Compensation
Committee Member other than Chairman: $5,000
|
|
●
|
Nominating/Corporate
Governance Committee Chairman: $10,000
|
|
●
|
Nominating/Corporate
Governance Committee Member other than Chairman: $5,000
|
|
●
|
Science
and Technology Committee Chairman: $10,000
|
|
●
|
Science
and Technology Committee Member other than Chairman: $5,000
|
|
●
|
Finance
and Strategy Committee Chairman: $10,000
|
|
●
|
Finance
and Strategy Committee Member other than Chairman: $5,000
|
The
following table summarizes certain information concerning the compensation paid during the past fiscal year to each of the persons
who served as directors during the year ended December 31, 2019 and who were not our employees on the date the compensation was
earned.
Name
|
|
Fees
Earned
Or
Paid in Cash
|
|
|
Option
Awards
(1)
|
|
|
Total
|
|
Ronald Andrews(2)
|
|
$
|
36,250
|
|
|
$
|
-
|
|
|
$
|
36,250
|
|
Andrew Arno
|
|
$
|
65,000
|
|
|
$
|
65,341
|
(3)
|
|
$
|
130,341
|
|
Melinda Griffith
|
|
$
|
25,000
|
|
|
$
|
65,341
|
(3)
|
|
$
|
90,341
|
|
Alfred D. Kingsley
|
|
$
|
40,000
|
|
|
$
|
65,341
|
(3)
|
|
$
|
105,341
|
|
Andrew J. Last
|
|
$
|
72,500
|
|
|
$
|
65,341
|
(3)
|
|
$
|
137,841
|
|
Aditya Mohanty
|
|
$
|
35,000
|
|
|
$
|
150,510
|
(3)(4)
|
|
$
|
185,510
|
|
Cavan Redmond
|
|
$
|
82,500
|
|
|
$
|
72,602
|
(5)
|
|
$
|
155,102
|
|
(1)
|
Options
granted will vest and become exercisable one year from the date of grant, subject to the non-employee director’s continued
service as a director of Oncocyte or a subsidiary from the date of grant until the vesting date or, if earlier, until the
next annual meeting of shareholders, but must be reported here at the aggregate grant date fair value, as if all options were
fully vested and exercisable at the date of grant. Values are computed in accordance with FASB Accounting Standards Codification
(ASC) Topic 718, Compensation - Stock Compensation. We used the Black-Scholes Pricing Model to compute option fair
values based on applicable exercise and stock prices, an expected option term, volatility assumptions, and risk-free interest
rates.
|
|
|
(2)
|
Mr.
Andrews became our President and Chief Executive Officer on July 1, 2019 and no longer receives compensation as a non-employee
director. The cash fees and value of option awards shown in this table do not include other compensation that Mr. Andrews
received in his capacity as President and Chief Executive Officer, which is shown the in Summary Compensation Table in the
Executive Compensation section of this Proxy Statement.
|
|
|
(3)
|
Mr.
Arno, Ms. Griffith, Mr. Kingsley, Mr. Last and Mr. Mohanty each received 45,000 stock options on July 17, 2019. The options
are exercisable at an exercise price of $2.12 per share.
|
|
|
(4)
|
Mr.
Mohanty received 33,750 stock options on February 15, 2019 as compensation for continuing to serve as a director of Oncocyte
after his departure from Lineage Cell Therapeutics, Inc. in September 2018. Mr. Mohanty did not receive compensation as a
director of Oncocyte while he concurrently served as Co-Chief Executive Officer of Lineage. The options are exercisable at
an exercise price of $3.80 per share. Mr. Mohanty’s term as a director will expire at the Meeting.
|
|
|
(5)
|
Mr.
Redmond received 50,000 stock options on July 17, 2019. The options are exercisable at an exercise price of $2.12 per share.
|
EXECUTIVE
OFFICERS
Ronald
Andrews, Chief Executive Officer and President, Mitchell Levine, Chief Financial Officer, Albert Parker, Chief Operating Officer,
Lyndal K. Hesterberg, Chief Scientific Officer, Douglas Ross, M.D., Chief Medical Officer, Tony Kalajian, Sr. Vice President and
Chief Accounting Officer, and Padma Sundar, Sr. Vice President-Marketing and Market Access, are our other executive officers.
William Annett served as our Chief Executive Officer until June 30, 2019.
Mitchell
Levine joined Oncocyte as Chief Financial Officer in November 2017. In 2000, Mr. Levine
founded Enable Capital Management. LLC, the general partner of Enable Growth Partners, L.P. which provided growth capital to private
and publicly traded companies, catalyzing transformative corporate innovation, job growth, and economic expansion in technology,
life sciences, consumer products, and energy. Prior to founding Enable, Mr. Levine was a founding member of The Shemano Group,
a leading San Francisco-based investment bank that focused on the capital needs of growth companies. He has also worked at Bear
Stearns and Lehman Brothers. Mr. Levine received his BA from the University of California, Davis.
Albert
P. Parker joined Oncocyte as Chief Operating Officer during August 2018. Prior to joining Oncocyte, Mr. Parker was the managing
shareholder of GC Legal Advisors, a law firm established to provide or supplement in-house legal support on an interim, part-time,
or project basis for companies operating across various industries. Mr. Parker also served as Executive Vice President, General
Counsel and Corporate Secretary of Sunovion Pharmaceuticals from 2013 to 2014. From 2000-2010, Mr. Parker served in a number of
management and legal positions at the Vice President or Senior Vice President and Chief Counsel level at Wyeth Pharmaceuticals
(now a part of Pfizer). Before joining Wyeth Pharmaceuticals, Mr. Parker served as an Assistant General Counsel at Warner-Lambert
Company, and was a partner in a Philadelphia law firm. Mr. Parker holds a J.D. from the University of Pennsylvania Law School
and a B.A. from Pennsylvania State University
Lyndal
K. Hesterberg, Ph.D. was appointed Chief Scientific Officer during March 2019 after serving as our Senior Vice President-Research
and Development since November 2016. Dr. Hesterberg began providing consulting services to Oncocyte in 2015 and was named Vice
President of Development in February of 2016. Dr. Hesterberg also provided counsel on clinical trial design, product development,
and corporate strategy as a consultant to medical and biotech companies. Until 2012, Dr. Hesterberg was the Chief Technology Officer
of Crescendo Biosciences where he was responsible for clinical trial, laboratory operations, manufacturing and quality systems
and helped bring to market Vectra DA. Previously, he was the president and Chief Executive Officer of Barofold, Inc., where he
led the company from product conception through its clinical stage, and recruited a senior leadership team that developed a pipeline
of proprietary drug candidates. Dr. Hesterberg received his Ph.D. in biochemistry from the University of St. Louis and a Bachelor
of Sciences from the University of Illinois.
Douglas
Ross, M.D. was appointed Chief Medical Officer during March 2020. Prior to joining Oncocyte, Dr. Ross was a principal of the
Bethesda Group, LLC, biomedical consulting company that he co-founded in 2015. From 2014, until founding Bethesda Group, Dr. Ross
served as Chief Scientific Officer of CardioDx, Inc. In 2011 Dr. Ross joined the Medical Science Division of Life Technologies
and served as its Chief Scientific Officer on a consulting basis until that company was acquired by Thermo Fisher Scientific in
2013. Dr. Ross’s private sector career started in 2000 as Chief Scientific Officer of Applied Genomics, Inc. (AGI), a company
he co-founded after post-doctoral training at Stanford University. AGI translated insights from gene expression patterns into
immunohistochemistry multivariate assays targeted to actionable clinical problems. In 2009, Clarient, Inc., a national pathology
reference laboratory, acquired AGI and Dr. Ross continued his role as Chief Scientific Officer. General Electric Healthcare acquired
Clarient in December 2010, and Dr. Ross continued as Chief Scientific Officer, working with the business development and partnership
teams at Clarient and capital teams at GE Healthcare. Dr. Ross obtained his M.D. and his Ph.D. in Pathology from the University
of Washington while studying at the Fred Hutchinson Cancer Research Center in Seattle, Washington.
Tony Kalajian was
appointed Sr. Vice President and Chief Accounting Officer during August 2019. Prior to joining Oncocyte, Mr. Kalajian, served
as Vice President and Chief Accounting Officer for Oncocyte’s former parent company Lineage Cell Therapeutics, Inc. (formerly
known as BioTime, Inc.). While at Lineage from May 2016 to August 2019, Mr. Kalajian concurrently managed and oversaw the financial
reporting, compliance and accounting for three other public companies spun off from Lineage, including Oncocyte, Asterias Biotherapeutics,
Inc. and AgeX Therapeutics, Inc. Prior to joining Lineage, Mr. Kalajian was the Senior Director of Finance at STAAR Surgical Company,
a publicly traded multi-national medical-device developer and manufacturer. Mr. Kalajian is a certified public accountant (CPA)
(inactive) with the State of California and brings over 20 years of finance and public accounting experience, including domestic
and international financial reporting, initial public offerings, management, business consulting and tax services in various industries
including medical devices, ophthalmic, diagnostic, start-ups, ecommerce, alternative energy, manufacturing and retail. Mr. Kalajian
held various positions at the public accounting firm of PricewaterhouseCoopers (PwC), where he was a Senior Manager in Audit and
Advisory Services. Mr. Kalajian holds a B.S. in accounting, theory and practice from California State University, Northridge and
an M.B.A. from the University of Southern California Marshall School of Business
Padma
Sundar joined Oncocyte as Senior Vice President—Marketing and Market Access in May 2019. Before joining Oncocyte, Ms.
Sundar served as Vice President of Strategy and Market Access at CellMax Life, a liquid biopsy company, from 2017 until 2019,
and she served as Director of Marketing at Guardant Health, Inc., cancer diagnostics company, from 2016 until 2017. Previously,
Ms. Sundar was Senior Director at Roche Sequencing and was Senior Director for the oncology portfolio at Affymetrix. Ms. Sundar
began her career at McKinsey and Company, and received her M.B.A. and M.P.H. from the University of California, Berkeley, and
her B.A. in Chemistry from the University of Delhi.
EXECUTIVE
COMPENSATION
Emerging
Growth Company and Smaller Reporting Company
We
are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and a “smaller
reporting company” as defined in the rules and regulations of the SEC. As an emerging growth company and as a smaller reporting
company we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable, in general,
to public companies that are not emerging growth companies or smaller reporting companies. Accordingly, this Proxy Statement includes
reduced disclosure about our executive compensation arrangements.
The
following tables show certain information relating to the compensation of our President and Chief Executive Officer, the two highest
paid individuals who were serving as executive officers at year end whose total individual compensation exceeded $100,000 during
2019, and our former Chief Executive Officer. We refer to such executive officers referred to as our “Named Executive Officers.
Summary
Compensation Table
Name
and principal position
|
|
Year
|
|
|
Salary
|
|
|
Bonus
|
|
|
Stock
Awards(1)
|
|
|
Option
Awards(1)
|
|
|
All
Other
Compensation(2)
|
|
|
Total
|
|
Ronald
Andrews
President and Chief Executive Officer
|
|
|
2019
|
|
|
$
|
276,250
|
(3)
|
|
$
|
—
|
|
|
$
|
163,150
|
(4)
|
|
$
|
1,626,562
|
(4)
|
|
$
|
—
|
|
|
$
|
2,065,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lyndal
K. Hesterberg
|
|
|
2019
|
|
|
$
|
298,448
|
|
|
$
|
60,000
|
|
|
|
|
|
|
$
|
857,112
|
(6)
|
|
$
|
1,250
|
|
|
$
|
1,216,810
|
|
Chief
Scientific Officer(5)
|
|
|
2018
|
|
|
$
|
216,691
|
|
|
$
|
311,820
|
|
|
|
|
|
|
$
|
314,940
|
(7)
|
|
$
|
7,132
|
|
|
$
|
850,583
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mitchell
Levine
|
|
|
2019
|
|
|
$
|
343,063
|
|
|
$
|
131,670
|
|
|
$
|
70,400
|
(8)
|
|
$
|
600,142
|
(8)
|
|
$
|
12,662
|
|
|
$
|
1,157,937
|
|
Chief
Financial Officer
|
|
|
2018
|
|
|
$
|
330,000
|
(9)
|
|
$
|
200,000
|
|
|
|
|
|
|
$
|
359,287
|
(9)
|
|
$
|
—
|
|
|
$
|
889,287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
Annett(10)
|
|
|
2019
|
|
|
$
|
275,833
|
|
|
$
|
73,500
|
|
|
|
|
|
|
$
|
955,545
|
(11)
|
|
$
|
324,000
|
(12)
|
|
$
|
1,628,878
|
|
Former
President and Chief Executive Officer
|
|
|
2018
|
|
|
$
|
400,000
|
|
|
$
|
220,000
|
|
|
|
|
|
|
$
|
292,058
|
(13)
|
|
$
|
13,750
|
|
|
$
|
925,808
|
|
(1)
|
Option
awards granted under our 2010 Employee Stock Option Plan (the “Option Plan”)
or under our Incentive Plan are valued at the aggregate grant date fair value, as if
all options were fully vested and exercisable at the date of grant. Except as otherwise
indicated below, one quarter of the options will vest upon completion of 12 full months
of continuous employment measured from the grant date, and the balance of the options
shall vest in 36 equal monthly installments commencing on the first anniversary of the
date of grant, based upon the completion of each month of continuous employment. Amounts
shown in this column do not reflect dollar amounts actually received by our Named Executive
Officers. Instead, these amounts reflect the aggregate grant date fair value of each
stock option granted, computed in accordance with the provisions of FASB ASC Topic 718.
For stock options that have performance-based (sometimes referred to as milestone-based)
vesting conditions indicated below, although the aggregate grant date fair value is included
in the table above, stock based compensation is recognized in the period only when it
is probable that the vesting condition will be, or has been, met. We used the Black-Scholes
Pricing Model to compute option fair values based on applicable exercise and stock prices,
an expected option term, volatility assumptions, and risk-free interest rates. Our Named
Executive Officers will only realize compensation upon exercise of the stock options
and to the extent the trading price of our common stock is greater than the exercise
price of such stock options at the time of exercise.
Stock
awards, consisting entirely of restricted stock units, except as otherwise indicated elsewhere in this Proxy Statement,
are valued at the aggregate grant date fair value based on the closing price of Oncocyte common stock as quoted on the
NYSE American as if all stock awards were fully vested.
|
|
|
(2)
|
Except
as otherwise indicated below, other compensation consists entirely of employer contributions to employee accounts under our
401(k) plan.
|
|
|
(3)
|
Mr.
Andrews was appointed President and Chief Executive Officer effective July 1, 2019. Amounts shown as salary in the table above
includes $36,250 of cash fees that Mr. Andrews received for services as a non-employee director prior to July 1, 2019, which
is also included in the Director Compensation table elsewhere in this Proxy Statement.
|
|
|
(4)
|
In
July 2019, Mr. Andrews was granted (i) options to purchase 950,000 shares of common stock, effective on the date his employment
commenced, at an exercise price of $2.51 per share, (ii) options to purchase 50,000 shares of common stock effective on upon
completion of one year of continuous service as an employee which are not included in the table as the grant of the options
will not be effective until and unless Mr. Andrews completes a year of continuous service as an employee, and (iii) restricted
stock units (RSUs) with respect to 65,000 shares of common stock, effective upon his completion of one year of continuous
service as an employee. The fair value of the RSUs, measured as of July 1, 2019, is shown in the table above under Stock Awards.
In accordance with ASC 718, the RSUs were considered granted on July 1, 2019 and Oncocyte is recognizing stock based compensation
over its effective two-year vesting period beginning on July 1, 2019.
|
|
|
(5)
|
Dr.
Hesterberg served as our Sr. Vice President of Research & Development during 2018 and was appointed Chief Scientific Officer
during March 2019.
|
|
|
(6)
|
In
March 2019, Dr. Hesterberg was granted 350,000 stock options exercisable at an exercise price of $3.52 per share.
|
(7)
|
In
May 2018, Dr. Hesterberg was granted 150,000 stock options exercisable at an exercise price of $2.35 per share. One third
of the options shall vest when a clinical validation study of DetermaDx™ (formerly known as DetermaVu™) is complete,
one third shall vest on the filing of a Medicare dossier for a local coverage determination (“LCD Approval”) for
DetermaDx™ and one third shall vest on the earlier of the third anniversary of the date of grant or the date of LCD
Approval for DetermaDx™.
|
|
|
|
In
October 2018, Dr. Hesterberg was granted 54,000 stock options exercisable at an exercise price of $1.95 per share. The options
shall vest in three equal annual installments from the date of grant.
|
|
|
(8)
|
In
March 2019, Mr. Levine was granted 245,000 stock options exercisable at an exercise price of $3.52 per share and 20,000 RSUs.
The RSUs vested on March 14, 2020. The fair value of the RSUs, measured as of the March 14, 2019 grant date based on the closing
price of Oncocyte common stock quoted on the NYSE American, is shown in the table above under Stock Awards.
|
|
|
(9)
|
In
May 2018, Mr. Levine was granted 50,000 stock options exercisable at an exercise price of $2.35 per share that will vest as
follows: one quarter of the options vested upon completion of 12 full months of continuous employment measured from the grant
date, and the balance of the options shall vest in 36 equal monthly installments thereafter based upon the completion of each
month of continuous services as an employee. Mr. Levine also was granted 125,000 stock options exercisable at an exercise
price of $2.35 per share which contain performance-based vesting conditions as follows: one third of the options shall vest
when a clinical validation study of DetermaDx™ is complete, one third shall vest on the filing of a Medicare dossier
for LCD Approval for DetermaDx™ and one third shall vest on the earlier of the third anniversary of the date of grant
or the date of LCD Approval of DetermaDx™.
|
|
|
|
In
June 2018, Mr. Levine agreed to a 10% salary reduction effective from June 10, 2018 through January 1, 2019. Accordingly,
Mr. Levine’s actual salary paid in cash for the year ended December 31, 2018 was $314,008. In consideration of his agreement
to the salary reduction, Mr. Levine was granted 45,000 performance-based stock options exercisable at an exercise price of
$2.55 per share. One half of the options shall vest upon acceptance for publication of a clinical validation study manuscript
for DetermaDx™, and one-half of the options shall vest upon the commencement of a clinical utility study of DetermaDx™.
As of December 31, 2019, none of the milestones for vesting had been met.
|
|
|
(10)
|
Mr.
Annett’s service as President and Chief Executive Officer ended on June 30, 2019.
|
|
|
(11)
|
In
March 2019, Mr. Annett was granted 390,000 stock options exercisable at an exercise price of $3.52 per share.
|
|
|
(12)
|
Mr.
Annett received $210,000 in severance payments and $100,000 for consulting services from September through December 31, 2019,
on which date his consulting services were terminated.
|
|
|
(13)
|
During
2018, Mr. Annett was granted 180,000 stock options exercisable at an exercise price of $2.35 per share. One quarter of the
options were designated to vest when a clinical validation study of DetermaDx™ is complete and Oncocyte receives a publication
date for an article describing the results of the study, and the balance of the options were designated to vest when Oncocyte
receives LCD Approval for DetermaDx™. As a result of the termination of Mr. Annett’s employment, those options
will lapse to the extent that the conditions to vesting are not met by June 30, 2020.
|
Executive
Employment Agreements and Change of Control Provisions
We
have entered into Employment Agreements with our Named Executive Officers.
Pursuant
to his employment agreement, the annual salary of our President and Chief Executive Officer Ronald Andrews, was set at $480,000.
Mr. Andrews is also eligible to receive annual bonuses, to the extent approved by the Board of Directors in its discretion, based
on the achievement of predetermined company and individual objectives set by the Board of Directors or its Compensation Committee
from time to time.
Mr.
Andrews received or will receive the following equity awards under the Incentive Plan: (i) options to purchase 950,000 shares
of Oncocyte common stock effective on the date his employment commenced (the “Initial Grant”); (ii) options to purchase
50,000 shares of common stock, effective on upon his completion of one year of continuous service as an employee (the “Second
Grant”); and (iii) restricted stock units (“RSUs”) with respect to 65,000 shares of common stock, effective
upon his completion of one year of continuous service as an employee. The exercise price of the options in the Initial Grant and
Second Grant will be the fair market value of a share of Oncocyte common stock on the applicable effective date of grant, determined
in accordance with the Incentive Plan.
The
options in the Initial Grant will vest and thereby become exercisable as follows: twenty-five percent of the options will vest
upon Mr. Andrew’s completion of one year of continuous service as an employee, and the balance of the options will vest
in 36 equal monthly installments, commencing on the first anniversary of the effective date of the Initial Grant, subject to his
continued service as an employee on the applicable vesting date.
The
options in the Second Grant and the RSUs will vest upon Mr. Andrew’s completion of one year of continuous service as an
employee from the effective date of the Second Grant. Vested RSUs will be settled in shares of common stock, unless Oncocyte elects
to pay cash or part cash and part common stock in lieu of delivering only shares of common stock for vested RSUs.
During
March 2019, the annual salary of Mitchell Levine our Chief Financial Officer was increased from $330,000 to $346,500. Pursuant
to Mr. Levine’s employment agreement he is eligible to receive annual cash incentive bonus awards determined by the Board
of Directors, with a target bonus of not less than 40% of his base salary, based on his achievement of specific, objectively determinable,
performance goals at target levels for the year.
During
March 2019, Dr. Lyndal Hesterberg was promoted from Sr. Vice President-Research & Development to Chief Scientific Officer
and his annual salary was increased from $289,400 to $347,280. Pursuant to his employment agreement, Dr. Hesterberg is eligible
to receive annual cash incentive bonus awards determined by the Board of Directors, with a target bonus of 40% of his base salary,
based on his performance and achievement of goals or milestones set by the Board of Directors. We granted Dr. Hesterberg options
purchase 350,000 shares of Oncocyte common stock at an exercise price of $3.52 per share which will vest and thereby become exercisable
as follows: 25% will vest upon the completion of one year of continuous service as an employee from the date of grant, and the
balance will vest in 36 equal monthly installments commencing on the first anniversary of the date of grant, subject to Dr. Hesterberg’s
continuous service as an officer or employee on the applicable vesting date. We also agreed to provide certain “relocation
benefits” to Dr. Hesterberg consisting of payments for certain expenses related to the relocation of his residence to the
metropolitan area where our principal office, research laboratory or clinical laboratory is located, plus a $5,000 related expense
allowance, and a tax “gross up” payment to the extent the relocation related expenses we pay are taxable to him for
federal income tax purposes. Dr. Hesterberg is obligated to reimburse us for the relocation benefits we pay if within two years
after the relocation of his residence his employment is terminated for “cause” as defined in his employment agreement
or if he resigns other than for “good reason” within one year of a “change of control,” as such terms
are defined in his employment agreement.
Change
in Control and Severance Plan
We
have adopted the OncoCyte Corporation Change in Control and Severance Plan (the “CIC Plan”) which provides change
in control and other severance benefits to a select group of our management or highly compensated employees, including our executive
officers, who have executed a Change in Control and Severance Agreement (“CIC Agreement”) and who otherwise satisfy
the conditions set forth in their CIC Agreement and the provisions of the CIC Plan. Pursuant to the CIC Plan, we have entered
into CIC Agreements with certain employees, including our President and Chief Executive Officer, Ronald Andrews, our Chief Financial
Officer, Mitchell Levine, and our Chief Scientific Officer, Dr. Lyndal Hesterberg. Each of their CIC Agreements has the effect
of modifying the executive’s employment agreement and provides that if we terminate the executive’s employment without
“cause” or if the executive resigns for “good reason”, the executive will receive a severance payment
in the amount of 12 months of his or her base salary and accelerated vesting of stock options, restricted stock units, and any
other equity awards (“Equity Awards”) that were schedule to vest based on the passage of time during the 12 months
following the termination of employment. In addition to those severance benefits, if a termination of the executive’s employment
without “cause” or a resignation for “good reason” occurs within three months before or twelve months
after a “change in control,” the executive will also receive his or her target bonus for the year and the vesting
of all Equity Awards will be fully accelerated. In addition to the foregoing, the terminated executive will receive a lump sum
payment (which shall not be grossed up for applicable income and employment taxes) equal to twelve months of the premium costs
of group health plan continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”)
to the same extent provided under Oncocyte’s group health plan. In order to receive the severance benefits, the executive
must execute and comply with a separation agreement and general release of all claims against Oncocyte.
Transition
Agreement with William Annett
On
July 1, 2019, we entered into a Transition Agreement with our former President and Chief Executive Officer, William Annett in
connection with the termination of his employment. Pursuant to the Transition Agreement, and consistent with the terms of his
former employment agreement, he received (i) a cash payment of $210,000, (ii) his accrued but unpaid salary through June 30, 2019,
(iii) a portion of his “target bonus” under his employment agreement prorated for the period January 1 through June
30, 2019; (iv) a lump-sum payment that represents the value of his accrued unused vacation and all vested benefits under any Oncocyte
retirement, deferred compensation plan or equity plan, and (v) COBRA coverage continuation rights under Oncocyte health care plans,
in accordance with the terms of the plans and applicable law. We also agreed to pay the premium for COBRA coverage for up to six
months. Pursuant to the Transition Agreement, Mr. Annett provided certain consulting services to Oncocyte through December 31,
2019, for which he received aggregate payments of $170,000 for that period.
Mr.
Annett’s unvested Oncocyte stock options continued to vest during the period for which he performed consulting services
under the Transition Agreement (the “Consulting Period”). The Consulting Period ended on December 31, 2019 and, as
of that date, and according to the terms of Mr. Annett’s original employment agreement, Mr. Annett’s unvested stock
options vested with respect to the number of unvested options that would otherwise have vested during the six month period ending
June 30, 2020 had he continued to provide services to Oncocyte during that period, including certain performance based stock options
that may vest to the extent that the performance milestones are attained during that six month period ending June 30, 2020. The
post-employment exercise period of all of Mr. Annett’s vested options was extended until December 31, 2020, which is one
year after the end of the Consulting Period in accordance with his employment agreement.
Equity
Awards Outstanding at Year End
The
following table summarizes certain information concerning stock options and other equity awards granted by us under the Option
Plan and the Incentive Plan held as of December 31, 2019 by our Named Executive Officers:
Option awards
|
|
Stock awards
|
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options
Exercisable
|
|
|
Number
of
Securities
Underlying
Unexercised
Options
Unexercisable
(1)
|
|
|
Equity
incentive
plan
awards: Number of
securities
underlying
unexercised
unearned
options
(#)
|
|
|
Option
Exercise
Price
|
|
|
Option
Expiration
Date
|
|
Number
of shares or units of stock that have not vested
(#)
|
|
|
Market
value of shares of units of stock that have not vested
($)
|
|
|
Equity
incentive
plan
awards: Number of
unearned
shares,
units or other rights that have not vested
(#)
|
|
|
Equity
incentive
plan
awards: Market or payout value of
unearned
shares,
units or other rights that have not vested
($)
|
|
Ronald
Andrews
|
|
|
20,000
|
(2)
|
|
|
—
|
|
|
|
—
|
|
|
$
|
2.10
|
|
|
April
1, 2028
|
|
|
65,000
|
(5)
|
|
$
|
146,250
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
45,000
|
(3)
|
|
|
—
|
|
|
|
—
|
|
|
$
|
2.40
|
|
|
August
29, 2028
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
950,000
|
(4)
|
|
|
—
|
|
|
$
|
2.51
|
|
|
June
30, 2029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lyndal
K. Hesterberg
|
|
|
12,500
|
|
|
|
—
|
|
|
|
12,500
|
(6)
|
|
$
|
3.06
|
|
|
February
15, 2026
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
96,354
|
|
|
|
28,646
|
(7)
|
|
|
|
|
|
$
|
4.05
|
|
|
October
31, 2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,200
|
|
|
|
4,200
|
(8)
|
|
|
|
|
|
$
|
4.70
|
|
|
February
16, 2027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
150,000
|
(9)
|
|
$
|
2.35
|
|
|
May
22, 2028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,000
|
|
|
|
36,000
|
(10)
|
|
|
|
|
|
$
|
1.95
|
|
|
October
16, 2028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
350,000
|
(11)
|
|
|
|
|
|
$
|
3.52
|
|
|
March
13, 2029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mitchell
Levine
|
|
|
104,168
|
|
|
|
95,832
|
(12)
|
|
|
|
|
|
$
|
5.90
|
|
|
November
15, 2027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,791
|
|
|
|
30,209
|
(13)
|
|
|
|
|
|
$
|
2.35
|
|
|
May
22, 2028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
125,000
|
(9)
|
|
$
|
2.35
|
|
|
May
22, 2028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
45,000
|
(14)
|
|
$
|
2.55
|
|
|
June
12, 2028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
245,000
|
(11)
|
|
|
|
|
|
$
|
3.52
|
|
|
March
13, 2029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
n/a
|
|
|
n/a
|
|
|
20,000
|
(15)
|
|
$
|
45,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
Annett(16)
|
|
|
5,000
|
|
|
|
—
|
|
|
|
|
|
|
$
|
2.20
|
|
|
January
8, 2025(16)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
—
|
|
|
|
|
|
|
$
|
2.20
|
|
|
June
15, 2025(16)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
600,000
|
|
|
|
—
|
(17)
|
|
|
|
|
|
$
|
2.20
|
|
|
June
15, 2025(16)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250,000
|
|
|
|
—
|
(18)
|
|
|
|
|
|
$
|
3.06
|
|
|
February
15, 2026(16)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
187,496
|
|
|
|
—
|
(8)
|
|
|
|
|
|
$
|
4.70
|
|
|
February
16, 2027(16)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
180,000
|
(19)
|
|
$
|
2.35
|
|
|
May
22, 2028(16)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
121,875
|
(11)
|
|
|
—
|
|
|
|
|
|
|
$
|
3.52
|
|
|
March
13, 2029(16)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Except
as otherwise indicated below, one quarter of the options shall vest upon completion of 12 full months of continuous employment
measured from the date of grant, and the balance of the options will vest in 36 equal monthly installments commencing on the
first anniversary of the date of grant, based upon the completion of each month of continuous employment.
|
|
(2)
|
The
date of grants was April 2, 2018 for services of Mr. Andrews as a non-employee director of Oncocyte. The options vested on
the first anniversary of the grant date.
|
|
|
|
|
(3)
|
The
date of grant was August 30, 2018 for services of Mr. Andrews as a non-employee director of Oncocyte. The options vested on
the first anniversary of the grant date.
|
|
|
|
|
(4)
|
The
date of grant was July 1, 2019.
|
|
|
|
|
(5)
|
The
date of grant of the RSUs was July 1, 2019. The RSUs will vest upon completion of two years of continuous service as an employee
from the grant date. The market value of the RSUs was determined based on the closing price of Oncocyte common stock as quoted
on the NYSE American on December 31, 2019.
|
|
|
|
|
(6)
|
These
options were granted to Dr. Hesterberg in the capacity of a consultant on February 16, 2016. One quarter of the options vested
upon completion of 12 full months of continuous service provided to the company measured from the date of grant, the second
quarterly installment shall vest upon the completion of the validation of a second product (bladder cancer, lung cancer small
nodule, or lung cancer screening), the third quarterly installment shall vest upon achievement of successful launch of a lung
cancer test, and the last one quarter vested on the second anniversary of the option grant date.
|
|
|
|
|
(7)
|
The
date of grant was November 1, 2016 at which time Dr. Hesterberg became an employee of Oncocyte.
|
|
|
|
|
(8)
|
The
date of grant was February 17, 2017.
|
|
|
|
|
(9)
|
The
date of grant was May 23, 2018. One third of the options shall vest when a clinical validation study of DetermaDx™ is
complete, one third shall vest on the filing of a Medicare dossier for a LCD Approval for DetermaDx™ and one third shall
vest on the earlier of the third anniversary of the date of grant or the date of LCD Approval for DetermaDx™.
|
|
|
|
|
(10)
|
The
date of grant was October 17, 2018. The options shall vest in three equal annual installments from the date of grant.
|
|
|
|
|
(11)
|
The
date of grant was March 14, 2019.
|
|
|
|
|
(12)
|
These
options were granted to Mr. Levine upon his appointment as Chief Financial Officer on November 16, 2017.
|
|
|
|
|
(13)
|
The
date of grant was May 23, 2018.
|
|
|
|
|
(14)
|
The
date of grant was June 13, 2018. One half of the options shall vest upon completion of a clinical validation study manuscript
for DetermaDx™, and one-half of the options shall vest upon the commencement of a clinical utility study of DetermaDx™.
|
|
(15)
|
The
date of the grant was March 14, 2019 and the 20,000 restricted stock units vested one year from the date of grant. The market
value of the RSUs was determined based on the closing price of Oncocyte common stock as quoted on the NYSE American on December
31, 2019.
|
|
|
|
|
(16)
|
Mr.
Annett’s employment as President and Chief Executive Officer ended on June 30, 2019. As a result of the termination
of Mr. Annett’s employment, options to purchase 59,377 shares of common stock immediately vested. Mr. Annett’s
vested options will expire on December 31, 2020.
|
|
|
|
|
(17)
|
The
date of grant was June 16, 2015.
|
|
|
|
|
(18)
|
The
date of grant was February 16, 2016.
|
|
|
|
|
(19)
|
The
date of grant was May 23, 2018. One quarter of the options were designated to vest when a clinical validation study of DetermaDx™
is complete and Oncocyte receives a publication date for an article describing the results of the study, and the remaining
options were designated to vest when Oncocyte receives LCD Approval for DetermaDx™. As a result of the termination of
Mr. Annett’s employment, these options will lapse to the extent that the conditions to vesting are not met by June 30,
2020.
|
The
Incentive Plan
The
following summary of the Incentive Plan is a summary only and does not purport to include all of the terms of the Inventive Plan,
and is qualified by the full terms of the Incentive Plan.
We
have adopted the Incentive Plan that permits us to grant awards, or Awards, consisting of stock options, the grant or sale of
restricted stock (“Restricted Stock”), the grant of stock appreciation rights (“SARs”), and the grant
of hypothetical units issued with reference to our common stock (“Restricted Stock Units” or “RSUs”),
for up to 11,000,000 shares of our common stock. The Incentive Plan also permits Oncocyte to issue such other securities as our
Board of Directors (the “Board”) or the Compensation Committee (the “Committee”) administering the Incentive
Plan may determine. Awards of stock options, Restricted Stock, SARs, and RSUs (“Awards”) may be granted under the
Incentive Plan to Oncocyte employees, directors, and consultants.
Awards
may vest and thereby become exercisable or have restrictions on forfeiture lapse on the date of grant or in periodic installments
or upon the attainment of performance goals, or upon the occurrence of specified events. Awards may not vest, in whole or in part,
earlier than one year from the date of grant. Vesting of an Award after the date of grant may be accelerated only in the limited
circumstances specified in the Incentive Plan. In the case of the acceleration of vesting of any performance-based Award, acceleration
of vesting shall be limited to actual performance achieved, pro rata achievement of the performance goal(s) on the basis for the
elapsed portion of the performance period, or a combination of actual and pro rata achievement of performance goals.
No
person shall be granted, during any one-year period, options to purchase, or SARs with respect to, more than 1,000,000 shares
in the aggregate, or any Awards of Restricted Stock or RSUs with respect to more than 500,000 shares in the aggregate. If an Award
is to be settled in cash, the number of shares on which the Award is based shall not count toward the individual share limit.
No
Awards may be granted under the Incentive Plan more than ten years after the date upon which the Incentive Plan was adopted by
the Board, and no options or SARS granted under the Incentive Plan may be exercised after the expiration of ten years from the
date of grant.
Stock
Options
Options
granted under the Incentive Plan may be either “incentive stock options” within the meaning of Section 422(b) of the
Internal Revenue Code of 1986, as amended, or “non-qualified” stock options that do not qualify incentive stock options.
Incentive stock options may be granted only to Oncocyte employees and employees of subsidiaries. The exercise price of stock options
granted under the Incentive Plan must be equal to the fair market of our common stock on the date the option is granted. In the
case of an optionee who, at the time of grant, owns more than 10% of the combined voting power of all classes of Oncocyte stock,
the exercise price of any incentive stock option must be at least 110% of the fair market value of the common stock on the grant
date, and the term of the option may be no longer than five years. The aggregate fair market value of common stock (determined
as of the grant date of the option) with respect to which incentive stock options become exercisable for the first time by an
optionee in any calendar year may not exceed $100,000.
The
exercise price of an option may be payable in cash or in common stock having a fair market value equal to the exercise price,
or in a combination of cash and common stock, or other legal consideration for the issuance of stock as the Board or Committee
may approve.
Generally,
options will be exercisable only while the optionee remains an employee, director or consultant, or during a specific period thereafter,
but in the case of the termination of an employee, director, or consultant’s services due to death or disability, the period
for exercising a vested option shall be extended to the earlier of 12 months after termination or the expiration date of the option.
Restricted
Stock and Restricted Stock Units
In
lieu of granting options, we may enter into purchase agreements with employees under which they may purchase or otherwise acquire
Restricted Stock or RSUs subject to such vesting, transfer, and repurchase terms, and other restrictions. The price at which Restricted
Stock may be issued or sold will be not less than 100% of fair market value. Employees or consultants, but not executive officers
or directors, who purchase Restricted Stock may be permitted to pay for their shares by delivering a promissory note or an installment
payment agreement that may be secured by a pledge of their Restricted Stock. Restricted Stock may also be issued for services
actually performed by the recipient prior to the issuance of the Restricted Stock. Unvested Restricted Stock for which we have
not received payment may be forfeited, or we may have the right to repurchase unvested shares upon the occurrence of specified
events, such as termination of employment.
Subject
to the restrictions set with respect to the particular Award, a recipient of Restricted Stock generally shall have the rights
and privileges of a shareholder, including the right to vote the Restricted Stock and the right to receive dividends; provided
that, any cash dividends and stock dividends with respect to the Restricted Stock shall be withheld for the recipient’s
account, and interest may be credited on the amount of the cash dividends withheld. The cash dividends or stock dividends so withheld
and attributable to any particular share of Restricted Stock (and earnings thereon, if applicable) shall be distributed to the
recipient in cash or, at the discretion of the Board or Committee, in shares of common stock having a fair market value equal
to the amount of such dividends, if applicable, upon the release of restrictions on the Restricted Stock and, if the Restricted
Stock is forfeited, the recipient shall have no right to the dividends.
The
terms and conditions of a grant of RSUs shall be determined by the Board or Committee. No shares of common stock shall be issued
at the time a RSU is granted. A recipient of Restricted Stock Units shall have no voting rights with respect to the RSUs. Upon
the expiration of the restrictions applicable to a RSU, we will either issue to the recipient, without charge, one share of common
stock per RSU or cash in an amount equal to the fair market value of one share of common stock.
At
the discretion of the Board or Committee, each RSU (representing one share of common stock) may be credited with cash and stock
dividends paid in respect of one share (“Dividend Equivalents”). Dividend Equivalents shall be withheld for the recipient’s
account, and interest may be credited on the amount of cash Dividend Equivalents withheld. Dividend Equivalents credited to a
recipient’s account and attributable to any particular RSU (and earnings thereon, if applicable) shall be distributed in
cash or in shares of common stock having a fair market value equal to the amount of the Dividend Equivalents and earnings, if
applicable, upon settlement of the RSU. If a RSU is forfeited, the recipient shall have no right to the related Dividend Equivalents.
SARs
An
SAR is the right to receive, upon exercise, an amount payable in cash or shares, or a combination of shares and cash, equal to
the number of shares subject to the SAR that is being exercised, multiplied by the excess of (a) the fair market value of a common
share on the date the SAR is exercised, over (b) the exercise price specified in the SAR Award agreement. SARs may be granted
either as free-standing SARs or in tandem with options. No SAR may be exercised later than 10 years after the date of grant.
The
exercise price of an SAR shall not be less than 100% of the fair market value of one share of common stock on the date of grant.
An SAR granted in conjunction with an option shall have the same exercise price as the related option, shall be transferable only
upon the same terms and conditions as the related option, and shall be exercisable only to the same extent as the related option;
provided, however, that the SAR by its terms shall be exercisable only when the fair market value per share exceeds the exercise
price per share of the SAR or related option. Upon any exercise of an SAR granted in tandem with an option, the number of shares
for which the related option shall be exercisable shall be reduced by the number of shares for which the SAR has been exercised.
The number of shares for which an SAR issued in tandem with an option shall be exercisable shall be reduced by the number of shares
for which the related option has been exercised.
Repricing
Prohibition
The
Incentive Plan prohibits any modification of the purchase price or exercise price of an outstanding option or other Award if the
change would effect a “repricing’ without shareholder approval. As defined in the Incentive Plan, “repricing”
means a reduction in the exercise price of an outstanding option or SAR or cancellation of an “underwater” or “out-of-the-money”
Award in exchange for other Awards or cash. An “underwater” or “out-of-the-money” Award is defined to
mean an Award for which the exercise price is less than the “fair market value” of Oncocyte common stock. The fair
market value is generally determined by the closing price of Oncocyte common stock on the NYSE American or any other national
securities exchange or inter-dealer quotation system on which Oncocyte common stock is traded.
Limitation
on Share Recycling
Shares
subject to an Award shall not again be made available for issuance or delivery under the Incentive Plan if those shares are (a)
shares tendered in payment of an option, (b) shares delivered or withheld by us to satisfy any tax withholding obligation, (c)
shares covered by a stock-settled SAR or other Award that were not issued upon the settlement of the Award, or (d) shares repurchased
by us using the proceeds from option exercises. Only shares subject to an Award that is cancelled or forfeited or expires prior
to exercise or realization may be regranted under the Incentive Plan.
Other
Compensation Plans
We
do not have any pension plans, defined benefit plans, or non-qualified deferred compensation plans. We do make contributions to
401(k) plans for participating executive officers and other employees.
Risk
Considerations and Recoupment Policies
The
Compensation Committee considers, in establishing and reviewing the executive compensation program, whether the program encourages
unnecessary or excessive risk taking. Our executive compensation arrangements include a fixed salary that provides a steady income
so that executives do not feel pressured to focus exclusively on stock price performance or short-term financial targets to the
detriment of our long-term operational and strategic objectives. We supplement fixed salaries with discretionary bonus awards
based on the executive’s performance as well as the performance of Oncocyte. Most of the stock options that we have granted
to our executive officers vest over four years, assuring that the executives take a long-term perspective in viewing their equity
ownership.
Because
we have not adopted compensation plans, or made incentive awards, based on quantified financial performance measures, we have
not adopted specific policies regarding the adjustment or recovery of awards or payments if the relevant performance measures
are restated or otherwise adjusted in a manner that would reduce the size of an award or payment. We may adopt such policies,
however, if we adopt incentive compensation plans or grant incentive bonuses based on financial performance measures or if we
are required to do by the rules of any national securities exchange or interdealer quotation system on which our common stock
or other equity securities are listed.
PRINCIPAL
SHAREHOLDERS
The
following table sets forth information as of May 12, 2020 concerning beneficial ownership of our common stock by each shareholder
known by us to be the beneficial owner of 5% or more of our outstanding shares of common stock. Information concerning certain
beneficial owners of more than 5% of the outstanding common stock is based upon information disclosed by such owners in their
reports on Schedule 13D or Schedule 13G.
Security
Ownership of Certain Beneficial Owners
Shareholder
|
|
Number of Shares
|
|
|
Percent of
Total
|
|
|
|
|
|
|
|
|
Broadwood Partners, L.P. (1)
Broadwood Capital, Inc.
Neal Bradsher
724 Fifth Avenue, 9th Floor
New York, New York 10019
|
|
|
15,775,311
|
|
|
|
23.11
|
%
|
|
|
|
|
|
|
|
|
|
Pura Vida Investments, LLC (2)
Efrem Kamen
150 East 52nd Street, Suite 32001
New York, NY 10022
|
|
|
6,296,576
|
|
|
|
9.37
|
%
|
|
|
|
|
|
|
|
|
|
George Karfunkel
126 East 56th Street/15th Floor
New York, New York 10022
|
|
|
5,120,000
|
|
|
|
7.62
|
%
|
|
|
|
|
|
|
|
|
|
Lineage Cell Therapeutics, Inc.
2173 Salk Avenue, Suite 200
Carlsbad, CA 92008
|
|
|
4,265,904
|
|
|
|
6.35
|
%
|
(1)
|
Includes
15,772,166 shares owned by Broadwood Partners, L.P. and 3,145 shares owned by Neal Bradsher. Broadwood Capital, Inc.
is the general partner of Broadwood Partners, L.P. Neal Bradsher is the President of Broadwood Capital, Inc. Mr. Bradsher
and Broadwood Capital, Inc. share voting power over and may be deemed to beneficially own the shares owned by Broadwood Partners,
L.P. The shares owned by Broadwood Partners, L.P. include 1,055,961 shares that may be acquired upon the exercise of certain
warrants.
|
|
|
(2)
|
Includes
shares held by Pura Vida Master Fund, Ltd. (the “Pura Vida Master Fund”) and certain separately managed accounts (the
“Accounts”). Pura Vida Investments, LLC (“Pura Vida”) serves as the investment manager to the Pura Vida
Master Fund and the Accounts. Efrem Kamen serves as the managing member of Pura Vida. Pura Vida and Mr. Kamen may be deemed to
have shared voting and dispositive power with respect to the shares owned directly by the Pura Vida Master Fund and the Accounts.
Pura Vida and Mr. Kamen disclaim beneficial ownership of those shares except to the extent of their pecuniary interest therein.
|
Security
Ownership of Management
The
following table sets forth information as of May 12, 2020 concerning beneficial ownership of our common stock and equity
awards by each member of the Board of Directors, all Named Executive Officers, and all executive officers and directors as a group.
|
|
Number of
Shares
|
|
|
Percent of
Total
|
|
Ronald Andrews (1)
|
|
|
382,680
|
|
|
|
*
|
%
|
|
|
|
|
|
|
|
|
|
Lyndal K. Hesterberg (2)
|
|
|
268,205
|
|
|
|
*
|
%
|
|
|
|
|
|
|
|
|
|
Mitchell Levine (3)
|
|
|
261,844
|
|
|
|
*
|
%
|
|
|
|
|
|
|
|
|
|
William Annett (4)
|
|
|
1,176,371
|
|
|
|
1.72
|
%
|
|
|
|
|
|
|
|
|
|
Alfred D. Kingsley (5)
|
|
|
789,338
|
|
|
|
1.17
|
%
|
|
|
|
|
|
|
|
|
|
Andrew Arno (6)
|
|
|
301,414
|
|
|
|
*
|
%
|
|
|
|
|
|
|
|
|
|
Andrew J. Last (7)
|
|
|
160,506
|
|
|
|
*
|
%
|
|
|
|
|
|
|
|
|
|
Cavan Redmond (8)
|
|
|
261,414
|
|
|
|
*
|
%
|
|
|
|
|
|
|
|
|
|
Aditya Mohanty (9)
|
|
|
78,750
|
|
|
|
*
|
%
|
|
|
|
|
|
|
|
|
|
Melinda Griffith (10)
|
|
|
45,000
|
|
|
|
*
|
%
|
|
|
|
|
|
|
|
|
|
All executive officers and directors as a group (14 persons) (11)
|
|
|
3,981,771
|
|
|
|
5.64
|
%
|
*Less
than 1%
(1)
|
Includes
302,500 shares that may be acquired through the exercise of stock options that are presently
exercisable or that may become exercisable within 60 days and 17,482 shares that may
be acquired upon the exercise of certain warrants. Excludes 712,500 shares that may be
acquired upon the exercise of certain stock options that are not presently exercisable
and that will not become exercisable within 60 days, and 106,221 shares that may be acquired
upon vesting of RSUs that will not vest within 60 days. Also excludes shares that may
be acquired upon the exercise of 50,000 stock options and upon vesting of 65,000 RSUs
that Oncocyte has agreed to grant to Mr. Andrews under the terms of his employment agreement
upon his completion of one year of continuous service as an employee.
|
|
|
(2)
|
Includes
266,457 shares that may be acquired through the exercise of stock options that are presently exercisable or that may
become exercisable within 60 days and 874 shares that may be acquired upon the exercise of certain warrants. Excludes 451,943
shares that may be acquired upon the exercise of certain stock options that are not presently exercisable and that will
not become exercisable within 60 days.
|
|
|
(3)
|
Includes
231,770 shares that may be acquired through the exercise of stock options that are presently exercisable or that may
become exercisable within 60 days and 3,495 shares that may be acquired upon the exercise of certain warrants. Excludes 637,230
shares that may be acquired upon the exercise of certain stock options that are not presently exercisable and that will
not become exercisable within 60 days and 20,000 shares that may be acquired upon vesting of RSUs that will
not vest within 60 days.
|
|
|
(4)
|
Mr. Annett’s employment as President and Chief Executive Officer
ended on June 30, 2019. Includes 1,169,371 shares that may be acquired through the exercise of stock options that are presently
exercisable and 3,500 shares that may be acquired upon the exercise of certain warrants.
|
|
|
(5)
|
Includes
303,995 shares held solely by Mr. Kingsley, and 75,345 shares held by Greenbelt Corp. and 18,767 shares held by Greenway Partners,
LP, which are affiliates of Mr. Kingsley. Mr. Kingsley disclaims beneficial ownership of 15,069 shares held by Greenbelt Corp.
Includes 406,300 shares that may be acquired through the exercise of stock options that are presently exercisable or
that may become exercisable within 60 days.
|
|
|
(6)
|
Includes
146,520 shares that may be acquired through the exercise of stock options that are presently exercisable or that may become
exercisable within 60 days and 52,447 shares that may be acquired upon the exercise of certain warrants.
|
(7)
|
Includes
146,520 shares that may be acquired through the exercise of stock options that are presently exercisable or that may
become exercisable within 60 days and 6,993 shares that may be acquired upon the exercise of certain warrants.
|
|
|
(8)
|
Includes
156,520 shares that may be acquired through the exercise of stock options that are presently exercisable or that may become
exercisable within 60 days and 52,447 shares that may be acquired upon the exercise of certain warrants.
|
|
|
(9)
|
Includes
78,750 shares that may be acquired through the exercise of stock options that are presently exercisable or that may become
exercisable within 60 days.
|
|
|
(10)
|
Includes
45,000 shares that may be acquired through the exercise of stock options that are presently exercisable or that may become
exercisable within 60 days.
|
|
|
(11)
|
Includes
3,195,957 shares and that may be acquired upon the exercise of certain stock options
that are presently exercisable or that may become exercisable within 60 days and 137,238
shares that may be acquired upon the exercise of certain warrants. Excludes 3,553,424
shares that may be acquired upon the exercise of certain stock options that are not presently
exercisable and that will not become exercisable within 60 days, and 126,221 shares that
may be acquired upon vesting of RSUs that will not vest within 60 days. Also excludes
shares that may be acquired upon the exercise of 50,000 stock options and upon vesting
of 65,000 RSUs that Oncocyte has agreed to grant to Mr. Andrews under the terms of his
employment agreement upon his completion of one year of continuous service as an employee.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Shared
Facilities Agreement and Relationship with Lineage
During
2009 Oncocyte and Lineage entered into a Shared Facilities Agreement pursuant to which Lineage provided Oncocyte with the use
of office and laboratory facilities, laboratory and office equipment and supplies, utilities, insurance, and the services of Lineage
employees and contractors, for which we have reimbursed Lineage, either through cash payments, shares of our common stock, or
delivering convertible promissory notes. Lineage provided us with the use of its facilities, equipment and supplies, utilities,
and personnel at its cost until 2016, and at its cost plus 5% thereafter. Oncocyte ceased using shared services from Lineage during
October 2019 and ceased using Lineage’s office and laboratory facilities under the Shared Facilities Agreement effective
December 31, 2019 at which time the Shared Facilities Agreement terminated. As of December 31, 2018, Oncocyte had $2.1 million
outstanding and payable to Lineage and affiliates in connection with the costs incurred under the Shared Facilities Agreement
during 2018 and prior periods, which Oncocyte paid in full during February 2019. Total fees incurred under the Shared Facilities
Agreement during 2019 were $1.2 million, which have been paid in full.
Alfred
D. Kingsley, who is a member of our Board of Directors, is also a director of Lineage. Broadwood Partners, L.P. and Mr. Kingsley
each beneficially own more than 5% of the outstanding common shares of Lineage. All of our directors and executive officers, and
beneficial owners of more than 5% of our outstanding common stock (“5% Shareholders”) as reported in this Proxy Statement,
in the aggregate beneficially own more than 20% of the outstanding common shares of Lineage. The fact that certain of our executive
officers and directors and 5% Shareholders own Lineage common shares should not be considered to mean that they constitute or
are acting in concert as a “group” with respect to those shares or that they otherwise share power or authority to
vote or dispose of the shares that each of them own.
Certain
Sales of Equity Securities
During
March 2018, Oncocyte entered into securities purchase agreements with Broadwood Partners, L.P. (“Broadwood”) and George
Karfunkel, each of whom beneficially own more than 5% of our outstanding common stock, pursuant to which Broadwood purchased 3,968,254
shares of common stock, and Mr. Karfunkel purchased 3,968,254 shares of common stock for $1.26 per share. Under the securities
purchase agreements, we agreed to register the shares for resale under the Securities Act of 1933, as amended (the “Securities
Act”), not later than 60 days after the closing of the sale of the shares. We also agreed to pay liquidated damages calculated
in the manner provided in the securities purchase agreement if we did not file the registration statement in a timely manner.
Because the registration statement was not filed as required by the securities purchase agreement, during 2019 we paid $300,000
to Broadwood on account of liquidated damages owed.
On
July 26, 2018, Cavan Redmond and Andrew Arno, who are members of our Board of Directors, each agreed to purchase from Oncocyte
52,447 shares of common stock and warrants to purchase 52,447 shares of common stock for $150,000 pursuant to a Securities Purchase
Agreement. The shares of common stock and warrants were sold in a registered direct offering in “units,” with each
unit consisting of one share of common stock and one warrant, at a price of $2.86 per unit. Each warrant entitles the warrant
holder to purchase one share of common stock at an exercise price of $3.00 per share. The warrants became exercisable six months
after the date of issue and will expire five years after the date they become exercisable.
During
February 2019, Broadwood purchased 533,333 shares of our common stock for $3.75 per share, the same price paid by other investors,
in an underwritten public offering of our common stock.
During
November 2019, we sold a total of 5,058,824 shares of common stock for $1.70 per share in cash in an offering registered under
the Securities Act. Broadwood purchased 1,176,471 shares, and certain funds and accounts managed by Pura Vida Investments, LLC
(“Pura Vida”) purchased 2,941,176 shares, on the same terms as other investors.
During
January 2020, we sold 768,376 shares of common stock to Broadwood, and 2,755,400 shares of common stock to certain funds and accounts
managed by Pura Vida, for $2.156 per share in an offering registered under the Securities Act.
During April 2020,
we sold a total of 4,733,700 shares of common stock for $2.27 per share in cash in an offering registered under the Securities
Act. Broadwood purchased 1,050,000 shares, and certain funds and accounts managed by Pura Vida purchased 600,000 shares, on the
same terms as other investors.
DELINQUENT
SECTION 16(a) REPORTS
Section
16(a) of Exchange Act, requires our directors and executive officers and persons who own more than ten percent (10%) of a registered
class of our equity securities (“Reporting Persons”) to file with the SEC initial reports of ownership and reports
of changes in ownership of our common stock and other Oncocyte equity securities.
To
our knowledge, based solely on our review of the copies of Forms 3 and 4 and amendments thereto filed during the last fiscal year,
and Forms 5 and amendments thereto filed with respect to the last fiscal year, by the Reporting Persons, or written representation
from the Reporting Persons that no Form 5 was required, Aditya Mohanty was delinquent in filing one Form 4 and Tony Kalajian was
delinquent in filing his Form 3.
RATIFICATION
OF THE SELECTION OF OUR INDEPENDENT REGISTERED
PUBLIC
ACCOUNTANTS
The
Board of Directors has selected OUM & Co., LLP (“OUM”) as our independent registered public accountants. OUM has
served as our independent registered public accountants since the fourth quarter of 2015. The Board of Directors proposes and
recommends that the shareholders ratify the selection of the firm of OUM to serve as our independent registered public accountants
for the fiscal year ending December 31, 2020.
Required
Vote
Approval
of the selection of OUM to serve as our independent registered public accountants requires the affirmative vote of a majority
of the shares of common stock present and voting in person or by proxy on the matter at the Meeting, provided that the affirmative
vote cast constitutes a majority of a quorum. Unless otherwise directed by the shareholders, proxies will be voted FOR
approval of the selection of OUM to audit our financial statements.
We
expect that a representative of OUM will be present at the Meeting, in person or by conference telephone, and will have an opportunity
to make a statement if he or she so desires and may respond to appropriate questions from shareholders.
The
Board of Directors Recommends a Vote “FOR” Ratification of the Selection of OUM as Our
Independent
Registered Public Accountants
Audit
Fees, Audit Related Fees, Tax Fees and Other Fees
OUM
audited our annual financial statements for the fiscal years ended December 31, 2019 and 2018. The following table sets forth
the aggregate fees billed to us during the fiscal years ended December 31, 2019 and 2018 by OUM:
|
|
2019
|
|
|
2018
|
|
Audit Fees
(1)
|
|
$
|
179,780
|
|
|
$
|
168,170
|
|
Audit
Related Fees (2)
|
|
|
80,064
|
|
|
|
8,000
|
|
Total Fees
|
|
$
|
259,844
|
|
|
$
|
176,170
|
|
(1)
|
Audit
Fees consist of fees billed for professional services rendered for the audit of Oncocyte’s annual financial statements
included in our Annual Report on Form 10-K, and review of the interim financial statements included in our Quarterly Reports
on Form 10-Q, as applicable, and services that are normally provided by our independent registered public accountants in connection
with statutory and regulatory filings or engagements.
|
|
|
(2)
|
Audit-Related
Fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit
or review of our consolidated financial statements and are not reported under “Audit Fees.” This category includes
fees related to non-routine SEC filings.
|
Pre-Approval
of Audit and Permissible Non-Audit Services
Our
Audit Committee requires pre-approval of all audit and non-audit services. Other than de minimis services incidental to
audit services, non-audit services shall generally be limited to tax services such as advice and planning and financial due diligence
services. All fees for such non-audit services must be approved by the Audit Committee, except to the extent otherwise permitted
by applicable SEC regulations. The Committee may delegate to one or more designated members of the Committee the authority to
grant pre-approvals, provided such approvals are presented to the Committee at a subsequent meeting. During 2019, all of the fees
paid to OUM were approved by the Audit Committee.
COMMON
STOCK AMENDMENT PROPOSAL
We
are asking our shareholders to approve an amendment (the “Common Stock Amendment”) to our Articles of Incorporation
that, if approved, will increase the authorized number of shares of our common stock, no par value, (“Common Stock”)
to 150,000,000 shares from the currently authorized number of 85,000,000 shares. We refer to this proposal as the Common
Stock Amendment Proposal.
The
operative provision of the proposed Common Stock Amendment would read as follows:
“Article
FOUR of the Articles of Incorporation of the corporation is amended to read as follows:
FOUR:
The corporation is authorized to issue two classes of shares, which shall be designated “Common Stock” and “Preferred
Stock.” The number of shares of Common Stock which the corporation is authorized to issue is 150,000,00, and the number
of shares of Preferred Stock which the corporation is authorized to issue is 5,000,000. The Preferred Stock may be issued in one
or more series as the board of directors may by resolution designate. The board of directors is authorized to fix the number of
shares of any series of Preferred Stock and to determine or alter the rights, preferences, privileges, and restrictions granted
to or imposed upon the Preferred Stock as a class, or upon any wholly unissued series of Preferred Stock. The board of directors
may, by resolution, increase or decrease (but not below the number of shares of such series then outstanding) the number of shares
of any series of Preferred Stock subsequent to the issue of shares of that series.”
The
text of the proposed Common Stock Amendment is subject to modification to include such changes as our Board determines to be necessary
or advisable to effect the Common Stock Amendment Proposal.
Vote
Required; Effect of Abstentions and Broker Non-Votes
For
the Common Stock Amendment Proposal to be approved in accordance with the requirements of California law and our Bylaws, the affirmative
vote of the holders of not less than a majority of our outstanding shares entitled to vote is required. Unless otherwise directed
by the shareholders, proxies will be voted FOR approval of the Common Stock Amendment Proposal.
Broker
non-votes occur when a beneficial owner of outstanding shares held in “street name” fails to provide instructions
to the broker or nominee holding the shares as to how to vote on matters deemed “non-routine” under applicable stock
exchange rules. If you as beneficial owner do not provide voting instructions, the broker or nominee cannot vote the shares with
respect to “non-routine” matters, but can vote the shares with respect to “routine” matters. Typically,
when brokers are able to vote the shares, they vote in favor of the matter. We believe the Common Stock Amendment Proposal is
a “routine” matter and, as a result, we do not expect there to be any broker non-votes for this proposal, however
the determination as to whether a broker may vote will be determined by the broker. If you do not vote your shares for a routine
matter, your broker will have the discretion to vote your shares and their vote might not reflect the vote you would have cast
if you had voted by proxy. Accordingly, we strongly encourage you to submit your proxy and exercise your right to vote as a shareholder
to ensure that your shares are voted in the manner in which you want them to be voted.
If
you check the “abstain” box for the Common Stock Amendment Proposal on the proxy card or if you attend the Meeting
without submitting a proxy and you abstain from voting on the Common Stock Amendment Proposal, your shares will be counted for
purposes of determining the presence or absence of a quorum but will not be counted for purposes of determining whether the Common
Stock Amendment Proposal has received an affirmative vote sufficient for approval. Because the vote to approve the Common Stock
Amendment Proposal requires the affirmative vote of a majority of our outstanding shares of common stock, an abstention on the
Common Stock Amendment Proposal has the effect of a vote against the Common Stock Amendment Proposal.
The
Board of Directors Recommends a Vote “FOR”
Approval
of the Common Stock Amendment Proposal
Reasons
for the Common Stock Amendment Proposal
Our
Board of Directors believes that the proposed increase in the number of authorized shares of Common Stock is desirable in order
to enhance our flexibility in taking possible future actions, such as raising additional equity capital, making acquisitions using
our equity as consideration, awarding equity compensation or pursuing other corporate purposes. As of May 12, 2020, we
had 67,217,906 shares of Common Stock issued and outstanding, approximately 9,608,000 shares of Common Stock reserved
for issuance upon the exercise of outstanding stock options and upon vesting of restricted stock units, approximately 4,155,000
shares of our common stock available for future grants under our Incentive Plan and 3,383,913 shares of Common Stock
reserved for issuance upon the exercise of outstanding stock purchase warrants, leaving only approximately 635,000 shares
of Common Stock available to Oncocyte for use in raising capital, making acquisitions, or pursuing other corporate purposes. Oncocyte
has not yet received significant revenues from the cancer diagnostic tests that it is developing and commercializing, and until
such time as it is able to do so and to generate sufficient revenue to finance its operations, it will need to raise additional
capital, which may occur through the sale of Common Stock, preferred stock, and securities convertible into or exercisable for
shares of Common Stock or preferred stock.
We
have issued or agreed to issue shares of Common Stock to acquire
assets to expand our technology and product portfolios and we may issue or sell shares of Common Stock in the future
to acquire additional assets or businesses. We consider potential sources of financing and potential acquisition candidates
from time to time when opportunities arise. We have agreed to issue shares of Common Stock to the stockholders of Razor Genomics,
Inc. (“Razor”), as described below, if certain conditions are met under agreements related to the acquisition
of shares of Razor and rights to develop and market our DetermaRx™ diagnostic test. If the Common Stock Amendment Proposal
is not approved by our shareholders, we might not be able to meet our contractual obligations to the Razor shareholders. We may,
at our election, also issue shares of Common Stock in lieu of cash to former shareholders of Insight Genetics, Inc. (“Insight”),
as described below, under the terms of a merger agreement pursuant to which Oncocyte acquired the cancer assays that we
are developing as DetermaIO™.
We
have also entered into an Equity Distribution Agreement with
Piper Sandler & Co. pursuant to which we may offer and sell shares of Common Stock from time to time for cash
in “at-the-market” transactions. We are not presently a party of any other financing or acquisition agreements
that require us to issue, or pursuant to which we may issue, shares of Common Stock, and we may not be able to raise capital
or consummate future acquisitions on terms we deem acceptable, or at all.
Contingent
Obligations to Issue Common Stock to Razor Shareholders
On
September 30, 2019, we completed the purchase of 1,329,870 shares of Razor Series A Convertible Preferred Stock, par value $0.0001
per share (“Razor Preferred Stock”), representing 25% of the outstanding equity of Razor on a fully diluted basis,
for $10 million in cash pursuant to a Subscription and Stock Purchase Agreement (the “Purchase Agreement”) among Oncocyte,
Encore Clinical, Inc. (“Encore”), and Razor. Oncocyte also entered into Minority Holder Stock Purchase Agreements
of like tenor (the “Minority Purchase Agreements”) with the shareholders of Razor other than Encore (the “Minority
Shareholders”) for the future purchase of the shares of Razor common stock they own. In connection with the purchase of
the shares of Razor Preferred Stock, Oncocyte has also entered into certain other agreements with Razor and Encore, including
a Sublicense Agreement through which we have acquired exclusive rights to develop and commercialize our DetermaRx™ lung
cancer assay, and a Development Agreement pertaining to a clinical trial of DetermaRx™.
We
have agreed to acquire the outstanding shares of Razor common stock from Encore under the Purchase Agreement and from the Minority
Shareholders under the Minority Purchase Agreements for an additional $10 million in cash and shares of Oncocyte Common Stock
valued at $5 million in total (the “Additional Purchase Payment”) if, within a specified time frame, certain milestones
are met related to the contracting of clinical trial sites for the clinical trial of DetermaRx™ that will be conducted under
the Development Agreement. Even if the DetermaRx™ clinical trial milestones are not met within the time frame referenced
in the Purchase Agreement and the Minority Purchase Agreements, we will have the option, but not the obligation, to purchase the
outstanding Razor common stock from Encore and the Minority Shareholders for the Additional Purchase Payment that would be applicable
if the milestones were met. Any purchase Razor shares from Encore and the Minority Shareholders will be subject to the satisfaction
of certain conditions customary for a transaction of this kind.
Regardless
of whether we purchase any shares of Razor common stock, a clinical trial of DetermaRx™ will be conducted under a Development
Agreement for the purpose of promoting commercialization of DetermaRx™. Upon completion of enrollment of the full number
of patients for the clinical trial, we will issue to Encore and the Minority Shareholders shares of Oncocyte Common Stock with
an aggregate market value at the date of issue equal to $3 million (“Clinical Trial Milestone Payment”).
We
cannot determine the number of shares of our Common Stock that might be issued to make the Additional Purchase Payment or the
Clinical Trial Milestone Payment, if the conditions to making those payments are met, because the number of shares issuable will
depend on the market price of our Common Stock at the time of the respective payments. Further, to comply with applicable stock
exchange rules, if the issuance of shares of Oncocyte Common Stock as part of the Additional Purchase Payment or for the Clinical
Trial Milestone Payment (on a combined basis that includes both shares issued as part of the Additional Purchase Payment and shares
issued for the Clinical Trial Milestone Payment) would exceed 19.99% of the issued and outstanding shares of Oncocyte Common Stock
or the outstanding voting power of our shares as of the date of the Purchase Agreement, we may deliver a number of shares of Common
Stock that would not exceed that combined 19.99% limit and an amount of cash necessary to bring the combined value of cash and
shares to $5 million to make the Additional Purchase Payment or $3 million to make the Clinical Trial Milestone Payment.
Right
to Issue Common Stock to Former Insight Shareholders as Milestone Payments
On
January 31, 2020, we acquired Insight pursuant to an Agreement and Plan of Merger (the “Merger Agreement”). Under
the terms of the Merger Agreement, we paid $7 million in cash and $5 million of Oncocyte Common Stock (the “Merger Payment”)
to the Insight shareholders, less a holdback of a portion of the cash and shares for indemnity claims. In addition to the Merger
Payment, we may also pay post-acquisition contingent milestone payments of up to an additional $6.0 million in any combination
of cash or shares of Oncocyte Common Stock if certain milestones are achieved with respect to DetermaIO™. The milestone
payments are (i) $1.5 million for clinical trial completion and data publication, (ii) $3.0 million for an affirmative final local
coverage determination from Centers for Medicare and Medicaid Services (“CMS”) for a specified lung cancer test, and
(iii) up to $1.5 million for achieving certain CMS reimbursement milestones. We will determine whether the milestone payments
will be made in cash, in Common Stock, or in a combination of cash and Common Stock at the time the payments are due. We cannot
determine the number of shares of our Common Stock that might be issued to make the milestone payments because we may choose to
pay cash and not issue shares for milestone payments, and if we do elect to issue shares, the number of shares of Common Stock
that we might issue will depend on the market price of our Common Stock at the time of the respective payments.
Certain
Effects of the Common Stock Amendment Proposal
If
approved by our shareholders, the Common Stock Amendment will allow Oncocyte to issue shares of Common Stock to accommodate its
foreseeable needs and objectives without further approval by Oncocyte shareholders. By increasing the authorized number of shares
of Common Stock in advance of any specific transactions, we will be able to act in a timely manner when an opportunity involving
the issuance of Common Stock arises, or when our Board of Directors believes it is in the best interests of Oncocyte and our shareholders
to take action, without the delay, uncertainty and expense that could be involved in obtaining shareholder approval in the midst
of that opportunity. The additional shares of Common Stock being authorized by the Common Stock Amendment will be unreserved and
available for issuance. No further shareholder authorization would be required prior to the issuance of those shares of Common
Stock by us, except where approval by our shareholders is required under NYSE American rules or the California Corporations Code.
The
additional shares of Common Stock authorized by adoption of the Common Stock Amendment have rights identical to the currently
outstanding shares of Common Stock. Adoption of the Common Stock Amendment and issuance of any newly authorized shares of Common
Stock will not affect the rights of the holders of the currently outstanding shares of Common Stock, except for effects incidental
to increasing the number of our shares of Common Stock outstanding, such as dilution of the earnings (loss) per share and voting
rights of current holders of shares of Common Stock.
The
increase in authorized shares of Common Stock could make more difficult or discourage attempts to obtain control of Oncocyte,
thereby having an anti-takeover effect. The increase in the authorized Common Stock was not proposed by our Board of Directors
in response to any known threat to acquire control of Oncocyte.
Our
Articles of Incorporation currently provide our Board of Directors with the authority to issue up to 5,000,000 shares of preferred
stock and to determine the preferences, limitations and relative rights of shares of preferred stock and to fix the number of
shares of preferred stock constituting any series and the designation of such series, without any further vote or action by our
shareholders. This authority of the Board of Directors will not be changed by the Common Stock Amendment, and the Common Stock
Amendment will not increase the total number of shares of preferred stock that the Board of Directors may determine to issue.
ADJOURNMENT
PROPOSAL
If we do not receive a
sufficient number of proxies from shareholders to constitute a quorum to conduct business at the Meeting or to approve the Common
Stock Amendment Proposal, we may propose to adjourn or postpone the Meeting, whether or not a quorum is present, for a period
of not more than 30 days to allow additional time to solicit additional proxies to constitute a quorum for purposes of the Meeting
(if we lacked a quorum at the time of the Meeting) or to solicit additional proxies voting in favor of approval of the Common
Stock Amendment Proposal. We currently do not intend to propose adjournment or postponement at the Meeting if there are sufficient
votes to approve the Common Stock Amendment.
Vote
Required
If
a quorum is present for the purpose of holding the Meeting and conducting business, the affirmative vote of a majority
of the shares of Common Stock present and voting in person or by proxy at the Meeting is required to approve the Adjournment
Proposal, provided that the affirmative vote cast constitutes a majority of a quorum. If a quorum is not present for purposes
of holding and conducting business at the Meeting other than voting to adjourn, a majority of the shares present and voting in
person or by proxy, even if less than a majority of a quorum, would be sufficient to approve the Adjournment Proposal. Unless
otherwise directed by the shareholders, proxies will be voted FOR approval of the Adjournment Proposal if we propose an
adjournment or postponement of the Meeting.
The
Board of Directors Recommends a Vote “FOR” the Adjournment Proposal if we submit the proposal to shareholders for
a vote at the Meeting.
PROPOSALS
OF SHAREHOLDERS
Shareholders
who intend to present a proposal for action at our 2021 Annual Meeting of Shareholders must notify our management of such intention
by notice received at our principal executive offices not later than March 19, 2021 for such proposal to be included in our proxy
statement and form of proxy relating to such meeting.
ANNUAL
REPORT
Our
Annual Report on Form 10-K filed with the SEC for the fiscal year ended December 31, 2019, without exhibits, may be obtained by
a shareholder without charge, upon written request to the Secretary of Oncocyte.
HOW
TO ATTEND THE ANNUAL MEETING
IMPORTANT
NOTICE:
If
you plan to attend the Meeting in person please be aware that in-person attendance could be prohibited or limited by federal,
state, or local orders due to the Covid-19 pandemic. We may issue a press release or post on our website or use other communication
methods to notify our shareholders of any such limitations that may be imposed and remain in effect after the date of this Proxy
Statement. However, due to changing circumstances we may not be able to give advance notice of the number of persons, if any,
that may be permitted to attend the Meeting in person. As explained below, we have made arrangements for our shareholders to attend
the Meeting online in lieu of attending in person.
Whether
you plan to attend the Meeting in person or online, we encourage you to sign and return the enclosed proxy card and indicate how
you wish your shares to be voted at the Meeting. If you do attend the Meeting you will be able to revoke your proxy and vote at
the Meeting by following the instructions in this Proxy Statement. If you are unable to attend the Meeting and you do not
revoke your proxy, your shares will be voted as indicated on your proxy card.
Attending
the Meeting in Peron
If
you are a “shareholder of record” (meaning that you have a stock certificate registered in your own name), your name
will appear on our shareholder list. You will be admitted to the Meeting in person upon showing your proxy card, driver’s
license, or other identification.
If
you are a “street name” shareholder (meaning that your shares are held in an account at a broker-dealer firm) your
name will not appear on our shareholder list. If you plan to attend the Meeting in person, you should ask your broker for a “legal
proxy.” You will be admitted to the Meeting by showing your legal proxy. You probably received a proxy form from your broker
along with your Proxy Statement, but that form can only be used by your broker to vote your shares, and it is not a “legal
proxy” that will permit you to vote your shares directly at the Meeting. Follow the instructions from your broker or bank
included with these proxy materials, or contact your broker or bank to request a legal proxy form. If you cannot obtain a legal
proxy in time, you will be admitted to the Meeting if you bring a copy of your most recent brokerage account statement showing
that you own Oncocyte shares. However, if you do not obtain a legal proxy, you can only vote your shares by returning to your
broker or bank, before the Meeting, the proxy form from your broker or bank that accompanied this Proxy Statement.
Participating
in the Meeting Online
This
year we have made arrangements for our shareholders to attend and vote at the Meeting online through electronic video screen communication.
Shareholders who wish to attend the Meeting online you will need to gain admission in the manner described below. Shareholders
who follow the procedures for attending the Meeting online will be able to vote at the Meeting and ask questions. If you do not
comply with the procedures described here for attending the Meeting online, you will not be able to participate and vote at the
Meeting online but may view the Meeting webcast by visiting https://web.lumiagm.com/259974801 and following
the instructions to log in as a guest using the password oncocyte2020.
If
you are a “shareholder of record” (meaning that you have a stock certificate registered in your own name), to attend
and participate in the Meeting online you will need to visit https://web.lumiagm.com/259974801 and
use the control number on your proxy card to log on. The password for the Meeting is oncocyte2020.
If
you are a “street name” shareholder (meaning that your shares are held in an account at a broker-dealer firm) and
you wish to participate and vote online at the Meeting, you must first obtain a valid legal proxy from your broker, bank or other
agent and then register in advance to attend the Meeting. After obtaining a valid legal proxy from your broker, bank or other
agent, you must register to attend the Meeting by submitting proof of your legal proxy reflecting the number of
your shares along with your name and email address to American Stock Transfer & Trust Company, LLC to receive an 11-digit
control number that may be used to access the Meeting online. Requests for registration should be directed to proxy@astfinancial.com
or to facsimile number 718-765-8730. Written requests can be mailed to:
American
Stock Transfer & Trust Company LLC
Attn:
Proxy Tabulation Department
6201
15th Avenue
Brooklyn,
NY 11219
Requests
for registration must be labeled as “Legal Proxy” and be received no later than 5:00 p.m., Eastern Time, on June 10,
2020, five business day before the Meeting.
You will receive a confirmation
of your registration by email after we receive your registration materials. You may attend the Meeting and vote your shares at
https://web.lumiagm.com/259974801 during the Meeting. The password for the meeting is oncocyte2020.
Follow the instructions provided to vote. We encourage you to access the Meeting prior to the start time leaving ample time
for the check in.
By
Order of the Board of Directors,
Albert
P. Parker
Chief
Operating Officer and Secretary
May
____, 2020
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