UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date
of Report (Date of earliest event reported): February 8, 2021
CANCER
GENETICS, INC.
(Exact
Name of Company as Specified in its Charter)
Delaware
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001-35817
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04-3462475
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(State
or Other Jurisdiction
of
Incorporation)
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(Commission
File
Number)
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(IRS
Employer
Identification
No.)
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201
Route 17 North 2nd Floor, Rutherford, New Jersey 07070
(Address
of Principal Executive Offices) (Zip Code)
Company’s
telephone number, including area code (201) 528-9200
(Former
name or former address, if changed since last report)
Check
the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Company under
any of the following provisions (see General Instruction A.2. below):
[X]
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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[ ]
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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[ ]
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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[ ]
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Indicate
by check mark whether the Company is an emerging growth company as defined by Rule 405 of the Securities Act of 1933 (17 §230.405)
or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging
growth company [ ]
If
an emerging growth company, indicate by check mark if the Company has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Securities
registered pursuant to Section 12(b) of the Act:
Title
of each class
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Trading
Symbol(s)
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Name
of each exchange on which registered
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Common
Stock
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CGIX
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The
Nasdaq Capital Market
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Item
1.01 Entry into a Material Definitive Agreement.
On
February 8, 2021, Cancer Genetics, Inc. (the “Company” or “CGI”), entered
into Amendment No. 1 to Agreement and Plan of Merger and Reorganization (the “Amendment”) with StemoniX,
Inc. (“StemoniX”) and CGI Acquisition, Inc., a wholly owned subsidiary of CGI (“Merger Sub”),
which amends the Agreement and Plan of Merger and Reorganization dated August 21, 2020 (the “Original Merger Agreement”
and as amended by the Amendment, the “Merger Agreement”) among StemoniX, the Company and Merger Sub,
whereby Merger Sub will be merged with and into StemoniX, with StemoniX surviving the merger as a wholly-owned subsidiary of CGI
(the “Merger”). The Original Merger Agreement had conditions that included (A) that the Company shall
have consummated a financing transaction (the “Private Placement”) no later than the closing of the
Merger resulting in aggregate gross proceeds of $10 million (or such other amount as the Company and StemoniX agree) and (B) that
the shares of common stock of CGI (“CGI Common Stock”) being issued in the Merger shall have been approved
for listing on the Nasdaq Capital Market.
In furtherance of meeting those two conditions,
on January 28, 2021, StemoniX entered into a stock purchase agreement (the “Series C Preferred Stock Purchase Agreement”)
with an institutional accredited investor (such investor, together with any future purchaser of Series C Preferred Stock, the
“Series C Investors”). Pursuant to the Series C Preferred Stock Purchase Agreement,
StemoniX agreed to issue to the Series C Investor shares of its Series C Preferred Stock (the “Series C Preferred
Stock”) for an aggregate purchase price of $2 million, at the initial closing in an ongoing private placement of
StemoniX Series C Preferred Stock for up to $10 million (subject to increase to up to $20 million with CGI’s consent) that
may involve one or more additional closings prior to the closing of the Merger (the “Series C Financing”),
and that as a condition to closing requires that StemoniX have agreements for the purchase of at least another $6 million of Series
C Preferred Stock. Pursuant to the Merger Agreement, as amended by the Amendment, each share of Series C Preferred Stock issued
and outstanding immediately prior to the Effective Time will be converted in the Merger, with no action or approval required from
the holders, into the right to receive a number of shares of CGI Common Stock (the “Series C Conversion Shares”)
equal to the price per share paid for the Series C Preferred Stock divided by a conversion price equal to 85% of the weighted
average share price of CGI Common Stock over the five trading days prior to the closing of the merger (the “5-Day
VWAP”), which conversion price is subject to a valuation cap (the “Series C Valuation Cap”)
based on an $85,000,000 valuation of CGI, after giving effect to the issuance of all shares of CGI Common Stock at or prior to
the closing of the merger (excluding the Series C Conversion Shares and out-of-the-money options and warrants to purchase shares
of CGI Common Stock, but including in-the-money options and warrants to purchase shares of CGI Common Stock on a net exercise
basis). No assurance can be given that the conditions to closing the Series C Preferred Stock Purchase Agreement will be satisfied
or waived, including that the additional shares be sold.
In
addition, on January 28, 2021, CGI entered into a Securities Purchase Agreement with certain institutional and accredited investors,
pursuant to which CGI issued and sold to certain purchasers in a private placement (the “CGI PIPE”)
an aggregate of (i) 2,758,624 shares of CGI Common Stock and (ii) common warrants to purchase up to an aggregate of 2,758,624
shares of CGI Common Stock, at a combined offering price of $3.625 per CGI share and accompanying warrant to purchase one share
of CGI Common Stock, for gross proceeds of approximately $10 million.
In light of the foregoing, the Amendment provides
that (i) the Series C Preferred Stock and Series C Conversion Shares are not included in the definitions of “Company Outstanding
Equity” and “Deemed Outstanding CGI Common Stock,” as applicable; and (ii) the CGI securities sold in the CGI
PIPE are not included in the definitions of “CGI Outstanding Equity” and “Deemed Outstanding CGI Common Stock”
(as each such term is defined in the Merger Agreement). As a result, the Series C Financing and the CGI PIPE do not affect
the “Exchange Ratio” (as defined in the Merger Agreement) and are dilutive to the historical equity holders of CGI
and StemoniX proportionately at the closing of the Merger, and each are not taken into account in calculating the total number
of shares of CGI Common Stock to be issued to the historical security holders (meaning those other than the Series C Investors
with respect to the Series C Preferred Stock) in the Merger. In addition, the Amendment revised the closing condition regarding
the Private Placement to solely require that StemoniX have sold an aggregate of $5 million of Series C Preferred Stock prior to
the closing of the Merger, and also clarifies that the “Net Cash” (as defined in the Merger Agreement) of each of
CGI and StemoniX at closing, for purposes of the Net Cash Adjustment (as defined in the Merger Agreement) calculation shall not
include any proceeds from the Series C Financing or the CGI PIPE.
Further,
an existing investor of StemoniX has agreed to purchase an additional $3 million of StemoniX convertible notes (“Convertible
Notes”) plus certain accompanying warrants to purchase StemoniX common stock (“Convertible Note Warrants”).
The Amendment provides that the Convertible Note Warrants will be exchanged in the Merger for warrants to purchase a number of
shares of CGI Common Stock equal to 20% of the principal amount of Convertible Notes purchased (including Convertible Notes previously
purchased by such investor) divided by the 5-Day VWAP, with an exercise price equal to the 5-Day VWAP. The sale of these additional
Convertible Notes is part of StemoniX’s plan to reach its target Net Cash at closing, and is currently pending StemoniX
shareholder approval and customary closing conditions. The Amendment also provides that (i) the equivalent amount of StemoniX
Common Stock (determined using the Exchange Ratio) underlying the Convertible Note Warrants is included in StemoniX’s outstanding
equity for purposes of allocating the shares of CGI Common Stock being issued to the StemoniX security holders (other than with
respect to the Series C Preferred Stock) and (ii) the shares of CGI Common Stock underlying certain warrants issued by CGI to
its placement agent in a public offering that closed on November 2, 2020 are included in CGI’s outstanding equity for purposes
of calculating the amount of CGI Common Stock to be issued to the StemoniX security holders (other than with respect to the Series
C Preferred Stock).
In
addition, the Amendment provides that (i) if the current Series C Investor purchases at least $5,000,000 Series C Preferred Stock
in the Series C Financing, the current Series C Investor will be entitled to have one observer on the CGI board after the merger
is consummated, and (ii) the investor that has agreed to purchase an additional $3 million of Convertible Notes and accompanying
Convertible Note Warrants will be entitled to have one observer on the CGI board after the merger is consummated, assuming such
purchase is consummated.
Further,
the Amendment extended the “End Date” (as defined in the Merger Agreement) to April 30, 2021 and designated the full
post-closing board of directors.
Additional
Information about the Proposed Merger and Where to Find It
In
connection with the proposed merger between CGI and StemoniX, CGI has filed relevant materials with the SEC, including a registration
statement on Form S-4 that contains a proxy statement/prospectus/information statement. INVESTORS AND SECURITY HOLDERS OF CGI
AND STEMONIX ARE URGED TO READ THESE MATERIALS (AS WELL AS AMENDMENTS AND SUPPLEMENTS THERETO AND ANY DOCUMENTS INCORPORATED BY
REFERENCE THEREIN) WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT CGI, STEMONIX AND THE PROPOSED
MERGER. The proxy statement/prospectus/information statement and other relevant materials (when they become available), and any
other documents filed by CGI with the SEC, may be obtained free of charge at the SEC website at www.sec.gov. In addition, investors
and security holders may obtain free copies of the documents filed with the SEC by CGI by directing a written request to: Cancer
Genetics, Inc., c/o John A. Roberts, Chief Executive Officer, 201 Route 17 North 2nd Floor, Rutherford, NJ 07070. Investors and
security holders are urged to read the Registration Statement and the other relevant materials when they become available before
making any voting or investment decision with respect to the proposed merger.
This
report shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any
securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities in connection
with the proposed merger shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities
Act of 1933, as amended.
Participants
in the Solicitation
CGI
and its directors and executive officers and StemoniX and its directors and executive officers may be deemed to be participants
in the solicitation of proxies from the shareholders of CGI in connection with the proposed transaction under the rules of the
SEC. Information about the directors and executive officers of CGI and their ownership of shares of CGI’s common stock is
set forth in its Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on May 29, 2020,
and in subsequent documents filed and to be filed with the SEC, including the Registration Statement referred to above. Additional
information regarding the persons who may be deemed participants in the proxy solicitations and a description of their direct
and indirect interests in the proposed merger, by security holdings or otherwise, are included in the Registration Statement and
other relevant materials to be filed with the SEC when they become available. These documents are available free of charge at
the SEC web site (www.sec.gov) and from the Chief Executive Officer at CGI at the address described above.
Forward-Looking
Statements
This report contains “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act of 1995. CGI and StemoniX generally identify
forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,”
“anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,”
“believes,” “estimates,” “predicts,” “potential” or “continue” or
the negative of these terms or other similar words. These statements are only predictions. CGI and StemoniX have based these forward-looking
statements largely on their then-current expectations and projections about future events and financial trends as well as the
beliefs and assumptions of management. Forward-looking statements are subject to a number of risks and uncertainties, many of
which involve factors or circumstances that are beyond each of CGI’s and StemoniX’s control. CGI’s and StemoniX’s
actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors,
including but not limited to: (i) risks associated with CGI’s and StemoniX’s ability to obtain the balance of the
financing, the approval of Nasdaq for continued listing and listing after the merger, and the shareholder approvals required to
consummate the proposed merger transaction and the timing of the closing of the proposed merger transaction, including the risks
that a condition to closing would not be satisfied within the expected timeframe or at all or that the closing of the proposed
merger transaction will not occur; (ii) the outcome of any legal proceedings that may be instituted against the parties and others
related to the Merger Agreement relating to the merger; (iii) the occurrence of any event, change or other circumstance or condition
that could give rise to the termination of the Merger Agreement, (iv) unanticipated difficulties or expenditures relating to the
proposed merger transaction, the response of business partners and competitors to the announcement of the proposed merger transaction,
and/or potential difficulties in employee retention as a result of the announcement and pendency of the proposed merger transaction;
(v) volatility and uncertainty in the financial markets and general economic conditions, which could have an adverse impact on
CGI and/or StemoniX, and (vi) those risks detailed in CGI’s most recent Annual Report on Form 10-K, Quarterly Report
on Form 10-Q, registration statement on Form S-4 in connection with the proposed merger and subsequent reports filed with
the SEC, as well as other documents that may be filed by CGI from time to time with the SEC. Accordingly, you should not rely
upon forward-looking statements as predictions of future events. Neither CGI nor StemoniX can assure you that the events and circumstances
reflected in the forward-looking statements will be achieved or occur, and actual results could differ materially from those projected
in the forward-looking statements. The forward-looking statements made in this communication relate only to events as of the date
on which the statements are made. Except as required by applicable law or regulation, CGI and StemoniX undertake no obligation
to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to
reflect the occurrence of unanticipated events.
Item
9.01 Financial Statements and Exhibits.
#
Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. CGI hereby undertakes to furnish supplemental
copies of any of the omitted schedules upon request by the SEC.
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
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Cancer
Genetics, Inc.
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February
8, 2021
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By:
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/s/
John A. Roberts
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Name:
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John
A. Roberts
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Title:
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President
and Chief Executive Officer
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Cancer Genetics (NASDAQ:CGIX)
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