Oncocyte(OCX) - 2020 Q1 - Quarterly Report

PART 1—FINANCIAL INFORMATION Item 1. Financial Statements This section presents OncoCyte's unaudited condensed consolidated interim financial statements, including balance sheets, statements of operations, comprehensive loss, cash flows, and detailed notes for Q1 2020 and FY2019 Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (in thousands) | ASSETS (in thousands) | March 31, 2020 | December 31, 2019 | | :---------------------- | :------------- | :---------------- | | Cash and cash equivalents | $16,577 | $22,072 | | Total current assets | $18,139 | $22,956 | | Total assets | $59,503 | $39,859 | | LIABILITIES AND SHAREHOLDERS' EQUITY (in thousands) | March 31, 2020 | December 31, 2019 | | Total current liabilities | $6,928 | $4,440 | | Total liabilities | $22,878 | $9,021 | | Total shareholders' equity | $36,625 | $30,838 | Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations (in thousands, except per share data) | (in thousands, except per share data) | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Total revenue | $16 | $- | | Total costs and operating expenses | $8,447 | $3,997 | | Loss from operations | $(8,431) | $(3,997) | | Net loss | $(7,732) | $(3,864) | | Net loss per share; basic and diluted | $(0.13) | $(0.08) | | Weighted average shares outstanding | 61,459 | 46,647 | Condensed Consolidated Statements of Comprehensive Loss Condensed Consolidated Statements of Comprehensive Loss (in thousands) | (in thousands) | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :------------- | :-------------------------------- | :-------------------------------- | | NET LOSS | $(7,732) | $(3,864) | | COMPREHENSIVE LOSS | $(7,732) | $(3,864) | Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (in thousands) | (in thousands) | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(6,870) | $(6,718) | | Net cash provided by (used in) investing activities | $(6,191) | $47 |\n| Net cash provided by financing activities | $7,565 | $37,894 | | NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | $(5,496) | $31,223 | | Cash, cash equivalents and restricted cash: At end of the period | $18,277 | $39,257 | Notes to Condensed Consolidated Interim Financial Statements 1. Organization, Description of the Business and Liquidity OncoCyte Corporation is a molecular diagnostics company focused on developing and commercializing proprietary laboratory-developed tests (LDTs) for cancer, prioritizing lung cancer, and relies on financing to support operations - OncoCyte Corporation is a molecular diagnostics company focused on developing and commercializing proprietary laboratory-developed tests (LDTs) for unmet medical needs across the cancer care continuum, with lung cancer as its first indication[18] - Key products include DetermaRx™ (treatment stratification for early-stage non-small cell lung cancer), DetermaDx™ (non-invasive blood test for lung nodules), and DetermaIO™ (gene expression assay for checkpoint inhibitor response, acquired via Insight Genetics)[19][21][22] - The company has incurred operating losses and negative cash flows since inception, with an accumulated deficit of $101.5 million as of March 31, 2020[24] - OncoCyte believes its current cash, cash equivalents, marketable equity securities, and access to additional capital through an ATM Agreement are sufficient to fund operations for at least the next twelve months from the financial statement issuance date[26] - The company will need to raise additional capital to finance operations, development, and commercialization of its diagnostic tests, and may pursue marketing arrangements with other diagnostic companies to reduce capital needs and risks[27][28] 2. Basis of Presentation and Summary of Significant Accounting Policies This section outlines the basis of presentation for the unaudited condensed consolidated interim financial statements, prepared in accordance with U.S. GAAP and SEC regulations, detailing key accounting policies including business combinations, fair value measurements, goodwill, intangible assets, royalty obligations, investments, and revenue recognition - The unaudited condensed consolidated interim financial statements are prepared in accordance with U.S. GAAP for interim financial information and SEC Form 10-Q instructions[29] - On January 31, 2020, Insight became a wholly-owned subsidiary, and its operations are now consolidated with OncoCyte's[31] - Business combinations are accounted for using the acquisition method, recognizing assets and liabilities at fair value, with goodwill representing the excess of purchase price over net identifiable assets[34][35] - In-process research and development (IPR&D) projects acquired in a business combination are capitalized as indefinite-lived intangible assets until completion or abandonment, then amortized over their useful life or written off[36] - Revenue recognition commenced on January 1, 2020, primarily from pharma services by the Insight subsidiary and cash-basis receipts from DetermaRx™ testing[43][44][45] - DetermaRx™ revenue is recognized on a cash basis due to uncertainty of payment, but is expected to shift to an accrual basis after Medicare coverage and pricing are established (effective June 14, 2020)[45] - Marketable equity securities (Lineage and AgeX shares) are measured at fair value and reported as current assets, with unrealized gains/losses recorded in other income/expenses[50] Marketable Equity Securities (in thousands) | Item | March 31, 2020 | March 31, 2019 | | :------------------------------------ | :------------- | :------------- | | Unrealized gain (loss) on marketable equity securities | $(53) | $178 | 3. Selected Balance Sheet Components This note provides a detailed breakdown of selected balance sheet components, including restricted cash, prepaid expenses, other current assets, deposits, other noncurrent assets, accrued expenses, and other current liabilities, highlighting changes between March 31, 2020, and December 31, 2019 Cash, Cash Equivalents, and Restricted Cash (in thousands) | Item | March 31, 2020 | December 31, 2019 | | :------------------------------------ | :------------- | :---------------- | | Cash and cash equivalents | $16,577 | $22,073 | | Restricted cash | $1,700 | $1,700 | | Total cash, cash equivalents, and restricted cash | $18,277 | $23,773 | Prepaid Expenses and Other Current Assets (in thousands) | Item | March 31, 2020 | December 31, 2019 | | :------------------------------------ | :------------- | :---------------- | | Prepaid insurance | $943 | $80 | | Prepaid vendors, deposits and service agreements | $261 | $389 | | Other | $20 | $36 | | Total prepaid expenses and other current assets | $1,224 | $505 | Accrued Expenses and Other Current Liabilities (in thousands) | Item | March 31, 2020 | December 31, 2019 | | :------------------------------------ | :------------- | :---------------- | | Accrued compensation | $1,029 | $1,287 | | Accrued insurance | $616 | $- | | Cash holdback liability | $600 | $-